Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion and analysis below has been organized as follows:

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

• Results of operations;

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

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

As you read this discussion and analysis, refer to NRG's condensed consolidated statements of operations to this Form 10-Q, which present the results of operations for the three months ended March 31, 2024 and 2023. Also refer to NRG's 2023 Form 10-K, which includes detailed discussions of various items impacting the Company's business, results of operations and financial condition, including: General section; Strategy section; Business Overview section, including how regulation, weather, and other factors affect NRG's business; and Critical Accounting Estimates section.

Executive Summary

Introduction and Overview

NRG Energy, Inc., or NRG or the Company, sits at the intersection of energy and home services. NRG is a leading energy and home services company fueled by market-leading brands, proprietary technologies, and complementary sales channels. Across the U.S. and Canada, NRG delivers innovative, sustainable solutions, predominately under brand names such as NRG, Reliant, Direct Energy, Green Mountain Energy and Vivint, while also advocating for competitive energy markets and customer choice. The Company has a customer base that includes approximately 8.0 million residential consumers in addition to commercial, industrial, and wholesale customers, supported by approximately 13 GW of generation as of March 31, 2024.

Strategy

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

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

Energy Regulatory Matters

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

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

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

Regional Regulatory Developments

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

Texas

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

Through Senate Bill 2627, the Texas Legislature created the Texas Energy Fund, which received voter approval in November 2023, and will provide grants and low-interest loans (3%) to incentivize the development of more dispatchable generation and smaller backup generation in ERCOT. The PUCT adopted a rule in March 2024, which establishes the application and participation requirements and the process by which the Texas Energy Fund loan proceeds for dispatchable generation in ERCOT will be distributed. The initial window for submitting loan applications will be open from June 1, 2024 to July 27, 2024. The PUCT adopted a rule for the completion bonus grant program in April 2024, which provides for opportunities for grants of $120,000 per MW for dispatchable generation projects interconnected before June 1, 2026, or $80,000 per MW for dispatchable generation projects interconnected on or after June 1, 2026 but before June 1, 2029, subject to performance requirements.

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

Ruling on Pricing during Winter Storm Uri — On March 17, 2023, the Third Court of Appeals issued a ruling in Luminant Energy Co. v. PUCT, which is an appeal relating to the validity of two orders issued by the PUCT on February 15 and 16, 2021, respectively, governing scarcity pricing in the ERCOT wholesale electricity market during Winter Storm Uri. The Third Court found that the PUCT exceeded its statutory authority by ordering the market price of energy to be set at the high system wide offer cap due to scarcity conditions as a result of firm load shed occurring in ERCOT. The Third Court reversed the PUCT's orders and remanded the case. On March 23, 2023, the PUCT filed a petition for review to the Supreme Court of Texas seeking reversal of the Third Court's decision, which was granted on September 29, 2023. The Court received briefing on the merits and oral arguments occurred on January 30, 2024. The outcome of this appeal could potentially require a retroactive repricing of the ERCOT market prices during the subject time period.

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

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

PJM

Revisions to PJM Local Deliverability Area Reliability Requirement — The Base Residual Auction for the 2024/2025 delivery year commenced on December 7, 2022 and closed on December 13, 2022. On December 19, 2022, PJM announced

that it would delay the publication of the auction results. On December 23, 2022, PJM made a filing at FERC to revise the definition of Locational Deliverability Area ("LDA") Reliability Requirement in the Tariff. This would allow PJM to exclude certain resources from the calculation of the Local Deliverability Area Reliability Requirement. On February 21, 2023, FERC accepted PJM's filing. Multiple parties, including NRG, filed for rehearing. Rehearing was denied by operation of law, and multiple parties, including the Company, filed appeals to the Third Circuit Court of Appeals. On March 12, 2024, the court vacated the portion of the FERC orders that allow PJM to apply the Local Deliverability Area Reliability Requirement to the 2024/2025 capacity auction. On March 29, 2024, PJM filed a petition seeking confirmation as to the capacity commitments rules for the 2024/2025 auction. On May 6, 2024, FERC directed PJM to recalculate the 2024/2025 auction results under the Initial LDA Reliability Requirement rules, and further directed PJM to rerun the Third Incremental Auction. As a result, the capacity for the 2024/2025 delivery year in the Delmarva Power and Light South zone will increase and rerunning the Third Incremental Auction is expected to impact that auction's prices.

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

Indian River RMR Proceeding — On June 29, 2021, Indian River notified PJM that it intended to retire Unit 4, effective May 31, 2022, due to expected uneconomic operations. On July 30, 2021, PJM responded to the deactivation notice and stated that PJM had identified reliability violations resulting from the proposed deactivation of Unit 4. NRG filed a cost based RMR rate schedule at FERC on April 1, 2022. FERC accepted the rate schedule with a June 1, 2022 effective date, subject to refund and established hearing and settlement procedures. The Company reached settlement with a number of the intervening parties and the settlement agreement was filed at FERC on April 2, 2024 and is pending FERC review.

Independent Market Monitor Market Seller Offer Cap Complaint — On March 18, 2021, finding that the calculation of the default Market Seller Offer Cap was unjust and unreasonable, FERC issued an Order, which permitted the PJM May 2021 capacity auction for the 2022/2023 delivery year to continue under the existing rules and set a procedural schedule for parties to file briefs with possible solutions. On September 2, 2021, FERC issued an order in response to a complaint filed by the PJM Independent Market Monitor's proposal, which eliminated the Cost of New Entry-based Market Seller Offer Cap, implemented a limited default cap for certain asset classes based on going-forward costs and provided for unit specific cost review by the Independent Market Monitor for all other non-zero offers into the auctions. On October 4, 2021, as required by the Order, PJM submitted its compliance tariff and certain parties filed a motion for rehearing, which was denied by operation of law. On February 18, 2022, FERC addressed the arguments raised on rehearing and rejected the rehearing requests. Multiple parties filed appeals at the Court of Appeals for the D.C. Circuit, and on August 15, 2023, the Court denied the petitions for review. On January 12, 2024, the generator trade association filed a petition for review with the U.S. Supreme Court to overturn the August 15, 2023 judgment.

Other Regulatory Matters

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

Environmental Regulatory Matters

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

A number of regulations that affect the Company have been and continue to be revised by the EPA, including requirements regarding coal ash, GHG emissions, NAAQS revisions and implementation and effluent limitation guidelines. NRG will evaluate the impact of these regulations as they are revised but cannot fully predict the impact of each until anticipated revisions and legal challenges are finally resolved. The Company’s environmental matters are described in the

Company’s 2023 Form 10-K in Item 1, Business - Environmental Matters and Item 1A, Risk Factors. These matters have been updated in Note 16, Environmental Matters, to the condensed consolidated financial statements of this Form 10-Q and as follows.

Air

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

CPP/ACE Rules — The attention in recent years on GHG emissions has resulted in federal and state regulations. In 2019, the EPA promulgated the ACE rule, which rescinded the CPP, which had sought to broadly regulate CO2 emissions from the power sector. On January 19, 2021, the D.C. Circuit vacated the ACE rule (but on February 22, 2021, at the EPA's request, stayed the issuance of the portion of the mandate that would vacate the repeal of the CPP). On June 30, 2022, the U.S. Supreme Court held that the "generation shifting" approach in the CPP exceeded the powers granted to the EPA by Congress. The Court did not address the related issues of whether the EPA may adopt only measures applied at each source. On April 25, 2024, the EPA released a prepublication version of a final rule that after publication in the Federal Register will repeal the ACE rule and significantly revise the manner in which new combustion-turbine and existing steam EGU's GHG emissions will be regulated including capturing and storing/sequestering CO2. The EPA has stated that it will address GHG emissions from existing combustion turbines in a future rule. The Company expects that the rule will be subject to legal challenges in the courts and may be uncertain for several years.

CSAPR — On March 15, 2023, the EPA signed and released a prepublication of a final rule that sought to significantly revise the CSAPR to address the good-neighbor obligations of the 2015 ozone NAAQS for 23 states after earlier having disapproved numerous state plans to address the issue. Several states, including Texas, challenged the EPA's disapproval of their state plans. On May 1, 2023, the United States Court of Appeals for the Fifth Circuit stayed the EPA's disapproval of Texas' and Louisiana's state plans, which disapprovals are a condition precedent to the EPA imposing its plan on Texas and Louisiana. Several other states are also similarly situated because of similar stays. Nonetheless, on June 5, 2023, the EPA published this rule in the Federal Register. On July 31, 2023, the EPA promulgated an interim final rule that addresses the various judicial orders that have stayed several State-Implementation-Plan disapprovals by limiting the effectiveness of certain requirements of the final rule promulgated on June 5, 2023 in Texas and five other states. The final rule decreases, over time, the ozone-season NOx allowances allocated to generators in the states not affected by the judicial stays by assuming that participants in this cap-and-trade program will optimize existing NOx controls and install additional NOx controls. The Company cannot predict the outcome of the legal challenges to the: (i) various state disapprovals; (ii) the final rule promulgated on June 5, 2023; and (iii) the interim final rule promulgated on July 31, 2023 that seeks to address the judicial orders.

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

Mercury and Air Toxics Standards (“MATS”) — On May 7, 2024, the EPA promulgated a final rule that amends the MATS rule by, among other things, increasing the stringency of the filterable particulate matter standard at coal-burning units. The deadline for complying with this more stringent standard is 2027. The Company expects that the rule will be subject to legal challenges in the courts and may be uncertain for several years.

Byproducts

In April 2015, the EPA finalized the rule regulating byproducts of coal combustion (e.g., ash and gypsum) as solid wastes under the RCRA. On July 30, 2018, the EPA promulgated a rule that amended the ash rule by extending some of the deadlines and providing more flexibility for compliance. On August 21, 2018, the D.C. Circuit found, among other things, that the EPA had not adequately regulated unlined ponds and legacy surface impoundments. On August 28, 2020, the EPA finalized "A Holistic Approach to Closure Part A: Deadline to Initiate Closure," which amended the April 2015 Rule to address the August 2018 D.C. Circuit decision and extend some of the deadlines. On November 12, 2020, the EPA finalized "A Holistic Approach to Closure Part B: Alternative Demonstration for Unlined Surface Impoundments," which further amended the April 2015 Rule to, among other things, provide procedures for requesting approval to operate existing ash impoundments with an alternate liner. On April 25, 2024, the EPA released a prepublication version of a final rule that after publication in the Federal Register

will establish requirements for: (i) inactive (or legacy) surface impoundments at inactive facilities and (ii) coal combustion residual ("CCR") management units (regardless of how or when the CCR was placed) at regulated facilities. The rule will also create an obligation to conduct site assessments (at all active and certain inactive facilities) to determine whether CCR management units are present. The Company expects that the rule will be subject to legal challenges in the courts and may be uncertain for several years.

Domestic Site Remediation Matters

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

Water

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

Effluent Limitations Guidelines — In 2015, the EPA revised the ELG for Steam Electric Generating Facilities, which imposed more stringent requirements (as individual permits were renewed) for wastewater streams from FGD, fly ash, bottom ash and flue gas mercury control. In 2017, the EPA promulgated a final rule that, among other things, postponed the compliance dates to preserve the status quo for FGD wastewater and bottom ash transport water by two years to November 2020 until the EPA amended the rule. On October 13, 2020, the EPA amended the 2015 ELG rule by: (i) altering the stringency of certain limits for FGD wastewater; (ii) relaxing the zero-discharge requirement for bottom ash transport water; and (iii) changing several deadlines. In October 2021, NRG informed its regulators that the Company intends to comply with the ELG by ceasing combustion of coal by the end of 2028 at its domestic coal units outside of Texas, and installing appropriate controls by the end of 2025 at its two plants that have coal-fired units in Texas. On April 25, 2024, the EPA released a prepublication version of a final rule that after publication in the Federal Register will again revise the ELG by, among other things, further restricting the discharge of (i) FGD wastewater, (ii) bottom ash transport water, and (iii) combustion residual leachate. The Company expects that the rule will be subject to legal challenges in the courts and may be uncertain for several years.

Regional Environmental Developments

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

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

Significant Events

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

Capital Allocation

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

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

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

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

Operations

A component of the Company's strategy is to procure mid to long-term generation through power purchase agreements. As of March 31, 2024, NRG has entered into Renewable PPAs totaling approximately 1.9 GW with third-party project developers and other counterparties, of which approximately 1.6 GW are operational. The average tenure of these agreements is eleven years. The Company expects to continue evaluating and executing similar agreements that support the needs of the business. The total GW procured through Renewable PPAs may be impacted by contract terminations when they occur.

Trends Affecting Results of Operations and Future Business Performance

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

Load Growth — The electric industry is expected to experience a surge in demand driven primarily by new manufacturing, industrial and data center facilities (inclusive of generative artificial intelligence ("gen AI")). The EIA's 2023 Annual Energy Outlook, combined with external forecasts of gen AI, shows the potential for 500 TWh of incremental load across the U.S. through 2030, as compared to 2023. ERCOT's current long term load forecast shows peak demand increasing from 82 GW in 2024 to 87 GW in 2028. In addition to the incremental 5 GW of peak demand load, there is an expectation for significant incremental demand increases from large loads interconnecting to the grid. This load growth will require significant planning and construction of new generation and transmission.

Texas Development Priorities

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

Facility						Fuel Type						Net Generation Capacity (MW)
Cedar Bayou 5						Natural Gas						689
Greens Bayou 6						Natural Gas						443
T.H. Wharton						Natural Gas						415
						Total						1,547

Changes in Accounting Standards

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

Consolidated Results of Operations

The following table provides selected financial information for the Company:

			Three months ended March 31,
(In millions)			2024						2023						Change
Revenue
Retail revenue			$	7,229					$	7,363					$	(134)
Energy revenue(a)			152						128						24
Capacity revenue(a)			42						42						—
Mark-to-market for economic hedging activities			(60)						91						(151)
Contract amortization			(10)						(11)						1
Other revenues(a)(b)			76						109						(33)
Total revenue			7,429						7,722						(293)
Operating Costs and Expenses
Cost of fuel			183						163						(20)
Purchased energy and other cost of sales(c)			5,514						6,002						488
Mark-to-market for economic hedging activities			(532)						2,035						2,567
Contract and emissions credit amortization(c)			63						108						45
Operations and maintenance			370						385						15
Other cost of operations			87						85						(2)
Cost of operations (excluding depreciation and amortization shown below)			5,685						8,778						3,093
Depreciation and amortization			268						190						(78)
Selling, general and administrative costs			591						426						(165)
Acquisition-related transaction and integration costs			9						71						62
Total operating costs and expenses			6,553						9,465						2,912
(Loss)/gain on sale of assets			(4)						199						(203)
Operating Income/(Loss)			872						(1,544)						2,416
Other Income/(Expense)
Equity in earnings of unconsolidated affiliates			3						5						(2)
Other income, net			30						16						14
Loss on debt extinguishment			(58)						—						(58)
Interest expense			(152)						(148)						(4)
Total other expense			(177)						(127)						(50)
Income/(Loss) Before Income Taxes			695						(1,671)						2,366
Income tax expense/(benefit)			184						(336)						(520)
Net Income/(Loss)			$	511					$	(1,335)					$	1,846

(a)Includes gains and losses from financially settled transactions

(b)Includes trading gains and losses and ancillary revenues

(c)Includes amortization of SO2 and NOx credits and excludes amortization of RGGI credits

Management’s discussion of the results of operations for the three months ended March 31, 2024 and 2023

Electricity Prices

The following table summarizes average on peak power prices for each of the major markets in which NRG operates for the three months ended March 31, 2024 and 2023:

			Average on Peak Power Price ($/MWh)
			Three months ended March 31,
Region			2024						2023						Change %
Texas
ERCOT - Houston(a)			$	26.10					$	26.98					(3)		%
ERCOT - North(a)			25.29						26.72						(5)		%
East
NY J/NYC(b)			$	48.33					$	45.40					6		%
NEPOOL(b)			47.50						52.63						(10)		%
COMED (PJM)(b)			30.17						29.78						1		%
PJM West Hub(b)			35.76						36.49						(2)		%
West
MISO - Louisiana Hub(b)			$	28.05					$	29.78					(6)		%
CAISO - SP15(b)			33.41						92.54						(64)		%

(a)Average on peak power prices based on real time settlement prices as published by the respective ISOs

(b)Average on peak power prices based on day ahead settlement prices as published by the respective ISOs

Natural Gas Prices

The following table summarizes the average Henry Hub natural gas price for the three months ended March 31, 2024 and 2023:

			Three months ended March 31,
			2024						2023						Change %
($/MMBtu)			$	2.24					$	3.42					(35)		%

Gross Margin

The Company calculates gross margin in order to evaluate operating performance as revenues less cost of fuel, purchased energy and other costs of sales, mark-to-market for economic hedging activities, contract and emissions credit amortization and depreciation and amortization.

Economic Gross Margin

In addition to gross margin, the Company evaluates its operating performance using the measure of economic gross margin, which is not a GAAP measure and may not be comparable to other companies’ presentations or deemed more useful than the GAAP information provided elsewhere in this report. Economic gross margin should be viewed as a supplement to and not a substitute for the Company's presentation of gross margin, which is the most directly comparable GAAP measure. Economic gross margin is not intended to represent gross margin. The Company believes that economic gross margin is useful to investors as it is a key operational measure reviewed by the Company's chief operating decision maker. Economic gross margin is defined as the sum of retail revenue, energy revenue, capacity revenue and other revenue, less cost of fuel, purchased energy and other cost of sales. Economic gross margin does not include mark-to-market gains or losses on economic hedging activities, contract amortization, emissions credit amortization, depreciation and amortization, operations and maintenance, or other cost of operations.

The following tables present the composition and reconciliation of gross margin and economic gross margin for the three months ended March 31, 2024 and 2023:

			Three months ended March 31, 2024
($ In millions)			Texas						East						West/Services/Other						Vivint Smart Home									Corporate/Eliminations						Total
Retail revenue			$	2,178					$	3,428					$	1,155					$	468								$	—					$	7,229
Energy revenue			7						81						67						—									(3)						152
Capacity revenue			—						41						2						—									(1)						42
Mark-to-market for economic hedging activities			—						(51)						(9)						—									—						(60)
Contract amortization			—						(10)						—						—									—						(10)
Other revenue(a)			48						26						4						—									(2)						76
Total revenue			2,233						3,515						1,219						468									(6)						7,429
Cost of fuel			(121)						(29)						(33)						—									—						(183)
Purchased energy and other cost of sales(b)(c)(d)			(1,487)						(2,952)						(1,028)						(53)									6						(5,514)
Mark-to-market for economic hedging activities			225						402						(95)						—									—						532
Contract and emissions credit amortization			—						(62)						(1)						—									—						(63)
Depreciation and amortization			(67)						(23)						(24)						(144)									(10)						(268)
Gross margin			$	783					$	851					$	38					$	271								$	(10)					$	1,933
Less: Mark-to-market for economic hedging activities, net			225						351						(104)						—									—						472
Less: Contract and emissions credit amortization, net			—						(72)						(1)						—									—						(73)
Less: Depreciation and amortization			(67)						(23)						(24)						(144)									(10)						(268)
Economic gross margin			$	625					$	595					$	167					$	415								$	—					$	1,802
(a) Includes trading gains and losses and ancillary revenues
(b) Includes capacity and emissions credits
(c) Includes $753 million, $65 million and $408 million of TDSP expense in Texas, East and West/Services/Other, respectively
(d) Excludes depreciation and amortization shown separately
Business Metrics			Texas						East						West/Services/Other						Vivint Smart Home									Corporate/Eliminations						Total
Retail sales
Home electricity sales volume (GWh)			7,886						3,831						642						—									—						12,359
Business electricity sales volume (GWh)			9,560						11,514						3,038						—									—						24,112
Home natural gas sales volume (MDth)			—						24,430						35,120						—									—						59,550
Business natural gas sales volume (MDth)			—						469,664						54,131						—									—						523,795
Average retail Home customer count (in thousands)(a)			2,927						2,159						761						—									—						5,847
Ending retail Home customer count (in thousands)(a)			2,951						2,183						760						—									—						5,894
Average Vivint Smart Home subscriber count (in thousands)(b)			—						—						—						2,042									—						2,042
Ending Vivint Smart Home subscriber count (in thousands) (b)			—						—						—						2,045									—						2,045
Power generation
GWh sold			3,531						1,085						1,584						—									—						6,200
GWh generated(c)
Coal			2,564						391						—						—									—						2,955
Gas			967						—						1,583						—									—						2,550
Oil			—						3						—						—									—						3
Renewables			—						—						1						—									—						1
Total			3,531						394						1,584						—									—						5,509
(a) Home customer count includes recurring residential customers, services customers and community choice
(b) Vivint Smart Home subscribers includes customers that also purchase other NRG products
(c) Includes owned and leased generation, excludes tolled generation and equity investments

			Three months ended March 31, 2023
($ In millions)			Texas						East						West/Services/Other						Vivint Smart Home**(a)**						Corporate/Eliminations						Total
Retail revenue			$	1,958					$	4,016					$	1,241					$	148					$	—					$	7,363
Energy revenue			4						74						48						—						2						128
Capacity revenue			—						41						1						—						—						42
Mark-to-market for economic hedging activities			—						35						67						—						(11)						91
Contract amortization			—						(11)						—						—						—						(11)
Other revenue(b)			72						21						17						—						(1)						109
Total revenue			2,034						4,176						1,374						148						(10)						7,722
Cost of fuel			(112)						(23)						(28)						—						—						(163)
Purchased energy and other cost of sales(c)(d)(e)			(1,255)						(3,577)						(1,157)						(11)						(2)						(6,002)
Mark-to-market for economic hedging activities			129						(1,790)						(385)						—						11						(2,035)
Contract and emissions credit amortization			(1)						(104)						(3)						—						—						(108)
Depreciation and amortization			(75)						(30)						(24)						$	(52)					(9)						(190)
Gross margin			$	720					$	(1,348)					$	(223)					$	85					$	(10)					$	(776)
Less: Mark-to-market for economic hedging activities, net			129						(1,755)						(318)						—						—						(1,944)
Less: Contract and emissions credit amortization, net			(1)						(115)						(3)						—						—						(119)
Less: Depreciation and amortization			(75)						(30)						(24)						(52)						(9)						(190)
Economic gross margin			$	667					$	552					$	122					$	137					$	(1)					$	1,477
(a) Includes result of operations following the acquisition date of March 10, 2023
(b) Includes trading gains and losses and ancillary revenues
(c) Includes capacity and emissions credits
(d) Includes $647 million, $49 million and $357 million of TDSP expense in Texas, East, and West/Services/Other, respectively
(e) Excludes depreciation and amortization shown separately
Business Metrics			Texas						East						West/Services/Other						Vivint Smart Home						Corporate/Eliminations						Total
Retail sales
Home electricity sales volume (GWh)			7,614						3,079						636						—						—						11,329
Business electricity sales volume (GWh)			8,568						10,451						2,393						—						—						21,412
Home natural gas sales volume (MDth)			—						22,395						36,733						—						—						59,128
Business natural gas sales volume (MDth)			—						471,121						50,879						—						—						522,000
Average retail Home customer count (in thousands)(a)			2,871						1,770						778						—						—						5,419
Ending retail Home customer count (in thousands)(a)			2,869						1,801						784						—						—						5,454
Ending Vivint Smart Home subscriber count (in thousands)(b)			—						—						—						1,938						—						1,938
Power generation
GWh sold			5,186						1,258						1,303						—						—						7,747
GWh generated(c)
Coal			2,081						218						—						—						—						2,299
Gas			785						39						1,302						—						—						2,126
Nuclear			2,320						—						—						—						—						2,320
Renewables			—						—						1						—						—						1
Total			5,186						257						1,303						—						—						6,746
(a) Home customer count includes recurring residential customers, services customers and community choice
(b) Vivint Smart Home subscribers includes customers that also purchase other NRG products
(c) Includes owned and leased generation, excludes tolled generation and equity investments

The following table represents the weather metrics for the three months ended March 31, 2024 and 2023:

			Three months ended March 31,
Weather Metrics			Texas						East						West/Services/Other**(b)**
2024
CDDs(a)			116						32						49
HDDs(a)			885						2,213						1,099
2023
CDDs			166						54						73
HDDs			799						2,092						1,159
10-year average
CDDs			112						42						51
HDDs			978						2,502						1,106

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

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

Gross Margin and Economic Gross Margin

Gross margin increased $2.7 billion and economic gross margin increased $325 million during the three months ended March 31, 2024, compared to the same period in 2023.

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

Texas

			(In millions)
Lower gross margin due to the net effect of: •a 14%, or $86 million increase in cost to serve the retail load, driven by higher realized power prices associated with the Company's diversified supply strategy •an increase in net revenue of $18 million, primarily driven by changes in customer term, product and mix			$	(68)
Higher gross margin due to an increase in load of 1.1 TWhs, or $18 million, driven by changes in customer mix and an increase in load of 143 GWhs, or $5 million, from weather			23
Other			3
Decrease in economic gross margin			$	(42)
Increase in mark-to-market for economic hedging primarily due to net unrealized gains/losses on open positions related to economic hedges			96
Decrease in contract and emissions credit amortization			1
Decrease in depreciation and amortization			8
Increase in gross margin			$	63

East

						(In millions)
Lower gross margin due to a decrease in generation and capacity as a result of the Joliet and Astoria asset retirements						$	(12)
Higher electric gross margin due to lower supply costs of $6.00 per MWh, or $92 million, driven primarily by decreases in power prices, partially offset by lower net revenue rates as a result of changes in customer term, product and mix of $1.50 per MWh, or $22 million						70
Higher electric gross margin of $19 million and natural gas gross margin of $6 million due to an increase in customer count and change in customer mix						25
Higher gross margin due to an increase in average realized price and a decrease in supply costs at Midwest Generation						19
Lower natural gas gross margin, including the impact of transportation and storage contract optimization, resulting in lower net revenue rates from changes in customer term, product, and mix of $1.50 per Dth, or $736 million, partially offset by lower supply costs of $1.40 per Dth, or $695 million						(41)
Lower electric and natural gas gross margin due to weather						(10)
Lower demand response gross margin due to lower pricing and volumes						(9)
Other						1
Increase in economic gross margin						$	43
Increase in mark-to-market for economic hedging primarily due to net unrealized gains/losses on open positions related to economic hedges						2,106
Decrease in contract amortization						43
Decrease in depreciation and amortization						7
Increase in gross margin						$	2,199

West/Services/Other

			(In millions)
Higher electric gross margin due to a decrease in supply costs of $19.00 per MWh, or $70 million, and changes in customer mix of $3 million, partially offset by lower revenue rates of $8.75 per MWh, or $33 million			$	40
Higher gross margin at Cottonwood driven by spark spread expansion			12
Higher natural gas gross margin due to lower supply costs of $1.95 per Dth, or $173 million, partially offset by lower revenue rates of $1.85 per Dth, or $164 million			9
Lower gross margin from market optimization activities			(16)
Increase in economic gross margin			$	45
Increase in mark-to-market for economic hedging primarily due to net unrealized gains/losses on open positions related to economic hedges			214
Decrease in contract amortization			2
Increase in gross margin			$	261

Vivint Smart Home

			(In millions)
Increase due to the acquisition of Vivint Smart Home			$	278
Increase in economic gross margin			$	278
Increase in depreciation and amortization			(92)
Increase in gross margin			$	186

Mark-to-Market for Economic Hedging Activities

Mark-to-market for economic hedging activities includes asset-backed hedges that have not been designated as cash flow hedges. Total net mark-to-market results increased by $2.4 billion during the three months ended March 31, 2024, compared to the same period in 2023.

The breakdown of gains and losses included in revenues and operating costs and expenses, by segment, was as follows:

			Three months ended March 31, 2024
(In millions)			Texas						East						West/Services/Other						Eliminations						Total
Mark-to-market results in revenue
Reversal of previously recognized unrealized (gains) on settled positions related to economic hedges			$	—					$	(33)					$	(11)					$	1					$	(43)
Net unrealized (losses)/gains on open positions related to economic hedges			—						(18)						2						(1)						(17)
Total mark-to-market (losses) in revenue			$	—					$	(51)					$	(9)					$	—					$	(60)
Mark-to-market results in operating costs and expenses
Reversal of previously recognized unrealized (gains)/losses on settled positions related to economic hedges			$	(86)					$	331					$	43					$	(1)					$	287
Reversal of acquired loss/(gain) positions related to economic hedges			4						(16)						—						—						(12)
Net unrealized gains/(losses) on open positions related to economic hedges			307						87						(138)						1						257
Total mark-to-market gains/(losses) in operating costs and expenses			$	225					$	402					$	(95)					$	—					$	532

			Three months ended March 31, 2023
(In millions)			Texas						East						West/Services/Other												Eliminations						Total
Mark-to-market results in revenue
Reversal of previously recognized unrealized (gains)/losses on settled positions related to economic hedges			$	—					$	(13)					$	9											$	(3)					$	(7)
Reversal of acquired (gain) positions related to economic hedges			—						(1)						—												—						(1)
Net unrealized gains on open positions related to economic hedges			—						49						58												(8)						99
Total mark-to-market gains in revenue			$	—					$	35					$	67											$	(11)					$	91
Mark-to-market results in operating costs and expenses
Reversal of previously recognized unrealized (gains) on settled positions related to economic hedges			$	(79)					$	(482)					$	(281)											$	3					$	(839)
Reversal of acquired loss/(gain) positions related to economic hedges			7						(28)						(3)												—						(24)
Net unrealized gains/(losses) on open positions related to economic hedges			201						(1,280)						(101)												8						(1,172)
Total mark-to-market gains/(losses) in operating costs and expenses			$	129					$	(1,790)					$	(385)											$	11					$	(2,035)

`

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

For the three months ended March 31, 2024, the $60 million loss in revenues from economic hedge positions was driven primarily by the reversal of previously recognized unrealized gains on contracts that settled during the period and a decrease in the value of East open positions as a result of increases in PJM power prices. The $532 million gain in operating costs and expenses from economic hedge positions was driven primarily by the reversal of previously recognized unrealized losses on contracts that settled during the period and an increase in the value of open positions in Texas and East as a result of increases in ERCOT and PJM power prices, partially offset by a decrease in the value of open positions in West/Services/Other as a result of decreases in CAISO and Canada power prices.

For the three months ended March 31, 2023, the $91 million gain in revenues from economic hedge positions was driven primarily by an increase in the value of open positions as a result of decreases in natural gas and power prices. The $2.0 billion loss in operating costs and expenses from economic hedge positions was driven primarily by a decrease in the value of open positions as a result of decreases in natural gas and power prices and the reversal of previously recognized unrealized gains on contracts that settled during the period.

In accordance with ASC 815, the following table represents the results of the Company's financial and physical trading of energy commodities for the three months ended March 31, 2024 and 2023. The realized and unrealized financial and physical trading results are included in revenue. The Company's trading activities are subject to limits based on the Company's Risk Management Policy.

			Three months ended March 31,
(In millions)			2024						2023
Trading gains/(losses)
Realized			$	5					$	2
Unrealized			(4)						12
Total trading gains			$	1					$	14

Operations and Maintenance Expense

Operations and maintenance expense is comprised of the following:

(In millions)			Texas						East						West/Services/Other						Vivint Smart Home**(a)**						Eliminations						Total
Three months ended March 31, 2024			$	186					$	78					$	52					$	54					$	—					$	370
Three months ended March 31, 2023			218						79						71						18						(1)						385

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

Operations and maintenance expense decreased by $15 million for the three months ended March 31, 2024, compared to the same period in 2023, due to the following:

			(In millions)
Decrease primarily due to the sale of STP in November 2023			$	(44)
Decrease driven by a reduction in deactivation expenditures primarily in the East			(8)
Increase due to the acquisition of Vivint Smart Home in March 2023			36
Increase in major maintenance expenditures associated with the scope and duration of outages at the Texas coal facilities, partially offset by the timing of planned outages at Cottonwood			5
Other			(4)
Decrease in operations and maintenance expense			$	(15)

Other Cost of Operations

Other cost of operations is comprised of the following:

(In millions)			Texas						East						West/Services/Other						Vivint Smart Home**(a)**						Total
Three months ended March 31, 2024			$	50					$	32					$	3					$	2					$	87
Three months ended March 31, 2023			49						32						4						—						85

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

Other cost of operations for the three months ended March 31, 2024 increased by $2 million, when compared to the same period in 2023, due to the following:

			(In millions)
Increase in gross receipt taxes due to higher revenues in Texas			$	5
Decrease due to the sale of STP in November 2023			(5)
Other			2
Increase in other cost of operations			$	2

Depreciation and Amortization

Depreciation and amortization are comprised of the following:

(In millions)			Texas						East						West/Services/Other						Vivint Smart Home**(a)**						Corporate						Total
Three months ended March 31, 2024			$	67					$	23					$	24					$	144					$	10					$	268
Three months ended March 31, 2023			75						30						24						52						9						190

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

Depreciation and amortization increased by $78 million for the three months ended March 31, 2024, compared to the same period in 2023, primarily due to higher amortization of intangible assets due to the acquisition of Vivint Smart Home in March 2023.

Selling, General and Administrative Costs

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

(In millions)			Texas						East						West/Services/Other						Vivint Smart Home**(a)**						Corporate						Total
Three months ended March 31, 2024			$	194					$	160					$	55					$	166					$	16					$	591
Three months ended March 31, 2023			170						149						51						50						6						426

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

Selling, general and administrative costs increased by $165 million for the three months ended March 31, 2024, compared to the same period in 2023, due to the following:

			(In millions)
Increase due to the acquisition of Vivint Smart Home in March 2023			$	104
Increase in provision for credit losses due to higher Home retail revenues and deteriorated customer payment behavior primarily in Texas			31
Increase in broker fee and commission expenses			19
Increase in marketing and media expenses			14
Increase in personnel costs			8
Decrease due to the sale of STP in November 2023			(3)
Other			(8)
Increase in selling, general and administrative costs			$	165

Acquisition-Related Transaction and Integration Costs

Acquisition-related transaction and integration costs of $9 million and $71 million for the three months ended March 31, 2024 and 2023, respectively, include:

			As of March 31,
(In millions)			2024						2023
Vivint Smart Home integration costs			$	8					$	30
Vivint Smart Home acquisition costs			—						36
Other integration costs, primarily related to Direct Energy			1						5
Acquisition-related transaction and integration costs			$	9					$	71

(Loss)/Gain on Sale of Assets

The gain on sale of assets of $199 million for the three months ended March 31, 2023 was related to the sale of land and related assets from the Astoria site.

Other Income, Net

Other income, net increased by $14 million for the three months ended March 31, 2024, compared to the same period in 2023, primarily due to a reduction of $12 million related to an indemnity.

Loss on Debt Extinguishment

A loss on debt extinguishment of $58 million was recorded for the three months ended March 31, 2024, driven by the repurchase of portion of the Convertible Senior Notes, as further discussed in Note 7, Long-term Debt and Finance Leases.

Income Tax Expense/(Benefit)

For the three months ended March 31, 2024, income tax expense of $184 million was recorded on pre-tax income of $695 million. For the same period in 2023, an income tax benefit of $336 million was recorded on a pre-tax loss of $1.7 billion. The effective tax rates were 26.5% and 20.1% for the three months ended March 31, 2024 and 2023, respectively.

For the three months ended March 31, 2024, the effective tax rate was higher than the statutory rate of 21% primarily due to the state tax expense. For the same period in 2023, the effective tax rate was lower than the statutory rate of 21% primarily due to current state tax expense and permanent differences which when applied to year-to-date financial statement losses have an inverted effect and reduce the overall effective income tax rate.

Liquidity and Capital Resources

Liquidity Position

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

(In millions)			March 31, 2024						December 31, 2023
Cash and cash equivalents			$	278					$	541
Restricted cash - operating			10						21
Restricted cash - reserves(a)			5						3
Total			293						565
Total availability under Revolving Credit Facility and collective collateral facilities(b)			4,501						4,278
Total liquidity, excluding funds deposited by counterparties			$	4,794					$	4,843

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

(b) Total capacity of Revolving Credit Facility and collective collateral facilities was $7.4 billion as of March 31, 2024 and December 31, 2023

For the three months ended March 31, 2024, total liquidity, excluding funds deposited by counterparties, decreased by $49 million. Changes in cash and cash equivalent balances are further discussed hereinafter under the heading Cash Flow Discussion. Cash and cash equivalents at March 31, 2024 were predominantly held in bank deposits.

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

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

Credit Ratings

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

Liquidity

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

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

Senior Credit Facility

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

At the Company’s election, the Term Loans will bear interest at a rate per annum equal to either (1) a fluctuating rate equal to the highest of (A) the rate published by the Federal Reserve Bank of New York in effect on such day, plus 0.50% (B) the rate of interest per annum publicly announced from time to time by The Wall Street Journal as the “Prime Rate” in the United States, and (C) a rate of one-month Term SOFR (as defined in the Term Loan Facility), plus 1.00%, or (2) Term SOFR (as defined in the Term Loan Facility and which rate will not be less than 0%) for a one-, three- or six-month interest period or such other period as agreed to by the Agent and the lenders, as selected by the Company, plus 2.00%.

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

Convertible Senior Notes

As of April 1, 2024, the Company's Convertible Senior Notes are convertible during the quarterly period ending June 30, 2024 due to the satisfaction of the Common Stock Sale Price Condition. For further discussion, see Note 7, Long-term Debt and Finance Leases.

During the three months ended March 31, 2024 and through April 30, 2024, the Company completed repurchases of a portion of the Convertible Senior Notes using cash on hand and a portion of the proceeds from the Term Loans, as detailed in the table below. For the three months ended March 31, 2024, a $58 million loss on debt extinguishment was recorded.

(In millions, except percentages)
Settlement Period						Principal Repurchased						Cash Paid**(a)**						Average Repurchase Percentage
March 2024						$	92					$	151					162.366%
April 2024						251						452						179.454%
Total Repurchases						$	343					$	603

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

Vivint Term Loan Repricing

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

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

Debt Reduction

The Company intends to spend approximately $500 million reducing debt during 2024 to maintain its targeted credit metrics. The Company intends to fund the debt reduction from cash from operations.

Market Operations

The Company's market operations activities require a significant amount of liquidity and capital resources. These liquidity requirements are primarily driven by: (i) margin and collateral posted with counterparties; (ii) margin and collateral required to participate in physical markets and commodity exchanges; (iii) timing of disbursements and receipts (e.g., buying energy before receiving retail revenues); and (iv) initial collateral for large structured transactions. As of March 31, 2024, the Company had total cash collateral outstanding of $309 million and $2.9 billion outstanding in letters of credit to third parties primarily to support its market activities. As of March 31, 2024, total funds deposited by counterparties were $241 million in cash and $518 million of letters of credit.

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

First Lien Structure

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

The Company's first lien counterparties may have a claim on its assets to the extent market prices differ from the hedged prices. As of March 31, 2024, all hedges under the first liens were in-the-money on a counterparty aggregate basis.

Capital Expenditures

The following table summarizes the Company's capital expenditures for maintenance, environmental and growth investments for the three months ended March 31, 2024, and the estimated forecast for the remainder of the year.

(In millions)			Maintenance						Environmental						Investments and Integration						Total
Texas			$	41					$	2					$	2					$	45
West/Services/Other			5						—						1						6
Vivint Smart Home			4												—						4
Corporate			5						—						9						14
Total cash capital expenditures for the three months ended March 31, 2024			55						2						12						69
Integration operating expenses and cost to achieve			—						—						18						18
Investments			—						—						34						34
Total cash capital expenditures and investments for the three months ended March 31, 2024			$	55					$	2					$	64					$	121
Estimated cash capital expenditures and investments for the remainder of 2024			255						23						271						549
Estimated full year 2024 cash capital expenditures and investments			$	310					$	25					$	335					$	670

Investments and Integration for the three months ended March 31, 2024 include growth expenditures, integration, small book acquisitions and other investments.

Environmental Capital Expenditures

NRG estimates that environmental capital expenditures from 2024 through 2028 required to comply with environmental laws will be approximately $64 million, primarily driven by the cost of complying with ELG at the Company's coal units in Texas.

Share Repurchases

On June 22, 2023, NRG revised its long-term capital allocation policy to target allocating approximately 80% of cash available for allocation after debt reduction to be returned to shareholders. As part of the revised capital allocation framework, the Company announced an increase to its share repurchase authorization to $2.7 billion, to be executed through 2025. As of April 30, 2024, $1.5 billion is remaining under the $2.7 billion authorization. See Note 9, Changes in Capital Structure for additional discussion.

Common Stock Dividends

During the first quarter of 2024, NRG increased the annual dividend to $1.63 from $1.51 per share and expects to target an annual dividend growth rate of 7%-9% per share in subsequent years. A quarterly dividend of $0.4075 per share was paid on the Company's common stock during the three months ended March 31, 2024. On April 17, 2024, NRG declared a quarterly dividend on the Company's common stock of $0.4075 per share, payable on May 15, 2024 to stockholders of record as of May 1, 2024.

Series A Preferred Stock Dividends

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

Obligations under Certain Guarantees

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

Obligations Arising Out of a Variable Interest in an Unconsolidated Entity

Variable interest in equity investments — NRG’s investment in Ivanpah is a variable interest entity for which NRG is not the primary beneficiary. NRG's pro-rata share of non-recourse debt was approximately $461 million as of March 31, 2024. This indebtedness may restrict the ability of Ivanpah to issue dividends or distributions to NRG.

Contractual Obligations and Market Commitments

NRG has a variety of contractual obligations and other market commitments that represent prospective cash requirements in addition to the Company's capital expenditure programs, as disclosed in the Company's 2023 Form 10-K. See also Note 7, Long-term Debt and Finance Leases, and Note 14, Commitments and Contingencies, to this Form 10-Q for a discussion of new commitments and contingencies that also include contractual obligations and market commitments that occurred during the three months ended March 31, 2024.

Cash Flow Discussion

The following table reflects the changes in cash flows for the three month ended March 31, 2024 and 2023, respectively:

			Three months ended March 31,
(In millions)			2024						2023						Change
Cash provided/(used) by operating activities			$	267					$	(1,598)					$	1,865
Cash used by investing activities			(92)						(2,350)						2,258
Cash (used)/provided by financing activities			(288)						2,536						(2,824)

Cash provided/(used) by operating activities

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

			(In millions)
Changes in cash collateral in support of risk management activities due to change in commodity prices			$	1,701
Increase in operating income/loss adjusted for other non-cash items			515
Decrease in working capital primarily related to the payout of the Company's annual incentive plan in 2024 reflecting financial outperformance for 2023			(216)
Decrease in working capital primarily due to deferred revenues related to Vivint Smart Home			(78)
Decrease in working capital primarily due to lower gas pricing coupled with lower gas sales volumes			(57)
			$	1,865

Cash used by investing activities

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

			(In millions)
Decrease in cash paid for acquisitions primarily due to the acquisition of Vivint Smart Home in March 2023			$	2,470
Decrease in proceeds from sale of assets primarily due to the sale of the land and related assets from the Astoria site in January 2023			(216)
Decrease in capital expenditures			73
Decrease in insurance proceeds for property, plant and equipment, net			(68)
Decrease in proceeds from sales of investments in nuclear decommissioning trust fund securities, net of purchases due to sale of STP in 2023			(12)
Increase due to fewer purchases of emissions allowances, net of sales			11
			$	2,258

Cash (used)/provided by financing activities

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

			(In millions)
Decrease in proceeds from Revolving Credit Facility and Receivables Securitization Facilities in 2023			$	(950)
Decrease in proceeds due to the issuance of long-term debt in 2023			(731)
Decrease in proceeds due to the issuance of preferred stock in 2023			(636)
Decrease in net receipts from settlement of acquired derivatives			(328)
Decrease due to repayments of long-term debt and finance leases			(93)
Decrease primarily due to debt extinguishment costs in 2024, partially offset by debt issuance costs in 2023			(40)
Increase in payments of dividends primarily due to preferred stock			(31)
Decrease due to payments for share repurchase activity			(15)
			$	(2,824)

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

For the three months ended March 31, 2024, the Company had domestic pre-tax book income of $759 million and foreign pre-tax book loss of $64 million. As of December 31, 2023, the Company had cumulative U.S. Federal NOL carryforwards of $8.4 billion, of which $6.4 billion do not have an expiration date, and cumulative state NOL carryforwards of $6.4 billion for financial statement purposes. NRG also has cumulative foreign NOL carryforwards of $411 million, most of which do not have an expiration date. In addition to the above NOLs, NRG has a $517 million indefinite carryforward for interest deductions, as well as $317 million of tax credits to be utilized in future years. As a result of the Company's tax position, including the utilization of federal and state NOLs, and based on current forecasts, the Company anticipates net income tax payments due to federal, state and foreign jurisdictions of up to $160 million in 2024. As of March 31, 2024, NRG as an applicable corporation is subject to the CAMT and expects to claim a CAMT credit in future years. The Company has reflected the impact of the CAMT in its current and deferred taxes. There is no CAMT impact to NRG's effective income tax rate.

As of March 31, 2024, the Company has $72 million of tax-effected uncertain federal, state, and foreign tax benefits, for which the Company has recorded a non-current tax liability of $76 million (inclusive of accrued interest) until final resolution is reached with the related taxing authority.

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

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

Deferred tax assets and valuation allowance

Net deferred tax balance — As of March 31, 2024 and December 31, 2023, NRG recorded a net deferred tax asset, excluding valuation allowance, of $2.4 billion and $2.5 billion, respectively. The Company believes certain state net operating losses may not be realizable under the more-likely-than-not measurement and as such, a valuation allowance was recorded as of March 31, 2024 and December 31, 2023 as discussed below.

NOL Carryforwards — As of March 31, 2024, the Company had a tax-effected cumulative U.S. NOLs consisting of carryforwards for federal and state income tax purposes of $1.8 billion and $367 million, respectively. The Company estimates it will need to generate future taxable income to fully realize the net federal deferred tax asset before the expiration of certain carryforwards commences in 2030. In addition, NRG has tax-effected cumulative foreign NOL carryforwards of $107 million.

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

Guarantor Financial Information

As of March 31, 2024, the Company's outstanding registered senior notes consisted of $375 million of the 2027 Senior Notes and $821 million of the 2028 Senior Notes as shown in Note 7, Long-term Debt and Finance Leases. These Senior Notes are guaranteed by certain of NRG's current and future 100% owned domestic subsidiaries, or guarantor subsidiaries (the “Guarantors”). See Exhibit 22.1 to this Form 10-Q for a listing of the Guarantors. These guarantees are both joint and several.

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

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

The following table presents the summarized statement of operations:

(In millions)			Three months ended March 31, 2024
Revenue(a)			$	6,071
Operating income(b)			901
Total other expense			(136)
Income before income taxes			765
Net Income			567

(a)Intercompany transactions with Non-Guarantors of $1 million during the three months ended March 31, 2024

(b)Intercompany transactions with Non-Guarantors including cost of operations of $19 million and selling, general and administrative of $52 million during the three months ended March 31, 2024

The following table presents the summarized balance sheet information:

(In millions)			March 31, 2024
Current assets(a)			$	6,968
Property, plant and equipment, net			1,225
Non-current assets			11,634
Current liabilities(b)			7,779
Non-current liabilities			9,057

(a)Includes intercompany receivables due from Non-Guarantors of $74 million as of March 31, 2024

(b)Includes intercompany payables due to Non-Guarantors of $23 million as of March 31, 2024

Fair Value of Derivative Instruments

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

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

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

The following tables disclose the activities that include both exchange and non-exchange traded contracts accounted for at fair value in accordance with ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). Specifically, these tables disaggregate realized and unrealized changes in fair value; disaggregate estimated fair values as of March 31, 2024, based on their level within the fair value hierarchy defined in ASC 820; and indicate the maturities of contracts at March 31, 2024. For a full discussion of the Company's valuation methodology of its contracts, see Derivative Fair Value Measurements in Note 5, Fair Value of Financial Instruments.

Derivative Activity Gains			(In millions)
Fair Value of Contracts as of December 31, 2023			$	648
Contracts realized or otherwise settled during the period			231
Other changes in fair value			297
Fair Value of Contracts as of March 31, 2024			$	1,176

			Fair Value of Contracts as of March 31, 2024
(In millions)			Maturity
Fair Value Hierarchy (Losses)/Gains			1 Year or Less						Greater than 1 Year to 3 Years						Greater than 3 Years to 5 Years						Greater than 5 Years						Total Fair Value
Level 1			$	(98)					$	54					$	(5)					$	(2)					$	(51)
Level 2			346						609						172						133						1,260
Level 3			(32)						(17)						—						16						(33)
Total			$	216					$	646					$	167					$	147					$	1,176

The Company has elected to disclose derivative assets and liabilities on a trade-by-trade basis and does not offset amounts at the counterparty master agreement level. Also, collateral received or posted on the Company's derivative assets or liabilities are recorded on a separate line item on the balance sheet. Consequently, the magnitude of the changes in individual current and non-current derivative assets or liabilities is higher than the underlying credit and market risk of the Company's portfolio. As discussed in Item 3, Quantitative and Qualitative Disclosures About Market Risk — Commodity Price Risk, to this Form 10-Q, NRG measures the sensitivity of the Company's portfolio to potential changes in market prices using VaR, a statistical model which attempts to predict risk of loss based on market price and volatility. NRG's risk management policy places a limit on one-day holding period VaR, which limits the Company's net open position. As the Company's trade-by-trade derivative accounting results in a gross-up of the Company's derivative assets and liabilities, the net derivative asset and liability position is a better indicator of NRG's hedging activity. As of March 31, 2024, NRG's net derivative asset was $1.2 billion, an increase to total fair value of $528 million as compared to December 31, 2023. This increase was primarily driven by gains in fair value and the roll-off of trades that settled during the period.

Based on a sensitivity analysis using simplified assumptions, the impact of a $0.50 per MMBtu increase or decrease in natural gas prices across the term of the derivative contracts would result in a change of approximately $2.1 billion in the net value of derivatives as of March 31, 2024.

Critical Accounting Estimates

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

but on the results reported through the application of accounting measures used in preparing the financial statements and related disclosures, even if the nature of the accounting policies has not changed.

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

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

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