UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

NRG Energy, Inc.

(Exact Name of Registrant as Specified in Its Charter)

(State or Other Jurisdiction of Incorporation)

001-15891		41-1724239
(Commission File Number)		(IRS Employer Identification No.)

211 Carnegie Center		Princeton, NJ 08540
(Address of Principal Executive Offices)		(Zip Code)

609-524-4500

(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02 Results of Operations and Financial Condition

     On February 23, 2010, NRG Energy, Inc. issued a press release announcing its financial results for the year ended December 31, 2009. A copy of the press release is furnished as Exhibit 99.1 to this report on Form 8-K and is hereby incorporated by reference.

Item 9.01 Financial Statements and Exhibits

     (d) Exhibits.

Exhibit
Number		Document
99.1		Press Release, dated February 23, 2010

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 hereunto duly authorized.

Dated: February 23, 2010

Exhibit Index

Exhibit
Number		Document
99.1		Press Release, dated February 23, 2010

Exhibit 99.1

NRG Energy, Inc. Reports Record Full Year 2009 and
Fourth Quarter Results

Full-Year 2009 Financial Highlights

•		$2,618 million of adjusted EBITDA, net of MtM impacts — up 14% from 2008
•		$1,862 million of adjusted cash from operating activities — up 26% from 2008
•		$941 million of net income and $3.44 per diluted common share
•		$500 million of common stock (19.3 million shares) repurchased during the year

Fourth Quarter Financial Highlights

•		$489 million of adjusted EBITDA, net of MtM impacts
•		$33 million of net income and $0.11 per diluted common share
•		$3,794 million of liquidity as of December 31, 2009, including $2,304 million in cash
•		$181 million payment of NRG Common Stock Finance II (CSF II) facility
•		$200 million pre-payment of debt on the Term Loan B Facility

Announcing 2010 Capital Allocation Plan and Updating 2010 Guidance:

•		Launching 2010 Capital Allocation Plan with $180 million share buy back, in line with commitment of 3% of market capitalization
•		Reaffirming 2010 EBITDA guidance of $2,200 million and increasing cash flow from operations guidance by $75 million to $1,425 million

PRINCETON, NJ; February 23, 2010—NRG Energy, Inc. (NYSE: NRG) for the year end December 31, 2009, reported net income of $941 million, or $3.44 per diluted common share, compared to $1,225 million, or $4.43 per diluted common share, for the full year 2008. Income from continuing operations before income taxes was $97 million lower in 2009 than in 2008 as contributions from the wholesale business declined in 2009, primarily due to a decrease of $776 million of pre-tax mark-to-market gains and $199 million lower contract amortization revenue. 2009 results benefited from the Reliant Energy acquisition as the segment generated $966 million of pre-tax income during the eight months ended December 31, 2009. Non-recurring operating expenses during 2009 included $31 million of Exelon defense costs and $54 million of transaction and integration costs associated with the Company’s acquisition of Reliant Energy.

For the quarter ended December 31, 2009, the Company reported net income of $33 million, or $0.11 per diluted common share, compared to $271 million, or $0.97 per diluted common share, for the fourth quarter last year. The current quarter’s income from continuing operations before income taxes of $147 million benefited from Reliant Energy’s contribution of $159 million in pre-tax income, which included $274 million of pre-tax mark-to-market gains on economic hedges. Fourth quarter 2008 net income was $481 million, which benefited from $360 million of pre-tax net mark-to-market gains on economic hedges. Included in the current quarter’s results is a $12 million pre-tax charge associated with the planned cancellation of the pollution control equipment project at Indian River unit 3.

Plant operational performance was strong during the fourth quarter 2009 as the Company’s coal assets realized an overall 90% equivalent availability factor and increased production due to

improved market conditions compared to earlier in the year. Highlighting this quarter’s plant performance was the Limestone facility, which ran without incident during the quarter. For 2009, NRG’s coal plants performed above the industry’s top quartile level for safety and availability and posted the second best year for operating performance in the Company’s history. During 2009 the Huntley generating station in Western New York led NRG’s coal assets with a 93% equivalent availability factor.

“2009 was a record year for NRG both in terms of EBITDA and cash flow, which, given the prevailing economic conditions, is a testament to the robustness of our business plan and the skill and dedication of our people,” commented David Crane, NRG President and Chief Executive Officer. “With our strong liquidity and hedge position, we are well situated to pursue the many growth opportunities that will make NRG a leader in the development of the 21^st century new energy economy.”

Regional Segment Review of Results

Table 1: Income (Loss) from Continuing Operations before Income Taxes

($ in millions)		Three Months Ended								Twelve Months Ended
Segment		12/31/09				12/31/08				12/31/09				12/31/08
Reliant Energy			(115	)			—				172				—
Texas			156				175				865				1,217
Northeast			32				45				294				307
South Central			(1	)			(8	)			(12	)			50
West			8				13				40				51
International			10				10				159				82
Thermal			4				1				10				12
Corporate (1)			(183	)			(115	)			(597	)			(426	)
Total, net of MtM Impacts			(89	)			121				931				1,293
Add: MtM forward position accruals (2)			35				365				105				536
Less: Prior period MtM reversals (3)			(173	)			6				(588	)			38
Add: Hedge ineffectiveness(4)			28				1				45				(25	)
Total			147				481				1,669				1,766

MtM Impacts of Hedging Activities

The Company, in the normal course of business, enters into contracts to lock in forward prices for a significant portion of its expected power generation and to fulfill Reliant Energy’s supply requirements. Although these transactions are predominantly economic hedges of our generation portfolio and load requirements, a portion of these forward sales and purchases are not afforded hedge accounting treatment and the MtM change in value of these transactions is recorded to current period earnings. During the fourth quarter of 2009, the Company recorded a $236 million forward net MtM gain on our economic hedges driven by $274 million of gains in our Retail segment. In the fourth quarter of 2008, there were $360 million net MtM gains on our economic hedges caused by decreasing power and natural gas prices, including $365 million of unrealized gains on open positions related to economic hedges. For the full year 2009, the Company recognized $738 million of MtM gains with $656 million of these gains associated with the reversal of positions acquired as part of the Reliant Energy acquisition. Our wholesale business recorded MtM gains during the full year 2008 of $473 million as a result of falling power and natural gas prices, of which $536 million were associated with unrealized gains on open positions related to economic hedges on the wholesale portfolio.

Table 2: Adjusted EBITDA, net of MtM impacts

($ in millions)		Three Months Ended								Twelve Months Ended
Segment		12/31/09				12/31/08				12/31/09				12/31/08
Reliant Energy			104				—				642				—
Texas			264				270				1,329				1,543
Northeast			77				92				468				475
South Central			25				17				81				145
West			11				17				53				68
International			12				10				59				82
Thermal			8				4				25				28
Corporate			(12	)			(7	)			(39	)			(50	)
Adjusted EBITDA, net of MtM(1)			489				403				2,618				2,291

Reliant Energy: During the fourth quarter, Reliant Energy’s adjusted EBITDA, net of MtM impacts was $104 million excluding the $89 million loss associated with the termination of forward positions related to the credit sleeve unwind. The quarter’s margins benefited from colder than normal weather in December in Texas which led to increased customer usage. Total sales to both Commercial and Industrial (C&I) and Mass customers were 12 TWh.

2009 full year adjusted EBITDA, net of MtM impacts for Reliant Energy totaled $642 million as warmer than normal weather during the summer combined with low supply costs drove strong margins in the Mass business. This was partially offset by a decrease in customer count during the eight months ended December 31, 2009. Total Retail revenues were $4,440 million on 38 TWh sold to both C&I and Mass customers. Retail cost of sales totaled $3,442 million, resulting in a Retail gross margin of $998 million, excluding the $89 million loss relating to the credit sleeve unwind. Other operating expenses incurred during the year totaled $356 million and included $98 million of expenses associated with the call center and billing, credit, and collections; $142 million of selling, general and administrative expense; $55 million of gross receipts tax; and $61 million of bad debt expense.

Texas: Adjusted EBITDA, net of MtM impacts for the fourth quarter of 2009 decreased by $6 million to $264 million compared to the fourth quarter of 2008. Lower development costs of $2

million were offset by a $6 million increase in O&M and property tax expenses due to the addition of Cedar Bayou 4 and a full quarter of Elbow Creek operations, and $2 million lower economic gross margin.

Annual adjusted EBITDA, net of MtM impacts decreased by $214 million from 2008 to 2009 to $1,329 million. Average power prices decreased substantially in the Houston zone in 2009 due to lower natural gas prices and heat rates. By comparison, heat rates during 2008 increased from congestion between zones in ERCOT during May and June resulting in very high power prices which benefited our gas-fueled plants. An increase in generation from the gas fleet, mostly due to Cedar Bayou unit 4 which started operations in June of 2009, plus a full year of wind generation from Elbow Creek only partially offset a decline in generation from our coal units at WA Parish and Limestone which were backed down more frequently in 2009 as a result of economic conditions. The combined impact of lower power prices and generation, offset by a decline in fuel costs driven by the lower price of natural gas, resulted in a $174 million decline in energy margins from 2008 to 2009. In addition, emissions sales and ancillary services declined by a combined $17 million largely due to sales of Carbon Financial Instruments in 2008. Operationally, maintenance costs increased at the region’s coal facilities by $20 million due to increased planned maintenance outages.

Northeast: For the fourth quarter, adjusted EBITDA, net of MtM impacts was $77 million, down $15 million compared to the fourth quarter of 2008. Net energy margins were down $8 million impacted by lower power prices and decreased generation. Emissions expense was $8 million higher due to RGGI compliance costs while operating expenses were flat, including the write-off of $12 million due to the planned cancellation of an air pollution control project at Indian River unit 3.

Annual adjusted EBITDA, net of MtM impacts decreased $7 million over the prior year to $468 million. Despite a 31% decrease in generation across the fleet, energy margins increased $63 million as a result of higher hedged prices in 2009 compared to 2008. Offsetting favorable energy margins in 2009 were increased emissions expenses of $22 million due to RGGI compliance, $20 million lower emissions credits sales, and $14 million higher property tax expenses due to lower Empire Zone tax benefits.

South Central: Adjusted EBITDA, net of MtM impacts for the fourth quarter increased by $8 million to $25 million. This was largely driven by increased merchant sale volumes, which led to higher merchant energy margins of $21 million during the quarter. Contracted energy margins decreased $7 million driven by a 12% decrease in load resulting from the expiration of a contract with a regional utility. Operating expenses were greater by $4 million mainly attributable to higher maintenance expenses from an increased length and scope of planned outage work.

On a full year basis, adjusted EBITDA, net of MtM impacts declined $64 million to $81 million from $145 million in 2008. Contributing to the decline in adjusted EBITDA was a 45% lower average realized merchant price of $53 per MWh, which more than offset a sales volume increase of 46% compared to 2008. Also contributing to the comparatively lower results were reduced load requirements, driven by the expiration of a contract with a regional utility, and increased length of scheduled outages. Finally, 2008 results included unrealized gains related to forward energy sales that were delivered in 2009.

Liquidity and Capital Resources

Table 3: Corporate Liquidity

($ in millions)		December 31, 2009				December 31, 2008
Cash and cash equivalents		$	2,304			$	1,494
Funds deposited by counterparties			177				754
Restricted cash			2				16
Total Cash		$	2,483			$	2,264
Letter of credit availability			583				860
Revolver availability			905				1,000
Total Liquidity		$	3,971			$	4,124
Less: Funds deposited as collateral by hedge counterparties			(177	)			(760	)
Total Current Liquidity		$	3,794			$	3,364

For the year ended December 31, 2009 total liquidity, excluding counterparty collateral received, was $3,794 million, a $430 million increase compared to $3,364 million at the end of 2008. The increase of $810 million in cash and cash equivalents was driven by $1,862 million of adjusted cash flow from operations, a $700 million bond issuance on June 5, 2009, and $284 million in proceeds from the sale of MIBRAG. These sources of cash were offset by $734 million of capital expenditures, $500 million of share repurchases, $360 million for the acquisition of Reliant Energy, and repayments of $429 million to the Term Loan B Facility and $181 million settlement of the CSF II facility. During 2009, net letters of credit issued from the Synthetic Letter of Credit Facility increased by $277 million primarily as a result of the Reliant Energy acquisition and unwind of the credit sleeve. The Company issued letters of credit in the amount of $95 million from the Revolving Credit Facility of which $59 million supports the tax exempt bonds issued by Dunkirk Power LLC to help fund environmental capital expenditures at the facility.

Expansion at South Texas Project Update

On February 17, 2010, an agreement in principle was announced among CPS Energy, NRG and its subsidiary Nuclear Innovation in North America (NINA), whereby NINA would acquire control of the STP 3 & 4 project, with an increase in ownership to 92.375% from 50% as part of a settlement of the litigation between the parties. That agreement in principle remains subject to documentation and the attendant risk that one or more significant issues might arise during documentation that could derail the business agreement between the parties.

2009 Share Repurchase Plan

For the year, the Company purchased 19,305,500 shares at a volume weighted average cost of $25.88 per share. During the fourth quarter of 2009, the Company purchased 10,386,400 of its common shares in open market transactions at a volume weighted average cost of $24.05 per share, for a total of $250 million. Since beginning share repurchases in December 2004, the Company has returned an aggregate of $2.4 billion of capital to its common shareholders at a weighted average cost of $23.92 per share.

2010 Capital Allocation Plan

NRG’s Board of Directors approved $180 million of share repurchases for 2010, in line with our commitment of 3% of our market capitalization. This is within the capacity projected to be available under our restricted payment basket. Further, as part of the 2010 Capital Allocation Plan, the Company will invest $241 million in maintenance capital expenditures, $227 million in net environmental expenditures in its existing assets and $598 million, net, in projects under RepoweringNRG. In addition to scheduled debt amortization payments, in the first quarter of 2010, the Company expects to offer its first-lien lenders 50% of the “2009 Excess Cash Flow” as defined in the Company’s Credit Agreement less the $200 million pre-payment made in December of 2009. This amount is currently anticipated to result in an additional payment of approximately $230 million resulting in a total of approximately $430 million of debt reduction payments to the Term Loan B facility.

Outlook for 2010

NRG is reaffirming its 2010 adjusted EBITDA guidance of $2,200 million and increasing cash flow from operations guidance by $75 million to $1,425 million due to reduced federal and state income tax payments. The Company’s environmental capital expenditures are expected to drop significantly as a result of the planned cancellation of the installation of the air quality control systems on unit 3 at Indian River. The $494 million increase in Repowering Investments, net is due to additional investment associated with STP 3&4 stemming from NINA’s proposed increased ownership in the project. The Repowering Investments, net increase includes an $80 million payment to CPS Energy, a $50 million payment from Toshiba, and a $134 million draw on the long lead time facility. This does not include the anticipated proceeds from equity sell downs.

Table 5: 2010 Reconciliation of Adjusted EBITDA Guidance ($ in millions)

		02/23/2010				10/29/2009
Wholesale			1,700				1,700
Retail			500				500
Updated adjusted EBITDA guidance, excluding MtM adjustment			2,200				2,200
Interest payments			(628	)			(628	)
Income tax			(75	)			(150	)
Collateral payments /working capital/other changes			(72	)			(72	)
Cash flow from operations			1,425				1,350
Maintenance capital expenditures			(241	)			(262	)
Preferred dividends			(9	)			(9	)
Free cash flow before environmental and growth capital			1,175				1,079
Environmental capital expenditures, net			(227	)			(281	)
Repowering investments, net			(598	)			(104	)
Free cash flow			350				694

Earnings Conference Call

On February 23, 2010, NRG will host a conference call at 9:00 a.m. eastern to discuss these results. Investors, the news media and others may access the live webcast of the conference call and accompanying presentation materials by logging on to NRG’s website at http://www.nrgenergy.com and clicking on “Investors.” The webcast will be archived on the site for those unable to listen in real time.

About NRG

NRG Energy, Inc., a Fortune 500 company, owns and operates one of the country’s largest and most diverse power generation portfolios. Headquartered in Princeton, NJ, the Company’s power plants provide more than 24,000 megawatts of generation capacity — enough to supply more than 20 million homes. NRG’s retail business, Reliant Energy, serves more than 1.6 million residential, business, and commercial and industrial customers in Texas. A past recipient of the energy industry’s highest honors — Platts Industry Leadership and Energy Company of the Year awards — NRG is a member of the U.S. Climate Action Partnership (USCAP), a group of business and environmental organizations calling for mandatory legislation to reduce greenhouse gas emissions. More information is available at www.nrgenergy.com.

Safe Harbor Disclosure

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are subject to certain risks, uncertainties and assumptions and include our adjusted EBITDA, cash flow from operations and free cash flow guidance, the 2010 Capital Allocation Plan, expected earnings, future growth, financial performance, environmental capital expenditures, and nuclear development, and typically can be identified by the use of words such as “will,” “expect,” “estimate,” “anticipate,” “forecast,” “plan,” “believe” and similar terms. Although NRG believes that its expectations are reasonable, it can give no assurance that these expectations will prove to have been correct, and actual results may vary materially. Factors that could cause actual results to differ materially from those contemplated above include, among others, general economic conditions, hazards customary in the power industry, weather conditions, successful partnering relationships, loan guarantees, competition in wholesale power markets, the volatility of energy and fuel prices, failure of customers to perform under contracts, changes in the wholesale power markets, changes in government regulation of markets and of environmental emissions, the condition of capital markets generally, our ability to access capital markets, unanticipated outages at our generation facilities, adverse results in current and future litigation, the inability to implement value enhancing improvements to plant operations and companywide processes, our ability to achieve the expected benefits and timing of development projects, and the 2010 Capital Allocation Plan, and share repurchase under the Capital Allocation Plan may be made from time to time subject to market conditions and other factors, including as permitted by United States securities laws.

NRG undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The adjusted EBITDA guidance and adjusted cash flow from operations, and free cash flows are estimates as of today’s date, February 23, 2010 and are based on assumptions believed to be reasonable as of this date. NRG expressly disclaims any current intention to update such guidance. The foregoing review of factors that could cause NRG’s actual results to differ materially from those contemplated in the forward-looking statements included in this news release should be considered in connection with information regarding risks and uncertainties that may affect NRG’s future results included in NRG’s filings with the Securities and Exchange Commission at www.sec.gov.

# # #

Contacts:

		Media:				Investors:
		Meredith Moore				Nahla Azmy
		609.524.4522				609.524.4526
		Lori Neuman				Stefan Kimball
		609.524.4525				609.524.4527
		Dave Knox				Erin Gilli
		713.824.6445				609.524.4528

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

		Three months ended December 31,								Twelve months ended December 31,
(In millions except per share amounts)		2009				2008				2009				2008
Operating Revenues
Total operating revenues		$	2,141			$	1,655			$	8,952			$	6,885
Operating Costs and Expenses
Cost of operations			1,422				786				5,323				3,598
Depreciation and amortization			224				171				818				649
Selling, general and administrative			159				86				550				319
Acquisition-related transaction and integration costs			8				—				54				—
Development costs			14				17				48				46
Total operating costs and expenses			1,827				1,060				6,793				4,612
Operating Income			314				595				2,159				2,273
Other Income/(Expense)
Equity in earnings of unconsolidated affiliates			8				24				41				59
Gains on sales of equity method investments			—				—				128				—
Other income/(loss), net			4				3				(5	)			17
Refinancing expenses			(20	)			—				(20	)			—
Interest expense			(159	)			(141	)			(634	)			(583	)
Total other expenses			(167	)			(114	)			(490	)			(507	)
Income From Continuing Operations Before Income Taxes			147				481				1,669				1,766
Income tax expense			114				210				728				713
Income From Continuing Operations			33				271				941				1,053
Income from discontinued operations, net of income taxes			—				—				—				172
Net Income			33				271				941				1,225
Less: Net loss attributable to noncontrolling interest			—				—				(1	)			—
Net Income attributable to NRG Energy, Inc.			33				271				942				1,225
Dividends for preferred shares			6				14				33				55
Income Available for Common Stockholders		$	27			$	257			$	909			$	1,170
Earnings per share attributable to NRG Energy, Inc. Common Stockholders
Weighted average number of common shares outstanding — basic			242				233				246				235
Income from continuing operations per weighted average common share — basic		$	0.11			$	1.10			$	3.70			$	4.25
Income from discontinued operations per weighted average common share — basic			—				—				—				0.73
Net Income per Weighted Average Common Share — Basic		$	0.11			$	1.10			$	3.70			$	4.98
Weighted average number of common shares outstanding — diluted			244				276				271				275
Income from continuing operations per weighted average common share — diluted		$	0.11			$	0.97			$	3.44			$	3.80
Income from discontinued operations per weighted average common share — diluted			—				—				—				0.63
Net Income per Weighted Average Common Share — Diluted		$	0.11			$	0.97			$	3.44			$	4.43
Amounts Attributable to NRG Energy, Inc.:
Income from continuing operations, net of income taxes		$	33			$	271				942				1,053
Income from discontinued operations, net of income taxes			—				—				—				172
Net Income		$	33			$	271			$	942			$	1,225

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

		As of December 31,
		2009				2008
		(In millions)
ASSETS
Current Assets
Cash and cash equivalents		$	2,304			$	1,494
Funds deposited by counterparties			177				754
Restricted cash			2				16
Accounts receivable — trade, less allowance for doubtful accounts of $29 and $3			876				464
Current portion of note receivable— affiliate and capital leases			32				68
Inventory			541				455
Derivative instruments valuation			1,636				4,600
Cash collateral paid in support of energy risk management activities			361				494
Prepayments and other current assets			279				147
Total current assets			6,208				8,492
Property, Plant and Equipment
In service			14,083				13,084
Under construction			533				804
Total property, plant and equipment			14,616				13,888
Less accumulated depreciation			(3,052	)			(2,343	)
Net property, plant and equipment			11,564				11,545
Other Assets
Equity investments in affiliates			409				490
Note receivable — affiliate and capital leases, less current portion			504				435
Goodwill			1,718				1,718
Intangible assets, net of accumulated amortization of $648 and $335			1,777				815
Nuclear decommissioning trust fund			367				303
Derivative instruments valuation			683				885
Other non-current assets			148				125
Total other assets			5,606				4,771
Total Assets		$	23,378			$	24,808

		As of December 31,
		2009				2008
		(In millions)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt and capital leases		$	571			$	464
Accounts payable — trade			693				447
Accounts payable — affiliates			4				4
Derivative instruments valuation			1,473				3,981
Deferred income taxes			197				201
Cash collateral received in support of energy risk management activities			177				760
Accrued interest expense			207				178
Other accrued expenses			298				215
Other current liabilities			142				331
Total current liabilities			3,762				6,581
Other Liabilities
Long-term debt and capital leases			7,847				7,697
Nuclear decommissioning reserve			300				284
Nuclear decommissioning trust liability			255				218
Postretirement and other benefit obligations			287				277
Deferred income taxes			1,783				1,190
Derivative instruments valuation			387				508
Out-of-market contracts			294				291
Other non-current liabilities			519				392
Total non-current liabilities			11,672				10,857
Total Liabilities			15,434				17,438
3.625% convertible perpetual preferred stock; $0.01 par value; 250,000 shares issued and outstanding (at liquidation value of $250, net of issuance costs)			247				247
Commitments and Contingencies
Stockholders’ Equity
4% convertible perpetual preferred stock; $0.01 par value; 154,057 shares issued and outstanding at December 31, 2009 (at liquidation value of $154, net of issuance costs) and 420,000 shares issued and outstanding at December 31, 2008 (at liquidation value of $420, net of issuance costs)			149				406
5.75% convertible perpetual preferred stock; $0.01 par value, 1,841,680 shares issued and outstanding at December 31, 2008 (at liquidation value of $460, net of issuance costs)			—				447
Common stock; $0.01 par value; 500,000,000 shares authorized; 295,861,759 and 263,599,200 shares issued and 253,995,308 and 234,356,717 shares outstanding at December 31, 2009 and 2008			3				3
Additional paid-in-capital			4,948				4,350
Retained earnings			3,332				2,423
Less treasury stock, at cost - 41,866,451 and 29,242,483 shares at December 31, 2009 and 2008			(1,163	)			(823	)
Accumulated other comprehensive income			416				310
Noncontrolling interest			12				7
Total Stockholders’ Equity			7,697				7,123
Total Liabilities and Stockholders’ Equity		$	23,378			$	24,808

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

		Year Ended
		December 31,
		2009				2008
		(In millions)
Cash Flows from Operating Activities
Net income		$	941			$	1,225
Adjustments to reconcile net income to net cash provided by operating activities:
Distributions and equity in earnings of unconsolidated affiliates			(41	)			(44	)
Depreciation and amortization			818				649
Provision for bad debts			61				—
Amortization of nuclear fuel			36				39
Amortization of financing costs and debt discount/premiums			44				37
Amortization of intangibles and out-of-market contracts			153				(270	)
Amortization of unearned equity compensation			26				26
Loss/(gain) on disposals and sales of assets			17				25
Impairment charges and asset write downs			—				23
Changes in derivatives			(225	)			(484	)
Changes in deferred income taxes and liability for unrecognized tax benefits			689				762
Gain on sales of equity method investments			(128	)			—
Gain on sale of discontinued operations			—				(273	)
Gain on sale of emission allowances			(4	)			(51	)
Gain recognized on settlement of pre-existing relationship			(31	)			—
Changes in nuclear decommissioning trust liability			26				34
Changes in collateral deposits supporting energy risk management activities			127				(417	)
Cash provided/(used) by changes in other working capital, net of acquisition and disposition effects
Accounts receivable, net			88				1
Inventory			(83	)			(5	)
Prepayments and other current assets			26				(7	)
Accounts payable			(176	)			(31	)
Option premiums collected			(282	)			268
Accrued expenses and other current liabilities			48				(6	)
Other assets and liabilities			(24	)			(22	)
Net Cash Provided by Operating Activities			2,106				1,479
Cash Flows from Investing Activities
Acquisition of businesses, net of cash acquired			(427	)			—
Capital expenditures			(734	)			(899	)
Increase in restricted cash, net			14				13
(Increase)/decrease in notes receivable			(22	)			10
Decrease in trust fund balances			—				—
Purchases of emission allowances			(78	)			(8	)
Proceeds from sale of emission allowances			40				75
Investments in nuclear decommissioning trust fund securities			(305	)			(616	)
Proceeds from sales of nuclear decommissioning trust fund securities			279				582
Proceeds from sale of assets, net			6				14
Proceeds from sale of equity method investment			284				—
Equity investment in unconsolidated affiliate			(6	)			(84	)
Purchases of securities			—				—
Proceeds from sale of discontinued operations and assets, net of cash divested			—				241
Other			(5	)			—
Net Cash Used by Investing Activities			(954	)			(672	)
Cash Flows from Financing Activities
Payment of dividends to preferred stockholders			(33	)			(55	)
Net payments to settle acquired derivatives that include financing elements			(79	)			(43	)
Payment for treasury stock			(500	)			(185	)
Installment proceeds from sale of noncontrolling interest in subsidiary			50				50
Payment to settle CSF I CAGR			—				(45	)
Proceeds from issuance of common stock, net of issuance costs			2				9
Proceeds from issuance of long-term debt			892				20
Payment of deferred debt issuance costs			(31	)			(4	)
Payments for short and long-term debt			(644	)			(234	)
Net Cash Used by Financing Activities			(343	)			(487	)
Change in cash from discontinued operations			—				43
Effect of exchange rate changes on cash and cash equivalents			1				(1	)
Net Increase in Cash and Cash Equivalents			810				362
Cash and Cash Equivalents at Beginning of Period			1,494				1,132
Cash and Cash Equivalents at End of Period		$	2,304			$	1,494

Appendix Table A-1: Fourth Quarter 2009 Regional EBITDA Reconciliation

The following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income/(loss)

		Reliant												South
(dollars in millions)		Energy				Texas				Northeast				Central				West				International				Thermal				Corporate				Total
Net Income (Loss) attributable to NRG Energy, Inc			159				162				(12	)			1				8				7				2				(294	)			33
Plus:
Income Tax			—				—				—				—				—				3				—				111				114
Interest Expense			5				(12	)			14				10				—				2				1				149				169
Amortization of Finance Costs			—				—				—				—				—				—				—				6				6
Amortization of Debt (Discount)/Premium)			—				—				—				2				—				—				—				2				4
Depreciation Expense			52				119				30				17				2				—				3				1				224
ARO Accretion Expense			—				—				1				—				1				—				—				—				2
Amortization of Power Contracts			98				(8	)			—				(3	)			—				—				—				—				87
Amortization of Fuel Contracts			(25	)			4				—				—				—				—				—				—				(21	)
Amortization of Emission Allowances			—				9				—				—				—				—				—				—				9
EBITDA			289				274				33				27				11				12				6				(25	)			627
Early termination of CSRA			89				(4	)			—				—				—				—				—				—				85
Exelon Defense Costs			—				—				—				—				—				—				—				—				—
Reliant Energy Transaction and Integration Costs			—				—				—				—				—				—				—				13				13
Adjusted EBITDA			378				270				33				27				11				12				6				(12	)			725
Less: MtM forward position accruals			67				(2	)			(32	)			2				1				—				(1	)			—				35
Add: Prior period MtM reversals			(207	)			21				11				—				1				—				1				—				(173	)
Less: Hedge Ineffectiveness			—				29				(1	)			—				—				—				—				—				28
Adjusted EBITDA, excluding MtM			104				264				77				25				11				12				8				(12	)			489

Appendix Table A-2: Fourth Quarter 2008 Regional EBITDA Reconciliation

The following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income/(loss)

										South
(dollars in millions)		Texas				Northeast				Central				West				International				Thermal				Corporate				Total
Net Income (Loss) attributable to NRG Energy, Inc			285				80				(8	)			13				6				5				(110	)			271
Plus:
Income Tax			211				—				—				—				4				—				(5	)			210
Interest Expense			13				14				13				1				—				1				90				132
Amortization of Finance Costs			—				—				—				—				—				—				5				5
Amortization of Debt (Discount)/Premium			—				—				—				—				—				—				4				4
Depreciation Expense			117				32				17				2				—				2				1				171
ARO Accretion Expense			1				1				—				1				—				—				—				3
Amortization of Power Contracts			(40	)			—				(5	)			—				—				—				—				(45	)
Amortization of Fuel Contracts			(6	)			—				—				—				—				—				—				(6	)
Amortization of Emission Allowances			10				—				—				—				—				—				—				10
EBITDA			591				127				17				17				10				8				(15	)			755
Exelon Defense Costs			—				—				—				—				—				—				8				8
Adjusted EBITDA			591				127				17				17				10				8				(7	)			763
Less: MtM forward position accruals			322				39				—				—				—				4				—				365
Add: Prior period MtM reversals			4				2				—				—				—				—				—				6
Less: Hedge Ineffectiveness			3				(2	)			—				—				—				—				—				1
Adjusted EBITDA, excluding MtM			270				92				17				17				10				4				(7	)			403

Appendix Table A-3: Year-to-date December 31, 2009 Regional EBITDA Reconciliation

The following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income/(loss)

		Reliant
(dollars in millions)		Energy				Texas				Northeast				South Central				West				International				Thermal				Corporate				Total
Net Income (Loss) attributable to NRG Energy, Inc			966				673				291				(41	)			40				150				8				(1,145	)			942
Plus:
Income Tax			—				171				—				—				—				9				—				548				728
Interest Expense			34				4				54				42				2				8				5				460				609
Amortization of Finance Costs			1				—				—				—				—				—				—				30				31
Amortization of Debt (Discount)/Premium			—				—				—				6				—				—				—				8				14
Depreciation Expense			137				472				118				67				8				—				10				6				818
ARO Accretion Expense			—				3				2				—				3				—				—				—				8
Amortization of Power Contracts			258				(57	)			—				(22	)			—				—				—				—				179
Amortization of Fuel Contracts			(49	)			7				—				—				—				—				—				—				(42	)
Amortization of Emission Allowances			—				38				—				—				—				—				—				—				38
EBITDA			1,347				1,311				465				52				53				167				23				(93	)			3,325
Early Termination of CSRA			89				(4	)			—				—				—				—				—				—				85
Exelon Defense Costs			—				—				—				—				—				—				—				31				31
Reliant Energy Transaction and Integration Expenses			—				—				—				—				—				—				—				54				54
Currency Loss on MIBRAG Sale Proceeds			—				—				—				—				—				20				—				—				20
Settlement of Pre-Existing Contract with Reliant Energy			—				—				—				—				—				—				—				(31	)			(31	)
Gain on Sale of Equity Method Investments			—				—				—				—				—				(128	)			—				—				(128	)
Adjusted EBITDA			1,436				1,307				465				52				53				59				23				(39	)			3,356
Less: MtM forward position accruals			138				(43	)			38				(29	)			—				—				1				—				105
Add: Prior period MtM reversals			(656	)			26				39				—				—				—				3				—				(588	)
Less: Hedge Ineffectiveness			—				47				(2	)			—				—				—				—				—				45
Adjusted EBITDA, excluding MtM			642				1,329				468				81				53				59				25				(39	)			2,618

Appendix Table A-4: Year-to-date December 31, 2008 Regional EBITDA Reconciliation

The following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income/(loss)

(dollars in millions)		Texas				Northeast				South Central				West				International				Thermal				Corporate				Total
Net Income (Loss) attributable to NRG Energy, Inc			911				390				50				51				235				16				(428	)			1,225
Plus:
Income Tax			692				—				—				—				19				—				2				713
Interest Expense			100				56				51				6				—				6				333				552
Amortization of Finance Costs			—				—				—				—				—				—				22				22
Amortization of Debt (Discount)/Premium			—				—				—				—				—				—				9				9
Depreciation Expense			451				109				67				8				—				10				4				649
ARO Accretion Expense			3				3				—				3				—				—				—				9
Amortization of Power Contracts			(255	)			—				(23	)			—				—				—				—				(278	)
Amortization of Fuel Contracts			(13	)			—				—				—				—				—				—				(13	)
Amortization of Emission Allowances			40				—				—				—				—				—				—				40
EBITDA			1,929				558				145				68				254				32				(58	)			2,928
Exelon Defense Costs			—				—				—				—				—				—				8				8
(Income)/loss from Discontinued Operations			—				—				—				—				(172	)			—				—				(172	)
Adjusted EBITDA			1,929				558				145				68				82				32				(50	)			2,764
Less: MtM forward position accruals			436				96				—				—				—				4				—				536
Add: Prior period MtM reversals			25				13				—				—				—				—				—				38
Less: Hedge Ineffectiveness			(25	)			—				—				—				—				—				—				(25	)
Adjusted EBITDA, excluding MtM			1,543				475				145				68				82				28				(50	)			2,291

Appendix Table A-5: Full Year 2009 Adjusted Cash Flow from Operating Activities Reconciliation

The following table summarizes the calculation of adjusted Cash Flow from Operations and provides a reconciliation to Cash from Operations

		Year ended
		December 31,
(dollars in millions)		2009
Cash Flow from Operating Activities			2,106
Less: Cash receipts from termination of hedges associated with CSRA unwind			(165	)
Less: Reclassifying of payment of Financing Element of Acquired Derivatives			(79	)
Adjusted Cash Flow from Operating Activities			1,862

EBITDA, adjusted EBITDA and adjusted EBITDA, net of MtM impacts are non GAAP financial measures. These measurements are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. The presentation of adjusted EBITDA and adjusted EBITDA, net of MtM impacts should not be construed as an inference that NRG’s future results will be unaffected by unusual or non-recurring items.

EBITDA represents net income before interest, taxes, depreciation and amortization. EBITDA is presented because NRG considers it an important supplemental measure of its performance and believes debt-holders frequently use EBITDA to analyze operating performance and debt service capacity. EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations are:

	•		EBITDA does not reflect cash expenditures, or future requirements for capital expenditures, or contractual commitments;
	•		EBITDA does not reflect changes in, or cash requirements for, working capital needs;
	•		EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debts or the cash income tax payments;
	•		Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; and
	•		Other companies in this industry may calculate EBITDA differently than NRG does, limiting its usefulness as a comparative measure.

Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to use to invest in the growth of NRG’s business. NRG compensates for these limitations by relying primarily on our GAAP results and using EBITDA and adjusted EBITDA only supplementally. See the statements of cash flow included in the financial statements that are a part of this news release.

Adjusted EBITDA is presented as a further supplemental measure of operating performance. Adjusted EBITDA represents EBITDA adjusted for reorganization, restructuring, impairment and corporate relocation charges, discontinued operations, write downs and gains or losses on the sales of equity method investments; Exelon defense costs, and Texas retail acquisition and integration costs; and factors which we do not consider indicative of future operating performance. The reader is encouraged to evaluate each adjustment and the reasons NRG considers it appropriate for supplemental analysis. As an analytical tool, adjusted EBITDA is subject to all of the limitations applicable to EBITDA. In addition, in evaluating adjusted EBITDA, the reader should be aware that in the future NRG may incur expenses similar to the adjustments in this news release.

Adjusted cash flow from operating activities is a non-GAAP measure NRG provides to show cash from operations exclusive of the nonrecurring benefit from net cash proceeds from the termination of positions associated with unwind of the Merrill Lynch credit sleeve in October 2009. In addition, NRG provides a reclassification of net payments of derivative contracts acquired in business combinations from financing to operating cash flow. The Company provides the reader with this alternative view of operating cash flow because the cash settlement of these derivative contracts materially impact operating revenues and cost of sales, while GAAP requires NRG to treat them as if there was a financing activity associated with the contracts as of the acquisition dates. Free cash flow is cash flow from operations less capital expenditures, preferred stock dividends and repowering capital expenditures net of project funding and is used by NRG predominantly as a forecasting tool to estimate cash available for debt reduction and other capital allocation alternatives. The reader is encouraged to evaluate each of these adjustments and the reasons NRG considers them appropriate for supplemental analysis. Because we have mandatory debt service requirements (and other non-discretionary expenditures) investors should not rely on adjusted cash flow from operating activities or free cash flow as a measure of cash available for discretionary expenditures. In addition, in evaluating adjusted cash flow or free cash flow, the reader should be aware that in the future NRG may incur expenses similar to the adjustment in this news release.