NRG ENERGY, INC. 10-K

Item 9A — Controls and Procedures Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures and Internal Control Over Financial Reporting Under the supervision and with the participation of NRG's management, including its principal executive officer, principal financial officer and principal accounting officer, NRG conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, as such term is defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act. Based on this evaluation, the Company's principal executive officer, principal financial officer and principal accounting officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K. Management's report on the Company's internal control over financial reporting and the report of the Company's independent registered public accounting firm are incorporated under the caption "Management's Report on Internal Control over Financial Reporting" and under the caption "Report of Independent Registered Public Accounting Firm" in this Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Changes in Internal Control over Financial Reporting There were no changes in NRG’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred in the fourth quarter of 2020 that materially affected, or are reasonably likely to materially affect, NRG’s internal control over financial reporting. Inherent Limitations over Internal Controls NRG's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP. The Company's internal control over financial reporting includes those policies and procedures that: 1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company's assets; 2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with GAAP, and that the Company's receipts and expenditures are being made only in accordance with authorizations of its management and directors; and 3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the consolidated financial statements. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls. Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Management's Report on Internal Control over Financial Reporting The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of the Company's management, including its principal executive officer, principal financial officer and principal accounting officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the Company's evaluation under the framework in Internal Control — Integrated Framework (2013) , the Company's management concluded that its internal control over financial reporting was effective as of December 31, 2020. The effectiveness of the Company's internal control over financial reporting as of December 31, 2020 has been audited by KPMG LLP, the Company's independent registered public accounting firm, as stated in its report which is included in this Annual Report on Form 10-K. 81 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders NRG Energy, Inc.: Opinion on Internal Control Over Financial Reporting We have audited NRG Energy, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission . In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report dated March 1, 2021 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Philadelphia, Pennsylvania March 1, 2021 82 Item 9B — Other Information Sale of 4.8 GWs of Generation Assets On February 28, 2021, the Company entered into a Purchase and Sale Agreement (the "Purchase Agreement") with Generation Bridge Acquisition, LLC ("Generation"), a Delaware limited liability company, pursuant to which NRG has agreed to sell, or cause to be sold, as applicable, to Generation one hundred percent (100%) of the outstanding membership interests of each of (1) Long Beach Generation LLC ("Long Beach") and Mission Del Cielo, LLC ("Mission Del Cielo"), each of which is an indirect wholly owned subsidiary of NRG, and (2) Arthur Kill Power LLC ("Arthur Kill"), Connecticut Jet Power LLC ("Connecticut Jet Power"), Devon Power LLC ("Devon"), Middletown Power LLC ("Middletown"), Montville Power LLC ("Montville") and Oswego Harbor Power LLC ("Oswego," and together with Long Beach, Mission Del Cielo, Arthur Kill, Connecticut Jet Power, Devon, Middletown and Montville, the "Subsidiaries"), each of which is a wholly owned subsidiary of NRG (such sale, the "Transaction"). Mission Del Cielo owns one hundred percent (100%) of the outstanding membership interests of Mission del Sol, LLC ("Mission Del Sol," and together with Mission Del Cielo, the "Holdcos"). Mission Del Sol owns one hundred percent (100%) of the outstanding membership interests of Sunrise Power Company, LLC (together with Long Beach, the "California Project Companies"). Arthur Kill, Connecticut Jet Power, Devon, Middletown, Montville and Oswego, together with the California Project Companies, are referred to as the "Project Companies". Consideration Subject to the terms and conditions of the Purchase Agreement, NRG has agreed to sell, or cause to be sold, as applicable, to Generation all of the outstanding membership interests of the Subsidiaries for an aggregate base purchase price of $760 million, subject to adjustments for working capital, indebtedness, and certain operations of the Holdcos and the Project Companies during the interim period between the date of the Purchase Agreement and the consummation of the Transaction (the "Closing"). Representations and Warranties and Covenants The Purchase Agreement contains customary representations and warranties of NRG and Generation. The representations and warranties of each party set forth in the Purchase Agreement have been made solely for the benefit of the other party to the Purchase Agreement, and such representations and warranties should not be relied on by any other person. In addition, such representations and warranties (a) have been qualified by disclosure schedules that the parties have delivered in connection with the execution of the Purchase Agreement, (b) are subject to the materiality standards set forth in the Purchase Agreement, which may differ from what may be viewed as material by investors, (c) in certain cases, were made as of a specific date, and (d) may have been used for purposes of allocating risk between the respective parties rather than establishing matters of fact. Accordingly, no person should rely on the representations and warranties as characterizations of the actual state of facts. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the execution of the Purchase Agreement. Generation has agreed to obtain, at its sole cost, a representation and warranty insurance policy. As a result, NRG will not be liable for any breach of its representations and warranties that occurs after the Closing. Between the date of the Purchase Agreement and the Closing, subject to certain exceptions, NRG agrees to cause the Holdcos and the Project Companies to be operated in the ordinary course of business consistent with laws and permits and past practice and to use commercially reasonable efforts to preserve, maintain and protect the assets and business of the Holdcos and the Project Companies. Following the Closing, NRG will be required to pay all costs incurred by Generation or the applicable Project Companies arising out of or related to certain environmental liabilities (the "Specific Environmental Liabilities") relating to certain remedial actions or the ownership of the Project Companies or the generation facilities owned by the Project Companies, other than certain costs to decommission such facilities, prior to the date of the Closing (the "Closing Date"), subject to a $39 million cap established as set forth in the Purchase Agreement (the "Seller Environmental Liability Cap"). NRG's obligations to pay such costs will terminate on the earlier to occur of the seventh anniversary of the Closing Date and the date on which NRG has paid Generation an amount equal to the Seller Environmental Liability Cap, subject to an extension of such term and a corresponding increase in the Seller Environmental Liability Cap to the extent there are remaining costs to address Specific Environmental Liabilities that have been reasonably estimated but not yet incurred prior to such anniversary date. Conditions to Closing and Deliverables The Transaction is subject to various conditions to Closing, including: (a) the accuracy of the representations and warranties of each party at the time of Closing, (b) compliance by each party with its covenants), (c) the absence of any law or order prohibiting the Closing, (d) certain contractual consents having been obtained, (e) receipt of certain regulatory approvals, as necessary (including HSR, FERC, and NYSPSC authorizations), and (f) the absence of a material adverse effect with respect 83 to the Holdcos, the California Project Companies and the other Subsidiaries, as well as other customary closing conditions. The Transaction is expected to close in the fourth quarter of 2021. In connection with the closing of the Transaction, NRG and Generation will enter in to certain additional ancillary agreements, including a transition services agreement. In addition, ArcLight Energy Partners Fund VII, L.P., the parent company of Generation, has executed and delivered a parent guaranty with respect to the obligations of Generation in connection with the Transaction. Indemnification and Termination Both NRG and Generation have agreed, subject to certain limitations, to indemnify the other party for losses arising from certain breaches of the Purchase Agreement. In addition, NRG has agreed to indemnify Generation for liabilities related to certain environmental matters and certain ongoing actions or proceedings, among other things. The Purchase Agreement contains certain customary termination rights for each of NRG and Generation, including among other things, that either party may terminate the Purchase Agreement if (a) the parties mutually agree in writing, (b) the Closing has not occurred on or before December 31, 2021, which date may be extended for an additional 90 days to enable the parties to satisfy certain regulatory conditions, or (c) the other party has incurably breached a representation, warranty, covenant or agreement contained in the Purchase Agreement resulting in a failure of a condition set forth in the Purchase Agreement. If NRG terminates the Purchase Agreement as a result of a breach by Generation of certain representations, warranties covenants or other agreements, Generation will be required to pay NRG a termination fee equal to 10 percent of the purchase price as adjusted in accordance with the Purchase Agreement. Compensatory Arrangements of Certain Officers As previously disclosed in a Current Report on Form 8-K, filed with the SEC on February 4, 2021, the Company announced that Gaëtan Frotté was appointed Interim Chief Financial Officer of the Company effective February 4, 2021. On March 1, 2021, the Compensation Committee of the Board of Directors of the Company (the "Compensation Committee") determined that while Mr. Frotté serves as Interim Chief Financial Officer, in addition to his base salary, he will be entitled to a monthly stipend of $50,000, effective February 4, 2021, to recognize his additional responsibilities. In addition, the Board of Directors of the Company approved the promotion of Mr. Brian E. Curci, the Senior Vice President and General Counsel, to Executive Vice President and General Counsel, effective on February 22, 2021. Mr. Curci will continue to be responsible for the day-to-day legal operations of the Company. In addition, on March 1, 2021, the Compensation Committee approved changes to Mr. Curci's annual compensation. Mr. Curci's annual base salary increased to $500,000 effective February 22, 2021. In addition, Mr. Curci's target long-term incentive award under the Company's LTIP has been increased to 200% of his base salary and Mr. Curci's target bonus under the Company's Annual Incentive Plan ("AIP") has been increased to 75% of his base salary with a maximum of 150%. The general terms and conditions of the LTIP and AIP are described in the Company's definitive proxy statement filed on March 15, 2020 with the SEC. The description of the LTIP is qualified in its entirety by reference to the full text of the LTIP, a copy of which was filed as Exhibit 10.1 to the Company's current report on Form 8-K filed on April 28, 2017, and the description of the AIP is qualified in its entirety by reference to the full text of the AIP, a copy of which was filed as Exhibit 10.1 to the Company's current report on Form 8-K filed on May 7, 2015. 84 PART III Item 10 — Directors, Executive Officers and Corporate Governance Directors E. Spencer Abraham has been a director of NRG since December 2012. Previously, he served as a director of GenOn Energy, Inc. from January 2012 to December 2012. He is Chairman and Chief Executive Officer of The Abraham Group, an international strategic consulting firm based in Washington, D.C. which he founded in 2005. Prior to that, Secretary Abraham served as Secretary of Energy under President George W. Bush from 2001 through January 2005 and was a U.S. Senator for the State of Michigan from 1995 to 2001. Secretary Abraham serves on the boards of the following public companies: PBF Energy and Two Harbors Investment Corp., as well as chairman of the board of Uranium Energy Corp. Secretary Abraham previously served as the non-executive chairman of AREVA, Inc., the U.S. subsidiary of the French-owned nuclear company, and as a director of Occidental Petroleum Corporation, Deepwater Wind LLC, International Battery, C3 IoT, Green Rock Energy, ICx Technologies, PetroTiger and Sindicatum Sustainable Resources. He also previously served on the advisory board or committees of Midas Medici (Utilipoint), Millennium Private Equity, Sunovia and Wetherly Capital. Antonio Carrillo has been a director of NRG since October 2019. Mr. Carrillo currently serves as Arcosa Inc.’s President and Chief Executive Officer since November 2018 and is a member of its Board of Directors. From April 2018 to November 2018, Mr. Carrillo served as Senior Vice President and Group President of Construction, Energy, Marine and Components of Trinity Industries, Inc. (Trinity). From 2012 to February 2018, Mr. Carrillo served as the Chief Executive Officer of Orbia Advance Corporation (formerly known as Mexichem S.A.B. de C.V.) (Orbia), a publicly-traded global specialty chemical company. Prior to joining Orbia, Mr. Carrillo spent 16 years at Trinity where he served as Senior Vice President and Group President of Trinity’s Energy Equipment Group and was responsible for Trinity’s Mexico operations. Mr. Carrillo previously served as a director of Trinity from 2014 until November 2018 and a director of Dr Pepper Snapple Group, Inc. from 2015 to 2018. Matthew Carter, Jr. has been a director of NRG since March 2018. Mr. Carter currently serves as Chief Executive Officer of Aryaka Networks, Inc. Mr. Carter served as President and Chief Executive Officer and a director of Inteliquent, Inc., a publicly traded provider of voice telecommunications services, from June 2015 until February 2017 when Inteliquent, Inc. was acquired. He served as President of the Sprint Enterprise Solutions business unit of Sprint Corporation, a publicly traded telecommunications company, from September 2013 until January 2015 and, previous to that position, served as President, Sprint Global Wholesale & Emerging Solutions at Sprint Nextel Corporation. Mr. Carter also serves as a director of Jones Lang Lasalle Incorporated. He previously served as a director of USG Corporation from 2012 to 2018, Apollo Education Group, Inc. from 2012 to 2017 and Inteliquent, Inc. from June 2015 to February 2017 and has significant marketing, technology and international experience, including previous management oversight for all of Inteliquent, Inc.’s operations. Lawrence S. Coben has served as Chairman of the Board since February 2017, and has been a director of NRG since December 2003. He was Chairman and Chief Executive Officer of Tremisis Energy Corporation LLC until December 2017. Dr. Coben was Chairman and Chief Executive Officer of both Tremisis Energy Acquisition Corporation II, a publicly held company, from July 2007 through March 2009 and of Tremisis Energy Acquisition Corporation from February 2004 to May 2006. From January 2001 to January 2004, he was a Senior Principal of Sunrise Capital Partners L.P., a private equity firm. From 1997 to January 2001, Dr. Coben was an independent consultant. From 1994 to 1996, Dr. Coben was Chief Executive Officer of Bolivian Power Company. Dr. Coben serves on the board of Freshpet, Inc. and served on the advisory board of Morgan Stanley Infrastructure II, L.P. from September 2014 through December 2016. Dr. Coben is also Executive Director of the Escala Initiative and a Consulting Scholar at the University of Pennsylvania Museum of Archaeology and Anthropology. Heather Cox has been a director of NRG since March 2018. Ms. Cox currently serves as Chief Digital Health and Analytics Officer at Humana Inc. Ms. Cox was Executive Vice President, Chief Technology & Digital Officer of United Services Automobile Association, Inc. from October 2016 to March 2018. Ms. Cox served as Chief Executive Officer, Financial Technology Division and Head of Citi FinTech of Citigroup, Inc. from November 2015 to September 2016, and as Chief Client Experience, Digital and Marketing Officer, Global Consumer Bank of Citigroup, Inc. from April 2014 to November 2015. Prior to that, Ms. Cox served at Capital One Financial Corporation for six years, most recently as Executive Vice President, US Card Operations, Capital One from August 2011 to August 2014. Ms. Cox also served in various managerial and executive roles at E*Trade Bank for ten years. Elisabeth B. Donohue has been a director of NRG since October 2020. Ms. Donohue retired in January 2020 from Publicis Groupe, the world’s third largest communications company where she spent 32 years advising clients on their consumer marketing efforts and business transformation. Her most recent role included serving as the chief executive officer of Publicis Spine, a data and technology start up launched by Publicis Groupe in October 2017. From April 2016 to October 2017, Ms. Donohue served as Global Brand President of the media communications agency Starcom Worldwide. From 2009 through 2016, Ms. Donohue served as chief executive officer of Starcom USA, where she drove Starcom’s digital offering and built the 85 agency’s data and analytics practice. Ms. Donohue plays leadership roles on two non-profit boards. She is currently President of the Board of Trustees of Milton Academy based in Milton, Massachusetts and immediate past Board President of She Runs It based in New York City. Ms. Donohue also serves as a director of Synacor, where she acts as the chair of the compensation committee and is a member of the audit committee. Ms. Donohue graduated from Brown University with a B.A. in both Organizational Behavior & Management and Business Economics. Mauricio Gutierrez has served as President and Chief Executive Officer of NRG since December 2015 and as a director of NRG since January 2016. Prior to December 2015, Mr. Gutierrez was the Executive Vice President and Chief Operating Officer of NRG from July 2010 to December 2015. Mr. Gutierrez also served as the Interim President and Chief Executive Officer of Clearway Energy, Inc. from December 2015 to May 2016 and Executive Vice President and Chief Operating Officer of Clearway Energy, Inc. from December 2012 to December 2015. Mr. Gutierrez has been with NRG since August 2004 and served in multiple executive positions within NRG including Executive Vice President - Commercial Operations from January 2009 to July 2010 and Senior Vice President - Commercial Operations from March 2008 to January 2009. Prior to joining NRG in August 2004, Mr. Gutierrez held various commercial positions within Dynegy, Inc. Mr. Gutierrez served as a director of Clearway Energy, Inc. from 2012 until 2018. Paul W. Hobby has been a director of NRG since March 2006. Mr. Hobby is the Managing Partner of Genesis Park, L.P., a Houston-based private equity business specializing in technology and communications investments which he founded in 1999. Mr. Hobby routinely provides management and governance services to Genesis Park portfolio companies. Since November 2020, Mr. Hobby is also serving as Chief Executive Officer and a director of Genesis Park Acquisition Corp., a newly formed special purpose acquisition vehicle. He previously served as the Chief Executive Officer of Alpheus Communications, Inc., a Texas wholesale telecommunications provider from 2004 to 2011, and as Former Chairman of CapRock Services Corp., the largest provider of satellite services to the global energy business from 2002 to 2006. From November 1992 until January 2001, he served as Chairman and Chief Executive Officer of Hobby Media Services and was Chairman of Columbine JDS Systems, Inc. from 1995 until 1997. Mr. Hobby currently serves on the board of directors of Flotek Industries Inc. Mr. Hobby is former Chairman of the Houston Branch of the Federal Reserve Bank of Dallas and the Greater Houston Partnership and is former Chairman of the Texas Ethics Commission. He was an Assistant U.S. Attorney for the Southern District of Texas from 1989 to 1992, Chief of Staff to the Lieutenant Governor of Texas, Bob Bullock and an Associate at Fulbright & Jaworski from 1986 to 1989. Alexandra Pruner has been a director of NRG since October 2019. Ms. Pruner is a Senior Advisor of Perella Weinberg Partners, a global independent advisory firm providing strategic and financial advice and asset-management services, and its energy division, Tudor, Pickering, Holt & Co., since December 2018. She previously served as Partner and Chief Financial Officer of Perella Weinberg Partners from December 2016 through November 2018. She served as Chief Financial Officer and a member of the Management Committee at Tudor, Pickering, Holt & Co. from the firm's founding in 2007 until its combination with Perella Weinberg in 2016. Ms. Pruner serves on the board of directors and as a member of the audit committees of Plains All American Pipeline, L.P. and its general partner PAA GP Holdings LLC, and on the Board of Directors of Encino Acquisition Partners, a privately held company backed by CCPIB. She previously served on the Anadarko Petroleum Corporation Board until its merger with Occidental Petroleum. She is the founder and a board member of Women's Global Leadership Conference in Energy & Technology, is an Emeritus Director of the Amegy Bank Development Board and is the Chair of Brown University's President's Advisory Council on the Economics Department. Ms. Pruner is on the board of the Houston Zoo and serves on the Houston advisory Board of The Nature Conservancy, among other volunteer efforts. Anne C. Schaumburg has been a director of NRG since April 2005. From 1984 until her retirement in January 2002, she was Managing Director of Credit Suisse First Boston and a senior banker in the Global Energy Group. Ms. Schaumburg worked in the Investment Banking industry for 28 years specializing in the power sector. She ran Credit Suisse's Power Group from 1994 - 1999, prior to its consolidation with Natural Resources and Project Finance, where she was responsible for assisting clients on advisory and finance assignments. Her transaction expertise, across the spectrum of utility and unregulated power, includes mergers and acquisitions, debt and equity capital market financings, project finance and leasing, utility disaggregation and privatizations. Ms. Schaumburg is also the chair of the board of directors of Brookfield Infrastructure Partners since 2008 and chair of its audit committee. Thomas H. Weidemeyer has been a director of NRG since December 2003. Mr. Weidemeyer served as Director, Senior Vice President and Chief Operating Officer of United Parcel Service, Inc., the world's largest transportation company and President of UPS Airlines, until his retirement in December 2003. Mr. Weidemeyer became Manager of the Americas International Operation in 1989, and in that capacity directed the development of the UPS delivery network throughout Central and South America. In 1990, Mr. Weidemeyer became Vice President and Airline Manager of UPS Airlines and, in 1994, was elected its President and Chief Operating Officer. Mr. Weidemeyer became Senior Vice President and a member of the Management Committee of United Parcel Service, Inc. that same year, and he became Chief Operating Officer of United Parcel Service, Inc. in January 2001. Mr. Weidemeyer also serves as a director of The Goodyear Tire & Rubber Co., Waste Management, Inc. and Amsted Industries Incorporated. 86 Executive Officers Mauricio Gutierrez has served as President and Chief Executive Officer of NRG since December 2015 and as a director of NRG since January 2016. For additional biographical information for Mr. Gutierrez, see above under "Directors." Gaëtan Frotté has served as Interim Chief Financial Officer since February 2021 and Senior Vice President and Treasurer since December 2015. Mr. Frotté has held various senior management positions since joining the Company in 2006. He studied management at The University of Hertfordshire and received a B.A. in Accounting and Financing from Institut Supérieur du Commerce. He also holds an MBA, Finance from the University of Virginia - Darden Graduate School of Business Administration. David Callen has served as Senior Vice President and Chief Accounting Officer since February 2016 and Vice President and Chief Accounting Officer from March 2015 to February 2016. In this capacity, Mr. Callen is responsible for directing NRG's financial accounting and reporting activities. Mr. Callen also has served as Vice President and Chief Accounting Officer of Clearway Energy, Inc. from March 2015 to August 2018. Mr. Callen served as the Company's Vice President, Financial Planning & Analysis from November 2010 to March 2015. He previously served as Director, Finance from October 2007 through October 2010, Director, Financial Reporting from February 2006 through October 2007, and Manager, Accounting Research from September 2004 through February 2006. Prior to NRG, Mr. Callen was an auditor for KPMG LLP in both New York City and Tel Aviv Israel from October 1996 through April 2001. Brian Curci has served as Executive Vice President, General Counsel of NRG since March 2021. Mr. Curci served as Senior Vice President and General Counsel from March 2018 to March 2021 and Senior Vice President and Deputy General Counsel from April 2017 to March 2018. Since joining NRG in 2007, Mr. Curci has served in various legal roles with NRG, including as Corporate Secretary from October 2011 to July 2018. Prior to NRG, Mr. Curci was a corporate associate with the law firm Saul Ewing LLP in Philadelphia. Robert Gaudette has served as Senior Vice President, Business Solutions of NRG since December 2013. In this role, Mr. Gaudette oversees NRG's broad portfolio of products and services for the commercial and industrial customers. Prior to December 2013, Mr. Gaudette was Senior Vice President, C&I and Origination, starting in August 2013, and Senior Vice President - Product Development & Origination following the acquisition of GenOn in December 2012. Mr. Gaudette served as Senior Vice President and Chief Commercial Officer at GenOn from December 2010 to December 2012 and served as Vice President of Mirant's Mid-Atlantic business unit from August 2009 to December 2010. During his career at Mirant, which began in 2001, Mr. Gaudette worked in various other capacities including Director of West Power, Director of NYMEX Trading, Assistant to the Chief Operating Officer and NYMEX natural gas trader. Elizabeth Killinger has served as Executive Vice President and President, NRG Retail and Reliant of NRG since February 2016. Ms. Killinger was Senior Vice President and President, NRG Retail from June 2015 to February 2016 and Senior Vice President and President, NRG Texas Retail from January 2013 to June 2015. Ms. Killinger has also served as President of Reliant, a subsidiary of NRG, since October 2012. Prior to that, Ms. Killinger was Senior Vice President of Retail Operations and Reliant Residential from January 2011 to October 2012. Ms. Killinger has been with the Company and its predecessors since 2002 and has held various operational and business leadership positions within the retail organization. Prior to joining the Company, Ms. Killinger spent a decade providing strategy, management and systems consulting to energy, oilfield services and retail distribution companies across the U.S. and in Europe. Christopher Moser has served as Executive Vice President, Operations of NRG since January 2018. Mr. Moser previously served as Senior Vice President, Operations of NRG, with responsibility for Plant Operations, Commercial Operations, Business Operations and Engineering and Construction, beginning in March 2016. From June 2010 to March 2016, Mr. Moser served as Senior Vice President, Commercial Operations. In this capacity, he was responsible for the optimization of the Company's wholesale generation fleet. Code of Ethics NRG has adopted a code of ethics entitled "NRG Code of Conduct" that applies to directors, officers and employees, including the chief executive officer and senior financial officers of NRG. It may be accessed through the "Governance" section of the Company's website at www.nrg.com. NRG also elects to disclose the information required by Form 8-K, Item 5.05, "Amendments to the Registrant's Code of Ethics, or Waiver of a Provision of the Code of Ethics," through the Company's website, and such information will remain available on this website for at least a 12-month period. A copy of the "NRG Code of Conduct" is available in print to any stockholder who requests it. Other information required by this Item is incorporated by reference to the similarly named section of NRG's Definitive Proxy Statement for its 2021 Annual Meeting of Stockholders. 87 Item 11 — Executive Compensation Information required by this Item is incorporated by reference to the similarly named section of NRG's Definitive Proxy Statement for its 2021 Annual Meeting of Stockholders. Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Securities Authorized for Issuance under Equity Compensation Plans Plan Category (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (b) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a) Equity compensation plans approved by security holders 2,449,484 (1) $ 19.83 12,139,321 Equity compensation plans not approved by security holders 78,903 (2) 26.16 — (4) Total 2,528,387 $ 25.13 12,139,321 (3) (1) Consists of shares issuable under the NRG LTIP and the ESPP. The NRG LTIP became effective upon the Company's emergence from bankruptcy. On April 27, 2017, the NRG LTIP was amended and restated to increase the number of shares available for issuance to 25,000,000. The ESPP, as amended and restated, was approved by the Company's stockholders on April 27, 2017, and became effective April 28, 2017. As of December 31, 2020, there were 2,753,591 shares reserved from the Company's treasury shares for the ESPP (2) Consists of shares issuable under the NRG GenOn LTIP. The plans is listed as “not approved” because it was not subject to separate line item approval by NRG's stockholders when the Merger was approved. See Item 15 — Note 22, Stock-Based Compensation , to Consolidated Financial Statements for a discussion of the NRG GenOn LTIP (3) Consists of 9,385,730 shares of common stock under NRG's LTIP and 2,753,591 shares of treasury stock reserved for issuance under the ESPP. (4) Upon adoption of the NRG Amended and Restated LTIP effective April 27, 2017, no securities remain available for future issuance under the NRG GenOn LTIP. See Note 22, Stock-Based Compensation , for additional information NRG LTIP currently provides for grants of restricted stock units, relative performance stock units, deferred stock units and dividend equivalent rights. NRG's directors, officers and employees, as well as other individuals performing services for, or to whom an offer of employment has been extended by the Company, are eligible to receive grants under the NRG LTIP. The purpose of the NRG LTIP is to promote the Company's long-term growth and profitability by providing these individuals with incentives to maximize stockholder value and otherwise contribute to the Company's success and to enable the Company to attract, retain and reward the best available persons for positions of responsibility. The Compensation Committee of the Board of Directors administers the NRG LTIP. Other information required by this Item is incorporated by reference to the similarly named section of NRG's Definitive Proxy Statement for its 2021 Annual Meeting of Stockholders. Item 13 — Certain Relationships and Related Transactions, and Director Independence Information required by this Item is incorporated by reference to the similarly named section of NRG's Definitive Proxy Statement for its 2021 Annual Meeting of Stockholders. Item 14 — Principal Accounting Fees and Services Information required by this Item is incorporated by reference to the similarly named section of NRG's Definitive Proxy Statement for its 2021 Annual Meeting of Stockholders. 88 PART IV Item 15 — Exhibits, Financial Statement Schedules (a)(1) Financial Statements The following consolidated financial statements of NRG Energy, Inc. and related notes thereto, together with the reports thereon of KPMG LLP, are included herein: Consolidated Statements of Operations — Years ended December 31, 2020, 2019, and 2018 Consolidated Statements of Comprehensive Income — Years ended December 31, 2020, 2019, and 2018 Consolidated Balance Sheets — As of December 31, 2020 and 2019 Consolidated Statements of Cash Flows — Years ended December 31, 2020, 2019, and 2018 Consolidated Statements of Stockholders' Equity — Years ended December 31, 2020, 2019, and 2018 Notes to Consolidated Financial Statements (a)(2) Financial Statement Schedule The following Consolidated Financial Statement Schedule of NRG Energy, Inc. is filed as part of Item 15 of this report and should be read in conjunction with the Consolidated Financial Statements. Schedule II — Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore, have been omitted. (a)(3) Exhibits: See Exhibit Index submitted as a separate section of this report. (b) Exhibits See Exhibit Index submitted as a separate section of this report. (c) Not applicable 89 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders NRG Energy, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of NRG Energy, Inc. and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes and financial statement schedule II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 1, 2021 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. Changes in Accounting Principle As discussed in Note 10 to the consolidated financial statements, effective January 1, 2019, the Company adopted Financial Accounting Standard Board (FASB) Accounting Standards Codification (ASC) Topic 842, Leases , and related amendments. As discussed in Note 3 to the consolidated financial statements, effective January 1, 2018, the Company adopted FASB ASC Topic 606, Revenue from Contracts with Customers , and related amendments. Basis for Opinion These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Evaluation of the sufficiency of audit evidence obtained over operating revenues As discussed in Note 3 to the consolidated financial statements, the Company had $9,093 million of operating revenues. Operating revenue is derived from various revenue streams in different geographic markets and the Company’s processes and related information technology (IT) systems used to record revenue differ for each of these revenue streams. 90 We identified the evaluation of the sufficiency of audit evidence over operating revenues as a critical audit matter which required a high degree of auditor judgment due to the number of revenue streams and IT systems involved in the revenue recognition process. This included determining the revenue streams over which procedures were to be performed and evaluating the nature and extent of evidence obtained over the individual revenue streams as well as operating revenue in the aggregate. It also included the involvement of IT professionals with specialized skills and knowledge to assist in the performance of certain procedures. The following are the primary procedures we performed to address this critical audit matter. We, with the assistance of IT professionals, applied auditor judgment to determine the revenue streams over which procedures were performed as well as the nature and extent of such procedures. For each revenue stream over which procedures were performed, we evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s revenue recognition processes; involved IT professionals, who assisted in testing certain IT applications used by the Company in its revenue recognition processes; and assessed the recorded revenue by selecting transactions and comparing the amounts recognized to underlying documentation, including contracts with customers. In addition, we evaluated the sufficiency of audit evidence obtained over operating revenues by assessing the results of procedures performed, including the appropriateness of such evidence . /s/ KPMG LLP We have served as the Company's auditor since 2004. Philadelphia, Pennsylvania March 1, 2021 91 NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Year Ended December 31, (In millions, except per share amounts) 2020 2019 2018 Operating Revenues Total operating revenues $ 9,093 $ 9,821 $ 9,478 Operating Costs and Expenses Cost of operations 6,540 7,303 7,108 Depreciation and amortization 435 373 421 Impairment losses 75 5 99 Selling, general and administrative costs 933 827 799 Reorganization costs — 23 90 Development costs 8 7 11 Total operating costs and expenses 7,991 8,538 8,528 Gain on sale of assets 3 7 32 Operating Income 1,105 1,290 982 Other Income/(Expense) Equity in earnings of unconsolidated affiliates 17 2 9 Impairment losses on investments ( 18 ) ( 108 ) ( 15 ) Other income, net 67 66 18 Loss on debt extinguishment, net ( 9 ) ( 51 ) ( 44 ) Interest expense ( 401 ) ( 413 ) ( 483 ) Total other expense ( 344 ) ( 504 ) ( 515 ) Income from Continuing Operations Before Income Taxes 761 786 467 Income tax expense/(benefit) 251 ( 3,334 ) 7 Income from Continuing Operations 510 4,120 460 Income from discontinued operations, net of income tax — 321 ( 192 ) Net Income 510 4,441 268 Less: Net income attributable to noncontrolling interest and redeemable interests — 3 — Net Income Attributable to NRG Energy, Inc. $ 510 $ 4,438 $ 268 Earnings/(Loss) Per Share Attributable to NRG Energy, Inc. Common Stockholders Weighted average number of common shares outstanding — basic 245 262 304 Income from continuing operations per weighted average common share — basic $ 2.08 $ 15.71 $ 1.51 Income/(loss) from discontinued operations per weighted average common share — basic $ — $ 1.23 $ ( 0.63 ) Net Income per Weighted Average Common Share — Basic $ 2.08 $ 16.94 $ 0.88 Weighted average number of common shares outstanding — diluted 246 264 308 Income from continuing operations per weighted average common share — diluted $ 2.07 $ 15.59 $ 1.49 Income/(loss) from discontinued operations per weighted average common share — diluted $ — $ 1.22 $ ( 0.62 ) Net Income per Weighted Average Common Share — Diluted $ 2.07 $ 16.81 $ 0.87 See notes to Consolidated Financial Statements 92 NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Year Ended December 31, (In millions) 2020 2019 2018 Net Income $ 510 $ 4,441 $ 268 Other Comprehensive Income/(Loss), net of tax Unrealized gain on derivatives, net of income tax — — 23 Foreign currency translation adjustments, net of income tax 8 ( 1 ) ( 11 ) Available-for-sale securities, net of income tax — ( 19 ) 1 Defined benefit plans, net of income tax ( 22 ) ( 78 ) ( 35 ) Other comprehensive (loss) ( 14 ) ( 98 ) ( 22 ) Comprehensive Income 496 4,343 246 Less: Comprehensive income attributable to noncontrolling interests and redeemable noncontrolling interests — 3 14 Comprehensive Income Attributable to NRG Energy, Inc. $ 496 $ 4,340 $ 232 See notes to Consolidated Financial Statements 93 NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, (In millions) 2020 2019 ASSETS Current Assets Cash and cash equivalents $ 3,905 $ 345 Funds deposited by counterparties 19 32 Restricted cash 6 8 Accounts receivable, net 904 1,025 Inventory 327 383 Derivative instruments 560 860 Cash collateral posted in support of energy risk management activities 50 190 Prepayments and other current assets 257 245 Total current assets 6,028 3,088 Property, plant and equipment, net 2,547 2,593 Other Assets Equity investments in affiliates 346 388 Operating lease right-of-use assets, net 301 464 Goodwill 579 579 Intangible assets, net 668 789 Nuclear decommissioning trust fund 890 794 Derivative instruments 261 310 Deferred income taxes 3,066 3,286 Other non-current assets 216 240 Total other assets 6,327 6,850 Total Assets $ 14,902 $ 12,531 See notes to Consolidated Financial Statements 94 NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) As of December 31, (In millions, except share data) 2020 2019 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current portion of long-term debt and finance lease $ 1 $ 88 Current portion of operating lease liabilities 69 73 Accounts payable 649 722 Derivative instruments 499 781 Cash collateral received in support of energy risk management activities 19 32 Accrued expenses and other current liabilities 678 663 Total current liabilities 1,915 2,359 Other Liabilities Long-term debt and finance lease 8,691 5,803 Non-current operating lease liabilities 278 483 Nuclear decommissioning reserve 303 298 Nuclear decommissioning trust liability 565 487 Derivative instruments 385 322 Deferred income taxes 19 17 Other non-current liabilities 1,066 1,084 Total other liabilities 11,307 8,494 Total Liabilities 13,222 10,853 Redeemable noncontrolling interest in subsidiaries — 20 Commitments and Contingencies Stockholders' Equity Common stock; $ 0.01 par value; 500,000,000 shares authorized; 423,057,848 and 421,890,790 shares issued; and 244,231,933 and 248,996,189 shares outstanding at December 31, 2020 and 2019 4 4 Additional paid-in capital 8,517 8,501 Accumulated deficit ( 1,403 ) ( 1,616 ) Treasury stock, at cost; 178,825,915 and 172,894,601 shares at December 31, 2020 and 2019 ( 5,232 ) ( 5,039 ) Accumulated other comprehensive loss ( 206 ) ( 192 ) Total Stockholders' Equity 1,680 1,658 Total Liabilities and Stockholders' Equity $ 14,902 $ 12,531 See notes to Consolidated Financial Statements 95 NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Year Ended December 31, (In millions) 2020 2019 2018 Cash Flows from Operating Activities Net income $ 510 $ 4,441 $ 268 Income/(loss) from discontinued operations, net of income tax — 321 ( 192 ) Income from continuing operations 510 4,120 460 Adjustments to reconcile net income to net cash provided by operating activities: Distributions from and equity in earnings of unconsolidated affiliates 45 14 46 Depreciation and amortization 435 373 421 Accretion expense related to asset retirement obligations 45 51 38 Provision for credit losses 108 95 85 Amortization of nuclear fuel 54 52 48 Amortization of financing costs and debt discounts 48 26 29 Loss on debt extinguishment, net 9 51 44 Amortization of emission allowances, out-of-market contracts and REC retirements 70 72 71 Amortization of unearned equity compensation 22 20 25 Net gain on sale of assets and disposal of assets ( 23 ) ( 23 ) ( 49 ) Impairment losses 93 113 114 Changes in derivative instruments 137 34 37 Changes in deferred income taxes and liability for uncertain tax benefits 228 ( 3,353 ) 5 Changes in collateral deposits in support of risk management activities 127 105 ( 105 ) Changes in nuclear decommissioning trust liability 51 37 60 Oil lower of cost or market adjustment 29 — 2 GenOn settlement, net of insurance proceeds — — ( 63 ) Net loss on deconsolidation of Agua Caliente and Ivanpah projects — — 13 Cash provided/(used) by changes in other working capital, net of acquisition and disposition effects: Accounts receivable - trade — 5 ( 83 ) Inventory 27 22 29 Prepayments and other current assets 4 29 ( 41 ) Accounts payable ( 56 ) ( 177 ) 113 Accrued expenses and other current liabilities ( 42 ) ( 75 ) ( 192 ) Other assets and liabilities ( 84 ) ( 186 ) ( 104 ) Cash provided by continuing operations 1,837 1,405 1,003 Cash provided by discontinued operations — 8 374 Net Cash Provided by Operating Activities 1,837 1,413 1,377 Cash Flows from Investing Activities Payments for acquisitions of assets, businesses and leases ( 284 ) ( 355 ) ( 243 ) Capital expenditures ( 230 ) ( 228 ) ( 388 ) Net (purchases)/sales of emissions allowances ( 10 ) 11 19 Investments in nuclear decommissioning trust fund securities ( 492 ) ( 416 ) ( 572 ) Proceeds from sales of nuclear decommissioning trust fund securities 439 381 513 Proceeds from sale of assets, net of cash disposed and sale of discontinued operations, net of fees 81 1,294 1,564 Deconsolidations of Agua Caliente and Ivanpah projects — — ( 268 ) Changes in investments in unconsolidated affiliates 2 ( 91 ) ( 39 ) Net contributions to discontinued operations — ( 44 ) ( 60 ) Other — 6 ( 6 ) Cash (used)/provided by continuing operations ( 494 ) 558 520 Cash used by discontinued operations — ( 2 ) ( 725 ) Net Cash (Used)/Provided by Investing Activities ( 494 ) 556 ( 205 ) 96 For the Year Ended December 31, (In millions) 2020 2019 2018 Cash Flows from Financing Activities Proceeds from issuance of long-term debt 3,234 1,833 1,100 Payments for short and long-term debt ( 335 ) ( 2,571 ) ( 1,734 ) Net (repayments)/proceeds of Revolving Credit Facility ( 83 ) 83 — Payments of debt issuance costs ( 75 ) ( 35 ) ( 19 ) Payments of dividends to common stockholders ( 295 ) ( 32 ) ( 37 ) Payments for share repurchase activity ( 229 ) ( 1,440 ) ( 1,250 ) Payments for debt extinguishment costs ( 5 ) ( 26 ) ( 32 ) Purchase of and distributions to noncontrolling interests from subsidiaries ( 2 ) ( 2 ) ( 16 ) Proceeds from issuance of common stock 1 3 21 Receivable from affiliate — — ( 26 ) Other ( 7 ) ( 4 ) ( 4 ) Cash provided/(used) by continuing operations 2,204 ( 2,191 ) ( 1,997 ) Cash provided by discontinued operations — 43 471 Net Cash Provided/(Used) by Financing Activities 2,204 ( 2,148 ) ( 1,526 ) Effect of exchange rate changes on cash and cash equivalents ( 2 ) — 1 Change in Cash from discontinued operations — 49 120 Net Increase/(Decrease) in Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash 3,545 ( 228 ) ( 473 ) Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at Beginning of Period 385 613 1,086 Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at End of Period $ 3,930 $ 385 $ 613 See notes to Consolidated Financial Statements 97 NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In millions) Common Stock Additional Paid-In Capital Accumulated Deficit Treasury Stock Accumulated Other Comprehensive Loss Noncon- trolling Interest Total Stock-holders' Equity Balances at December 31, 2017 $ 4 $ 8,376 $ ( 6,268 ) $ ( 2,386 ) $ ( 72 ) $ 2,314 $ 1,968 Net income 268 26 294 Other comprehensive loss ( 22 ) ( 22 ) Sale of assets to NRG Yield, Inc. 8 8 16 Shares reissuance for ESPP ( 2 ) 4 2 Share repurchases ( 1,250 ) ( 1,250 ) Equity-based awards activity, net 6 6 Issuance of common stock 21 21 Common stock dividends and dividend equivalents declared (a) ( 37 ) ( 37 ) Distributions to noncontrolling interests ( 43 ) ( 43 ) Dividends paid to NRG Yield, Inc. ( 61 ) ( 61 ) Contributions from noncontrolling interests 304 304 Adoption of new accounting standards 15 15 Sale of NRG Yield and other business ( 2,548 ) ( 2,548 ) Equity component of convertible senior notes 101 101 Balances at December 31, 2018 $ 4 $ 8,510 $ ( 6,022 ) $ ( 3,632 ) $ ( 94 ) $ — $ ( 1,234 ) Net income attributable to NRG Energy, Inc. 4,438 4,438 Other comprehensive loss ( 98 ) ( 98 ) Shares reissuance for ESPP 1 2 3 Share repurchases ( 1,409 ) ( 1,409 ) Equity-based awards activity, net ( 16 ) ( 16 ) Issuance of common stock 6 6 Common stock dividends and dividend equivalents declared (a) ( 32 ) ( 32 ) Balance at December 31, 2019 $ 4 $ 8,501 $ ( 1,616 ) $ ( 5,039 ) $ ( 192 ) $ — $ 1,658 Net income attributable to NRG Energy, Inc. 510 510 Other comprehensive loss ( 14 ) ( 14 ) Repurchase of partners' equity interest in VIE 18 18 Shares reissuance for ESPP 4 4 Share repurchases ( 197 ) ( 197 ) Equity-based awards activity, net ( 3 ) ( 3 ) Issuance of common stock 1 1 Common stock dividends and dividend equivalents declared (a) ( 297 ) ( 297 ) Balance at December 31, 2020 $ 4 $ 8,517 $ ( 1,403 ) $ ( 5,232 ) $ ( 206 ) $ — $ 1,680 (a) Dividends per common share were $ 1.20 for the year ended December 31, 2020 and $ 0.12 for each of the years ended December 31, 2019 and 2018 See notes to Consolidated Financial Statements 98 NRG ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 — Nature of Business General NRG Energy, Inc., or NRG or the Company, is an integrated power company built on dynamic retail brands with diverse generation assets. NRG brings the power of energy to customers by producing and selling energy and related products and services in major competitive power and gas markets in the U.S. and Canada in a manner that delivers value to all of NRG's stakeholders. NRG is a customer-centric business focused on perfecting the integrated model by balancing retail load with generation supply within its deregulated markets. As of December 31, 2020, the Company sold energy, services, and innovative, sustainable products and services directly to retail customers under the names NRG, Reliant, Green Mountain Energy, Stream and XOOM Energy, as well as other brand names owned by NRG, supported by approximately 23,000 MW of generation. NRG also conducts business under the brand name of Direct Energy as a result of the Company's acquisition of Direct Energy, a North American subsidiary of Centrica plc, on January 5, 2021. Direct Energy is a leading retail provider of electricity, natural gas, and home and business energy related products and services in North America, with operations in all 50 U.S. states and 8 Canadian provinces. Following the acquisition, the Company serves more than 6 million customers. In addition, Direct Energy is a participant in the wholesale gas and power markets in the United States and Canada. Note 4, Acquisitions, Discontinued Operations and Dispositions for further discussion of the acquisition of Direct Energy. The Company began managing its integrated model based on the combined results of the retail and wholesale generation businesses with a geographical focus in 2020. As a result, the Company changed its business segments from Retail and Generation to Texas, East and West/Other beginning in the first quarter of 2020. The Company's updated segment structure reflects how management makes financial decisions and allocates resources. The Company's businesses are segregated as follows: • Texas, which includes all activity related to customer, plant and market operations in Texas; • East, which includes the remaining activity related to customer operations and all activity related to plant and market operations in the East; • West/Other, which includes the following assets and activities: (i) all activity related to plant and market operations in the West, (ii) activity related to the Cottonwood power plant that was sold to Cleco on February 4, 2019 and is being leased back until 2025, (iii) the remaining renewables activity, including the Company’s equity method investments in Ivanpah Master Holdings, LLC and Agua Caliente (which was sold on February 3, 2021), the remaining Home Solar assets (which were primarily sold on November 13, 2020) and the NFL stadium solar generating assets, and (iv) activity related to the Company’s equity method investment for the Gladstone power plant in Australia; and • Corporate activities. All affected disclosures presented herein have been recast to reflect these changes for all periods presented. For further discussion of segment reporting, refer to Note 20, Segment Reporting . The acquired operations of Direct Energy will be integrated into the existing NRG segment structure. Domestic customer and market operations will be combined into the corresponding geographical segments of Texas, East and West/Other. The East segment will also include the deregulated customer and market operations of Canada. The West/Other segment will also include activity related to the regulated operations in Alberta, Canada and the services businesses. COVID-19 In March 2020, the World Health Organization categorized COVID-19 as a pandemic and the President of the United States declared the COVID-19 outbreak a national emergency. Electricity was deemed a 'critical and essential business operation' under various state and federal governmental COVID-19 mandates. NRG had activated its Crisis Management Team ("CMT") in January 2020 to proactively manage the Company's response to the impacts of COVID-19. NRG continues to remain focused on protecting the health and well-being of its employees, while supporting its customers and the communities in which it operates and assuring the continuity of its operations. In June 2020, summer-critical office employees returned to the offices and safety protocols were successfully implemented. The Company continues to maintain certain restrictions on business travel and face-to-face sales channels, remote work practices remain in place and there are enhanced cleaning and hygiene protocols in all of its facilities. In addition, select essential employees and contractors are continuing to report to plant and certain office locations. The Company also continues to require pre-entry screening, including temperature checks, separation of work crews, additional personal protective 99 equipment for employees and contractors when social distancing cannot be maintained, and a ban on all non-essential visitors. The Company has not experienced any material disruptions in its ability to continue its business operations to date. The first COVID-19 vaccine became available in the United States in December 2020. NRG continues to advocate alongside state and federal trade groups for the high prioritization of essential electric industry personnel for inoculation against COVID-19. States are receiving weekly doses of vaccines and allocating those doses to frontline healthcare workers, elderly populations and high risk individuals. NRG continues to monitor state information, as well as dosage and allocation numbers to anticipate the latest timing of vaccine distribution to our essential employees. The Company will continue to evaluate additional return to normal work operations on a location-by-location basis as COVID-19 conditions evolve. Discontinued Operations On December 31, 2018, as described in Note 4, Acquisitions, Discontinued Operations and Dispositions , the Company concluded that the sale of its South Central Portfolio to Cleco, excluding the Cottonwood facility, met held-for-sale criteria and should be presented as a discontinued operation, as the sale represented a strategic shift in the business in which NRG operates. The financial information for all historical periods was recast in 2018 to reflect the presentation of these entities as discontinued operations. On August 31, 2018, as described in Note 4, Acquisitions, Discontinued Operations and Dispositions , the Company deconsolidated NRG Yield, Inc. and its Renewables Platform for financial reporting purposes. The financial information for all historical periods was recast in 2018 to reflect the presentation of these entities, as well as the Carlsbad project, as discontinued operations. As a result of the sale of NRG Yield, the Company no longer controls the Agua Caliente project. Due to this change in control, the Company deconsolidated the Agua Caliente project from its financial results and began accounting for the project as an equity method investment. Note 2 — Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The Company's consolidated financial statements have been prepared in accordance with U.S. GAAP. The ASC, established by the FASB, is the source of authoritative U.S. GAAP to be applied by nongovernmental entities. In addition, the rules and interpretative releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The consolidated financial statements include NRG's accounts and operations and those of its subsidiaries in which the Company has a controlling interest. All significant intercompany transactions and balances have been eliminated in consolidation. The usual condition for a controlling financial interest is ownership of a majority of the voting interests of an entity. However, a controlling financial interest may also exist through arrangements that do not involve controlling voting interests. As such, NRG applies the guidance of ASC 810, Consolidations, or ASC 810, to determine when an entity that is insufficiently capitalized or not controlled through its voting interests, referred to as a VIE, should be consolidated. Net Income/(Loss) attributable to NRG Energy, Inc. The following table reflects the net income/(loss) attributable to NRG Energy, Inc. after removing the net loss attributable to the noncontrolling interest and redeemable noncontrolling interest: Year Ended December 31, (In millions) 2020 2019 2018 Income from continuing operations, net of income tax $ 510 $ 4,117 $ 465 Income/(loss) from discontinued operations, net of income tax — 321 ( 197 ) Net income attributable to NRG Energy, Inc. stockholders $ 510 $ 4,438 $ 268 Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments with an original maturity of three months or less at the time of purchase. Funds Deposited by Counterparties Funds deposited by counterparties consist of cash held by the Company as a result of collateral posting obligations from its counterparties. Some amounts are segregated into separate accounts that are not contractually restricted but, based on the Company's intention, are not available for the payment of general corporate obligations. Depending on market fluctuations and the settlement of the underlying contracts, the Company will refund this collateral to the hedge counterparties pursuant to the terms and conditions of the underlying trades. Since collateral requirements fluctuate daily and the Company cannot predict if 100 any collateral will be held for more than twelve months, the funds deposited by counterparties are classified as a current asset on the Company's balance sheet, with an offsetting liability for this cash collateral received within current liabilities. Credit Losses On January 1, 2020, the Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , or ASU No. 2016-13, using the modified retrospective approach. Following the adoption of the new standard, the Company’s process of estimating expected credit losses remains materially consistent with its historical practice. Information prior to January 1, 2020, which was previously referred to as the allowance and provision for bad debt, has not been restated and continues to be reported under the accounting standards in effect for that period. Retail trade receivables are reported on the balance sheet net of the allowance for credit losses. The Company accrues an allowance for current expected credit losses based on (i) estimates of uncollectible revenues by analyzing accounts receivable aging and current and reasonable forecasts of expected economic factors including, but not limited to, unemployment rates and weather-related events, (ii) historical collections and delinquencies, and (iii) counterparty credit ratings for commercial and industrial customers. The Company writes off customer contract receivable balances against the allowance for credit losses when it is determined a receivable is uncollectible. The following table represents the activity in the allowance for credit losses for the year ended December 31, 2020: (In millions) Year Ended December 31, 2020 Beginning balance $ 43 Provision for credit losses 108 Write-offs ( 101 ) Recoveries collected 17 Ending balance $ 67 Restricted Cash The following table provides a reconciliation of cash and cash equivalents, restricted cash and funds deposited by counterparties reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the statements of cash flows. Year Ended December 31, (In millions) 2020 2019 2018 Cash and cash equivalents $ 3,905 $ 345 $ 563 Funds deposited by counterparties 19 32 33 Restricted cash 6 8 17 Cash and cash equivalents, funds deposited by counterparties and restricted cash shown in the statements of cash flows $ 3,930 $ 385 $ 613 Restricted cash consists primarily of funds held within the Company's projects that are restricted in their use. Inventory Inventory is valued at the lower of weighted average cost or market, and consists principally of fuel oil, coal and raw materials used to generate electricity or steam. The Company removes these inventories as they are used in the production of electricity or steam. Spare parts inventory is valued at weighted average cost. The Company removes these inventories when they are used for repairs, maintenance or capital projects. The Company expects to recover the fuel oil, coal, raw materials, and spare parts costs in the ordinary course of business. Finished goods inventory is valued at the lower of cost or net realizable value with cost being determined on a first-in first-out basis. The Company removes these inventories as they are sold to customers. Sales of inventory are classified as an operating activity in the consolidated statements of cash flows. Property, Plant and Equipment Property, plant and equipment are stated at cost or, in the case of business acquisitions, fair value; however, impairment adjustments are recorded whenever events or changes in circumstances indicate that their carrying values may not be recoverable. NRG also classifies nuclear fuel related to the Company's 44 % ownership interest in STP as part of the Company's property, plant, and equipment. Significant additions or improvements extending asset lives are capitalized as incurred, while repairs and maintenance that do not improve or extend the life of the respective asset are charged to expense as incurred. Depreciation, other than nuclear fuel, is computed using the straight-line method, while nuclear fuel is amortized based on units 101 of production over the estimated useful lives. Certain assets and their related accumulated depreciation amounts are adjusted for asset retirements and disposals with the resulting gain or loss included in cost of operations in the consolidated statements of operations. Asset Impairments Long-lived assets that are held and used are reviewed for impairment whenever events or changes in circumstances indicate carrying values may not be recoverable. Such reviews are performed in accordance with ASC 360. An impairment loss is indicated if the total future estimated undiscounted cash flows expected from an asset are less than its carrying value. An impairment charge is measured by the difference between an asset's carrying amount and fair value with the difference recorded in operating costs and expenses in the consolidated statements of operations. Fair values are determined by a variety of valuation methods, including third-party appraisals, sales prices of similar assets, and present value techniques. Investments accounted for by the equity method are reviewed for impairment in accordance with ASC 323, Investments-Equity Method and Joint Ventures , or ASC 323, which requires that a loss in value of an investment that is an other-than-temporary decline should be recognized. The Company identifies and measures losses in the value of equity method investments based upon a comparison of fair value to carrying value. For further discussion of these matters, refer to Note 11, Asset Impairments . Development Costs and Capitalized Interest Development costs include project development costs, which are expensed in the preliminary stages of a project and capitalized when the project is deemed to be commercially viable. Commercial viability is determined by one or a series of actions including, among others, Board of Director approval pursuant to a formal project plan that subjects the Company to significant future obligations that can only be discharged by the use of a Company asset. When a project is available for operations, capitalized interest and capitalized project development costs are reclassified to property, plant and equipment and depreciated on a straight-line basis over the estimated useful life of the project's related assets. Capitalized costs are charged to expense if a project is abandoned or management otherwise determines the costs to be unrecoverable. Interest incurred on funds borrowed to finance capital projects is capitalized until the project under construction is ready for its intended use. The amount of interest capitalized for the years ended December 31, 2020, 2019 and 2018, was $ 2 million, $ 3 million and $ 7 million, respectively. Debt Issuance Costs Debt issuance costs are capitalized and amortized as interest expense on a basis which approximates the effective interest method over the term of the related debt. Debt issuance costs are presented as a direct deduction from the carrying amount of the related debt, or as an asset if the issuance costs relate to revolving debt agreements or certain other financing arrangements. Intangible Assets Intangible assets represent contractual rights held by the Company. The Company recognizes specifically identifiable intangible assets including customer contracts, customer relationships, energy supply contracts, marketing partnerships, trade names, emission allowances, and fuel contracts when specific rights and contracts are acquired. These intangible assets are amortized based on expected volumes, expected delivery, expected discounted future net cash flows, straight line or units of production basis. As of December 31, 2020 and 2019, the Company had accumulated amortization related to its intangible assets of $ 1.4 billion and $ 1.3 billion, respectively. Emission allowances held-for-sale, which are included in other non-current assets on the Company's consolidated balance sheet, are not amortized; they are carried at the lower of cost or fair value and reviewed for impairment in accordance with ASC 360. Goodwill In accordance with ASC 350, Intangibles-Goodwill and Other , or ASC 350, the Company recognizes goodwill for the excess cost of an acquired entity over the net value assigned to assets acquired and liabilities assumed. NRG performs goodwill impairment tests annually, during the fourth quarter, and when events or changes in circumstances indicate that the carrying value may not be recoverable. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. If it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, there is no goodwill impairment. 102 In the absence of sufficient qualitative factors indicating that it is more-likely-than-not that no impairment occurred, the Company performs a quantitative assessment by determining the fair value of the reporting unit and comparing the fair value to its book value. If the fair value of the reporting unit exceeds its book value, goodwill of the reporting unit is not considered impaired. If the book value exceeds fair value, the Company recognizes an impairment loss equal to the difference between book value and fair value. For further discussion of goodwill and goodwill impairment losses recognized refer to Note 12, Goodwill and Other Intangibles. Income Taxes The Company accounts for income taxes using the liability method in accordance with ASC 740, Income Taxes, or ASC 740, which requires that the Company use the asset and liability method of accounting for deferred income taxes and provide deferred income taxes for all significant temporary differences. The Company has two categories of income tax expense or benefit — current and deferred, as follows: • Current income tax expense or benefit consists solely of current taxes payable less applicable tax credits, and • Deferred income tax expense or benefit is the change in the net deferred income tax asset or liability, excluding amounts charged or credited to accumulated other comprehensive income The Company reports some of its revenues and expenses differently for financial statement purposes than for income tax return purposes, resulting in temporary and permanent differences between the Company's financial statements and income tax returns. The tax effects of such temporary differences are recorded as either deferred income tax assets or deferred income tax liabilities in the Company's consolidated balance sheets. The Company measures its deferred income tax assets and deferred income tax liabilities using income tax rates that are expected to be in effect when the deferred tax is realized. The Company accounts for uncertain tax positions in accordance with ASC 740, which applies to all tax positions related to income taxes. Under ASC 740, tax benefits are recognized when it is more-likely-than-not that a tax position will be sustained upon examination by the authorities. The benefit recognized from a position is the amount of benefit that has surpassed the more-likely-than-not threshold, as it is more than 50% likely to be realized upon settlement. The Company recognizes interest and penalties accrued related to uncertain tax benefits as a component of income tax expense. In accordance with ASC 805 and as discussed further in Note 21, Income Taxes , changes to existing net deferred tax assets or valuation allowances or changes to uncertain tax benefits, are recorded to income tax (benefit)/expense. Contract Amortization Assets and liabilities recognized through acquisitions related to the sale of electric capacity and energy in future periods for which the fair value has been determined to be significantly less or more than market are amortized to cost of operations over the term of each underlying contract based on actual generation and/or contracted volumes. Lease Revenue Certain of the Company’s revenues are obtained through leases of rooftop residential solar systems, which are accounted for as operating leases in accordance with ASC 842, Leases. Pursuant to the lease agreements, the customers’ monthly payments are pre-determined fixed monthly amounts and may include an annual fixed percentage escalation to reflect the impact of utility rate increases over the lease term, which is 20 years. The Company records operating lease revenue on a straight-line basis over the life of the lease term. Certain customers made initial down payments that are being amortized over the life of the lease. The difference between the payments received and the revenue recognized is recorded as deferred revenue. Lessor Accounting Certain of the Company's revenues are obtained through PPAs or other contractual agreements. Many of these agreements are accounted for as operating leases under ASC 842 . Certain of these leases have no minimum lease payments and all of the rent is recorded as contingent rent on an actual basis when the electricity is delivered. Judgment is required by management in determining the economic life of each generating facility, in evaluating whether certain lease provisions constitute minimum payments or represent contingent rent and other factors in determining whether a contract contains a lease and whether the lease is an operating lease or finance lease . Contingent rental income under ASC 840 was $ 104 million for the year ended December 31, 2018. Gross Receipts and Sales Taxes In connection with its retail sales, the Company records gross receipts taxes on a gross basis in revenues and cost of operations in its consolidated statements of operations. During the years ended December 31, 2020, 2019 and 2018, the Company's revenues and cost of operations included gross receipts taxes of $ 107 million, $ 109 million and $ 99 million, 103 respectively. Additionally, the Company records sales taxes collected from its taxable retail customers and remitted to the various governmental entities on a net basis; thus, there is no impact on the Company's consolidated statement of operations. Purchased Energy and Other Cost of Sales for Customer Operations The cost of energy for electricity sales and services to retail customers is included in cost of operations and is based on actual and estimated supply volumes for the applicable reporting period. A portion of the cost of energy, $ 98 million, $ 103 million and $ 105 million as of December 31, 2020, 2019 and 2018, respectively, was accrued and consisted of estimated transmission and distribution charges not yet billed by the transmission and distribution utilities. In estimating supply volumes, the Company considers the effects of historical customer volumes, weather factors and usage by customer class. Transmission and distribution delivery fees are estimated using the same method used for electricity sales and services to retail customers. In addition, ISO fees are estimated based on historical trends, estimated supply volumes and initial ERCOT ISO settlements. Volume estimates are then multiplied by the supply rate and recorded as cost of operations in the applicable reporting period. Derivative Financial Instruments The Company accounts for derivative financial instruments under ASC 815, which requires the Company to record all derivatives on the balance sheet at fair value unless they qualify for a NPNS exception. Changes in the fair value of non-hedge derivatives are immediately recognized in earnings. Changes in the fair value of derivatives accounted for as cash flow hedges, if elected for hedge accounting, are deferred and recorded as a component of accumulated OCI until the hedged transactions occur and are recognized in earnings. The Company's primary derivative instruments are power purchase or sales contracts, fuels purchase contracts, and other energy related commodities used to mitigate variability in earnings due to fluctuations in market prices and interest rates. On an ongoing basis, the Company assesses the effectiveness of all derivatives that are designated as hedges for accounting purposes in order to determine that each derivative continues to be highly effective in offsetting changes in fair values or cash flows of hedged items. Internal analyses that measure the statistical correlation between the derivative and the associated hedged item determine the effectiveness of such a contract designated as a hedge. If it is determined that the derivative instrument is not highly effective as a hedge, hedge accounting will be discontinued prospectively. In this case, the gain or loss previously deferred in accumulated OCI would be frozen until the underlying hedged instrument is delivered unless the transactions being hedged are no longer probable of occurring in which case the amount in OCI would be immediately reclassified into earnings. If the derivative instrument is terminated, the effective portion of this derivative deferred in accumulated OCI will be frozen until the underlying hedged item is delivered. The Company had no cash flow hedges as of December 31, 2020. Revenues and expenses on contracts that qualify for the NPNS exception are recognized when the underlying physical transaction is delivered. While these contracts are considered derivative financial instruments under ASC 815, they are not recorded at fair value, but on an accrual basis of accounting. If it is determined that a transaction designated as NPNS no longer meets the scope exception, the fair value of the related contract is recorded on the balance sheet and immediately recognized through earnings. 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. Foreign Currency Translation and Transaction Gains and Losses The local currencies are generally the functional currency of NRG's foreign operations. Foreign currency denominated assets and liabilities are translated at end-of-period rates of exchange. Revenues, expenses, and cash flows are translated at the weighted-average rates of exchange for the period. The resulting currency translation adjustments are not included in the Company's consolidated statements of operations for the period, but are accumulated and reported as a separate component of stockholders' equity until sale or complete or substantially complete liquidation of the net investment in the foreign entity takes place. Foreign currency transaction gains or losses are reported within other income/(expense) in the Company's consolidated statements of operations. For the years ended December 31, 2020, 2019 and 2018, amounts recognized as foreign currency transaction gains/(losses) were immaterial. The Company's cumulative translation adjustment balances as of December 31, 2020, 2019 and 2018 were $( 2 ) million, $( 13 ) million and $( 13 ) million, respectively. Concentrations of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of trust funds, accounts receivable, notes receivable, derivatives, and investments in debt securities. Trust funds are held in accounts managed by experienced investment advisors. Certain accounts receivable, notes receivable, and derivative instruments are concentrated within entities engaged in the energy industry. These industry concentrations may impact the Company's overall exposure to credit risk, either positively or negatively, in that the customers may be similarly affected by changes in economic, industry or other conditions. Receivables and other contractual arrangements are subject to collateral requirements under the 104 terms of enabling agreements. However, the Company believes that the credit risk posed by industry concentration is offset by the diversification and creditworthiness of its customer base. See Note 5, Fair Value of Financial Instruments, for a further discussion of derivative concentrations. Fair Value of Financial Instruments The carrying amount of cash and cash equivalents, funds deposited by counterparties, receivables, accounts payable, and accrued liabilities approximate fair value because of the short-term maturity of these instruments. See Note 5, Fair Value of Financial Instruments, for a further discussion of fair value of financial instruments. Asset Retirement Obligations The Company accounts for AROs in accordance with ASC 410-20, Asset Retirement Obligations, or ASC 410-20. Retirement obligations associated with long-lived assets included within the scope of ASC 410-20 are those for which a legal obligation exists under enacted laws, statutes, and written or oral contracts, including obligations arising under the doctrine of promissory estoppel, and for which the timing and/or method of settlement may be conditional on a future event. ASC 410-20 requires an entity to recognize the fair value of a liability for an ARO in the period in which it is incurred and a reasonable estimate of fair value can be made. Upon initial recognition of a liability for an ARO, the Company capitalizes the asset retirement cost by increasing the carrying amount of the related long-lived asset by the same amount. Over time, the liability is accreted to its future value, while the capitalized cost is depreciated over the useful life of the related asset. See Note 15, Asset Retirement Obligations, for a further discussion of AROs. Pensions and Other Postretirement Benefits The Company offers pension benefits through a defined benefit pension plan. In addition, the Company provides postretirement health and welfare benefits for certain groups of employees. The Company accounts for pension and other postretirement benefits in accordance with ASC 715, Compensation — Retirement Benefits , or ASC 715 . The Company recognizes the funded status of the Company's defined benefit plans in the statement of financial position and records an offset for gains and losses as well as all prior service costs that have not been included as part of the Company's net periodic benefit cost to other comprehensive income. The determination of the Company's obligation and expenses for pension benefits is dependent on the selection of certain assumptions. These assumptions determined by management include the discount rate, the expected rate of return on plan assets and the rate of future compensation increases. The Company's actuarial consultants assist in determining assumptions for such items as retirement age. The assumptions used may differ materially from actual results, which may result in a significant impact to the amount of pension obligation or expense recorded by the Company. The Company measures the fair value of its pension assets in accordance with ASC 820, Fair Value Measurements and Disclosures, or ASC 820. Stock-Based Compensation The Company accounts for its stock-based compensation in accordance with ASC 718, Compensation — Stock Compensation, or ASC 718 . The fair value of the Company's performance stock units is estimated on the date of grant using a Monte Carlo valuation model. NRG uses the Company's common stock price on the date of grant as the fair value of the Company's deferred stock units. The fair value of the Company's restricted stock units is derived from the closing price of NRG's common stock at the grant date. Forfeiture rates are estimated based on an analysis of the Company's historical forfeitures, employment turnover, and expected future behavior. The Company recognizes compensation expense for both graded and cliff vesting awards on a straight-line basis over the requisite service period for the entire award. Investments Accounted for by the Equity Method The Company has investments in various domestic energy projects, as well as one Australian project. The equity method of accounting is applied to such investments in affiliates, which include joint ventures and partnerships, because the ownership structure prevents the Company from exercising a controlling influence over the operating and financial policies of the projects. Under this method, equity in pre-tax income or losses of domestic partnerships and, generally, in the net income or losses of its Australian project, are reflected as equity in earnings of unconsolidated affiliates. Distributions from equity method investments that represent earnings on the Company's investment are included within cash flows from operating activities and distributions from equity method investments that represent a return of the Company's investment are included within cash flows from investing activities. Tax Equity Arrangements The Company’s redeemable noncontrolling interest in subsidiaries represented third-party interests in the net assets under certain tax equity arrangements, which were consolidated by the Company, that had been entered into to finance the cost of solar energy systems under operating leases. The Company determined that the provisions in the contractual agreements of 105 these structures represented substantive profit sharing arrangements. Further, the Company had determined that the appropriate methodology for calculating the redeemable noncontrolling interest that reflected the substantive profit sharing arrangements was a balance sheet approach that utilized the HLBV method. Under the HLBV method, the amounts reported as redeemable noncontrolling interests represented the amounts the investors that were party to the tax equity arrangements would hypothetically receive at each balance sheet date under the liquidation provisions of the contractual agreements, assuming the net assets of the funding structures were liquidated at their recorded amounts. The investors’ interests in the results of operations of the funding structures were determined as redeemable noncontrolling interests at the start and end of each reporting period, after taking into account any capital transactions between the structures and the funds’ investors. The calculations utilized to apply the HLBV method included estimated calculations of taxable income or losses for each reporting period. During the first quarter of 2020, the Company repurchased its partners' equity interest as further described in Note 18, Investments Accounted for by the Equity Method and Variable Interest Entities . The Company has no remaining tax equity arrangements as of December 31, 2020. Redeemable Noncontrolling Interest To the extent that the third-party has the right to redeem their interests for cash or other assets, the Company had included the noncontrolling interest attributable to the third party as a component of temporary equity in the mezzanine section of the consolidated balance sheet. During the first quarter of 2020, the Company repurchased its partners' equity interest. The following table reflects the changes in the Company's redeemable noncontrolling interest balance for the years ended December 31, 2020, 2019 and 2018. (In millions) Balance as of December 31, 2017 $ 78 Distributions to redeemable noncontrolling interest ( 3 ) Contributions from redeemable noncontrolling interest 26 Non-cash adjustments to redeemable noncontrolling interest ( 8 ) Net income attributable to redeemable noncontrolling interest - continuing operations 1 Net loss attributable to redeemable noncontrolling interest - discontinued operations ( 27 ) Sale of NRG Yield and the Renewables Platform (a) ( 48 ) Balance as of December 31, 2018 19 Distributions to redeemable noncontrolling interest ( 2 ) Net income attributable to redeemable noncontrolling interest - continuing operations 3 Balance as of December 31, 2019 20 Repurchase of redeemable noncontrolling interest ( 20 ) Balance as of December 31, 2020 $ — (a) See Note 4, Acquisitions, Discontinued Operations and Dispositions , for further information regarding the sale of NRG Yield and its Renewables Platform Sale-Leaseback Arrangements NRG is party to sale-leaseback arrangements that provide for the sale of certain assets to a third party and simultaneously leases back the same asset to the Company. If the seller-lessee transfers control of the underlying assets to the buyer-lessor, the arrangement is accounted for under ASC 842-40, Sale-Leaseback Transactions. These arrangements are classified as operating leases on the Company's consolidated balance sheets. See Note 10, Leases, for further discussion. Marketing and Advertising Costs The Company expenses its marketing and advertising costs as incurred and includes them within selling, general and administrative expenses. The costs of tangible assets used in advertising campaigns are recorded as fixed assets or deferred advertising costs and amortized as advertising costs over the shorter of the useful life of the asset or the advertising campaign. The Company has several long-term sponsorship arrangements. Payments related to these arrangements are deferred and expensed over the term of the arrangement. Advertising expenses for the years ended December 31, 2020, 2019 and 2018 were $ 74 million, $ 66 million and $ 73 million, respectively. Reorganization Costs Reorganization costs include costs incurred by the Company related to the Transformation Plan implementation and primarily reflect severance and contract modifications. There were no reorganization costs for the year ended December 31, 2020. Reorganization costs for the years ended December 31, 2019 and 2018 were $ 23 million and $ 90 million, respectively. 106 Business Combinations The Company accounts for its business combinations in accordance with ASC 805, Business Combinations, or ASC 805, which requires an acquirer to recognize and measure in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at fair value at the acquisition date. The Company also recognizes and measures the goodwill acquired or a gain from a bargain purchase in the business combination. In addition, transaction costs are expensed as incurred. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. In recording transactions and balances resulting from business operations, the Company uses estimates based on the best information available. Estimates are used for such items as plant depreciable lives, tax provisions, uncollectible accounts, actuarially determined benefit costs, the valuation of energy commodity contracts, environmental liabilities, legal costs incurred in connection with recorded loss contingencies, and assets acquired and liabilities assumed in business combinations, among others. In addition, estimates are used to test long-lived assets and goodwill for impairment and to determine the fair value of impaired assets. As better information becomes available or actual amounts are determinable, the recorded estimates are revised. Consequently, operating results can be affected by revisions to prior accounting estimates. Reclassifications Certain prior year amounts have been reclassified for comparative purposes. The reclassifications did not affect results from operations, net assets or cash flows. Recent Accounting Developments - Guidance Adopted in 2020 ASU 2020-09 — In October 2020, the FASB issued ASU 2020-09, Debt (Topic 470) - Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762 , or ASU 2020-09, to reflect the SEC’s amended disclosure rules for guaranteed debt securities offerings. The final rule amends the disclosure requirements in SEC Regulation S-X, Rule 3-10, which require entities to separately present financial statements for subsidiary issuers and guarantors of registered debt securities unless certain exceptions are met. The amended rule allows entities to provide summarized financial information of the parent company and its issuers and guarantors on a combined basis either in a note to the financial statements or as part of management’s discussion and analysis. ASU 2020-09 is effective for filings on or after January 4, 2021, with early adoption permitted. The Company adopted the amendments effective December 31, 2020. As the amendments contemplate changes in disclosures only, it did not have an impact on the Company's results of operations, cash flows, or statement of financial position. ASU 2018-17 — In October 2018, the FASB issued ASU No. 2018-17, Consolidations (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities , or ASU No. 2018-17, in response to stakeholders’ observations that Topic 810, Consolidations , could be improved thereby improving general purpose financial reporting. Specifically, ASU No. 2018-17 requires application of the variable interest entity (VIE) guidance to private companies under common control and consideration of indirect interest held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests. The Company adopted the amendments effective January 1, 2020 using the retrospective approach. The adoption did not have a material impact on the Company's results of operations, cash flows, or statement of financial position. ASU 2018-15 — In August 2018, the FASB issued ASU No. 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in Cloud Computing Arrangement That Is a Service Contract , or ASU No. 2018-15. The amendments in ASU No. 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs incurred to develop or obtain internal-use software (and hosting arrangement that include an internal-use software license). The amendment also requires the customer to amortize the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The Company adopted the amendments effective January 1, 2020 using the prospective approach. The adoption did not have a material impact on the Company's results of operations, cash flows, or statement of financial position. ASU 2018-13 — In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirement for Fair value Measurement) , or ASU No. 2018-13. The amendments in ASU No. 2018-13 eliminate such disclosures as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and add new disclosure requirements for Level 3 measurements. The Company adopted the amendments 107 effective January 1, 2020. Certain disclosures in ASU No. 2018-13 were applied on a retrospective basis and others on a prospective basis as required. As the amendments contemplates changes in disclosures only, it did not have an impact on the Company's results of operations, cash flows, or statement of financial position. ASU 2016-13 — In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements, or ASU No. 2016-13, which was further amended through various updates issued by the FASB thereafter. The guidance in ASU No. 2016-13 provides a new model for recognizing credit losses on financial assets carried at amortized cost using an estimate of expected credit losses, instead of the "incurred loss" methodology previously required for recognizing credit losses that delayed recognition until it was probable that a loss was incurred. The estimate of expected credit losses is to be based on consideration of past events, current conditions and reasonable and supportable forecasts of future conditions. The Company adopted the standard and its subsequent corresponding updates effective January 1, 2020 using the modified retrospective approach. Results for the reporting periods after January 1, 2020 are presented under Topic 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company's adoption of Topic 326 did not have a material impact on the Company's results of operations, cash flows, or statement of financial position. Recent Accounting Developments - Guidance Not Yet Adopted ASU 2020-06 — In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) , or ASU No. 2020-06. The guidance in ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. In addition, ASU 2020-06 improves and amends the related earnings per share guidance. This standard is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted in fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently in the process of assessing the impact of this guidance on the consolidated financial statements and disclosures related to earnings per share. ASU 2019-12 — In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, or ASU No. 2019-12, to simplify various aspects related to accounting for income taxes. The guidance in ASU 2019-12 amends the general principles in Topic 740 to eliminate certain exceptions for recognizing deferred taxes for investment, performing intraperiod allocation and calculating income taxes in interim periods. This ASU also includes guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company does not believe that the adoption of this ASU will have a material impact on the Company's results of operations, cash flows, or statement of financial position. Note 3 — Revenue Recognition Revenue from Contracts with Customers On January 1, 2018, the Company adopted the guidance in ASC 606, Revenue from Contracts with Customers, or ASC 606, using the modified retrospective method applied to contracts that were not completed as of the adoption date. The Company recognized the cumulative effect of initially applying the new standard as a credit to the opening balance of accumulated deficit, resulting in a decrease of $ 15 million. The adjustment primarily related to costs incurred to obtain a contract with customers and customer incentives. Following the adoption of the new standard, the Company’s revenue recognition of its contracts with customers remains materially consistent with its historical practice. The Company's policies with respect to its various revenue streams are detailed below. The Company generally applies the invoicing practical expedient to recognize revenue for the revenue streams detailed below, except in circumstances where the invoiced amount does not represent the value transferred to the customer. Retail Revenue Gross revenues for energy sales and services to retail customers are recognized as the Company transfers the promised goods and services to the customer. For the majority of its electricity and natural gas contracts, the Company’s performance obligation with the customer is satisfied over time and performance obligations for its electricity and natural gas products are recognized as the customer takes possession of the product. The Company also allocates the contract consideration to distinct performance obligations in a contract for which the timing of the revenue recognized is different. Additionally, customer discounts and incentives reduce the contract consideration and are recognized over the term of the contract. Energy sales and services that have been delivered but not billed by period end are estimated. Accrued unbilled revenues are based on estimates of customer usage since the date of the last meter reading provided by the independent system operators, utilities, or electric distribution companies. Volume estimates are based on daily forecasted volumes and estimated customer 108 usage by class. Unbilled revenues are calculated by multiplying these volume estimates by the applicable rate by customer class. Estimated amounts are adjusted when actual usage is known and billed. As contracts for retail electricity and natural gas can be for multi-year periods, the Company has performance obligations under these contracts that have not yet been satisfied. These performance obligations have transaction prices that are both fixed and variable, and that vary based on the contract duration, customer type, inception date and other contract-specific factors. For the fixed price contracts, the amount of any unsatisfied performance obligations will vary based on customer usage, which will depend on factors such as weather and customer activity and therefore it is not practicable to estimate such amounts. Energy Revenue Both physical and financial transactions consist of revenues billed to a third party at either market or negotiated contract terms to optimize the financial performance of the Company's generating facilities. Electric energy revenue is recognized upon transmission to the customer over time, using the output method for measuring progress of satisfaction of performance obligations. Physical transactions, or the sale of generated electricity to meet supply and demand, are recorded on a gross basis in the Company's consolidated statements of operations. The Company applies the invoicing practical expedient in recognizing energy revenue. Under the practical expedient, revenue is recognized based on the invoiced amount which is equal to the value to the customer of NRG’s performance obligation completed to date. Financial transactions used to hedge the sale of electricity are recorded net within operating revenues in the consolidated statements of operations in accordance with ASC 815. Capacity Revenue The Company's largest sources of capacity revenues are capacity auctions in PJM, ISO-NE and NYISO. Capacity revenues also include revenues billed to a third party at either market or negotiated contract terms for making installed generation and demand response capacity available in order to satisfy system integrity and reliability requirements. Capacity revenues are recognized over time, using the output method for measuring progress of satisfaction of performance obligations. The Company applies the invoicing practical expedient in recognizing capacity revenue. Under the practical expedient, revenue is recognized based on the invoiced amount which is equal to the value to the customer of NRG’s performance obligation completed to date. Performance Obligations As of December 31, 2020, estimated future fixed fee performance obligations are $ 668 million, $ 289 million, $ 47 million, $ 36 million and $ 20 million for fiscal years 2021, 2022, 2023, 2024 and 2025, respectively. These performance obligations are for cleared auction MWs in the PJM, ISO-NE, NYISO and MISO capacity auctions and are subject to penalties for non performance. Renewable Energy Credits Renewable energy credits are usually sold through long-term contracts. Revenue from the sale of self-generated RECs is recognized when related energy is generated and simultaneously delivered even in cases where there is a certification lag as it has been deemed to be perfunctory. In a bundled contract to sell energy, capacity and/or self-generated RECs, all performance obligations are deemed to be delivered at the same time and hence, timing of recognition of revenue for all performance obligations is the same and occurs over time. In such cases, it is often unnecessary to allocate transaction price to multiple performance obligations. Sale of Emission Allowances The Company records its inventory of emission allowances as part of intangible assets. From time to time, management may authorize the transfer of emission allowances in excess of expected usage from the Company's emission bank to intangible assets held-for-sale for trading purposes. The Company records the sale of emission allowances on a net basis within operating revenue in the Company's consolidated statements of operations. 109 Disaggregated Revenue The following tables represent the Company’s disaggregation of revenue from contracts with customers for the years ended December 31, 2020, 2019 and 2018: For the Year Ended December 31, 2020 (In millions) Texas East West/Other Corporate/Eliminations Total Retail revenue Mass Market $ 5,027 $ 1,306 $ — $ ( 2 ) $ 6,331 Business Solutions 1,034 95 — — 1,129 Total retail revenue 6,061 1,401 — ( 2 ) 7,460 Energy revenue (a) 24 183 333 ( 1 ) 539 Capacity revenue (a) — 620 61 ( 1 ) 680 Mark-to-market for economic hedging activities (b) 2 88 ( 3 ) 8 95 Other revenue (a) 222 62 43 ( 8 ) 319 Total operating revenue 6,309 2,354 434 ( 4 ) 9,093 Less: Lease revenue — 1 17 — 18 Less: Realized and unrealized ASC 815 revenue 30 314 38 3 385 Total revenue from contracts with customers $ 6,279 $ 2,039 $ 379 $ ( 7 ) $ 8,690 (a) The following amounts of energy, capacity and other revenue relate to derivative instruments and are accounted for under ASC 815: (In millions) Texas East West/Other Corporate/Eliminations Total Energy revenue $ — $ 67 $ 43 $ ( 5 ) $ 105 Capacity revenue — 156 — — 156 Other revenue 28 3 ( 2 ) — 29 (b) Revenue relates entirely to unrealized gains and losses on derivative instruments accounted for under ASC 815 For the Year Ended December 31, 2019 (In millions) Texas East West/Other Corporate/Eliminations Total Retail revenue Mass Market $ 5,027 $ 1,230 $ — $ ( 3 ) $ 6,254 Business Solutions 1,205 74 — — 1,279 Total retail revenue 6,232 1,304 — ( 3 ) 7,533 Energy revenue (a) 529 322 318 — 1,169 Capacity revenue (a) — 664 36 — 700 Mark-to-market for economic hedging activities (b) 47 ( 29 ) 16 ( 1 ) 33 Other revenue (a)(c) 261 58 70 ( 3 ) 386 Total operating revenue 7,069 2,319 440 ( 7 ) 9,821 Less: Lease revenue — 1 19 — 20 Less: Realized and unrealized ASC 815 revenue 1,562 183 67 ( 2 ) 1,810 Total revenue from contracts with customers $ 5,507 $ 2,135 $ 354 $ ( 5 ) $ 7,991 (a) The following amounts of energy, capacity and other revenue relate to derivative instruments and are accounted for under ASC 815: (In millions) Texas East West/Other Corporate/Eliminations Total Energy revenue $ 1,459 $ 98 $ 39 $ ( 1 ) $ 1,595 Capacity revenue — 109 — — 109 Other revenue 56 5 12 — 73 (b) Revenue relates entirely to unrealized gains and losses on derivative instruments accounted for under ASC 815 110 For the Year Ended December 31, 2018 (In millions) Texas East West/Other Corporate/Eliminations Total Retail revenue Mass Market $ 4,618 $ 974 $ — $ ( 1 ) $ 5,591 Business Solutions 1,238 65 — — 1,303 Total retail revenue 5,856 1,039 — ( 1 ) 6,894 Energy revenue (a) 371 546 566 13 1,496 Capacity revenue (a) — 746 79 — 825 Mark-to-market for economic hedging activities (b) ( 77 ) ( 35 ) ( 5 ) ( 13 ) ( 130 ) Other revenue (a)(c) 251 75 84 ( 17 ) 393 Total operating revenue 6,401 2,371 724 ( 18 ) 9,478 Less: Lease revenue 1 1 19 — 21 Less: Realized and unrealized ASC 815 revenue 1,096 210 2 1 1,309 Total revenue from contracts with customers $ 5,304 $ 2,160 $ 703 $ ( 19 ) $ 8,148 (a) The following amounts of energy, capacity and other revenue relate to derivative instruments and are accounted for under ASC 815: (In millions) Texas East West/Other Corporate/Eliminations Total Energy revenue $ 1,131 $ 90 $ ( 2 ) $ 14 $ 1,233 Capacity revenue — 137 — — 137 Other revenue 42 17 9 1 69 (b) Revenue relates entirely to unrealized gains and losses on derivative instruments accounted for under ASC 815 Contract Balances The following table reflects the contract assets and liabilities included in the Company's balance sheet as of December 31, 2020 and 2019: (In millions) December 31, 2020 December 31, 2019 Deferred customer acquisition costs $ 113 $ 133 Accounts receivable, net - Contracts with customers 866 1,002 Accounts receivable, net - Derivative instruments 33 18 Accounts receivable, net - Affiliate 5 5 Total accounts receivable, net $ 904 $ 1,025 Unbilled revenues (included within Accounts receivable, net - Contracts with customers) $ 393 $ 402 Deferred revenues (a) $ 60 $ 82 (a) Deferred revenues from contracts with customers for the years ended December 31, 2020 and 2019 were approximately $ 31 million and $ 24 million, respectively. The revenue recognized from contracts with customers during both years ended December 31, 2020 and 2019 relating to the deferred revenue balance at the beginning of each period was $ 13 million. The change in deferred revenue balances during the years ended December 31, 2020 and 2019 was primarily due to the timing difference of when consideration was received and when the performance obligation was transferred. The Company's customer acquisition costs consist of broker fees, commission payments and other costs that represent incremental costs of obtaining the contract with customers for which the Company expects to recover. The Company amortizes these amounts over the estimated life of the customer contract. As a practical expedient, the Company expenses the incremental costs of obtaining a contract if the amortization period of the asset would have been one year or less. When the Company receives consideration from the customer that is in excess of the amount due, such consideration is reclassified to deferred revenue, which represents a contract liability. Generally, the Company will recognize revenue from contract liabilities in the next period as the Company satisfies its performance obligations. 111 Note 4 — Acquisitions, Discontinued Operations and Dispositions Acquisitions Direct Energy Acquisition On January 5, 2021 (the "Acquisition Closing Date"), the Company acquired all of the issued and outstanding common shares of Direct Energy, a North American subsidiary of Centrica plc. Direct Energy is a leading retail provider of electricity, natural gas, and home and business energy related products and services in North America, with operations in all 50 U.S. states and 8 Canadian provinces. The acquisition increased NRG's retail portfolio by over 3 million customers and strengthens its integrated model. It also broadens the Company's presence in the Northeast and into states and locales where it did not previously operate, supporting NRG's objective to diversify its business. The Company paid an aggregate purchase price of $ 3.625 billion in cash, subject to a purchase price adjustment of $ 77 million. The Company funded the purchase price using a combination of $ 715 million of cash on hand, $ 166 million from a draw on its Revolving Credit Facility (of which $ 107 million was used to fund acquisition costs and financing fees that are not included in the aggregate purchase price above) as well as approximately $ 2.9 billion in secured and unsecured corporate debt issued in December 2020. The Company also increased its collective collateral facilities by $ 3.4 billion as of the Acquisition Closing Date to meet the additional liquidity requirements related to the acquisition, as detailed in the following table: (In millions) December 31, 2020 Revolving Credit Facility commitment increase (a) $ 802 Revolving Credit Facility new tranche (a) 273 Credit default swap facility 150 Revolving accounts receivable financing facility 750 Repurchase facility 75 Facility agreement in connection with the sale of pre-capitalized trust securities (a) 874 Bilateral letter of credit facilities 475 Total Increases to Liquidity and Collateral Facilities $ 3,399 (a) Available upon the Acquisition Closing Date For further discussion see Note 13, Receivables Securitization and Repurchase Facility and Note 14, Long-term Debt and Finance Leases . Acquisition costs of $ 17 million for the year ended December 31, 2020 are included in selling, general and administrative costs in the Company's consolidated statement of operations. The acquisition will be recorded as a business combination under ASC 805, with identifiable assets acquired and liabilities assumed provisionally recorded at their estimated fair values on the acquisition date. The initial accounting for the business combination is not complete because the evaluation necessary to assess the fair value of certain net assets acquired and the amount of goodwill to be recognized are still in process. The provisional amounts are subject to revision until the evaluations are completed to the extent that additional information is obtained about the facts and circumstances that existed as of the acquisition date. 112 The purchase price is provisionally allocated as follows: (In millions) Assets Cash and cash equivalents $ 152 Current assets 3,374 Property, plant and equipment 166 Goodwill and other intangibles (a) 3,446 Other non-current assets 687 Total assets acquired 7,825 Liabilities Current liabilities 3,085 Non-current liabilities 1,038 Total liabilities assumed 4,123 Direct Energy Purchase Price $ 3,702 (a) Goodwill arising from the acquisition is attributed to the value of the platform acquired and the synergies expected from combining the operations of Direct Energy with NRG's existing businesses. Midwest Generation Lease Purchase — On September 29, 2020, Midwest Generation acquired all of the ownership interests in the Powerton facility and Units 7 and 8 of the Joliet facility, which were being leased through 2034 and 2030, respectively, for approximately $ 260 million. The purchase was funded with cash-on-hand. Upon closing, lease expense related to these facilities, which totaled approximately $ 14 million in 2019, and the operating lease liability of $ 148 million were eliminated. Stream Energy Acquisition — On August 1, 2019, the Company completed the acquisition of Stream Energy's retail electricity and natural gas business operating in 9 states and Washington, D.C. for $ 329 million, including working capital and other adjustments of approximately $ 29 million. The acquisition increased NRG's retail portfolio by approximately 600,000 RCEs or 450,000 customers. The purchase price was allocated as follows: (In millions) Account receivable $ 98 Accounts payable ( 73 ) Other net current and non-current working capital 5 Marketing partnership 154 Customer relationships 85 Trade name 28 Other intangible assets 26 Goodwill (a) 6 Stream Purchase Price $ 329 (a) Goodwill arising from the acquisition is attributed to the value of the platform acquired and the synergies expected from combining the operations of Stream Energy with NRG's existing businesses. Goodwill of $ 5 million and $ 1 million was assigned to the Texas and East segments, respectively, and is not deductible for tax purposes XOOM Energy Acquisition — On June 1, 2018, the Company completed the acquisition of XOOM Energy, LLC, an electricity and natural gas retailer operating in 19 states, Washington, D.C. and Canada, for approximately $ 213 million, including working capital and other adjustments of $ 48 million. The acquisition increased NRG's retail portfolio by approximately 395,000 RCEs or 300,000 customers. The purchase price was allocated as follows: (In millions) Net current and non-current working capital $ 46 Other intangible assets 133 Goodwill 34 XOOM Purchase Price $ 213 (a) Goodwill arising from the acquisition is attributed to the value of the platform acquired and the synergies expected from combining the operations of XOOM Energy with NRG's existing businesses. Goodwill of $ 28 million and $ 6 million was assigned to the Texas and East segments, respectively, and is deductible for tax purposes 113 Small Book Acquisitions — In 2020, the Company acquired multiple books of customers totaling approximately 56,000 customers for $ 22 million. During 2019, the Company acquired several books of customers totaling approximately 72,000 customers for $ 17 million, of which $ 13 million was paid in 2019. During 2018, the Company acquired several books of customers totaling approximately 115,000 customers, along with brand names, for $ 44 million, of which $ 40 million was paid in 2018 and $ 2 million was paid in 2019. The majority of the purchase price for the 2020, 2019 and 2018 book acquisitions were allocated to acquired intangible assets. Discontinued Operations Sale of South Central Portfolio On February 4, 2019, the Company completed the sale of its South Central Portfolio to Cleco for cash consideration of $ 1 billion excluding working capital and other adjustments. The Company concluded that the divested business met the criteria for discontinued operations, as the disposition represents a strategic shift in the business in which NRG operates and held-for-sale criteria as of December 31, 2018. As such, all prior period results for the operations of the South Central Portfolio were reclassified as discontinued operations at December 31, 2018. In connection with the transaction, NRG also entered into a transition services agreement to provide certain corporate services to the divested business, which have been substantially completed in 2020. The South Central Portfolio includes the 1,153 MW Cottonwood natural gas generating facility. Upon the closing of the sale of the South Central Portfolio, NRG entered into a lease agreement with Cleco to leaseback the Cottonwood facility through 2025. Due to its continuing involvement with the Cottonwood facility, NRG did not use held-for-sale or discontinued operations treatment in accounting for the Cottonwood facility. Summarized results of South Central discontinued operations were as follows: Year Ended December 31, (In millions) 2019 2018 Operating revenues $ 31 $ 410 Operating costs and expenses ( 23 ) ( 346 ) Other income — 2 Gain from operations of discontinued components 8 66 Gain on disposal of discontinued operations, net of tax 20 — Gain from discontinued operations, including disposal, net of tax $ 28 $ 66 Sale of Ownership in NRG Yield, Inc. and its Renewables Platform On August 31, 2018, the Company completed the sale of its ownership interests in NRG Yield, Inc. and its Renewables Platform to GIP for total cash consideration of $ 1.348 billion. The Company concluded that the divested businesses met the criteria for discontinued operations, as the dispositions represented a strategic shift in the business in which NRG operates. As such, all prior period results for the transaction were reclassified as discontinued operations. In connection with the transaction, NRG entered into a transition services agreement to provide certain corporate services to the divested businesses in 2018, which concluded in 2020. During the year ended December 31, 2019, the Company recorded an adjustment to reduce the purchase price by $ 15 million in connection with the completion of the Patriot Wind project. During the year ended December 31, 2019, the Company reduced the liability related to the indemnification of NRG Yield for any increase in property taxes for certain solar properties by $ 22 million due to updated estimates. Carlsbad On February 6, 2018, NRG entered into an agreement with NRG Yield and GIP to sell 100 % of its membership interests in Carlsbad Energy Holdings LLC, which owns the Carlsbad project, for $ 385 million of cash consideration, excluding working capital adjustments. The primary condition to close the Carlsbad transaction was the completion of the sale of NRG Yield and the Renewables Platform. At the time of the sale of NRG Yield and the Renewables Platform in August 2018, the Company concluded that the Carlsbad project met the criteria for discontinued operations and accordingly, all current and prior period results for Carlsbad were reclassified as discontinued operations. The transaction closed on February 27, 2019. Carlsbad will continue to have a ground lease and easement agreement with NRG with an initial term ending in 2039 and two ten -year extensions. As a result of the transaction, additional commitments related to the project totaled $ 23 million as of December 31, 2020 and December 31, 2019. 114 Summarized results of NRG Yield, Inc. and Renewables Platform and Carlsbad discontinued operations were as follows: (In millions) 2019 2018 Operating revenues $ 19 $ 909 Operating costs and expenses ( 9 ) ( 661 ) Other expenses ( 5 ) ( 174 ) Gain/(loss) from operations of discontinued components, before tax 5 74 Income tax expense — 4 Gain/(loss) from discontinued operations, net of tax 5 70 Gain/(loss) on disposal of discontinued operations, net of tax 265 ( 134 ) Income/(expense) from California property tax indemnification 22 ( 153 ) Income/(expense) from other commitments, indemnification and fees 4 ( 75 ) Income/(loss) on disposal of discontinued operations, net of tax 291 ( 362 ) Income/(loss) from discontinued operations, net of tax $ 296 $ ( 292 ) Sale of Assets to NRG Yield, Inc. Prior to Discontinued Operations On June 19, 2018, the Company completed the UPMC Thermal Project and received cash consideration from NRG Yield of $ 84 million, plus an additional $ 3 million received at final completion in January 2019. On March 30, 2018, as part of the Transformation Plan, the Company sold to NRG Yield, Inc. 100 % of NRG's interests in Buckthorn Renewables, LLC, which owns a 154 MW construction-stage utility-scale solar generation project, located in Texas. NRG Yield, Inc. paid cash consideration of approximately $ 42 million, excluding working capital adjustments, and assumed non-recourse debt of $ 183 million. GenOn On June 14, 2017, the GenOn Entities filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. As a result of the bankruptcy filings, NRG concluded that it no longer controlled GenOn as it was subject to the control of the Bankruptcy Court; and, accordingly, NRG deconsolidated GenOn and its subsidiaries for financial reporting purposes as of such date. By eliminating a large portion of its operations in the PJM market with the deconsolidation of GenOn, NRG concluded that GenOn met the criteria for discontinued operations, as this represented a strategic shift in the business in which NRG operated. As such, all prior period results for GenOn were reclassified in 2017 as discontinued operations. Summarized results of discontinued operations were as follows: Year Ended December 31, (In millions) 2019 2018 Interest income - affiliate $ — $ 3 Income/(loss) from discontinued operations, net of tax — 3 Settlement consideration, insurance and services credit — 63 Pension and post-retirement liability assumption — 21 Other ( 3 ) ( 53 ) (Loss)/income on disposal of discontinued operations, net of tax ( 3 ) 31 (Loss)/income from discontinued operations, net of tax $ ( 3 ) $ 34 GenOn Settlement and Plan Confirmation Effective July 16, 2018, NRG and GenOn consummated the GenOn Settlement whereby the Company paid GenOn approximately $ 125 million, which included (i) the settlement consideration of $ 261 million, (ii) the transition services credit of $ 28 million and (iii) the return of $ 15 million of collateral posted to NRG; offset by the (i) $ 151 million in borrowings under the intercompany secured revolving credit facility, (ii) related accrued interest and fees of $ 12 million, (iii) remaining payments due under the transition services agreement of $ 10 million, (iv) $ 4 million reduction of the settlement payment related to NRG assigning to GenOn approximately $ 8 million of historical claims against REMA and (v) certain other balances due to NRG totaling $ 2 million. 115 GenOn's plan of reorganization was confirmed on December 14, 2018. Pursuant to the confirmed plan, NRG retained the pension liability for GenOn employees for service provided prior to the completion of the reorganization. NRG also retained the liability for GenOn's post-employment and retiree health and welfare benefits. As a result of GenOn's emergence from bankruptcy, NRG took a deduction for GenOn tax losses of $ 9.5 billion, including a worthless stock deduction. Other than those obligations which survive or are independent of the releases described herein, the GenOn Settlement and the GenOn Chapter 11 plan provide NRG releases from GenOn and each of its debtor and non-debtor subsidiaries. REMA Plan of Reorganization On October 16, 2018, REMA and its subsidiaries filed voluntary petitions for chapter 11 relief and a prepackaged plan of reorganization in the United States Bankruptcy Court for the Southern District of Texas. The REMA debtors' plan of reorganization has been formally accepted by REMA's voting creditors and is consistent with the releases NRG received under the GenOn Settlement and the GenOn plan. GenMA Settlement The Bankruptcy Court order confirming the plan of reorganization also approved the settlement terms agreed to among the GenOn Entities, NRG, the Consenting Holders, GenOn Mid-Atlantic, and certain of GenOn Mid-Atlantic’s stakeholders, or the GenMA Settlement, and directed the settlement parties to cooperate in good faith to negotiate definitive documentation consistent with the GenMA Settlement term sheet in order to pursue consummation of the GenMA Settlement. The definitive documentation effectuating the GenMA Settlement was finalized and effective as of April 27, 2018. Certain terms of the compromise with respect to NRG and GenOn Mid-Atlantic are as follows: • Settlement of all pending litigation and objections to the Plan (including with respect to releases and feasibility); • NRG provided $ 38 million in letters of credit as new qualifying credit support to GenOn Mid-Atlantic; such letters of credit were never drawn and were returned and canceled on December 17, 2019 and • NRG paid approximately $ 6 million as reimbursement of professional fees incurred by certain of GenOn Mid-Atlantic's stakeholders in connection with the GenMA Settlement. Dispositions On February 28, 2021, the Company entered into a definitive purchase agreement with Generation Bridge, an affiliate of ArcLight Capital Partners, to sell approximately 4,850 MWs of fossil generating assets from its East and West regions of operations for total proceeds of $ 760 million, subject to standard purchase price adjustments and certain other indemnifications. As part of the transaction, NRG is entering into a tolling agreement for its 866 MW Arthur Kill plant in New York City through April 2025. The transaction is expected to close in the fourth quarter of 2021, and is subject to various closing conditions, approvals and consents, including FERC, NYSPSC, and antitrust review under Hart-Scott-Rodino. On November 19, 2020, the Company entered an agreement to sell its 35 % ownership in Agua Caliente to Clearway Energy for $ 202 million. The sale of the solar project closed on February 3, 2021. In the third quarter of 2020, the Company concluded its Home Solar business was held for sale and recorded an impairment loss of $ 29 million, as further discussed in Note 11, Asset Impairments . On November 13, 2020, the Company completed the sale of the Home Solar business for cash proceeds of $ 66 million, resulting in a $ 2 million loss on the sale. In connection with the sale, the Company extinguished debt of $ 27 million and recognized a $ 5 million loss on the extinguishment. On August 1, 2018, the Company completed the sale of 100 % of its ownership interests in BETM to Diamond Energy Trading and Marketing, LLC for $ 71 million, net of working capital adjustments, which resulted in a gain of $ 15 million on the sale. The sale also resulted in the release and return of approximately $ 119 million of letters of credit, $ 32 million of parent guarantees, and $ 4 million of net cash collateral to NRG. On June 29, 2018, the Company completed the sale of Canal 3 to Stonepeak Kestrel for cash proceeds of approximately $ 16 million and recorded a gain of $ 17 million. Prior to the sale, Canal 3 entered into a financing arrangement and received cash proceeds of $ 167 million, of which $ 151 million was distributed to the Company. The related debt was non-recourse to NRG and was transferred to Stonepeak Kestrel in connection with the sale of Canal 3. The Company entered into a project management agreement in 2018 to manage construction of Canal 3 and substantial completion was reached in June 2019. The Company completed other asset sales for cash proceeds of $ 15 million and $ 22 million during the years ended December 31, 2020 and 2019, respectively. 116 Note 5 — Fair Value of Financial Instruments For cash and cash equivalents, funds deposited by counterparties, restricted cash, accounts and other receivables, accounts payable, restricted cash, and cash collateral posted and received in support of energy risk management activities, the carrying amount approximates fair value because of the short-term maturity of those instruments and are classified as Level 1 within the fair value hierarchy. The estimated carrying values and fair values of the Company's recorded financial instruments not carried at fair market value are as follows: As of December 31, 2020 2019 (In millions) Carrying Amount Fair Value Carrying Amount Fair Value Assets Notes receivable $ 2 $ 2 $ 11 $ 8 Liabilities Long-term debt, including current portion (a) $ 8,781 $ 9,446 $ 5,956 $ 6,504 (a) Excludes deferred financing costs, which are recorded as a reduction to long-term debt on the Company's consolidated balance sheets The fair value of the Company's publicly-traded long-term debt is based on quoted market prices and is classified as Level 2 within the fair value hierarchy. The fair value of debt securities, non-publicly traded long-term debt, and certain notes receivable of the Company are based on expected future cash flows discounted at market interest rates or current interest rates for similar instruments with equivalent credit quality and are classified as Level 3 within the fair value hierarchy. The following table presents the level within the fair value hierarchy for long-term debt, including current portion as of December 31, 2020 and 2019: As of December 31, 2020 As of December 31, 2019 (In millions) Level 2 Level 3 Level 2 Level 3 Long-term debt, including current portion $ 9,446 $ — $ 6,388 $ 116 Fair Value Accounting under ASC 820 ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows: • Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date. NRG's financial assets and liabilities utilizing Level 1 inputs include active exchange-traded securities, energy derivatives, and trust fund investments. • Level 2 — inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. NRG's financial assets and liabilities utilizing Level 2 inputs include fixed income securities, exchange-based derivatives, and over the counter derivatives such as swaps, options and forward contracts. • Level 3 — unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. NRG's financial assets and liabilities utilizing Level 3 inputs include infrequently-traded, non-exchange-based derivatives and commingled investment funds, and are measured using present value pricing models. In accordance with ASC 820, the Company determines the level in the fair value hierarchy within which each fair value measurement in its entirety falls, based on the lowest level input that is significant to the fair value measurement in its entirety. 117 Recurring Fair Value Measurements Debt securities, equity securities, and trust fund investments, which are comprised of various U.S. debt and equity securities, and derivative assets and liabilities, are carried at fair market value. The following tables present assets and liabilities measured and recorded at fair value on the Company's consolidated balance sheets on a recurring basis and their level within the fair value hierarchy: As of December 31, 2020 Fair Value (In millions) Total Level 1 Level 2 Level 3 Investments in securities (classified within other current and non-current assets) $ 25 $ 10 $ 15 $ — Nuclear trust fund investments: Cash and cash equivalents 23 23 — — U.S. government and federal agency obligations 70 69 1 — Federal agency mortgage-backed securities 89 — 89 — Commercial mortgage-backed securities 36 — 36 — Corporate debt securities 144 — 144 — Equity securities 434 434 — — Foreign government fixed income securities 7 1 6 — Other trust fund investments: U.S. government and federal agency obligations 1 1 — — Derivative assets: Commodity contracts 821 59 623 139 Measured using net asset value practical expedient: Equity securities-nuclear trust fund investments 87 — — — Equity securities 8 — — — Total assets $ 1,745 $ 597 $ 914 $ 139 Derivative liabilities: Commodity contracts $ 884 $ 86 $ 643 $ 155 Total liabilities $ 884 $ 86 $ 643 $ 155 As of December 31, 2019 Fair Value (In millions) Total Level 1 Level 2 Level 3 Investments in securities (classified within other current or non-current assets) $ 20 $ — $ 20 $ — Nuclear trust fund investments: Cash and cash equivalents 17 17 — — U.S. government and federal agency obligations 68 68 — — Federal agency mortgage-backed securities 100 — 100 — Commercial mortgage-backed securities 29 — 29 — Corporate debt securities 109 — 109 — Equity securities 388 388 — — Foreign government fixed income securities 5 — 5 — Other trust fund investments: U.S. government and federal agency obligations 1 1 — — Derivative assets: Commodity contracts 1,170 84 893 193 Measured using net asset value practical expedient: Equity securities-nuclear trust fund investments 78 — — — Equity securities 8 — — — Total assets $ 1,993 $ 558 $ 1,156 $ 193 Derivative liabilities: Commodity contracts $ 1,103 $ 143 $ 805 $ 155 Total liabilities $ 1,103 $ 143 $ 805 $ 155 118 The following tables reconcile, for the years ended December 31, 2020 and 2019, the beginning and ending balances for financial instruments that are recognized at fair value in the consolidated financial statements at least annually using significant unobservable inputs: For the Year Ended December 31, 2020 Fair Value Measurement Using Significant Unobservable Inputs (Level 3) (In millions) Derivatives (a) Beginning balance as of January 1, 2020 $ 38 Total (losses) — realized/unrealized included in earnings ( 44 ) Purchases ( 13 ) Transfers into Level 3 (b) 1 Transfers out of Level 3 (b) 2 Ending balance as of December 31, 2020 $ ( 16 ) Gains for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held as of December 31, 2020 $ 9 (a) Consists of derivatives assets and liabilities, net (b) Transfers into/out of Level 3 are related to the availability of external broker quotes, and are valued as of the end of the reporting period. All transfers into/out of Level 3 are from/to Level 2 For the Year Ended December 31, 2019 Fair Value Measurement Using Significant Unobservable Inputs (Level 3) (In millions) Debt Securities Derivatives (a) Total Beginning balance as of January 1, 2019 $ 19 $ 20 $ 39 Contracts added from acquisitions — ( 3 ) $ ( 3 ) Total (losses) — realized/unrealized included in earnings — ( 26 ) ( 26 ) Purchases — 40 40 Sale ( 19 ) — ( 19 ) Transfers into Level 3 (b) — 2 2 Transfers out of Level 3 (b) — 5 5 Ending balance as of December 31, 2019 $ — $ 38 $ 38 Gains for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held as of December 31, 2019 $ — $ 17 $ 17 (a) Consists of derivatives assets and liabilities, net (b) Transfers into/out of Level 3 are related to the availability of external broker quotes, and are valued as of the end of the reporting period. All transfers into/out of Level 3 are from/to Level 2 Realized and unrealized gains and losses included in earnings that are related to the energy derivatives are recorded in operating revenues and cost of operations. 119 Non-derivative fair value measurements NRG's investments in debt securities are classified as Level 3 and consist of non-traded debt instruments that were valued based on third-party market value assessments. The trust fund investments are held primarily to satisfy NRG's nuclear decommissioning obligations. These trust fund investments hold debt and equity securities directly and equity securities indirectly through commingled funds. The fair values of equity securities held directly by the trust funds are based on quoted prices in active markets and are categorized in Level 1. In addition, U.S. government and federal agency obligations are categorized as Level 1 because they trade in a highly liquid and transparent market. The fair values of corporate debt securities are based on evaluated prices that reflect observable market information, such as actual trade information of similar securities, adjusted for observable differences and are categorized in Level 2. Certain equity securities, classified as commingled funds, are analogous to mutual funds, are maintained by investment companies, and hold certain investments in accordance with a stated set of fund objectives. The fair value of the equity securities classified as commingled funds are based on net asset values per fund share (the unit of account), derived from the quoted prices in active markets of the underlying equity securities. However, because the shares in the commingled funds are not publicly quoted, not traded in an active market and are subject to certain restrictions regarding their purchase and sale, the commingled funds are measured using net asset value practical expedient. See also Note 7, Nuclear Decommissioning Trust Fund. Derivative fair value measurements A portion of the Company's contracts are exchange-traded contracts with readily available quoted market prices. A majority of NRG's contracts are non-exchange-traded contracts valued using prices provided by external sources, primarily price quotations available through brokers or over-the-counter and on-line exchanges. For the majority of NRG markets, the Company receives quotes from multiple sources. To the extent that NRG receives multiple quotes, the Company's prices reflect the average of the bid-ask mid-point prices obtained from all sources that NRG believes provide the most liquid market for the commodity. If the Company receives one quote, then the mid-point of the bid-ask spread for that quote is used. The terms for which such price information is available vary by commodity, region and product. A significant portion of the fair value of the Company's derivative portfolio is based on price quotes from brokers in active markets who regularly facilitate those transactions and the Company believes such price quotes are executable. The Company does not use third party sources that derive price based on proprietary models or market surveys. The remainder of the assets and liabilities represents contracts for which external sources or observable market quotes are not available. These contracts are valued based on various valuation techniques including but not limited to internal models based on a fundamental analysis of the market and extrapolation of observable market data with similar characteristics. Contracts valued with prices provided by models and other valuation techniques make up 17 % of derivative assets and 18 % of derivative liabilities. The fair value of each contract is discounted using a risk free interest rate. In addition, the Company applies a credit reserve to reflect credit risk, which for interest rate swaps is calculated utilizing the bilateral method based on published default probabilities. For commodities, to the extent that NRG's net exposure under a specific master agreement is an asset, the Company uses the counterparty's default swap rate. If the exposure under a specific master agreement is a liability, the Company uses NRG's default swap rate. For interest rate swaps and commodities, the credit reserve is added to the discounted fair value to reflect the exit price that a market participant would be willing to receive to assume NRG's liabilities or that a market participant would be willing to pay for NRG's assets. As of December 31, 2020 the credit reserve resulted in a $ 2 million increase primarily within cost of operations. As of December 31, 2019 the credit reserve did not result in a significant change in fair value in operations revenue and cost of operations. The fair values in each category reflect the level of forward prices and volatility factors as of December 31, 2020, and may change as a result of changes in these factors. Management uses its best estimates to determine the fair value of commodity and derivative contracts NRG holds and sells. These estimates consider various factors including closing exchange and over-the-counter price quotations, time value, volatility factors and credit exposure. It is possible, however, that future market prices could vary from those used in recording assets and liabilities from energy marketing and trading activities and such variations could be material. NRG's significant positions classified as Level 3 include physical and financial power executed in illiquid markets as well as financial transmission rights, or FTRs. The significant unobservable inputs used in developing fair value include illiquid power location pricing which is derived as a basis to liquid locations. The basis spread is based on observable market data when available or derived from historic prices and forward market prices from similar observable markets when not available. For FTRs, NRG uses the most recent auction prices to derive the fair value. 120 The following tables quantify the significant unobservable inputs used in developing the fair value of the Company's Level 3 positions as of December 31, 2020 and 2019: Significant Unobservable Inputs December 31, 2020 Fair Value Input/Range (In millions) Assets Liabilities Valuation Technique Significant Unobservable Input Low High Weighted Average Power Contracts $ 111 $ 143 Discounted Cash Flow Forward Market Price (per MWh) $ 10 $ 105 $ 21 FTRs 28 12 Discounted Cash Flow Auction Prices (per MWh) ( 28 ) 43 0 $ 139 $ 155 Significant Unobservable Inputs December 31, 2019 Fair Value Input/Range (In millions) Assets Liabilities Valuation Technique Significant Unobservable Input Low High Weighted Average Power Contracts $ 151 $ 139 Discounted Cash Flow Forward Market Price (per MWh) $ 8 $ 218 $ 24 FTRs 42 16 Discounted Cash Flow Auction Prices (per MWh) ( 105 ) 213 0 $ 193 $ 155 The following table provides sensitivity of fair value measurements to increases/(decreases) in significant unobservable inputs as of December 31, 2020 and 2019: Significant Unobservable Input Position Change In Input Impact on Fair Value Measurement Forward Market Price Power Buy Increase/(Decrease) Higher/(Lower) Forward Market Price Power Sell Increase/(Decrease) Lower/(Higher) FTR Prices Buy Increase/(Decrease) Higher/(Lower) FTR Prices Sell Increase/(Decrease) Lower/(Higher) Under the guidance of ASC 815, entities may choose to offset cash collateral posted or received against the fair value of derivative positions executed with the same counterparties under the same master netting agreements. The Company has chosen not to offset positions as defined in ASC 815. As of December 31, 2020, the Company recorded $ 50 million of cash collateral posted and $ 19 million of cash collateral received on its balance sheet. Concentration of Credit Risk In addition to the credit risk discussion as disclosed in Note 2, Summary of Significant Accounting Policies , the following item is a discussion of the concentration of credit risk for the Company's financial instruments. Credit risk relates to the risk of loss resulting from non-performance or non-payment by counterparties pursuant to the terms of their contractual obligations. The Company monitors and manages credit risk through credit policies that include: (i) an established credit approval process; (ii) a daily monitoring of counterparties' credit limits; (iii) the use of credit mitigation measures such as margin, collateral, prepayment arrangements, or volumetric limits; (iv) the use of payment netting agreements; and (v) the use of master netting agreements that allow for the netting of positive and negative exposures of various contracts associated with a single counterparty. Risks surrounding counterparty performance and credit could ultimately impact the amount and timing of expected cash flows. The Company seeks to mitigate counterparty risk by having a diversified portfolio of counterparties. The Company also has credit protection within various agreements to call on additional collateral support if and when necessary. Cash margin is collected and held at the Company to cover the credit risk of the counterparty until positions settle. 121 Counterparty Credit Risk As of December 31, 2020, counterparty credit exposure, excluding credit exposure from RTOs, ISOs, and registered commodity exchanges and certain long-term agreements, was $ 210 million and NRG held collateral (cash and letters of credit) against those positions of $ 14 million, resulting in a net exposure of $ 204 million. NRG periodically receives collateral from counterparties in excess of their exposure. Collateral amounts shown include such excess while net exposure shown excludes excess collateral received. Approximately 54 % of the Company's exposure before collateral is expected to roll off by the end of 2022. Counterparty credit exposure is valued through observable market quotes and discounted at a risk free interest rate. The following tables highlight net counterparty credit exposure by industry sector and by counterparty credit quality. Net counterparty credit exposure is defined as the aggregate net asset position for NRG with counterparties where netting is permitted under the enabling agreement and includes all cash flow, mark-to-market and NPNS, and non-derivative transactions. The exposure is shown net of collateral held, and includes amounts net of receivables or payables. Category Net Exposure (a) (b) (% of Total) Utilities, energy merchants, marketers and other 96 % Financial institutions 4 Total 100 % Category Net Exposure (a) (b) (% of Total) Investment grade 59 % Non-Investment grade/Non-Rated 41 Total 100 % (a) Counterparty credit exposure excludes uranium and coal transportation contracts because of the unavailability of market prices. (b) The figures in the tables above exclude potential counterparty credit exposure related to RTOs, ISOs, registered commodity exchanges and certain long term contracts. The Company currently has $ 47 million exposure to two wholesale counterparties in excess of 10 % of the total net exposure discussed above as of December 31, 2020. Changes in hedge positions and market prices will affect credit exposure and counterparty concentration. Given the credit quality, diversification and term of the exposure in the portfolio, NRG does not anticipate a material impact on the Company's financial position or results of operations from nonperformance by any of NRG's counterparties. RTOs and ISOs The Company participates in the organized markets of CAISO, ERCOT, ISO-NE, MISO, NYISO and PJM, known as RTOs or ISOs. Trading in these markets is approved by FERC, or in the case of ERCOT, approved by the PUCT and includes credit policies that, under certain circumstances, require that losses arising from the default of one member on spot market transactions be shared by the remaining participants. As a result, the counterparty credit risk to these markets is limited to NRG’s share of overall market and are excluded from the above exposures. Exchange Traded Transactions The Company enters into commodity transactions on registered exchanges, notably ICE and NYMEX. These clearinghouses act as the counterparty and transactions are subject to extensive collateral and margining requirements. As a result, these commodity transactions have limited counterparty credit risk. Long-Term Contracts Counterparty credit exposure described above excludes credit risk exposure under certain long term contracts, primarily solar PPAs. As external sources or observable market quotes are not available to estimate such exposure, the Company values these contracts based on various techniques including, but not limited to, internal models based on a fundamental analysis of the market and extrapolation of observable market data with similar characteristics. Based on these valuation techniques, as of December 31, 2020, aggregate credit risk exposure managed by NRG to these counterparties was approximately $ 645 million for the next five years. 122 Retail Customer Credit Risk The Company is exposed to retail credit risk through the Company's retail electricity providers, which serve C&I customers and the Mass market. Retail credit risk results in losses when a customer fails to pay for services rendered. The losses may result from both nonpayment of customer accounts receivable and the loss of in-the-money forward value. The Company manages retail credit risk through the use of established credit policies that include monitoring of the portfolio and the use of credit mitigation measures such as deposits or prepayment arrangements. As of December 31, 2020, the Company's retail customer credit exposure to C&I and Mass customers was diversified across many customers and various industries, as well as government entities. The Company is also subject to risk with respect to its residential solar customers. The Company's provision for credit losses was $ 108 million, $ 95 million, and $ 85 million for the years ending December 31, 2020, 2019, and 2018, respectively. Current economic conditions may affect the Company's customers' ability to pay bills in a timely manner, which could increase customer delinquencies and may lead to an increase in credit losses. Note 6 — Accounting for Derivative Instruments and Hedging Activities ASC 815 requires the Company to recognize all derivative instruments on the balance sheet as either assets or liabilities and to measure them at fair value each reporting period unless they qualify for a NPNS exception. The Company may elect to designate certain derivatives as cash flow hedges, if certain conditions are met, and defer the change in fair value of the derivatives to accumulated OCI, until the hedged transactions occur and are recognized in earnings. For derivatives that are not designated as cash flow hedges or do not qualify for hedge accounting treatment, the changes in the fair value will be immediately recognized in earnings. Certain derivative instruments may qualify for the NPNS exception and are therefore exempt from fair value accounting treatment. ASC 815 applies to NRG's energy related commodity contracts, and interest rate swaps. As the Company engages principally in the trading and marketing of its generation assets and retail operations, some of NRG's commercial activities qualify for NPNS accounting. Most of the retail load contracts either qualify for the NPNS exception or fail to meet the criteria for a derivative and the majority of the retail supply and fuels supply contracts are recorded under mark-to-market accounting. All of NRG's hedging and trading activities are subject to limits within the Company's Risk Management Policy. Energy-Related Commodities To manage the commodity price risk associated with the Company's competitive supply activities and the price risk associated with wholesale power sales from the Company's electric generation facilities and retail power sales from NRG's retail operations, NRG enters into a variety of derivative and non-derivative hedging instruments, utilizing the following: • Forward contracts, which commit NRG to purchase or sell energy commodities or purchase fuels in the future; • Futures contracts, which are exchange-traded standardized commitments to purchase or sell a commodity or financial instrument; • Swap agreements, which require payments to or from counterparties based upon the differential between two prices for a predetermined contractual, or notional, quantity; • Option contracts, which convey to the option holder the right but not the obligation to purchase or sell a commodity; • Extendable swaps, which include a combination of swaps and options executed simultaneously for different periods. This combination of instruments allows NRG to sell out-year volatility through call options in exchange for natural gas swaps with fixed prices in excess of the market price for natural gas at that time. The above-market swap combined with its later-year call option are priced in aggregate at market at the trade's inception; and • Weather derivative products used to mitigate a portion of lost revenue due to weather. The objectives for entering into derivative contracts designated as hedges include: • Fixing the price of a portion of anticipated power purchases for the Company's retail sales; • Fixing the price for a portion of anticipated future electricity sales that provides an acceptable return on the Company's electric generation operations; and • Fixing the price of a portion of anticipated fuel purchases for the operation of the Company's power plants. 123 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. As of December 31, 2020, NRG's derivative assets and liabilities consisted primarily of the following: • Forward and financial contracts for the purchase/sale of electricity and related products economically hedging NRG's generation assets' forecasted output or NRG's retail load obligations through 2034; • Forward and financial contracts for the purchase of fuel commodities relating to the forecasted usage of NRG's generation assets through 2021; and • Other energy derivatives instruments extending through 2029. Also, as of December 31, 2020, NRG had other energy-related contracts that did not meet the definition of a derivative instrument or qualified for the NPNS exception and were therefore exempt from fair value accounting treatment as follows: • Load-following forward electric sale contracts extending through 2034; • Power tolling contracts through 2037; • Coal purchase contracts through 2021; • Power transmission contracts through 2025; • Natural gas transportation contracts and storage agreements through 2030; and • Coal transportation contracts through 2029. Interest Rate Swaps NRG was exposed to changes in interest rates through the Company's issuance of variable rate debt. In order to manage the Company's interest rate risk, NRG entered into interest rate swap agreements. As of December 31, 2019, NRG had no interest rate derivative instruments as a result of the early termination of such contracts in connection with the repayment of the 2023 Term Loan Facility during the second quarter of 2019. During the fourth quarter of 2020, NRG entered into $ 1.6 billion of interest rate hedges associated with anticipated certain financing needs. As of December 31, 2020, the interest rate hedges were settled in connection with the issuance of fixed rate debt, resulting in a gain of $ 11 million that was recorded as a reduction to interest expense. Volumetric Underlying Derivative Transactions The following table summarizes the net notional volume buy/(sell) of NRG's open derivative transactions broken out by commodity, excluding those derivatives that qualified for the NPNS exception as of December 31, 2020 and 2019. Option contracts are reflected using delta volume. Delta volume equals the notional volume of an option adjusted for the probability that the option will be in-the-money at its expiration date. (In millions) Total Volume Commodity Units December 31, 2020 December 31, 2019 Emissions Short Ton 1 3 Renewables Energy Certificates Certificates 5 1 Coal Short Ton 2 10 Natural Gas MMBtu ( 286 ) ( 181 ) Power MWh 57 38 Capacity MW/Day ( 1 ) ( 1 ) 124 Fair Value of Derivative Instruments The following table summarizes the fair value within the derivative instrument valuation on the balance sheet: Fair Value Derivative Assets Derivative Liabilities (In millions) December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019 Derivatives Not Designated as Cash Flow or Fair Value Hedges : Commodity contracts current $ 560 $ 860 $ 499 $ 781 Commodity contracts long-term 261 310 385 322 Total Derivatives Not Designated as Cash Flow or Fair Value Hedges $ 821 $ 1,170 $ 884 $ 1,103 The Company has elected to present derivative assets and liabilities on the balance sheet on a trade-by-trade basis and does not offset amounts at the counterparty master agreement level. In addition, collateral received or paid on the Company's derivative assets or liabilities are recorded on a separate line item on the balance sheet. The following table summarizes the offsetting derivatives by counterparty master agreement level and collateral received or paid: Gross Amounts Not Offset in the Statement of Financial Position (In millions) Gross Amounts of Recognized Assets/Liabilities Derivative Instruments Cash Collateral (Held)/Posted Net Amount As of December 31, 2020 Commodity contracts: Derivative assets $ 821 $ ( 658 ) $ ( 5 ) $ 158 Derivative liabilities ( 884 ) 658 — ( 226 ) Total commodity contracts $ ( 63 ) $ — $ ( 5 ) $ ( 68 ) Gross Amounts Not Offset in the Statement of Financial Position (In millions) Gross Amounts of Recognized Assets/Liabilities Derivative Instruments Cash Collateral (Held)/Posted Net Amount As of December 31, 2019 Commodity contracts: Derivative assets $ 1,170 $ ( 909 ) $ ( 7 ) $ 254 Derivative liabilities ( 1,103 ) 909 73 ( 121 ) Total commodity contracts $ 67 $ — $ 66 $ 133 Accumulated Other Comprehensive Income The following table summarizes the effects on NRG's accumulated OCI balance attributable to cash flow hedge derivatives, net of tax, for the year 2018: Interest Rate Contracts (In millions) 2018 Accumulated OCI beginning balance $ ( 54 ) Reclassified from accumulated OCI to income: Due to realization of previously deferred amounts 8 Mark-to-market of cash flow hedge accounting contracts 21 Sale of NRG Yield and Renewables 25 Accumulated OCI ending balance $ — Amounts reclassified from accumulated OCI into income were recorded in discontinued operations. 125 Impact of Derivative Instruments on the Statement of Operations Unrealized gains and losses associated with changes in the fair value of derivative instruments not accounted for as cash flow hedges are reflected in current period earnings. The following table summarizes the pre-tax effects of economic hedges that have not been designated as cash flow hedges or fair value hedges and trading activity on the Company's statement of operations. The effect of commodity hedges is included within operating revenues and cost of operations and the effect of interest rate hedges is included in interest expense. Year Ended December 31, (In millions) 2020 2019 2018 Unrealized mark-to-market results Reversal of previously recognized unrealized (gains) on settled positions related to economic hedges $ ( 55 ) $ ( 68 ) $ ( 73 ) Reversal of acquired loss/(gain) positions related to economic hedges 4 6 ( 10 ) Net unrealized (losses)/gains on open positions related to economic hedges ( 68 ) 42 97 Total unrealized mark-to-market (losses)/gains for economic hedging activities ( 119 ) ( 20 ) 14 Reversal of previously recognized unrealized (gains) on settled positions related to trading activity ( 20 ) ( 11 ) ( 12 ) Net unrealized gains on open positions related to trading activity 15 31 29 Total unrealized mark-to-market (losses)/gains for trading activity ( 5 ) 20 17 Total unrealized (losses)/gains $ ( 124 ) $ — $ 31 Year Ended December 31, (In millions) 2020 2019 2018 Unrealized gains/(losses) included in operating revenues $ 90 $ 53 $ ( 113 ) Unrealized (losses)/gains included in cost of operations ( 214 ) ( 53 ) 144 Total impact to statement of operations — energy commodities $ ( 124 ) $ — $ 31 Total impact to statement of operations — interest rate contracts $ — $ ( 38 ) $ — The reversal of gain or loss positions acquired as part of acquisitions were valued based upon the forward prices on the acquisition dates. The roll-off amounts were offset by realized gains or losses at the settled prices and are reflected in revenue or cost of operations during the same period. For the year ended December 31, 2020, the $ 68 million loss from open economic hedge positions was primarily the result of a decrease in the value of forward positions as a result of decreases in ERCOT power prices and heat rate contraction, partially offset by an increase in value of forward positions as a result of decreases in New York capacity prices. The gains from open economic hedge positions of $ 42 million and $ 97 million for the years ended December 31, 2019 and 2018, respectively, were primarily the result of an increase in the value of forward purchases of ERCOT heat rate contracts due to ERCOT heat rate expansion. Credit Risk Related Contingent Features Certain of the Company's hedging agreements contain provisions that require the Company to post additional collateral if the counterparty determines that there has been deterioration in credit quality, generally termed "adequate assurance" under the agreements, or require the Company to post additional collateral if there were a downgrade in the Company's credit rating. The collateral required for contracts that have adequate assurance clauses that are in net liability positions as of December 31, 2020 was $ 26 million. The Company is also a party to certain marginable agreements under which it has a net liability position, but the counterparty has not called for the collateral due, which was approximately $ 35 million as of December 31, 2020. If called for by the counterparty, $ 1 million of additional collateral would be required for all contracts with credit rating contingent features as of December 31, 2020. See Note 5, Fair Value of Financial Instruments, for discussion regarding concentration of credit risk. 126 Note 7 — Nuclear Decommissioning Trust Fund NRG's Nuclear Decommissioning Trust Fund assets, which are for the decommissioning of STP, are comprised of securities classified as available-for-sale and recorded at fair value based on actively quoted market prices. Although NRG is responsible for managing the decommissioning of its 44 % interest in STP, the predecessor utilities that owned STP are authorized by the PUCT to collect decommissioning funds from their ratepayers to cover decommissioning costs on behalf of NRG. NRC requirements determine the decommissioning cost estimate which is the minimum required level of funding. In the event that funds from the ratepayers that accumulate in the nuclear decommissioning trust are ultimately determined to be inadequate to decommission the STP facilities, the utilities will be required to collect through rates charged to rate payers all additional amounts, with no obligation from NRG, provided that NRG has complied with PUCT rules and regulations regarding decommissioning trusts. Following completion of the decommissioning, if surplus funds remain in the decommissioning trusts, any excess will be refunded to the respective ratepayers of the utilities. NRG accounts for the Nuclear Decommissioning Trust Fund in accordance with ASC 980, Regulated Operations , or ASC 980, because the Company's nuclear decommissioning activities are subject to approval by the PUCT, with regulated rates that are designed to recover all decommissioning costs and that can be charged to and collected from the ratepayers per PUCT mandate. Since the Company is in compliance with PUCT rules and regulations regarding decommissioning trusts and the cost of decommissioning is the responsibility of the Texas ratepayers, not NRG, all realized and unrealized gains or losses (including other-than-temporary impairments) related to the Nuclear Decommissioning Trust Fund are recorded to the Nuclear Decommissioning Trust liability and are not included in net income or accumulated other comprehensive income, consistent with regulatory treatment. The following table summarizes the aggregate fair values and unrealized gains and losses for the securities held in the trust funds, as well as information about the contractual maturities of those securities. As of December 31, 2020 As of December 31, 2019 (In millions, except otherwise noted) Fair Value Unrealized Gains Unrealized Losses Weighted- average maturities (in years) Fair Value Unrealized Gains Unrealized Losses Weighted- average maturities (in years) Cash and cash equivalents $ 23 $ — $ — — $ 17 $ — $ — — U.S. government and federal agency obligations 70 6 — 10 68 4 — 11 Federal agency mortgage-backed securities 89 4 — 24 100 3 — 24 Commercial mortgage-backed securities 36 2 — 27 29 1 1 24 Corporate debt securities 144 13 — 12 109 6 — 11 Equity securities 521 372 — — 466 324 — — Foreign government fixed income securities 7 1 — 10 5 — — 10 Total $ 890 $ 398 $ — $ 794 $ 338 $ 1 The following table summarizes proceeds from sales of available-for-sale securities and the related realized gains and losses from these sales. The cost of securities sold is determined using the specific identification method. Year Ended December 31, (In millions) 2020 2019 2018 Realized gains $ 34 $ 18 $ 17 Realized (losses) ( 13 ) ( 9 ) ( 13 ) Proceeds from sale of securities 439 381 513 127 Note 8 — Inventory Inventory consisted of: As of December 31, (In millions) 2020 2019 Fuel oil $ 37 $ 73 Coal 73 93 Natural gas 22 21 Spare parts 195 196 Total Inventory $ 327 $ 383 The Company recorded a $ 29 million lower of weighted average cost or market adjustment related to fuel oil during the year ended December 31, 2020. Note 9 — Property, Plant and Equipment The Company's major classes of property, plant, and equipment were as follows: As of December 31, Depreciable (In millions) 2020 2019 Lives Facilities and equipment $ 3,365 $ 3,262 1 - 40 years Land and improvements 329 324 Nuclear fuel 239 235 5 years Hardware and office equipment and furnishings 453 422 2 - 10 years Construction in progress 97 102 Total property, plant, and equipment 4,483 4,345 Accumulated depreciation ( 1,936 ) ( 1,752 ) Net property, plant, and equipment $ 2,547 $ 2,593 The Company recorded long-lived asset impairments during the years ended December 31, 2020 and 2019, as further described in Note 11, Asset Impairments. Depreciation expense of property, plant and equipment recorded during the years ended 2020, 2019 and 2018 was $ 295 million, $ 271 million and $ 356 million, respectively. Note 10 — Leases The Company leases generating facilities, land, office and equipment, railcars, and storefront space at retail stores. Operating leases with an initial term greater than twelve months are recognized as right-of-use assets and lease liabilities in the consolidated balance sheets. The Company made an accounting policy election for all asset classes not to recognize right-of-use assets and lease liabilities in the consolidated balance sheets for its short-term leases, which are leases that have a lease term of twelve months or less. The Company recognizes lease expense for all operating leases on a straight-line basis over the lease term. In the future, should another systematic basis become more representative of the pattern in which the lessee expects to consume the remaining economic benefit of the right-of-use asset, the Company will use that basis for lease expense. The Company considers a contract to be or to contain a lease when both of the following conditions apply: 1) an asset is either explicitly or implicitly identified in the contract and 2) the contract conveys to the Company the right to control the use of the identified asset for a period of time. The Company has the right to control the use of the identified asset when the Company has both the right to obtain substantially all the economic benefits from the use of the identified asset and the right to direct how and for what purpose the identified asset is used throughout the period of use. Lease payments are typically fixed and payable on a monthly, quarterly, semi-annual or annual basis. Lease payments under certain agreements may escalate over the lease term either by a fixed percentage or a fixed dollar amount. Certain leases may provide for variable lease payments in the form of payments based on usage, a percentage of sales from the location under lease, or index-based (e.g., the U.S. Consumer Price Index) adjustments to lease payments. The Company has no leases which contain residual value guarantees provided by the Company as a lessee. The Company’s leases may grant the Company an option to renew a lease for an additional term(s) or to terminate the lease after a certain period. As part of its transition from the guidance contained in ASC 840 to the updated guidance in ASC 842, the Company elected not to use the practical expedient of using hindsight to determine the lease term and in assessing impairment of the right-of-use assets. 128 As permitted by ASC 842, the Company made an accounting policy election for all asset classes not to recognize right-of-use assets and lease liabilities in the consolidated balance sheets for its short-term leases, which are leases that have a lease term of twelve months or less. For the initial measurement of lease liabilities, the discount rate that the Company uses is either the rate implicit in the lease, if known, or its incremental borrowing rate, which is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, over a similar term an amount equal to the payments for the lease. In transition to ASC 842, the Company elected to apply the effective date transition method as of the January 1, 2019 adoption date. In accordance with this method, the Company’s reporting for comparative periods prior to January 1, 2019 presented in the financial statements continues to be in conformity with the guidance in ASC 840. The Company elected the following practical expedients, which allow entities to: • Not reassess whether any contracts that existed prior to the January 1, 2019 implementation date are or contain leases; • Not reassess the lease classification for any leases that commenced prior to the January 1, 2019 implementation date, meaning that all commenced capital leases under ASC 840 will be classified as finance leases under ASC 842 and all commenced operating leases under ASC 840 will be classified as operating leases under ASC 842; • Not reassess initial direct costs for any leases; • Not reassess whether existing land easements, which were not previously accounted as leases under ASC 840, are or contain leases; and • Not separate lease and non-lease components for all asset classes, except office space leases and generation facilities leases. As described in Note 4, Acquisitions, Discontinued Operations and Dispositions , upon the close of the South Central Portfolio sale in 2019, the Company entered into an agreement to leaseback the Cottonwood facility through May 2025. The lease was accounted for in accordance with ASC 842-40, Sale and Leaseback Transactions , as an operating lease and accordingly, a right-of-use asset and lease liability were established on the lease commencement date and will be amortized through the end of the lease. Lease Cost: (In millions) For the Year Ended December 31, 2020 For the Year Ended December 31, 2019 Finance lease cost $ 3 $ — Operating lease cost 100 109 Short-term lease cost 3 3 Variable lease cost 6 6 Sublease income ( 17 ) ( 17 ) Total lease cost $ 95 $ 101 Other information: (In millions) For the Year Ended December 31, 2020 For the Year Ended December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 101 $ 104 Financing cash flows from finance leases 1 — Right-of-use assets obtained in exchange for new finance lease liabilities 5 — Right-of-use assets obtained in exchange for new operating lease liabilities 4 215 129 Lease Term and Discount Rate for leases: December 31, 2020 December 31, 2019 Finance leases: Weighted average remaining lease term (in years) 1.1 — Weighted average discount rate 4.79 % — Operating leases: Weighted average remaining lease term (in years) 5.3 7.8 Weighted average discount rate 5.63 % 5.72 % As of December 31, 2020, annual payments based on the maturities of NRG's leases are expected to be as follows: (In millions) 2021 $ 86 2022 82 2023 81 2024 71 2025 47 Thereafter 34 Total undiscounted lease payments $ 401 Less: present value adjustment ( 54 ) Total discounted lease payments $ 347 Note 11 — Asset Impairments 2020 Impairment Losses During the fourth quarter of 2020, the Company completed its annual budget and revised its view of long-term power and fuel prices and the corresponding impact on estimated cash flows associated with its long-lives assets. The Cottonwood facility had estimated cash flows that were lower than its carrying amount and the assets were considered impaired. The fair value of the assets was determined using an income approach by applying a discounted cash flow methodology to the long-term budget for the facility. The income approach utilized estimates of after-tax cash flows, which were Level 3 fair value measurements, and included key inputs such as forecasted power prices, fuel costs, operating and maintenance costs, plant investment capital expenditures and discount rates. The Cottonwood facility is being leased through 2025 and the Company recognized an impairment loss of $ 32 million in 2020 in the West/Other segment associated with the Company's long-term services agreement and related lease payments, as the carrying amounts of the assets from the contract were higher than the estimated operating cash flow though the remaining lease period. The Company also recorded the following impairments in 2020 based on specific triggering events that occurred: Home Solar — In the third quarter of 2020, the Company concluded its Home Solar business was held for sale and recorded an impairment loss of $ 29 million in the West/Other segment to adjust the carrying amount of the assets and liabilities to fair market value based on indicative sale prices. Petra Nova Parish Holdings — During the first quarter of 2020, due to the decline in oil prices, NRG determined that the carrying amount of the Company’s equity method investment exceeded the fair value of the investment and that the decline is considered to be other-than-temporary. In determining the fair value, the Company utilized an income approach to estimate future project cash flows. The Company recorded an impairment loss of $ 18 million in the Texas segment, which included the anticipated drawdown of the $ 12 million letter of credit posted in September 2019 to cover certain project debt reserve requirements. Other Impairments — For the year ended December 31, 2020, the Company recorded $ 14 million of impairment losses related to intangible assets in the Texas segment. 130 2019 Impairment Losses Petra Nova Parish Holdings — During the third quarter of 2019, NRG contributed $ 95 million in cash to Petra Nova and posted a $ 12 million letter of credit to cover certain project debt reserve requirements. The cash portion of the contribution was used by Petra Nova to prepay a significant portion of the project debt. As a result, the previously disclosed guarantee of up to $ 124 million related to the project level debt provided by NRG was canceled and the remaining project debt became non-recourse to NRG. In relation to this contribution, the Company evaluated the project for impairment and determined that the carrying amount of the Company’s equity method investment exceeded the fair value of the investment and that the decline is considered to be other-than-temporary. In determining the fair value, the Company utilized an income approach and considered project specific assumptions for the estimated future project cash flows. The Company measured the impairment loss as the difference between the carrying amount and the fair value of the investment and recorded an impairment loss of $ 101 million. Other Impairments — For the year ended December 31, 2019, the Company recorded $ 12 million of impairment losses primarily related to investments and intangibles. 2018 Impairment Losses Guam — During the fourth quarter of 2018, the Company concluded its wholly-owned subsidiary, NRG Solar Guam, LLC, was held for sale after board approval and advanced negotiations to sell the business. Accordingly, the Company recorded the assets and liabilities at fair market value as of December 31, 2018 based on the contractual sale price, which resulted in an impairment loss of $ 12 million. On February 20, 2019, the Company completed the sale of Guam for cash consideration of approximately $ 8 million. Keystone and Conemaugh — On September 5, 2018, the Company sold its approximately 3.7 % interests in the Keystone and Conemaugh generating stations. NRG recorded impairment losses of $ 14 million for Keystone and $ 14 million for Conemaugh to adjust the carrying amount of the assets to fair value based on the contractual sale price. Dunkirk — During the second quarter of 2018, NRG ceased its development of the project to add gas capability at the Dunkirk generating station. The project was put on hold in 2015 pending the resolution of a lawsuit filed by Entergy Corporation against the NYPSC, which challenged the legality of its contract with Dunkirk. The lawsuit was later dropped and development continued, but the delay imposed a new requirement on Dunkirk to enter into the NYISO interconnection study process. The NYISO studies have concluded that extensive electric system upgrades would be necessary for the station to return to service. This would cause the Company to incur a material increase in cost and delay the project schedule that would render the project impractical. Consequently, the Company has recorded an impairment loss of $ 46 million, reducing the carrying amount of the related assets to $ 0 . Other Impairments — As of December 31, 2018, the Company recorded additional asset impairment losses of $ 13 million and impairment losses on equity method investments of $ 15 million. Note 12 — Goodwill and Other Intangibles Goodwill NRG's goodwill balance was $ 579 million as of December 31, 2020 and 2019. As of December 31, 2020, goodwill consisted of $ 165 million associated with the acquisition of Midwest Generation and $ 414 million for retail operations acquisitions, including Stream Energy and XOOM, which were acquired in 2019 and 2018, respectively. Intangible Assets The Company's intangible assets as of December 31, 2020, primarily reflect intangible assets established with the acquisitions of various companies, including Stream Energy, XOOM, other retail acquisitions, and Texas Genco. Intangible assets are comprised of the following: • Emission Allowances — These intangibles primarily consist of SO2 emission allowances, including those established with the 2006 acquisition of Texas Genco, RGGI emission credits and California carbon allowances. These emission allowances are held-for-use and are amortized to cost of operations based on units of production. • In-market nuclear fuel contracts — These intangibles were established with the Texas Genco acquisition in 2006 and are amortized to cost of operations over expected volumes over the life of each contract. • Customer relationships — These intangibles represent the fair value at the acquisition date of acquired businesses' customer base. The customer relationships are amortized to depreciation and amortization expense based on the expected discounted future net cash flows by year. 131 • Marketing partnerships — These intangibles represent the fair value at the acquisition date of existing agreements with marketing vendors and loyalty and affinity partners for customer acquisition. The marketing partnerships are amortized to depreciation and amortization expense based on the expected discounted future net cash flows by year. • Trade names — These intangibles are amortized to depreciation and amortization expense on a straight-line basis. • Other — Consists of renewable energy credits, costs to extend the operating license for STP Units 1 and 2, and energy supply contracts acquired with Stream Energy that represent the fair value at the acquisition date of in-market contracts for the purchase of energy to serve retail electric customers. Renewable energy credits are retired, as required, for the applicable compliance period. They are expensed to cost of operations based on NRG’s customer usage. Energy supply contracts are amortized to depreciation and amortization based on the expected delivery under the respective contracts. The following tables summarize the components of NRG's intangible assets subject to amortization: (In millions) Year Ended December 31, 2020 Emission Allowances Fuel Contracts Customer Relationships Marketing Partnerships Trade Names Other (b) Total January 1, 2020 $ 662 $ 49 $ 573 $ 285 $ 373 $ 109 $ 2,051 Purchases 25 — — — — 45 70 Acquisition of businesses (a) — — 22 — — — 22 Retirements — — — — — ( 35 ) ( 35 ) Write-off of fully amortized balances ( 4 ) — ( 70 ) — — — ( 74 ) Impairment ( 14 ) — — — — — ( 14 ) Other 3 — 2 — — — 5 December 31, 2020 672 49 527 285 373 119 2,025 Less accumulated amortization ( 563 ) ( 46 ) ( 349 ) ( 99 ) ( 247 ) ( 53 ) ( 1,357 ) Net carrying amount $ 109 $ 3 $ 178 $ 186 $ 126 $ 66 $ 668 (a) The weighted average life of acquired intangibles was 5 years for customer relationships (b) RECs are not subject to amortization and had a carrying value of $ 28 million (In millions) Year Ended December 31, 2019 Emission Allowances Fuel Contracts Customer Relationships Marketing Partnerships Trade Names Other (b) Total January 1, 2019 $ 659 $ 49 $ 478 $ 131 $ 345 $ 80 $ 1,742 Purchases 13 — — — — 29 42 Acquisition of businesses (a) — — 110 154 28 26 318 Usage/Retirements ( 4 ) — — — — ( 17 ) ( 21 ) Write-off of fully amortized balances ( 8 ) — ( 13 ) — — ( 9 ) ( 30 ) Impairment — — ( 2 ) — — — ( 2 ) Other 2 — — — — — 2 December 31, 2019 662 49 573 285 373 109 2,051 Less accumulated amortization ( 539 ) ( 45 ) ( 345 ) ( 75 ) ( 220 ) ( 38 ) ( 1,262 ) Net carrying amount $ 123 $ 4 $ 228 $ 210 $ 153 $ 71 $ 789 (a) The weighted average life of acquired intangibles was: customer relationships 7 years, trade names 12 years, marketing partnerships 9 years, and energy supply contracts 2 years (b) RECs are not subject to amortization and had a carrying value of $ 18 million 132 The following table presents NRG's amortization and retirements of intangible assets for each of the past three years: Years Ended December 31, (In millions) 2020 2019 2018 Emission allowances $ 28 $ 32 $ 39 Customer relationships 74 44 32 Marketing partnerships 24 15 9 Trade names 27 25 23 Other (a) 51 35 30 Total amortization $ 204 $ 151 $ 133 (a) For the years ended December 31, 2020, 2019 and 2018, RECs were retired to cost of operations for $ 36 million, $ 17 million and $ 28 million, respectively. For the years ended December 31, 2020, 2019 and 2018, other intangibles were amortized to depreciation and amortization expense for $ 15 million, $ 18 million and $ 2 million, respectively. The following table presents estimated amortization of NRG's intangible assets as of December 31, 2020 for each of the next five years: (In millions) Year Ended December 31, Emission Allowances Fuel Contracts Customer Relationships Marketing Partnerships Trade Names Other Total 2021 $ 31 $ — $ 64 $ 24 $ 27 $ 3 $ 149 2022 30 1 44 23 27 3 128 2023 30 — 45 23 26 3 127 2024 31 1 16 23 17 3 91 2025 29 — 5 22 11 3 70 Intangible assets held-for-sale — From time to time, management may authorize the transfer from the Company's emission bank of emission allowances held-for-use to intangible assets held-for-sale. Emission allowances held-for-sale are included in other non-current assets on the Company's consolidated balance sheet and are not amortized, but rather expensed as sold. As of December 31, 2020 and 2019, the value of emission allowances held-for-sale was $ 14 million and $ 6 million, respectively, within the Corporate segment. Once transferred to held-for-sale, these emission allowances are prohibited from moving back to held-for-use. Note 13 — Receivables Securitization and Repurchase Facility Receivables Securitization On September 22, 2020, NRG Receivables LLC, a bankruptcy remote, special purpose, indirect wholly owned subsidiary, entered into the Receivables Facility for an amount up to $ 750 million, subject to adjustments on a seasonal basis, with issuers of asset-backed commercial paper and commercial banks (the "Lenders".) The assets of NRG Receivables LLC are first available to satisfy the claims of the Lenders before making payments on the subordinated note and equity issued by NRG Receivables LLC. The assets of NRG Receivables LLC are not available to the Company and its subsidiaries or creditors unless and until distributed by NRG Receivables LLC. Under the Receivables Facility, certain indirect subsidiaries of the Company sell their accounts receivables to NRG Receivables LLC, subject to certain terms and conditions. In turn, NRG Receivables LLC grants a security interest in the purchased receivables to the Lenders as collateral for cash borrowings and issuances of letters of credit. Pursuant to the Performance Guaranty, the Company has guaranteed, for the benefit of NRG Receivables and the lenders, the payment and performance by each indirect subsidiary of its respective obligations under the Receivables Facility. The accounts receivables remain on the Company's consolidated balance sheet and any amounts funded by the Lenders to NRG Receivables LLC will be reflected as short-term borrowings. Cash flows from the Receivables Facility are reflected as financing activities in the Company's consolidated statements of cash flows. The Company will continue to service the accounts receivables sold in exchange for a servicing fee. The Receivables Facility is scheduled to expire on September 21, 2021, unless renewed by the mutual consent of the parties in accordance with its terms. Borrowings by NRG Receivables LLC under the Receivables Facility bear interest as defined under the Receivables Financing Agreement. The weighted average interest rate related to usage under the Securitization Facility as of December 31, 2020 was 0.537 %. As of December 31, 2020, there were no outstanding borrowings and there were $ 198 million in letters of credit issued under the Receivables Facility. Repurchase Facility On September 22, 2020, the Company entered into an uncommitted repurchase facility (“Repurchase Facility”) related to the Receivables Facility. Under the Repurchase Facility, the Company can borrow up to $ 75 million, collateralized by a 133 subordinated note issued by NRG Receivables LLC to NRG Retail LLC in favor of the originating entities representing a portion of the balance of receivables sold to NRG Receivables LLC under the Receivables Facility. The Repurchase Facility is scheduled to expire on September 22, 2021, unless renewed by the mutual consent of the parties in accordance with its terms. The Repurchase Facility has no commitment fee and borrowings will be drawn at LIBOR + 1.25 %. As of December 31, 2020, there were no outstanding borrowings under the Repurchase Facility. Note 14 — Long-term Debt and Finance Leases Long-term debt and finance leases consisted of the following: (In millions, except rates) December 31, 2020 December 31, 2019 Interest rate % Recourse debt: Senior Notes, due 2026 $ 1,000 $ 1,000 7.250 Senior Notes, due 2027 1,230 1,230 6.625 Senior Notes, due 2028 821 821 5.750 Senior Notes, due 2029 733 733 5.250 Senior Notes, due 2029 500 — 3.375 Senior Notes, due 2031 1,030 — 3.625 Convertible Senior Notes, due 2048 (a) 575 575 2.750 Senior Secured First Lien Notes, due 2024 600 600 3.750 Senior Secured First Lien Notes, due 2025 500 — 2.000 Senior Secured First Lien Notes, due 2027 900 — 2.450 Senior Secured First Lien Notes, due 2029 500 500 4.450 Revolving Credit Facility — 83 L+ 1.75 Tax-exempt bonds 466 466 1.250 - 4.75 Subtotal recourse debt 8,855 6,008 Non-recourse debt: Other — 34 various Subtotal all non-recourse debt — 34 Subtotal long-term debt (including current maturities) 8,855 6,042 Finance leases 4 — various Subtotal long-term debt and finance leases (including current maturities) 8,859 6,042 Less current maturities ( 1 ) ( 88 ) Less debt issuance costs ( 93 ) ( 65 ) Discounts ( 74 ) ( 86 ) Total long-term debt and finance leases $ 8,691 $ 5,803 (a) The effective interest rate was 5.19 % and 5.05 % for the years ended December 31, 2020 and 2019, respectively. As of the ex-dividend date of January 29, 2021, the Convertible Notes were convertible at a price of $ 45.94 , which is equivalent to a conversion rate of approximately 21.77 shares of common stock per $1,000 principal amount. The remaining period over which the discount on the liability component will be amortized is 4.7 years. Debt includes the following discounts: As of December 31, (In millions) 2020 2019 Senior Secured First Lien Notes, due 2024, 2025, 2027 and 2029 $ ( 2 ) $ ( 1 ) Convertible Senior Notes, due 2048 ( 72 ) ( 85 ) Total discounts $ ( 74 ) $ ( 86 ) 134 Consolidated Annual Maturities As of December 31, 2020, annual payments based on the maturities of NRG's debt and finance leases are expected to be as follows: (In millions) 2021 $ 1 2022 2 2023 1 2024 600 2025 500 Thereafter 7,755 Total $ 8,859 Recourse Debt Senior Notes Issuance of 2029 Senior Unsecured Notes and 2031 Senior Unsecured Notes On December 2, 2020, NRG issued $ 500 million aggregate principal amount of 3.375 % senior notes due 2029 (the “2029 Unsecured Notes”) and $ 1.0 billion aggregate principal amount of 3.625 % senior notes due 2031 (the “2031 Unsecured Notes” and, together with the 2029 Unsecured Notes, the “Unsecured Notes”). Interest is payable on the Unsecured Notes on February 15 and August 15 of each year beginning on August 15, 2021 until the maturity date of February 15, 2029 for the 2029 Unsecured Notes and February 15, 2031 for the 2031 Unsecured Notes. Issuance of 2025 and 2027 Senior Secured First Lien Notes On December 2, 2020, NRG issued $ 1.4 billion of aggregate principal amount of senior secured first lien notes, consisting of $ 500 million 2.000 % senior secured first lien notes due 2025 (the “2025 Secured Notes”) and $ 900 million 2.450 % senior secured first lien notes due 2027 (the “2027 Secured Notes” and, together with the 2025 Secured Notes, the “2025 and 2027 Senior Secured First Lien Notes”), at a discount. The 2027 Secured Notes were issued under NRG’s Sustainability-Linked Bond Framework, which sets out certain sustainability targets, including reducing greenhouse gas emissions. Failure to meet such sustainability targets will result in a 25 basis point increase to the interest rate payable on the 2027 Secured Notes from and including the interest period ending on June 2, 2026. The 2025 and 2027 Senior Secured First Lien Notes are guaranteed on a first-priority basis by each of NRG’s current and future subsidiaries that guarantee indebtedness under its credit agreement. The 2025 and 2027 Senior Secured First Lien Notes will be secured by a first priority security interest in the same collateral that is pledged for the benefit of the lenders under NRG’s credit agreement, which consists of a substantial portion of the property and assets owned by NRG and the guarantors. The collateral securing the 2025 and 2027 Senior Secured First Lien Notes will be released if the Company obtains an investment grade rating from two out of the three rating agencies, subject to an obligation to reinstate the collateral if such rating agencies withdraw the Company's investment grade rating or downgrade its rating below investment grade. Interest is payable on the 2025 and 2027 Senior Secured First Lien Notes on June 2 and December 2 of each year beginning on June 2, 2021 until the maturity date of December 2, 2025 for the 2025 Secured Notes and until the maturity date of December 2, 2027 for the 2027 Secured Notes. Issuance of 2029 Senior Notes On May 14, 2019, NRG issued $ 733 million of aggregate principal amount at par of 5.25 % senior unsecured notes due 2029, or the 2029 Senior Notes. The 2029 Senior Notes are senior unsecured obligations of NRG and are guaranteed by certain of its subsidiaries. Interest will be paid semi-annually beginning on December 15, 2019, until the maturity date of June 15, 2029. The proceeds from the issuance of the 2029 Senior Notes were utilized to redeem the Company's remaining 6.25 % Senior Notes due 2024. Issuance of 2024 and 2029 Senior Secured First Lien Notes On May 28, 2019, NRG issued $ 1.1 billion of aggregate principal amount of senior secured first lien notes, consisting of $ 600 million 2.75 % senior secured first lien notes due 2024 and $ 500 million 4.45 % senior secured first lien notes due 2029, or the Senior Secured First Lien Notes, at a discount. The Senior Secured First Lien Notes are guaranteed on a first-priority basis by each of NRG’s current and future subsidiaries that guarantee indebtedness under its credit agreement. The Senior Secured First Lien Notes will be secured by a first priority security interest in the same collateral that is pledged for the benefit of the lenders under NRG’s credit agreement, which consists of a substantial portion of the property and assets owned by NRG and the guarantors. The collateral securing the Senior Secured First Lien Notes will be released if the Company obtains an 135 investment grade rating from two out of the three rating agencies, subject to an obligation to reinstate the collateral if such rating agencies withdraw the Company's investment grade rating or downgrade its rating below investment grade. Interest will be paid semi-annually beginning on December 15, 2019, until the maturity dates of June 15, 2024 and June 15, 2029. The proceeds from the issuance of the Senior Secured First Lien Notes, together with cash on hand, were used to repay the Company's 2023 Term Loan Facility. 2019 Senior Note Redemptions During the year ended December 31, 2019, the Company redeemed $ 733 million of its 6.25 % Senior Notes due 2024 and recorded a loss on debt extinguishment of $ 29 million, which included the write-off of previously deferred debt issuance costs of $ 5 million. 2048 Convertible Senior Notes The Convertible Notes are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options . Under ASC 470-20, issuers of convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement, are required to separately account for the liability (debt) and equity (conversion option) components. The Convertible Notes are convertible, under certain circumstances, into the Company's common stock, cash or a combination thereof (at NRG's option) at a price of $ 46.24 per common share as of December 31, 2020, which is equivalent to an conversion rate of approximately 21.6242 shares of common stock per $1,000 principal amount of Convertible Notes. As of December 31, 2019, the Convertible Notes were convertible at a price of $ 47.74 per common share, which is equivalent to an conversion rate of approximately 20.9479 shares of common stock per $1,000 principal amount of Convertible Notes. The carrying amounts of the liability components as of December 31, 2020 and 2019 of $ 503 million and $ 491 million, respectively, were calculated by estimating the fair value of similar liabilities without a conversion feature at inception and amortizing the debt discount using the effective interest rate over the life of the note. Senior Notes Early Redemption As of December 31, 2020, NRG had the following outstanding issuances of senior notes with an early redemption feature, or Senior Notes: i. 7.250 % senior notes, issued May 23, 2016 and due May 15, 2026, or the 2026 Senior Notes; ii. 6.625 % senior notes, issued August 2, 2016 and due January 15, 2027, or the 2027 Senior Notes; iii. 5.750 % senior notes, issued December 7, 2017 and due January 15, 2028, or the 2028 Senior Notes; iv. 5.250 % senior notes, issued May 24, 2019 and due June 15, 2029, or the 2029 Senior Notes; v. 3.375 % senior notes, issued December 2, 2020 and due February 15, 2029, or the 3.375 % 2029 Senior Notes; and vi. 3.625 % senior notes, issued December 2, 2020 and Due February 15, 2031, or the 2031 Senior Notes. The Company periodically enters into supplemental indentures for the purpose of adding entities under the Senior Notes as guarantors. The indentures and the forms of notes provide, among other things, that the Senior Notes will be senior unsecured obligations of NRG. The indentures also provide for customary events of default, which include, among others: nonpayment of principal or interest; breach of other agreements in the indentures; defaults in failure to pay certain other indebtedness; the rendering of judgments to pay certain amounts of money against NRG and its subsidiaries; the failure of certain guarantees to be enforceable; and certain events of bankruptcy or insolvency. Generally, if an event of default occurs, the Trustee or the Holders of at least 25 % in principal amount of the then outstanding series of Senior Notes may declare all of the Senior Notes of such series to be due and payable immediately. The terms of the indentures, among other things, limit NRG's ability and certain of its subsidiaries' ability to return capital to stockholders, grant liens on assets to lenders and incur additional debt. Interest is payable semi-annually on the Senior Notes until their maturity dates. 136 2026 Senior Notes At any time prior to May 15, 2021, NRG may redeem all or a part of the 2026 Senior Notes, at a redemption price equal to 100 % of the principal amount, accrued and unpaid interest to the redemption date, plus a premium. The premium is the greater of: (i) 1 % of the principal amount of the notes; or (ii) the excess of the principal amount of the note over the following: the present value of 103.625 % of the note, plus interest payments due on the note from the date of redemption through May 15, 2021 computed using a discount rate equal to the Treasury Rate as of such redemption date plus 0.50 %. In addition, on or after May 15, 2021, NRG may redeem some or all of the notes at redemption prices expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the notes redeemed to the first applicable redemption date: Redemption Period Redemption Percentage May 15, 2021 to May 14, 2022 103.625 % May 15, 2022 to May 14, 2023 102.417 % May 15, 2023 to May 14, 2024 101.208 % May 15, 2024 and thereafter 100.000 % 2027 Senior Notes At any time prior to July 15, 2021, NRG may redeem all or a part of the 2027 Senior Notes, at a redemption price equal to 100 % of the principal amount, accrued and unpaid interest to the redemption date, plus a premium. The premium is the greater of: (i) 1 % of the principal amount of the notes; or (ii) the excess of the principal amount of the note over the following: the present value of 103.313 % of the note, plus interest payments due on the note from the date of redemption through July 15, 2021 computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 %. In addition, on or after July 15, 2021, NRG may redeem some or all of the notes at redemption prices expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the notes redeemed to the first applicable redemption date: Redemption Period Redemption Percentage July 15, 2021 to July 14, 2022 103.313 % July 15, 2022 to July 14, 2023 102.208 % July 15, 2023 to July 14, 2024 101.104 % July 15, 2024 and thereafter 100.000 % 2028 Senior Notes At any time prior to January 15, 2021, NRG may redeem up to 35 % of the aggregate principal amount of the 2028 Senior Notes, at a redemption price equal to 105.750 % of the principal amount of the notes redeemed, plus accrued and unpaid interest, with an amount equal to the net cash proceeds of certain equity offerings. At any time prior to January 15, 2023, NRG may redeem all or a part of the 2028 Senior Notes, at a redemption price equal to 100 % of the principal amount, accrued and unpaid interest to the redemption date, plus a premium. The premium is the greater of: (i) 1 % of the principal amount of the notes; or (ii) the excess of the principal amount of the note over the following: the present value of 102.875 % of the note, plus interest payments due on the note from the date of redemption through January 15, 2023 computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 %. In addition, on or after January 15, 2023, NRG may redeem some or all of the notes at redemption prices expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the notes redeemed to the first applicable redemption date: Redemption Period Redemption Percentage January 15, 2023 to January 14, 2024 102.875 % January 15, 2024 to January 14, 2025 101.917 % January 15, 2025 to January 14, 2026 100.958 % January 15, 2026 and thereafter 100.000 % 137 5.250 % 2029 Senior Notes At any time prior to June 15, 2022, NRG may redeem up to 40 % of the aggregate principal amount of the 2029 Senior Notes, at a redemption price equal to 105.250 % of the principal amount of the notes redeemed, plus accrued and unpaid interest, with an amount equal to the net cash proceeds of certain equity offerings, provided that at least 50 % of the aggregate principal amount remains outstanding immediately after the occurrence of such redemption. At any time prior to June 15, 2024, NRG may redeem all or a part of the 2029 Senior Notes, at a redemption price equal to 100 % of the principal amount accrued and unpaid interest to the redemption date, plus a premium. The premium is the greater of: (i) 1 % of the principal amount of the notes; or (ii) the excess of the principal amount of the note over the following: the present value of 102.625 % of the note, plus interest payments due on the note through June 15, 2024 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 0.50 %. In addition, on or after June 15, 2024, NRG may redeem some or all of the notes at redemption prices expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the notes redeemed to the first applicable redemption date: Redemption Period Redemption Percentage June 15, 2024 to June 14, 2025 102.625 % June 15, 2025 to June 14, 2026 101.750 % June 15, 2026 to June 14, 2027 100.875 % June 15, 2027 and thereafter 100.000 % 3.375 % 2029 Senior Notes At any time prior to February 15, 2024, NRG may redeem up to 40 % of the aggregate principal amount of the 2029 Senior Notes, at a redemption price equal to 103.375 % of the principal amount of the notes redeemed, plus accrued and unpaid interest, with an amount equal to the net cash proceeds of certain equity offerings, provided that at least 50 % of the aggregate principal amount remains outstanding immediately after the occurrence of such redemption. At any time prior to February 15, 2024, NRG may redeem all or a part of the 2029 Senior Notes, at a redemption price equal to 100 % of the principal amount accrued and unpaid interest to the redemption date, plus a premium. The premium is the greater of: (i) 1 % of the principal amount of the notes; or (ii) the excess of the principal amount of the note over the following: the present value of 101.688 % of the note, plus interest payments due on the note through February 15, 2024 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 0.50 %. In addition, on or after February 15, 2024, NRG may redeem some or all of the notes at redemption prices expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the notes redeemed to the first applicable redemption date: Redemption Period Redemption Percentage February 15, 2024 to February 14, 2025 101.688 % February 15, 2025 to February 14, 2026 100.844 % February 15, 2026 and thereafter 100.000 % 138 2031 Senior Notes At any time prior to February 15, 2026, NRG may redeem up to 40 % of the aggregate principal amount of the 2031 Senior Notes, at a redemption price equal to 103.625 % of the principal amount of the notes redeemed, plus accrued and unpaid interest, with an amount equal to the net cash proceeds of certain equity offerings, provided that at least 50 % of the aggregate principal amount remains outstanding immediately after the occurrence of such redemption. At any time prior to February 15, 2026, NRG may redeem all or a part of the 2031 Senior Notes, at a redemption price equal to 100 % of the principal amount accrued and unpaid interest to the redemption date, plus a premium. The premium is the greater of: (i) 1 % of the principal amount of the notes; or (ii) the excess of the principal amount of the note over the following: the present value of 101.813 % of the note, plus interest payments due on the note through February 15, 2026 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 0.50 %. In addition, on or after February 15, 2026, NRG may redeem some or all of the notes at redemption prices expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the notes redeemed to the first applicable redemption date: Redemption Period Redemption Percentage February 15, 2026 to February 14, 2027 101.813 % February 15, 2027 to February 14, 2028 101.208 % February 15, 2028 to February 14, 2029 100.604 % February 15, 2029 and thereafter 100.000 % Senior Credit Facility 2023 Term Loan Facility Repayment On May 28, 2019, the Company repaid its $ 1.7 billion 2023 Term Loan Facility using the proceeds from the issuance of the Senior First Lien Notes, as well as cash on hand, resulting in a decrease of $ 594 million to long-term debt outstanding. The Company recorded a loss on debt extinguishment of $ 17 million, which included the write-off of previously deferred debt issuance costs of $ 13 million. As a result of the repayment of the outstanding 2023 Term Loan Facility, the Company terminated the related interest rate swap agreements, which were in-the-money, and received $ 25 million that was recorded as a reduction to interest expense. Revolving Credit Facility Modification On May 28, 2019, the Company amended its existing credit agreement to, among other thing, (i) provide for a $ 184 million increase in revolving commitments, resulting in aggregate revolving commitments under the amended credit agreement equal to $ 2.6 billion, (ii) extend the maturity date of the revolving loans and commitments under the amended credit agreement to May 28, 2024, (iii) provide for a release of the collateral securing the amended credit agreement if NRG obtains an investment grade rating form two out of the three rating agencies, subject to an obligation to reinstate the collateral if such rating agencies withdraw NRG's investment grade rating or downgrade NRG's rating below investment grade, (iv) reduce the applicable margins for borrowings under (a) ABR Revolving Loans from 1.25 % to 0.75 % and (b) Eurodollar Revolving Loans from 2.25 % to 1.75 %, (v) add a sustainability covenant and (vi) make certain other changes to the existing covenants. On August 20, 2020, the Company amended its existing credit agreement to, among other things, (i) increase the existing revolving commitments in an aggregate amount of $ 802 million, (ii) provide for a new tranche of revolving commitments in an aggregate amount of $ 273 million with a maturity date that is 30 months after the Acquisition Close Date. The maturity date of the new revolving tranche of commitments may, upon request by the Company, at the option of each applicable lender under the new tranche be extended by a further 12 months, but not beyond May 28, 2024, which is the maturity date of the existing and increased commitments. Other than with respect to the maturity date, the terms of all revolving commitments and loan made pursuant thereto are identical. The increase in the existing commitments, and the commitments with respect to the new tranche, are effective on August 20, 2020 but only became available on the Acquisition Closing Date. For further discussion on the acquisition of Direct Energy see Note 4, Acquisitions, Discontinued Operations and Dispositions . Upon the Acquisition Closing Date, total revolving commitments available, subject to usage, under this amendment will be $ 3.7 billion. In addition, the amendment includes changes to, among other things, (i) permit the borrowing of up to full amount of the revolving commitments in Canadian dollars, (ii) increase the swingline facility from $ 50 million to $ 100 million and provide a $ 10 million swingline facility in Canadian dollars, (iii) increase the credit facilities lien basket from the greater of $ 6 billion and 30 % of total assets to the greater of $ 10 billion and 30 % of total assets, (iv) increase the credit facilities debt basket from $ 6 billion to $ 10 billion, (v) increase the basket for securitization indebtedness from $ 750 million to $ 1.7 billion, (vi) provide an additional indebtedness basket equal to $ 600 million for certain liquidity facilities, and (vii) make certain other changes to the existing covenants and other provisions. 139 Tax Exempt Bonds As of December 31, (In millions, except rates) 2020 2019 Interest Rate % NRG Indian River Power 2020, tax exempt bonds, due 2040 $ 57 $ — 1.250 NRG Indian River Power 2020, tax exempt bonds, due 2045 190 — 1.250 Indian River Power, tax exempt bonds, due 2040 — 57 6.000 Indian River Power LLC, tax exempt bonds, due 2045 — 190 5.375 NRG Dunkirk 2020, tax exempt bonds, due 2042 59 — 1.300 Dunkirk Power LLC, tax exempt bonds, due 2042 — 59 5.875 City of Texas City, tax exempt bonds, due 2045 33 33 4.125 Fort Bend County, tax exempt bonds, due 2038 54 54 4.750 Fort Bend County, tax exempt bonds, due 2042 73 73 4.750 Total $ 466 $ 466 Dunkirk Bonds On March 11, 2020, NRG issued $ 59 million in aggregate principal amount of NRG Dunkirk 2020 1.30 % tax-exempt refinancing bonds due 2042 (the "Dunkirk Bonds"). The Dunkirk Bonds are guaranteed on a first-priority basis by each of NRG’s current and future subsidiaries that guarantee indebtedness under its credit agreement. The Dunkirk Bonds are secured by a first priority security interest in the same collateral that is pledged for the benefit of the lenders under NRG’s credit agreement, which consists of a substantial portion of the property and assets owned by NRG and the guarantors. The collateral securing the Dunkirk Bonds will, at the request of NRG, be released if NRG satisfies certain conditions, including receipt of an investment grade rating on its senior, unsecured debt securities from two out of the three rating agencies, subject to reversion if those rating agencies withdraw their investment grade rating of the Bonds or any of NRG’s senior, unsecured debt securities or downgrade such rating below investment grade. The Dunkirk Bonds are subject to mandatory tender and purchase on April 3, 2023 and have a final maturity date of April 1, 2042. NRG used the net proceeds from the offering to redeem during 2020 the existing principal amount of outstanding Dunkirk Power LLC 5.875 % tax exempt bonds due 2042. Indian River Bonds On December 17, 2020, NRG issued $ 57 million in aggregate principal amount of NRG Indian River 2020 1.25 % tax-exempt refinancing bonds due 2040 (the "IR 2040 Bonds") and $ 190 million aggregate principal amount of NRG Indian River Power 2020 1.25 % tax-exempt refinancing bonds due 2045 (the "IR 2045 Bonds") (together the "IR Bonds"). The IR Bonds are guaranteed on a first-priority basis by each of NRG’s current and future subsidiaries that guarantee indebtedness under its credit agreement. The IR Bonds are secured by a first priority security interest in the same collateral that is pledged for the benefit of the lenders under NRG’s credit agreement, which consists of a substantial portion of the property and assets owned by NRG and the guarantors. The collateral securing the IR Bonds will, at the request of NRG, be released if NRG satisfies certain conditions, including receipt of an investment grade rating on its senior, unsecured debt securities from two out of the three rating agencies, subject to reversion if those rating agencies withdraw their investment grade rating of the IR Bonds or any of NRG’s senior, unsecured debt securities or downgrade such rating below investment grade. The IR Bonds are subject to mandatory tender and purchase on October 1, 2025 and have final maturity dates of October 1, 2040 for the IR 2040 Bonds and October 1, 2045 for the IR 2045 Bonds. NRG used the net proceeds from the offering to redeem during 2020 the existing principal amounts of outstanding Indian River Power 6.000 % tax exempt bonds due 2040 and Indian River Power LLC 5.375 % tax exempt bonds due 2045. Non-Recourse Debt The following are descriptions of certain indebtedness of NRG's subsidiaries. All of NRG's non-recourse debt is secured by the assets in the respective project subsidiaries as further described below. Credit Default Swap Facility On January 4, 2019, the Company entered into an $ 80 million credit agreement to issue letters of credit, which is currently supporting the Cottonwood facility lease. Annual fees of 1.33 % on the facility were paid quarterly in advance. On August 13, 2020, the agreement was amended permitting the Company to increase the size of the facility and fees on the facility were adjusted to reflect the costs of the credit default swaps that serve as collateral for the facility. In order to increase the Company’s collective collateral facilities in connection with the Direct Energy acquisition, NRG expanded the facility allowing for the issuance of an additional $ 150 million of letters of credit as of December 31, 2020. As of December 31, 2020, $ 229 million was issued under this facility. 140 Bilateral Letter of Credit Facilities In December 2020 the Company entered into a series of Bilateral Letter of Credit Facilities to allow for the issuance of up to $ 475 million of letters of credit. These facilities are uncommitted. As of December 31, 2020, $ 5 million was issued under these facilities. Put Option Agreement for Senior Debt Issuance During the fourth quarter of 2020, the Company entered into a 3 -year put option agreement with a Delaware trust formed by the Company upon completion of the sale of $ 900 million pre-capitalized trust securities redeemable November 15, 2023 (the “P-Caps”). The Trust invested the proceeds from the sale of the P-Caps in a portfolio of principal and interest strips of U.S. Treasury securities (the “Eligible Treasury Assets”). Under the put option agreement, NRG has the right, from time to time, to issue to the Trust and to require the Trust to purchase from NRG, on one or more occasions (the “Issuance Right”), up to $ 900 million aggregate principal amount of NRG’s 1.841 % Senior Secured First Lien Notes due 2023 (the “P-Caps Secured Notes”) in exchange for all or a portion of the Eligible Treasury Assets corresponding to the portion of the Issuance Right. NRG will pay a semi-annual premium to the Trust at a rate of 1.65 %. The P-Caps are to be redeemed by the Trust on November 15, 2023 or earlier upon an early redemption of the P-Caps Secured Notes. Following any distribution of P-Caps Secured Notes to the holders of the P-Caps, NRG may similarly redeem such P-Caps Secured Notes, in whole or in part, at the redemption price described below, plus accrued but unpaid interest to, but excluding, the date of redemption. Any P-Caps Secured Notes outstanding and held by the Trust as a result of the exercise of the Issuance Right that remain outstanding will also mature on November 15, 2023. The Issuance Right will be exercised automatically in full if (1) NRG fails to pay the facility fee when due or any amount due and owing under the trust expense reimbursement agreement or fails to purchase and pay for any Eligible Treasury Assets that are due and not paid on their payment date and such failure is not cured within 30 days, or (2) upon certain bankruptcy events of NRG. NRG will be required to mandatorily exercise the Issuance Right if (1) an Acquisition Triggering Event has occurred, (2) NRG’s consolidated stockholders’ equity, determined in accordance with GAAP, but excluding accumulated other comprehensive income (or loss), equity of non-controlling interests attributable thereto and treasury stock at cost, has fallen below $ 2.0 billion, which amount may be adjusted from time to time upon the occurrence of certain specified events, (3) an event of default under the P-Caps Secured Notes Indenture (as defined below) has occurred or would have occurred had the P-Caps Secured Notes been outstanding, (4) NRG breaches its covenant to maintain sufficient capacity under other material agreements to permit the issuance of the P-Caps Secured Notes in full, (5) a Collateral Enforcement Event (as defined below) has occurred, (6) a change of control triggering event has occurred in respect of NRG or (7) certain events relating to the Trust’s status as an “investment company” under the Investment Company Act of 1940, as amended (the “Investment Company Act”), have occurred. Upon the occurrence of any event described in clause (1), (2), (3), (4) or (7) of this paragraph, the Issuance Right will be exercised in full, and upon the occurrence of any event described in clause (5) or (6) of this paragraph, the Issuance Right will be exercised with respect to the applicable portion of the available amount of P-Caps Secured Notes specified in the Facility Agreement. In connection with the issuance of the P-Caps, on December 2, 2020, NRG entered into a facility agreement for the issuance of letters of credit (the “LC Agreement”) and Deutsche Bank Trust Company Americas as collateral agent (the “Collateral Agent”) and administrative agent pursuant to which certain financial institutions (the “LC Issuers”) are permitted to join with commitments to provide letters of credit in an aggregate amount not to exceed $ 874 million to support the operations of NRG and its subsidiaries and minority investments, including to replace certain currently outstanding letters of credit and other credit support issued for the account of entities being acquired pursuant to the Acquisition. In addition, on December 2, 2020, the Trust entered into a pledge and control agreement (the “Pledge Agreement”), among NRG, the Trust and the Collateral Agent for the LC Issuers, under which the Trust agreed to grant a pledge over the Eligible Treasury Assets in favor of the Collateral Agent for the benefit of the LC Issuers. Pursuant to the LC Agreement and the Pledge Agreement, the Collateral Agent is entitled to withdraw Eligible Treasury Assets from the Trust’s pledged account, following notice to NRG, in the event NRG has failed to reimburse amounts drawn under any letter of credit issued pursuant to the LC Agreement, and the LC Issuers have the right to instruct the Collateral Agent to enforce the pledge over the Eligible Treasury Assets upon the occurrence of any event of default under the LC Agreement (a “Collateral Enforcement Event”). As of December 31, 2020 no letters of credit were issued under this agreement . Agua Caliente Borrower 1 On January 22, 2019, the lenders of the Agua Borrower 1 notes notified Agua Caliente Borrower 1, a subsidiary of the Company, of certain defaults under the financing agreement as it relates to the bankruptcy filing made by PG&E on January 29, 2019. PG&E is the offtaker of the underlying contracts, which are material to the project. The financing was entered into along with Agua Caliente Borrower 2, LLC, a subsidiary of Clearway Energy Inc., which is joint and several to the parties. On 141 October 21, 2019, the Company repaid the outstanding amount on the notes at 102 % plus accrued interest through the payment date of $ 83 million. Note 15 — Asset Retirement Obligations The Company's AROs are primarily related to the environmental obligations for nuclear decommissioning, mine reclamation, ash disposal, site closures, fuel storage facilities and future dismantlement of equipment on leased property. In addition, the Company has also identified conditional AROs for asbestos removal and disposal, which are specific to certain power generation operations. See Note 7, Nuclear Decommissioning Trust Fund, for a further discussion of the Company's nuclear decommissioning obligations. Accretion for the nuclear decommissioning ARO and amortization of the related ARO asset are recorded to the Nuclear Decommissioning Trust Liability to the ratepayers and are not included in net income, consistent with treatment per ASC 980, Regulated Operations . The following table represents the balance of ARO obligations as of December 31, 2020 and 2019, along with the additions, reductions and accretion related to the Company's ARO obligations for the year ended December 31, 2020: (In millions) Nuclear Decommission Other (a) Total Balance as of December 31, 2019 $ 298 $ 430 $ 728 Revisions in estimates for current obligations ( 12 ) 38 26 Additions — 3 3 Spending for current obligations — ( 43 ) ( 43 ) Accretion 17 29 46 Balance as of December 31, 2020 $ 303 $ 457 $ 760 (a) Total accretion expense related to asset retirement obligations included in the consolidated statement of cash flows includes accretion and revisions in estimates for asset retirement liabilities on non-operating plants Note 16 — Benefit Plans and Other Postretirement Benefits NRG sponsors and operates defined benefit pension and other postretirement plans. NRG pension benefits are available to eligible non-union and union employees through various defined benefit pension plans. These benefits are based on pay, service history and age at retirement. Most pension benefits are provided through tax-qualified plans. NRG also provides postretirement health and welfare benefits for certain groups of employees. Cost sharing provisions vary by the terms of any applicable collective bargaining agreements. NRG maintains two separate qualified pension plans, the NRG Pension Plan for Bargained Employees and the NRG Pension Plan. Participation in the NRG Pension Plan for Bargained Employees depends upon whether an employee is covered by a bargaining agreement. NRG expects to contribute $ 30 million to the Company's pension plans in 2021, of which $ 14 million relates to the GenOn plan. NRG Defined Benefit Plans The annual net periodic benefit cost/(credit) related to NRG's pension and other postretirement benefit plans include the following components: Year Ended December 31, Pension Benefits (In millions) 2020 2019 2018 Service cost benefits earned $ 10 $ 10 $ 23 Interest cost on benefit obligation 38 46 44 Expected return on plan assets ( 61 ) ( 59 ) ( 62 ) Amortization of unrecognized net loss 5 3 — Settlement/curtailment expense — — 7 Net periodic benefit (credit)/cost $ ( 8 ) $ — $ 12 142 Year Ended December 31, Other Postretirement Benefits (In millions) 2020 2019 2018 Service cost benefits earned $ — $ 1 $ 1 Interest cost on benefit obligation 3 3 4 Amortization of unrecognized prior service cost ( 14 ) ( 13 ) ( 10 ) Amortization of unrecognized net loss 1 — — Curtailment gain — — ( 10 ) Net periodic benefit credit $ ( 10 ) $ ( 9 ) $ ( 15 ) A comparison of the pension benefit obligation, other postretirement benefit obligations and related plan assets for NRG's plans on a combined basis is as follows: As of December 31, Pension Benefits Other Postretirement Benefits (In millions) 2020 2019 2020 2019 Benefit obligation at January 1 $ 1,397 $ 1,222 $ 93 $ 83 Service cost 10 10 — 1 Interest cost 38 46 3 3 Plan amendments — — — ( 2 ) Actuarial loss 126 207 — 16 Employee and retiree contributions — — 3 4 Benefit payments ( 82 ) ( 88 ) ( 9 ) ( 12 ) Benefit obligation at December 31 1,489 1,397 90 93 Fair value of plan assets at January 1 1,150 981 — — Actual return on plan assets 193 216 — — Employee and retiree contributions — — 3 4 Employer contributions 11 41 6 7 Benefit payments ( 82 ) ( 88 ) ( 9 ) ( 11 ) Fair value of plan assets at December 31 1,272 1,150 — — Funded status at December 31 — excess of obligation over assets $ ( 217 ) $ ( 247 ) $ ( 90 ) $ ( 93 ) During the year ended December 31, 2020, the actuarial loss of $ 126 million on pension benefits was driven by decreasing discount rates and demographic assumptions, partially offset by gains from life expectancy projection updates. During the year ended December 31, 2019, the actuarial loss of $ 207 million on pension benefits was driven by decreasing discount rates, assumption changes to reflect current market conditions and actual experience different than assumed, partially offset by gains from life expectancy projection updates. Amounts recognized in NRG's balance sheets were as follows: As of December 31, Pension Benefits Other Postretirement Benefits (In millions) 2020 2019 2020 2019 Other current liabilities $ — $ — $ 5 $ 7 Other non-current liabilities 217 247 85 86 Amounts recognized in NRG's accumulated OCI that have not yet been recognized as components of net periodic benefit cost were as follows: As of December 31, Pension Benefits Other Postretirement Benefits (In millions) 2020 2019 2020 2019 Net loss $ 127 $ 138 $ 6 $ 7 Prior service cost/(credit) 2 2 ( 29 ) ( 43 ) Total accumulated OCI $ 129 $ 140 $ ( 23 ) $ ( 36 ) 143 Other changes in plan assets and benefit obligations recognized in OCI were as follows: Year Ended December 31, Pension Benefits Other Postretirement Benefits (In millions) 2020 2019 2020 2019 Net actuarial (gain)/loss $ ( 6 ) $ 50 $ — $ 16 Amortization of net actuarial (gain) ( 5 ) ( 3 ) ( 1 ) — Prior service credit — — — ( 2 ) Amortization of prior service cost — — 14 12 Total recognized in OCI $ ( 11 ) $ 47 $ 13 $ 26 Net periodic benefit credit ( 8 ) — ( 10 ) ( 9 ) Net recognized in net periodic pension credit and OCI $ ( 19 ) $ 47 $ 3 $ 17 The following table presents the balances of significant components of NRG's pension plan: As of December 31, Pension Benefits (In millions) 2020 2019 Projected benefit obligation $ 1,489 $ 1,397 Accumulated benefit obligation 1,455 1,362 Fair value of plan assets 1,272 1,150 NRG's market-related value of its plan assets is the fair value of the assets. The fair values of the Company's pension plan assets by asset category and their level within the fair value hierarchy are as follows: Fair Value Measurements as of December 31, 2020 (In millions) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Total Common/collective trust investment — U.S. equity $ — $ 284 $ 284 Common/collective trust investment — non-U.S. equity — 113 113 Common/collective trust investment — non-core assets — 151 151 Common/collective trust investment — fixed income — 258 258 Short-term investment fund 13 — 13 Subtotal fair value $ 13 $ 806 $ 819 Measured at net asset value practical expedient: Common/collective trust investment — non-U.S. equity 45 Common/collective trust investment — fixed income 289 Common/collective trust investment — non-core assets 84 Partnerships/joint ventures 35 Total fair value $ 1,272 144 Fair Value Measurements as of December 31, 2019 (In millions) Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Total Common/collective trust investment — U.S. equity $ — $ 233 $ 233 Common/collective trust investment — non-U.S. equity — 73 73 Common/collective trust investment — non-core assets — 143 143 Common/collective trust investment — fixed income — 272 272 Short-term investment fund 12 — 12 Subtotal fair value $ 12 $ 721 $ 733 Measured at net asset value practical expedient: Common/collective trust investment — non-U.S. equity 84 Common/collective trust investment — fixed income 279 Common/collective trust investment — non-core assets 24 Partnerships/joint ventures 30 Total fair value $ 1,150 In accordance with ASC 820, the Company determines the level in the fair value hierarchy within which each fair value measurement in its entirety falls, based on the lowest level input that is significant to the fair value measurement in its entirety. The fair value of the common/collective trust investments is valued at fair value which is equal to the sum of the market value of all of the fund's underlying investments. Certain common/collective trust investments have readily determinable fair value as they publish daily net asset value, or NAV, per share and are categorized as Level 2. Certain other common/collective trust investments and partnerships/joint ventures use NAV per share, or its equivalent, as a practical expedient for valuation, and thus have been removed from the fair value hierarchy table. The following table presents the significant assumptions used to calculate NRG's benefit obligations: As of December 31, Pension Benefits Other Postretirement Benefits Weighted-Average Assumptions 2020 2019 2020 2019 Discount rate 2.56 % 3.26 % 2.54 % 3.26 % Interest crediting rate 3.12 % — 1.62 % — Rate of compensation increase 3.00 % 3.00 % — % — % Health care trend rate — — 7.2 % grading to 4.5 % in 2028 7.5 % grading to 4.5 % in 2028 The following table presents the significant assumptions used to calculate NRG's benefit expense: As of December 31, Pension Benefits Other Postretirement Benefits Weighted-Average Assumptions 2020 2019 2018 2020 2019 2018 Discount rate 3.26 % 4.38 %/ 4.20 % 3.71 %/ 4.04 % 3.26 % 4.37 % 3.71 % / 4.08 % Interest crediting rate 3.66 % — — 2.28 % — — Expected return on plan assets 5.93 % 6.35 % 6.17 % — — — Rate of compensation increase 3.00 % 3.00 % 3.00 % — — — Health care trend rate — — — 7.5 % grading to 4.5 % in 2028 7.8 % grading to 4.5 % in 2025 8.2 % grading to 4.5 % in 2025 145 NRG uses December 31 of each respective year as the measurement date for the Company's pension and other postretirement benefit plans. The Company sets the discount rate assumptions on an annual basis for each of NRG's defined benefit retirement plans as of December 31. The discount rate assumptions represent the current rate at which the associated liabilities could be effectively settled at December 31. The Company utilizes the Aon AA Above Median, or AA-AM, yield curve to select the appropriate discount rate assumption for each retirement plan. The AA-AM yield curve is a hypothetical AA yield curve represented by a series of annualized individual spot discount rates from 6 months to 99 years. Each bond issue used to build this yield curve must be non-callable, and have an average rating of AA when averaging available Moody's Investor Services, Standard & Poor's and Fitch ratings. NRG employs a total return investment approach, whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The Investment Committee reviews the asset mix periodically and as the plan assets increase in future years, the Investment Committee may examine other asset classes such as real estate or private equity. NRG employs a building block approach to determining the long-term rate of return assumption for plan assets, with proper consideration given to diversification and rebalancing. Historical markets are studied and long-term historical relationships between equities and fixed income are preserved, consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. Peer data and historical returns are reviewed to check for reasonableness and appropriateness. The target allocations of NRG's pension plan assets were as follows for the year ended December 31, 2020: U.S. equity 20 % Non-U.S. equity 13 % Non-core assets 17 % U.S. fixed income 50 % Plan assets are currently invested in a diversified blend of equity and fixed-income investments. Furthermore, equity investments are diversified across U.S., non-U.S., global, and emerging market equities, as well as among growth, value, small and large capitalization stocks. Investment risk and performance are monitored on an ongoing basis through quarterly portfolio reviews of each asset fund class to a related performance benchmark, if applicable, and annual pension liability measurements. Performance benchmarks are composed of the following indices: Asset Class Index U.S. equities Dow Jones U.S. Total Stock Market Index Non-U.S. equities MSCI All Country World Ex-U.S. IMI Index Non-core assets (a) Various (per underlying asset class) Fixed income securities Barclays Short, Intermediate and Long Credits/Barclays Strips 20+ Index (a) Non-Core Assets are defined as diversifying asset classes approved by the Investment Committee that are intended to enhance returns and/or reduce volatility of the U.S. and non-U.S. equities. Asset classes considered Non-Core include, but may not be limited to: Emerging Market Equity, Emerging Market Debt, Non-US Developed Market Small Cap, High Yield Fixed Income, Real Estate, Bank Loans, Global Infrastructure and other Alternatives. NRG's expected future benefit payments for each of the next five years, and in the aggregate for the five years thereafter, are as follows: Other Postretirement Benefit (In millions) Pension Benefit Payments Benefit Payments Medicare Prescription Drug Reimbursements 2021 $ 90 $ 6 $ — 2022 89 6 — 2023 87 5 — 2024 85 5 — 2025 83 5 — 2026-2030 386 19 2 146 STP Defined Benefit Plans NRG has a 44 % undivided ownership interest in STP, as discussed further in Note 29, Jointly Owned Plants . STPNOC, which operates and maintains STP, provides its employees a defined benefit pension plan, as well as postretirement health and welfare benefits. Although NRG does not sponsor the STP plan, it reimburses STPNOC for 44 % of the contributions made towards its retirement plan obligations. During the third quarter of 2019, STPNOC announced that the defined benefit pension plan will be frozen for non-union employees on December 31, 2021, This resulted in the curtailment of benefits, thereby requiring a remeasurement, including an update to the discount rate used to determine benefit obligations. As a result, during 2019, NRG recognized a gain of $ 8 million related to the curtailment of benefits and an increase of $ 32 million to the pension liability was recorded to other comprehensive income. The Company measures the fair value of its pension assets in accordance with ASC 820, Fair Value Measurements and Disclosures, or ASC 820. For the years ended December 31, 2020 and December 31, 2019, NRG reimbursed STPNOC $ 8 million and $ 24 million, respectively, for its contribution to the plans. In 2021, NRG expects to reimburse STPNOC $ 18 million for its contribution to the plan. The Company has recognized the following in its statement of financial position, statement of operations and accumulated OCI related to its 44 % interest in STP: As of December 31, Pension Benefits Other Postretirement Benefits (In millions) 2020 2019 2020 2019 Funded status — STPNOC benefit plans $ ( 99 ) $ ( 77 ) $ ( 20 ) $ ( 20 ) Net periodic benefit cost/(credit) 7 9 ( 4 ) ( 4 ) Other changes in plan assets and benefit obligations recognized in other comprehensive income/(loss) 22 ( 13 ) 5 6 Defined Contribution Plans NRG's employees are also eligible to participate in defined contribution 401(k) plans. The Company's contributions to these plans were as follows: Year Ended December 31, (In millions) 2020 2019 2018 Company contributions to defined contribution plans $ 22 $ 22 $ 28 Note 17 — Capital Structure For the period from December 31, 2017 to December 31, 2020, the Company had 10,000,000 shares of preferred stock authorized and 500,000,000 shares of common stock authorized. The following table reflects the changes in NRG's common shares issued and outstanding for each period presented: Common Issued Treasury Outstanding Balance as of December 31, 2017 418,323,134 ( 101,580,045 ) 316,743,089 Shares issued under ESPP — 175,862 175,862 Shares issued under LTIPs 1,965,752 — 1,965,752 Share repurchases — ( 35,234,664 ) ( 35,234,664 ) Balance as of December 31, 2018 420,288,886 ( 136,638,847 ) 283,650,039 Shares issued under ESPP — 46,128 46,128 Shares issued under LTIPs 1,601,904 — 1,601,904 Share repurchases — ( 36,301,882 ) ( 36,301,882 ) Balance as of December 31, 2019 421,890,790 ( 172,894,601 ) 248,996,189 Shares issued under ESPP — 131,469 131,469 Shares issued under LTIPs 1,167,058 — 1,167,058 Share repurchases — ( 6,062,783 ) ( 6,062,783 ) Balance as of December 31, 2020 423,057,848 ( 178,825,915 ) 244,231,933 147 Common Stock As of December 31, 2020, NRG had 14,862,069 shares of common stock reserved for the maximum number of shares potentially issuable based on the conversion and redemption features of the long-term incentive plans. Common stock dividends — The Company declared and paid $ 0.30 , $ 0.03 and $ 0.03 quarterly dividend per common share, or $ 1.20 , $ 0.12 and $ 0.12 per share on an annualized basis for 2020, 2019 and 2018 respectively. In the first quarter of 2020, NRG increased the annual dividend to $ 1.20 from $ 0.12 per share, as part of a long-term capital allocation policy adopted in the fourth quarter of 2019, that targets allocating 50 % of cash available for allocation generated each year to growth investments and 50 % to be returned to shareholders. The return of capital to shareholders is expected to be completed through the increased dividend supplemented by share repurchases. The long-term capital allocation policy targets an annual dividend growth rate of 7 - 9 % per share in years subsequent to 2020. In 2021 NRG increased the annual dividend to $ 1.30 per share, representing an 8 % increase. The Company's common stock dividends are subject to available capital, market conditions, and compliance with associated laws, regulations and other contractual obligations. On January 21, 2021, NRG declared a quarterly dividend on the Company's common stock of $ 0.325 per share, or $ 1.30 per share on an annualized basis, payable on February 16, 2021, to stockholders of record as of February 1, 2021. Employee Stock Purchase Plan — In March 2019, the Company reopened participation in the ESPP, which allows eligible employees to elect to withhold between 1 % and 10 % of their eligible compensation to purchase shares of NRG common stock at the lesser of 95 % of its market value on the offering date or 95 % of the fair market value on the exercise date. An offering date will occur each April 1 and October 1. An exercise date will occur each September 30 and March 31. The ESPP, that was suspended in 2018, allowed eligible employees to elect to withhold up to 10 % of their eligible compensation to purchase shares of NRG common stock at the lesser of 85 % of its fair market value on the offering date or 85 % of the fair market value on the exercise date. An offering date occurred each January 1 and July 1. An exercise date occurred each June 30 and December 31. As of December 31, 2020, there remained 2,753,591 shares of treasury stock reserved for issuance under the ESPP. Share Repurchases — In 2018, the Company's board of directors authorized the Company to repurchase $ 1.5 billion of its common stock. The Company executed $ 1.25 billion of these share repurchases in 2018, with the remaining $ 0.25 billion completed in the first quarter of 2019. In 2019, the Company's board of directors authorized the Company to repurchase an additional $ 1.25 billion of its common stock. The Company executed $ 1.194 billion of these share repurchases in 2019 and completed the remaining $ 56 million under the 2019 authorization by February 27, 2020. The remaining repurchases in 2020 were made under the long-term capital allocation policy discussed above. The following table summarizes the shares repurchases made during the years 2018, 2019 and 2020: Total number of shares and share equivalents purchased Average price paid per share and share equivalent Amounts paid for shares and share equivalents purchased (in millions) 2018 repurchases: Shares repurchased under May 24, 2018 Accelerated Repurchase Agreement 10,829,903 354 Shares repurchased under September 5, 2018 Accelerated Repurchase Agreement 13,307,130 500 Other repurchases 11,097,631 396 Total Share Repurchases during 2018 35,234,664 $ 35.48 $ 1,250 2019 repurchases: Repurchases under February 28, 2019 Accelerated Share Repurchase Agreement 9,438,671 400 Other repurchases 26,863,211 1,008 Equivalent shares purchased in lieu of tax withholdings on equity compensation issuances (a) 936,928 36 Total Share Repurchases during 2019 37,238,810 $ 38.79 $ 1,444 2020 repurchases: Repurchases 6,062,783 197 Equivalent shares purchased in lieu of tax withholdings on equity compensation issuances (a) 711,248 27 Total Share Repurchases during 2020 6,774,031 $ 33.05 $ 224 (a) NRG elected to pay cash for tax withholding on equity awards instead of issuing actual shares to management. The average price per equivalent shares withheld was $ 38.23 and $ 38.78 in 2020 and 2019, respectively. See Note 22, Stock-Based Compensation, for further discussion of the equity awards 148 Note 18 — Investments Accounted for by the Equity Method and Variable Interest Entities Entities that are not Consolidated NRG accounts for the Company's significant investments using the equity method of accounting. NRG's carrying value of equity investments can be impacted by a number of elements including impairments, unrealized gains and losses on derivatives and movements in foreign currency exchange rates. The following table summarizes NRG's equity method investments as of December 31, 2020: (In millions, except percentages) Name Economic Interest Investment Balance (a) Agua Caliente 35.0 % $ 185 Gladstone 37.5 % 131 Ivanpah Master Holdings, LLC 54.5 % 17 Watson Cogeneration Company 49.0 % 14 Midway-Sunset Cogeneration Company 50.0 % 12 Petra Nova Parish Holdings, LLC (b) 50.0 % ( 13 ) Total equity investments in affiliates $ 346 (a) As of December 31, 2020, the carry value of NRG's equity method investment was $ 343 million lower than the underlying net assets of the investees. The basis difference is being amortized into net income over the remaining estimated useful lives of the underlying net assets. The basis difference is primarily due to impairments booked on Petra Nova, but not booked at the project level, as well as differences related to the deconsolidations of Ivanpah and Agua Caliente in 2018 and the treatment of certain deferred tax assets. (b) Refer to Note 11, Asset Impairments , for discussion of NRG's investment in Petra Nova Parish Holdings, LLC As of December 31, (In millions) 2020 2019 Undistributed earnings from equity investments $ 30 $ 42 PG&E Bankruptcy — The Agua Caliente project and two of the three Ivanpah units are party to PPAs with PG&E. Both projects have project financing with the U.S. DOE. On January 29, 2019, PG&E Corp. and primary operating subsidiary utility PG&E filed for Chapter 11 relief in the California Bankruptcy Court. As a result of the bankruptcy filing, Agua Caliente and the two Ivanpah units were issued notices of events of default under their respective loan agreements. On September 9, 2019, PG&E filed a plan of reorganization that would assume all power purchase agreements, including those held by Agua Caliente and the two Ivanpah units. The California Bankruptcy Court approved the PG&E plan and the Confirmation Order was entered on June 19, 2020. The plan went effective, and PG&E emerged from bankruptcy on July 1, 2020. In July 2020, the U.S. DOE agreed to waivers of the bankruptcy-related events of default with respect to the Agua Caliente and Ivanpah projects. Subsequent to PG&E's emergence from bankruptcy, the Agua Caliente and the Ivanpah projects were allowed to resume distributions, and as of December 31, 2020, NRG received $ 50 million. In November 2020, Clearway Energy Inc. agreed to buy NRG’s 35 % interest in Agua Caliente. The transaction closed on February 3, 2021. Variable Interest Entities NRG accounts for its interests in certain entities that are considered VIEs under ASC 810, Consolidation , for which NRG is not the primary beneficiary, under the equity method. Through its consolidated subsidiary, NRG Solar Ivanpah LLC, NRG owns a 54.5 % interest in Ivanpah Master Holdings, LLC, or Ivanpah, the owner of three solar electric generating projects located in the Mojave Desert with a total capacity of 393 MW. NRG considers this investment a VIE under ASC 810 and NRG is not considered the primary beneficiary. The Company accounts for its interest under the equity method of accounting. The Ivanpah solar electric generating projects were funded in large part by loans guaranteed by the U.S. DOE and equity from the projects' partners. During the first quarter of 2018, all interested parties sought a restructuring of Ivanpah's debt in order to avoid a potential event of default with respect to the loans in connection with several recent events. Ensuing negotiations culminated in a settlement during the second quarter of 2018 between the parties which resulted in certain transactions, including the release of reserves totaling $ 95 million to fund equity distributions to the partners, which reduced the equity at risk, and the prepayment of certain of the debt balance outstanding, and the amendment of certain of Ivanpah's governing documents. The equity distributions and prepayment of debt were funded by the agreed upon release of reserve funds. These events were considered to be a reconsideration event in accordance with ASC 810. As a result, NRG determined that it is not the primary beneficiary and deconsolidated Ivanpah. NRG recognized a loss of $ 22 million on the deconsolidation and subsequent recognition of Ivanpah as an equity method investment. The deconsolidation of Ivanpah reduced the Company's 149 assets by approximately $ 1.3 billion, which was primarily property, plant and equipment, and reduced the Company's liabilities by $ 1.2 billion, which was primarily long-term debt. Other Equity Investments Gladstone — Through a joint venture, NRG owns a 37.5 % interest in Gladstone, a 1,613 MW coal-fueled power generation facility in Queensland, Australia. The power generation facility is managed by the joint venture participants and the facility is operated by NRG. Operating expenses incurred in connection with the operation of the facility are funded by each of the participants in proportion to their ownership interests. Coal is sourced from local mines in Queensland. NRG and the joint venture participants receive their respective share of revenues directly from the off takers in proportion to the ownership interests in the joint venture. Power generated by the facility is primarily sold to an adjacent aluminum smelter, with excess power sold to the Queensland Government-owned utility under long-term supply contracts. NRG's investment in Gladstone was $ 131 million as of December 31, 2020. Entities that are Consolidated The Company has a controlling financial interest in certain entities which have been identified as VIEs under ASC 810. These arrangements are related to the Receivables Facility, as further described in Note 13, Receivables Securitization and Repurchase Facility, and tax equity arrangements entered into with third-parties in order to finance the cost of solar energy systems under operating leases eligible for certain tax credits as further described in Note 2, Summary of Significant Accounting Policies . During the first quarter of 2020, the Company repurchased its partners' equity interest in one of the remaining partnerships. As the Company retains control of its interest in the entity, the repurchase was recorded to equity. During the fourth quarter of 2020, the Company completed the sale of its other remaining tax equity arrangement, as part of the sale of the Home Solar business for $ 66 million. The summarized financial information for the Company's consolidated VIEs consisted of the following: (In millions) December 31, 2020 December 31, 2019 Accounts receivable $ 647 $ 3 Other current assets 2 — Net property, plant and equipment — 71 Other long-term assets — 27 Total assets 649 101 Current liabilities 78 4 Long-term debt — 24 Other long-term liabilities — 8 Total liabilities 78 36 Redeemable noncontrolling interests — 20 Net assets less noncontrolling interests $ 571 $ 45 Note 19 — Earnings Per Share Basic income per common share is computed by dividing net income by the weighted average number of common shares outstanding. Shares issued and treasury shares repurchased during the year are weighted for the portion of the year that they were outstanding. Diluted income per share is computed in a manner consistent with that of basic income per share, while giving effect to all potentially dilutive common shares that were outstanding during the period. Dilutive effect for equity compensation and other equity instruments — The outstanding non-qualified stock options, non-vested restricted stock units, and market stock units and relative performance stock units are not considered outstanding for purposes of computing basic income per share. However, these instruments are included in the denominator for purposes of computing diluted income per share under the treasury stock method. The 2048 Convertible Senior Notes are convertible, under certain circumstances, into the Company’s common stock, cash or combination thereof (at NRG's option). There is no dilutive effect for the 2048 Convertible Senior Notes due to the Company’s expectation to settle the liability in cash. 150 The reconciliation of NRG's basic income/(loss) per share to diluted income/(loss) per share is shown in the following table: Year Ended December 31, (In millions, except per share amounts) 2020 2019 2018 Basic income per share attributable to NRG, Inc; Net income attributable to NRG Energy, Inc. common stockholders $ 510 $ 4,438 $ 268 Weighted average number of common shares outstanding-basic 245 262 304 Income per weighted average common share — basic $ 2.08 $ 16.94 $ 0.88 Diluted income per share attributable to NRG, Inc; Net income attributable to NRG Energy, Inc. common stockholders $ 510 $ 4,438 $ 268 Weighted average number of common shares outstanding-basic 245 262 304 Incremental shares attributable to the issuance of equity compensation (treasury stock method) 1 2 4 Weighted average number of common shares outstanding-diluted 246 264 308 Income per weighted average common share — diluted $ 2.07 $ 16.81 $ 0.87 As of December 31, 2020 and 2019 and 2018 the Company had an insignificant number of outstanding equity instruments that are anti-dilutive and were not included in the computation of the Company’s diluted income per share. Note 20 — Segment Reporting The Company began managing its integrated model based on the combined results of the retail and wholesale generation businesses with a geographical focus in 2020. As a result, the Company changed its business segments to Texas, East and West/Other beginning in the first quarter of 2020. The Company's updated segment structure reflects how management makes financial decisions and allocates resources. All affected disclosures presented herein have been recast to reflect these changes for all periods presented. For further discussion, refer to Note 1, Nature of Busines s. NRG's chief operating decision maker, its chief executive officer, evaluates the performance of its segments based on operational measures including adjusted earnings before interest, taxes, depreciation and amortization, or Adjusted EBITDA, free cash flow and capital for allocation, as well as net income/(loss) and net income/(loss) attributable to NRG Energy, Inc. In February 2019, the Company completed the sale and deconsolidation of the South Central Portfolio and Carlsbad. On August 31, 2018, NRG deconsolidated NRG Yield Inc., its Renewables Platform and Carlsbad for financial reporting purposes. In 2018, the financial information for historical periods was recast to reflect the presentation of discontinued operations within the corporate segment. Refer to Note 4, Acquisitions, Discontinued Operations and Dispositions , for further discussion. The Company had no customer that comprised more than 10 % of the Company's consolidated revenues during the years ended December 31, 2020 and 2019. The company had one customer in the Texas segment that comprised 11 % of the Company's consolidated revenues during the year ended December 31, 2018. Intersegment sales are accounted for at market. 151 For the Year Ended December 31, 2020 (In millions) Texas East West/Other Corporate (a) Eliminations Total Operating revenues (a) $ 6,309 $ 2,354 $ 434 $ — $ ( 4 ) $ 9,093 Operating expenses 5,246 1,828 346 57 ( 4 ) 7,473 Depreciation and amortization 227 142 32 34 — 435 Impairment losses 14 — 61 — — 75 Development costs 4 3 1 — — 8 Total operating cost and expenses 5,491 1,973 440 91 ( 4 ) 7,991 (Loss)/gain on sale of assets — — ( 2 ) 5 — 3 Operating income/(loss) 818 381 ( 8 ) ( 86 ) — 1,105 Equity in (losses)/earnings of unconsolidated affiliates ( 12 ) — 29 — — 17 Impairment losses on investments ( 18 ) — — — — ( 18 ) Other income, net 11 7 8 41 — 67 Loss on debt extinguishment — ( 4 ) ( 5 ) — — ( 9 ) Interest expense — ( 14 ) ( 3 ) ( 384 ) — ( 401 ) Income/(loss) from continuing operations before income taxes 799 370 21 ( 429 ) — 761 Income tax (benefit)/expense — ( 1 ) 2 250 — 251 Net income/(loss) attributable to NRG Energy, Inc. $ 799 $ 371 $ 19 $ ( 679 ) $ — $ 510 Balance sheet Equity investments in affiliates $ ( 13 ) $ — $ 359 $ — $ — $ 346 Capital expenditures 130 45 30 25 — 230 Goodwill (b) 325 254 — — — 579 Total assets $ 7,641 $ 1,885 $ 1,584 $ 11,152 $ ( 7,360 ) $ 14,902 (a) Inter-segment sales and inter-segment net derivative gains and losses included in operating revenues $ 6 $ ( 6 ) $ 4 $ — $ — $ 4 (b) Goodwill was allocated based on the regions in which the business operates and are expected to benefit using a relative fair value approach 152 For the Year Ended December 31, 2019 (In millions) Texas East West/Other Corporate (a) Eliminations Total Operating revenues (a) $ 7,069 $ 2,319 $ 440 $ — $ ( 7 ) $ 9,821 Operating expenses 5,818 1,895 397 50 ( 7 ) 8,153 Depreciation and amortization 188 121 33 31 — 373 Impairment losses 1 — 4 — — 5 Development costs 3 3 1 — — 7 Total operating cost and expenses 6,010 2,019 435 81 ( 7 ) 8,538 Gain on sale of assets — 1 — 6 — 7 Operating income/(loss) 1,059 301 5 ( 75 ) — 1,290 Equity in (losses)/earnings of unconsolidated affiliates ( 4 ) — 6 — — 2 Impairment losses on investments ( 103 ) — — ( 5 ) — ( 108 ) Other income, net 20 6 10 30 — 66 Loss on debt extinguishment — — ( 3 ) ( 48 ) — ( 51 ) Interest expense — ( 18 ) ( 10 ) ( 385 ) — ( 413 ) Income/(loss) from continuing operations before income taxes 972 289 8 ( 483 ) — 786 Income tax expense/(benefit) — 2 1 ( 3,337 ) — ( 3,334 ) Net income from continuing operations 972 287 7 2,854 — 4,120 Gain from discontinued operations, net of income tax — — — 321 — 321 Net Income 972 287 7 3,175 — 4,441 Less: Net income attributable to noncontrolling interests and redeemable noncontrolling interests — — 3 — — 3 Net income attributable to NRG Energy, Inc. $ 972 $ 287 $ 4 $ 3,175 $ — $ 4,438 Balance sheet Equity investments in affiliates $ 6 $ — $ 382 $ — $ — $ 388 Capital expenditures 136 30 25 37 — 228 Goodwill (b) 325 254 — — — 579 Total assets $ 5,711 $ 2,160 $ 1,190 $ 8,342 $ ( 4,872 ) $ 12,531 (a) Inter-segment sales and inter-segment net derivative gains and losses included in operating revenues $ 1 $ 8 $ ( 2 ) $ — $ — $ 7 (b) Goodwill was allocated based on the regions in which the business operates and are expected to benefit using a relative fair value approach 153 For the Year Ended December 31, 2018 (In millions) Texas East West/Other Corporate (a) Eliminations Total Operating revenues (a) $ 6,401 $ 2,371 $ 724 $ — $ ( 18 ) $ 9,478 Operating expenses 5,399 2,024 467 125 ( 18 ) 7,997 Depreciation and amortization 156 105 127 33 — 421 Impairment losses 5 82 12 — — 99 Development costs 3 3 3 2 — 11 Total operating cost and expenses 5,563 2,214 609 160 ( 18 ) 8,528 Gain/(loss) on sale of assets 4 — ( 2 ) 30 — 32 Operating income/(loss) 842 157 113 ( 130 ) — 982 Equity in (losses)/earnings of unconsolidated affiliates ( 3 ) — 13 ( 1 ) — 9 Impairment losses on investments ( 15 ) — — — — ( 15 ) Other income/(loss), net 13 2 4 ( 1 ) — 18 Loss on debt extinguishment — — — ( 44 ) — ( 44 ) Interest expense — ( 22 ) ( 39 ) ( 422 ) — ( 483 ) Income/(loss) from continuing operations before income taxes 837 137 91 ( 598 ) — 467 Income tax expense — 1 — 6 — 7 Net income/(loss) from continuing operations 837 136 91 ( 604 ) — 460 Loss from discontinued operations, net of income tax — — — ( 192 ) — ( 192 ) Net Income/(loss) 837 136 91 ( 796 ) — 268 Less: Net income/(loss) attributable to noncontrolling interests and redeemable noncontrolling interests — — 5 ( 5 ) — — Net income/(loss) attributable to NRG Energy, Inc. $ 837 $ 136 $ 86 $ ( 791 ) $ — $ 268 (a) Inter-segment sales and inter-segment net derivative gains and losses included in operating revenues $ 19 $ ( 5 ) $ 4 $ — $ — $ 18 (b) Goodwill was allocated based on the regions in which the business operates and are expected to benefit using a relative fair value approach Note 21 — Income Taxes The income tax provision from continuing operations consisted of the following amounts: Year Ended December 31, (In millions, except effective income tax rate) 2020 2019 2018 Current State $ 22 $ 2 $ 6 Foreign 4 4 — Total — current 26 6 6 Deferred U.S. Federal 168 ( 3,000 ) ( 16 ) State 60 ( 340 ) 16 Foreign ( 3 ) — 1 Total — deferred 225 ( 3,340 ) 1 Total income tax expense/(benefit) $ 251 $ ( 3,334 ) $ 7 Effective income tax rate 33.0 % ( 424.2 ) % 1.5 % 154 During the year ended December 31, 2019, NRG released the majority of its valuation allowance against its U.S. federal and state deferred tax assets, resulting in a non-cash benefit to income tax expense of approximately $ 3.5 billion. In making the determination to release the majority of the valuation allowance as of December 31, 2019, the Company evaluated a number of factors, including its recent history of pre-tax earnings, utilization of $ 593 million of NOLs in 2019, as well as its forecasted future pre-tax earnings. Based on this evaluation, the Company determined that the majority of its future tax benefits are more-likely-than-not to be realized. Given the Company’s current level of pre-tax earnings and forecasted future pre-tax earnings, the Company expects to generate income before taxes in the U.S. in future periods at a level that would fully utilize its U.S. federal NOL carryforwards and the majority of its state NOL carryforwards prior to their expiration. On March 27, 2020, the Senate passed the CARES Act to provide emergency relief related to the COVID-19 pandemic. The CARES Act contains federal income tax provisions which, among other things: (i) increases the amount of interest expense that businesses are allowed to deduct by increasing the adjusted taxable income limitation from 30% to 50% for tax years that begin in 2019 and 2020; (ii) permits businesses to carry back to each of the five tax years NOLs arising from tax years beginning after December 31, 2017 and before January 1, 2020; and (iii) temporarily removes the 80% limitation on NOLs until tax years beginning after 2020. The CARES Act provisions did not have a material impact on the tax positions of the Company. The following represented the domestic and foreign components of income from continuing operations before income taxes: Year Ended December 31, (In millions) 2020 2019 2018 U.S. $ 749 $ 771 $ 468 Foreign 12 15 ( 1 ) Total $ 761 $ 786 $ 467 Reconciliations of the U.S. federal statutory tax rate to NRG's effective tax rate were as follows: Year Ended December 31, (In millions, except effective income tax rate) 2020 2019 2018 Income from continuing operations before income taxes $ 761 $ 786 $ 467 Tax at federal statutory tax rate 160 165 98 State taxes 18 13 18 Permanent differences 8 ( 9 ) 7 Changes in valuation allowance 24 ( 3,492 ) ( 106 ) Deferred impact of state tax rate changes 2 12 — Production tax credits ("PTC") — — ( 7 ) Recognition of uncertain tax benefits 3 ( 10 ) 1 Return to provision adjustments 36 — — Alternative minimum tax ("AMT") refundable credit — — ( 4 ) Other — ( 13 ) — Income tax expense/(benefit) $ 251 $ ( 3,334 ) $ 7 Effective income tax rate 33.0 % ( 424.2 ) % 1.5 % For the year ended December 31, 2020, NRG's effective income tax rate was higher than the federal statutory tax rate of 21% primarily due to state tax expense, the recognition of state valuation allowance on NOLs, and return to provision adjustments. For the year ended December 31, 2019, NRG's effective income tax rate was lower than the federal statutory tax rate of 21% primarily due to the tax benefit from the release of the valuation allowance. For the year ended December 31, 2018, NRG's effective income tax rate was lower than the federal statutory tax rate of 21% primarily due to a tax benefit for the change in valuation allowance, the generation of PTCs from various wind facilities and establishment of the previously sequestered AMT credit receivable, partially offset by current state tax expense. 155 The temporary differences, which gave rise to the Company's deferred tax assets and liabilities consisted of the following: As of December 31, (In millions) 2020 2019 Deferred tax assets: Deferred compensation, accrued vacation and other reserves $ 79 $ 81 Difference between book and tax basis of property 357 548 Pension and other postretirement benefits 86 86 Equity compensation 10 11 Bad debt reserve 16 13 Derivatives, net 11 — U.S. Federal net operating loss carryforwards 2,117 2,116 Foreign net operating loss carryforwards 102 105 State net operating loss carryforwards 351 360 Federal and state tax credit carryforwards 384 384 Federal benefit on state uncertain tax positions 4 4 Interest disallowance carryforward per §163(j) of the Tax Act 4 82 Inventory obsolescence 6 7 Other 10 3 Total deferred tax assets 3,537 3,800 Deferred tax liabilities: Emissions allowances 21 19 Derivatives, net — 27 Goodwill 29 8 Intangibles amortization (excluding goodwill) 2 15 Equity method investments 156 201 Convertible Debt 16 19 Total deferred tax liabilities 224 289 Total deferred tax assets less deferred tax liabilities 3,313 3,511 Valuation allowance ( 266 ) ( 242 ) Total net deferred tax assets, net of valuation allowance $ 3,047 $ 3,269 The following table summarizes NRG's net deferred tax position as presented in the consolidated balance sheets: As of December 31, (In millions) 2020 2019 Deferred tax asset $ 3,066 $ 3,286 Deferred tax liability ( 19 ) ( 17 ) Net deferred tax asset $ 3,047 $ 3,269 The primary drivers for the decrease in the net deferred tax asset from $ 3.3 billion as of December 31, 2019 to $ 3.0 billion as of December 31, 2020 are a decrease in the tax basis of property and the utilization of previously disallowed interest, partially offset by a change in equity method investments. Deferred tax assets and valuation allowance Net deferred tax balance — As of December 31, 2020 and 2019, NRG recorded a net deferred tax asset, excluding valuation allowance, of $ 3.3 billion and $ 3.5 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 December 31, 2020 as discussed below. NOL carryforwards — As of December 31, 2020, the Company had tax-effected cumulative U.S. NOLs consisting of carryforwards for federal and state income tax purposes of $ 2.1 billion and $ 351 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 2031. In addition, NRG has tax-effected cumulative foreign NOL carryforwards of $ 102 million with no expiration date. 156 Valuation allowance — As of December 31, 2020, the Company's tax-effected valuation allowance was $ 266 million, 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. Taxes Receivable and Payable As of December 31, 2020, NRG recorded a current tax payable of $ 12 million that represents a tax liability due for state income taxes that is primarily comprised of Texas margin tax. NRG has a tax receivable of $ 1 million, comprised of refunds due from state income tax estimated payments and return filings. Uncertain tax benefits NRG has identified uncertain tax benefits with after-tax value of $ 15 million as of December 31, 2020 and 2019, for which NRG has recorded a non-current tax liability of $ 18 million and $ 17 million, respectively. The Company recognizes interest and penalties related to uncertain tax benefits in income tax expense. The Company recognized expense of $ 1 million related to interest in each of the years ended December 31, 2020, 2019 and 2018. As of December 31, 2020 and 2019, NRG had cumulative interest and penalties related to these uncertain tax benefits of $ 3 million and $ 2 million, respectively. Tax jurisdictions — NRG is subject to examination by taxing authorities for income tax returns filed in the U.S. federal jurisdiction and various state and foreign jurisdictions including operations located in Australia and Canada. The Company is no longer subject to U.S. federal income tax examinations for years prior to 2017. With few exceptions, state and local income tax examinations are no longer open for years before 2012. The following table summarizes uncertain tax benefits activity: As of December 31, (In millions) 2020 2019 Balance as of January 1 $ 15 $ 26 Increase due to current year positions 3 2 Settlements, payments and statute closure ( 3 ) ( 13 ) Uncertain tax benefits as of December 31 $ 15 $ 15 Note 22 — Stock-Based Compensation NRG Energy, Inc. Long-Term Incentive Plan On April 27, 2017, the NRG LTIP was amended to increase the number of shares available for issuance by 3,000,000 . As of December 31, 2020 and 2019, a total of 25,000,000 shares of NRG common stock were authorized for issuance under the NRG LTIP. There were 9,385,730 and 9,935,750 shares of common stock remaining available for grants under the NRG LTIP as of December 31, 2020 and 2019, respectively. The NRG LTIP is subject to adjustments in the event of reorganization, recapitalization, stock split, reverse stock split, stock dividend, and a combination of shares, merger or similar change in NRG's structure or outstanding shares of common stock. Upon adoption of the amended NRG LTIP effective April 27, 2017, no shares of NRG common stock remain available for future issuance under the NRG GenOn LTIP. As of December 31, 2020 and 2019, there were 78,903 and 319,264 shares of common stock remaining available for grants under the NRG GenOn LTIP, respectively. Restricted Stock Units As of December 31, 2020, RSUs granted under the Company's LTIPs typically have three -year graded vesting schedules beginning on the grant date. Fair value of the RSUs granted during 2020 is derived from the closing price of NRG common stock on the grant date. The following table summarizes the Company's non-vested RSU awards and changes during the year: Units Weighted Average Grant Date Fair Value per Unit Non-vested at December 31, 2019 717,239 $ 25.56 Granted 271,718 38.05 Forfeited ( 16,750 ) 35.86 Vested ( 452,693 ) 20.73 Non-vested at December 31, 2020 519,514 35.87 157 The total fair value of RSUs vested during the years ended December 31, 2020, 2019 and 2018 was $ 17 million, $ 36 million and $ 42 million, respectively. The weighted average grant date fair value of RSUs granted during the years ended December 31, 2020, 2019 and 2018 was $ 38.05 , $ 37.37 and $ 28.90 , respectively. Deferred Stock Units DSUs represent the right of a participant to be paid one share of NRG common stock at the end of a deferral period established under the terms of the award. DSUs granted under the Company's LTIPs are fully vested at the date of issuance. Fair value of the DSUs, which is based on the closing price of NRG common stock on the date of grant, is recorded as compensation expense in the period of grant. The following table summarizes the Company's outstanding DSU awards and changes during the year: Units Weighted Average Grant Date Fair Value per Unit Outstanding at December 31, 2019 331,223 $ 23.98 Granted 58,861 35.59 Converted to Common Stock ( 47,378 ) 26.87 Outstanding at December 31, 2020 342,706 25.37 The aggregate intrinsic values for DSUs outstanding as of December 31, 2020, 2019 and 2018 were approximately $ 13 million each year. The aggregate intrinsic values for DSUs converted to common stock for the years ended December 31, 2020, 2019 and 2018 were $ 2 million, $ 2 million and $ 6 million, respectively. The weighted average grant date fair value of DSUs granted during the years ended December 31, 2020, 2019 and 2018 was $ 35.59 , $ 34.84 and $ 33.43 , respectively. Performance Stock Units PSUs entitle the recipient to stock upon vesting. The amount of the award is subject to the Company's achievement of certain performance measures over the vesting period. PSUs include RPSUs and MSUs. As of December 31, 2020, non-vested PSUs consist primarily of RPSUs. Relative Performance Stock Units — RPSUs are restricted grants where the quantity of shares increases and decreases alongside the Company's Total Shareholder Return, or TSR, relative to the TSR of the Company's current proxy peer group and the total returns of select indexes, or Peer Group. Each RPSU represents the potential to receive NRG common stock after the completion of the performance period, typically three years of service from the date of grant. The number of shares of NRG common stock to be paid (if any) as of the vesting date for each RPSU will depend on the Company’s percentile rank within the Peer Group. The number of shares of common stock to be paid as of the vesting date for each RPSU is linearly interpolated for TSR performance between the following points: (i) 0 % if ranked below the 25th percentile; (ii) 25 % if ranked at the 25th percentile; (iii) 100 % if ranked at the 55th percentile (or the 65th percentile if the Company's absolute TSR is less than negative 15 %); and (iv) 200 % if ranked at the 75th percentile or above. The value of the common stock on the date of grant is based on the closing price of NRG common stock on the date of grant. Market Stock Units — MSUs are restricted grants where the quantity of shares increases and decreases alongside the Company's TSR. Each MSU represents the potential to receive NRG common stock after the completion of the performance period, typically three years of service from the date of grant. The number of shares of common stock to be paid as of the vesting date for each MSU is : (i) zero shares, if the TSR has decreased by more than 25 % over the performance period, (ii) three-quarters of one share, if the TSR has decreased by 25 % over the performance period; (iii) interpolated between three-quarters of one share and one share, if the TSR has decreased less than 25 % over the performance period; (iv) one share, if there is no change in TSR over the performance period; (v) interpolated between one share and two shares, if TSR increases less than 100 % during the performance period; and (vi) two shares, if the TSR increases 100 % over the performance period. The value of the common stock on the date of grant was based on the closing price of NRG common stock on the date of grant. The Company last granted MSUs during the year ended December 31, 2016. As of March 1, 2021 all MSUs were vested. 158 The following table summarizes the Company's non-vested PSU awards and changes during the year: Units Weighted Average Grant-Date Fair Value per Unit Non-vested at December 31, 2019 1,200,541 $ 26.65 Granted (a) 928,215 23.75 Forfeited ( 5,142 ) 35.77 Vested (b) ( 1,330,053 ) 15.91 Non-vested at December 31, 2020 (c) 793,561 41.69 (a) The weighted average grant date fair value per unit includes RPSUs that were granted during 2020 with grant date fair value of $ 45.60 . It also includes RPSUs with 2017 grant date fair value of $ 15.91 and MSUs with 2016 grant date fair value of $ 15.28 , that due to vesting at 200 %, were considered additional grants in 2020 (b) MSUs granted during 2016 and RPSUs granted during 2017 vested during 2020 at 200 % (c) Non-vested units as of December 31, 2020 includes 4,260 MSUs which were vested as of March 1, 2021 The weighted average grant date fair value of PSUs granted during the years ended December 31, 2020, 2019 and 2018, was $ 23.75 , $ 22.50 and $ 35.36 , respectively. The fair value of PSUs is estimated on the date of grant using a Monte Carlo simulation model and expensed over the service period, which equals the vesting period. Significant assumptions used in the fair value model with respect to the Company's PSUs are summarized below: 2020 2019 2018 2017 2016 RPSUs RPSUs RPSUs RPSUs MSUs Expected volatility 30.15 % 40.72 % 47.52 % 43.96 % 34.33 % Expected term (in years) 3 3 3 3 3 Risk free rate 1.58 % 2.45 % 2.01 % 1.5 % 1.31 % For the years ended December 31, 2020 and 2019, expected volatility is calculated based on NRG's historical stock price volatility data over the period commensurate with the expected term of the PSU, which equals the vesting period. Non-Qualified Stock Options All NQSOs granted under the Company's LTIP were fully vested as of December 31, 2020, 2019 and 2018. No NQSOs were granted in 2020, 2019 or 2018. NRG recognized compensation costs for NQSOs over the requisite service period for the entire award. No compensation expense was recognized during 2020, 2019 or 2018 as it was fully recognized in prior years. The maximum contractual term is 10 years for NRG's outstanding NQSOs. The following table summarizes the Company's NQSO activity and changes during the year: Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in millions) Outstanding at December 31, 2019 134,398 $ 25.31 1 $ 2 Expired ( 9,083 ) 37.44 Exercised ( 48,268 ) 23.33 Outstanding at December 31, 2020 77,047 25.13 0.5 1 Exercisable at December 31, 2020 77,047 25.13 0.5 1 The following table summarizes the total intrinsic value of options exercised and the cash received from the exercises of options: Year Ended December 31, (In millions) 2020 2019 2018 Total intrinsic value of options exercised $ 1 $ 2 $ 10 Cash received from options exercised 1 3 24 159 Supplemental Information The following table summarizes NRG's total compensation expense recognized for the years presented, as well as total non-vested compensation costs not yet recognized and the period over which this expense is expected to be recognized as of December 31, 2020, for each of the types of awards issued under the LTIPs. Minimum tax withholdings of $ 27 million, $ 36 million, and $ 19 million for the years ended December 31, 2020, 2019, and 2018, respectively, are reflected as a reduction to additional paid-in capital on the Company's consolidated balance sheets. Non-vested Compensation Cost (In millions, except weighted average data) Compensation Expense Unrecognized Total Cost Weighted Average Recognition Period Remaining (In years) Year Ended December 31, As of December 31, Award 2020 2019 2018 2020 2020 RSUs $ 9 $ 9 $ 12 $ 7 1.15 DSUs 2 2 2 — 0.00 MSUs — — 4 — 0.01 RPSUs 10 10 7 10 0.95 PRSUs (a) 6 11 16 6 1.24 Total $ 27 $ 32 $ 41 $ 23 Tax detriment recognized $ ( 9 ) $ ( 12 ) $ ( 4 ) (a) Phantom Restricted Stock Units, PRSUs, are liability-classified time-based awards that typically vest ratably over a three -year period. The amount to be paid upon vesting is based on NRG's closing stock price for the period Note 23 — Related Party Transactions NRG provides services to some of its equity method investments under operations and maintenance agreements. Fees for the services under these agreements include recovery of NRG's costs of operating the plants. Certain agreements also include fees for administrative service, a base monthly fee, profit margin and/or annual incentive bonus. The following table summarizes NRG's material related party transactions with third party affiliates: Year Ended December 31, (In millions) 2020 2019 2018 Revenues from Related Parties Included in Operating Revenues Gladstone $ 4 $ 4 $ 3 GenConn (a) — — 4 Ivanpah (b) 43 35 20 Midway-Sunset 5 5 5 Total $ 52 $ 44 $ 32 (a) As of August 31, 2018, NRG no longer had an ownership interest in GenConn as a result of the sale of its ownership interests in NRG Yield, Inc. and its Renewables Platform (b) Includes fees under project management agreements with each project company. Ivanpah became a related party to NRG upon deconsolidation in the second quarter of 2018 Services Agreement and Transition Services Agreement with GenOn The Company provided GenOn with various management, personnel and other services, which included human resources, regulatory and public affairs, accounting, tax, legal, information systems, treasury, risk management, commercial operations, and asset management, as set forth in the services agreement with GenOn, or the Services Agreement. In December 2017, in conjunction with the confirmation of the GenOn Entities' plan of reorganization, the Services Agreement was terminated and replaced by the transition services agreement. Under the transition services agreement, NRG provided the shared services and other separation services. For the year ended December 31, 2018, NRG recorded approximately $ 53 million, under the transition services agreement against selling, general and administrative costs post-Chapter 11 Filing. 160 Note 24 — Commitments and Contingencies Coal, Gas and Transportation Commitments NRG has entered into long-term contractual arrangements to procure fuel and transportation services for the Company's generation assets. As of December 31, 2020, the Company's minimum commitments under such outstanding agreements are estimated as follows: Period (In millions) 2021 $ 146 2022 98 2023 69 2024 67 2025 65 Thereafter 80 Total (a) $ 525 (a) Actual coal, gas and transportation purchases are significantly higher than these estimated minimum unconditional long-term firm commitments For the years ended December 31, 2020, 2019 and 2018, the Company purchased $ 0.8 billion, $ 1.2 billion and $ 1.2 billion, respectively, under coal, gas and transportation arrangements. Purchased Power Commitments NRG has purchased power contracts of various quantities and durations, including renewable purchased power agreements under PPAs with third-party project developers, which are accounted for as NPNS. These contracts are not included in the consolidated balance sheet as of December 31, 2020. Minimum purchase commitment obligations are as follows as of December 31, 2020: Period (In millions) 2021 $ 48 2022 62 2023 50 2024 50 2025 49 Thereafter 316 Total (a) $ 575 (a) Actual power purchases are significantly higher than these estimated minimum unconditional long-term firm commitments For the years ended December 31, 2020, 2019 and 2018, the Company purchased $ 142 million, $ 183 million and $ 138 million, respectively, under purchased power arrangements. First Lien Structure NRG has granted first liens to certain counterparties on a substantial portion of property and assets owned by NRG and the guarantors of its senior debt. NRG uses the first lien structure to reduce the amount of cash collateral and letters of credit that it would otherwise be required to post from time to time to support its obligations under out-of-the-money hedges. To the extent that the underlying hedge positions for a counterparty are out-of-the-money to NRG, the counterparty would have a claim under the first lien program. As of December 31, 2020, hedges under the first lien were in-the-money for NRG on a counterparty aggregate basis. Nuclear Insurance STP maintains required insurance coverage for liability claims arising from nuclear incidents pursuant to the Price-Anderson Act. The current liability limit per incident is $ 13.8 billion, subject to change to account for the effects of inflation and the number of licensed reactors. An inflation adjustment must be made at least once every five years with the next adjustment expected to be effective no later than November 1, 2023. Under the Price-Anderson Act, owners of nuclear power plants in the U.S. are required to purchase primary insurance limits of $ 450 million for each operating site. In addition, the Price-Anderson Act requires an additional layer of protection through mandatory participation in a retrospective rating plan for power reactors resulting in an additional $ 13.3 billion in funds available for public liability claims. The current maximum 161 assessment per incident, per reactor, is approximately $ 138 million, taking into account a 5 % adjustment for administrative fees, payable at approximately $ 21 million per year, per reactor. NRG would be responsible for 44 % of the maximum assessment, or $ 9 million per year, per reactor, and a maximum of $ 61 million per incident, per reactor. In addition, the U.S. Congress retains the ability to impose additional financial requirements on the nuclear industry to pay liability claims that exceed $ 13.8 billion for a single incident. The liabilities of the co-owners of STP with respect to the retrospective premium assessments for nuclear liability insurance are joint and several. STP purchases insurance for property damage and site decontamination cleanup costs from Nuclear Electric Insurance Limited, or NEIL, and European Mutual Association for Nuclear Insurance, or EMANI, both of which are industry mutual insurance companies, of which STP is a member. STP has purchased $ 2.8 billion in limits for nuclear events and $ 1.0 billion in limits for non-nuclear events. The nuclear event limit remains the maximum available from NEIL. The upper $ 1.3 billion in nuclear events limits (excess of the first $ 1.5 billion in nuclear events limits) is a single limit blanket policy shared with two Diablo Canyon nuclear reactors, which have no affiliation with the Company. This shared limit is not subject to automatic reinstatement in the event of a loss. The NEIL primary policy covers both nuclear and non-nuclear property damage events, and a NEIL companion policy provides Accidental Outage coverage for the co-owners of STP's lost revenue following a property damage event, at a weekly indemnity limit of $ 3 million per unit up to a maximum of $ 274 million nuclear per unit and $ 184 million non-nuclear per unit, and is subject to an eight-week waiting period. NRG also purchases an Accidental Outage policy from NEIL, which provides protection for lost revenue due to an insurable event. This coverage allows for reimbursement up to $ 2 million per week per unit up to a maximum of $ 216 million nuclear and $ 144 million non-nuclear, and is subject to an eight-week waiting period. Accidental Outage coverage amounts decrease in the event more than one unit at a station is out of service due to a common accident. Under the terms of the NEIL and EMANI policies, member companies may be assessed up to ten and six times their annual premiums respectively if the NEIL or EMANI Board of Directors determines their surplus has been depleted due to the payment of property losses at any of the licensed reactors in a single policy year. NEIL and EMANI require that their members maintain an investment grade credit rating or ensure their annual retrospective obligation by providing a financial guarantee, letter of credit, deposit premium, or an insurance policy. NRG has purchased an insurance policy from NEIL and EMANI to guarantee the Company's obligation; however note the NEIL aspect of this insurance will only respond to retrospective premium adjustments assessed within twenty-four months after the policy term, whereas NEIL's Board of Directors can make such an adjustment up to 6 years after the policy expires. All insurance coverage is subject to various sub limits and significant deductibles. Contingencies The Company's material legal proceedings are described below. The Company believes that it has valid defenses to these legal proceedings and intends to defend them vigorously. NRG records accruals for estimated losses from contingencies when information available indicates that a loss is probable and the amount of the loss, or range of loss, can be reasonably estimated. As applicable, the Company has established an adequate accrual for the applicable legal matters, including regulatory and environmental matters as further discussed in Note 25, Regulatory Matters , and Note 26, Environmental Matters . In addition, legal costs are expensed as incurred. Management has assessed each of the following matters based on current information and made a judgment concerning its potential outcome, considering the nature of the claim, the amount and nature of damages sought, and the probability of success. Unless specified below, the Company is unable to predict the outcome of these legal proceedings or reasonably estimate the scope or amount of any associated costs and potential liabilities. As additional information becomes available, management adjusts its assessment and estimates of such contingencies accordingly. Because litigation is subject to inherent uncertainties and unfavorable rulings or developments, it is possible that the ultimate resolution of the Company's liabilities and contingencies could be at amounts that are different from its currently recorded accruals and that such difference could be material. In addition to the legal proceedings noted below, NRG and its subsidiaries are party to other litigation or legal proceedings arising in the ordinary course of business. In management's opinion, the disposition of these ordinary course matters will not materially adversely affect NRG's consolidated financial position, results of operations, or cash flows. Washington-St. Tammany and Claiborne Electric Cooperative v. LaGen — On June 28, 2017, plaintiffs Washington-St. Tammany Electric Cooperative, Inc. and Claiborne Electric Cooperative, Inc. filed a lawsuit against LaGen in the United States District Court for the Middle District of Louisiana. The plaintiffs claim breach of contract against LaGen for allegedly improperly charging the plaintiffs for costs related to the installation and maintenance of certain pollution control technology. Plaintiffs sought damages for the alleged improper charges and a declaration as to which charges were proper under the contract. In February 2020, the court dismissed this lawsuit without prejudice for lack of subject matter jurisdiction. On March 17, 2020, plaintiffs filed a lawsuit in the Nineteenth Judicial District Court for the Parish of East Baton Rouge in Louisiana alleging substantially the same matters. On February 4, 2019, NRG sold the South Central Portfolio, including the entities subject to this litigation. However, NRG has agreed to indemnify the purchaser for certain losses suffered in connection therewith. 162 Sierra club et al. v. Midwest Generation LLC — In 2012, several environmental groups filed a complaint against Midwest Generation with the Illinois Pollution Control Board ("IPCB") alleging violations of environmental law resulting in groundwater contamination. In June 2019, the IPCB found that Midwest Generation violated the law because it had improperly handled coal ash at four facilities in Illinois and caused or allowed coal ash constituents to impact groundwater. On September 9, 2019, Midwest Generation filed a Motion to Reconsider numerous issues, which the court granted in part and denied in part on February 6, 2020. The IPCB will hold hearings to determine the appropriate relief. Midwest Generation has been working with the Illinois EPA to address the groundwater issues since 2010. XOOM Energy Litigation — XOOM has been a defendant in two purported class action lawsuits in Maryland and New York. The plaintiffs generally claim that they did not receive the savings they were promised in their natural gas and electricity bills. In the Maryland lawsuit, the district court denied plaintiff's' bid to certify the case as a class action on August 18, 2020. The matter has been dismissed. In the New York case, XOOM filed a motion to dismiss, which the court granted on September 21, 2018, later entering judgment in XOOM's favor on September 24, 2018. The plaintiffs in the New York case appealed to the U.S. Court of Appeals for the Second Circuit. On July 26, 2019, the Second Circuit reversed the judgment of the district court and remanded to the district court with instructions that plaintiffs be permitted to proceed on their proposed amended complaint. The New York case is in the discovery phase. This matter was known and accrued for at the time of the acquisition. Note 25 — Regulatory Matters NRG operates in a highly regulated industry and is subject to regulation by various federal and state agencies. As such, NRG is affected by regulatory developments at both the federal and state levels and in the regions in which NRG operates. In addition, NRG is subject to the market rules, procedures, and protocols of the various ISO and RTO markets in which NRG participates. These power markets are subject to ongoing legislative and regulatory changes that may impact NRG's wholesale and retail operations. In addition to the regulatory proceedings noted below, NRG and its subsidiaries are parties to other regulatory proceedings arising in the ordinary course of business or have other regulatory exposure. In management's opinion, the disposition of these ordinary course matters will not materially adversely affect NRG's consolidated financial position, results of operations, or cash flows. California Station Power — As the result of unfavorable final and non-appealable litigation, the Company accrued a liability associated with consumption of station power at the Company's Encina power plant facility in California after August 30, 2010. The Company has established an appropriate accrual pending potential regulatory action by SDG&E regarding the Company's Encina facility. South Central — On August 4, 2016, NRG received a document hold notice from FERC regarding conduct in the MISO and PJM markets. FERC Office of Enforcement Staff investigated potential violations of MISO rules involving bidding for the Big Cajun 2 facility, as well as other aspects of NRG’s operations in MISO. On August 18, 2020, FERC Office of Enforcement presented NRG with its preliminary findings. NRG responded to the preliminary findings on January 15, 2021. FERC has the authority to require disgorgement of profits and to impose penalties and NRG retains any liability following the sale of the South Central Portfolio. ISO-NE — On January 8, 2021, the Commission approved a settlement agreement the Company entered into to resolve FERC Enforcement Staff's investigation of offers submitted during the qualification period for the ISO-NE Forward Capacity Auction in 2016. The settlement was approved in a 2-1 vote. The Commission Chairman dissented on the basis that the investigation should have been terminated because the Company should not be penalized for reflecting a different expectation from that of the ISO-NE Internal Market Monitor in its forecast of future events submitted for independent review in the tariff-prescribed bid review process. Under the settlement, the Company agreed to pay a civil penalty of $ 85 thousand and is subject to compliance monitoring. Note 26 — Environmental Matters NRG is subject to a wide range of 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. The electric generation industry has been facing increasingly stringent requirements regarding air quality, GHG emissions, combustion byproducts, water discharge and use, and threatened and endangered species. In general, future laws are expected to require the addition of emissions controls or other environmental controls or to impose additional restrictions on the operations of the Company's facilities, which could have a material effect on the Company's consolidated financial position, results of operations, or cash flows. The Company has elected to use a $1 million disclosure threshold, as permitted, for environmental proceedings to which the government is a party. 163 Air On July 8, 2019, the EPA promulgated the ACE rule, which rescinded the CPP, which had sought to broadly regulate CO 2 emissions from the power sector. The ACE rule required states that have coal-fired EGUs to develop plans to seek heat rate improvements from coal-fired EGUs. On January 19, 2021, the D.C. Circuit vacated the ACE rule (but on February 22, 2021, at the EPA's request, stayed the issuance of the portion of the mandate that would vacate the repeal of the CPP). Accordingly, we expect the EPA to promulgate a new rule to regulate GHG emissions from power plants. Water Effluent Limitations Guidelines — In November 2015, the EPA revised the Effluent Limitations Guidelines 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. On September 18, 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. The Company is in the process of estimating the environmental capital expenditures that will be required to comply. The capital expenditures required to comply will depend on elections regarding future operations of each coal-fired unit. NRG expects to make these elections for each unit in Q4 2021 at which time the EPA will be notified as required. Accordingly, we do not expect to provide estimates of ELG compliance costs until early 2022. Byproducts, Wastes, Hazardous Materials and Contamination In April 2015, the EPA finalized the rule regulating byproducts of coal combustion (e.g., ash and gypsum) as solid wastes under the RCRA. In September 2017, the EPA agreed to reconsider the rule. On July 30, 2018, the EPA promulgated a rule that amended the existing 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 ponds. In 2019 and 2020, the EPA proposed several changes to this rule. On August 28, 2020, the EPA finalized "A Holistic Approach to Close 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," which further amended the April 2015 Rule to, among other things, provide procedures for requesting approval to operate existing impoundments with an alternative liner. The Company has updated its estimates of required environmental capital expenditures. Note 27 — Cash Flow Information Detail of supplemental disclosures of cash flow and non-cash investing and financing information was: Year Ended December 31, (In millions) 2020 2019 2018 Interest paid, net of amount capitalized $ 340 $ 372 $ 436 Income taxes paid, net of refunds 24 8 9 Non-cash investing activities: (Decreases)/additions to fixed assets for accrued capital expenditures ( 6 ) 1 20 Note 28 — Guarantees NRG and its subsidiaries enter into various contracts that include indemnification and guarantee provisions as a routine part of the Company's business activities. Examples of these contracts include asset purchases and sale agreements, commodity sale and purchase agreements, retail contracts, joint venture agreements, EPC agreements, operation and maintenance agreements, service agreements, settlement agreements, and other types of contractual agreements with vendors and other third parties, as well as affiliates. These contracts generally indemnify the counterparty for tax, environmental liability, litigation and other matters, as well as breaches of representations, warranties and covenants set forth in these agreements. The Company is obligated with respect to customer deposits associated with the Company's retail operations. In some cases, NRG's maximum potential liability cannot be estimated, since the underlying agreements contain no limits on potential liability. 164 The following table summarizes the maximum potential exposures that can be estimated for NRG's guarantees, indemnities, and other contingent liabilities by maturity: By Remaining Maturity at December 31, (In millions) 2020 Guarantees Under 1 Year 1-3 Years 3-5 Years Over 5 Years Total 2019 Total Letters of credit and surety bonds $ 1,049 $ 73 $ 31 $ — $ 1,153 $ 1,024 Asset sales guarantee obligations 86 282 26 112 506 698 Other guarantees — — — 87 87 288 Total guarantees $ 1,135 $ 355 $ 57 $ 199 $ 1,746 $ 2,010 Letters of credit and surety bonds — As of December 31, 2020, NRG and its consolidated subsidiaries were contingently obligated for a total of $ 1.2 billion under letters of credit and surety bonds. Most of these letters of credit and surety bonds are issued in support of the Company's obligations to perform under commodity agreements and obligations associated with future closure and maintenance of ash sites, as well as for financing or other arrangements. A majority of these letters of credit and surety bonds expire within one year of issuance, and it is typical for the Company to renew them on similar terms. The material indemnities, within the scope of ASC 460, are as follows: Asset sales — The purchase and sale agreements which govern NRG's asset or share investments and divestitures customarily contain guarantees and indemnifications of the transaction to third parties. The contracts indemnify the parties for liabilities incurred as a result of a breach of a representation or warranty by the indemnifying party, or as a result of a change in tax laws. These obligations generally have a discrete term and are intended to protect the parties against risks that are difficult to predict or estimate at the time of the transaction. In several cases, the contract limits the liability of the indemnifier. NRG has no reason to believe that the Company currently has any material liability relating to such routine indemnification obligations, except for the California property tax indemnity for estimated increases in California property taxes of certain solar properties that the Company agreed to indemnify NRG Yield for, as part of the agreement to sell NRG Yield and the Renewables Platform. The California property tax indemnity is estimated to be $ 176 million as of December 31, 2020 and is included in the above table under asset sales guarantee obligations. Other guarantees — NRG has issued other guarantees of obligations including payments under certain agreements with respect to certain of its unconsolidated subsidiaries, payment or performance by fuel providers and payment or reimbursement of credit support and deposits. The Company does not believe that it will be required to perform under these guarantees. Other indemnities — Other indemnifications NRG has provided cover operational, tax, litigation and breaches of representations, warranties and covenants. NRG has also indemnified, on a routine basis in the ordinary course of business, consultants or other vendors who have provided services to the Company. NRG's maximum potential exposure under these indemnifications can range from a specified dollar amount to an indeterminate amount, depending on the nature of the transaction. Total maximum potential exposure under these indemnifications is not estimable due to uncertainty as to whether claims will be made or how they will be resolved. NRG does not have any reason to believe that the Company will be required to make any material payments under these indemnity provisions. Because many of the guarantees and indemnities NRG issues to third parties and affiliates do not limit the amount or duration of its obligations to perform under them, there exists a risk that the Company may have obligations in excess of the amounts described above. For those guarantees and indemnities that do not limit the Company's liability exposure, it may not be able to estimate what the Company's liability would be, until a claim is made for payment or performance, due to the contingent nature of these contracts. 165 Note 29 — Jointly Owned Plants Certain NRG subsidiaries own undivided interests in jointly-owned plants, as described below. These plants are maintained and operated pursuant to their joint ownership participation and operating agreements. NRG is responsible for its subsidiaries' share of operating costs and direct expenses and includes its proportionate share of the facilities and related revenues and direct expenses in these jointly-owned plants in the corresponding balance sheet and income statement captions of the Company's consolidated financial statements. The following table summarizes NRG's proportionate ownership interest in the Company's jointly-owned facilities: (In millions unless otherwise stated) As of December 31, 2020 Ownership Interest Property, Plant & Equipment Accumulated Depreciation Construction in Progress South Texas Project Units 1 and 2, Bay City, TX 44.00 % $ 428 $ ( 227 ) $ 1 Cedar Bayou Unit 4, Baytown, TX 50.00 % 220 ( 101 ) 9 SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31, 2020, 2019 and 2018 (In millions) Balance at Beginning of Period Charged to Costs and Expenses Charged to Other Accounts Deductions Balance at End of Period Allowance for credit losses, deducted from accounts receivable Year Ended December 31, 2020 $ 43 $ 108 $ — $ ( 84 ) (a) $ 67 Year Ended December 31, 2019 32 95 — ( 84 ) (a) 43 Year Ended December 31, 2018 28 83 — ( 79 ) (a) 32 Income tax valuation allowance, deducted from deferred tax assets Year Ended December 31, 2020 $ 242 $ 24 $ — $ — $ 266 Year Ended December 31, 2019 3,794 ( 3,543 ) ( 9 ) — 242 Year Ended December 31, 2018 1,863 1,934 ( 128 ) 125 (b) 3,794 (a) Represents principally net amounts charged as uncollectible (b) Represents removal of NRG Yield, Inc. and its Renewables Platform due to their sale on August 31, 2018 166 EXHIBIT INDEX Number Description Method of Filing 2.1 Third Amended Joint Plan of Reorganization of NRG Energy, Inc., NRG Power Marketing, Inc., NRG Capital LLC, NRG Finance Company I LLC, and NRGenerating Holdings (No. 23) B.V. Incorporated herein by reference to Exhibit 99.1 to the Registrant's current report on Form 8-K filed on November 19, 2003. 2.2 First Amended Joint Plan of Reorganization of NRG Northeast Generating LLC (and certain of its subsidiaries), NRG South Central Generating (and certain of its subsidiaries) and Berrians I Gas Turbine Power LLC. Incorporated herein by reference to Exhibit 99.2 to the Registrant's current report on Form 8-K filed on November 19, 2003. 2.3 Acquisition Agreement, dated as of September 30, 2005, by and among NRG Energy, Inc., Texas Genco LLC and the Direct and Indirect Owners of Texas Genco LLC. Incorporated herein by reference to Exhibit 2.1 to the Registrant's current report on Form 8-K filed on October 3, 2005. 2.4 Asset Purchase Agreement, dated October 18, 2013, by and among NRG Energy, Inc., Edison Mission Energy and NRG Energy Holdings Inc. Incorporated herein by reference to Exhibit 2.2 to Amendment No. 1 to the Registrant’s current report on Form 8-K filed on October 21, 2013. 2.5 Third Amended Joint Plan of Reorganization of GenOn Energy, Inc. and its Debtor Affiliates. Incorporated herein by reference to Exhibit 2.1 to the Registrant's current report on Form 8-K filed on December 18, 2017. 2.6†^ Purchase and Sale Agreement, dated as of February 6, 2018, by and among NRG Energy, Inc. and NRG Repowering Holdings LLC, and GIP III Zephyr Acquisition Partners, L.P. Incorporated herein by reference to Exhibit 2.9 to the Registrant's annual report on Form 10-K filed on March 1, 2018. 2.7^ Purchase and Sale Agreement, dated as of February 6, 2018, by and between NRG Energy, Inc., NRG South Central Generating LLC, and Cleco Energy LLC. Incorporated herein by reference to Exhibit 2.10 to the Registrant's annual report on Form 10-K filed on March 1, 2018. 3.1 Amended and Restated Certificate of Incorporation. Incorporated herein by reference to Exhibit 3.1 to the Registrant's quarterly report on Form 10-Q filed on May 3, 2012. 3.2 Certificate of Amendment to Amended and Restated Certificate of Incorporation. Incorporated herein by reference to Exhibit 3.1 to the Registrant's current report on Form 8-K filed on December 14, 2012. 3.3 Fourth Amended and Restated By-Laws. Incorporated herein by reference to Exhibit 3.1 to the Registrant's current report on Form 8-K filed on February 13, 2017. 4.1 Specimen of Certificate representing common stock of NRG Energy, Inc. Incorporated herein by reference to Exhibit 4.3 to the Registrant's quarterly report on Form 10-Q filed on August 4, 2006. 4.2 Indenture, dated May 23, 2016, between NRG Energy, Inc. and Law Debenture Trust Company of New York Incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K, filed on May 23, 2016. 4.3 Supplemental Indenture, dated May 23, 2016, among NRG Energy, Inc., the guarantors named therein and Law Debenture Trust Company of New York. Incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K, filed on May 23, 2016. 4.4 Form of 7.250% Senior Notes due 2026 Incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K, filed on May 23, 2016. 4.5 Registration Rights Agreement,dated May 23, 2016, among NRG Energy, Inc., the guarantors named therein and Deutsche Bank Securities Inc., as representative to the initial purchasers listed in Schedule I thereto Incorporated herein by reference to Exhibit 4.4 to the Registrant's Current Report on Form 8-K, filed on May 23, 2016. 4.6 Second Supplemental Indenture, dated as of July 19, 2016, among NRG Energy, Inc., the guarantors named therein and Law Debenture Trust Company of New York. Incorporated herein by reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K, filed on July 25, 2016. 4.7 Third Supplemental Indenture, dated August 2, 2016, among NRG Energy, Inc., the guarantors named therein and Law Debenture Trust Company of New York. Incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K, filed on August 3, 2016. 4.8 Form of 6.625% Senior Note due 2027. Incorporated herein by reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K, filed on August 3, 2016. 4.9 Registration Rights Agreement, dated August 2, 2016, among NRG Energy, Inc., the guarantors named therein and Morgan Stanley & Co. LLC, as representative to the initial purchasers listed in Schedule I thereto. Incorporated herein by reference to Exhibit 4.4 to the Registrant's Current Report on Form 8-K, filed on August 3, 2016. 4.10 Fourth Supplemental Indenture, dated December 7, 2017, among NRG Energy, Inc., the guarantors named therein and Delaware Trust Company, as trustee. Incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K, filed on December 8, 2017. 167 4.11 Form of 5.75% Senior Notes due 2028 Incorporated herein by reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K, filed on December 8, 2017. 4.12 Registration Rights Agreement, dated December 7, 2017, among NRG Energy, Inc., the guarantors named therein and Citigroup Global Markets, Inc., as representative to the initial purchasers listed in Schedule I thereto. Incorporated herein by reference to Exhibit 4.4 to the Registrant's Current Report on Form 8-K, filed on December 8, 2017. 4.13 Indenture, dated May 24, 2018, among NRG Energy, Inc., the guarantors named therein and Delaware Trust Company, as trustee. Incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K, filed on May 25, 2018. 4.14 Form of 2.75% Convertible Senior Notes due 2048. Incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K, filed on May 25, 2018. 4.15 Description of NRG Energy, Inc. securities registered pursuant to section 12 of the Securities Exchange Act of 1934 Incorporated herein by reference to Exhibit 4.15 to the Registrant's Annual Report on Form 10-K, filed on February 27, 2020. 4.16 Indenture, dated December 2, 2020, between NRG Energy, Inc. and Deutsche Bank Trust Company Americas, as trustee, pertaining to the Secured Notes. Incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K, filed on December 4, 2020. 4.17 Supplemental Indenture, dated December 2, 2020, among NRG Energy, Inc., the guarantors named therein and Deutsche Bank Trust Company Americas, as trustee, pertaining to the Secured Notes Incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K, filed on December 4, 2020. 4.18 Form of 2.000% Senior Secured First Lien Notes due 2025 Incorporated herein by reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K, filed on December 4, 2020. 4.19 Form of 2.450% Senior Secured First Lien Notes due 2027 Incorporated herein by reference to Exhibit 4.4 to the Registrant's Current Report on Form 8-K, filed on December 4, 2020. 4.20 Indenture, dated December 2, 2020, between NRG Energy, Inc. and Deutsche Bank Trust Company Americas, as trustee, pertaining to the Unsecured Notes Incorporated herein by reference to Exhibit 4.5 to the Registrant's Current Report on Form 8-K, filed on December 4, 2020. 4.21 Supplemental Indenture, dated December 2, 2020, among NRG Energy, Inc., the guarantors named therein and Deutsche Bank Trust Company Americas, as trustee, pertaining to the Unsecured Notes Incorporated herein by reference to Exhibit 4.6 to the Registrant's Current Report on Form 8-K, filed on December 4, 2020. 4.22 Form of 3.375% Senior Notes due 2029 (incorporated by reference to Exhibit 4.6 filed herewith) Incorporated herein by reference to Exhibit 4.7 to the Registrant's Current Report on Form 8-K, filed on December 4, 2020. 4.23 Form of 3.625% Senior Notes due 2031 (incorporated by reference to Exhibit 4.6 filed herewith) Incorporated herein by reference to Exhibit 4.8 to the Registrant's Current Report on Form 8-K, filed on December 4, 2020. 4.24 Facility Agreement, dated December 2, 2020, among NRG Energy, Inc., the guarantors party thereto, Alexander Funding Trust and Deutsche Bank Trust Company Americas, as the notes trustee Incorporated herein by reference to Exhibit 4.9 to the Registrant's Current Report on Form 8-K, filed on December 4, 2020. 4.25 Letter of Credit Facility Agreement, dated December 2, 2020, among NRG Energy, Inc., the financial institutions from time to time party thereto as letter of credit issuers, and Deutsche Bank Trust Company Americas, as administrative agent and as collateral agent Incorporated herein by reference to Exhibit 4.10 to the Registrant's Current Report on Form 8-K, filed on December 4, 2020. 4.26 Amended and Restated Declaration of Trust of Alexander Funding Trust, dated December 2, 2020, among NRG Energy, Inc. as depositor and in its own capacity, Deutsche Bank Trust Company Americas, as trustee, and Deutsche Bank Trust Company Delaware, as Delaware trustee Incorporated herein by reference to Exhibit 4.11 to the Registrant's Current Report on Form 8-K, filed on December 4, 2020. 4.27 Indenture, dated December 2, 2020, between NRG Energy, Inc. and Deutsche Bank Trust Company Americas, as trustee, pertaining to the P-Caps Secured Notes Incorporated herein by reference to Exhibit 4.12 to the Registrant's Current Report on Form 8-K, filed on December 4, 2020. 4.28 Supplemental Indenture, dated December 2, 2020, among NRG Energy, Inc., the guarantors named therein and Deutsche Bank Trust Company Americas, as trustee, pertaining to the P-Caps Secured Notes Incorporated herein by reference to Exhibit 4.13 to the Registrant's Current Report on Form 8-K, filed on December 4, 2020. 4.29 Form of 1.841% Senior Secured First Lien Notes due 2023(incorporated by reference to Exhibit 4.31 filed herewith) Incorporated herein by reference to Exhibit 4.14 to the Registrant's Current Report on Form 8-K, filed on December 4, 2020. 168 4.30 Amendment and Restatement Agreement, dated as of June 30, 2016, to the Amended and Restated Credit Agreement, the Second Amended and Restated Collateral Trust Agreement and the Amended and Restated Guarantee and Collateral Agreement. Incorporated herein by reference to Exhibit 10.1 to the Registrant's quarterly report on Form 10-Q filed on August 9, 2016. 4.31 Second Amended and Restated Credit Agreement, dated as of June 30, 2016, by and among NRG Energy, Inc., the lenders party thereto, the joint lead arrangers and joint lead bookrunners party thereto, Citicorp North America, Inc., Commerzbank AG, New York Branch, Keybank Capital Markets Inc. and CIT Bank, N.A. Incorporated herein by reference to Exhibit 10.2 to the Registrant's quarterly report on Form 10-Q filed on August 9, 2016. 4.32 First Amendment Agreement, dated as of January 24, 2017, dated as of January 24, 2017, by and among NRG Energy, Inc., the lenders from time to time parties thereto and Citicorp North America, Inc., as administrative agent and collateral agent. Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on January 24, 2017. 4.33 Second Amendment Agreement, dated as of March 21, 2018, by and among NRG Energy, Inc., the lenders from time to time parties thereto and Citicorp North America, Inc., as administrative agent and collateral agent. Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on March 22, 2018. 4.34 Third Amendment Agreement, dated as of May 7, 2018, by and among NRG Energy, Inc., its subsidiaries parties thereto, the lenders from time to time parties thereto and Citicorp North America, Inc., as administrative agent and collateral agent. Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on May 7, 2018. 4.35 Indenture, dated May 23, 2016, between NRG Energy, Inc. and Delaware Trust Company (as successor in interest to Law Debenture Trust Company of New York), as trustee. Incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on May 23, 2016. 4.36 Fifth Supplemental Indenture, dated May 14, 2019, among NRG Energy, Inc., the guarantors named therein and Delaware Trust Company, as trustee. Incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on May 16, 2019. 4.37 Form of 5.250% Senior Notes due 2029 . Incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on May 14, 2019. 4.38 Indenture, dated May 28, 2019, between NRG Energy, Inc. and Delaware Trust Company, as trustee Incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on May 30, 2019. 4.39 Supplemental Indenture, dated May 28, 2019, among NRG Energy, Inc., the guarantors named therein and Delaware Trust Company, as trustee. Incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on May 30, 2019. 4.40 Form of 3.750% Senior Secured First Lien Notes due 2024 Incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on May 30, 2019. 4.41 Form of 4.450% Senior Secured First Lien Notes due 2029 Incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on May 30, 2019. 4.42 Fourth Amendment dated as of May 28, 2019 to the Second Amended and Restated Credit Agreement dated as of June 30, 2016, included as Annex A thereto a clean, conformed copy of the Second Amended and Restated Credit Agreement Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on November 7, 2019. 4.43 Fifth Amendment to Credit Agreement and Third Amendment to Collateral Trust Agreement, dated as of August 20, 2020, by and among NRG Energy, Inc., its subsidiaries parties thereto, the lenders party thereto, Citicorp North America, Inc., as administrative agent and collateral agent, and Deutsche Bank Trust Company Americas, as collateral trustee. Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on August 21, 2020. 4.44 Receivables Sale Agreement, dated as of September 22, 2020, among the Originators from time to time parties thereto, NRG Retail LLC, as Servicer, and NRG Receivables LLC. Incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 22, 2020. 4.45 Receivables Loan and Servicing Agreement, dated as of September 22, 2020, among NRG Receivables LLC, as Borrower, NRG Retail LLC, as Servicer, the persons from time to time party thereto as Conduit Lenders, the persons from time to time party thereto as Committed Lenders, the persons from time to time party thereto as Facility Agents, the financial institutions from time to time party thereto as LC Issuers, and Royal Bank of Canada as Administrative Agent Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on September 22, 2020. 10.1* Form of NRG Energy Inc. Long-Term Incentive Plan Deferred Stock Unit Agreement for Officers and Key Management. Incorporated herein by reference to Exhibit 10.14 to the Registrant's annual report on Form 10-K filed on March 30, 2005. 169 10.2* Form of NRG Energy, Inc. Long-Term Incentive Plan Deferred Stock Unit Agreement for Directors. Incorporated herein by reference to Exhibit 10.15 to the Registrant's annual report on Form 10-K filed on March 30, 2005. 10.3* Form of NRG Energy, Inc. Long-Term Incentive Plan Non-Qualified Stock Option Agreement. Incorporated herein by reference to Exhibit 10.1 to the Registrant's quarterly report on Form 10-Q filed on November 9, 2004. 10.4* Form of NRG Energy, Inc. Long-Term Incentive Plan Restricted Stock Unit Agreement for Officers. Incorporated herein by reference to Exhibit 10.6 to the Registrant's annual report on Form 10-K filed on March 1, 2018. 10.5* Form of NRG Energy, Inc. Long-Term Incentive Plan Restricted Stock Unit Agreement for Non-Officers. Incorporated herein by reference to Exhibit 10.7 to the Registrant's annual report on Form 10-K filed on March 1, 2018. 10.6* Form of NRG Energy, Inc. Long-Term Incentive Plan Performance Stock Unit Agreement. Incorporated herein by reference to Exhibit 10.7 to the Registrant's annual report on Form 10-K filed on February 23, 2010. 10.7* Second Amended and Restated Annual Incentive Plan for Designated Corporate Officers. Incorporated herein by reference to Exhibit 10.1 to the Registrant's current report on Form 8-K filed on May 7, 2015. 10.8† LLC Membership Interest Purchase Agreement between Reliant Energy, Inc. and NRG Retail LLC, dated as of February 28, 2009. Incorporated herein by reference to Exhibit 10.1 to the Registrant's quarterly report on Form 10-Q filed on April 30, 2009. 10.9* The NRG Energy, Inc. Amended and Restated Long-Term Incentive Plan. Incorporated herein by reference to Exhibit 10.1 to the Registrant's current report on Form 8-K filed on April 28, 2017. 10.10* NRG 2010 Stock Plan for GenOn Employees. Incorporated herein by reference to Exhibit 10.49 to the Registrant’s annual report on Form 10-K filed on February 27, 2013. 10.11* NRG Energy, Inc. Long-Term Incentive Plan Market Stock Unit Agreement. Incorporated herein by reference to Exhibit 10.53 to the Registrant's annual report on Form 10-K filed on February 28, 2014. 10.12* NRG Energy, Inc. 2010 Stock Plan For GenOn Employees Market Stock Unit Agreement Incorporated herein by reference to Exhibit 10.54 to the Registrant's annual report on Form 10-K filed on February 28, 2014. 10.13* Amended and Restated Employee Stock Purchase Plan. Incorporated herein by reference to Exhibit 10.2 to the Registrant's current report on Form 8-K filed on April 28, 2017. 10.14 Employment Agreement, dated December 21, 2015, by and between NRG Energy, Inc. and Mauricio Gutierrez. Incorporated herein by reference to Exhibit 10.1 to the Registrant's current report on Form 8-K filed on December 24, 2015. 10.15 Settlement Agreement, dated as of December 14, 2017, by and between NRG Energy, Inc. on behalf of itself and the NRG Parties, GenOn Energy, Inc. on behalf of itself and the Debtors. Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on December 18, 2017. 10.16 Transition Services Agreement, dated as of December 14, 2017, by and between GenOn Energy, Inc. and NRG Energy, Inc. Incorporated herein by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed on December 18, 2017. 10.17 Cooperation Agreement, dated as of December 14, 2017, by and between GenOn Energy, Inc. and NRG Energy, Inc. Incorporated herein by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K filed on December 18, 2017. 10.18 Pension Indemnity Agreement, dated as of December 14, 2017, by and between NRG Energy, Inc. and GenOn Energy, Inc. Incorporated herein by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K filed on December 18, 2017. 10.19 Employee Matters Agreement, dated as of December 14, 2017, by and between NRG Energy, Inc. and GenOn Energy, Inc. Incorporated herein by reference to Exhibit 10.5 to the Registrant's Current Report on Form 8-K filed on December 18, 2017. 10.20 Tax Matters Agreement, initially dated as of December 14, 2017, by and between NRG Energy, Inc. and GenOn Energy, Inc. and by Reorganized GenOn upon the Effective Date. Incorporated herein by reference to Exhibit 10.5 to the Registrant's Current Report on Form 8-K filed on December 18, 2017. 10.21* Form of NRG Energy, Inc. Long-Term Incentive Plan Relative Performance Stock Unit Agreement for Officers. Incorporated herein by reference to Exhibit 10.73 to the Registrant's annual report on Form 10-K filed on March 1, 2018. 10.22* Form of NRG Energy, Inc. Long-Term Incentive Plan Relative Performance Stock Unit Agreement for Senior Vice Presidents. Incorporated herein by reference to Exhibit 10.74 to the Registrant's annual report on Form 10-K filed on March 1, 2018. 170 10.23† Consent and Indemnity Agreement, dated as of February 6, 2018, by and among NRG Energy, Inc., NRG Repowering Holdings LLC, NRG Yield, Inc., and GIP III Zephyr Acquisition Partners, L.P., and NRG Yield Operating LLC (solely with respect to Sections E.5, E.6 and G.12). Incorporated herein by reference to Exhibit 10.34 to NRG Yield, Inc.'s Annual Report on Form 10-K filed on March 1, 2018. 10.24* Amended and Restated Employee Stock Purchase Plan Incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on May 7, 2018. 10.25* NRG Energy, Inc. Amended and Restated Executive Change-in-Control and General Severance Plan for Tier IA and Tier IIA Executives (Amended and Restated Effective April 1, 2018). Incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q filed on August 2, 2018. 21.1 Subsidiaries of NRG Energy, Inc. Filed herewith. 22.1 List of Guarantor Subsidiaries Filed herewith. 23.1 Consent of KPMG LLP. Filed herewith. 31.1 Rule 13a-14(a)/15d-14(a) certification of Mauricio Gutierrez. Filed herewith. 31.2 Rule 13a-14(a)/15d-14(a) certification of Gaëtan Frotté. Filed herewith. 31.3 Rule 13a-14(a)/15d-14(a) certification of David Callen. Filed herewith. 32 Section 1350 Certification. Furnished herewith. 101 INS Inline XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. 101 SCH Inline XBRL Taxonomy Extension Schema. Filed herewith. 101 CAL Inline XBRL Taxonomy Extension Calculation Linkbase. Filed herewith. 101 DEF Inline XBRL Taxonomy Extension Definition Linkbase. Filed herewith. 101 LAB Inline XBRL Taxonomy Extension Label Linkbase. Filed herewith. 101 PRE Inline XBRL Taxonomy Extension Presentation Linkbase. Filed herewith. 104 Cover Page Interactive Data File (the cover page interactive data file does not appear in Exhibit 104 because it's Inline XBRL tags are embedded within the Inline XBRL document). Filed herewith. * Exhibit relates to compensation arrangements. † Portions of this exhibit have been redacted and are subject to a confidential treatment request filed with the Secretary of the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. ^ This filing excludes schedules pursuant to Item 601(b)(2) of Regulation S-K, which the registrant agrees to furnish supplementary to the Securities and Exchange Commission upon request by the Commission. Item 16. Form 10-K Summary None. 171 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NRG ENERGY, INC. (Registrant) By: /s/ MAURICIO GUTIERREZ Mauricio Gutierrez Chief Executive Officer Date: March 1, 2021 172 POWER OF ATTORNEY Each person whose signature appears below constitutes and appoints Brian E. Curci and Christine A. Zoino, each or any of them, such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for such person and in such person's name, place and stead, in any and all capacities, to sign any and all amendments to this report on Form 10-K, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary or desirable to be done in and about the premises, as fully to all intents and purposes as such person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. In accordance with the Exchange Act, this report has been signed by the following persons on behalf of the registrant in the capacities indicated on March 1, 2021. Signature Title Date /s/ MAURICIO GUTIERREZ President, Chief Executive Officer and March 1, 2021 Mauricio Gutierrez Director (Principal Executive Officer) /s/ GAËTAN FROTTÉ Interim Chief Financial Officer March 1, 2021 Gaëtan Frotté (Principal Financial Officer) /s/ DAVID CALLEN Chief Accounting Officer March 1, 2021 David Callen (Principal Accounting Officer) /s/ LAWRENCE S. COBEN Chairman of the Board March 1, 2021 Lawrence S. Coben /s/ E. SPENCER ABRAHAM Director March 1, 2021 E. Spencer Abraham /s/ ANTONIO CARRILLO Director March 1, 2021 Antonio Carrillo /s/ MATTHEW CARTER, JR. Director March 1, 2021 Matthew Carter, Jr. /s/ HEATHER COX Director March 1, 2021 Heather Cox /s/ ELISABETH B. DONOHUE Director March 1, 2021 Elisabeth B. Donohue /s/ PAUL W. HOBBY Director March 1, 2021 Paul W. Hobby /s/ ALEXANDRA PRUNER Director March 1, 2021 Alexandra Pruner /s/ ANNE C. SCHAUMBURG Director March 1, 2021 Anne C. Schaumburg /s/ THOMAS H. WEIDEMEYER Director March 1, 2021 Thomas H. Weidemeyer 173