NRG ENERGY, INC. 10-K

nrg-20241231 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year ended December 31 , 2024 . ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from to . Commission file No. 001-15891 NRG Energy, Inc . (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 41-1724239 (I.R.S. Employer Identification No.) 910 Louisiana Street , Houston , Texas (Address of principal executive offices) 77002 (Zip Code) ( 713 ) 537-3000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Trading Symbol(s) Name of Exchange on Which Registered Common Stock, par value $0.01 NRG New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None I ndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large Accelerated Filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report ☒ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ As of the last business day of the most recently completed second fiscal quarter, the aggregate market value of the common stock of the registrant held by non-affiliates was approximately $ 12,225,722,798 based on the closing sale price of $77.86 as reported on the New York Stock Exchange. Indicate the number of shares outstanding of each of the registrant's classes of common stock as of the latest practicable date. Class Outstanding at January 31, 2025 Common Stock, par value $0.01 per share 198,068,576 Documents Incorporated by Reference: Portions of the Registrant's definitive Proxy Statement relating to its 2025 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K 1 TABLE OF CONTENTS GLOSSARY OF TERMS 3 PART I 7 Item 1 — Business 7 Item 1A — Risk Factors 24 Item 1B — Unresolved Staff Comments 40 Item 1C — Cybersecurity 40 Item 2 — Properties 42 Item 3 — Legal Proceedings 43 Item 4 — Mine Safety Disclosures 43 PART II 44 Item 5 — Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 44 Item 6 — Reserved 45 Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations 46 Item 7A — Quantitative and Qualitative Disclosures About Market Risk 77 Item 8 — Financial Statements and Supplementary Data 79 Item 9 — Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 79 Item 9A — Controls and Procedures 80 Item 9B — Other Information 82 Item 9C— Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 82 PART III 83 Item 10 — Directors, Executive Officers and Corporate Governance 83 Item 11 — Executive Compensation 83 Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 83 Item 13 — Certain Relationships and Related Transactions, and Director Independence 84 Item 14 — Principal Accounting Fees and Services 84 PART IV 85 Item 15 — Exhibits, Financial Statement Schedules 85 EXHIBIT INDEX 164 Item 16 — Form 10-K Summary 169 2 Glossary of Terms When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below: ACE Affordable Clean Energy Acquisition The acquisition of Vivint Smart Home, Inc. by NRG completed on March 10, 2023 Adjusted EBITDA Adjusted earnings before interest, taxes, depreciation and amortization AESO Alberta Electric System Operator ARO Asset Retirement Obligation ASC The FASB Accounting Standards Codification, which the FASB established as the source of authoritative GAAP ASR Accelerated Share Repurchase ASU Accounting Standards Updates – updates to the ASC AUC Alberta Utilities Commission BTU British Thermal Unit Business NRG Business, which serves business customers CAA Clean Air Act CAISO California Independent System Operator CAMT 15% Corporate Alternative Minimum Tax enacted by the IRA on August 16, 2022 CDD Cooling Degree Day CFTC U.S. Commodity Futures Trading Commission CO 2 Carbon Dioxide CO 2 e Carbon Dioxide Equivalents Company NRG Energy, Inc. CONE Cost of New Entry Convertible Senior Notes As of December 31, 2024, consists of NRG’s $232 million unsecured 2.750% Convertible Senior Notes due 2048 Cottonwood Cottonwood Generating Station, a 1,139 MW natural gas-fueled plant CPP Clean Power Plan CPUC California Public Utilities Commission D.C. Circuit U.S. Court of Appeals for the District of Columbia Circuit DSI Dry Sorbent Injection DSU Deferred Stock Unit Dth Dekatherms Dual fuel customers Customer that have both electricity and natural gas service with the Company Economic gross margin Sum of retail revenue, energy revenue, capacity revenue and other revenue, less cost of fuels, purchased energy and other cost of sales ELG Effluent Limitations Guidelines which are EPA regulations issued under the federal Clean Water Act EPA U.S. Environmental Protection Agency EPC Engineering, Procurement and Construction ERCOT Electric Reliability Council of Texas, the Independent System Operator and the regional reliability coordinator of the various electricity systems within Texas ESPP NRG Energy, Inc. Amended and Restated Employee Stock Purchase Plan Exchange Act The Securities Exchange Act of 1934, as amended FASB Financial Accounting Standards Board FERC Federal Energy Regulatory Commission FGD Flue gas desulfurization FPA Federal Power Act FTRs Financial Transmission Rights 3 GAAP Generally accepted accounting principles in the United States GHG Greenhouse Gas Green Mountain Energy Green Mountain Energy Company GW Gigawatts GWh Gigawatt Hours HDD Heating Degree Day Heat Rate A measure of thermal efficiency computed by dividing the total BTU content of the fuel burned by the resulting kWhs generated. Heat rates can be expressed as either gross or net heat rates, depending whether the electricity output measured is gross or net generation and is generally expressed as BTU per net kWh Home NRG Home, which serves residential customers ICE Intercontinental Exchange IoT Internet of Things IRA Inflation Reduction Act ISO Independent System Operator, also referred to as RTOs ISO-NE ISO New England Inc. Ivanpah Ivanpah Solar Electric Generation Station, a 385 MW solar thermal power plant located in California's Mojave Desert in which NRG owns 54.5% interest kWh Kilowatt-hours LSEs Load Serving Entities LTIPs Collectively, the NRG LTIP and the Vivint LTIP MDth Thousand Dekatherms Midwest Generation Midwest Generation, LLC MISO Midcontinent Independent System Operator, Inc. MMBtu Million British Thermal Units MMDth Million Dekatherms MW Megawatts MWh Saleable megawatt hour net of internal/parasitic load megawatt-hour NAAQS National Ambient Air Quality Standards NEPOOL New England Power Pool NERC North American Electric Reliability Corporation NERC-CIP North American Electric Reliability Corporation Critical Infrastructure Protection Net Exposure Counterparty credit exposure to NRG, net of collateral Net Generation The net amount of electricity produced, expressed in kWhs or MWhs, that is the total amount of electricity generated (gross) minus the amount of electricity used during generation NIST National Institute of Standards and Technology Nodal Nodal Exchange is a derivatives exchange NOL Net Operating Loss NO x Nitrogen Oxides NPNS Normal Purchase Normal Sale NRC U.S. Nuclear Regulatory Commission NRG NRG Energy, Inc. NRG LTIP NRG Energy, Inc. Amended and Restated Long-Term Incentive Plan, as amended Nuclear Decommissioning Trust Fund NRG's nuclear decommissioning trust fund assets, which were for the Company's portion of the decommissioning of the STP, units 1 & 2 through the sale of STP on November 1, 2023 NYISO New York Independent System Operator NYMEX New York Mercantile Exchange OCI/OCL Other Comprehensive Income/(Loss) 4 Peaking Units expected to satisfy demand requirements during the periods of greatest or peak load on the system PG&E PG&E Corporation (NYSE: PCG) and its primary operating subsidiary, Pacific Gas and Electric Company PJM PJM Interconnection, LLC PM2.5 Particulate Matter that has a diameter of less than 2.5 micrometers PPA Power Purchase Agreement PUCT Public Utility Commission of Texas RCRA Resource Conservation and Recovery Act of 1976 Receivables Facility NRG Receivables LLC, a bankruptcy remote, special purpose, wholly-owned indirect subsidiary of the Company's $2.3 billion accounts receivables securitization facility due 2025, which was last amended on June 21, 2024 Receivables Securitization Facilities Collectively, the Receivables Facility and the Repurchase Facility RECs Renewable Energy Certificates Renewable PPA A third-party PPA entered into directly with a renewable generation facility for the offtake of the RECs or other similar environmental attributes generated by such facility, coupled with the associated power generated by that facility Renewables Consists of the following projects in which NRG has an ownership interest: Ivanpah and solar generating stations located at various NFL Stadiums Renewables Platform The renewable operating and development platform sold to Global Infrastructure Partners with NRG's interest in NRG Yield REP Retail electric provider Repurchase Facility NRG's $150 million uncommitted repurchase facility related to the Receivables Facility due 2024, which was terminated on June 21, 2024 Revolving Credit Facility The Company's $4.2 billion revolving credit facility due 2029, which was last amended on December 20, 2024 RGGI Regional Greenhouse Gas Initiative RMR Reliability Must-Run RPS Renewable Portfolio Standards RPSU Relative Performance Stock Unit RSU Restricted Stock Unit RTO Regional Transmission Organization SCR Selective Catalytic Reduction Control System SEC U.S. Securities and Exchange Commission Securities Act The Securities Act of 1933, as amended Senior Credit Facility NRG's senior secured credit facility, comprised of the Revolving Credit Facility and the Term Loan B Facility Senior Notes As of December 31, 2024, NRG's $6.2 billion outstanding unsecured senior notes consisting of $821 million of 5.750% senior notes due 2028, $733 million of the 5.250% senior notes due 2029, $500 million of the 3.375% senior notes due 2029, $798 million of the 5.750% senior notes due 2029, $1.0 billion of the 3.625% senior notes due 2031, $480 million of the 3.875% senior notes due 2032, $925 million of the 6.000% senior notes due 2033 and $950 million of the 6.250% senior notes due 2034 Senior Secured First Lien Notes As of December 31, 2024, NRG’s $2.6 billion outstanding Senior Secured First Lien Notes consists of $500 million of the 2.000% Senior Secured First Lien Notes due 2025, $900 million of the 2.450% Senior Secured First Lien Notes due 2027, $500 million of the 4.450% Senior Secured First Lien Notes due 2029 and $740 million of the 7.000% Senior Secured First Lien Notes due 2033 Series A Preferred Stock As of December 31, 2024, NRG's Series A Preferred Stock consists of 650,000 outstanding shares of the 10.25% Series A Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, with a $1,000 liquidation preference per share SO 2 Sulfur Dioxide SOFR Secured overnight financing rate 5 South Central Portfolio NRG's South Central Portfolio, which owned and operated a portfolio of generation assets consisting of Bayou Cove, Big Cajun-I, Big Cajun-II, Cottonwood and Sterlington, was sold on February 4, 2019. NRG is leasing back the Cottonwood facility through May 2025 S&P Standard & Poor's STP South Texas Project — a nuclear generating facility located near Bay City, Texas in which NRG owned a 44% interest. NRG closed on the sale of its interest in STP on November 1, 2023 STPNOC South Texas Project Nuclear Operating Company Tax Act The Tax Cuts and Jobs Act of 2017 TDSP Transmission/distribution service provider Texas Genco Texas Genco LLC TSR Total Shareholder Return TWh Terawatt Hour U.S. United States of America VaR Value at Risk VIE Variable Interest Entity Vivint LTIP NRG Energy Inc., 2020 Omnibus Incentive Plan (Legacy Vivint) (formerly known as the Vivint Smart Home, Inc. Long-Term Incentive Plan), assumed by NRG pursuant to merger between NRG and Vivint Winter Storm Elliott A major winter storm that had impacts across the majority of the United States and parts of Canada occurring in December 2022 Winter Storm Uri A major winter and ice storm that had widespread impacts across North America occurring in February 2021 6 PART I Item 1 — Business General NRG Energy, Inc., or NRG or the Company, is a leading energy and smart home company fueled by market-leading brands, proprietary technologies and complementary sales channels. Across the U.S. and Canada, NRG delivers innovative, sustainable solutions, predominately under brand names such as NRG, Reliant, Direct Energy, Green Mountain Energy and Vivint, while also advocating for competitive energy markets and customer choice. The Company has a customer base that includes approximately 8 million residential customers (comprised of 6 million retail energy customers and 2 million smart home customers) in addition to commercial, industrial, and wholesale customers, supported by approximately 13 GW of generation as of December 31, 2024. NRG sold 154 TWhs of electricity and 1,833 MMDth of natural gas in 2024, making it one of the largest competitive energy retailers in the U.S. As of the end of 2024, NRG had recurring electricity and/or natural gas sales in 25 U.S. states, the District of Columbia, and 8 provinces in Canada, and Vivint Smart Home served customers in all 50 U.S. states. NRG's retail brands, collectively, have the largest share of competitively served residential electric customers in Texas and is one of the largest business-to-business providers of power and natural gas in North America, including to manufacturing, industrial, and data center facilities. Strategy NRG's strategy is to maximize shareholder value by being a leader in the emerging convergence of energy and smart automation in the home and business. Through a diversified supply strategy, the Company sells reliable electricity and natural gas to its customers in the markets it serves, while also providing innovative home solutions to customers. NRG's unique combination of assets and capabilities enables the Company to develop and sell highly differentiated offerings that bring together every day essential services like powering and securing the home through a seamless and integrated experience. This strategy is intended to enable the Company to optimize its unique integrated platform to delight customers, generate recurring cash flow, significantly strengthen earnings and cost competitiveness, and lower risk and volatility. Sustainability is a philosophy that underpins NRG’s strategy and facilitates value creation across NRG's business. To effectuate the Company’s strategy, NRG is focused on: (i) serving the energy needs of end-use residential, commercial and industrial, and wholesale counterparties in competitive markets and optimizing on additional revenue opportunities through its multiple brands and channels; (ii) offering a variety of energy products and smart home products and services that are differentiated by innovative features, premium service, integrated platforms, sustainability and loyalty/affinity programs; (iii) excellence in operating performance of its assets; (iv) achieving the optimal mix of supply to serve its customer load requirements through a diversified supply strategy; and (v) engaging in disciplined and transparent capital allocation. In 2024, NRG entered into a definitive partnership agreement with Renew Home, a Virtual Power Plant platform (“VPP”) formed by the combination of Google’s Nest Renew and OhmConnect. Leveraging Google Cloud’s AI and cloud platforms, NRG and Renew Home plan to develop a VPP portfolio of up to 1 GW of load management capacity, with instantaneous dispatch value during peak events and tight supply conditions. Business Overview The Company’s core businesses are the sale of electricity and natural gas to residential, commercial and industrial and wholesale customers, supported by the Company's wholesale electric generation, as well as the sale of smart home products and services. NRG manages its electricity and natural gas operations based on the combined results of the retail, wholesale and generation businesses with a geographical focus. Vivint Smart Home operations are reported within the Vivint Smart Home segment. The Company's business is segmented as follows: • Texas, which includes all activity related to customer, plant and market operations in Texas, other than Cottonwood; • East, which includes all activity related to customer, plant and market operations in the East; • West/Services/Other, which primarily includes the following assets and activities: (i) all activity related to customer, plant and market operations in the West and Canada, and (ii) activity related to the Cottonwood facility and other investments; • Vivint Smart Home; and • Corporate activities. 7 In Texas, the Company’s generation supply is fully integrated with its retail load. This integrated model provides the advantage of being able to supply a portion of the Company’s retail customers with electricity from the Company’s assets, which reduces the need to sell electricity to, and buy electricity from, other institutions and intermediaries, resulting in more stable earnings and cash flows, lower transaction costs and less credit exposure. The integrated model also results in a reduction in actual and contingent collateral through offsetting transactions, thereby reducing transactions with third parties. The integrated model consists of three core functions in each geographic segment above: Customer Operations, Market Operations and Plant Operations. Customer Operations Customer Operations is responsible for growing and retaining the customer base and delivering an outstanding customer experience. This includes acquisition and retention of all of NRG’s residential, small commercial, commercial and industrial, and government customers. NRG employs a multi-brand strategy that leverages a wide array of sales and partnership channels, direct face-to-face sales channels, call centers, websites, and brokers. Go-to-market activities include market strategy planning and development, product innovation, offer design, campaign execution, marketing and creative services, and selling. Customer portfolio maintenance and retention activities include fulfillment, billing, payment processing, collections, customer service, issue resolution, and contract renewals. NRG provides energy and related services at either fixed, indexed or month-to-month prices. Home customers typically contract for terms ranging from one month to five years, while Business customers typically contract for terms ranging from one year to five years in length and extended contractual terms are available. Throughout all Customer Operations activities, the customer experience is kept at the forefront to inform decision-making and optimize retention, while creating supporters and advocates for NRG’s brands in the market. Customer Operations primarily comprises two end-use customer facing teams: NRG Home, which serves residential customers, and NRG Business, which serves business customers. Product Offerings NRG sells a variety of products to residential and small commercial customers, in a wide variety of sales channels, including retail electricity and energy management, natural gas, line and surge protection products and home protection products, repair and maintenance, and carbon offsets. Home customers make purchase decisions based on a variety of factors, including price, incentive, customer service, brand, innovative offers/features and referrals from friends and family. Through its broad range of service offerings and value propositions, NRG seeks to attract, retain, and increase the value of its customer relationships. NRG's brands are recognized for exemplary customer service, innovative smart energy and environmentally-friendly solutions. The Company provides power and natural gas to the business-to-business markets in North America, as well as retail services, including demand response, commodity sales, energy efficiency and energy management solutions to Business customers. The Company is an integrated provider of supply and distributed energy resources and focuses on distributed products as businesses seek greater reliability, cleaner power and other benefits that they cannot obtain from the grid. These solutions include system power, distributed generation, renewable and low-carbon products, carbon management and specialty services, backup generation, storage and distributed solar, demand response, and energy efficiency and advisory services. Market Operations Market Operations has two primary objectives: to supply energy to customers in the most cost-efficient manner and to maximize the value of the Company's assets in satisfying its customer load requirements. These objectives are intended to reduce supply costs and maximize earnings with predictable cash flows. Power and natural gas are the two main commercial groups within Market Operations. Power The power commercial group is responsible for end-use electricity supply including power plant optimization and certain fuel supply. To meet the market operations objectives, NRG enters into supply, power and gas hedging agreements via a wide range of products and contracts, including (i) physical and financial commodity instruments, (ii) fuel supply and transportation contracts, (iii) PPAs and Renewable PPAs, and (iv) capacity and other contracted revenue or supply sources, as further discussed below. In addition, because changes in power prices in the markets where NRG operates are generally correlated to changes in natural gas prices, NRG uses hedging strategies that may include power and natural gas forward purchases and sales contracts to manage commodity price risk. Physical and Financial Commodity Instruments NRG trades power, natural gas, environmental, weather and other physical and financial commodity related products, including forwards, futures, options and swaps. NRG enters into these instruments primarily to manage price and delivery risk, 8 optimize physical and contractual assets in the portfolio, manage working capital requirements, reduce the carbon exposure in its business and comply with laws and regulations. Fuel Supply and Transportation Contracts NRG's fuel requirements consist of various forms of fossil fuel. The prices of fossil fuels can be volatile. The Company obtains its fossil fuels from multiple suppliers and through multiple transporters. Although availability is generally not an issue, localized shortages, transportation availability, delays arising from extreme weather conditions and supplier financial stability issues can and do occur. The preceding factors related to the sources and availability of raw materials are fairly uniform across the Company's business and fuel products used. NRG's primary fuel requirements consist of the following: Natural Gas — NRG operates a fleet of mid-merit and peaking natural gas plants. Fuel needs are managed by the natural gas commercial group, generally on a spot basis, as the Company does not believe it is prudent to forward purchase natural gas for these types of units as the dispatch is highly unpredictable. Natural gas storage and transportation contracts are utilized to reduce daily volatility. Coal — NRG actively manages its coal requirements based on forecasted generation, market volatility and its inventory on site. The Company believes it is adequately hedged, using forward coal supply agreements, for its domestic coal consumption for 2025. As of December 31, 2024, NRG had purchased forward contracts to provide fuel for the Company's expected requirements for 2025. For the domestic fleet, NRG purchased approximately 13 million tons of coal in 2024, all of which was Powder River Basin coal. For fuel transport, NRG has entered into various rail transportation and rail car lease agreements with varying tenures, which will provide for the Company's transportation requirements of Powder River Basin coal for the next four years. Renewable PPAs The Company's strategy is to procure mid to long-term renewable generation through power purchase agreements. NRG has entered into Renewable PPAs totaling approximately 1.9 GW with third-party project developers and other counterparties, of which all are operational as of December 31, 2024. The remaining average tenure of these agreements is nine years. The Company expects to continue evaluating and executing similar agreements that support the needs of the business. The total GW entered into through Renewable PPAs may be impacted by contract terminations when they occur. Capacity and Other Contracted Revenue or Supply Sources NRG's revenues and/or cash flows, primarily in the East and West, benefit from capacity/demand payments and other contracted revenue sources, originating from market clearing capacity prices, tolling arrangements and other long-term contractual arrangements. Natural Gas The natural gas commercial group is responsible for costing, logistics and supply for all of NRG's residential, commercial and industrial, and wholesale customers. NRG has contractual rights to natural gas transportation and storage assets across its footprint that allow for optimal supply economics in support of its various businesses. NRG's diversified load coupled with this asset portfolio enables the Company to deliver supply economically while providing incremental optimization activities when market conditions allow. The scale of the natural gas operation extends from the wellhead (through its producer services business) to end use customers (through NRG's various sales channels). This scale, coupled with the Company's associated assets, gas system platform and people, create significant value across North America. Plant Operations As of December 31, 2024, the Company owns and leases a diversified wholesale generation portfolio with approximately 13 GW of fossil fuel, and renewable generation capacity at 18 plants. The Company's wholesale generation assets are diversified by fuel-type and dispatch level, which helps mitigate the risks associated with fuel price volatility and market demand cycles. NRG continually evaluates its generation portfolio to focus on asset optimization opportunities and the locational value of its generation assets in each of the markets where the Company participates, as well as opportunities for the development of new generation. 9 The following table summarizes NRG's generation portfolio as of December 31, 2024: (In MW) (a) Type Texas East West/Services/Other (b) Total Natural gas 4,353 80 1,252 5,685 Coal 4,174 1,948 605 6,727 Oil — 455 — 455 Utility Scale Solar — — 214 214 Total generation capacity 8,527 2,483 2,071 13,081 (a) Utility Scale Solar is described in MW on an alternating current basis. MW figures provided represent nominal summer net MW capacity of power generated as adjusted for the Company's owned interest (b) Includes proportionate share of equity owned investments and the Cottonwood lease Plant Operations is responsible for operating the Company's generation facilities at high standards of safety and regulatory compliance, and includes (i) operations and maintenance, (ii) asset management, and (iii) development, engineering and construction. Operations & Maintenance NRG operates and maintains its generation portfolio, as well as approximately 6,200 MW of additional coal, natural gas and wind generation capacity at 13 plants operated on behalf of third parties as of December 31, 2024 using prudent industry practices for the safe, reliable and economic generation of electricity in compliance with all local, state and federal requirements. The Company follows a consistent set of operating requirements, including a solid base of training, required adherence to specific safety and environmental limits, procedure and checklist usage, and the implementation of continuous process improvement through incident investigations. NRG uses industry leading maintenance practices for preventive, predictive and corrective maintenance planning. The Company’s strategic planning process evaluates equipment condition, performance, and obsolescence to support the development of a comprehensive work scope and schedule for long-term performance. Asset Management NRG manages all aspects of its generation portfolio to optimize the lifecycle value of the assets, consistent with the Company’s goals. The Company evaluates capital projects required for continued operation and strategic enhancement of the assets, provides quality assurance on capital outlays, and assesses the impact of rules, regulations, and laws on business profitability. In addition, the Company manages its long-term contracts and real estate holdings and provides management services. Development, Engineering & Construction NRG develops, engineers and executes major plant projects as well as “new build” generation and energy storage projects that enhance the value of its generation portfolio and provide options to meet generation growth needs in the retail markets it serves, in accordance with the Company’s strategic goals. These projects have included gas-fired generation development and construction, coal to gas conversions, grid scale energy storage development, grid scale renewable construction, and asset demolition, remediation and reclamation work. Texas Development Priorities — During 2024, NRG advanced progress on three new generation projects aimed at expanding its operational capacity to meet growing retail power supply needs in the ERCOT wholesale electric market. These projects include a new 415 MW peaker plant at its T.H. Wharton generating station in Texas, which is scheduled to be operational in 2026 and a new 689 MW combined cycle generating facility at its Cedar Bayou generating station in Texas, which is scheduled to be operational in 2028. Both projects are under consideration for financing from the Texas Energy Fund. NRG continues to explore its options for the 443 MW Greens Bayou 6 project. These additions to NRG’s portfolio are strategically aligned with the Company’s commitment to meeting the growing energy needs of its customers. Vivint Smart Home Vivint Smart Home is a leading smart home platform that provides customers with technology, products and services to create a smarter, greener, safer home. A smart home has multiple devices integrated into a single expandable platform that incorporates artificial intelligence (“AI”) and machine-learning in its operating system, which allows customers to interact with and manage their home from anywhere via the Vivint app on their smart device. Vivint Smart Home provides a customized 10 solution for the home using integrated smart cameras (indoor, outdoor and doorbell), locks, lights, thermostats, garage door controls and a host of other safety and security sensors. Vivint Smart Home provides a fully integrated solution for consumers, including hardware, software, sales, installation by trained and experienced in-home service professionals, customer service, technical support and professional monitoring. This seamless integration of high-quality products and services resulted in an average customer lifetime of approximately nine years as of December 31, 2024. The Company believes its ability to offer related or adjacent products and services that leverage the existing smart home platform, as well as energy services, can extend the average customer lifetime and increase the lifetime value of customers. As of December 31, 2024, Vivint Smart Home's cloud-based home platform currently manages more than 33 million in-home devices, and the average customer on Vivint Smart Home's cloud-based home platform engages with the smart home app approximately 17 times per day and has approximately 16 devices in its home. Operational Statistics The following statistics represent the Company's retail load and customer count: Year ended December 31, 2024 2023 2022 Sales volumes - Electricity (in GWh) Home - Texas 39,353 40,032 43,155 Home - East 15,229 12,838 13,269 Home - West/Services/Other 2,355 2,243 2,250 Business - Texas 40,274 40,250 38,447 Business - East 46,724 46,438 47,724 Business - West/Services/Other 10,513 10,393 10,231 Total Load 154,448 152,194 155,076 Sales volumes - Natural gas (in MDth) Home - East 49,927 49,990 53,051 Home - West/Services/Other 75,898 75,150 92,035 Business - East 1,525,094 1,587,052 1,618,946 Business - West/Services/Other 181,972 179,888 154,074 Total Load 1,832,891 1,892,080 1,918,106 11 Year ended December 31, 2024 2023 2022 Customer count - Electricity customers (a)(b) (in thousands) Home - Texas Average retail 2,940 2,878 2,961 Ending retail 2,909 2,928 2,859 Home - East Average retail 1,777 1,466 1,408 Ending retail 1,807 1,752 1,381 Home - West/Services/Other Average retail 395 393 383 Ending retail 373 404 390 Customer count - Natural gas customers (b) (in thousands) Home - East Average retail 388 390 375 Ending retail 384 385 380 Home - West/Services/Other Average retail 353 381 416 Ending retail 347 358 396 Total Customer count (in thousands) Average retail - Home - Electricity and Natural gas 5,853 5,508 5,543 Average - Vivint Smart Home (c) 2,100 2,008 — Ending retail - Home - Electricity and Natural gas 5,820 5,827 5,406 Ending - Vivint Smart Home (c) 2,154 2,043 — Total Ending retail and Vivint Smart Home 7,974 7,870 5,406 (a) Home customer count includes recurring residential customers, services customers, and community choice (b) Dual fuel customers are included within electricity customer counts only (c) Vivint Smart Home includes customers that also purchase other NRG products The tables below present these performance metrics for the Company's generation portfolio, including leased facilities, for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 Fossil Plants (a) Net Owned Capacity (MW) Net Generation (In thousands of MWh) (a) Annual Equivalent Availability Factor Average Net Heat Rate BTU/kWh Net Capacity Factor Texas 8,527 23,350 70.8 % 11,337 30.1 % East 2,483 2,372 78.4 % 13,956 10.9 % West/Services/Other 1,143 5,977 70.2 % 7,498 57.6 % (a) Excludes equity method investments Year Ended December 31, 2023 Fossil and Nuclear Plants (a) Net Owned Capacity (MW) Net Generation (In thousands of MWh) (a) Annual Equivalent Availability Factor Average Net Heat Rate BTU/kWh Net Capacity Factor Texas 8,529 30,776 74.2 % 11,175 35.4 % East 2,483 2,016 85.5 % 13,007 6.6 % West/Services/Other 1,169 5,903 73.5 % 7,449 56.8 % (a) Excludes equity method investments 12 The following are industry statistics for the Company's fossil and nuclear plants, as defined by the NERC: Annual Equivalent Availability Factor, or EAF — Measures the percentage of maximum generation available over time as the fraction of net maximum generation that could be provided over a defined period of time after all types of outages and deratings, including seasonal deratings, are taken into account. Net Heat Rate — The net heat rate represents the total amount of fuel in BTU required to generate one net kWh provided. Net Capacity Factor — The net amount of electricity that a generating unit produces over a period of time divided by the net amount of electricity it could have produced if it had run at full power over that time period. The net amount of electricity produced is the total amount of electricity generated minus the amount of electricity used during generation by the station. The generation performance by region for the three years ended December 31, 2024, 2023 and 2022 is shown below: Net Generation (In thousands of MWh) 2024 2023 2022 Texas Coal 15,433 15,576 18,860 Gas 7,917 7,333 8,763 Nuclear (a) — 7,867 9,652 Total Texas 23,350 30,776 37,275 East Coal 2,369 1,328 6,738 Oil 2 3 7 Gas 1 685 537 Total East 2,372 2,016 7,282 West/Services/Other Gas 5,974 5,899 6,669 Renewables 3 4 7 Total West/Services/Other 5,977 5,903 6,676 Total generation performance 31,699 38,695 51,233 (a) Reflects the Company's undivided interest in total MWh generated by STP. The Company sold its interest in STP on November 1, 2023 Competition While there has been consolidation in the competitive retail energy space over the past few years, there is still considerable competition for customers. In Texas, there is healthy competition in deregulated areas and customers can choose providers based on the most appealing offers. Outside of Texas, electricity retailers compete with the incumbent utilities, in addition to other retail electric providers, which can inhibit competition depending on the market rules of the state. There is a high degree of fragmentation, with both large and small competitors offering a range of value propositions, including value, rewards, and sustainability-based offerings. Wholesale generation is highly fragmented and diverse in terms of industry structure by region. As such, there is wide variation in the capabilities, resources, nature and identities of the Company’s competitors depending on the market. Competitors include regulated utilities, municipalities, cooperatives, other independent power producers, and power marketers or trading companies, including those owned by financial institutions. The smart home market is an expanding global opportunity and is in the early stages of broad consumer adoption. It is highly competitive and fragmented. Major competitors range from large-cap technology companies seeking to expand their core market opportunity who predominantly offer do-it-yourself devices that put a large burden on homeowners to self-install and support many devices, to security-based providers, as well as industrial and telecommunications companies that offer connected home experiences. Vivint Smart Home provides the full smart home experience, with an end-to-end solution that includes a wide range of unique capabilities and use cases. Currently, the vast majority of competitors do not offer comprehensive smart home solutions and accompanying services. Seasonality and Price Volatility The sale of power and natural gas to retail customers are seasonal businesses with the demand for power generally peaking during the summer, and the demand for natural gas generally peaking during the winter. As a result, net working capital requirements for the Company's retail operations generally increase during summer and winter months along with the 13 higher revenues, and then decline during off-peak months. Weather may impact operating results and extreme weather conditions could have a material impact. The rates charged to retail customers may be impacted by fluctuations in total power prices and market dynamics, such as the price of natural gas, transmission constraints, competitor actions, and changes in market heat rates. Annual and quarterly operating results of the Company's generation portfolio can be significantly affected by weather and energy commodity price volatility. Significant other events, such as the demand for natural gas, interruptions in fuel supply infrastructure and relative levels of hydroelectric capacity can increase seasonal fuel and power price volatility. The preceding factors related to seasonality and price volatility are fairly uniform across the regions in which the Company operates. Market Framework NRG sells electricity, natural gas and related products and services, and smart home products and services to customers throughout the U.S. and Canada. In most of the states and regions that have introduced retail consumer choice, NRG competitively offers electricity, natural gas and other value-enhancing services to customers. Each retail consumer choice state or province establishes its own retail competition laws and regulations, and the specific operational, licensing, and compliance requirements vary by state or province. Regulated terms and conditions of default service, as well as any movement to replace default service with competitive services, as is done in ERCOT, can affect customer participation in retail competition. In Canada, NRG sells energy and related services to residential and commercial customers in the province of Alberta pursuant both to a regulated rate service governed by provincial regulations as well as a competitive service with rates set by market forces. Sales of energy to commercial customers take place in other provinces as well. The attractiveness of NRG's retail offerings may be impacted by the rules, regulations, market structure and communication requirements from public utility commissions in each state and province. NRG's fleet of power plants which it owns, operates or manages are located in organized energy markets, known as RTOs or ISOs. Each organized market administers day-ahead and real-time centralized bid-based energy and ancillary services markets pursuant to tariffs approved by FERC, or in the case of ERCOT, market rules approved by the PUCT. These tariffs and rules dictate how the energy markets operate, how market participants make bilateral sales with one another and how entities with market-based rates are compensated. Established prices reflect the value of energy at the specific location and time it is delivered, which is known as the Locational Marginal Price. Each market is subject to market mitigation measures designed to limit the exercise of locational market power. These market structures facilitate NRG's sale of power and capacity products at market-based rates. Other than ERCOT and AESO, each of the ISO regions also operates a capacity or resource adequacy market that provides an opportunity for generating and demand response resources to earn revenues to offset their fixed costs that are not recovered in the energy and ancillary services markets. The ISOs are also responsible for transmission planning and operations. Texas NRG's business in Texas is subject to standards and regulations adopted by the PUCT and ERCOT 1 , including the requirement for retailers to be certified by the PUCT in order to contract with end-users to sell electricity. The ERCOT market is one of the nation's largest and, historically, fastest growing power markets. ERCOT is an energy-only market. The majority of the retail load in the ERCOT market region is served by competitive retail suppliers, except certain areas that have not opted into competitive consumer choice and are served by municipal utilities and electric cooperatives. East While most of the states in the East region of the U.S. have introduced some level of retail consumer choice for electricity and/or natural gas, the incumbent utilities currently provide default service in most of the states and as a result typically serve the majority of residential customers. NRG’s retail activities in the East include both direct sales to end-use customers as well as sales through municipal aggregations, both of which are subject to standards and regulations adopted by the ISOs, state public utility commissions and legislators, including the requirement for retailers to be certified in each state in order to contract with end-users to sell electricity. Power plants owned, operated or managed by NRG and NRG's demand response assets located in the East region of the U.S. are within the control areas of PJM, NYISO, ISO-NE and MISO. Each of the market regions in the East region provides for robust competition in the day-ahead and real-time energy and ancillary services markets. Additionally, the assets in the East region receive a significant portion of their revenues from capacity markets. PJM and ISO-NE use a forward capacity auction, while NYISO uses a month-ahead capacity auction. MISO has an annual auction. Capacity market prices are sensitive to design parameters, as well as additions of new capacity. PJM and ISO-NE operate a pay-for-performance model where capacity payments are modified based on real-time generator performance during certain system conditions. In such markets, NRG’s actual capacity revenues will be the combination of cleared auction prices times the quantity of MW cleared, plus the net of any 1 The Cottonwood facility is located in Deweyville, Texas, but operates in the MISO market 14 over-performance "bonus payments" and any under-performance charges. Additionally, bidding rules allow for the incorporation of a risk premium into generator bids. West In the West region of the U.S., NRG is an LSE and sells electricity at retail in California’s Direct Access marketplace, as well as through community choice aggregations in the state. Additionally, NRG sells natural gas as both a retail supplier and wholesaler principally in California. NRG also owns equity interests in, operates, or manages power plants located entirely within the CAISO footprint. The CAISO operates day-ahead and real-time locational markets for energy and ancillary services, while managing congestion primarily through nodal prices. The CAISO system facilitates NRG's sale and purchase of power, ancillary services and capacity products at market-based rates, either within the CAISO's centralized energy and ancillary service markets or bilaterally. The CPUC also determines capacity requirements for LSEs and for specified local areas utilizing inputs from the CAISO. Both the CAISO and CPUC rules require LSEs to contract with sufficient generation resources in order to maintain minimum levels of generation within defined local areas. Additionally, the CAISO has independent authority to contract with needed resources under certain circumstances, typically either when LSEs have failed to procure sufficient resources, or system conditions change unexpectedly. Canada In Canada, NRG sells to residential and commercial retail customers in Alberta, within the AESO footprint, under both regulated rates approved by the AUC as well as through competitive service. The Company's regulated rates are approved through periodic rate applications that establish rates for power and gas sales as well as for recovery of other costs associated with operating the regulated business. In addition, the Company sells energy to commercial customers in other provinces. All sales and operations are subject to applicable federal and provincial laws and regulations. Vivint Smart Home Vivint Smart Home operates in all states throughout the U.S. that regulate in some manner the sale, installation, servicing, monitoring or maintenance of smart home and electronic security systems. Vivint Smart Home and its sales representatives are typically required to obtain and maintain licenses, certifications or similar permits from governmental entities as a condition to engaging in the smart home and security service business. Vivint Smart Home is subject to federal and state laws related to consumer financing which may include rules related to fees and charges, disclosures and regulation of the party extending consumer credit. Energy Regulatory Matters As participants in wholesale and retail energy markets and owners and operators of power plants, certain NRG entities are subject to regulation by various federal and state government agencies. These include the CFTC, FERC, NRC and the PUCT, as well as other public utility commissions in certain states where NRG's generation or distributed generation assets are located. In addition, NRG is subject to the market rules, procedures and protocols of the various ISO and RTO markets in which it participates. Likewise, certain NRG entities participating in the retail markets are subject to rules and regulations established by the states and provinces in which NRG entities are licensed to sell at retail. NRG must also comply with the mandatory reliability requirements imposed by NERC and the regional reliability entities in the regions where NRG operates. NRG's operations within the ERCOT footprint are not subject to rate regulation by FERC, as they are deemed to operate solely within the ERCOT market and not in interstate commerce. These operations are subject to regulation by the PUCT. State and Provincial Energy Regulation Maryland Legislation — On May 9, 2024, Maryland Governor Wes Moore signed Senate Bill 1 into law, which restricts the competitive retail electric and natural gas market in Maryland, affecting residential customers but not commercial and industrial customers. Key provisions of the law took effect on January 1, 2025. The legislation imposes a price cap on residential contracts tied to a trailing 12-month historical average of utility rates, with only a limited exception for renewable power products. Renewable products must now have their price pre-approved by the Maryland Public Service Commission and source their renewable electricity certificates from within the PJM region. The law also requires that any variable-price contract not contain a change in price more than once a year, except time-of-use contracts, and limits contract terms to 12 months. It requires affirmative consent for the renewal of customer contracts for renewable power products. The law also imposes licensing requirements on energy salespeople. The law states that it does not impair existing contracts. On October 1, 2024, Green Mountain Energy Company, NRG’s renewable electricity provider, along with a retail trade association to which NRG belongs, filed a lawsuit in federal court challenging the constitutionality of Senate Bill 1. On November 18, 2024, the trial court denied the plaintiffs' motion for a preliminary injunction. The plaintiffs, including Green Mountain, have filed an appeal to this denial to the Fourth Circuit Court of Appeals. The appeal is pending. 15 Alberta Rate of Last Resort — On September 27, 2024, the government of Alberta legislative assembly adopted the Rate of Last Resort Regulation to transition the regulated electricity rate from a monthly, variable rate “Regulated Rate Option” to a two-year, fixed rate “Rate of Last Resort” effective January 1, 2025. On November 29, 2024, the Alberta Utilities Commission approved a negotiated settlement between Direct Energy Regulated Services and the Utilities Consumer Advocate to establish the Rate of Last Resort price-setting methodology as well as the rate itself for the first two years of the four-year period. Under the government’s regulation, customers may return to the Rate of Last Resort at any time, and the price for the second two-year term may only vary from the first two-year term by 10%. The new rates may provide risks and benefits to the Company. Regional Regulatory Developments NRG is affected by rule/tariff changes that occur in the ISO regions. For further discussion on regulatory developments, see Item 15 — Note 23, Regulatory Matters, to the Consolidated Financial Statements. ERCOT/PUCT Public Utility Commission of Texas’ Actions with Respect to Wholesale Pricing and Market Design — The PUCT continues to analyze and implement multiple options for promoting increased reliability in the wholesale electric market, including the adoption of a reliability standard for resource adequacy and market-based mechanisms to achieve this standard. The Commission adopted a reliability standard that became effective in September 2024. In 2023, the Texas Legislature authorized implementation of the Performance Credit Mechanism ("PCM"), which will measure real-time contribution to system reliability and provide compensation for resources to be available, subject to certain "guardrails" such as an absolute annual net cost cap, as part of its adoption of the PUCT Sunset Bill (House Bill 1500). The Texas Legislature also directed the PUCT to implement additional market design changes such as the creation of a new ancillary service called Dispatchable Reliability Reserve Service ("DRRS") to further increase ERCOT's capability to manage net load variability and firming requirements for new generation resources which penalize poor performance during periods of low grid reserves. The PUCT directed ERCOT to implement DRRS as a standalone product which will delay implementation until 2026 or 2027. Texas Energy Fund — Through Senate Bill 2627, the Texas Legislature created the Texas Energy Fund, which received voter approval in November 2023, and will provide grants and low-interest loans (3%) to incentivize the development of more dispatchable generation and smaller backup generation in ERCOT. The PUCT adopted a rule in March 2024, which establishes the application and participation requirements and the process by which the Texas Energy Fund loan proceeds for dispatchable generation in ERCOT will be distributed. The initial window for submitting loan applications was opened on June 1, 2024 and closed on July 27, 2024. NRG, through its subsidiaries, filed for loan proceeds for three separate projects, totaling more than 1,500 MWs of capacity. The PUCT also adopted a rule for the completion bonus grant program in April 2024, which provides for opportunities for grants of $120,000 per MW for dispatchable generation projects interconnected before June 1, 2026, or $80,000 per MW for dispatchable generation projects interconnected on or after June 1, 2026 but before June 1, 2029, subject to performance requirements. Applications for completion bonus grants can be submitted beginning in January 2025. Availability of grant funds may be impacted by the 10,000 MW collective cap on the ERCOT loan and grant program. On August 29, 2024, the PUCT approved an initial portfolio of projects to move into a due diligence process with its third-party administrator. NRG THW GT LLC's 415 MW gas peakers, which is projected to become commercially operational in 2026, was among the projects selected to move into diligence, and that process is underway. On December 12, 2024, the PUCT approved two additional projects to move into due diligence, including Cedar Bayou Unit 5’s 689 MW combined cycle generating facility, which is projected to become commercially operational in 2028. Approximately 9,700 MW of projects are currently approved to undergo due diligence. Real-time Co-optimization of Energy and Ancillary Services ("RTC") — ERCOT is progressing with a multi-year project to upgrade its systems to co-optimize the dispatch of energy and ancillary services in real-time. The RTC project will also replace the Operating Reserve Demand Curve with demand curves for each ancillary service product which will act as the primary scarcity pricing mechanism when energy or ancillary services are in shortage. ERCOT anticipates commencing market trials for testing the RTC project in Spring 2025 with production to go-live on December 5, 2025. Supreme Court of Texas Ruling on Pricing during Winter Storm Uri — On June 14, 2024, the Supreme Court of Texas affirmed the validity of two orders issued by the PUCT on February 15 and 16, 2021, respectively, governing scarcity pricing in the ERCOT wholesale electricity market during Winter Storm Uri. The Supreme Court's order reversed the judgment of the Third Court of Appeals, which had held that the PUCT exceeded its statutory authority by ordering the market price of energy to be set at the high system wide offer cap due to scarcity conditions as a result of firm load shed occurring in ERCOT. In addition to holding that the PUCT's orders were consistent with the agency's statutory authority, the Supreme Court of Texas found that the PUCT had substantially complied with the Administrative Procedure Act's procedural rulemaking requirements in issuing its orders. 16 Voluntary Mitigation Plan (“VMP”) Changes — On March 13, 2023, the PUCT Staff determined that a portion of NRG's VMP should be terminated due to the increase in procurement of ancillary services by ERCOT, specifically non-spin reserve services, following Winter Storm Uri. As such, PUCT Staff terminated part of the VMP for NRG which provides protection from wholesale market power abuse accusations related to offers for ancillary services. NRG agreed with these changes to the VMP. At the March 23, 2023 open meeting, the PUCT approved the amended VMP. In February 2024, NRG filed a notice of intent with the PUCT and terminated its existing VMP as of March 1, 2024. Lubbock, Texas Transition to Competition — The customers of Lubbock Power and Light ("LP&L"), a municipally owned utility, entered the Texas retail competitive market in March 2024. Starting in January 2024, LP&L customers were able to shop for a REP. Customers who did not select a REP by February 15, 2024 were assigned to one of three default REPs, one of which is Reliant. LP&L customers started transitioning to their chosen REP or a default REP on March 4, 2024, which concluded in early April 2024. PJM Capacity Market Litigation and Reforms — On September 27, 2024, various public interest organizations filed a complaint at FERC against PJM seeking changes to the treatment of RMRs in the capacity market. On November 18, 2024, various state consumer advocates filed a complaint at FERC against PJM seeking revisions to several aspects of PJM’s capacity market, including requiring resources previously subject to categorical exemptions to participate in capacity auctions, longer notice periods for deactivating generating resources, and several other changes. On December 9, 2024, PJM submitted a filing at FERC proposing various capacity market updates regarding the treatment of qualifying resources that are retained under RMR agreements as capacity, retention of a dual-fuel fired combustion turbine plant as the reference resource, and updates to the Non-Performance Charge based on the RTO Net CONE for the 2026/2027 and 2027/2028 Delivery Years. On February 14, 2025, FERC approved PJM’s filings. On December 13, 2024, PJM filed tariff changes to add provisions enabling a one-time reliability-based expansion of the eligibility criteria for PJM’s interconnection process intended to allow a limited number of additional resources to participate in an upcoming interconnection queue. On February 11, 2025, FERC approved PJM’s filing. On December 20, 2024, PJM submitted tariff changes that propose to require all Existing Generation Capacity Resources to offer into the capacity auctions beginning with the 2026/2027 Delivery Year as well as certain enhancements to the Market Seller Offer Cap. On February 20, 2025, FERC approved PJM’s filing. On December 30, 2024, Pennsylvania Governor Josh Shapiro and the Commonwealth of Pennsylvania filed a complaint at FERC alleging that PJM’s demand curve cap is unjust and unreasonable. The complaint seeks to lower the demand curve cap to be 1.5 times net CONE of the reference resource. On January 28, 2025, PJM notified stakeholders that it had reached an agreement with Governor Shapiro, and on February 14, 2025, PJM and Governor Shapiro filed a join settlement agreement establishing the capacity market temporary price cap and price floor for the next two auctions and also filed a motion to dismiss the December 30, 2024 complaint. Any changes approved by FERC could affect future capacity prices. Revisions to PJM Locational Deliverability Area (“LDA”) Reliability Requirement — The Base Residual Auction ("BRA") for the 2024/2025 delivery year commenced on December 7, 2022 and closed on December 13, 2022. On December 19, 2022, PJM announced that it would delay the publication of the auction results. On December 23, 2022, PJM made a filing at FERC to revise the definition of LDA Reliability Requirement in the Tariff. This would allow PJM to exclude certain resources from the calculation of the LDA Reliability Requirement. On February 21, 2023, FERC accepted PJM's filing. Multiple parties, including NRG, filed for rehearing. Rehearing was denied by operation of law, and multiple parties, including the Company, filed appeals to the Third Circuit Court of Appeals. On March 12, 2024, the court vacated the portion of the FERC orders that allow PJM to apply the LDA Reliability Requirement to the 2024/2025 capacity auction. On March 29, 2024, PJM filed a petition seeking confirmation as to the capacity commitments rules for the 2024/2025 auction. On April 22, 2024, multiple parties filed a complaint seeking to find the revised rate unjust and unreasonable and implement rates consistent with FERC's February 2023 decision, which was denied on July 9, 2024. Those parties filed an appeal to the Court of Appeals for the D.C. Circuit on November 5, 2024. On May 6, 2024, FERC directed PJM to recalculate the 2024/2025 auction results under the Initial LDA Reliability Requirement rules, and further directed PJM to rerun the Third Incremental Auction. PJM published the revised BRA and Third Incremental Auction results on May 8, 2024 and May 23, 2024, respectively. On June 14, 2024, multiple parties filed appeals to the Third Circuit Court of Appeals seeking review of the May 6, 2024 FERC orders approving PJM's petition to restore the original capacity commitment rules for PJM to recalculate the 2024/2025 BRA and the rerun of the 2024/2025 BRA. As a result, the capacity for the 2024/2025 delivery year in the Delmarva Power and Light South zone resulted in higher prices. This outcome may change depending upon the disposition of the outstanding complaint and appeals. 17 PJM Base Residual Auction Revisions and Delay — On October 13, 2023, PJM made two filings at FERC. In the first filing, PJM proposed revisions to the Market Seller Offer Cap, which FERC rejected on February 6, 2024. The second filing proposed to make changes to PJM’s resource adequacy risk modeling and capacity accreditation processes, which FERC approved, with condition, on January 20, 2024. The approved changes were in effect for the 2025/2026 BRA that occurred in July 2024. In November 2024, at PJM’s request, FERC approved delays to future BRAs. The 2026/2027 BRA is currently scheduled for July 2025. Indian River RMR Proceeding — On June 29, 2021, Indian River notified PJM that it intended to retire Unit 4, effective May 31, 2022, due to expected uneconomic operations. On July 30, 2021, PJM responded to the deactivation notice and stated that PJM had identified reliability violations resulting from the proposed deactivation of Unit 4. NRG filed a cost based RMR rate schedule at FERC on April 1, 2022. FERC accepted the rate schedule with a June 1, 2022 effective date, subject to refund and established hearing and settlement procedures. The Company reached settlement with a number of the intervening parties and the settlement agreement was filed at FERC on April 2, 2024. On January 16, 2025, FERC issued an order approving the settlement agreement. On February 14, 2025, the Independent Market Monitor and the Maryland Office of the People’s Counsel filed a request for a rehearing of the January 16, 2025 FERC order. PJM announced the Delmarva Power transmission upgrades were completed in December 2024 and as a result, PJM sent NRG a termination notice. Indian River Unit 4 retired on February 23, 2025. Independent Market Monitor Market Seller Offer Cap Complaint — On March 18, 2021, finding that the calculation of the default Market Seller Offer Cap was unjust and unreasonable, FERC issued an order, which permitted the PJM May 2021 capacity auction for the 2022/2023 delivery year to continue under the existing rules and set a procedural schedule for parties to file briefs with possible solutions. On September 2, 2021, FERC issued an order in response to a complaint filed by the PJM Independent Market Monitor's proposal, which eliminated the Cost of New Entry-based Market Seller Offer Cap, implemented a limited default cap for certain asset classes based on going-forward costs and provided for unit specific cost review by the Independent Market Monitor for all other non-zero offers into the auctions. On October 4, 2021, as required by the Order, PJM submitted its compliance tariff and certain parties filed a motion for rehearing, which was denied by operation of law. On February 18, 2022, FERC addressed the arguments raised on rehearing and rejected the rehearing requests. Multiple parties filed appeals at the Court of Appeals for the D.C. Circuit, and on August 15, 2023, the Court denied the petitions for review. On January 12, 2024, the generator trade association filed a petition for review with the U.S. Supreme Court to overturn the August 15, 2023 judgment. On May 28, 2024, the U.S Supreme Court denied the petition for review. Final Rule on Reactive Power Payments — On October 17, 2024, FERC issued its final rule on reactive power, eliminating compensation for a generator’s reactive power within the standard power factor. ISOs must make a compliance filing, but FERC will permit ISO-NE, NYISO, and PJM to request a later effective date. This change affects the payments provided to generators providing reactive power service. Change to Energy Efficiency in the PJM Capacity Auction — On November 5, 2024, FERC approved PJM’s proposal to terminate compensation paid through the PJM capacity market to energy efficiency resources beginning in the 2026/2027 auction year. However, energy efficiency resources will be counted as a reduction in the PJM load forecast that is the basis of the PJM capacity auction. FERC's action will eliminate wholesale market financial support for utility-run programs authorized by state utility commissions, as well as certain third-party providers of energy efficiency services. NRG's demand-side programming is not significantly affected by the modification . Other Regulatory Matters From time to time, NRG entities may be subject to examinations, investigations and/or enforcement actions by federal, state and provincial licensing and regulatory agencies and may face the risk of penalties for violation of financial services, consumer protection and other applicable laws and regulations. Environmental Regulatory Matters NRG is subject to numerous environmental laws in the development, construction, ownership and operation of power plants. These laws generally require that governmental permits and approvals be obtained before construction and maintained during operation of power plants. Federal and state environmental laws generally have become more stringent over time. Future laws may require the addition of emissions controls or other environmental controls, impose restrictions on the Company's operations including unit retirements or impose obligations related to historic coal ash use, storage and disposal. Complying with environmental laws often involves specialized human resources and significant capital and operating expenses, as well as occasionally curtailing operations. NRG decides to invest capital for environmental controls based on the relative certainty of the requirements, an evaluation of compliance options and the expected economic returns on capital. 18 Several regulations that affect the Company have been and continue to be revised by the EPA, including requirements regarding coal ash, GHG emissions, NAAQS revisions and implementation, and effluent limitation guidelines. NRG will evaluate the impact of these regulations as they are revised but cannot fully predict the impact of each until anticipated revisions, legal challenges and reconsiderations are resolved. Air The CAA and related regulations (as well as similar state and local requirements) have the potential to affect air emissions, operating practices and pollution control equipment required at power plants. Under the CAA, the EPA sets NAAQS for certain pollutants including SO 2 , ozone, and PM2.5. Many of the Company's facilities are located in or near areas that are classified by the EPA as not achieving certain NAAQS (non-attainment areas). The relevant NAAQS may become more stringent. In March 2024, the EPA increased the stringency of the PM2.5 NAAQS. The Company maintains a comprehensive compliance strategy to address continuing and new requirements. Complying with increasingly stringent air regulations could require the installation of additional emissions control equipment at some NRG facilities or retiring of units if installing such controls is not economic. Significant changes to air regulatory programs affecting the Company are described below. CPP/ACE Rules — The attention in recent years on GHG emissions has resulted in federal and state regulations. In 2019, the EPA promulgated the ACE rule, which rescinded the CPP, which had sought to broadly regulate CO 2 emissions from the power sector. On January 19, 2021, the D.C. Circuit vacated the ACE rule (but on February 22, 2021, at the EPA's request, stayed the issuance of the portion of the mandate that would vacate the repeal of the CPP). On June 30, 2022, the U.S. Supreme Court held that the "generation shifting" approach in the CPP exceeded the powers granted to the EPA by Congress. The Court did not address the related issues of whether the EPA may adopt only measures applied at each source. On May 9, 2024, the EPA promulgated a rule that repealed the ACE rule and significantly revised the manner in which new combustion-turbine and existing steam EGU's GHG emissions will be regulated including capturing and storing/sequestering CO 2 in some instances. This rule has been challenged by numerous parties in the D.C. Circuit including 27 states with 22 states intervening in support of the rule. The DC Circuit held oral arguments related to this rule in December 2024. On February 5, 2025, the DOJ filed a motion asking the court to hold proceedings in abeyance while the new administration evaluates the rule. The court granted the motion on February 19, 2025. Cross-State Air Pollution Rule (“CSAPR”) — On March 15, 2023, the EPA signed and released a prepublication of a final rule that sought to significantly revise the CSAPR to address the good-neighbor obligations of the 2015 ozone NAAQS for 23 states after earlier having disapproved numerous state plans to address the issue. Several states, including Texas, challenged the EPA's disapproval of their state plans. On May 1, 2023, the U.S. Court of Appeals for the Fifth Circuit stayed the EPA's disapproval of Texas' and Louisiana's state plans, which disapprovals are a condition precedent to the EPA imposing its plan on Texas and Louisiana. Several other states are also similarly situated because of similar stays. Nonetheless, on June 5, 2023, the EPA promulgated this rule. On July 31, 2023, the EPA promulgated an interim final rule that addresses the various judicial orders that have stayed several State-Implementation-Plan disapprovals by limiting the effectiveness of certain requirements of the final rule promulgated on June 5, 2023 in Texas and several other states. On June 27, 2024, the U.S. Supreme Court stayed the final rule in the 11 states where the rule had not already been stayed. The Company cannot predict the outcome of the legal challenges to the: (i) various state disapprovals; (ii) the final rule promulgated on June 5, 2023; and (iii) the interim final rule promulgated on July 31, 2023 that seeks to address the judicial orders. The Company anticipates that the new U.S. presidential administration will revisit this rule. Regional Haze Proposal — On May 2023, the EPA proposed to withdraw the existing Texas Sulfur Dioxide Trading Program and replace it with unit-specific SO 2 limits for 12 units in Texas to address requirements to improve visibility at National Parks and Wilderness areas. If finalized as proposed, the rule would result in more stringent SO 2 limits for two of the Company's coal-fired units in Texas. The Company cannot predict the outcome of this proposal. Greenhouse Gas Emissions — NRG emits CO 2 when generating electricity at its facilities. Nearly all of NRG's domestic GHG emissions are subject to federal (U.S. EPA) GHG reporting requirements. NRG's climate goals are to reduce greenhouse gas emissions by 50% by 2025, from its current 2014 base year, and to achieve net-zero emissions by 2050. Greenhouse gas emissions included in NRG's goals are directly controlled emissions, emissions from purchased electricity for NRG's consumption and emissions from employee business travel. In March 2021, the Science Based Targets initiative validated NRG's 2025 and 2050 goals as aligned with a 1.5 degree Celsius trajectory. This validation was based on NRG’s business in 2020, prior to its acquisition of Direct Energy and Vivint. Following the acquisitions, the magnitude of NRG’s indirect emissions changed, and the Company is currently in the process of analyzing these emissions. From the current 2014 base year through 2024, the Company's directly controlled CO 2 e emissions decreased from 58 million metric tons to 25 million metric tons, representing a cumulative 57% reduction. The decrease is attributed to reductions in fleet-wide annual net generation and an overall market-driven shift away from coal as a primary fuel to natural gas. The 19 continued achievement of NRG's 2025 emissions reduction targets could be impacted by volatility within the power markets, driven by market conditions and changes in regulatory policies. As of December 31, 2024, less than 5% of the Company's consolidated revenues were derived from coal-fired operating assets. The following charts reflect the Company’s domestic generation portfolio, including leased facilities and those accounted for through equity method investments, but excluding the battery storage and remaining renewables activity. Prior year information on U.S. CO 2 e emissions and U.S. generation was adjusted to remove divested assets. Mercury and Air Toxics Standards (“MATS”) — On May 7, 2024, the EPA promulgated a final rule that amends the MATS rule by, among other things, increasing the stringency of the filterable particulate matter standard at coal-burning units. The deadline for complying with this more stringent standard is 2027. Twenty three states have challenged this rule in the D.C. Circuit. Accordingly, the outcome of this rulemaking is uncertain. The Company anticipates that the new U.S. presidential administration will revisit this rule. Byproducts In April 2015, the EPA finalized the rule regulating byproducts of coal combustion (e.g., ash and gypsum) as solid wastes under the RCRA. On July 30, 2018, the EPA promulgated a rule that amended the ash rule by extending some of the deadlines and providing more flexibility for compliance. On August 21, 2018, the D.C. Circuit found, among other things, that the EPA had not adequately regulated unlined ponds and legacy surface impoundments. On August 28, 2020, the EPA finalized "A Holistic Approach to Closure Part A: Deadline to Initiate Closure," which amended the April 2015 Rule to address the August 2018 D.C. Circuit decision and extend some of the deadlines. On November 12, 2020, the EPA finalized "A Holistic Approach to Closure Part B: Alternative Demonstration for Unlined Surface Impoundments," which further amended the April 2015 Rule to, among other things, provide procedures for requesting approval to operate existing ash impoundments with an alternate liner. On May 8, 2024, the EPA promulgated a rule that establishes requirements for: (i) inactive (or legacy) surface impoundments at inactive facilities and (ii) coal combustion residuals ("CCR") management units (regardless of how or when the CCR was placed) at regulated facilities. The rule also creates an obligation to conduct site assessments (at all active and certain inactive facilities) to determine whether CCR management units are present. The rule has been challenged in the D.C. Circuit and the outcome of the legal challenges is uncertain. The Company anticipates that the new U.S. presidential administration will revisit this rule. Domestic Site Remediation Matters Under certain federal, state and local environmental laws, a current or previous owner or operator of a facility, including an electric generating facility, may be required to investigate and remediate releases or threatened releases of hazardous or toxic substances or petroleum products. NRG may be responsible for property damage, personal injury and investigation and remediation costs incurred by a party in connection with hazardous material releases or threatened releases. These laws impose liability without regard to whether the owner knew of or caused the presence of the hazardous substances, and the courts have interpreted liability under such laws to be strict (without fault) and joint and several. Cleanup obligations can often be triggered during the closure or decommissioning of a facility, in addition to spills during its operations. 20 Jewett Mine Lignite Contract — The Company's Limestone facility historically burned lignite obtained from the Jewett mine. Active mining ceased as of December 31, 2016; however, the Company remains responsible for reclamation activities and is responsible for all reclamation costs. NRG has recorded an adequate ARO liability. The Railroad Commission of Texas has imposed a bond obligation of approximately $112 million for the reclamation of the Jewett mine, which NRG supports through surety bonds. The cost of the reclamation may exceed the value of the bonds. NRG may provide additional performance assurance if required by the Railroad Commission of Texas. Water The Company is required under the Clean Water Act to comply with intake and discharge requirements, requirements for technological controls and operating practices. As with air quality regulations, federal and state water regulations have become more stringent and imposed new requirements. ELG — In 2015, the EPA revised the ELG for Steam Electric Generating Facilities, which imposed more stringent requirements (as individual permits were renewed) for wastewater streams from FGD, fly ash, bottom ash and flue gas mercury control. In 2017, the EPA promulgated a final rule that, among other things, postponed the compliance dates to preserve the status quo for FGD wastewater and bottom ash transport water by two years to November 2020 until the EPA amended the rule. On October 13, 2020, the EPA amended the 2015 ELG rule by: (i) altering the stringency of certain limits for FGD wastewater; (ii) relaxing the zero-discharge requirement for bottom ash transport water; and (iii) changing several deadlines. In October 2021, NRG informed its regulators that the Company intends to comply with the ELG by ceasing combustion of coal by the end of 2028 at its domestic coal units outside of Texas, and installing appropriate controls by the end of 2025 at its two plants that have coal-fired units in Texas. On May 9, 2024, the EPA promulgated a rule that revises the ELG by, among other things, further restricting the discharge of (i) FGD wastewater, (ii) bottom ash transport water, and (iii) combustion residual leachate. The rule was challenged in numerous courts, but the cases have been consolidated in the Eighth Circuit of the U.S. Court of Appeals. The outcome of the legal challenges is uncertain. On February 19, 2025, the DOJ filed a motion asking the court to hold proceedings in abeyance while the new administration evaluates the rule. The Company anticipates that the new U.S. presidential administration will revisit this rule. Regional Environmental Developments Ash Regulation in Illinois — On July 30, 2019, Illinois enacted legislation that required the state to promulgate regulations regarding coal ash at surface impoundments. On April 15, 2021, the state promulgated the implementing regulation, which became effective on April 21, 2021. NRG has applied for initial operating permits and construction permits (for closure and retrofits) as required by the regulation and is waiting for most of its permits to be issued by the Illinois EPA. Houston Nonattainment for 2008 Ozone Standard — In 2022, the EPA changed the Houston area’s classification from Serious to Severe nonattainment for the 2008 Ozone Standard. Accordingly, Texas is required to develop a new control strategy and submit it to the EPA. Customers NRG sells to a wide variety of customers, primarily end-use customers in the residential, commercial and industrial, and wholesale sectors. The Company owns and operates power plants to generate and sell power to wholesale customers, such as utilities and other intermediaries. The Company had no customer that comprised more than 10% of the Company's consolidated revenues for the year ended December 31, 2024. Human Capital As of December 31, 2024, NRG and its consolidated subsidiaries had 15,637 employees, including 7,028 active smart home direct sales and installation individuals, which are largely seasonal. Approximately 4% of the Company's employees were covered by U.S. collective bargaining agreements. During 2024, the Company did not experience any labor stoppages or labor disputes at any of its facilities. NRG believes its employees are vital to its success and is committed to offering employees a rewarding career that provides opportunities for growth and the ability to make valuable contributions toward the achievement of the Company’s business objectives. NRG focuses on safety, health and wellness, employee engagement, talent development and total rewards for its workforce. 21 Safety Safety is embedded in the culture at NRG. The Company strives to begin meetings with a safety moment and regularly reminds its employees that safety comes first. NRG has achieved its targeted top decile safety record of Occupational Safety and Health Administration recordable injury rates in each of the 5 previous years. The following chart reflects the Company's 5 year safety record, excluding Vivint Smart Home which uses different industry specific safety benchmarks. Health and Wellness NRG has continued to invest in the health and well-being of its employees and their families by providing programs that holistically support its employees’ physical, emotional, social and financial wellness, allowing employees the opportunity to take control of their well-being and focus on what matters most to them for a healthy, secure future. The Company includes well-being goals as a metric in the Annual Incentive Plan (AIP), ensuring participants are motivated to improve their overall well-being. Employee Engagement NRG seeks to create work environments where employees are treated fairly and respectfully and where each voice matters. The Company seeks to build on that position by continually improving its hiring and promotion policies and supporting the growth of Business Resource Groups (“BRGs”). In these BRGs, employees can share, learn, and receive support from colleagues with whom they have an affinity based on shared backgrounds or interests. The Company strives to be a place that empowers employee growth that celebrates the individual employee and his or her unique backgrounds. Talent Development NRG deploys various talent development strategies and programs to develop leaders who can execute on the Company’s strategy and drive value for all stakeholders. The Board of Directors regularly engages with management on leadership development and succession planning, including providing feedback on development plans and bench strength for key senior leader positions. In 2024, the Company continued its annual Emerging Executive Leaders Program to strengthen the identified pipeline of future executives and create a cohort of high potential candidates to work on active company challenges or opportunities. Additionally, the Company expanded a front-line leader program called Peak Leadership to the entire company with the intent to onboard first-level leaders into their leadership role in select business units, and will look to continue growing the initiative in 2025. The Company has a performance management tool that emphasizes a continuous feedback loop and a robust online training curriculum covering topics such as leadership, communication and productivity. 22 Total Rewards NRG seeks to provide market competitive compensation and benefits benchmarked against the industries in which the Company operate: energy, consumer services and, where appropriate, the entire market. To ensure incentives are properly aligned with business needs and can attract and retain qualified employees, the Compensation Committee of the Board of Directors actively reviews the Company's total rewards programs, including benchmarking, risk assessment, and program design. NRG offers full-time employees incentives designed to motivate and reward success, and it continues to evaluate its benefits and offerings taking into consideration the needs of its employees to ensure they are competitive and best serve its employees. Every two years, the Company engages an independent third-party to benchmark its compensation and benefits programs against its peers and report the results to the Compensation Committee of the Board of Directors. For further discussion and recent available data regarding the Company’s efforts and programs please see the Company’s 2024 Proxy Statement and 2023 Sustainability Report, which are available on the Company’s website at: www.nrg.com . Information included in these documents is not intended to be incorporated into this Annual Report on Form 10-K. Available Information NRG's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are available free of charge through the SEC's website, www.sec.gov , and through the Company's website, www.nrg.com , as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The Company also routinely posts press releases, presentations, webcasts, sustainability reports and other information regarding the Company on the Company's website. The information posted on the Company's website is not a part of this report. 23 Item 1A — Risk Factors NRG's risk factors are grouped into the following categories: (i) Risks Related to the Operation of NRG's Business; (ii) Risks Related to Governmental Regulation and Laws; and (iii) Risks Related to Economic and Financial Market Conditions and the Company's Indebtedness. Risks Related to the Operation of NRG's Business NRG's financial performance may be impacted by price fluctuations in the retail and wholesale power and natural gas markets, as well as fluctuations in coal and oil markets and other market factors that are beyond the Company's control. Market prices for power, capacity, ancillary services, natural gas, coal, oil and renewable energy credits are unpredictable and tend to fluctuate substantially. Electric power generally must be produced concurrently with its use. As a result, power prices are subject to significant volatility due to supply and demand imbalances, especially in the day-ahead and spot markets. Long and short-term power and gas prices may also fluctuate substantially due to other factors outside of the Company's control, including: • changes in generation capacity in the Company’s markets, including the addition of new supplies of power as a result of the development of new plants, expansion of existing plants, the continued operation of uneconomic power plants due to state subsidies, retirement of existing plants or addition of new transmission capacity; • electric supply disruptions, including plant outages and transmission disruptions; • changes in power and gas transmission infrastructure; • transportation capacity constraints or inefficiencies; • weather conditions, including extreme weather conditions and seasonal fluctuations, including the effects of climate change; • a public health crisis, epidemic or pandemic; • changes in commodity prices and the supply of commodities, including but not limited to natural gas, coal and oil; • changes in the demand for power or gas, or in patterns of power or gas usage, including the potential development of demand-side management tools and practices, distributed generation, and more efficient end-use technologies; • development of new fuels, new technologies and new forms of competition for the production of power; • economic and political conditions, including the impact of changing U.S. trade policies and potential additional tariffs that may be imposed; • changes in law, including judicial decisions, environmental regulations and environmental legislation; and • federal, state and provincial power regulations and legislation, and regulations and actions of the ISO and RTOs. While retail rates are generally designed to allow retail sellers of electricity and natural gas to pass through price fluctuations and other changes to costs, the Company may not be able to pass through all such changes to customers. For example, serving retail power customers in ISOs that have a capacity market exposes the Company to the risk that capacity costs can change and may not be recoverable, or the Company may engage in sales of power at fixed prices. Additionally, increases in wholesale costs to retail customers may cause additional customer defaults or increased customer attrition, or may be impacted by regulatory rules. Conversely, should natural gas prices rise to consistently exceed coal prices, NRG’s demand for coal generation may exceed the near-term ability of coal suppliers or rail transporters to meet it, causing the Company to lose generation sales opportunities and/or realize higher retail energy supply costs. Such factors and the associated fluctuations in power prices have affected the Company's wholesale and retail profitability in the past and are expected to continue to do so in the future. Volatile power and gas supply costs and demand for power and gas could adversely affect the financial performance of NRG's retail operations. The Company's earnings and cash flows could be adversely affected in any period in which the wholesale power or gas prices rise at a greater rate than the rates the Company can charge to customers. The price of wholesale electricity and gas supply purchases associated with the retail operations' energy commitments can be different than that reflected in the rates charged to customers due to, among other factors: • varying supply procurement contracts used and the timing of entering into related contracts; • subsequent changes in the overall price of natural gas; • daily, monthly or seasonal fluctuations in the price of natural gas relative to the 12-month forward prices; • transmission and transportation constraints and the Company's ability to move power or gas to its customers; and • changes in market heat rate (i.e., the relationship between power and natural gas prices). The Company's earnings and cash flows could also be adversely affected in any period in which its customers' actual usage of electricity or gas significantly varies from the forecasted usage, which could occur due to, among other factors, weather events, changes in usage patterns, competition and economic conditions. 24 The Company’s expectations regarding load growth may not materialize. The electricity industry is expected to experience a surge in demand driven primarily by new manufacturing, industrial and data center facilities (inclusive of generative AI (“GenAI”)). The U.S. Energy Information Administration's 2023 Annual Energy Outlook, combined with external forecasts, shows the potential for 500 TWh of incremental load across the U.S. through 2030, as compared to 2023. ERCOT's current long term load forecast shows peak demand increasing from 86 GW in 2024 to 137 GW in 2028. However, there is no assurance that these forecasts will be accurate or that the anticipated load growth will occur as projected. Factors such as evolving technology, improvements in energy efficiency, changes in economic conditions, shifts in government policy or regulation, and project delays or cancellations by the Company’s commercial and industrial consumers (including data center facilities) could reduce or slow demand for electricity relative to current expectations. The Company’s capital expenditures and other investments are influenced by projected demand; if the anticipated load growth fails to materialize, the Company could incur additional expenses to terminate or redeploy any underutilized assets or infrastructure, or it may be unable to fully recover its capital expenditures or realize the expected returns on its investments. Operation of power generation facilities involves significant risks and hazards customary to the power industry that could have a material adverse effect on NRG's revenues and results of operations, and NRG may not have adequate insurance to cover these risks and hazards. The ongoing operation of NRG's facilities involves risks that include the breakdown or failure of equipment or processes, performance below expected levels of output or efficiency and the inability to transport the Company's products to its customers in an efficient manner due to a lack of transmission capacity. Unplanned outages of generating units, including extensions of scheduled outages due to mechanical failures or other problems occur from time to time and are an inherent risk of the Company's business. Unplanned outages typically increase the Company's operation and maintenance expenses and may reduce the Company's revenues as a result of selling fewer MWh or incurring non-performance penalties and/or require NRG to incur significant costs as a result of obtaining replacement power from third parties in the open market or running one of its higher cost units to satisfy the Company's forward power sales obligations. NRG's inability to operate the Company's plants efficiently, manage capital expenditures and costs, and generate earnings and cash flow from the Company's asset-based businesses could have a material adverse effect on the Company's results of operations, financial condition or cash flows. In addition, NRG provides plant operations and commercial services to a variety of third parties. There is a risk that mistakes, mis-operations or actions taken by these third parties could be attributed to NRG, including the risk of investigation or penalties being assessed to NRG in connection with the services it offers, or that regulators could question whether NRG had the appropriate safeguards in place. Power generation involves hazardous activities, including acquiring, transporting and unloading fuel, operating large pieces of rotating equipment and delivering electricity to transmission and distribution systems. In addition to natural risks such as earthquake, flood, lightning, wildfires, hurricane and wind, other hazards, such as fire, explosion, structural collapse and machinery failure are inherent risks in the Company's operations. These and other hazards can cause significant personal injury or loss of life, severe damage to and destruction of property, plant and equipment, contamination of, or damage to, the environment and suspension of operations. The occurrence of any one of these events may result in NRG being named as a defendant in lawsuits asserting claims for substantial damages, including for environmental cleanup costs, personal injury and property damage and fines and/or penalties. NRG maintains an amount of insurance protection that it considers adequate, obtains warranties from vendors and obligates contractors to meet certain performance levels, but the Company cannot provide any assurance that these measures will be sufficient or effective under all circumstances and against all hazards or liabilities to which it may be subject. A successful claim for which the Company is not adequately insured or protected could hurt its financial results and materially harm NRG's financial condition. NRG cannot provide any assurance that its insurance coverage will continue to be available at all or at rates or on terms similar to those presently available. Any losses not covered by insurance could have a material adverse effect on the Company's financial condition, results of operations or cash flows. NRG's costs, results of operations, financial condition and cash flows could be adversely impacted by disruption of its fuel supplies. NRG relies on natural gas, coal and oil to fuel a majority of its power generation facilities. Grid operations depend on the continuing financial viability of contractual counterparties, as well as the infrastructure (including rail lines, rail cars, barge facilities, roadways, riverways and natural gas pipelines) available to serve generation facilities and to ensure that there is sufficient power produced to meet retail demand. As a result, the Company’s wholesale generation facilities are subject to the risks of disruptions or curtailments in the production of power at its generation facilities if no fuel is available at any price, if a counterparty fails to perform or if there is a disruption in the fuel delivery infrastructure. NRG routinely hedges both its wholesale sales and purchases to support its retail load obligations. In order to hedge these obligations, the Company may enter into long-term and short-term contracts for the purchase and delivery of fuel. Many of the 25 forward power sales contracts do not allow the Company to pass through changes in fuel costs or discharge the power sale obligations in the case of a disruption in fuel supply due to force majeure events or the default of a fuel supplier or transporter. Disruptions in the Company's fuel supplies or power supply arrangements may therefore require it to supply replacement power either by running its other, higher cost power plants or by obtaining power from third-party sources at market prices that could substantially exceed the contract price, or to pay damages to counterparties for failure to deliver power or sell electricity or natural gas as contracted. Any such event could have a material adverse effect on the Company's financial performance. NRG also buys energy and fuel on a short-term or spot market basis. Prices sometimes rise or fall significantly over a relatively short period of time. The price NRG can obtain for the sale of energy may not rise at the same rate, or may not rise at all, to match a rise in fuel or delivery costs. Retail rates may also not rise at the same rate or may not rise at all. This may have a material adverse effect on the Company's financial performance. NRG's plant operating characteristics and equipment, particularly at its coal-fired plants, often dictate the specific fuel quality to be combusted. The availability and price of specific fuel qualities may vary due to supplier financial or operational disruptions, transportation disruptions and force majeure. At times, coal of specific quality may not be available at any price or the Company may not be able to transport such coal to its facilities on a timely basis. In this case, the Company may not be able to run the coal facility even if it would be profitable. Operating a coal facility with different quality coal can lead to emission or operating problems. If the Company had sold forward the power from such a coal facility, it could be required to supply or purchase power from alternate sources, perhaps at a loss. This could have a material adverse impact on the financial results of specific plants and on the Company's results of operations. NRG relies on storage, transportation assets and suppliers, which it does not own or control, to deliver natural gas. The Company depends on natural gas pipelines and other transportation and storage facilities owned and operated by third parties to deliver natural gas to wholesale and retail markets and to provide retail energy services to customers. The Company's ability to provide natural gas for its present and projected customers will depend upon its suppliers' ability to obtain and deliver supplies of natural gas, as well as NRG's ability to acquire supplies. Factors beyond the control of the Company and its suppliers may affect the Company's ability to deliver such supplies. These factors include other parties' control over the drilling of new wells and the facilities to transport natural gas to the Company's receipt points, development of additional interstate pipeline infrastructure, availability of supply sources competition for the acquisition of natural gas, priority allocations, impact of severe weather disruptions to natural gas supplies and the regulatory and pricing policies of federal and state regulatory agencies, as well as the availability of Canadian reserves for export to the U.S. Energy deregulation legislation may increase competition among natural gas utilities and impact the quantities of natural gas requirements needed for sales service. If supply, transportation or storage is disrupted, including for reasons of force majeure, the ability of the Company to sell and deliver its products and services may be hindered. As a result, the Company may be responsible for damages incurred by its customers, such as the additional cost of acquiring alternative supply at then-current market rates. These conditions could have a material impact on the Company's financial condition, results of operations and cash flows. NRG relies on power transmission and distribution facilities that it does not own or control and that are subject to transmission constraints within a number of the Company's core regions. NRG depends on transmission and distribution facilities owned and operated by others to deliver power to its customers. If transmission or distribution is disrupted, including by force majeure events, or if the transmission or distribution infrastructure is inadequate, NRG's ability to deliver power may be adversely impacted. The Company also cannot predict whether transmission or distribution facilities will be expanded in specific markets to accommodate competitive access to those markets. In addition, in certain of the markets in which NRG operates, energy transmission congestion may occur and the Company may be deemed responsible for congestion costs associated with power sales or purchases, or retail sales, particularly where the Company’s load is not co-located with its retail sales obligations. If NRG were liable for such congestion costs, the Company's financial results could be adversely affected. Maintenance, expansion and refurbishment of power generation facilities involve significant risks that could result in unplanned power outages or reduced output and could have a material adverse effect on NRG's results of operations, cash flows and financial condition. NRG's facilities require periodic maintenance and repair. Any unexpected failure, including failure associated with breakdowns, forced outages or any unanticipated capital expenditures could result in reduced profitability. NRG cannot be certain of the level of capital expenditures that will be required due to changing environmental and safety laws (including changes in the interpretation or enforcement thereof), needed facility repairs and unexpected events (such as natural disasters or terrorist attacks). The unexpected requirement of large capital expenditures could have a material adverse effect on the Company's liquidity and financial condition. 26 The Company may incur additional costs or delays in the development and construction of new generation projects and may not be able to recover its investments or complete the projects. NRG’s development and construction of new generation facilities involve many risks, including: • inability to receive governmental or other third-party funding; • delays or inability in obtaining necessary permits and licenses; • supply interruptions; • work stoppages and labor disputes; • weather interferences; • unforeseen engineering, environmental and geological problems; • unanticipated cost overruns; and • failure of various third parties to perform under contracts. Any of these risks could cause NRG's financial returns on such new investments to be lower than expected, or could cause the Company to operate below expected capacity or availability levels, which could result in loss of revenues, increase in expenses, higher maintenance costs and penalties. To protect against these risks, insurance is maintained, warranties are generally obtained for limited periods relating to the construction of each project and its equipment in varying degrees, and contractors and equipment suppliers are obligated to meet certain performance levels. The insurance, warranties or performance guarantees, however, may not be adequate to cover increased expenses. As a result, a project may cost more than projected and the Company may be unable to fund principal and interest payments under construction financing obligations, if any. Furthermore, where the Company has partnering relationships with a third party, the Company is subject to the viability and performance of the third party. The Company's inability to find a replacement contracting party where the original contracting party has failed to perform, could result in the abandonment of the development and/or construction of such project, while the Company could remain obligated on other agreements associated with the project. If the Company is unable to complete the development or construction of a facility, or decides to delay, downsize, or cancel such project, it may not be able to recover its investment in that facility. Furthermore, if construction projects are not completed according to specification, the Company may incur liabilities and suffer reduced plant efficiency, higher operating costs and reduced net income. Because NRG owns less than a majority of the ownership interests of some of its project investments, the Company cannot exercise complete control over their operations. NRG has limited control over the operation of some project investments and joint ventures because the Company's investments are in projects where it beneficially owns less than a majority of the ownership interests. NRG seeks to exert a degree of influence with respect to the management and operation of projects in which it owns less than a majority of the ownership interests by negotiating to obtain positions on management committees or to receive certain limited governance rights, such as rights to veto significant actions. However, the Company may not always succeed in such negotiations. NRG may be dependent on its co-venturers to operate such projects. The Company's co-venturers may not have the level of experience, technical expertise, human resources management or other attributes necessary to operate these projects optimally. The approval of co-venturers also may be required for NRG to receive distributions of funds from projects or to transfer the Company's interest in projects. NRG's trading operations and use of hedging agreements could result in financial losses that negatively impact its results of operations , and NRG's hedging activities may increase the volatility in the Company's quarterly and annual financial results. The Company typically enters into hedging agreements, including contracts to purchase or sell commodities at future dates and at fixed prices, to manage the commodity price risks inherent in its business. The Company’s risk management policies and hedging procedures may not mitigate risk as planned, and the Company may fail to fully or effectively hedge its commodity supply and price risk. In addition, these activities, although intended to mitigate price volatility, expose the Company to other risks. When the Company sells or buys power or gas forward, it gives up the opportunity to buy or sell at the future price, which not only may result in lost opportunity costs but also may require the Company to post significant amounts of cash collateral or other credit support to its counterparties. The Company also relies on counterparty performance under its hedging agreements and is exposed to the credit quality of its counterparties under those agreements. Further, if the values of the financial contracts change in a manner that the Company does not anticipate, or if a counterparty fails to perform under a contract, it could harm the Company's business, operating results or financial position. NRG does not typically hedge the entire exposure of its operations against commodity price volatility. To the extent it does not hedge against commodity price volatility, the Company's results of operations and financial position may be improved or diminished based upon movement in commodity prices. 27 NRG may engage in trading activities, including the trading of power, natural gas, fuel, emissions allowances, environmental attributes and credits, weather, and other physical and financial commodity related products that are not directly related to the operation of the Company's generation facilities or the management of related risks. These trading activities take place in volatile markets and some of these trades could be characterized as speculative. This trading activity may expose the Company to the risk of significant financial losses which could have a material adverse effect on its business and financial condition. NRG generally attempts to balance its fixed-price physical and financial purchases and sales commitments in terms of contract volumes and the timing of performance and delivery obligations through the use of financial and physical derivative contracts. These derivatives are accounted for in accordance with the FASB ASC 815, Derivatives and Hedging ("ASC 815"), which requires the Company to record all derivatives on the balance sheet at fair value with changes in the fair value resulting from fluctuations in the underlying commodity prices immediately recognized in earnings, unless the derivative qualifies for cash flow hedge accounting treatment or a scope exception. As a result, the Company's quarterly and annual results are subject to significant fluctuations caused by changes in market prices. NRG may not have sufficient liquidity to hedge market risks effectively. The Company is exposed to market risks through its retail and wholesale operations, which involve the purchase of electricity and natural gas for resale, the sale of energy, capacity and related products, and the purchase and sale of fuel, transmission services and emission allowances. These market risks include, among other risks, volatility arising from location and timing differences that may be associated with buying and transporting fuel, converting fuel into energy and delivering energy to a buyer. NRG undertakes to hedge these market activities through agreements with various counterparties. Many of the Company's agreements with counterparties include provisions that require the Company to provide guarantees, offset or netting arrangements, letters of credit, a first lien on assets and/or cash collateral to protect the counterparties against the risk of the Company's default or insolvency. The amount of such credit support that must be provided typically is based on the difference between the price of the commodity in a given contract and the market price of the commodity. Significant movements in market prices can result in the Company being required to provide cash collateral and letters of credit in very large amounts. The effectiveness of the Company's strategy may depend on the amount of collateral available to enter into or maintain these contracts, and liquidity requirements may be greater than the Company anticipates or will be able to meet. Without a sufficient amount of working capital to post as collateral in support of performance guarantees or as a cash margin, the Company may not be able to manage price volatility effectively or to implement its strategy. An increase in the amount of letters of credit or cash collateral required to be provided to the Company's counterparties may negatively affect the Company's liquidity and financial condition. Further, if retail customers use more power or gas than expected, or if any of NRG's facilities experience unplanned outages, the Company may be required to procure additional power or gas at spot market prices to fulfill contractual commitments. Without adequate liquidity to meet margin and collateral requirements, the Company may be exposed to significant losses, may miss significant opportunities, and may have increased exposure to the volatility of spot markets. There may be periods when NRG will not be able to meet its commitments under forward sale or purchase obligations at a reasonable cost or at all. The Company may sell fixed price gas as a proxy for power. Because the obligations under most of the Company's forward sale agreements are not contingent on a unit being available to generate power, NRG is generally required to deliver power to the buyer, even in the event of a plant outage, fuel supply disruption or a reduction in the available capacity of the unit. To the extent that the Company does not have sufficient lower-cost capacity to meet its commitments under its forward sale obligations, the Company would be required to supply replacement power either by running its other, higher cost power plants or by obtaining power from third-party sources at market prices that could substantially exceed the contract price. If NRG fails to deliver the contracted power, it would be required to pay the difference between the market price at the delivery point and the contract price, and the amount of such payments could be substantial. NRG’s strategy relies, in part, on its ability to bundle its products and services to optimize its network of home energy and smart home customers, and if it is unable to retain existing customers and expand their use of the Company’s products and services, its expected growth and operating results could be adversely affected. As part of NRG’s growth strategy, it is important for the Company to bundle home energy and smart home services and products to optimize its customer base. As the Company is pursuing these opportunities to bundle services and products, there can be no assurances that its efforts in this regard will be successful. Additionally, for the Company to be successful in such opportunities, it must retain its existing customers. The length of the terms for which NRG’s home energy customers are contracted can be for multi-year periods, but many customers are contracted for a period of one year or less. Smart home customers historically have entered into subscriptions that range from three to five years. These customers are not obligated to, and may not, renew their contracts or subscriptions after the expiration of their original commitments. If customers terminate or 28 do not renew their contracts or do not expand their use of NRG’s products and services, the Company’s growth strategy may not be successful and its expected results of operations may be adversely affected. The Company has made investments focused on consumer products that may not be successful, may not achieve the intended financial results or may result in product liability and reputational risk that could adversely affect the Company. The Company may be liable to customers for any damage caused to customers’ homes, facilities, belongings or property during the installation of Company products and systems, such as smart home systems. Where such work is performed by independent contractors, such as repairs performed under the Company's home protection plan products, the Company may nonetheless face claims and costs for damage. In addition, shortages of skilled labor for Company projects could significantly delay a project or otherwise increase its costs. The products that the Company sells or manufactures may expose the Company to product liability claims relating to personal injury, death, or environmental or property damage, and may require product recalls or other actions. Although the Company maintains liability insurance and its service contracts limit Company liability, the Company cannot be certain that its coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to the Company on economically reasonable terms, or at all, or that contractual limitations will be enforced. The laws of some states limit or prohibit insurance coverage for certain liabilities and actions, and any significant uninsured damages could have a material adverse effect on the Company’s business, financial condition and cash flows. Further, any product liability claims or damage caused by the Company could significantly impair the Company’s brand and reputation, which may result in a failure to maintain customers and achieve the Company’s desired growth initiatives in these new businesses. Changes in technology may impair the value of, and the attractiveness of, NRG’s retail products, smart home services and generation facilities. Research and development activities are ongoing in the industry to provide alternative and more efficient technologies to produce power, including wind, photovoltaic (solar) cells, hydrogen, energy storage, and improvements in traditional technologies and equipment, such as more efficient gas turbines. Advances in these or other technologies, including through AI, could reduce the costs of power production to a level below what the Company has currently forecasted, which could adversely affect its cash flows, results of operations or competitive position. Technology, including distributed technology or changes in retail rate structures, may also have a material impact on the Company’s ability to retain retail customers. Further, technological innovation and changes could cause the Company’s smart home products and services to become obsolete, or otherwise more expensive and less effective than those of competitors, putting the Company at a competitive disadvantage. Some emerging technologies, such as distributed renewable energy technologies, broad consumer adoption of electric vehicles and energy storage devices, could affect the price of energy. These emerging technologies may affect the financial viability of utility counterparties and could have significant impacts on wholesale market prices, which could ultimately have a material adverse effect on NRG's financial condition, results of operations and cash flows. The Company’s smart home services rely on innovation and any failure to adequately protect the Company’s intellectual property underlying such innovation, or claims that the Company has infringed the intellectual property rights of others, could have an adverse effect on its business and operations and result in a competitive disadvantage. The Company relies on a combination of patent, trademark, copyright and trade secret right under the laws of the United States and other countries and a combination of confidentiality procedures, contractual provisions and other methods, to protect its intellectual property, all of which offer only limited protection. If the Company fails to acquire the necessary intellectual property rights or adequately protect or assert its intellectual property rights, competitors may manufacture and market similar products and services or convert customers, which could adversely affect market share and results of operations for smart home services. In addition, patent rights may not prevent competitors from developing, using or selling products or services that are similar to or address the same market as the Company’s smart home products and services. Certain of the Company’s smart home solutions contain software modules licensed under “open-source” licenses, which may entail greater risks than the use of commercial software, as open-source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. Further, if proprietary software is combined with open-source software, in certain cases the Company could be required to release the source code of the proprietary software to the public, allowing competitors to create similar products with lower development effort and time. It is possible that certain of the Company’s smart home products and services or those of third parties incorporated into its offerings could infringe the intellectual property rights of others. From time to time, Vivint Smart Home has been subject to claims based on allegations of infringement, misappropriation or other violations of the intellectual property rights of others. If the Company is unable to successfully defend against such claims or license necessary third-party technology or intellectual property on acceptable terms, it may be required to develop alternative, non-infringing technology, which could require significant time, effort, and expense and may ultimately not be successful. 29 The operation of the Company's businesses is subject to advanced persistent cyber-based security threats and integrity risk. Attacks on NRG's infrastructure that breach cyber/data security measures could expose the Company to significant liabilities, reputational damage, regulatory action, and disrupt business operations, which could have a material adverse effect. Numerous functions affecting the efficient operation of NRG’s businesses depend on the secure and reliable storage, processing and communication of electronic data and the use of sophisticated computer hardware and software systems, much of which is connected (directly or indirectly) to the internet. As a result, NRG's information technology systems and infrastructure, and those of its vendors and suppliers, are vulnerable to cyber-based security threats which could compromise confidentiality, integrity or availability. While the Company has controls in place designed to protect its infrastructure, such breaches and threats are becoming increasingly sophisticated and complex, requiring continuing evolution and constant improvements in security programs and technology. Any such breach, disruption or similar event that impairs NRG's information technology infrastructure could disrupt normal business operations and affect the Company's ability to control its generation assets, provide smart home services, maintain confidentiality, availability and integrity of restricted data, access retail customer information and limit communication with customers and third parties, which could have a material adverse effect on the Company. As part of the continuing development of new and modified reliability standards, the FERC has approved changes to its Critical Infrastructure Protection reliability standards and has established standards for assets identified as "critical cyber assets." Under the Energy Policy Act of 2005, the FERC can impose penalties, up to $1 million per day, per violation, for failure to comply with mandatory electric reliability standards, including standards to protect the power system against potential disruptions from cyber/data and physical security breaches. Further, the Company's retail and Home businesses, as well as Vivint Smart Home's smart home platform, require accessing, collecting, storing and transmitting sensitive customer data in the ordinary course of business. Concerns about data privacy have led to increased regulation and other actions that could impact NRG's businesses and changes in data privacy and data protection laws and regulations or any failure to comply with such laws and regulations could adversely affect the Company's business and financial results. NRG's retail, Home and smart home businesses access and store sensitive customer data. Additionally, NRG relies on vendors and service providers, such as call centers, that may require access to sensitive data, which increase the risk of data breaches through third-party action or errors. The services and the networks and information systems utilized by the Company may be at risk for breaches as a result of third-party actions, employee or vendor error, malfeasance or other factors. Although the Company takes precautions to protect its infrastructure, it has been, and will likely continue to be, subject to attempts at phishing and other cybersecurity intrusions. International conflict increases the risk of state-sponsored cyber threats and escalated use of cybercriminal and cyber-espionage activities. In particular, the current geopolitical climate has further escalated cybersecurity risk, with various government agencies, including the U.S. Cybersecurity & Infrastructure Security Agency, issuing warnings of increased cyber threats, particularly for U.S. critical infrastructure. Additionally, the rapid advancement and integration of AI and machine learning technologies present new and evolving risks. These technologies can be exploited by malicious actors to enhance the sophistication and scale of cyberattacks, making it more challenging to detect and mitigate such threats. While the Company has not experienced a cyber/data breach or event causing any material operational, reputational or financial harm, it recognizes the growing threat within the general marketplace and the industry, and there is no assurance that NRG will be able to prevent any such harm in the future. If a material breach of the Company's information technology systems were to occur, the critical operational capabilities and reputation of its business may be adversely affected, customer confidence may be diminished, and NRG may be subject to substantial legal or regulatory scrutiny and claims, any of which may contribute to potential legal or regulatory actions against the Company, loss of customers, fines, penalties or other sanctions and otherwise have a material adverse effect. Any loss or disruption of critical operational capabilities to support the Company's generation, commercial or retail operations, loss of customers, or loss of confidential or proprietary data through a breach, unauthorized access, disruption, misuse or disclosure could adversely affect NRG's reputation, expose the Company to material legal or regulatory claims and impair the Company's ability to execute its business strategy, which could have a material adverse effect. In addition, NRG may experience increased capital and operating costs to implement enhanced security for its information technology infrastructure. NRG cannot provide any assurance that such events and impacts will not be material in the future, and the Company's efforts to deter, identify and mitigate future breaches may require additional significant capital and may not be successful. The Company’s growing use of AI systems in its operations, services and products poses inherent risks, which may cause operational and reputational harm. The Company has incorporated and intends to continue to incorporate AI technologies, such as GenAI, in its operations. services and products. Because GenAI is an emerging technology, ineffective or inadequate AI development, governance, or deployment practices by NRG or third-party vendors could result in unintended consequences, and the desired efficiencies and other intended benefits could fail to materialize. Due to its non-deterministic nature, GenAI technologies can create accuracy 30 issues, unintended biases and discriminatory outcomes, or may create content that appears correct but is actually inaccurate or flawed. If the recommendations, content, or analyses that AI applications produce are or are alleged to be deficient or inaccurate, NRG could be subjected to potential legal liability and business harm, including brand or reputational harm and operational interruptions and ultimately have a material adverse effect on NRG’s results of operations. In addition, the evolving nature of AI may cause new laws and regulations to be enacted which may require significant resources and costs to modify and maintain business practices in order to comply with these new laws and regulations. Future acquisition or disposition activities could involve unknown risks and may have materially adverse effects and NRG may be subject to trailing liabilities from businesses that it disposes of or that are inactive. NRG may in the future acquire or dispose of businesses or assets, acquire or sell books of retail customers, or pursue other business activities, directly or indirectly, through subsidiaries that involve a number of risks. The acquisition of companies and assets, and their integration, is subject to substantial risks, including the failure to identify material problems during due diligence, the risk of over-paying for assets or customers, the inability to retain customers and the inability to arrange financing for an acquisition as may be required or desired. Further, the integration and consolidation of acquisitions requires substantial human, financial and other resources and, ultimately, the Company's acquisitions may not be successfully integrated. In the case of dispositions, such risks may relate to employment matters, counterparties, regulators and other stakeholders in the disposed business, the separation of disposed assets from NRG’s business, the management of NRG’s ongoing business, and other financial, legal and operational matters related to such disposition, which may be unknown to NRG at the time. In addition, NRG may be subject to material trailing liabilities from disposed businesses. Any such risk may result in one or more costly disputes or litigation. There can be no assurances that any future acquisitions will perform as expected or that the returns from such acquisitions will support the indebtedness incurred to acquire them or the capital expenditures needed to develop them. There can also be no assurances that NRG will realize the anticipated benefits from any such dispositions. The failure to realize the anticipated returns or benefits from an acquisition or disposition could adversely affect NRG's results of operations, cash flows and financial condition. Competition may have a material adverse effect on NRG's results of operations, cash flows and the market value of its assets. The Company's retail operations face competition for customers. Competitors may offer different products, lower prices, and other incentives which may attract customers away from the Company. In some retail electricity markets, the principal competitor may be the incumbent utility. The incumbent utility often has the advantage of long-standing relationships with its customers and strong brand recognition. Furthermore, NRG may face competition from other energy service providers, other energy industry participants, or nationally branded providers of consumer products and services — including providers that may be better equipped to satisfy the large and rapid load growth expected of manufacturing, industrial, and data center customers — who have, and may in the future, develop businesses and offerings that compete with NRG. The Company's smart home services market faces competition from residential security companies as well as other companies that are able to bundle their existing offerings, such as cable, telecommunications and internet service, with automation and monitored security services, and from do-it-yourself smart home systems, which customers are able to install without subscription services. The Company’s plant operations face competition from newer or more efficient plants owned by competitors, which may put some of the Company's plants at a disadvantage to the extent these competitors are able to consume the same or less fuel as the Company's plant. Over time, the Company's plants may be unable to compete with these more efficient plants, which could result in asset retirements. NRG’s competitors may have greater liquidity, greater access to credit and other financial resources, lower cost structures, more effective risk management policies and procedures, greater ability to incur losses, longer-standing relationships with customers, greater brand awareness, greater potential for profitability from retail sales or greater flexibility in the timing of their sale of generation capacity and ancillary services than NRG does. Competitors may also have better access to subsidies or other out-of-market payments that put NRG at a competitive disadvantage. NRG's competitors may be able to respond more quickly to new laws or regulations or emerging technologies, or devote greater resources to marketing of retail energy and home services than NRG can. In addition, current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties. Accordingly, it is possible that new competitors or alliances among current and new competitors may emerge and rapidly gain significant market share. There can be no assurance that NRG will be able to compete successfully against current and future competitors, and any failure to do so would have a material adverse effect on the Company's business, financial condition, results of operations and cash flow. 31 Supplier and/or customer concentration, the inability of suppliers to meet their obligations and dependence on third-party service providers may expose the Company to significant financial credit or performance risks and adversely affect NRG's results of operations, cash flows and financial condition. NRG often relies on a single contracted supplier or a small number of suppliers for the provision and transportation of fuel, chemicals and other services required for the operation of certain of its facilities. If these suppliers cannot perform these services, the Company utilizes the marketplace. There can be no assurance that the marketplace can provide these services as, when and where required or at comparable prices. The Company also relies on a number of sole or limited source suppliers for critical components for its smart home products and services, and those services are dependent on third-party cellular, telecommunications and/or internet providers. The failure of any supplier or customer to fulfill its contractual obligations to NRG, the inability of NRG to source products and services on acceptable terms, if at all, and the failure of third parties to provide services to its customers that are necessary for the Company’s smart home services could have a material adverse effect on the Company's financial results. As a result, the financial performance of the Company's facilities is dependent on the credit quality of, and continued performance by, suppliers and customers, which cannot be guaranteed. Negative publicity may damage NRG's reputation or its brands and negatively impact its business, financial condition, results of operations and ability to attract and retain highly qualified employees. NRG’s reputation and brands could be damaged for numerous reasons, including negative views of the Company’s environmental impact, sustainability goals, supply chain practices, product and service offerings, sponsorship relationships, charitable giving programs and public statements made by Company officials. Additionally, the Company is from time to time named in investigations, claims and lawsuits arising in the ordinary course of business, and customers have in the past communicated complaints to consumer protection organizations, regulators or the media. Negative claims or publicity regarding the Company or its operations, offerings, practices or customer service may damage its brands or reputation, even if such claims are untrue. The Company may also experience criticism or backlash from media, customers, employees, government entities, advocacy groups and other stakeholders that disagree with positions taken by the Company or its executives. If the Company’s brands or reputation are damaged, it could negatively impact the Company’s business, financial condition, results of operations, and ability to attract and retain highly qualified employees. NRG's business, financial condition and results of operations could be adversely impacted by strikes or work stoppages by its unionized employees or inability to replace employees as they retire. As of December 31, 2024, approximately 4% of NRG's employees were covered by collective bargaining agreements. In the event that the Company's union employees strike, participate in a work stoppage or slowdown or engage in other forms of labor strife or disruption, NRG would be responsible for procuring replacement labor or the Company could experience reduced power generation or outages. Although NRG's ability to procure such labor is uncertain, contingency staffing planning is completed as part of each respective contract negotiation. Strikes, work stoppages or the inability to negotiate future collective bargaining agreements on favorable terms could have a material adverse effect on the Company's business, financial condition, results of operations and cash flows. In addition, a number of the Company's employees at NRG's plants are close to retirement. The Company's inability to replace retiring workers could create potential knowledge and expertise gaps as such workers retire. NRG's failure to manage key executive succession and retention and to continue to attract qualified personnel could adversely affect the Company's financial condition and results of operations. The loss of one or more of the Company’s key personnel or the inability to effectively identify a suitable successor to a key role could adversely affect the Company’s business. The failure to successfully transition and assimilate key employees, the effectiveness of the Company’s leaders, and any further transition, could adversely affect the Company’s financial condition and results of operations. Risks that are beyond NRG's control, including but not limited to acts of terrorism or related acts of war, natural disaster or other catastrophic events could have a material adverse effect on NRG's financial condition, results of operations and cash flows. NRG's generation facilities and the facilities of third parties on which they rely may be targets of terrorist activities, as well as events occurring in response to or in connection with such activities, all of which could cause environmental repercussions and/or result in full or partial disruption of the facilities ability to generate, transmit, transport or distribute electricity or natural gas. Strategic targets, such as energy-related facilities, may be at greater risk of future terrorist activities than other domestic targets. Any such environmental repercussions or disruption could result in a significant decrease in revenues or significant reconstruction or remediation costs beyond what could be recovered through insurance policies, which could have a material adverse effect on the Company's financial condition, results of operations and cash flows. In addition, significant weather events or terrorist actions could damage or shut down the power or gas transmission and distribution 32 facilities upon which the Company is dependent, which may reduce retail volume for extended periods of time. Power or gas supply may be sold at a loss if these events cause a significant loss of retail customer demand. Risks Related to Governmental Regulation and Laws NRG's business is subject to substantial energy regulation and may be adversely affected by legislative or regulatory changes, as well as liability under, or any future inability to comply with, existing or future energy regulations or requirements. NRG's business is subject to extensive U.S. federal, state and local laws and foreign laws. Compliance with, or changes to, the requirements under these legal regimes may cause the Company to incur significant additional costs, reduce the Company's ability to hedge exposure or to sell retail power within certain states or to certain classes of retail customers, or restrict the Company’s marketing practices, its ability to pass through costs to retail customers, or its ability to compete on favorable terms with competitors, including the incumbent utility. Retail competition and home protection services are regulated on a state-by-state or at the province-by-province level and are highly dependent on state and provincial laws, regulations and policies, which could change at any moment. Failure to comply with such requirements could result in the shutdown of a non-complying facility or line of business, the imposition of liens, fines, penalties and/or civil or criminal liability. Public utilities under the FPA are required to obtain FERC acceptance of their rate schedules for wholesale sales of electricity. Except for ERCOT generation facilities and power marketers, all of NRG's non-qualifying facility generating companies and power marketing affiliates in the U.S. make sales of electricity in interstate commerce and are public utilities for purposes of the FPA. FERC has granted each of NRG's generating and power marketing companies that make sales of electricity outside of ERCOT the authority to sell electricity at market-based rates. FERC's orders that grant NRG's generating and power marketing companies market-based rate authority reserve the right to revoke or revise that authority if FERC subsequently determines that NRG can exercise market power in transmission or generation, create barriers to entry, or engage in abusive affiliate transactions. In addition, NRG's market-based sales are subject to certain market behavior rules, and if any of NRG's generating and power marketing companies were deemed to have violated those rules, they are subject to potential disgorgement of profits associated with the violation and/or suspension or revocation of their market-based rate authority. If NRG's generating and power marketing companies were to lose their market-based rate authority, such companies would be required to obtain FERC's acceptance of a cost-of-service rate schedule and could become subject to the accounting, record-keeping, and reporting requirements that are imposed on utilities with cost-based rate schedules. This could have a material adverse effect on the rates NRG charges for power from its facilities. The Company's generation assets are also subject to the reliability standards promulgated by the designated Electric Reliability Organization (currently NERC) and approved by FERC. If NRG fails to comply with the mandatory reliability standards, NRG could be subject to sanctions, including substantial monetary penalties and increased compliance obligations. NRG is also affected by legislative and regulatory changes, as well as changes to market design, market rules, tariffs, cost allocations, and bidding rules that occur in the existing ISOs. The ISOs that oversee most of the wholesale power markets impose, and in the future may continue to impose, mitigation, including price limitations, offer caps, non-performance penalties and other mechanisms to address some of the volatility and the potential exercise of market power in these markets. These types of price limitations and other regulatory mechanisms may have a material adverse effect on the profitability of NRG's generation facilities that sell energy and capacity into the wholesale power markets. The regulatory environment is subject to significant changes due to state and federal policies affecting wholesale and retail competition and the creation of incentives for the addition of large amounts of new renewable and nuclear generation and, in some cases, transmission. These changes are ongoing, and the Company cannot predict the future design of the wholesale power markets or the ultimate effect that the changing regulatory environment will have on NRG's business. In addition, in some of these markets, interested parties have proposed material market design changes. If competitive restructuring of the electric power markets is reversed, discontinued, or delayed, the Company's business prospects and financial results could be negatively impacted. In addition, there have been a number of reforms to the regulation of the derivatives markets, both in the United States and internationally. These regulations, and any further changes thereto, or adoption of additional regulations, including any regulations relating to position limits on futures and other derivatives or margin for derivatives, could negatively impact NRG’s ability to hedge its portfolio in an efficient, cost-effective manner by, among other things, potentially decreasing liquidity in the forward commodity and derivatives markets or limiting NRG’s ability to utilize non-cash collateral for derivatives transactions. NRG’s business may be affected by interference in the competitive wholesale marketplace. NRG’s generation and competitive retail operations rely on a competitive wholesale marketplace. The competitive wholesale marketplace may be impacted by out-of-market subsidies, imports of power from Canada, renewable mandates or subsidies, mandates to sell power below its cost of acquisition and associated costs as well as out-of-market payments to new or existing generators. These out-of-market subsidies to existing or new generation undermine the competitive wholesale marketplace, which can lead to premature retirement of existing facilities, including those owned by the Company. If these 33 measures continue, capacity and energy prices may be suppressed, and the Company may not be successful in its efforts to insulate the competitive market from this interference. The Company's retail operations may be materially impacted by rules or regulations that allow regulated utilities to participate in competitive retail markets or own and operate facilities that could be provided by competitive market participants. Additions or changes in tax laws and regulations could potentially affect the Company’s financial results or liquidity. NRG is subject to various types of tax arising from normal business operations in the jurisdictions in which the Company operates. Any additions or changes to tax legislation, or their interpretation and application, including those with retroactive effect, could have a material adverse effect on NRG’s financial condition and results of operations, including income tax provision and accruals reflected in the consolidated financial statements. The Company is subject to a 15% corporate alternative minimum tax as a result of the Inflation Reduction Act. The CAMT may lead to volatility in the Company’s cash tax payment obligations, particularly in periods of significant commodity or currency variability resulting from potential changes in the fair value of derivative instruments. The Company continuously monitors and assesses proposed tax legislation that could negatively impact its business. The Capacity Performance product into the PJM market could lead to substantial changes in capacity income and non-performance penalties, which could have a material adverse effect on NRG’s results of operations, financial condition and cash flows. PJM operates a pay-for-performance model where capacity payments are modified based on real-time generator performance. Capacity market prices are sensitive to design parameters, as well as additions of new capacity. NRG may experience substantial changes in capacity income and incur non-performance penalties, which could have a material adverse effect on NRG’s results of operations, financial condition and cash flows. NRG is subject to environmental laws that impose extensive and increasingly stringent requirements on the Company's ongoing operations, as well as potentially substantial liabilities arising out of environmental contamination. These environmental requirements and liabilities could adversely impact NRG's results of operations, financial condition and cash flows. NRG is subject to the environmental laws of foreign and U.S., federal, state and local authorities. The Company must comply with numerous environmental laws and obtain numerous governmental permits and approvals to build and operate the Company's plants. Should NRG fail to comply with any environmental requirements that apply to its operations, the Company could be subject to administrative, civil and/or criminal liability and fines, and regulatory agencies could take other actions seeking to curtail the Company's operations. In addition, when new requirements take effect or when existing environmental requirements are revised, reinterpreted or subject to changing enforcement policies, NRG's business, results of operations, financial condition and cash flows could be adversely affected. NRG's businesses are subject to physical, market and economic risks relating to potential effects of climate change, and policies to regulate GHG emissions and mitigate climate change which could adversely impact NRG's results of operations, financial condition and cash flows. Fluctuations in weather and other environmental conditions, including temperature and precipitation levels, may affect consumer demand for electricity or natural gas. In addition, the potential physical effects of climate change, such as increased frequency and severity of storms, floods and other climatic events, could disrupt NRG's operations and supply chain, and cause it to incur significant costs in preparing for or responding to these effects. These or other changes in climate could lead to increased operating costs or capital expenses. NRG's customers may also experience the potential physical impacts of climate change and may incur significant costs in preparing for or responding to these efforts, including changing the fuel mix and resiliency of their energy solutions and supply. The contribution of climate change to the frequency or intensity of weather-related events could affect NRG's operations and planning process. Climate change could also affect the availability of a secure and economical supply of water in some locations, which is essential for the continued operation of NRG's generation plants. NRG monitors water supply risk carefully. If it is determined that a water supply risk exists that could impact projected generation levels at any plant, risk mitigation efforts are identified and evaluated for implementation. Further, demand for NRG's energy-related services could be similarly impacted by consumers’ preferences or market or regulatory factors favoring energy efficiency, lower carbon energy sources or reduced electricity or natural gas usage. NRG's GHG emissions reduction targets can be found in Item 1, Business —Environmental Regulatory Matters . The Company's ability to achieve these targets depends on many factors, including the ability to retire high emitting assets, ability to reduce emissions based on technological advances and innovation, and ability to source energy from less carbon intense resources. In addition, any future decarbonization efforts may increase costs, or NRG may otherwise be limited in its ability to apply them. The cost associated with NRG's GHG emissions reduction goals could be significant. Failure to achieve the 34 Company's emissions targets could result in a negative impact on access to and cost of capital, changing investor sentiment regarding investment in the Company or reputation harm. Enhanced data privacy and data protection laws and regulations, or any non-compliance with such laws and regulations, could adversely affect NRG’s business and financial results. The consumer privacy landscape continues to experience momentum for greater privacy protection and reform at the state and federal level in response to precedents set forth by the Personal Information Protection and Electronic Documents Act (the "PIPEDA") of Canada and the California Consumer Privacy Act (the "CCPA"). The development and evolving nature of domestic and international privacy regulation and enforcement could impact and potentially limit how NRG collects, processes, discloses and stores personally identifiable information. California residents have increased access rights (including the right to limit the use, right of data deletion and correction and right of non-disclosure of sensitive personal information), which are enforced by a new state privacy regulator, resulting in more scrutiny of business practices and disclosures. Additional states including Virginia, Utah, Connecticut, Colorado, Nevada, Texas, New Hampshire, Nebraska and Maryland have similarly adopted enhanced data privacy legislation and patterned after the standards set forth by CCPA, including broader data access rights, with several states going a step further requiring businesses to perform data protection assessments for a variety of processing activities. The Company is also bound by contractual requirements relating to privacy and data protection, and may agree to additional contractual requirements addressing these matters from time to time. In addition, Canadian data protection laws, PIPEDA, and the privacy laws of certain Canadian provinces who have promulgated more onerous data protection laws than PIPEDA, apply to the Company’s business in Canada. As new laws and regulations are created, amended or expanded, requiring businesses to implement processes to enable customers access to their data and enhanced data protection and management standards, NRG cannot forecast with any certainty the impact that they may have on the Company’s business; however, it is possible the Company may find it necessary or desirable to change certain of its business practices or to expend resources to modify its home products and services and otherwise adapt to these changes. It is possible that the Company may be unable to make such changes and modifications in a commercially reasonable manner or at all, and its ability to develop new home services and features could be limited. Any non-compliance with laws may result in proceedings or actions against the Company by governmental entities or individuals. Moreover, any inquiries or investigations, government penalties or sanctions, or civil actions by individuals may be costly to comply with, resulting in negative publicity, increased operating costs, significant management time and attention, and may lead to remedies that harm the business, including fines, demands or orders that existing business practices be modified or terminated. NRG's retail operations and smart home services are subject to changing rules and regulations that could have a material impact on the Company's profitability. The competitiveness of NRG's retail operations partially depends on regulatory policies that establish the structure, rules, terms and conditions upon which services are offered to retail customers. These policies can include, among other things, controls on the retail rates that NRG can charge, the imposition of additional costs on sales, restrictions on the Company's ability to sell certain types of products or ability to obtain new customers through various marketing channels and disclosure requirements. The Company's retail operations may be materially impacted by rules or regulations that allow regulated utilities to participate in competitive retail markets or own and operate facilities that could be provided by competitive market participants. Additionally, state, federal or provincial imposition of net metering or RPS programs can make it more or less expensive for retail customers to supplement or replace their reliance on grid power. The Company’s smart home services focus on transactions with residential customers, subjecting it to a variety of laws, regulations and licensing requirements governing interactions with residential consumers, including those pertaining to privacy and data security, consumer financial and credit transactions, home improvements, warranties and door-to-door solicitation. In certain jurisdictions, the Company is required to obtain licenses or permits to comply with standards governing marketing and sales efforts, installation of equipment or servicing of customers and monitoring station employee selection and training. Increased regulation of matters relating to interactions with residential consumers could require modification to the Company’s home services operations and the incurrence of additional expenses. Further, any expansion of the scope of products or services into new markets may require additional licenses and expenditures to otherwise maintain compliance with additional laws, regulations or licensing requirements. These laws and regulations, as well as their interpretation, and any new laws, regulations or licensing requirements could negatively affect the Company’s ability to acquire new residential customers. Any of these measures could increase costs for providing, or reduce customer satisfaction with respect to, smart home services. The Federal Trade Commission ("FTC") and the Federal Communications Commission have issued regulations that restrict direct-to-home marketing, telemarketing, email marketing and other sales practices, including limitations on methods of communication, requirements to maintain a “do not call” list, cancellation rights and required training for personnel to comply with these restrictions. Any noncompliance, or alleged noncompliance, of applicable regulations by the Company, third-party vendors used for marketing, telemarketing or lead generation activities or independent, third-party authorized dealers of smart 35 home services could result in private rights of actions or enforcement actions for civil or criminal penalties. Changes in regulations or interpretations that further restrict lead generating activities also could result in a reduction in the number of new smart home services customers. The Company’s smart home business exposes it to risks of liability for the acts or omissions of its employees, including with respect to sales practices. Activities in connection with sales efforts by employees, independent contractors, and other agents, including predatory door-to-door sales tactics and fraudulent misrepresentations, have in the past subjected it to, and could in the future subject the Company to, governmental investigations and class action lawsuits for, among others, false advertising and deceptive trade practice damage claims. Any litigation or regulatory proceedings resulting from such activities could adversely impact the Company’s business, financial condition, results of operations, and cash flows. The Company is subject to various risks in connection with Vivint Smart Home’s ongoing settlement administration process involving the FTC, and may be subject to other FTC actions in the future. In 2021, Vivint Smart Home entered into a settlement with the FTC where Vivint Smart Home agreed to implement various compliance-related measures and pay a penalty or fine. The settlement requires an initial assessment and thereafter biennial assessments by an independent third-party assessor of Vivint Smart Home’s compliance programs and for the assessor to provide a report to the FTC staff on ongoing compliance with the settlement. Although Vivint Smart Home took action to enhance its compliance programs, these and other measures that the Company may take in the future may not be successful. If any assessments identify deficiencies in the Company’s efforts to comply, and should the FTC determine that Vivint Smart Home is not in full compliance with the settlement, the FTC could take further action, such as seeking judicial remedies for any noncompliance, and Vivint Smart Home could be subject to additional sanctions, fines, penalties and restrictions on its smart home operations. In addition, the filing of an application with the court for noncompliance with the settlement could lead to regulatory actions by other agencies or private litigation, which could impact Vivint Smart Home’s ability to obtain regulatory approvals necessary to carry out present or future plans and operations, and result in negative publicity. The Company's international operations are exposed to political and economic risks, commercial instability and events beyond the Company's control in the countries in which it operates, which risks may negatively impact the Company's business. The Company's international operations depend on products manufactured, purchased and sold in the U.S. and internationally. In some cases, these countries have greater political and economic volatility and greater vulnerability to infrastructure labor, and supply chain disruptions than in NRG's other markets. Operating a business in a number of different regions and countries exposes the Company to a number of risks, including: imposition of burdensome tariffs or quotas, multiple and potentially conflicting laws, regulations and policies that are subject to change, imposition of currency restrictions on repatriation of earnings or other restraints, national and international conflict, including terrorist acts and political and economic instability or civil unrest that may severely disrupt economic activity in affected countries and result in increased cost. The occurrence of one or more of these events may negatively impact the Company's business, results of operations and financial condition. Rates and terms for service of certain residential and commercial customers in Alberta are subject to regulatory review and approval. The Company owns Direct Energy Regulated Services, which serves as a regulated rate supplier for residential and commercial energy customers in portions of the province of Alberta. It is required to engage in regulatory approval proceedings as a part of the process of establishing the terms and rates for sales of power and natural gas. These proceedings typically involve multiple parties, including governmental bodies and officials, consumer advocacy groups and various consumers of energy, who have differing concerns but also have the common objective of limiting rate increases or even reducing rates. Decisions are subject to appeal, potentially leading to additional uncertainty associated with the approval proceedings. The potential duration of such proceedings creates a risk that rates ultimately approved by the applicable regulatory body may not be sufficient for the Company to recover its costs by the time the rates become effective. Established rates are also subject to subsequent reviews by regulators, whereby various portions of rates could be adjusted, subject to refund or disallowed. In certain instances, the Company could agree to negotiated settlements related to various rate matters and other cost recovery elements. These settlements are subject to regulatory approval. The ultimate outcome and timing of regulatory rate proceedings have a significant effect on the Company to recover its costs or earn an adequate return. In addition, subsequent legislative or regulatory action could alter the terms on which the regulated business operates and future earnings could be negatively impacted. The Company also operates a competitive energy supply business in Alberta that is not subject to rate regulation and is subject to stringent requirements to segregate operations and information relating to the competitive business from the regulated business. Failure to comply with these and other requirements on the business could subject the Company's regulated and competitive businesses in Alberta to fines, penalties, and restrictions on the ability to continue business. 36 Risks Related to Economic and Financial Market Conditions and the Company's Indebtedness NRG's level of indebtedness could adversely affect its ability to raise additional capital to fund its operations or return capital to stockholders. It could also expose it to the risk of increased interest rates and limit its ability to react to changes in the economy or its industry. NRG's substantial amount of debt could have negative consequences, including: • increasing NRG's vulnerability to general economic and industry conditions; • requiring a substantial portion of NRG's cash flow from operations be used to pay principal and interest on its indebtedness, which reduces NRG's ability to pay dividends or fund its operations, capital expenditures and future business opportunities; • limiting NRG's ability to enter into long-term power sales or fuel purchases, which require credit support; • adversely impacting NRG's credit rating, which could increase borrowing costs; • limiting NRG's ability to obtain additional financing for working capital, including collateral postings, capital expenditures, debt service requirements, acquisitions and general corporate purposes; • limiting NRG's ability to adjust to changing market conditions and placing it at a competitive disadvantage compared to its competitors, who may have less debt; and • exposing NRG to the risk of increased interest rates because certain of its borrowings are at variable rates of interest. The Company’s debt agreements contain financial and other restrictive covenants that may limit the Company's ability to return capital to stockholders, including by paying dividends, or otherwise engage in activities that may be in its long-term best interests. NRG's failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of such indebtedness, which in turn could cause a cross default to NRG's other indebtedness. NRG's assets and available cash balances may not be sufficient to fully repay all outstanding indebtedness if accelerated upon an event of default. If NRG is unable to repay, refinance, or restructure its indebtedness as required, or amend the covenants contained in those agreements, the lenders or other creditors may be entitled to obtain a lien or institute foreclosure proceedings against its assets, which could have a material adverse effect on its business, results of operations and financial condition. In addition, the Company's Revolving Credit Facility and sustainability-linked bonds include a sustainability-linked metric, which could result in increased interest expense for the Company if the sustainability metrics set forth therein are not achieved. Furthermore, financial and other restrictive covenants contained in any subsidiary or project level debt may limit the ability of NRG to receive distributions from such subsidiary. In addition, NRG's ability to arrange financing, either at the corporate level, a non-recourse project-level subsidiary or otherwise, and the costs of such capital are dependent on numerous factors, including: general economic and capital market conditions, credit availability from banks and other financial institutions, investor confidence in NRG, its partners and the regional wholesale power markets, NRG's financial performance and the financial performance of its subsidiaries, NRG's level of indebtedness and compliance with covenants in debt agreements, maintenance of acceptable credit ratings, cash flow and provisions of tax and securities laws that may impact raising capital. NRG's ability to meet its payment obligations under its debt agreements is dependent on its ability to generate significant cash flows or obtain additional capital in the future. This, to some extent, is subject to market, economic, financial, competitive, legislative, and regulatory factors as well as other factors that are beyond its control. NRG may not be successful in obtaining additional capital for these or other reasons. The failure to obtain additional capital on terms acceptable to NRG, or at all, from time to time may have a material adverse effect on its business and operations. NRG's outstanding preferred stock is senior to its common stock, and a failure to pay dividends on its preferred stock will prohibit the payment of dividends on its common stock. NRG has outstanding 650,000 shares of Series A Preferred Stock, with a $1,000 liquidation preference per share. The Series A Preferred Stock is senior to NRG's common stock in right of payment of dividends and other distributions and could adversely affect NRG's ability to declare or pay dividends or distributions on its common stock. In the event of NRG's voluntary or involuntary liquidation, winding-up or dissolution, the holders of Series A Preferred Stock must receive their $1,000 per share, plus accumulated but unpaid dividends, prior to any distributions to holder of common stock. NRG must be current on dividends payable to holders of Series A Preferred Stock before any dividends can be paid on its common stock. Whenever dividends on any shares of Series A Preferred Stock have not been declared and paid for the equivalent of three or more dividend payments, whether or not for consecutive dividend periods, the number of directors on the Company's Board of Directors will be increased by two, and the holders of Series A Preferred Stock will have the right to elect two members of the Company's Board of Directors to fill such newly created openings. 37 Adverse economic conditions could adversely affect NRG’s business, financial condition, results of operations and cash flows. Adverse economic conditions, including inflation, and declines in wholesale energy prices, partially resulting from adverse economic conditions, may impact NRG's results of operations, including by reducing the demand for energy commodities. In general, economic and commodity market conditions will continue to impact NRG’s unhedged future energy margins, liquidity, earnings growth and overall financial condition. Macroeconomic factors may also impact consumer spending, which could adversely affect the Company’s smart home services, and increase the Company’s costs for such products and services, which it may not be able to pass on to customers. In addition, adverse economic conditions, declines in wholesale energy prices, reduced demand for energy and other factors may negatively impact the trading price of NRG’s common stock and impact forecasted cash flows, which may require NRG to evaluate its goodwill and other long-lived assets for impairment. Any such impairment could have a material impact on NRG’s financial condition. Goodwill and other intangible assets that NRG has recorded in connection with its acquisitions are subject to impairment evaluations and, as a result, the Company could be required to write off some or all of this goodwill and other intangible assets, which may adversely affect the Company's financial condition and results of operations. Goodwill is not amortized but is reviewed annually or more frequently for impairment. Other intangibles are also reviewed at least annually or more frequently, if certain conditions exist, and are amortized. Any reduction in or impairment of the value of goodwill or other intangible assets will result in a charge against earnings, which could materially adversely affect NRG's reported results of operations and financial position in future periods. 38 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION This Annual Report on Form 10-K of NRG Energy, Inc., or NRG or the Company, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. The words "believes," "projects," "anticipates," "plans," "expects," "intends," "estimates," "should," "forecasts," and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause NRG's actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors, risks and uncertainties include the factors described under Item 1A — Risk Factors and the following: • NRG's ability to obtain and maintain retail market share; • General economic conditions, changes in the wholesale power and gas markets and fluctuations in the cost of fuel; • Volatile power and gas supply costs and demand for power and gas, including the impacts of weather; • Hazards customary to the power production industry and power generation operations, such as fuel and electricity price volatility, unusual weather conditions, catastrophic weather-related or other damage to facilities, unscheduled generation outages, maintenance or repairs, unanticipated changes to fuel supply costs or availability due to higher demand, shortages, transportation problems or other developments, environmental incidents, or electric transmission or gas pipeline system constraints and the possibility that NRG may not have adequate insurance to cover losses as a result of such hazards; • The effectiveness of NRG's risk management policies and procedures and the ability of NRG's counterparties to satisfy their financial commitments; • NRG's ability to enter into contracts to sell power or gas and procure fuel on acceptable terms and prices; • NRG's ability to successfully integrate, realize cost savings and manage any acquired businesses; • NRG's ability to engage in successful acquisitions and divestitures, as well as other mergers and acquisitions activity; • NRG’s ability to successfully complete the development and construction new generation projects in a timely and cost effective manner; • Cyber terrorism and cybersecurity risks, data breaches or the occurrence of a catastrophic loss and the possibility that NRG may not have sufficient insurance to cover losses resulting from such hazards or the inability of NRG's insurers to provide coverage; • Operational and reputational risks related to the use of AI and the adherence to developing laws and regulations related to the use of AI; • Counterparties' collateral demands and other factors affecting NRG's liquidity position and financial condition; • NRG's ability to operate its businesses efficiently and generate earnings and cash flows from its asset-based businesses in relation to its debt and other obligations; • The liquidity and competitiveness of wholesale markets for energy commodities; • Changes in law, including judicial and regulatory decisions; • Government regulation, including changes in market rules, rates, tariffs and environmental laws; • NRG's ability to develop and innovate new products, as retail and wholesale markets continue to change and evolve; • Price mitigation strategies and other market structures employed by ISOs or RTOs that result in a failure to adequately and fairly compensate NRG's generation units; • NRG's ability to mitigate forced outage risk; • NRG's ability to borrow funds and access capital markets, as well as NRG's substantial indebtedness and the possibility that NRG may incur additional indebtedness in the future; • Operating and financial restrictions placed on NRG and its subsidiaries that are contained in NRG's corporate credit agreements, and in debt and other agreements of certain of NRG subsidiaries and project affiliates generally; • The ability of NRG and its counterparties to develop and build new power generation facilities; • NRG's ability to implement its strategy of finding ways to meet the challenges of climate change, clean air and protecting natural resources, while taking advantage of business opportunities; • NRG's ability to increase cash from operations through operational and market initiatives, corporate efficiencies, asset strategy, and a range of other programs throughout NRG to reduce costs or generate revenues; • NRG's ability to successfully evaluate investments and achieve intended financial results in new business and growth initiatives; and • NRG's ability to develop and maintain successful partnering relationships as needed. 39 In addition, unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Forward-looking statements speak only as of the date they were made and NRG undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise except as otherwise required by applicable laws. The foregoing factors that could cause NRG's actual results to differ materially from those contemplated in any forward-looking statements included in this Annual Report on Form 10-K should not be construed as exhaustive. Item 1B — Unresolved Staff Comments None. Item 1C — Cybersecurity Risk Management and Strategy The Company leverages a comprehensive, multi-tiered cybersecurity strategy to manage cybersecurity risk based on criteria established by the NIST Cybersecurity Framework. As part of its cybersecurity strategy, the Company utilizes a range of industry and regulatory standards including, but not limited to, NERC-CIP, Payment Card Industry Data Security Standard, and IoT Security Assurance Framework. Compliance with NERC-CIP standards is mandated for entities involved in power generation, transmission, and distribution by regulatory bodies responsible for protecting critical infrastructure within the United States. NRG engages certified external assessors to ensure compliance with these standards. The Company’s strategy seeks to align underlying processes not only with industry standards but also mirror best practices among peer organizations. The strategy ensures a standardized method across all activities at NRG allowing for consistent recognition, assessment and potential mitigation of significant cybersecurity risks. To further the strategy, the Company established the NRG Cybersecurity Integration Center ("CIC") which is composed of experienced team members from across cybersecurity disciplines with relevant educational and industry experience. The CIC provides the following functions to the Company: cyber governance, operations, detection and response, engineering, testing, cyber risk management (including third-party risks), compliance, training and awareness, and reporting. The CIC utilizes advanced continuous monitoring systems and investigative techniques for real-time threat detection . The systematic monitoring approach allows for risk classification and prioritization based on potential impacts, and facilitates targeted resource allocation according to risk severity. The Company conducts regular penetration testing to proactively identify vulnerabilities and enhance its defense measures. The Company engages third-party assessors to gain comprehensive insights into its cyber risk profile. The Company relies on third-party service providers in the normal course of business. The Company has established a comprehensive approach to identify and manage cybersecurity risks associated with providers including, but not limited to, rigorous due diligence and assessments of third-party service providers' cybersecurity protocols before engagement, requirements relating to information handling, incident notification and assessment against the Company's cybersecurity requirements. Furthermore, the Company has implemented additional control measures and procedures in business processes to enable continuous risk identification and assessment, and to support monitoring mechanisms to oversee and manage supplier cybersecurity practices . As of December 31, 2024, the Company is not aware of any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to have a material affect on NRG’s business strategy, results of operations and financial condition . Despite efforts to maintain processes which mitigate cybersecurity risks, there is no guarantee that such risks may not have a material affect on NRG’s business strategy, results of operations, and financial condition in the future. For additional information on cybersecurity risks the Company may face, see Item 1A — Risk Factors – “The operation of the Company's businesses is subject to advanced persistent cyber-based security threats and integrity risk. Attacks on NRG's infrastructure that breach cyber/data security measures could expose the Company to significant liabilities, reputational damage, regulatory action, and disrupt business operations, which could have a material adverse effect”. Governance Management The Chief Information Security Officer ("CISO") is the head of cybersecurity for the Company and leads the CIC. The CISO has decades of professional experience, education, and certification in security analysis, design, implementation, and management, with a particularly strong background in technical vulnerability assessment and program development. Within various roles throughout the CISO's career, he has overseen information assurance and cybersecurity efforts, including critical infrastructure protection in government agencies and industry. 40 At least twice per year, the CISO provides comprehensive updates to the Board of Directors on cybersecurity and any recent developments impacting the Company. These updates include, among other items: • Incident reports and developments from any cybersecurity events; • Current cybersecurity landscape and emerging cybersecurity threats, with a particular emphasis on Company and industry-specific threats; and • Status of ongoing initiatives to strengthen the Company's cybersecurity program. In addition, the CISO regularly informs other members of senior management, including the President and CEO, of all aspects related to cybersecurity risks and incidents. This is intended to ensure that the highest levels of management remain updated on the cybersecurity risk preparedness and potential risks facing the Company. Furthermore, significant cybersecurity matters and strategic risk management decisions are escalated to the Board of Directors ensuring that they have comprehensive oversight and can provide guidance on critical cybersecurity issues. In preparation for a potential cybersecurity incident, the Company has implemented structured processes and procedures aligned with the NIST framework. This framework provides a foundation for a systematic and consistent approach to preparing for, identifying, containing, eradicating, and recovering from incidents. The effectiveness of these protocols is routinely verified through tabletop exercises involving relevant teams and Company leadership. In accordance with the Company’s process and procedures, incidents which may have a material impact on the Company are promptly referred to senior leadership and the Board of Directors for review and appropriate determination. Board of Directors The Board of Directors is primarily responsible for the risk oversight of the Company, and has delegated oversight of risks related to cybersecurity to the Finance and Risk Management ("FARM") Committee of the Board. The FARM Committee regularly reports on its activities to the Board of Directors after each meeting . The FARM Committee, as well as the overall Board of Directors, is composed of members with diverse expertise, including risk management, incident response and technology. The Board of Directors is aware of the critical nature of managing risks associated with cybersecurity threats and has worked with the Company’s management to establish comprehensive oversight mechanisms to ensure effective cybersecurity governance. The FARM Committee and the Board of Directors receive updates on any significant developments in the cybersecurity domain, seeking to ensure that the Board of Director’s oversight is proactive and responsive. The Board of Directors remains involved in ensuring that cybersecurity considerations are integrated into the Company’s broader strategic objectives. Pursuant to the charter of the FARM Committee, the FARM Committee's responsibilities include an annual review of the Company’s cybersecurity program and the effectiveness of its risk management strategies. This review is intended to help identify areas for improvement and ensure the alignment of cybersecurity efforts with the overall risk management framework. 41 Item 2 — Properties Listed below are descriptions of NRG's interests in facilities, operations and/or projects owned or leased as of December 31, 2024. The rated MW capacity figures provided represent nominal summer MW capacity of power generated. Net MW capacity is adjusted for the Company's owned or leased interest as of December 31, 2024. The Company believes its existing facilities, operations and/or projects are suitable for the conduct of its business. The following table summarizes NRG's power production and cogeneration facilities by region: Name of Facility Power Market Plant Type Primary Fuel Location Rated MW Capacity (a) Net MW Capacity (b) % Owned Texas Cedar Bayou ERCOT Fossil Natural Gas TX 1,494 1,494 100.0 Cedar Bayou 4 ERCOT Fossil Natural Gas TX 504 252 50.0 Greens Bayou ERCOT Fossil Natural Gas TX 327 327 100.0 Limestone ERCOT Fossil Coal TX 1,660 1,660 100.0 San Jacinto ERCOT Fossil Natural Gas TX 160 160 100.0 T.H. Wharton ERCOT Fossil Natural Gas TX 1,002 1,002 100.0 W.A. Parish ERCOT Fossil Coal TX 2,514 2,514 100.0 W.A. Parish ERCOT Fossil Natural Gas TX 1,118 1,118 100.0 Total Texas 8,779 8,527 East Chalk Point PJM Fossil Natural Gas MD 80 80 100.0 Fisk PJM Fossil Oil IL 171 171 100.0 Indian River (c) PJM Fossil Coal DE 410 410 100.0 Indian River PJM Fossil Oil DE 16 16 100.0 Powerton (d) PJM Fossil Coal IL 1,538 1,538 100.0 Vienna PJM Fossil Oil MD 167 167 100.0 Waukegan PJM Fossil Oil IL 101 101 100.0 Total East 2,483 2,483 West/Services/Other Cottonwood MISO Fossil Natural Gas TX 1,139 1,139 ___(e) Gladstone Fossil Coal AUS 1,613 605 37.5 Ivanpah (f) CAISO Renewable Solar CA 385 210 54.5 Midway-Sunset CAISO Fossil Natural Gas CA 226 113 50.0 Stadiums and Other Renewable Solar various 4 4 100.0 Total West/Services/Other 3,367 2,071 Total Fleet 14,629 13,081 (a) MW capacity of the facility without taking into account NRG ownership percentage (b) Actual capacity, adjusted for ownership interest, can vary depending on factors including weather conditions, operational conditions, and other factors. Additionally, ERCOT and PJM require periodic demonstration of capability, and the capacity may vary individually and in the aggregate from time to time (c) The Company previously announced the shut down of the Indian River facility. However, PJM identified reliability impacts resulting from the proposed deactivation and Indian River Unit 4 retired on February 23, 2025 (d) Powerton is projected to close by December 31, 2028 to comply with ELG regulations (e) NRG leases 100% interests in the Cottonwood facility through a facility lease agreement expiring in May 2025 and operates the Cottonwood facility (f) On January 17, 2025, PG&E filed an advice letter to the CPUC seeking approval of a termination agreement between the utility and Solar Partners II, LLC and Solar Partners VIII, LLC, which include NRG’s ownership interests. If approved by the CPUC, this would result in the termination of PG&E’s PPAs with Ivanpah Units 1 and 3 NRG owns several real properties and facilities related to its generation assets, other vacant real property unrelated to its generation assets, and properties not used for operational purposes. NRG believes it has satisfactory title to its plants and facilities in accordance with standards generally accepted in the electric power industry, subject to exceptions that, in the Company's opinion, would not have a material adverse effect on the use or value of its portfolio. NRG leases its operational and corporate headquarters in Houston, Texas, its financial and commercial corporate offices in Princeton, New Jersey, its smart home corporate offices in Provo and Lehi, Utah, as well as its retail operations offices, smart home monitoring stations, call centers, warehouses and various other office space. 42 Item 3 — Legal Proceedings See Item 15 — Note 22, Commitments and Contingencies , to the Consolidated Financial Statements for discussion of the material legal proceedings to which NRG is a party. Item 4 — Mine Safety Disclosures There have been no events that are required to be reported under this Item. 43 PART II Item 5 — Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders NRG's common stock trades on the New York Stock Exchange under the symbol "NRG". NRG's authorized capital stock consists of 500,000,000 shares of common stock and 10,000,000 shares of preferred stock. A total of 25,000,000 shares of the Company's common stock are authorized for issuance under the NRG LTIP, and a total of 17,500,000 shares of common stock are authorized for issuance under the Vivint LTIP. For more information about the LTIPs, refer to Item 12 — S ecurity Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters and Item 15 — Note 20, Stock-Based Compensation , to the Consolidated Financial Statements . As of January 31, 2025, there were 14,339 common stockholders of record. The Company’s long-term capital allocation framework targets to return approximately 80% of excess cash to shareholders and invest 20% in growth initiatives, after debt reduction. The Company expects to return the capital to shareholders through share repurchases and dividends on its common stock. In 2024, the Company increased the annual dividend on its common stock to $1.63 per share, representing an 8% increase from 2023. Consistent with its capital allocation framework, the Company further increased the annual dividend on its common stock by 8% to $1.76 per common share beginning in the first quarter of 2025. The long-term capital allocation policy targets an annual dividend growth rate of 7-9% per common share. Issuer Purchases of Equity Securities NRG engages in share repurchase programs with the goal of returning excess cash to shareholders. The share repurchase plan permits the execution of the plan through open-market purchases, private transactions, accelerated share repurchases and other similar transactions. The timing, price and volume of repurchases is based on a number of factors, including available capital, market conditions, and compliance with associated laws and regulations. In June 2023, the Company announced that the Board of Directors increased the share repurchase authorization of its common stock to $2.7 billion to be executed through 2025. In October 2024, the Board of Directors authorized an additional $1.0 billion for shares repurchases as part of the existing share repurchase authorization. Through January 31, 2025, the Company completed $2.2 billion of share repurchases under the $3.7 billion authorization. For further information regarding share repurchases, see Item 15 — Note 15 , Capital Structure in this Annual Report on Form 10-K. The table below sets forth the information with respect to purchases made by or on behalf of NRG or any "affiliated purchaser" (as defined in Rule 10b-18(a)(3) under the Exchange Act) of NRG's common stock during the quarter ended December 31, 2024: For the three months ended December 31, 2024 Total Number of Shares Purchased Average Price Paid per Share (a) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (b) Month #1 (October 1, 2024 to October 31, 2024) 2,524,323 $ 89.23 2,524,323 $ 2,006 Month #2 (November 1, 2024 to November 30, 2024) 1,612,869 $ 94.94 1,612,869 $ 1,853 Month #3 (December 1, 2024 to December 31, 2024) 2,406,947 $ 94.78 2,406,947 $ 1,625 Total at December 31, 2024 6,544,139 $ 92.68 6,544,139 (a) The average price paid per share excludes excise taxes owed and commissions per share paid in connection with the open market share repurchases (b) Includes commissions paid in connection with the open market share repurchases 44 Stock Performance Graph The performance graph below compares the cumulative total stockholder return on NRG's common stock for the period December 31, 2019 through December 31, 2024, with the cumulative total return of the Standard & Poor's 500 Composite Stock Price Index ("S&P 500") and the Philadelphia Utility Sector Index ("UTY"). The performance graph shown below is being furnished and compares each period assuming that $100 was invested on December 31, 2019, in each of the common stock of NRG, the stocks included in the S&P 500 and the stocks included in the UTY, and that all dividends were reinvested. Comparison of Cumulative Total Return 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 NRG Energy, Inc. $ 100.00 $ 99.16 $ 117.55 $ 89.97 $ 152.25 $ 271.99 S&P 500 100.00 118.76 152.84 125.16 158.07 197.61 UTY 100.00 103.22 122.05 122.84 111.58 134.88 Item 6 — Reserved 45 Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations The discussion and analysis below has been organized as follows: • Executive Summary, including the business environment in which the Company operates, a discussion of regulation, weather, competition and other factors that affect the business, and other significant events that are important to understanding the results of operations and financial condition; • Results of operations for the years ended December 31, 2024 and December 31, 2023, including an explanation of significant differences between the periods in the specific line items of NRG's Consolidated Statements of Operations; • Liquidity and capital resources including liquidity position, financial condition addressing credit ratings, material cash requirements and commitments, and other obligations; and • Critical accounting estimates that are most important to both the portrayal of the Company's financial condition and results of operations, and require management's most difficult, subjective, or complex judgments. As you read this discussion and analysis, refer to NRG's Consolidated Statements of Operations in this Annual Report on Form 10-K, which present the results of the Company's operations for the years ended December 31, 2024 and 2023, and also refer to Item 1 — Business to this Annual Report on Form 10-K for more detail discussion about the Company's business. Beginning in the third quarter of 2024, the Company is recording the amortization of capitalized contracts costs within depreciation and amortization. This change, along with additional financial statement disclosures, is meant to address investor inquiries by enhancing transparency to easier match expenses with revenues. The Company previously recorded amortization of capitalized contract costs related to fulfillment in cost of operations and amortization of capitalized contract costs related to customer acquisition primarily in selling, general and administrative costs in the consolidated statements of operations. Amounts for prior years were adjusted for comparative purposes. See Item 15 — Note 2 , Summary of Significant Accounting Policies for further detail. The adjustments had no impact on the Company’s total operating costs and expenses, and total cash flows. The Company has elected to omit discussion of the earliest of the three years covered by the consolidated financial statements presented. A discussion and analysis of fiscal year 2022 may be found in Part II, Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations of the Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 28, 2024, and is not materially impacted by the adjustments noted above. The following discussion and analysis also contains forward-looking statements, including, without limitation, statements relating to NRG’s plans, strategies, objectives, expectations, intentions, and resources. Such forward-looking statements should be read in conjunction with the disclosures under Item 1A — Risk Factors of this Annual Report on Form 10-K. Executive Summary NRG Energy, Inc., or NRG or the Company, is a leading energy and smart home company fueled by market-leading brands, proprietary technologies and complementary sales channels. Across the U.S. and Canada, NRG delivers innovative, sustainable solutions, predominately under the brand names such as NRG, Reliant, Direct Energy, Green Mountain Energy, and Vivint, while also advocating for competitive energy markets and customer choice. The Company has a customer base that includes approximately 8 million residential customers (comprised of 6 million retail energy customers and 2 million smart home customers) in addition to commercial, industrial, and wholesale customers, supported by approximately 13 GW of generation as of December 31, 2024. Business Environment The industry dynamics and external influences affecting the Company, its businesses, and the retail energy and power generation industry in 2024 and for the future medium term include: Market Dynamics — The price of natural gas plays an important role in setting the price of electricity in many of the regions where NRG operates. Natural gas prices are driven by variables including demand from the industrial, residential, and electric sectors, productivity across natural gas supply basins, costs of natural gas production, changes in pipeline infrastructure, global liquified natural gas demand, exports of natural gas, and the financial and hedging profile of natural gas customers and producers. In 2024, the average natural gas price at Henry Hub was $2.27 per MMBtu compared to $2.74 per MMBtu in 2023, representing a decrease of 17%. NRG may experience impacts to gross margins due to significant, rapid changes in current natural gas prices, the impact those prices have on power prices, and the lag in its ability to make a corresponding adjustment to the retail rates it charges customers on term and month to month contracts. The Company hedges its load commitments in order to mitigate the impact of changes in commodity prices, and as a result, these gross margin impacts would be realized in future periods until it is able to make the corresponding adjustments to the retail customer rates. 46 The relative price of natural gas as compared to coal and prevailing power prices are the primary driver of coal demand. Coal commodity prices remained relatively flat in 2024. Electricity Prices — The price of electricity is a key determinant of the profitability of the Company. Many variables such as the price of different fuels, weather, load growth and unit availability all coalesce to impact the final price for electricity and the Company's profitability. An increase in supply cost volatility in the competitive retail markets may result in smaller companies choosing to exit the market, which may result in further consolidation in the competitive retail space. The following table summarizes average on-peak power prices for each of the major markets in which NRG operates. Average On-Peak Power Price ($/MWh) Year Ended December 31, 2024 vs 2023 Region 2024 2023 Change % Texas ERCOT - Houston (a) $ 32.05 $ 74.32 (57) % ERCOT - North (a) 30.71 72.89 (58) % East NY J/NYC (b) 45.25 38.95 16 % NEPOOL (b) 46.59 41.36 13 % COMED (PJM) (b) 31.86 32.72 (3) % PJM West Hub (b) 40.75 39.34 4 % West CAISO - SP15 (b) 29.95 60.17 (50) % MISO - Louisiana Hub (b) 30.26 33.64 (10) % (a) Average on-peak power prices based on real time settlement prices as published by the respective ISOs (b) Average on-peak power prices based on day-ahead settlement prices as published by the respective ISOs Load Growth — The electric industry is expected to experience a surge in demand driven primarily by new manufacturing, industrial and data center facilities (inclusive of GenAI). The U.S. Energy Information Administration's 2023 Annual Energy Outlook, combined with external forecasts of GenAI, shows the potential for 500 TWh of incremental load across the U.S. through 2030, as compared to 2023. ERCOT's current long term load forecast shows peak demand increasing from 86 GW in 2024 to 137 GW in 2028. This load growth will require significant planning and construction of new generation and transmission. Increased Awareness of, and Action to Combat, Climate Change — Diverse groups of stakeholders, including investors, asset managers, financial institutions, non-government organizations, industry coalitions, individual companies, consumer groups and academic institutions, are increasingly engaged in efforts to limit global warming in the post-industrial era to 1.5 degrees Celsius. As a result, policymakers and regulators at regional, national, sub-national and local levels of government, both in the U.S. and other parts of the world, are increasingly focused on actions to combat climate change. NRG actively monitors climate change related developments that could impact its business and regularly engages with a diverse set of stakeholders on these issues. Such engagement helps the Company identify and pursue potential opportunities both to decarbonize its business and better serve its customers. NRG is committed to providing transparent disclosures of its climate risks and opportunities to stakeholders. Lower Carbon Infrastructure Development — Policy mechanisms at the state and federal level, including production and investment tax credits, cash grants, loan guarantees, accelerated depreciation tax benefits, RPS, and carbon trading plans, have supported and continue to support the development of renewable generation, demand-side and smart grid, and other lower carbon infrastructure technologies. According to ERCOT, 43% of 2024 energy consumption in the ERCOT market was generated from carbon emission-free resources, with wind power contributing 24%. In addition, as subsidies and incentives contribute to increases in renewable power sources, customer awareness and preferences are shifting toward sustainable solutions. Increased demand for sustainable energy products from both residential and commercial customers creates opportunities for diversified product offerings in competitive retail markets. Digitization and Customization — The electric industry is experiencing major technological changes in the way power is distributed and consumed by end-use customers. The electric grid is shifting from a centralized analog system, where power is generated from limited sources and flows in one direction, to a decentralized multidirectional system, where power can be generated from a number of distributed resources and stored or dispatched on an as-needed basis. In addition, customers are seeking new ways to engage with their power providers. Technologies like smart thermostats, smart appliances and electric vehicles are giving individuals more choice and control over their electricity usage. Power providers are starting to engage with 47 customers who have transitioned to smart homes with new offerings, including but not limited to behind-the-meter demand response, or virtual power plant products. Companies with large customer bases in competitive marketplaces are poised to create additional engagement with customers to help further integrate their smart home into their daily lives. Weather — Weather conditions in the regions of the U.S. in which NRG conducts business influence the Company's financial results. Weather conditions can affect the supply and demand for electricity and fuels and may also impact the availability of the Company's generating assets. Changes in energy supply and demand may impact the price of these energy commodities in both the spot and forward markets, which may affect the Company's results in any given period. Typically, demand for and the price of electricity is higher in the summer and the winter seasons, when temperatures and resultant demand are more extreme. The demand for and price of natural gas is also generally higher in the winter. However, all regions of the U.S. typically do not experience extreme weather conditions at the same time, thus NRG's operations are typically not exposed to the effects of extreme weather in all parts of its business at once. Other Factors — A number of other factors significantly influence the level and volatility of prices for energy commodities and related derivative products for NRG's business. These factors include: • seasonal, daily and hourly changes in demand; • extreme peak demands; • performance of renewable generation; • available supply resources; • transportation and transmission availability and reliability within and between regions; • location of NRG's generating facilities relative to the location of its load-serving opportunities; • procedures used to maintain the integrity of the physical electricity system during extreme conditions; and • changes in the nature and extent of federal and state regulations. These factors can affect energy commodity and derivative prices in different ways and to different degrees. These effects may vary throughout the country as a result of regional differences in: • weather conditions; • market liquidity; • capability and reliability of the physical electricity and gas systems; • local transportation systems; and • the nature and extent of electricity deregulation. Environmental Matters, Regulatory Matters and Legal Proceedings — Details of environmental matters are presented in Item 15 — Note 24, Environmental Matters , to the Consolidated Financial Statements and Item 1 — Business, Environmental Matters . Details of regulatory matters are presented in Item 15 — Note 23, Regulatory Matters , to the Consolidated Financial Statements and Item 1 — Business, Regulatory Matters . Details of legal proceedings are presented in Item 15 — Note 22, Commitments and Contingencies , to the Consolidated Financial Statements. Some of this information relates to costs that may be material to the Company's financial results. Significant Events The following significant events occurred during 2024 and through the filing date, as further described within this Management's Discussion and Analysis and the Consolidated Financial Statements: Dispositions On September 16, 2024, the Company closed on the sale of its 100% ownership in the Airtron business unit. Proceeds of $500 million were reduced by working capital and other adjustments of $20 million, resulting in net proceeds of $480 million. The Company recorded a gain on the sale of $204 million within the West/Services/Other region of operations. Capital Allocation In October 2024, the Board of Directors authorized an additional $1.0 billion for share repurchases as part of the existing share repurchase authorization, for a total of $3.7 billion. As of January 31, 2025, $1.5 billion is remaining under the $3.7 billion authorization. In the first quarter of 2024, NRG increased the annual common stock dividend to $1.63 from $1.51 per share, representing an 8% increase from 2023. Beginning in the first quarter of 2025, NRG increased the annual common stock dividend by 8% to $1.76 per share. The Company expects to target an annual common stock dividend growth rate of 7-9% per share in subsequent years. 48 On April 16, 2024, the Company, as borrower, and certain of its subsidiaries, as guarantors, entered into the Eighth Amendment to the Second Amended and Restated Credit Agreement (the “Eighth Amendment”) with, among others, Citicorp North America, Inc., as administrative agent (the “Agent”) and as collateral agent, and certain financial institutions, as lenders, which amended the Company’s Second Amended and Restated Credit Agreement, dated as of June 30, 2016 (as amended, restated, supplemented and/or otherwise modified from time to time, the “Credit Agreement”), in order to (i) establish a new Term Loan Facility with borrowings of $875 million in aggregate principal amount (the “Existing Term Loan B Facility” and the loans thereunder, the “Existing Term Loans”) and (ii) make certain other modifications to the Credit Agreement as set forth therein. The proceeds from the Existing Term Loans were used to repay a portion of the Company’s Convertible Senior Notes, all of the Company's 3.750% senior secured first lien notes due 2024 and for general corporate purposes. For further discussion, see Item 15 — Note 12, Long-term Debt and Finance Leases. On April 22, 2024, the Company, as borrower, and certain of its subsidiaries, as guarantors, entered into the Ninth Amendment to the Second Amended and Restated Credit Agreement (the “Ninth Amendment”) to the Credit Agreement to its Revolving Credit Facility to extend the maturity date of a portion of the revolving commitments thereunder to February 14, 2028. For further discussion, see Item 15 — Note 12, Long-term Debt and Finance Leases. During the year ended December 31, 2024, the Company repurchased $343 million in aggregate principal amount of its Convertible Senior Notes, for $603 million, which included the payment of $3 million of accrued interest, using cash on hand and a portion of the proceeds from the Existing Term Loans. For the year ended December 31, 2024, a $260 million loss on debt extinguishment was recorded in connection with the repurchases. For further discussion, see Item 15 — Note 12, Long-term Debt and Finance Leases. During the second quarter of 2024, the Company entered into privately negotiated capped call transactions with certain counterparties to effectively lock in a conversion premium of $257 million on the remaining $232 million of the Convertible Senior Notes. The option price of $257 million was incurred when the Company entered into the capped call transactions, which will be payable upon the earlier of settlement and expiration of the applicable Capped Call. For further discussion see Item 15 — Note 15, Capital Structure . On June 21, 2024, NRG Receivables, amended its existing Receivables Facility to, among other things, (i) extend the scheduled termination date to June 20, 2025, (ii) increase the aggregate commitments from $1.4 billion to $2.3 billion (adjusted seasonally) and (iii) add a new originator. For further discussion, see Item 15 — Note 12, Long-term Debt and Finance Leases. During the second quarter of 2024, the Company repaid $600 million in aggregate principal amount of its 3.750% Senior Secured First Lien Notes due 2024. Debt Refinancing Transactions In the fourth quarter of 2024, the Company entered into the following debt transactions: Sources Uses Issuance by NRG of 6.000% Senior Notes due 2033 $925 million Repayment of the Vivint Senior Secured Term Loan B $1.310 billion Issuance by NRG of 6.250% Senior Notes due 2034 $950 million Cash tender offer for Vivint 6.750% Senior Secured Notes due 2027 (a) $600 million Exchange offer for New NRG 5.750% Senior Notes due 2029 $798 million Exchange offer for Vivint 5.750% Senior Notes due 2029 (b) $798 million Incremental Term Loan B issued by NRG $450 million Repayment of NRG 6.625% Senior Notes due 2027 $375 million Transactions fees, expenses and premiums $40 million Total $3.123 billion Total $3.123 billion (a) On October 15, 2024, APX Group, Inc. launched the Cash Tender Offer for the Vivint 6.750% Senior Secured Notes due 2027 and on October 30, 2024, delivered a notice of redemption with respect to the $11 million of the Vivint 6.750% Senior Secured Notes due 2027 that remained outstanding (b) On October 15, 2024, APX Group, Inc. launched an Exchange Offer for the Vivint 5.750% Senior Notes due 2029 and on November 4, 2024, delivered a notice of redemption with respect to the $2 million of the Vivint 5.750% Senior Notes due 2029 that remained outstanding following the Exchange Offer As part of the above transactions, the Company entered into the Tenth and Eleventh Amendments to the Second Amended and Restated Credit Agreement (the “Tenth and Eleventh Amendments”) to the Credit Agreement to (i) include an incremental term loan B in an aggregate principal amount of $450 million (the “Incremental Term Loan B Facility” and the loans thereunder, the “Incremental Term Loans”), (ii) extend the maturity date of its revolving credit facility to October 30, 2029 and (iii) make certain other amendments to the Credit Agreement. 49 On November 26, 2024, the Company, as borrower, entered into the Twelfth Amendment to the Second Amended and Restated Credit Agreement (the “Twelfth Amendment”) to the Credit Agreement to (i) reprice both the Existing Term Loan B Facility and the Incremental Term Loan B Facility and (ii) make certain other modifications to the Credit Agreement as set forth therein. On December 20, 2024, the Company, as borrower, entered into the Thirteenth Amendment to the Second Amended and Restated Credit Agreement (the “Thirteenth Amendment”) to the Credit Agreement to (i) add APX Group, Inc. as an additional borrower of the loans under the Credit Agreement on a joint and several basis with the Company and (ii) make certain other modifications to the Credit Agreement as set forth therein. In connection with the above transactions, a $122 million loss on debt extinguishment was recorded, which included the write-off of discounts and previously deferred financing costs and other fees. For further discussion on these amendments and the debt transactions in the table above, see Item 15 — Note 12, Long-term Debt and Finance Leases. Operations In 2024, NRG entered into a definitive partnership agreement with Renew Home, a VPP platform formed by the combination of Google’s Nest Renew and OhmConnect. Leveraging Google Cloud’s AI and cloud platforms, NRG and Renew Home plan to develop a VPP portfolio of up to 1 GW of load management capacity, with instantaneous dispatch value during peak events and tight supply conditions. The Company's strategy is to procure mid to long-term renewable generation through power purchase agreements. NRG has entered into Renewable PPAs totaling approximately 1.9 GW with third-party project developers and other counterparties, of which all are operational as of December 31, 2024. The remaining average tenure of these agreements is nine years. The Company expects to continue evaluating and executing similar agreements that support the needs of the business. The total GW entered into through Renewable PPAs may be impacted by contract terminations when they occur. Site Development Updates On February 13, 2025, NRG signed a strategic Project Development Agreement with GE Vernova (“GEV”) and Kiewit’s subsidiary, TIC, to develop and construct up to 5.4 GW of new gas-fired, combined cycle generation projects. The generation facilities will be owned and operated by NRG. Additionally, NRG has entered into a slot reservation agreement with GEV for the procurement of 1.2 GW of 7HA gas turbines. The first projects under this comprehensive development agreement are expected to commence operations by the end of 2029. 50 Consolidated Results of Operations for the years ended December 31, 2024 and 2023 The following table provides selected financial information for the Company: Year Ended December 31, (In millions) 2024 2023 Change Revenue Retail revenue $ 27,149 $ 27,467 $ (318) Energy revenue (a) 500 553 (53) Capacity revenue (a) 177 197 (20) Mark-to-market for economic hedging activities (3) 144 (147) Contract amortization (29) (32) 3 Other revenues (a)(b) 336 494 (158) Total revenue 28,130 28,823 (693) Operating Costs and Expenses Cost of fuel 890 992 102 Purchased energy and other cost of sales (c) 19,371 20,610 1,239 Mark-to-market for economic hedging activities (209) 3,007 3,216 Contract and emissions credit amortization (c) 49 93 44 Operations and maintenance 1,607 1,391 (216) Other cost of operations 392 390 (2) Cost of operations (excluding depreciation and amortization shown below) 22,100 26,483 4,383 Depreciation and amortization 1,403 1,295 (108) Impairment losses 36 26 (10) Selling, general and administrative costs (excluding amortization of customer acquisition costs of $204, and $125, respectively, which are included in depreciation and amortization shown separately above) 2,031 1,843 (188) Provision for credit losses 314 251 (63) Acquisition-related transaction and integration costs 30 119 89 Total operating costs and expenses 25,914 30,017 4,103 Gain on sale of assets 208 1,578 (1,370) Operating Income 2,424 384 2,040 Other Income/(Expense) Equity in earnings of unconsolidated affiliates 20 16 4 Impairment losses on investments (7) (102) 95 Other income, net 44 47 (3) (Loss)/Gain on debt extinguishment (382) 109 (491) Interest expense (651) (667) 16 Total other expenses (976) (597) (379) Income/(Loss) Before Income Taxes 1,448 (213) 1,661 Income tax expense/(benefit) 323 (11) 334 Net Income/(Loss) $ 1,125 $ (202) $ 1,327 (a) Includes realized gains and losses from financially settled transactions (b) Includes trading gains and losses and ancillary revenues (c) Includes amortization of SO 2 and NO x credits and excludes amortization of RGGI credits Gross Margin The Company calculates gross margin in order to evaluate operating performance as revenues less cost of fuel, purchased energy and other costs of sales, mark-to-market for economic hedging activities, contract and emission credit amortization and depreciation and amortization. 51 Economic Gross Margin In addition to gross margin, the Company evaluates its operating performance using the measure of economic gross margin, which is not a GAAP measure and may not be comparable to other companies’ presentations or deemed more useful than the GAAP information provided elsewhere in this report. Economic gross margin should be viewed as a supplement to and not a substitute for the Company's presentation of gross margin, which is the most directly comparable GAAP measure. Economic gross margin is not intended to represent gross margin. The Company believes that economic gross margin is useful to investors as it is a key operational measure reviewed by the Company's management. Economic gross margin is defined as the sum of retail revenue, energy revenue, capacity revenue and other revenue, less cost of fuels, purchased energy and other cost of sales. Economic gross margin does not include mark-to-market gains or losses on economic hedging activities, contract amortization, emission credit amortization, depreciation and amortization, operations and maintenance, or other costs of operations. The following tables present the composition and reconciliation of gross margin and economic gross margin for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 ($ in millions, except otherwise noted) Texas East West/Services/Other Vivint Smart Home Corporate/Eliminations Total Retail revenue $ 10,400 $ 11,247 $ 3,595 $ 1,932 $ (25) $ 27,149 Energy revenue 41 242 229 — (12) 500 Capacity revenue — 156 24 — (3) 177 Mark-to-market for economic hedging activities — (23) 16 — 4 (3) Contract amortization — (27) (2) — — (29) Other revenue (a) 212 112 24 — (12) 336 Total revenue 10,653 11,707 3,886 1,932 (48) 28,130 Cost of fuel (647) (135) (108) — — (890) Purchased energy and other costs of sales (b)(c)(d) (6,585) (9,577) (3,090) (144) 25 (19,371) Mark-to-market for economic hedging activities (684) 1,083 (186) — (4) 209 Contract and emissions credit amortization (9) (31) (9) — — (49) Depreciation and amortization (323) (158) (114) (767) (41) (1,403) Gross margin $ 2,405 $ 2,889 $ 379 $ 1,021 $ (68) $ 6,626 Less: Mark-to-market for economic hedging activities, net (684) 1,060 (170) — — 206 Less: Contract and emissions credit amortization, net (9) (58) (11) — — (78) Less: Depreciation and amortization (323) (158) (114) (767) (41) (1,403) Economic gross margin $ 3,421 $ 2,045 $ 674 $ 1,788 $ (27) $ 7,901 (a) Includes trading gains and losses and ancillary revenues (b) Includes capacity and emissions credits (c) Includes $3.3 billion, $278 million and $1.2 billion of TDSP expense in Texas, East, and West/Services/Other, respectively (d) Excludes depreciation and amortization shown separately 52 Year Ended December 31, 2024 Business Metrics Texas East West/Services/Other Vivint Smart Home Corporate/Eliminations Total Home electricity sales volume (GWh) 39,353 15,229 2,355 — — 56,937 Business electricity sales volume (GWh) 40,274 46,724 10,513 — — 97,511 Home natural gas retail sales volumes (MDth) — 49,927 75,898 — — 125,825 Business natural gas retail sales volumes (MDth) — 1,525,094 181,972 — — 1,707,066 Average retail Home customer count (in thousands) (a) 2,940 2,165 748 — — 5,853 Ending retail Home customer count (in thousands) (a) 2,909 2,191 720 — — 5,820 Average Vivint Smart Home subscriber count (in thousands) (b) — — — 2,100 — 2,100 Ending Vivint Smart Home subscriber count (in thousands) (b) — — — 2,154 — 2,154 GWh sold 23,350 4,442 5,977 — — 33,769 GWh generated (c) 23,350 2,372 5,977 — — 31,699 (a) Home customer count includes recurring residential customers, services customers and community choice (b) Vivint Smart Home includes customers that also purchase other NRG products (c) Includes owned and leased generation, excludes tolled generation and equity investments 53 Year Ended December 31, 2023 ($ in millions, except otherwise noted) Texas East West/Services/Other Vivint Smart Home (a) Corporate/Eliminations Total Retail revenue $ 10,030 $ 11,946 $ 3,943 $ 1,549 $ (1) $ 27,467 Energy revenue 77 291 185 — — 553 Capacity revenue — 197 2 — (2) 197 Mark-to-market for economic hedging activities — 57 103 — (16) 144 Contract amortization — (32) — — — (32) Other revenue (b) 369 88 48 — (11) 494 Total revenue 10,476 12,547 4,281 1,549 (30) 28,823 Cost of fuel (760) (112) (120) — — (992) Purchased energy and other costs of sales (c)(d)(e) (6,288) (10,683) (3,532) (116) 9 (20,610) Mark-to-market for economic hedging activities 315 (2,471) (867) — 16 (3,007) Contract and emissions credit amortization (11) (68) (14) — — (93) Depreciation and amortization (348) (167) (99) (645) (36) (1,295) Gross margin $ 3,384 $ (954) $ (351) $ 788 $ (41) $ 2,826 Less: Mark-to-market for economic hedging activities, net 315 (2,414) (764) — — (2,863) Less: Contract and emissions credit amortization, net (11) (100) (14) — — (125) Less: Depreciation and amortization (348) (167) (99) (645) (36) (1,295) Economic gross margin $ 3,428 $ 1,727 $ 526 $ 1,433 $ (5) $ 7,109 (a) Includes results of operations following the acquisition date of March 10, 2023 (b) Includes trading gains and losses and ancillary revenues (c) Includes capacity and emissions credits (d) Includes $3.1 billion, $244 million and $1.1 billion of TDSP expense in Texas, East, and West/Services/Other, respectively (e) Excludes depreciation and amortization shown separately Business Metrics Texas East West/Services/Other Vivint Smart Home Corporate/Eliminations Total Home electricity sales volume (GWh) 40,032 12,838 2,243 — — 55,113 Business electricity sales volume (GWh) 40,250 46,438 10,393 — — 97,081 Home natural gas retail sales volumes (MDth) — 49,990 75,150 — — 125,140 Business natural gas retail sales volumes (MDth) — 1,587,052 179,888 — — 1,766,940 Average retail Home customer count (in thousands) (a) 2,878 1,856 774 — — 5,508 Ending retail Home customer count (in thousands) (a) 2,928 2,137 762 — — 5,827 Average Vivint Smart Home subscriber count (in thousands) (b) — — — 2,008 — 2,008 Ending Vivint Smart Home subscriber count (in thousands) (b) — — — 2,043 — 2,043 GWh sold 30,776 5,396 5,903 — — 42,075 GWh generated (c) 30,776 2,016 5,903 — — 38,695 (a) Home customer count includes recurring residential customers, services customers and community choice (b) Vivint Smart Home includes customers that also purchase other NRG products (c) Includes owned and leased generation, excludes tolled generation and equity investments 54 The following table represents the weather metrics for 2024 and 2023: Year ended December 31, Quarter ended December 31, Quarter ended September 30, Quarter ended June 30, Quarter ended March 31, Weather Metrics Texas East West/Services/Other (a) Texas East West/Services/Other (a) Texas East West/Services/Other (a) Texas East West/Services/Other (a) Texas East West/Services/Other (a) 2024 CDDs (b) 3,464 1,360 2,132 461 83 251 1,714 814 1,194 1,173 431 638 116 32 49 HDDs (b) 1,309 4,236 1,968 393 1,560 658 — 28 11 31 435 200 885 2,213 1,099 2023 CDDs 3,468 1,229 2,024 285 85 158 2,039 817 1,291 978 273 502 166 54 73 HDDs 1,469 4,139 2,105 613 1,520 688 — 48 4 57 479 254 799 2,092 1,159 10-year average CDDs 3,109 1,315 1,966 298 90 169 1,710 833 1,192 989 350 554 112 42 51 HDDs 1,676 4,705 2,058 636 1,616 752 3 49 8 59 538 192 978 2,502 1,106 (a) The West/Services/Other weather metrics are comprised of the average of the CDD and HDD regional results for the West - California and West - South Central regions (b) National Oceanic and Atmospheric Administration-Climate Prediction Center - A CDD represents the number of degrees that the mean temperature for a particular day is above 65 degrees Fahrenheit in each region. A HDD represents the number of degrees that the mean temperature for a particular day is below 65 degrees Fahrenheit in each region. The CDDs/HDDs for a period of time are calculated by adding the CDDs/HDDs for each day during the period Gross margin and economic gross margin Gross margin increased $3.8 billion and economic gross margin increased $792 million, both of which include intercompany sales, during the year ended December 31, 2024, compared to the same period in 2023. The detail by segment is as follows: Texas (In millions) Higher gross margin due to the net effect of: • an increase in net revenue of $178 million, primarily driven by changes in customer term, product and mix • a 5%, or $144 million increase in cost to serve the retail load driven by higher realized power prices associated with the Company’s diversified supply strategy including asset sales in 2023 $ 34 Lower gross margin due to a decrease in load of 1.4 TWhs, or $46 million, due to weather, partially offset by an increase in load of 7 GWhs, or $8 million, driven by an increase in average customer counts (38) Other (3) Decrease in economic gross margin $ (7) Decrease in mark-to-market for economic hedging primarily due to net unrealized gains/losses on open positions related to economic hedges (999) Decrease in contract and emissions credit amortization 2 Decrease in depreciation and amortization 25 Decrease in gross margin $ (979) 55 East (In millions) Lower gross margin due to a decrease in generation and capacity as a result of the Joliet and Astoria asset retirements $ (20) Higher electric gross margin due to higher net revenue rates as a result of changes in customer term, product and mix of $2.00 per MWh, or $127 million as well as lower supply costs of $0.75 per MWh, or $54 million driven primarily by decreases in realized power prices 181 Higher electric gross margin due to an increase in customer count and change in customer mix 29 Higher natural gas gross margin including the impact of transportation and storage contract optimization, resulting in lower supply costs of $0.60 per Dth, or $992 million, driven by a decrease in gas costs, partially offset by lower net revenue rates of $0.55 per Dth, or $873 million, from changes in customer term, product and mix 119 Lower natural gas gross margin from a decrease in load due to a lower customer count and change in customer mix (14) Lower gross margin due to a reduction in capacity prices along with a prior year reduction in capacity performance penalties resulting from Winter Storm Elliott in December 2022 (15) Higher gross margin due to an increase in average realized price at Midwest Generation and toll facilities, partially offset by higher supply costs 45 Other (7) Increase in economic gross margin $ 318 Increase in mark-to-market for economic hedging primarily due to net unrealized gains/losses on open positions related to economic hedges 3,474 Decrease in contract amortization 42 Decrease in depreciation and amortization 9 Increase in gross margin $ 3,843 West/Services/Other (In millions) Higher electric gross margin due to lower supply costs of $18.25 per MWh, or $236 million, partially offset by lower revenue rates of $9.75 per MWh, or $124 million $ 112 Higher natural gas gross margin due to lower supply costs of $1.10 per Dth, or $284 million and changes in customer mix of $1 million, partially offset by lower revenue rates of $1.05 per Dth, or $272 million 13 Higher gross margin at Cottonwood driven by spark spread expansion, favorable current year capacity pricing and a prior year reduction in capacity performance bonus payments resulting from Winter Storm Elliott in December 2022 74 Lower gross margin primarily due to the Sale of Airtron in September 2024 (28) Lower gross margin from market optimization activities (25) Other 2 Increase in economic gross margin $ 148 Increase in mark-to-market for economic hedges primarily due to net unrealized gains/losses on open positions related to economic hedges 594 Decrease in contract amortization 3 Increase in depreciation and amortization (15) Increase in gross margin $ 730 56 Vivint Smart Home (a) (In millions) Increase due to the acquisition of Vivint Smart Home $ 289 Higher gross margin driven by growth in subscribers, or $77 million, higher revenue rates of $1.55 per subscriber or $33 million, partially offset by lower non-recurring sales revenue of $37 million 73 Lower gross margin due to recognition of fees associated with licensing products and services (10) Other 3 Increase in economic gross margin $ 355 Increase in depreciation and amortization (122) Increase in gross margin $ 233 (a) Includes results of operations following the acquisition date of March 10, 2023 Mark-to-market for Economic Hedging Activities Mark-to-market for economic hedging activities includes asset-backed hedges that have not been designated as cash flow hedges. Total net mark-to-market results increased by $3.1 billion during the year ended December 31, 2024, compared to the same period in 2023. The breakdown of gains and losses included in revenues and operating costs and expenses by segment is as follows: Year Ended December 31, 2024 (In millions) Texas East West/Services/Other Eliminations Total Mark-to-market results in revenues Reversal of previously recognized unrealized (gains) on settled positions related to economic hedges $ — $ (33) $ (1) $ 4 $ (30) Reversal of acquired (gain) positions related to economic hedges — (1) — — (1) Net unrealized gains on open positions related to economic hedges — 11 17 — 28 Total mark-to-market (losses)/gains in revenues $ — $ (23) $ 16 $ 4 $ (3) Mark-to-market results in operating costs and expenses Reversal of previously recognized unrealized (gains)/losses on settled positions related to economic hedges (a) $ (663) $ 740 $ 63 $ (4) $ 136 Reversal of acquired loss/(gain) positions related to economic hedges 9 (5) 2 — 6 Net unrealized (losses)/gains on open positions related to economic hedges (30) 348 (251) — 67 Total mark-to-market (losses)/gains in operating costs and expenses $ (684) $ 1,083 $ (186) $ (4) $ 209 (a) Includes $37 million, within the Texas segment, related to derivative contracts that were elected as NPNS on October 1, 2024 and are no longer valued at fair value on a recurring basis. For further discussion, see Item 15 — Note 6, Accounting for Derivative Instruments and Hedging Activities 57 Year Ended December 31, 2023 (In millions) Texas East West/Services/Other Eliminations Total Mark-to-market results in revenues Reversal of previously recognized unrealized (gains)/losses on settled positions related to economic hedges $ — $ (25) $ 56 $ (12) $ 19 Reversal of acquired (gain) positions related to economic hedges — (2) — — (2) Net unrealized gains on open positions related to economic hedges — 84 47 (4) 127 Total mark-to-market gains in revenues $ — $ 57 $ 103 $ (16) $ 144 Mark-to-market results in operating costs and expenses Reversal of previously recognized unrealized (gains) on settled positions related to economic hedges $ (473) $ (812) $ (480) $ 12 $ (1,753) Reversal of acquired loss/(gain) positions related to economic hedges 17 11 (6) — 22 Net unrealized gains/(losses) on open positions related to economic hedges 771 (1,670) (381) 4 (1,276) Total mark-to-market gains/(losses) in operating costs and expenses $ 315 $ (2,471) $ (867) $ 16 $ (3,007) Mark-to-market results consist of unrealized gains and losses on contracts that are yet to be settled. The settlement of these transactions is reflected in the same revenue or cost caption as the items being hedged. The reversals of acquired gain or loss positions were valued based upon the forward prices on the acquisition date. For the year ended December 31, 2024, the $3 million loss in revenues from economic hedge positions was driven by the reversal of previously recognized unrealized gains on contracts that settled during the period, largely offset by an increase in the value of open positions as a result of decreases in New York capacity and MISO power prices. The $209 million gain in operating costs and expenses from economic hedge positions was driven primarily by the reversal of previously recognized unrealized losses on contracts that settled during the period, as well as an increase in the value of open positions as a result of increases in natural gas and Northeast power prices. This was partially offset by a decrease in the value of open positions as a result of decreases in CAISO and Alberta power prices. For the year ended December 31, 2023, the $144 million gain in revenues from economic hedge positions was driven by an increase in the value of open positions as a result of decreases in power prices. The $3.0 billion loss in operating costs and expenses from economic hedge positions was driven primarily by the reversal of previously recognized unrealized gains on contracts that settled during the period, as well as a decrease in the value of East and West/Other open positions as a result of decreases in natural gas and power prices. This was partially offset by an increase in the value of Texas open positions as a result of increases in ERCOT power prices. In accordance with ASC 815, the following table represents the results of the Company's financial and physical trading of energy commodities for the years ended December 31, 2024 and 2023. The realized and unrealized financial and physical trading results are included in revenue. The Company's trading activities are subject to limits within the Company's Risk Management Policy. Year ended December 31, (In millions) 2024 2023 Trading gains Realized $ 31 $ 11 Unrealized 1 38 Total trading gains $ 32 $ 49 58 Operations and Maintenance Expenses Operations and maintenance expenses are comprised of the following: (In millions) Texas East West/Services/Other Vivint Smart Home (a) Corporate Eliminations Total Year Ended December 31, 2024 $ 783 $ 364 $ 216 $ 247 $ 7 $ (10) $ 1,607 Year Ended December 31, 2023 620 343 245 187 — (4) 1,391 (a) Includes results of operations following the acquisition date of March 10, 2023 Operations and maintenance expenses increased by $216 million for the year ended December 31, 2024, compared to the same period in 2023, due to the following: (In millions) Increase primarily due to the prior year partial property insurance claim for the extended outage at W.A. Parish $ 164 Increase in planned major maintenance expenditures associated with the scope and duration of outages at the Texas coal and gas facilities, and Powerton 154 Increase due to the acquisition of Vivint Smart Home in March 2023 36 Increase driven by higher Vivint Smart Home operations costs 24 Increase driven by higher retail operations costs 16 Decrease primarily due to the sale of STP in November 2023 (125) Decrease driven by a reduction in deactivation and asset retirement expenditures primarily in the East (33) Decrease due to the sale of Airtron in September 2024 (15) Other (5) Increase in operations and maintenance expense $ 216 Other Cost of Operations Other Cost of operations are comprised of the following: (In millions) Texas East West/Services/Other Vivint Smart Home (a) Total Year Ended December 31, 2024 $ 236 $ 136 $ 14 $ 6 $ 392 Year Ended December 31, 2023 243 131 13 3 390 (a) Includes results of operations following the acquisition date of March 10, 2023 Other cost of operations increased by $2 million for the year ended December 31, 2024, compared to the same period in 2023, due to the following: (In millions) Increase in retail gross receipt taxes in Texas and East $ 9 Increase due to changes in current year ARO cost estimates at Midwest Generation and Jewett Mine 6 Increase due to higher insurance premiums 6 Decrease primarily due to the sale of STP in November 2023 (21) Other 2 Increase in other cost of operations $ 2 Depreciation and Amortization Depreciation and amortization expenses are comprised of the following: (In millions) Texas East West/Services/Other Vivint Smart Home (a) Corporate Total Year Ended December 31, 2024 $ 323 $ 158 $ 114 $ 767 $ 41 $ 1,403 Year Ended December 31, 2023 348 167 99 645 36 1,295 (a) Includes results of operations following the acquisition date of March 10, 2023 59 Depreciation and amortization expense increased by $108 million for the year ended December 31, 2024, compared to the same period in 2023, primarily due to an increase in amortization of capitalized contract costs, partially offset by a decrease in amortization driven by the expected roll of the acquired Vivint Smart Home intangibles. Impairment Losses During the year ended December 31, 2024, the Company recorded impairment losses related to property plant and equipment and other assets of $7 million, and $29 million in the Texas and West/Services/Other segments, respectively. During the year ended December 31, 2023, the Company recorded impairment losses related to property plant and equipment and leases of $2 million, $4 million and $20 million in the Texas, East and West/Services/Other segments, respectively. Refer to Item 15 — Note 10, Asset Impairments , to the Consolidated Financial Statements for further discussion . Selling, General and Administrative Costs Selling, general and administrative costs are comprised of the following: (In millions) Texas East West/Services/Other Vivint Smart Home (a) Corporate/ Eliminations Total Year Ended December 31, 2024 $ 638 $ 561 $ 201 $ 591 $ 40 $ 2,031 Year Ended December 31, 2023 587 524 198 477 57 1,843 (a) Includes results of operations following the acquisition date of March 10, 2023 Selling, general and administrative costs increased by $188 million for the year ended December 31, 2024 compared to the same period in 2023, due to the following: (In millions) Increase due to the acquisition of Vivint Smart Home in March 2023 $ 87 Increase due to reserves for legal matters in 2024 and partially offset by the favorable resolution of legal matters in 2023 58 Increase in personnel costs primarily driven by an increase in accruals as part of the Company's annual incentive plan reflecting financial outperformance for the year 46 Increase in equity linked compensation primarily driven by a higher share price in 2024 33 Increase in marketing and media expenses 24 Decrease in consulting and legal expenses (36) Decrease driven by the sale of STP in November 2023 (10) Other (14) Increase in selling, general and administrative costs $ 188 Provision for Credit Losses Provision for credit losses are comprised of the following: (In millions) Texas East West/Services/Other Vivint Smart Home (a) Total Year Ended December 31, 2024 $ 203 $ 25 $ 48 $ 38 $ 314 Year Ended December 31, 2023 159 28 30 34 251 (a) Includes results of operations following the acquisition date of March 10, 2023 Provision for credit losses increased by $63 million for the year ended December 31, 2024, compared to the same period in 2023, due to the following: (In millions) Increase primarily due to higher Texas Home retail revenues and customer payment behavior $ 54 Increase due to the acquisition of Vivint Smart Home in March 2023 9 Increase in provision for credit losses $ 63 60 Acquisition-Related Transaction and Integration Costs Acquisition-related transaction and integration costs were $30 million and $119 million for the years ended December 31, 2024 and 2023, respectively, include: As of December 31, (In millions) 2024 2023 Vivint Smart Home integration costs $ 23 $ 52 Vivint Smart Home acquisition costs — 38 Other integration costs, primarily related to Direct Energy 7 29 Acquisition-related transaction and integration costs $ 30 $ 119 Gain on Sale of Assets The gain on sale of assets of $208 million and $1.6 billion recorded for the years ended December 31, 2024 and 2023, respectively, include: As of December 31, (In millions) 2024 2023 Sale of the Company's 44% equity interest in STP $ — $ 1,236 Sale of the Airtron business unit 204 — Sale of Astoria land and related assets — 199 Sale of the Company's 100% ownership in the Gregory natural gas generating facility — 82 Sale of land and structures at the Company's deactivated Norwalk Harbor, LLC site — 38 Sale of land at the Company's Indian River Power, LLC site — 19 Other asset sales 4 4 Gain on sale of assets $ 208 $ 1,578 Impairment Losses on Investments During the years ended December 31, 2024 and 2023, the Company recorded impairment losses of $7 million and $102 million, respectively, on the Company's equity method investment in Gladstone generation facility, as further described in Item 15 — Note 10, Asset Impairments, to the Consolidated Financial Statements. (Loss)/Gain on Debt Extinguishment The (loss)/gain on debt extinguishment of $(382) million and $109 million recorded for the years ended December 31, 2024, and 2023, respectively, include: As of December 31, (In millions) 2024 2023 Repurchase of a portion of the Convertible Senior Notes $ (260) $ — Exchange offer for the Vivint 5.750% Senior Notes, due 2029 (90) — Repayment of the Vivint Senior Secured Term Loan B (18) — Redemption of the Vivint 6.750% Senior Secured Notes, due 2027 (13) — Redemption of the 6.625% Senior Notes, due 2027 (1) — Partial redemption of the 3.875% Senior Notes, due 2032 — 109 (Loss)/Gain on Debt Extinguishment $ (382) $ 109 Refer to Item 15 — Note 12, Long-term Debt and Finance Leases , to the Consolidated Financial Statements for further discussion. 61 Income Tax Expense/(Benefit) For the year ended December 31, 2024, NRG recorded an income tax expense of $323 million on pre-tax income of $1.4 billion. For the same period in 2023, NRG recorded income tax benefit of $11 million on a pre-tax loss of $213 million. The effective tax rate was 22.3% and 5.2% for the years ended December 31, 2024 and 2023, respectively. For the year ended December 31, 2024, NRG's overall effective tax rate was higher than the federal statutory tax rate of 21%, primarily due to permanent differences and state tax expense partially offset by tax benefits from the revaluation of deferred tax assets and decrease of certain state valuation allowances. Year Ended December 31, (In millions, except effective income tax rate) 2024 2023 Income/(Loss) before income taxes $ 1,448 $ (213) Tax at federal statutory tax rate 304 (45) State taxes 92 (22) Foreign rate differential 1 (10) Changes in state valuation allowances (110) 42 Nondeductible loss on Convertible Senior Notes repurchases 56 — Permanent differences 23 31 Stock compensation (19) — Recognition of uncertain tax benefits 1 12 Deferred impact of state tax rate changes (24) 3 Foreign tax refunds — (17) Return to provision adjustments (1) (5) Income tax expense/(benefit) $ 323 $ (11) Effective income tax rate 22.3 % 5.2 % The effective income tax rate may vary from period to period depending on, among other factors, the geographic and business mix of earnings and losses and changes in valuation allowances in accordance with ASC 740, Income Taxes ("ASC 740"). These factors and others, including the Company's history of pre-tax earnings and losses, are taken into account in assessing the ability to realize deferred tax assets. Liquidity and Capital Resources Liquidity Position As of December 31, 2024 and 2023, NRG's liquidity, excluding collateral funds deposited by counterparties, was approximately $5.4 billion and $4.8 billion, respectively, comprised of the following: As of December 31, (In millions) 2024 2023 Cash and cash equivalents $ 966 $ 541 Restricted cash - operating 4 21 Restricted cash - reserves (a) 4 3 Total 974 565 Total availability under Revolving Credit Facility and collective collateral facilities (b) 4,469 4,278 Total liquidity, excluding collateral funds deposited by counterparties $ 5,443 $ 4,843 (a) Includes reserves primarily for debt service, performance obligations and capital expenditures (b) Total capacity of Revolving Credit Facility and collective collateral facilities was $7.3 billion and $7.4 billion as of December 31, 2024 and December 31, 2023, respectively As of December 31, 2024, total liquidity, excluding collateral funds deposited by counterparties, increased by $600 million. Changes in cash and cash equivalent balances are further discussed under the heading Cash Flow Discussion . Cash and cash equivalents at December 31, 2024, were predominantly held in bank deposits. 62 Management believes that the Company's liquidity position and cash flows from operations will be adequate to finance operating and maintenance capital expenditures, to fund dividends, and to fund other liquidity commitments in the short and long-term. Management continues to regularly monitor the Company's ability to finance the needs of its operating, financing and investing activity within the dictates of prudent balance sheet management. The consolidated statement of cash flows includes certain draws from, and payments to, the revolving credit facility and other credit facilities which are not eligible for net reporting. These transactions are for short term liquidity purposes. Credit Ratings On March 18, 2024, S&P affirmed the Company's issuer credit rating of BB and changed the rating outlook from Stable to Positive. The following table summarizes the Company's current credit ratings: S&P Moody's Fitch NRG Energy, Inc. BB Positive Ba1 Stable BB+ Stable Senior Secured Debt BBB- Baa3 BBB- Senior Unsecured Debt BB Ba2 BB+ Preferred Stock B Ba3 BB- Liquidity The principal sources of liquidity for NRG's operating and capital expenditures are expected to be derived from cash on hand, cash flows from operations and financing arrangements. As described in Item 15 — Note 12, Long-term Debt and Finance Leases, to the Consolidated Financial Statements, the Company's financing arrangements consist mainly of the Senior Notes, Convertible Senior Notes, Senior Secured First Lien Notes, Revolving Credit Facility, the Receivables Securitization Facilities and tax-exempt bonds. The Company also issues letters of credit through bilateral letter of credit facilities and the pre-capitalized trust securities facility. The Company's requirements for liquidity and capital resources, other than for operating its facilities, can generally be categorized by the following: (i) market operations activities; (ii) debt service obligations, as described more fully in Item 15 — Note 12, Long-term Debt and Finance Leases , to the Consolidated Financial Statements; (iii) capital expenditures, including maintenance, environmental, and investments and integration; and (iv) allocations in connection with acquisition opportunities, debt repayments, share repurchases and dividend payments to stockholders, as described in Item 15 — Note 15, Capital Structure , to the Consolidated Financial Statements. Sale of Airtron On September 16, 2024, the Company closed on the sale of its 100% ownership in the Airtron business unit. Proceeds of $500 million were reduced by working capital and other adjustments of $20 million, resulting in net proceeds of $480 million. Senior Credit Facility On April 16, 2024, the Company, as borrower, and certain of its subsidiaries, as guarantors, entered into the Eighth Amendment, which amended the Credit Agreement, in order to (i) establish the Existing Term Loan B Facility with borrowings of $875 million in aggregate principal amount and the Existing Term Loans and (ii) make certain other modifications to the Credit Agreement as set forth therein. The proceeds from the Existing Term Loans were used to repay a portion of the Company’s Convertible Senior notes, all of the Company’s 3.750% senior secured first lien notes due 2024 and for general corporate purposes. On April 22, 2024, the Company, as borrower, and certain of its subsidiaries, as guarantors, entered into the Ninth Amendment to its Revolving Credit Facility to extend the maturity date of a portion of the revolving commitments thereunder to February 14, 2028. For further discussion, see Item 15 — Note 12, Long-term Debt and Finance Leases. 63 Debt Refinancing Transactions In the fourth quarter of 2024, the Company entered into the following debt transactions: Sources Uses Issuance by NRG of 6.000% Senior Notes due 2033 $925 million Repayment of the Vivint Senior Secured Term Loan B $1.310 billion Issuance by NRG of 6.250% Senior Notes due 2034 $950 million Cash tender offer for Vivint 6.750% Senior Secured Notes due 2027 (a) $600 million Exchange offer for New NRG 5.750% Senior Notes due 2029 $798 million Exchange offer for Vivint 5.750% Senior Notes due 2029 (b) $798 million Incremental Term Loan B issued by NRG $450 million Repayment of NRG 6.625% Senior Notes due 2027 $375 million Transactions fees, expenses and premiums $40 million Total $3.123 billion Total $3.123 billion (a) On October 15, 2024, APX Group, Inc. launched the Cash Tender Offer for the Vivint 6.750% Senior Secured Notes due 2027 and on October 30, 2024, delivered a notice of redemption with respect to the $11 million of the Vivint 6.750% Senior Secured Notes due 2027 that remained outstanding (b) On October 15, 2024, APX Group, Inc. launched an Exchange Offer for the Vivint 5.750% Senior Notes due 2029 and on November 4, 2024, delivered a notice of redemption with respect to the $2 million of the Vivint 5.750% Senior Notes due 2029 that remained outstanding following the Exchange Offer As part of the above transactions, the Company entered into the Tenth and Eleventh Amendments to the Credit Agreement to (i) include the Incremental Term Loan B Facility in an aggregate principal amount of $450 million and the Incremental Term Loans, (ii) extend the maturity date of its revolving credit facility to October 30, 2029 and (iii) make certain other amendments to the Credit Agreement. On November 26, 2024, the Company, as borrower, entered into the Twelfth Amendment to the Credit Agreement to (i) reprice both the Existing Term Loan B Facility and the Incremental Term Loan B Facility and (ii) make certain other modifications to the Credit Agreement as set forth therein. On December 20, 2024, the Company, as borrower, entered into the Thirteenth Amendment to the Credit Agreement to (i) add APX Group, Inc. as an additional borrower of the loans under the Credit Agreement on a joint and several basis with the Company and (ii) make certain other modifications to the Credit Agreement as set forth therein. For further discussion on these amendments and the debt transactions in the table above, see Item 15 — Note 12, Long-term Debt and Finance Leases. Convertible Senior Notes As of January 1, 2025, the Company’s Convertible Senior Notes are convertible during the quarterly period ending March 31, 2025 due to the satisfaction of the Common Stock Sale Price Condition. In addition, the Convertible Senior Notes are also convertible from December 1, 2024 until the close of business on the second scheduled trading day immediately before June 1, 2025. For further discussion, see Item 15 — Note 12, Long-term Debt and Finance Leases. During the year ended December 31, 2024, the Company completed repurchases of a portion of the Convertible Senior Notes using cash on hand and a portion of the proceeds from the Existing Term Loans, as detailed in the table below. For the year ended December 31, 2024, a $260 million loss on debt extinguishment was recorded. (In millions, except percentages) Settlement Period Principal Repurchased Cash Paid (a) Average Repurchase Percentage March 2024 $ 92 $ 151 162.356% April 2024 251 452 179.454% Total Repurchases $ 343 $ 603 (a) Includes accrued interest of $1 million and $2 million for the March and April repurchases, respectively During the second quarter of 2024, the Company entered into privately negotiated capped call transactions with certain counterparties. The Capped Calls have a cap price of $249.00 per share, subject to certain adjustments, and effectively lock in a conversion premium of $257 million on the remaining $232 million balance of the Convertible Senior Notes. The option price of $257 million was incurred when the Company entered into the Capped Calls, which will be payable upon the earlier of settlement and expiration of the applicable Capped Calls. For further discussion, see Item 15 - Note 15, Capital Structure , to the Consolidated Financial Statements for additional discussion. 64 Receivables Securitization Facilities On June 21, 2024, NRG Receivables, amended its existing Receivables Facility to, among other things, (i) extend the scheduled termination date to June 20, 2025, (ii) increase the aggregate commitments from $1.4 billion to $2.3 billion (adjusted seasonally) and (iii) add a new originator. As of December 31, 2024, there were no outstanding borrowings and there were $1.4 billion in letters of credit issued. Also on June 21, 2024, the Additional Originator entered into the Joinder Agreement to join as Additional Originator to the Receivables Sale Agreement, dated as of September 22, 2020, among Direct Energy, LP, Direct Energy Business, LLC, Green Mountain Energy Company, NRG Business Marketing, LLC, Reliant Energy Northeast LLC, Reliant Energy Retail Services, LLC, Stream SPE, Ltd., US Retailers LLC and XOOM Energy Texas, LLC, as Originators, NRG Retail, as the servicer, and the Receivables Sale Agreement. Pursuant to the Joinder Agreement, the Additional Originator agrees to be bound by the terms of the Receivables Sale Agreement, will sell to NRG Receivables substantially all of its Receivables and in connection therewith have transferred to NRG Receivables the deposit accounts into which the proceeds of such Receivables are paid. Concurrently with the amendments to the Receivables Facility, the Company and the originators thereunder terminated the existing uncommitted Repurchase Facility. Senior Secured First Lien Note Repayment During the second quarter of 2024, the Company repaid $600 million in aggregate principal amount of its 3.750% Senior Secured First Lien Notes due 2024. Vivint Term Loan On April 10, 2024, the Company’s wholly-owned indirect subsidiary, Vivint, entered into Amendment No. 2 (the “Second Amendment”) to the Second Amended and Restated Credit Agreement dated as of June 9, 2021 (the “Vivint Credit Agreement”) with, among others, Bank of America, N.A. as administrative agent (the “Vivint Agent”), and certain financial institutions, as lenders, which amended the Vivint Credit Agreement in order to (i) reprice its term loan B facility (the term loans thereunder, the “Vivint Term Loans”) and (ii) make certain other modifications to the Vivint Credit Agreement as set forth therein. On October 30, 2024, the Company repaid in full the outstanding Vivint Term Loans of approximately $1.3 billion and terminated the revolving credit facility under the Vivint Credit Agreement. Liability Management The Company executed $342 million in liability management in 2024 and achieved its targeted credit metrics. The Company intends to spend approximately $270 million from cash from operations during 2025. The Company remains committed to maintaining a strong balance sheet and its targeted credit metrics. Pension and Other Postretirement Benefit Contributions As of December 31, 2024, the Company’s estimated pension minimum funding requirements for the next 5 years were $108 million, of which $16 million are required to be made within the next 12 months. As of December 31, 2024, the Company’s estimated other postretirement benefits minimum funding requirements for the next 5 years were $24 million, of which $5 million are required to be made within the next 12 months. These amounts represent estimates based on assumptions that are subject to change. For further discussion, see Item 15 — Note 14, Benefit Plans and Other Postretirement Benefits , to the Consolidated Financial Statements. 65 Debt Service Obligations Principal payments on debt and finance leases as of December 31, 2024, are due in the following periods: (In millions) Description 2025 2026 2027 2028 2029 Thereafter Total Recourse Debt: 5.750% Senior Notes, due 2028 $ — $ — $ — $ 821 $ — $ — $ 821 5.250% Senior Notes, due 2029 — — — — 733 — 733 3.375% Senior Notes, due 2029 — — — — 500 — 500 5.750% Senior Notes, due 2029 — — — — 798 — 798 3.625% Senior Notes, due 2031 — — — — — 1,030 1,030 3.875% Senior Notes, due 2032 — — — — — 480 480 6.000% Senior Notes, due 2033 — — — — — 925 925 6.250% Senior Notes, due 2034 — — — — — 950 950 2.750% Convertible Senior Notes, due 2048 232 — — — — — 232 2.000% Senior Secured Notes, due 2025 500 — — — — — 500 2.450% Senior Secured Notes, due 2027 — — 900 — — — 900 4.450% Senior Secured Notes, due 2029 — — — — 500 — 500 7.00% Senior Secured Notes, due 2033 — — — — — 740 740 Tax-exempt bonds 247 — — 59 — 160 466 Term Loan B, due 2031 11 14 13 13 13 1,253 1,317 Subtotal Recourse Debt 990 14 913 893 2,544 5,538 10,892 Finance Leases: Finance leases 6 4 3 1 — — 14 Total Debt and Finance Leases $ 996 $ 18 $ 916 $ 894 $ 2,544 $ 5,538 $ 10,906 Interest Payments $ 598 $ 578 $ 565 $ 486 $ 408 $ 877 $ 3,512 For further discussion, see Item 15 — Note 12, Long-term Debt and Finance Leases. Market Operations The Company's market operations activities require a significant amount of liquidity and capital resources. These liquidity requirements are primarily driven by: (i) margin and collateral posted with counterparties; (ii) margin and collateral required to participate in physical markets and commodity exchanges; (iii) timing of disbursements and receipts (e.g. buying power before receiving retail revenues); and (iv) initial collateral for large structured transactions. As of December 31, 2024, market operations had total cash collateral outstanding of $309 million and $2.9 billion outstanding in letters of credit to third parties primarily to support its market activities. As of December 31, 2024, total funds deposited by counterparties were $199 million in cash and $377 million of letters of credit. The Company has entered into long-term contractual arrangements related to energy purchases, gas transportation and storage, and fuel and transportation services and generation projects. As of December 31, 2024, the Company had minimum payment obligations under such outstanding agreements of $9.0 billion, with $2.4 billion payable within the next 12 months and an additional $1.5 billion of short-term purchase energy commitments. For further discussion, see Item 15 — Note 22, Commitments and Contingencies . Future liquidity requirements may change based on the Company's hedging activities and structures, fuel purchases, and future market conditions, including forward prices for energy and fuel and market volatility. In addition, liquidity requirements are dependent on the Company's credit ratings and general perception of its creditworthiness. First Lien Structure NRG has the capacity to grant first liens to certain counterparties on a substantial portion of the Company's assets, subject to various exclusions including NRG's assets that have project-level financing and the assets of certain non-guarantor subsidiaries, to reduce the amount of cash collateral and letters of credit that it would otherwise be required to post from time to time to support its obligations under out-of-the-money hedge agreements. The first lien program does not limit the volume that 66 can be hedged or the value of underlying out-of-the-money positions. The first lien program also does not require NRG to post collateral above any threshold amount of exposure. The first lien structure is not subject to unwind or termination upon a ratings downgrade of a counterparty and has no stated maturity date. The Company's first lien counterparties may have a claim on its assets to the extent market prices exceed the hedged prices. As of December 31, 2024, all hedges under the first liens were in-the-money on a counterparty aggregate basis. Capital Expenditures The following table summarizes the Company's capital expenditures for maintenance, environmental and investments and integration for the year ended December 31, 2024: (In millions) Maintenance Environmental Investments and Integration Total Texas $ 191 $ 18 $ 160 $ 369 East — 3 — 3 West/Services/Other 15 — 1 16 Vivint Smart Home 18 — 5 23 Corporate 19 — 42 61 Total cash capital expenditures for 2024 243 21 208 472 Integration operating expenses and cost to achieve — — 60 60 Investments — — 180 180 Total cash capital expenditures and investments for the year ended December 31, 2024 $ 243 $ 21 $ 448 $ 712 Investments and Integration for the year ended December 31, 2024 include growth expenditures, integration, small book acquisitions and other investments. Environmental Capital Expenditures Estimate NRG estimates that environmental capital expenditures from 2025 through 2029 required to comply with environmental laws will be approximately $73 million, primarily driven by the cost of complying with ELG at the Company's coal units in Texas. The table below summarizes the status of NRG's coal fleet with respect to air quality controls as of December 31, 2024. NRG uses an integrated approach to fuels, controls and emissions markets to meet environmental requirements. SO 2 NO x Mercury Particulate Units State Control Equipment Install Date Control Equipment Install Date Control Equipment Install Date Control Equipment Install Date Indian River 4 (a) DE CDS 2011 LNBOFA/SCR 1999/2011 ACI/CDS/FF 2008/2011 ESP/FF 1980/2011 Limestone 1-2 TX FGD 1985-86 LNBOFA 2002/2003 ACI 2015 ESP 1985-1986 Powerton 5 IL DSI 2016 OFA/SNCR 2003/2012 ACI 2009 ESP/upgrade 1973/2016 Powerton 6 IL DSI 2014 OFA/SNCR 2002/2012 ACI 2009 ESP/upgrade 1976/2014 W.A. Parish 5, 6, 7 TX FF co-benefit 1988 SCR 2004 ACI 2015 FF 1988 W.A. Parish 8 TX FGD 1982 SCR 2004 ACI 2015 FF 1988 (a) Indian River Unit 4 retired on February 23, 2025 ACI - Activated Carbon Injection CDS - Circulating Dry Scrubber DSI - Dry Sorbent Injection with Trona ESP - Electrostatic Precipitator FGD - Flue Gas Desulfurization (wet) FF- Fabric Filter LNBOFA - Low NO x Burner with Overfire Air OFA - Overfire Air SCR - Selective Catalytic Reduction SNCR - Selective Non-Catalytic Reduction 67 The following table summarizes the estimated environmental capital expenditures by year: (In millions) Total 2025 $ 40 2026 16 2027 11 2028 3 2029 3 Total $ 73 Share Repurchases During the year ended December 31, 2024, the Company completed $925 million of open market share repurchases at an average price of $87.57 per share. See Item 15 — Note 15, Capital Structure for additional discussion. In October 2024, the Board of Directors authorized an additional $1.0 billion for share repurchases as part of the existing share repurchase authorization, for a total of $3.7 billion. As of January 31, 2025, $1.5 billion is remaining under the $3.7 billion authorization. Dividend Increase on Common Stock During the first quarter of 2024, NRG increased the annual dividend on its common stock to $1.63 from $1.51 per share. The Company returned $343 million of capital to common shareholders in the year ended 2024 through a $1.63 dividend per common share. Beginning in the first quarter of 2025, NRG increased the annual common stock dividend to $1.76 per share, representing an 8% increase from 2024. The Company expects to target an annual common stock dividend growth rate of 7-9% per share in subsequent years. On January 22, 2025, NRG declared a quarterly dividend on the Company's common stock of $0.44 per share, or $1.76 per share on an annualized basis, payable on February 18, 2025, to stockholders of record as of February 3, 2025. The Company's common stock dividends are subject to available capital, market conditions, and compliance with associated laws and regulations. Series A Preferred Stock Dividends In March and September 2024, the Company declared and paid semi-annual dividends of $51.25 per share on its outstanding Series A Preferred Stock, each totaling $33 million. Additional Material Cash Requirements Not Discussed Above Operating leases — The Company leases generating facilities, land, office and equipment, railcars, fleet vehicles and storefront space at retail stores. As of December 31, 2024, the Company had lease payment obligations of $292 million, of which $85 million is payable within the next 12 months. For further discussion, see Item 15 — Note 9, Leases . Other liabilities — Other liabilities includes water right agreements, service and maintenance agreements, stadium naming rights, stadium sponsorships, long-term service agreements and other contractual obligations. As of December 31, 2024, the Company had total of $270 million under such commitments, of which $49 million are payable within the next 12 months. Contingent obligations for guarantees — NRG and its subsidiaries enter into various contracts that include indemnifications and guarantee provisions as a routine part of the Company’s business activities. For further discussion, see Item 15 —Note 26, Guarantees . Obligations Arising Out of a Variable Interest in an Unconsolidated Entity Variable Interest in Equity investments — NRG's investment in Ivanpah is a variable interest entity for which NRG is not the primary beneficiary. See also Item 15 — Note 16, Investments Accounted for by the Equity Method and Variable Interest Entities, to the Consolidated Financial Statements for additional discussion. NRG's pro-rata share of non-recourse debt was approximately $461 million as of December 31, 2024. This indebtedness may restrict the ability of Ivanpah to issue dividends or distributions to NRG. 68 Cash Flow Discussion 2024 compared to 2023 The following table reflects the changes in cash flows for the comparative years: Year ended December 31, (In millions) 2024 2023 Change Cash provided/(used) by operating activities $ 2,306 $ (221) $ 2,527 Cash used by investing activities (24) (910) 886 Cash used by financing activities (1,755) (400) (1,355) Cash provided/(used) by operating activities Changes to cash provided/(used) by operating activities were driven by: (In millions) Changes in cash collateral in support of risk management activities due to change in commodity prices $ 2,051 Increase in operating income adjusted for other non-cash items 645 Increase in working capital primarily due to lower gas pricing coupled with lower gas sales volumes 341 Decrease in working capital primarily driven by capitalized contract costs and deferred revenues (396) Decrease in working capital primarily related to the payout of the Company's annual incentive plan in 2024 reflecting financial outperformance for 2023 (114) $ 2,527 Cash used by investing activities Changes to cash provided/(used) by investing activities were driven by: (In millions) Decrease in cash paid for acquisitions primarily due to the acquisition of Vivint Smart Home in March 2023 $ 2,485 Decrease in proceeds from the sale of assets primarily due to the sale of the Company's 44% equity interest in STP in November 2023 (1,506) Decrease in insurance proceeds for property, plant and equipment, net (237) Decrease in capital expenditures 126 Other 18 $ 886 Cash (used)/provided by financing activities Changes in cash (used)/provided by financing activities were driven by: (In millions) Decrease due to repayments of long-term debt and finance leases $ (2,732) Increase in proceeds due to the issuance of long-term debt in 2024 2,469 Decrease in proceeds due to the issuance of preferred stock in 2023 (635) Decrease in net receipts from settlement of acquired derivatives (345) Decrease primarily due to debt extinguishment costs in 2024 (275) Increase due to less payments for share repurchase activity in 2024 187 Increase in payments of dividends primarily due to preferred stock (24) $ (1,355) 69 NOLs, Deferred Tax Assets and Uncertain Tax Position Implications For the year ended December 31, 2024, the Company had domestic pre-tax book income of $1.5 billion and foreign pre-tax book loss of $37 million. For the year ended December 31, 2024, the Company utilized U.S. federal NOLs of $1.4 billion, and tax credits of $103 million. As of December 31, 2024, the Company has cumulative U.S. federal NOL carryforwards of $7 billion, of which $5.3 billion do not have an expiration date, and cumulative state NOL carryforwards of $6.1 billion for financial statement purposes. NRG also has cumulative foreign NOL carryforwards of $394 million, most of which have no expiration date. In addition to the above NOLs, NRG has a $274 million indefinite carryforward for interest deductions, as well as $269 million of tax credits, inclusive of $61 million of CAMT credits to be utilized in future years. As a result of the Company's tax position, including the utilization of federal and state NOLs, and based on current forecasts, the Company anticipates income tax payments, due to federal, state and foreign jurisdictions, of up to $125 million in 2025, excluding the impact of the proposed CAMT regulations. As of December 31, 2024, NRG as an applicable corporation is subject to the CAMT, and has reflected the impact in its current and deferred taxes. There is no impact on the Company’s provision for income taxes from the CAMT as of December 31, 2024. The Company has $57 million of tax effected uncertain federal, state and foreign tax benefits for which the Company has recorded a non-current tax liability of $62 million (inclusive of accrued interest) until such final resolution with the related taxing authority. On December 31, 2021, the OECD released rules which set forth a common approach to a global minimum tax at 15% for multinational companies, which has been enacted into law by certain countries effective for 2024. The Company's preliminary analysis indicates that there is no material impact to the Company's financial statements from these rules. The Company is no longer subject to U.S. federal income tax examinations for years prior to 2021. With few exceptions, state and Canadian income tax examinations are no longer open for years before 2015. Guarantor Financial Information As of December 31, 2024, the Company's outstanding registered senior notes consisted of $821 million of the 2028 Senior Notes as shown in Note 12, Long-term Debt and Finance Leases . These Senior Notes are guaranteed by certain of NRG's current and future 100% owned domestic subsidiaries, or guarantor subsidiaries (the “Guarantors”). See Exhibit 22.1 to this Annual Report on Form 10-K for a listing of the Guarantors. These guarantees are both joint and several. NRG conducts much of its business through and derives much of its income from its subsidiaries. Therefore, the Company's ability to make required payments with respect to its indebtedness and other obligations depends on the financial results and condition of its subsidiaries and NRG's ability to receive funds from its subsidiaries. There are no restrictions on the ability of any of the Guarantors to transfer funds to NRG. Other subsidiaries of the Company do not guarantee the registered debt securities of either NRG Energy, Inc. or the Guarantors (such subsidiaries are referred to as the “Non-Guarantors”). The Non-Guarantors include all of NRG's foreign subsidiaries and certain domestic subsidiaries. The following tables present summarized financial information of NRG Energy, Inc. and the Guarantors in accordance with Rule 3-10 under the SEC's Regulation S-X. The financial information may not necessarily be indicative of the results of operations or financial position of NRG Energy, Inc. and the Guarantors in accordance with U.S. GAAP. The following table presents the summarized statement of operations: (In millions) For the Year Ended December 31, 2024 Revenue (a) $ 23,553 Operating income (b) 2,382 Total other expense (635) Income before income taxes 1,747 Net Income 1,411 (a) Intercompany transactions with Non-Guarantors of $5 million during the year ended December 31, 2024 (b) Intercompany transactions with Non-Guarantors including cost of operations of $26 million and selling, general and administrative of $349 million during the year ended December 31, 2024 70 The following table presents the summarized balance sheet information: (In millions) As of December 31, 2024 Current assets (a) $ 6,090 Property, plant and equipment, net 1,318 Non-current assets 15,208 Current liabilities (b) 8,181 Non-current liabilities 12,481 (a) Includes intercompany receivables due from Non-Guarantors of $30 million as of December 31, 2024 (b) Includes intercompany payables due to Non-Guarantors that were de minimis as of December 31, 2024 Fair Value of Derivative Instruments NRG may enter into energy purchase and sales contracts, fuel purchase contracts and other energy-related financial instruments to mitigate variability in earnings due to fluctuations in spot market prices and to hedge fuel requirements at power plants or retail load obligations. In order to mitigate interest risk associated with the issuance of the Company's variable rate debt, NRG enters into interest rate swap agreements. In addition, in order to mitigate foreign exchange rate risk primarily associated with the purchase of USD denominated natural gas for the Company's Canadian business, NRG enters into foreign exchange contract agreements. Under Flex Pay, offered by Vivint Smart Home, customers pay for smart home products by obtaining financing from a third-party financing provider under the Consumer Financing Program. Vivint Smart Home pays certain fees to the financing providers and shares in credit losses depending on the credit quality of the customer. NRG's trading activities are subject to limits in accordance with the Company's Risk Management Policy. These contracts are recognized on the balance sheet at fair value and changes in the fair value of these derivative financial instruments are recognized in earnings. The tables below disclose the activities that include both exchange and non-exchange traded contracts accounted for at fair value in accordance with ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). Specifically, these tables disaggregate realized and unrealized changes in fair value; disaggregate estimated fair values at December 31, 2024, based on their level within the fair value hierarchy defined in ASC 820; and indicate the maturities of contracts at December 31, 2024. For a full discussion of the Company's valuation methodology of its contracts, see Derivative Fair Value Measurements in Item 15 — Note 5, Fair Value of Financial Instruments , to the Consolidated Financial Statements. Derivative Activity Gains (In millions) Fair value of contracts as of December 31, 2023 $ 648 Contracts realized or otherwise settled during the period 165 Other changes in fair value 179 Fair value of contracts as of December 31, 2024 (a) $ 992 (a) Includes $770 million of derivative contracts that were elected as NPNS on October 1, 2024 and are no longer valued at fair value on a recurring basis. For further discussion, see Item 15 — Note 6, Accounting for Derivative Instruments and Hedging Activities Fair Value of Contracts as of December 31, 2024 (In millions) Maturity Fair Value Hierarchy Gains/(Losses) (a) 1 Year or Less Greater Than 1 Year to 3 Years Greater Than 3 Years to 5 Years Greater Than 5 Years Total Fair Value Level 1 $ 92 $ 7 $ (1) $ (2) $ 96 Level 2 118 143 22 7 290 Level 3 (107) (50) (9) 2 (164) Total $ 103 $ 100 $ 12 $ 7 $ 222 (a) Excludes $770 million of derivative contracts that were elected as NPNS on October 1, 2024 and are no longer valued at fair value on a recurring basis. For further discussion, see Item 15 — Note 6, Accounting for Derivative Instruments and Hedging Activities The Company has elected to disclose derivative assets and liabilities on a trade-by-trade basis and does not offset amounts at the counterparty master agreement level. Also, collateral received or posted on the Company's derivative assets or liabilities are recorded on a separate line item on the balance sheet. Consequently, the magnitude of the changes in individual current and non-current derivative assets or liabilities is higher than the underlying credit and market risk of the Company's portfolio. As discussed in Item 7A — Quantitative and Qualitative Disclosures About Market Risk, Commodity Price Risk , NRG measures 71 the sensitivity of the Company's portfolio to potential changes in market prices using VaR, a statistical model which attempts to predict risk of loss based on market price and volatility. NRG's risk management policy places a limit on one-day holding period VaR, which limits the Company's net open position. As the Company's trade-by-trade derivative accounting results in a gross-up of the Company's derivative assets and liabilities, the net derivative assets and liability position is a better indicator of NRG's hedging activity. As of December 31, 2024, NRG's net derivative asset was $992 million, an increase to total fair value of $344 million as compared to December 31, 2023. This increase was primarily driven by gains in fair value and roll-off of trades that settled during the period. Based on a sensitivity analysis using simplified assumptions, the impact of a $0.50 per MMBtu increase or decrease in natural gas prices across the term of the derivative contracts would result in a change of approximately $1.0 billion in the net value of derivatives as of December 31, 2024. Critical Accounting Estimates The Company's discussion and analysis of the financial condition and results of operations are based upon the Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements and related disclosures in compliance with GAAP requires the application of appropriate technical accounting rules and guidance as well as the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. The application of appropriate technical accounting rules and guidance involves judgments regarding future events, including the likelihood of success of particular projects, legal and regulatory challenges, and the fair value of certain assets and liabilities. These judgments, in and of themselves, could materially affect the financial statements and disclosures based on varying assumptions, which may be appropriate to use. In addition, the financial and operating environment may also have a significant effect, not only on the operation of the business, but on the results reported through the application of accounting measures used in preparing the financial statements and related disclosures, even if the accounting guidance has not changed. NRG evaluates these estimates, on an ongoing basis, utilizing historic experience, consultation with experts and other methods the Company considers reasonable. In any event, actual results may differ substantially from the Company's estimates. Any effects on the Company's business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the information that gives rise to the revision becomes known. The Company identifies its most critical accounting estimates as those that are the most pervasive and important to the portrayal of the Company's financial position and results of operations, and require the most difficult, subjective, and/or complex judgments by management about matters that are inherently uncertain. 72 Such accounting estimates include: Accounting Estimate Judgments/Uncertainties Affecting Application Derivative Instruments Assumptions used in valuation techniques Market maturity and economic conditions Contract interpretation Market conditions in the energy industry, especially the effects of price volatility on contractual commitments Income Taxes and Valuation Allowance for Deferred Tax Assets Interpret existing tax statute and regulations upon application to transactions Ability to utilize tax benefits through carry backs to prior periods and carry forwards to future periods Judgement about future realization of deferred tax assets Evaluation of Assets for Impairment Regulatory and political environments and requirements Estimated useful lives of assets Environmental obligations and operational limitations Estimates of future cash flows Estimates of fair value Judgment about impairment triggering events Goodwill and Other Intangible Assets Estimated useful lives for finite-lived intangible assets Judgment about impairment triggering events Estimates of reporting unit's fair value Fair value estimate of intangible assets acquired in business combinations Business Combinations Fair value of assets acquired and liabilities assumed in business combinations Estimated future cash flow Estimated useful lives of assets Contingencies Estimated financial impact of event(s) Judgment about likelihood of event(s) occurring Regulatory and political environments and requirements Derivative Instruments The Company follows the guidance of ASC 815, Derivatives and Hedging "(A SC 815"), to account for derivative instruments. ASC 815 requires the Company to mark-to-market all derivative instruments on the balance sheet and recognize fair value change in earnings, unless they qualify for the NPNS exception. ASC 815 applies to NRG's energy related commodity contracts, interest rate swaps, foreign exchange contracts and Consumer Financing Program. Energy-Related Commodities As of December 31, 2024 and 2023, for purposes of measuring the fair value of derivative instruments, the Company primarily used quoted exchange prices and consensus pricing. Consensus pricing is provided by independent pricing services which are compiled from market makers with longer dated tenors as compared to broker quotes. Prior to the fourth quarter of 2023, the Company valued derivatives based on price quotes from brokers in active markets who regularly facilitate those transactions. The Company started using consensus pricing as it offers data from more market makers and for longer dated tenors as compared to broker quotes, enhances data integrity, and increases transparency. When external prices are not available, NRG uses internal models to determine the fair value. These internal models include assumptions of the future prices of energy commodities based on the specific market in which the energy commodity is being purchased or sold, using externally available forward market pricing curves for all periods possible under the pricing model. These estimations are considered to be critical accounting estimates. Interest Rate Swaps NRG is exposed to changes in interest rate through the Company's issuance of variable rate debt. To manage the Company's interest rate risk, NRG enters into interest rate swap agreements. In order to qualify the derivative instruments for hedged transactions, NRG estimates the forecasted borrowings for interest rate swaps occurring within a specified time period. 73 Foreign Exchange Contracts In order to mitigate foreign exchange risk primarily associated with the purchase of USD denominated natural gas for the Company's Canadian business, the Company enters into foreign exchange contract agreements. Consumer Financing Program The derivative positions for the Company's Consumer Financing Program are valued using a discounted cash flow model, with inputs consisting of available market data, such as market yield discount rates, as well as unobservable internally derived assumptions, such as collateral prepayment rates, collateral default rates and credit loss rates. In summary, the fair value represents an estimate of the present value of the cash flows Vivint Smart Home will be obligated to pay to the third-party financing provider for each component of the derivative. Certain derivative instruments that meet the criteria for derivative accounting treatment also qualify for a scope exception to derivative accounting, as they are considered to be NPNS. The availability of this exception is based upon the assumption that the Company has the ability and it is probable to deliver or take delivery of the underlying item. These assumptions are based on expected load requirements, internal forecasts of sales and generation and historical physical delivery on contracts. Derivatives that are considered to be NPNS are exempt from derivative accounting treatment and are accounted for under accrual accounting. If it is determined that a transaction designated as NPNS no longer meets the scope exception due to changes in estimates, the related contract would be recorded on the balance sheet at fair value combined with the immediate recognition through earnings. Income Taxes and Valuation Allowance for Deferred Tax Assets As of December 31, 2024, NRG’s deferred tax assets were primarily the result of U.S. federal and state NOLs, the difference between book and tax basis in property, plant, and equipment, deferred revenues and tax credit carryforwards. The realization of deferred tax assets is dependent upon the Company's ability to generate sufficient future taxable income during the periods in which those temporary differences become deductible, prior to the expiration of the tax attributes. The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in the Company's financial statements or tax returns and forecasting future profitability by tax jurisdiction. The Company evaluates its deferred tax assets on a jurisdictional basis to determine whether adjustments to the valuation allowance are appropriate considering changes in facts or circumstances. As of each reporting date, management considers new evidence, both positive and negative, when determining the future realization of the Company’s deferred tax assets. 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. The Company continues to maintain a valuation allowance of $144 million as of December 31, 2024 against deferred tax assets consisting of state NOL carryforwards and foreign NOL carryforwards in jurisdictions where the Company does not currently believe that the realization of deferred tax assets is more likely than not. As of December 31, 2023, the Company's valuation allowance balance was $275 million. Considerable judgment is required to determine the tax treatment of a particular item that involves interpretations of complex tax laws. The Company 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 continues to be under audit for multiple years by taxing authorities in various jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years prior to 2021. With few exceptions, state and Canadian income tax examinations are no longer open for years before 2015. NRG does not intend, nor currently foresee a need, to repatriate funds held at its international operations into the U.S. These funds are deemed to be indefinitely reinvested in its foreign operations and the Company has not changed its assertion with respect to distributions of funds that would require the accrual of U.S. income tax. 74 Evaluation of Assets for Impairment In accordance with ASC 360, Property, Plant, and Equipment (" ASC 360"), the Company evaluates property, plant and equipment and certain intangible assets for impairment whenever indicators of impairment exist. Examples of such indicators or events include: • Significant decrease in the market price of a long-lived asset; • Significant adverse change in the manner an asset is being used or its physical condition; • Adverse business climate; • Accumulation of costs significantly in excess of the amounts originally expected for the construction or acquisition of an asset; • Current period loss combined with a history of losses or the projection of future losses; and • Change in the Company's intent about an asset from an intent to hold to a greater than 50% likelihood that an asset will be sold, or disposed of before the end of its previously estimated useful life. For assets to be held and used, recoverability is measured by a comparison of the carrying amount of the assets to the undiscounted future net cash flows expected to be generated by the asset, through considering project specific assumptions for long-term power and natural gas prices, escalated future project operating costs and expected plant operations. If the Company determines that the undiscounted cash flows from the asset are less than the carrying amount of the asset, NRG must estimate fair value to determine the amount of any impairment loss. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets, factoring in the different courses of action available to the Company. Generally, fair value will be determined using valuation techniques, such as the present value of expected future cash flows. NRG uses its best estimates in making these evaluations and considers various factors, including forward price curves for energy, fuel and operating costs. However, actual future market prices and project costs could vary from the assumptions used in the Company's estimates and the impact of such variations could be material. Assets held-for-sale are reported at the lower of the carrying amount or fair value less the cost to sell. The estimation of fair value, whether in conjunction with an asset to be held and used or with an asset held-for-sale, and the evaluation of asset impairment are, by their nature, subjective. The Company considers quoted market prices in active markets to the extent they are available. In the absence of such information, NRG may consider prices of similar assets, consult with brokers or employ other valuation techniques. The Company will also discount the estimated future cash flows associated with the asset using a single interest rate representative of the risk involved with such an investment or asset. The use of these methods involves the same inherent uncertainty of future cash flows as previously discussed with respect to undiscounted cash flows. Actual future market prices and project costs could vary from those used in NRG's estimates and the impact of such variations could be material. Annually, during the fourth quarter, the Company revises its views of power and fuel prices including the Company's fundamental view for long-term prices, forecasted generation and operating and capital expenditures, in connection with the preparation of its annual budget. Changes to the Company's views of long-term power and fuel prices impact the Company’s projections of profitability, based on management's estimate of supply and demand within the sub-markets for its operations and the physical and economic characteristics of each of its businesses. For further discussion, see Item 15 — Note 10 , Asset Impairments . Goodwill and Other Intangible Assets At December 31, 2024, the Company reported goodwill of $5.0 billion, consisting of $3.5 billion from the acquisition of Vivint in 2023, $1.2 billion from the acquisition of Direct Energy in 2021 and $0.3 billion from other retail acquisitions. The Company applies ASC 805, Business Combinations ("ASC 805"), and ASC 350, Intangibles-Goodwill and Other (" ASC 350") to account for its goodwill and intangible assets. Under these standards, the Company amortizes all finite-lived intangible assets over their respective estimated weighted-average useful lives. Goodwill has an indefinite life and is not amortized. Goodwill is tested for impairment at least annually, or more frequently whenever an event or change in circumstances occurs that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company tests goodwill for impairment at the reporting unit level, which is identified by assessing whether the components of the Company's operating segments constitute businesses for which discrete financial information is available and whether segment management regularly reviews the operating results of those components. The Company performs the annual goodwill impairment assessment as of December 31 or when events or changes in circumstances indicate that the fair value of the reporting unit may be below the carrying amount. The Company may first assess qualitative factors to determine whether it is more likely than not that an impairment has occurred. In the absence of sufficient qualitative factors, the Company performs a 75 quantitative assessment by determining the fair value of the reporting unit and comparing to its book value. If it is determined that the fair value of a reporting unit is below its carrying amount, the Company's goodwill will be impaired at that time. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill impairment test will prove to be accurate predictions of the future. For further discussion, see Evaluation of Assets for Impairment caption above, and Item 15 — Note 10 , Asset Impairments . Business Combinations NRG accounts for business acquisitions using the acquisition method of accounting prescribed under ASC 805. Under this method, the Company is required to record on its Consolidated Balance Sheets the estimated fair values of the acquired company’s assets and liabilities assumed at the acquisition date. The excess of the consideration transferred over the fair value of the net identifiable assets acquired and liabilities assumed is recorded as goodwill. Determining fair values of assets acquired and liabilities assumed requires significant estimates and judgments. Fair value is determined based on the estimated price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The acquired assets and assumed liabilities from the Vivint Smart Home acquisition that involved the most subjectivity in determining fair value consisted of customer relationships, developed technology, trade names, acquired debt and derivative instruments. NRG describes in detail its acquisitions in Item 15 — Note 4, Acquisitions and Dispositions , to the Consolidated Financial Statements. The fair value of the customer relationships, technology and trade names are measured using income-based valuation methodologies, which include certain assumptions such as forecasted future cash flows, customer attrition rates, royalty rates and discount rates. Customer relationships and technology are amortized to depreciation and amortization, ratably based on discounted future cash flows. Trade names are amortized to depreciation and amortization, on a straight line basis. The acquired Vivint Smart Home debt was measured at fair value using observable market inputs based on interest rates at the acquisition closing date. The difference between the fair value at the acquisition closing date and the principal outstanding was being amortized through interest expense over the remaining term of the debt. On October 30, 2024, the Company repaid in full the outstanding Vivint Term Loans and terminated the revolving credit facility under the Vivint Credit Agreement. For further discussion, see Item 15 — Note 12, Long-term Debt and Finance Leases. The derivative liabilities in connection with the contractual future payment obligations with the financing providers under Vivint Smart Home’s Consumer Financing Program were measured at fair value at the acquisition closing date using a discounted cash flow model, with inputs consisting of available market data, such as market yield discount rates, as well as unobservable internally derived assumptions, such as collateral prepayment rates, collateral default rates and credit loss rates. Changes to the fair value are recorded each period through other income, net in the consolidated statement of operations. Contingencies NRG records reserves for estimated losses from contingencies when information available indicates that a loss is probable and the amount of the loss, or range of loss, can be reasonably estimated. Gain contingencies are not recorded until management determines it is certain that the future event will become or does become a reality. Such determinations are subject to interpretations of current facts and circumstances, forecasts of future events, and estimates of the financial impacts of such events. NRG describes in detail its contingencies in Item 15 — Note 22, Commitments and Contingencies, to the Consolidated Financial Statements. Recent Accounting Developments See Item 15 — Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements for a discussion of recent accounting developments. 76 Item 7A — Quantitative and Qualitative Disclosures About Market Risk NRG is exposed to several market risks in the Company's normal business activities. Market risk is the potential loss that may result from market changes associated with the Company's retail operations, merchant power generation, or with an existing or forecasted financial or commodity transactions. The types of market risks the Company is exposed to are commodity price risk, credit risk, liquidity risk, interest rate risk and currency exchange risk. In order to manage these risks, the Company uses various fixed-price forward purchase and sales contracts, futures and option contracts traded on NYMEX and other exchanges, and swaps and options traded in the over-the-counter financial markets to: • Manage and hedge fixed-price purchase and sales commitments; • Reduce exposure to the volatility of cash market prices; and • Hedge fuel requirements for the Company's generating facilities. Commodity Price Risk Commodity price risks result from exposures to changes in spot prices, forward prices, volatilities, and correlations between various commodities, such as natural gas, electricity, coal, oil, and emissions credits. NRG manages the commodity price risk of the Company's load servicing obligations and merchant generation operations by entering into various derivative or non-derivative instruments to hedge the variability in future cash flows from forecasted sales and purchases of power and fuel. NRG measures the risk of the Company's portfolio using several analytical methods, including sensitivity tests, scenario tests, stress tests, position reports and VaR. NRG uses a Monte Carlo simulation based VaR model to estimate the potential loss in the fair value of its energy assets and liabilities, which includes generation assets, gas transportation and storage assets, load obligations and bilateral physical and financial transactions, based on historical and forward values for factors such as customer demand, weather, commodity availability and commodity prices. The Company's VaR model is based on a one-day holding period at a 95% confidence interval for the forward 36 months, not including the spot month. The VaR model is not a complete picture of all risks that may affect the Company's results. Certain events such as counterparty defaults, regulatory changes, and extreme weather and prices that deviate significantly from historically observed values are not reflected in the model. The following table summarizes average, maximum and minimum VaR for NRG's commodity portfolio, calculated using the VaR model for the years ended December 31, 2024 and 2023: (In millions) 2024 2023 VaR as of December 31, $ 71 $ 51 For the year ended December 31, Average $ 61 $ 62 Maximum 75 82 Minimum 50 41 The Company also uses VaR to estimate the potential loss of derivative financial instruments that are subject to mark-to-market accounting. These derivative instruments include transactions that were entered into for both asset management and trading purposes. The VaR for the derivative financial instruments calculated using the diversified VaR model for the entire term of these instruments entered into for both asset management and trading was $142 million as of December 31, 2024, primarily driven by asset-backed transactions. Credit Risk Credit risk relates to the risk of loss resulting from non-performance or non-payment by counterparties pursuant to the terms of their contractual obligations. NRG is exposed to counterparty credit risk through various activities including wholesale sales, fuel purchases and retail supply arrangements, and retail customer credit risk through its retail load activities. Counterparty credit risk and retail customer credit risk are discussed below. See Item 15 — Note 6, Accounting for Derivative Instruments and Hedging Activities , to this Annual Report on Form 10-K for discussion regarding credit risk contingent features. Counterparty Credit Risk Credit risk relates to the risk of loss resulting from non-performance or non-payment by counterparties pursuant to the terms of their contractual obligations. The Company monitors and manages credit risk through credit policies that include: (i) an established credit approval process; (ii) a daily monitoring of counterparties' credit limits; (iii) the use of credit mitigation measures such as margin, collateral, 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 77 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. As of December 31, 2024, counterparty credit exposure, excluding credit exposure from RTOs, ISOs, registered commodity exchanges and certain long-term agreements, was $1.7 billion, of which the Company held collateral (cash and letters of credit) against those positions of $288 million resulting in a net exposure of $1.5 billion. 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 69% of the Company's exposure before collateral is expected to roll off by the end of 2026. The following table highlights the 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, NPNS, and non-derivative transactions. As of December 31, 2024, the aggregate credit 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 74 % Financial institutions 26 Total 100 % Category Net Exposure (a) (b) (% of Total) Investment grade 55 % Non-Investment grade/Non-Rated 45 Total 100 % (a) Counterparty credit exposure excludes 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 had no exposure to wholesale counterparties in excess of 10% of the total net exposure discussed above as of December 31, 2024. Changes in hedge positions and market prices will affect credit exposure and counterparty concentration. RTOs and ISOs The Company participates in the organized markets of CAISO, ERCOT, AESO, IESO, ISO-NE, MISO, NYISO and PJM, known as RTOs or ISOs. Trading in the majority of these markets is approved by FERC, whereas in the case of ERCOT, it is approved by the PUCT, and whereas in the case of AESO and IESO, both exist provincially with AESO primarily subject to Alberta Utilities Commission and the IESO subject to the Ontario Energy Board. These ISOs may include 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 the overall market and are excluded from the above exposures. Exchange Traded Transactions The Company enters into commodity transactions on registered exchanges, notably ICE, NYMEX and Nodal. 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 under Renewable 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, 2024, aggregate credit risk exposure managed by NRG to these counterparties was approximately $868 million for the next five years. Retail Customer Credit Risk NRG is exposed to retail credit risk through the Company's retail electricity and gas providers as well as through Vivint Smart Home. 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 78 credit risk through the use of established credit policies, which include monitoring of the portfolio and the use of credit mitigation measures such as deposits or prepayment arrangements. As of December 31, 2024, the Company's retail customer credit exposure to Home and Business customers was diversified across many customers and various industries, as well as government entities. 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. The Company's provision for credit losses resulting from credit risk was $314 million, $251 million and $11 million for the years ended December 31, 2024, 2023 and 2022, respectively. During the year ended December 31, 2022, the provision for credit losses included the Company's loss mitigation efforts recognized as income of $126 million related to Winter Storm Uri. Liquidity Risk Liquidity risk arises from the general funding needs of the Company's activities and the management of the Company's assets and liabilities. The Company is currently exposed to additional collateral posting if natural gas prices decline, primarily due to the long natural gas equivalent position at various exchanges used to hedge NRG's retail supply load obligations. Based on a sensitivity analysis for power and gas positions under marginable contracts as of December 31, 2024, a $0.50 per MMBtu decrease in natural gas prices across the term of the marginable contracts would cause an increase in margin collateral posted of approximately $1.1 billion and a 1.00 MMBtu/MWh decrease in heat rates for heat rate positions would result in an increase in margin collateral posted of approximately $359 million. This analysis uses simplified assumptions and is calculated based on portfolio composition and margin-related contract provisions as of December 31, 2024. Interest Rate Risk NRG is exposed to fluctuations in interest rates through its issuance of variable rate debt. Exposures to interest rate fluctuations may be mitigated by entering into derivative instruments known as interest rate swaps, caps, collars and put or call options. These contracts reduce exposure to interest rate volatility and result in primarily fixed rate debt obligations when taking into account the combinations of the variable rate debt and the interest rate derivative instrument. NRG's risk management policies allow the Company to reduce interest rate exposure from variable rate debt obligations. In November 2024, the Company entered into $700 million of interest rate swaps through 2029 to hedge the floating rate on the Term Loans. As of December 31, 2024, the Company's debt fair value was $10.8 billion and carrying value was $10.9 billion. NRG estimates that a 1% decrease in market interest rates would have increased the fair value of the Company's long-term debt by $465 million. Currency Exchange Risk NRG is subject to transactional exchange rate risk from transactions with customers in countries outside of the U.S., primarily within Canada, as well as from intercompany transactions between affiliates. Transactional exchange rate risk arises from the purchase and sale of goods and services in currencies other than the Company's functional currency or the functional currency of an applicable subsidiary. NRG hedges a portion of its forecasted currency transactions with foreign exchange forward contracts. As of December 31, 2024, NRG is exposed to changes in foreign currency primarily associated with the purchase of U.S. dollar denominated natural gas for its Canadian business and entered into foreign exchange contracts with a notional amount of $410 million. The Company is subject to translation exchange rate risk related to the translation of the financial statements of its foreign operations into U.S. dollars. Costs incurred and sales recorded by subsidiaries operating outside of the U.S. are translated into U.S. dollars using exchange rates effective during the respective period. As a result, the Company is exposed to movements in the exchange rates of various currencies against the U.S. dollar, primarily the Canadian and Australian dollars. A hypothetical 10% appreciation in major currencies relative to the U.S. dollar as of December 31, 2024, would have resulted in a decrease of $3 million to net income within the Consolidated Statement of Operations. Item 8 — Financial Statements and Supplementary Data The financial statements and schedules are included in Part IV, Item 15 of this Annual Report on Form 10-K. Item 9 — Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None. 79 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, 2024. 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 2024 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, 2024. The effectiveness of the Company's internal control over financial reporting as of December 31, 2024 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. 80 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, 2024, 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, 2024, 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, 2024 and 2023, the related consolidated statements of operations, comprehensive income/(loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report dated February 26, 2025 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 February 26, 2025 81 Item 9B — Other Information Director and Officer Trading Arrangements During the three months ended December 31, 2024, no director or officer of the Company adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement,' as each term is defined in Item 408(a) of Regulation S-K. Item 9C — Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 82 PART III Item 10 — Directors, Executive Officers and Corporate Governance Directors and Executive Officers Information required by this Item is incorporated by reference to the similarly named section of NRG's Definitive Proxy Statement for its 2025 Annual Meeting of Stockholders. 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. Insider Trading Arrangements and Policies The Company has adopted a Securities Trading and Non-Disclosure Policy (the “Insider Trading Policy”) governing the purchase, sale, and other dispositions of its securities by its directors, officers, employees, and other covered personnel. It also follows procedures for the repurchase of its securities. NRG believes that its Insider Trading Policy and repurchase procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations, and the exchange listing standards applicable to the Company. A copy of NRG’s Insider Trading Policy, including any amendments thereto, is filed as Exhibit 19.1 to this Annual Report on Form 10-K. Other information required by this Item is incorporated by reference to the similarly named section of NRG's Definitive Proxy Statement for its 2025 Annual Meeting of Stockholders. 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 2025 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 2,852,917 (1) $ — 13,648,879 Equity compensation plans not approved by security holders 2,877,137 (2) $ — 12,557,143 Total 5,730,054 $ — 26,206,022 (3) (1) Consists of shares issuable under the NRG LTIP. See Note 20, Stock-Based Compensation for a discussion of the NRG LTIP (2) Consists of shares issuable under the Vivint LTIP. On March 10, 2023, in connection with the Acquisition, NRG assumed the Vivint LTIP. While the Vivint LTIP was previously approved by stockholders of Vivint Smart Home, Inc., the plan is listed as "not approved" because it was assumed as part of the Acquisition and not subject to approval by NRG stockholders. The Company intends to make subsequent grants under the Vivint LTIP. See Note 20, Stock-Based Compensation for a discussion of the Vivint LTIP (3) Consists of 7,188,824 shares of common stock under the NRG LTIP, 12,557,143 shares of common stock under the Vivint LTIP and 6,460,055 shares of treasury stock reserved for issuance under the ESPP 83 The LTIPs currently provides for grants of restricted stock units, relative performance stock units, deferred stock units and dividend equivalent rights. The Company'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 one or both of the LTIPs. The purpose of the LTIPs 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 LTIPs. Other information required by this Item is incorporated by reference to the similarly named section of NRG's Definitive Proxy Statement for its 2025 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 2025 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 2025 Annual Meeting of Stockholders. 84 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 , Philadelphia, PA , Auditor Firm ID: 185 , are included herein: Consolidated Statements of Operations — Years ended December 31, 2024, 2023, and 2022 Consolidated Statements of Comprehensive Income/(Loss) — Years ended December 31, 2024, 2023, and 2022 Consolidated Balance Sheets — As of December 31, 2024 and 2023 Consolidated Statements of Cash Flows — Years ended December 31, 2024, 2023, and 2022 Consolidated Statements of Stockholders' Equity — Years ended December 31, 2024, 2023, and 2022 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 85 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, 2024 and 2023, the related consolidated statements of operations, comprehensive income/(loss), stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, 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, 2024, 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 February 26, 2025 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. 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 over revenues As discussed in Note 3 to the consolidated financial statements, the Company had $28,130 million of revenues. 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. We identified the evaluation of the sufficiency of audit evidence over 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 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 certain revenue streams over which procedures were performed, 86 we evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s revenue recognition processes. For certain revenue streams, we involved IT professionals, who assisted in testing certain IT applications used by the Company in its revenue recognition processes. In addition, we assessed recorded revenue for a selection of transactions by comparing the amounts recognized to underlying documentation, including contracts with customers, and for certain revenue streams, we performed a software-assisted data analysis to assess certain relationships among revenue transactions. In addition, we evaluated the sufficiency of audit evidence obtained over 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 February 26, 2025 87 NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Year Ended December 31, (In millions, except per share amounts) 2024 2023 2022 Revenue Revenue $ 28,130 $ 28,823 $ 31,543 Operating Costs and Expenses Cost of operations (excluding depreciation and amortization shown below) 22,100 26,483 27,443 Depreciation and amortization 1,403 1,295 720 Impairment losses 36 26 206 Selling, general and administrative costs (excluding amortization of customer acquisition costs of $ 204 , $ 125 and $ 83 , respectively, which are included in depreciation and amortization shown separately above) 2,031 1,843 1,145 Provision for credit losses 314 251 11 Acquisition-related transaction and integration costs 30 119 52 Total operating costs and expenses 25,914 30,017 29,577 Gain on sale of assets 208 1,578 52 Operating Income 2,424 384 2,018 Other Income/(Expense) Equity in earnings of unconsolidated affiliates 20 16 6 Impairment losses on investments ( 7 ) ( 102 ) — Other income, net 44 47 56 (Loss)/Gain on debt extinguishment ( 382 ) 109 — Interest expense ( 651 ) ( 667 ) ( 417 ) Total other expense ( 976 ) ( 597 ) ( 355 ) Income/(Loss) Before Income Taxes 1,448 ( 213 ) 1,663 Income tax expense/(benefit) 323 ( 11 ) 442 Net Income/(Loss) 1,125 ( 202 ) 1,221 Less: Cumulative dividends attributable to Series A Preferred Stock 67 54 — Net Income/(Loss) Available for Common Stockholders $ 1,058 $ ( 256 ) $ 1,221 Income/(Loss) Per Share Weighted average number of common shares outstanding — basic 206 228 236 Income/(Loss) per Weighted Average Common Share — Basic $ 5.14 $ ( 1.12 ) $ 5.17 Weighted average number of common shares outstanding — diluted 212 228 236 Income/(Loss) per Weighted Average Common Share — Diluted $ 4.99 $ ( 1.12 ) $ 5.17 See notes to Consolidated Financial Statements 88 NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) For the Year Ended December 31, (In millions) 2024 2023 2022 Net Income/(Loss) $ 1,125 $ ( 202 ) $ 1,221 Other Comprehensive (Loss)/Income, net of tax Foreign currency translation adjustments ( 22 ) 9 ( 35 ) Defined benefit plans ( 4 ) 30 ( 16 ) Other comprehensive (loss)/income ( 26 ) 39 ( 51 ) Comprehensive Income/(Loss) $ 1,099 $ ( 163 ) $ 1,170 See notes to Consolidated Financial Statements 89 NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, (In millions) 2024 2023 ASSETS Current Assets Cash and cash equivalents $ 966 $ 541 Funds deposited by counterparties 199 84 Restricted cash 8 24 Accounts receivable, net 3,488 3,542 Inventory 478 607 Derivative instruments 2,686 3,862 Cash collateral paid in support of energy risk management activities 309 441 Prepayments and other current assets 830 626 Total current assets 8,964 9,727 Property, plant and equipment, net 2,021 1,763 Other Assets Equity investments in affiliates 45 42 Operating lease right-of-use assets, net 151 179 Goodwill 5,011 5,079 Customer relationships, net 1,538 2,164 Other intangible assets, net 1,370 1,763 Derivative instruments 1,710 2,293 Deferred income taxes 2,067 2,251 Other non-current assets 1,145 777 Total other assets 13,037 14,548 Total Assets $ 24,022 $ 26,038 90 NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) As of December 31, (In millions, except share data) 2024 2023 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current portion of long-term debt and finance leases $ 996 $ 620 Current portion of operating lease liabilities 66 90 Accounts payable 2,513 2,325 Derivative instruments 2,297 4,019 Cash collateral received in support of energy risk management activities 199 84 Deferred revenue current 711 720 Accrued expenses and other current liabilities 2,031 1,642 Total current liabilities 8,813 9,500 Other Liabilities Long-term debt and finance leases 9,812 10,133 Non-current operating lease liabilities 117 128 Derivative instruments 1,107 1,488 Deferred income taxes 12 22 Deferred revenue non-current 862 914 Other non-current liabilities 821 947 Total other liabilities 12,731 13,632 Total Liabilities 21,544 23,132 Commitments and Contingencies Stockholders' Equity Preferred stock; 10,000,000 shares authorized; 650,000 Series A shares issued and outstanding at December 31, 2024 and 2023 (aggregate liquidation preference $ 650 ) 650 650 Common stock; $ 0.01 par value; 500,000,000 shares authorized; 205,064,058 and 267,330,470 shares issued; and 198,604,003 and 208,130,950 shares outstanding at December 31, 2024 and 2023, respectively 2 3 Additional paid-in capital 705 3,416 Retained earnings 1,535 820 Treasury stock, at cost; 6,460,055 and 59,199,520 shares at December 31, 2024 and 2023, respectively ( 297 ) ( 1,892 ) Accumulated other comprehensive loss ( 117 ) ( 91 ) Total Stockholders' Equity 2,478 2,906 Total Liabilities and Stockholders' Equity $ 24,022 $ 26,038 See notes to Consolidated Financial Statements 91 NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Year Ended December 31, (In millions) 2024 2023 2022 Cash Flows from Operating Activities Net Income/(Loss) $ 1,125 $ ( 202 ) $ 1,221 Adjustments to reconcile net income to net cash provided by operating activities: Equity in earnings of unconsolidated affiliates, net of distributions ( 13 ) ( 6 ) 7 Depreciation of property, plant and equipment and amortization of customer relationships and other intangible assets 1,071 1,127 634 Amortization of capitalized contract costs 332 168 86 Accretion of asset retirement obligations 34 27 55 Provision for credit losses 314 251 11 Amortization of nuclear fuel — 47 54 Amortization of financing costs and debt discounts 39 52 23 Loss/(Gain) on debt extinguishment 382 ( 109 ) — Amortization of in-the-money contracts and emissions allowances 105 137 158 Amortization of unearned equity compensation 102 101 28 Net gain on sale of assets and disposal of assets ( 192 ) ( 1,559 ) ( 102 ) Impairment losses 43 128 206 Changes in derivative instruments ( 337 ) 2,455 ( 3,221 ) Changes in current and deferred income taxes and liability for uncertain tax benefits 165 ( 92 ) 382 Changes in collateral deposits in support of risk management activities 245 ( 1,806 ) 896 Changes in nuclear decommissioning trust liability — — 9 Uplift securitization proceeds received from ERCOT — — 689 Cash (used)/provided by changes in other working capital: Accounts receivable - trade ( 366 ) 840 ( 1,560 ) Inventory 111 189 ( 252 ) Prepayments and other current assets ( 539 ) ( 401 ) ( 69 ) Accounts payable 170 ( 1,455 ) 1,295 Accrued expenses and other current liabilities 136 360 ( 29 ) Other assets and liabilities ( 621 ) ( 473 ) ( 161 ) Cash provided/(used) by operating activities $ 2,306 $ ( 221 ) $ 360 Cash Flows from Investing Activities Payments for acquisitions of businesses and assets, net of cash acquired $ ( 38 ) $ ( 2,523 ) $ ( 62 ) Capital expenditures ( 472 ) ( 598 ) ( 367 ) Proceeds from sale of assets, net of cash disposed 501 2,007 109 Net purchases of emissions allowances ( 18 ) ( 24 ) ( 6 ) Proceeds from insurance recoveries for property, plant and equipment, net 3 240 — Investments in nuclear decommissioning trust fund securities — ( 367 ) ( 454 ) Proceeds from sales of nuclear decommissioning trust fund securities — 355 448 Cash used by investing activities $ ( 24 ) $ ( 910 ) $ ( 332 ) 92 For the Year Ended December 31, (In millions) 2024 2023 2022 Cash Flows from Financing Activities Proceeds from issuance of preferred stock, net of fees $ — $ 635 $ — Payments for share repurchase activity and excise tax (a) ( 935 ) ( 1,150 ) ( 600 ) Equivalent shares purchased in lieu of tax withholdings ( 50 ) ( 22 ) ( 6 ) Payments of dividends to preferred and common stockholders ( 405 ) ( 381 ) ( 332 ) Proceeds from issuance of long-term debt 3,200 731 — Payments for current and long-term debt ( 3,255 ) ( 523 ) ( 5 ) Payments for debt extinguishment costs ( 262 ) — — Payments of debt issuance costs ( 45 ) ( 32 ) ( 9 ) Net (payments)/receipts from settlement of acquired derivatives that include financing elements ( 3 ) 342 1,995 Proceeds from credit facilities 1,050 3,020 — Repayments to credit facilities ( 1,050 ) ( 3,020 ) — Cash (used)/provided by financing activities $ ( 1,755 ) $ ( 400 ) $ 1,043 Effect of exchange rate changes on cash and cash equivalents ( 3 ) 2 ( 3 ) Net (Decrease)/Increase in Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash 524 ( 1,529 ) 1,068 Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at Beginning of Period 649 2,178 1,110 Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at End of Period $ 1,173 $ 649 $ 2,178 (a) Includes excise tax paid of $ 10 million during the year ended December 31, 2024 For further discussion of supplemental cash flow information see Note 25, Cash Flow Information See notes to Consolidated Financial Statements 93 NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In millions) Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total Stock-holders' Equity Balance at December 31, 2021 $ — $ 4 $ 8,531 $ 464 $ ( 5,273 ) $ ( 126 ) $ 3,600 Net income 1,221 1,221 Other comprehensive loss ( 51 ) ( 51 ) Shares reissuance for ESPP 2 4 6 Share repurchases ( 595 ) ( 595 ) Equity-based awards activity, net (a) 24 24 Common stock dividends and dividend equivalents declared (b) ( 334 ) ( 334 ) Adoption of ASU 2020-06 ( 100 ) 57 ( 43 ) Balance at December 31, 2022 $ — $ 4 $ 8,457 $ 1,408 $ ( 5,864 ) $ ( 177 ) $ 3,828 Net loss ( 202 ) ( 202 ) Issuance of Series A Preferred Stock 650 ( 15 ) 635 Other comprehensive income 39 39 Shares reissuance for ESPP 2 6 8 Share repurchases (c) ( 117 ) ( 1,043 ) ( 1,160 ) Retirement of treasury stock (d) ( 1 ) ( 5,008 ) 5,009 — Equity-based awards activity, net (a) 97 97 Common stock dividends and dividend equivalents declared (b) ( 352 ) ( 352 ) Series A Preferred Stock dividends (e) ( 34 ) ( 34 ) Sale of the 44 % equity interest in STP 47 47 Balance at December 31, 2023 $ 650 $ 3 $ 3,416 $ 820 $ ( 1,892 ) $ ( 91 ) $ 2,906 Net income 1,125 1,125 Other comprehensive loss ( 26 ) ( 26 ) Shares reissuance for ESPP 5 8 13 Share repurchases (c) 117 ( 1,051 ) ( 934 ) Retirement of treasury stock (d) ( 1 ) ( 2,637 ) 2,638 — Equity-based awards activity, net (a) 57 57 Common stock dividends and dividend equivalents declared (b) ( 343 ) ( 343 ) Series A Preferred Stock dividends (e) ( 67 ) ( 67 ) Capped Call Options (f) ( 253 ) ( 253 ) Balance at December 31, 2024 $ 650 $ 2 $ 705 $ 1,535 $ ( 297 ) $ ( 117 ) $ 2,478 (a) Includes $( 50 ) million, $( 22 ) million and $( 6 ) million of equivalent shares purchased in lieu of tax withholding on equity compensation issuances for the years ended December 31, 2024, 2023 and 2022, respectively (b) Dividends per common share were $ 1.63 , $ 1.51 and $ 1.40 for each of the years ended December 31, 2024, 2023 and 2022, respectively (c) Includes excise tax accrued of $ 9 million and $ 10 million for the years ended December 31, 2024 and 2023, respectively. For further discussion of the share repurchases, see Item 15 — Note 15 , Capital Structure (d) For further discussion of the treasury stock retirements, see Item 15 — Note 15 , Capital Structure (e) Dividends per share of Series A Preferred Stock were $ 51.25 for each of the periods ended September 15 and March 15, 2024 and $ 52.96 for the period ended September 15, 2023 (f) For further discussion of the Capped Call Options, see Item 15 — Note 15 , Capital Structure See notes to Consolidated Financial Statements 94 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 a leading energy and smart home company fueled by market-leading brands, proprietary technologies, and complementary sales channels. Across the United States and Canada, NRG delivers innovative, sustainable solutions, predominately under the brand names such as NRG, Reliant, Direct Energy, Green Mountain Energy and Vivint, while also advocating for competitive energy markets and customer choice. The Company has a customer base that includes approximately 8 million residential customers (comprised of 6 million retail energy customers and 2 million smart home customers) in addition to commercial, industrial, and wholesale customers, supported by approximately 13 GW of generation as of December 31, 2024. The Company's business is segmented as follows: • Texas, which includes all activity related to customer, plant and market operations in Texas, other than Cottonwood; • East, which includes all activity related to customer, plant and market operations in the East; • West/Services/Other, which includes the following assets and activities: (i) all activity related to customer, plant and market operations in the West and Canada, and (ii) activity related to the Cottonwood facility and other investments; • Vivint Smart Home; and • Corporate activities. 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. Presentation Adjustments Beginning in the third quarter of 2024, the Company is recording the amortization of capitalized contracts costs within depreciation and amortization. This change, along with additional financial statement disclosures, is meant to address investor inquiries by enhancing transparency to easier match expenses with revenues. NRG previously recorded amortization of capitalized contract costs related to fulfillment in cost of operations and amortization of capitalized contract costs related to customer acquisition primarily in selling, general and administrative costs in the consolidated statements of operations. Prior years amounts were adjusted for comparative purposes. The adjustments had no impact on the Company’s total operating costs and expenses, and total cash flows. 95 The following table presents adjustments within the consolidated statement of operations for the years ended December 31, 2023 and 2022 related to capitalized contract costs: (In millions) As Previously Presented Presentation Adjustments As Adjusted Year ended December 31, 2023 Cost of operations (excluding depreciation and amortization shown below) $ 26,526 $ ( 43 ) $ 26,483 Depreciation and amortization 1,127 168 1,295 Selling, general and administrative costs 1,968 ( 125 ) 1,843 Year ended December 31, 2022 Cost of operations (excluding depreciation and amortization shown below) $ 27,446 $ ( 3 ) $ 27,443 Depreciation and amortization 634 86 720 Selling, general and administrative costs 1,228 ( 83 ) 1,145 The following table presents adjustments within the consolidated statement of cash flows for the years ended December 31, 2023 and 2022 related to capitalized contract costs: (In millions) As Previously Presented Presentation Adjustments As Adjusted Year ended December 31, 2023 Cash flows from operating activities: Amortization of capitalized contract costs $ — $ 168 $ 168 Prepayments and other current assets ( 233 ) ( 168 ) ( 401 ) Year ended December 31, 2022 Cash flows from operating activities: Amortization of capitalized contract costs $ — $ 86 $ 86 Prepayments and other current assets 17 ( 86 ) ( 69 ) Winter Storm Uri Uplift Securitization Proceeds In May 2021, the Texas Legislature passed House Bill (“HB”) 4492 to mitigate exceptionally high price adders and ancillary service costs incurred by ERCOT LSEs during Winter Storm Uri. HB 4492 authorized ERCOT to obtain $2.1 billion of financing to distribute to LSEs that were charged and paid to ERCOT those highly priced ancillary service and online reliability deployment price adders during Winter Storm Uri. In December 2021, ERCOT filed with the PUCT a calculation of each LSE’s share of proceeds based on the settlement methodology. The Company accounted for the proceeds by analogy to the contribution model within ASC 958-605, Not-for-Profit Entities- Revenue Recognition and the grant model within IAS 20, Accounting for Government Grants and Disclosure of Government Assistance , as a reduction to expenses in the consolidated statements of operations in the 2021 annual period for which the proceeds were intended to compensate. In June 2022, the Company received proceeds of $ 689 million from ERCOT in relation with HB 4492. Credit Losses In accordance with ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , or ASU No. 2016-13, retail trade receivables are reported on the balance sheet net of the allowance for credit losses within accounts receivables, net. Long-term receivables are recorded net in other non-current assets on the consolidated balance sheet. 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. 96 The following table presents the activity in the allowance for credit losses for the years ended December 31, 2024, 2023, and 2022: Year Ended December 31, (In millions) 2024 2023 2022 Beginning balance $ 145 $ 133 $ 683 Acquired balance from Vivint Smart Home — 22 — Provision for credit losses (a) 314 251 11 Write-offs ( 363 ) ( 313 ) ( 593 ) Recoveries collected 38 39 32 Other 18 13 — Ending balance (a) $ 152 $ 145 $ 133 (a) Includes bilateral finance hedging risk of $( 70 ) million accounted for under ASC 815 for the year ended December 31, 2022 During the year ended December 31, 2022, the provision for credit losses included the Company's loss mitigation efforts recognized as income of $ 126 million related to Winter Storm Uri. The increase in write-offs during the year ended December 31, 2022 was primarily due to the resolution of credit losses that occurred during Winter Storm Uri. 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 related to NRG's hedging program. The increase in funds deposited by counterparties is driven by the increase in forward positions as a result of increases in natural gas and power prices compared to December 31, 2023. Though some amounts are segregated into separate accounts, not all funds are contractually restricted. Based on the Company's intention, these funds are not available for the payment of general corporate obligations; however, they are available for liquidity management. 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 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. 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) 2024 2023 2022 Cash and cash equivalents $ 966 $ 541 $ 430 Funds deposited by counterparties 199 84 1,708 Restricted cash 8 24 40 Cash and cash equivalents, funds deposited by counterparties and restricted cash shown in the statements of cash flows $ 1,173 $ 649 $ 2,178 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 natural gas, fuel oil, coal, spare parts and finished goods. The Company removes natural gas inventory as goods are delivered to customers and as they are used in the production of electricity or steam. The Company removes fuel oil and coal inventories as they are used in the production of electricity. The Company removes spare parts inventories when they are used for repairs, maintenance or capital projects. The Company expects to recover the natural gas, fuel oil, coal and spare parts costs in the ordinary course of business. Inventory is valued at the lower of cost or net realizable value with cost being determined on a first in first out basis for finished goods and weighted average cost method for all other inventories. The Company removes finished goods inventories as they are 97 sold to customers. Inventories sold to customers as part of a smart home system are generally capitalized as contract costs. 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, acquisition date fair value; however, impairment adjustments are recorded whenever events or changes in circumstances indicate that their carrying values may not be recoverable. 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 was amortized based on units 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. For further discussion, see Note 8, Property, Plant and Equipment . Business Interruption Insurance The Company carries insurance policies to cover insurable risks including, but not limited to, business interruption. There were no business interruption insurance settlements during the year ended December 31, 2024. As a result of damage at the Limestone 1 and W.A. Parish 8 units, the Company recorded business interruption insurance settlements of $ 7 million and $ 81 million during the years ended December 31, 2023 and 2022, respectively. Business interruption insurance is recorded to cost of operations in the consolidated statements of operations and cash provided by operating activities in the consolidated statement of cash flows. 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 10, Asset Impairments . Debt Issuance Costs Debt issuance costs are capitalized and amortized as interest expense on a basis that 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 emissions allowances, customer and supply contracts, customer relationships, marketing partnerships, technologies, trade names 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, 2024 and 2023, the Company had accumulated amortization related to its intangible assets of $ 3.6 billion and $ 3.0 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. For further discussion, see Note 11, Goodwill and Other Intangibles . 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. 98 The Company may first assess 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. 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 impairment losses recognized refer to Note 10, Asset Impairments . Capitalized Contract Costs Capitalized contract costs represent the costs directly related and incremental to the origination of new contracts, modification of existing contracts or to the fulfillment of the related customer contracts. These costs include installed products, commissions, other compensation and the cost of installation of new or upgraded customer contracts. The Company calculates amortization by accumulating all deferred contract costs into separate portfolios based on the initial month of service and amortizes those deferred contract costs on a straight-line basis over the expected period of benefit, consistent with the pattern in which the Company provides services to its customers. The expected period of benefit for customers is approximately five years . The Company updates its estimate of the expected period of benefit periodically and whenever events or circumstances indicate that the expected period of benefit could change significantly. Such changes, if any, are accounted for prospectively as a change in estimate. Amortization of capitalized contract costs are included in depreciation and amortization in the consolidated statements of operations. Contract costs not directly related and incremental to the origination of new contracts, modification of existing contracts or to the fulfillment of the related customer contracts are expensed as incurred. Depreciation and Amortization The Company's depreciation and amortization included in the consolidated statement of operations consisted of the following: For the Year Ended December 31, (In millions) 2024 2023 2022 Amortization of capitalized contract costs related to fulfillment $ 120 $ 37 $ — Amortization of capitalized contract costs related to customer acquisition 212 131 86 Amortization of customer relationships and other intangible assets 800 870 343 Depreciation of property, plant and equipment 271 257 291 Total depreciation and amortization $ 1,403 $ 1,295 $ 720 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 99 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 740 and as discussed further in Note 19, Income Taxes , changes to existing net deferred tax assets or valuation allowances or changes to uncertain tax benefits, are recorded to income tax expense/(benefit). Contract and Emission Credit Amortization Assets and liabilities recognized through acquisitions related to the purchase and sale of energy and energy-related products in future periods for which the fair value has been determined to be significantly less or more than market are amortized to revenues or cost of operations over the term of each underlying contract based on actual generation and/or contracted volumes. Emission credits represent the right to emit a specified amount of certain pollutants, including sulfur dioxide, nitrogen oxides and carbon dioxide, over a compliance period. Emission credits held for use are amortized to cost of operations based on the weighted average cost of the allowances held. 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, 2024, 2023, and 2022, the Company's revenues and cost of operations included gross receipts taxes of $ 216 million, $ 212 million, and $ 218 million, 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. Cost of Operations Cost of operations includes cost of fuel, purchased energy and other costs of sales, mark-to-market for economic hedging activities, contract and emission credit amortization, operations and maintenance, and other cost of operations. Cost of Fuel, Purchased Energy and Other Cost of Sales Cost of fuel is primarily the costs associated with procurement, transportation and storage of natural gas, nuclear fuel, oil and coal to operate the generation portfolio, which is expensed as the fuel is consumed. Purchased energy primarily relates to purchases to supply the Company's customer base, which includes spot market purchases, as well as contracts of various quantities and durations, including Renewable PPAs with third-party developers, which are primarily accounted for as NPNS (see further discussion in Derivative Instruments below). Other cost of sales primarily consists of TDSP expenses. The cost of fuel is based on actual and estimated fuel usage for the applicable reporting period. The cost to deliver energy and related services to customers is based on actual and estimated supply volumes for the applicable reporting period. A portion of the cost of energy, $ 284 million, $ 240 million, and $ 202 million as of December 31, 2024, 2023, and 2022, 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 ISO settlements. Volume estimates are then multiplied by the supply rate and recorded as cost of operations in the applicable reporting period. Vivint Smart Home Flex Pay Under the Flex Pay plan (“Flex Pay”), offered by Vivint Smart Home, customers pay separately for smart home products and services (smart home and security). The customer has the ability to pay for Vivint Smart Home products in the following three ways: (i) qualified customers may finance the purchase through third-party financing providers ("Consumer Financing Program" or “CFP”), (ii) Vivint Smart Home generally offers a limited number of customers not eligible for the CFP, but who qualify under Vivint Smart Home underwriting criteria, the option to enter into a retail installment contract directly with Vivint Smart Home or (iii) customers may conduct purchases by check, automatic clearing house payments, credit or debit card or by obtaining short-term financing (generally no more than six-month installment terms) through Vivint Smart Home. Although customers pay separately for products and services under Flex Pay, the Company has determined that the sale of products and services are one single performance obligation resulting in deferred revenue for the gross amount of products sold. For products financed through the CFP, gross deferred revenues are reduced by (i) any fees the third-party financing provider (“Financing Provider”) is contractually entitled to receive at the time of loan origination, and (ii) the present value of expected future payments due to the Financing Providers . Loans are issued on either an installment or revolving basis with repayment terms ranging from 6 to 60 months. 100 For certain Financing Provider loans: • Vivint Smart Home pays a monthly fee based on either the average daily outstanding balance of the installment loans, or the number of outstanding loans. • Vivint Smart Home incurs fees at the time of the loan origination and receives proceeds that are net of these fees. • Vivint Smart Home also shares liability for credit losses. • Vivint Smart Home is responsible for reimbursing certain Financing Providers for merchant transaction fees and other associated loan fees. Due to the nature of these provisions, the Company records a derivative liability ("CFP Derivative") at its fair value when the Financing Provider originates loans to customers, which reduces the amount of estimated revenue recognized on the provision of the services. The derivative liability is reduced as payments are made by Vivint Smart Home to the Financing Provider. Subsequent changes to the fair value of the derivative liability are realized through other income, net in the consolidated statements of operations. For further discussion, see Note 6, Accounting for Derivative Instruments and Hedging Activities . Derivative Instruments The Company accounts for derivative instruments under ASC 815, which requires the Company to record all derivatives on the balance sheet at fair value and changes in fair value in earnings, unless they qualify for the NPNS exception. The Company's primary derivative instruments are power and natural gas purchase or sales contracts, fuels purchase contracts, the CFP and other energy related commodities used to mitigate variability in earnings due to fluctuation in market prices. In order to mitigate interest rate risk associated with the issuance of the Company's variable rate debt, NRG enters into interest rate swap agreements. In addition, in order to mitigate foreign exchange risk associated with the purchase of USD denominated natural gas for the Company's Canadian business, NRG enters into foreign exchange contract agreements. As of December 31, 2024 and 2023, the Company did not have derivative instruments that were designated as cash flow or fair value hedges. 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 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 instruments are recognized in earnings. Mark-to-Market for Economic Hedging Activities NRG enters into derivative instruments to manage price and delivery risk, optimize physical and contractual assets in the portfolio and manage working capital requirements. The mark-to-market for economic hedging activities are recognized to revenues or cost of operations during the reporting period. Operations and Maintenance and Other Cost of Operations Operations and maintenance costs include major and other routine preventative (planned outage) and corrective (forced outage) maintenance activities to ensure the safe and reliable operation of the Company's generation portfolio in compliance with all local, state and federal requirements. Operations and maintenance costs are also costs associated with retaining and maintaining the Company's customer base, such as call center support, portfolio maintenance and data analytics. Other cost of operations primarily includes gross receipts taxes, insurance, property taxes and asset retirement obligation expense. 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, net in the Company's consolidated statements of operations. For the years ended December 31, 2024, 2023 and 2022, amounts recognized as foreign currency transaction gains/(losses) were immaterial. The Company's cumulative translation adjustment balances as of December 31, 2024, 2023, and 2022 were $( 72 ) million, $( 43 ) million, and $( 55 ) million, respectively. 101 Concentrations of Credit Risk Financial instruments that 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 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. 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 13, 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. For further discussion, see Note 14, Benefit Plans and Other Postretirement Benefits . 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. 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. For further discussion, see Note 20, Stock-Based Compensation . Investments Accounted for by the Equity Method The Company has investments in 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. For further discussion, see Note 16, Investments Accounted for by the Equity Method and Variable Interest Entities . 102 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. Marketing and Advertising Costs The Company expenses its marketing and advertising costs as incurred and includes them within selling, general and administrative costs. 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, 2024, 2023, and 2022 were $ 215 million, $ 185 million, and $ 82 million, respectively. 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 period 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 2024 ASU 2023-07 – In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures , or ASU 2023-07. The guidance in ASU 2023-07 enhances reportable segment disclosure requirements by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit and loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets. The Company adopted the amendments effective December 31, 2024. Because the amendments update disclosure requirements only, it did not have an impact on the Company's results of operations, cash flows, or statement of financial position. Recent Accounting Developments - Guidance Not Yet Adopted ASU 2023-09 – In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures , or ASU 2023-09. The guidance in ASU 2023-09 enhances income tax disclosures by requiring disclosure of specific categories in the effective tax rate reconciliation and additional information for reconciling items that meet a quantitative threshold. Further, the amendments of ASU 2023-09 require certain disclosures on income tax expense and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The amendments of ASU 2023-09 may be applied on a prospective or retrospective basis. The Company is currently evaluating the impact of adopting ASU 2023-09 on its disclosures. ASU 2024-03 – In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) – Disaggregation of Income Statement Expenses , or ASU 103 2024-03. The guidance in ASU 2024-03 requires more detailed information about specified categories of expenses included in certain captions presented on the face of the income statement. This ASU is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting ASU 2024-03 on its disclosures. ASU 2024-04 – In November 2024, the FASB issued ASU No. 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20) – Induced Conversions of Convertible Debt Instruments , or ASU 2024-04. The guidance in ASU 2024-04 clarifies the requirements related to accounting for the settlement of a debt instrument as an induced conversion when changes are made to conversion features as part of an offer to settle the instrument. This ASU is effective for annual periods beginning after December 15, 2025, with early adoption permitted. The amendments may be applied either (1) prospectively to any settlements of convertible debt instruments that occur after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements, with a cumulative adjustment-effect adjustment to equity. The Company is currently evaluating the impact of adopting ASU 2024-04 on its disclosures. Note 3 — Revenue Recognition 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. Payment terms are generally 15 to 60 days. 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 sa