NRG ENERGY, INC. (NRG) FY 2024 MD&A

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.

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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.

(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

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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.

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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:

(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.

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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.

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Consolidated Results of Operations for the years ended December 31, 2024 and 2023

The following table provides selected financial information for the Company:

(a)Includes realized gains and losses from financially settled transactions

(b)Includes trading gains and losses and ancillary revenues

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

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.

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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:

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The following table represents the weather metrics for 2024 and 2023:

(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

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East

West/Services/Other

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Vivint Smart Home(a)

(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:

(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

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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.

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Operations and Maintenance Expenses

Operations and maintenance expenses are comprised of the following:

(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:

Other Cost of Operations

Other Cost of operations are comprised of the following:

(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:

Depreciation and Amortization

Depreciation and amortization expenses are comprised of the following:

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

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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:

(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:

Provision for Credit Losses

Provision for credit losses are comprised of the following:

(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:

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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:

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:

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:

Refer to Item 15 — Note 12, Long-term Debt and Finance Leases, to the Consolidated Financial Statements for further discussion.

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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.

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:

(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.

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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:

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.

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Debt Refinancing Transactions

In the fourth quarter of 2024, the Company entered into the following debt transactions:

(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.

(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.

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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.

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Debt Service Obligations

Principal payments on debt and finance leases as of December 31, 2024, are due in the following periods:

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

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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:

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.

(a) Indian River Unit 4 retired on February 23, 2025

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The following table summarizes the estimated environmental capital expenditures by year:

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.

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Cash Flow Discussion

2024 compared to 2023

The following table reflects the changes in cash flows for the comparative years:

Cash provided/(used) by operating activities

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

Cash used by investing activities

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

Cash (used)/provided by financing activities

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

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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:

(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

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The following table presents the summarized balance sheet information:

(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.

(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

(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

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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.

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Such accounting estimates include:

Derivative Instruments

The Company follows the guidance of ASC 815, Derivatives and Hedging "(ASC 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.

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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.

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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

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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.

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