UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K/A

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

Date of report (Date of earliest event reported) September 30, 2005

NRG Energy, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

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

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

609-524-4500

(Registrant’s Telephone Number, Including Area Code)

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

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

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

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

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

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

 

 

TABLE OF CONTENTS

Item 8.01 Other Events
Item 9.01 Exhibits
SIGNATURES
EX-23.1: CONSENT OF DELOITTE & TOUCHE LLP
EX-99.01: QUARTERLY REPORT
EX-99.02: AUDITED FINANCIAL STATEMENTS
EX-99.03: AUDITED FINANCIAL STATEMENTS
EX-99.04: PRO FORMA PRESENTATION OF THE STATEMENTS OF OPERATION
EX-99.05: PRO FORMA PRESENTATION OF THE STATEMENT OF OPERATION
EX-99.06: UNAUDITED QUARTERLY FINANCIAL STATEMENTS OF WEST COAST POWER LLC
EX-99.10: PRO FORMA FINANCIAL STATEMENTS
EX-99.11: PRO FORMA FINANCIAL STATEMENTS

EXPLANATORY NOTE

     This Form 8-K/A is being filed to update our previously filed pro forma financial statements to include a proposed transaction with Dynegy, Inc., or Dynegy, for the acquisition, sale and exchange of ownership interest in power facilities jointly owned by NRG Energy, Inc. and Dynegy. We have agreed to acquire Dynegy’s 50% ownership interest in West Coast Power LLC (WCP) for $205 million (the “WCP Acquisition”) and sell Dynegy our 50% ownership interest in Rocky Road Power LLC (Rocky Road) for $45 million cash. After the transaction, we will be the sole owner of WCP’s 1,808 megawatts (MW) of generation in Southern California. Rocky Road owns a 330 MW gas-fueled power plant located in East Dundee, Illinois. Each transaction is conditioned upon one another and subject to regulatory approval. We expect to close the transaction in the first quarter of 2006 and effectively fund the net cash payment of $160 million with cash held by WCP.

     Other than updating the original Form 8-K filed on December 21, 2005 to include the pro forma effect of this planned acquisition, this Form 8-K/A does not modify the disclosure contained in the original Form 8-K. See footnote 22 through 26 to the Pro Forma Combined Condensed Balance Sheet as of September 30, 2005, footnotes 10 through 16 to the Pro Forma Combined Statement of Operations for the Nine Months Ended September 30, 2005 and footnotes 9 through 16 to the Pro Forma Combined Statement of Operations for the Year Ended December 31, 2004.

     WCP owns and operates 1,808 MW in Southern California as listed below.

Plant		MW				Primary Fuel		Status
El Segundo Power, LLC (El Segundo)			670			Gas		Tolling agreement through 12/31/05 and from May 1, 2006 through April 30, 2008
Cabrillo Power I LLC (Encina)			965			Gas		Reliability-Must-Run, or RMR, status for Units 1-3 and 5 through 12/31/2006.
Cabrillo Power II LLC (13 combustion turbines in San Diego area)			173			Gas		RMR status through 12/31/2006
Long Beach Generation LLC (Long Beach)			N/A			N/A		Retired
Total			1,808

Item 8.01 Other Events

     NRG Energy, Inc., or NRG, has filed a registration statement on Form S-3 to register unsecured debt securities, preferred stock and common stock, and non-registered senior debt securities, the issuance of which are together referred to as the Financing Transactions. The Financing Transactions will be entered into to finance the Acquisition (described below) and re-capitalize the Company. In connection with this registration statement, NRG is filing the unaudited pro forma analyses as set forth below.

     On September 30, 2005, NRG entered into an Acquisition Agreement (the “Acquisition Agreement”) with Texas Genco LLC, a Delaware limited liability company (“Texas Genco”), and each of the direct and indirect owners of Texas Genco (the “Sellers”). Pursuant to the Acquisition Agreement, upon the terms and subject to the conditions set forth therein, the Company agreed to purchase all of the outstanding equity interests in Texas Genco (the “Acquisition”). We expect to close this transaction during the first quarter of 2006.

     On a pro forma basis, we estimate that the total purchase price will be $6.121 billion. This amount is comprised of common stock, cash, preferred stock and capitalized expenses. The number of shares to be issued to the Sellers is 35,406,320, of this amount 19,346,788 are from treasury and 16,059,532 are newly issued shares, at a price of $45.37 which is the average NRG share price

immediately before and after the pro forma date of closing, or September 30, 2005, with a total value of $1.6 billion for the shares. NRG will pay $4.031 billion in cash, issue Cumulative Redeemable Preferred Stock (the “Cumulative Preferred Stock”) at a value of $368 million and will capitalize expenses of $120 million. This purchase price includes the assumption by the Company of approximately $2.74 billion of Texas Genco indebtedness. As a result of the Acquisition, Texas Genco will become a wholly owned subsidiary of the Company.

     Of the pro forma $6.121 billion consideration to the Sellers upon consummation of the Acquisition, the Company is paying $4.031 billion in cash, and must issue a minimum of 35,406,320 shares of the Company’s common stock. At the Company’s election, the remaining consideration with a fair value of $368 million may be comprised of either an additional 9,038,125 shares of common stock, additional cash, shares of a new series of NRG’s Cumulative Preferred Stock or a combination of the foregoing. If issued, the aggregate liquidation preference of the Cumulative Preferred Stock will be equal to the average trading value of 9,038,125 shares of the Company’s common stock over a twenty trading day period prior to closing. If the Company elects to pay all or a portion of the remaining purchase price in cash, the amount payable in cash would be calculated in the same manner. On a pro forma basis we have assumed that the remaining consideration will be paid by issuing the Cumulative Preferred Stock. Thus, our interest expense increased on a pro forma basis for the Cumulative Preferred Stock. Interest expense increased by $41.4 million for the year ended December 31, 2004 and by $33.1 million for the nine months ended September 30, 2005. If we would elect to pay this consideration in cash or common stock, our income from continuing operations before tax would increase by these amounts, respectively.

     If less than $200 million of aggregate liquidation preference of the Cumulative Preferred Stock is issued in the Acquisition, and the Company elects to issue the Cumulative Preferred Stock, then the initial dividend rate on the Cumulative Preferred Stock will be 9%. If more than $200 million of aggregate liquidation preference is issued, then the initial dividend rate on the Cumulative Preferred Stock will be 10%. In either case, the applicable dividend rate will increase by 1% per quarter to a maximum of 2% above the initial dividend rate. The Cumulative Preferred Stock will be redeemable at the option of the Company at any time for cash and will be mandatorily redeemable by the Company on the earlier of seven and one-half years from issuance and a change of control of the Company. On a pro forma basis we have calculated the dividend rate assuming the initial dividend rate is 10%, increasing to 12% after two quarters.

     NRG expects to finance the cash requirements of the Acquisition through a combination of a new senior secured credit facility, an unsecured high yield notes offering and the sale of common and preferred equity securities in the public markets. We have received a commitment letter from Morgan Stanley Senior Funding, Inc. (“Morgan Stanley”) and Citigroup Global Markets, Inc. (“Citigroup”) to provide us with up to $5.2 billion in senior secured debt financing, including up to $3.2 billion under a senior first priority term loan facility, up to $1 billion under a senior first priority secured revolving credit facility and up to $1 billion under a senior first priority secured synthetic letter of credit facility. The commitment letter further provides for up to $5.1 billion in bridge financing to fund all necessary amounts not provided for under the senior secured debt financing. NRG does not intend to draw down on the bridge financing unless the contemplated high yield debt financing and preferred and common equity financings are for some reason unavailable at the time of the closing. The commitment letter is subject to customary conditions to consummation, including the absence of any event or circumstance that would have a material adverse effect on the business, assets, properties, liabilities, condition (financial or otherwise) or results of operations, taken as a whole, of Texas Genco, or Texas Genco and NRG combined, since June 30, 2005. We have agreed to pay Morgan Stanley and Citigroup $44.6 million in connection with the commitment letter, or the Bridge Loan Commitment Fee, and have agreed to indemnify Morgan Stanley and Citigroup against certain liabilities.

     The Financing Transactions will enable us to refinance our outstanding Second Priority Notes and Credit Facility. This Credit Facility includes a senior secured term loan, a revolving credit facility and funded letter of credit facility. In addition, the new financing will supply the source of funds to acquire Texas Genco and to repay their Term Loan Facility and Senior Notes. The following is a brief summary of the companies’ outstanding debt instruments that we expect to refinance with the new debt structure:

Old Debt Structure

As of September 30, 2005

New Debt

New Debt

(in millions)

NRG

Texas Genco

Structure

Term

Term loan – adjustable interest

447

1,614

3,200

7 years

Second Priority Notes

1,080

n/a

n/a

n/a

Unsecured senior notes

n/a

1,125

3,600

7 years

Revolving credit facility

150

325

1,000

5 years

Funded letter of credit facility

350

694

n/a

n/a

Synthetic letter of credit facility

n/a

n/a

1,000

5 years

     On a pro forma basis we have assumed that the fixed interest rate for the new unsecured senior notes will be 7.25%. For the new term loan facility we have assumed that the adjustable annual interest rate will be 6.504% for the year ended December 31, 2004 and 6.622% for the nine months ended September 30, 2005. NRG will pay an annual fee of 0.5% for the new revolving credit facility, and when drawn upon, the adjustable interest rate would be the London Interbank Offering Rate plus 2%. On a pro forma basis, we have assumed an annual fee of 2% to have access to the synthetic letter of credit facility.

     On December 8, 2005 NRG entered into an Asset Purchase and Sale Agreement to sell all the assets of NRG Audrain Generating LLC, or Audrain, to AmerenUE, a subsidiary of Ameren Corporation. For purposes of these pro forma statements we have reflected the sale of assets of Audrain as a discontinued operation. The purchase price is $115 million, subject to customary purchase price adjustments. The transaction is expected to close during the first half of 2006. The sale is subject to customary approvals, including Federal Energy Regulatory Commission, Missouri Public Utilities Commission, Illinois Commerce Commission, and Hart-Scott-Rodino review. We expect to record a gain of approximately $15 million at closing.

     On May 19, 2005, pursuant to the exercise of a right of first refusal by Texas Genco, subsequent to a third party offer to American Electric Power, or AEP, in early 2004, Texas Genco acquired from AEP an additional 13.2% undivided interest in South Texas Project, or STP. We refer to that acquisition as the “ROFR.” As a result, Texas Genco now owns a 44.0% undivided interest in STP. For pro forma purposes, NRG has accounted for the ROFR as a business acquisition and included the ROFR in our pro forma adjustments to the statements of operation.

     On December 27, 2005, NRG entered into purchase and sale agreements for projects co-owned with Dynegy, Inc. Under the agreements, NRG will acquire Dynegy’s 50% ownership interest in WCP, and become the sole owner of WCP’s 1,808 MW of generation in Southern California. In addition, NRG is selling to Dynegy its 50% ownership interest in Rocky Road Power LLC, or Rocky Road, a 330 MW gas-fueled, simple cycle peaking plant located in Dundee, Illinois. Both of these transactions are conditioned upon one another and NRG will pay Dynegy a net purchase price of $160 million at closing. NRG will fund the net purchase price with cash held by the WCP partnership. NRG anticipates closing both transactions during the first quarter 2006.

     We have determined that the fair value of our equity investment in Rocky Road is equal to the negotiated price of $45 million. The current carrying value of our investment in Rocky Road is $70.2 million and we therefore expect to record in the fourth quarter of 2005 an other than temporary impairment in our investment. On a pro forma basis the total impairment is in the amount of $25.2 million. As the tax basis of Rocky Road is higher than the consideration received and it is not probable that we can utilize any future benefit from this capital loss, there is no tax expense/(benefit) related to this transaction

Transactional Pro Forma Analysis:

     The following tables present historical condensed consolidated financial information of (i) NRG for the year ended December 31, 2004 and as of and for the nine months ended September 30, 2005, (ii) Texas Genco for the year ended December 31, 2004 and as of and for the nine months ended September 30, 2005, and (iii) the combined company on a pro forma basis for the year ended December 31, 2004 and as of and for the nine months ended September 30, 2005. The combined company on a pro forma basis is shown after giving effect to (a) the reclassification of Audrain as a discontinued operation; (b) the inclusion of the results pursuant to the ROFR; (c) the refinancing of NRG’s old debt structure; (d) the remaining financing and subsequent Acquisition; and (e) the acquisition of the remaining 50% ownership interest in WCP and sale of our 50% ownership interest in Rocky Road.

     The historical consolidated financial information of NRG for the year ended December 31, 2004 is derived from the historical financial information contained in the audited consolidated financial statements of NRG incorporated by reference in this current report Form 8-K/A. The unaudited historical consolidated financial information as of and for the nine months ended September 30, 2005 (i) have been derived from NRG’s unaudited condensed consolidated financial statements which are incorporated by reference in this current report Form 8-K/A, (ii) have been prepared on a similar basis to that used in the preparation of the audited financial statements, and (iii) in the opinion of NRG’s management, include all adjustments necessary for a fair statement of the results for the unaudited interim period.

     The historical consolidated financial information for Texas Genco as of December 31, 2004 were derived from the audited consolidated financial statements of Texas Genco LLC as of December 31, 2004 and the audited consolidated financial statements of Texas Genco Holdings, Inc. as of December 31, 2004, and are included as Exhibits 99.02 and 99.03 to this current report Form 8-K/A. The historical consolidated financial information for Texas Genco as of and for the nine months ended September 30, 2005 (i) were derived from unaudited financial statements of Texas Genco LLC for the nine months ended September 30, 2005 and the unaudited financial statements of Texas Genco Holdings, Inc. for the period from January 1, 2005 through April 13, 2005 (on April 13, 2005 the remaining business of Texas Genco Holdings, Inc. was acquired by Texas Genco LLC) included as Exhibit 99.01 to this current report Form 8-K/A, (ii) have been prepared on a similar basis to that used in the preparation of the aforementioned audited financial statements and, (iii) in the opinion of Texas Genco’s management, include all adjustments necessary for a fair presentation of the results for the unaudited interim period.

     The historical financial information for WCP for the year ended December 31, 2004 were derived from the audited financial statements of WCP for the year ended December 31, 2004 contained as Exhibit 99.1 in NRG’s Form 10-K filed on March 30, 2005. The unaudited historical consolidated financial information as of and for the nine months ended September 30, 2005 (i) have been derived from WCP’s unaudited condensed consolidated financial statements that are included as exhibit 99.06 to this current report on Form 8-K/A, (ii) have been prepared on a similar basis to that used in the preparation of the audited financial statements, and (iii) in the opinion of WCP’s management, include all adjustments necessary for a fair statement of the results for the unaudited interim period.

     The unaudited pro forma combined income statement data and other financial and operating data for the combined company for the year ended December 31, 2004 and for the nine months ended September 30, 2005 give effect to (a) the reclassification of Audrain as a discontinued operation; (b) the inclusion of the results pursuant to the ROFR; (c) the refinancing of NRG’s old debt structure; (d) the remaining financing and subsequent Acquisition; and (e) the acquisition of the remaining 50% ownership interest in WCP and sale of our 50% ownership interest in Rocky Road, as if the transactions had occurred on January 1, 2004. The unaudited pro forma combined balance sheet data as of September 30, 2005 gives effect to (a) the sale of Audrain as of September 30, 2005; (b) the refinancing of NRG’s old debt structure; (c) the remaining financing and subsequent Acquisition; and (d) the acquisition of the remaining 50% ownership interest in WCP and sale of our 50% ownership interest in Rocky Road, as if the transactions had occurred on September 30, 2005. The combined unaudited pro forma financial data presented below do not purport to represent what the combined company’s results of operations would actually have been had the transactions in fact occurred on the dates specified above or to project the combined company’s results of operations for any future period.

     The historical consolidated financial information and the unaudited pro forma combined financial information set forth below should be read in conjunction with (a) the consolidated financial statements of NRG Energy, Inc., the related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operation included in NRG Energy, Inc.’s annual report on Form 10-K for the year ended December 31, 2004 as amended by the Current Report on Form 8-K filed on December 20, 2005, and quarterly report on Form 10-Q for the nine months ended September 30, 2005; (b) the consolidated financial statements of Texas Genco LLC and Texas Genco Holdings, Inc., the related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operation for the year ended December 31, 2004 and for the nine months ended September 30, 2005 filed and incorporated herein by reference as Exhibits 99.01, 99.02 and 99.03 to this current report on Form 8-K/A; and (c) with the financial statements of West Coast Power LLC and the related notes thereto included in NRG Energy, Inc.’s annual report on Form 10-K as Exhibit 99.1 for the year ended December 31, 2004 and financial statements as of and for the nine months ended September 30, 2005 as found in Exhibit 99.06 to this current report on Form 8-K/A.

     The Acquisition will be accounted for using the purchase method of accounting and, accordingly, the purchase price will be allocated to the assets acquired and liabilities assumed based on the estimated fair value of such assets and liabilities at the date of acquisition. As it is difficult to estimate a pro forma allocation of purchase price without completed asset appraisals, we have made a preliminary allocation estimate based on the latest available information. For purposes of these pro forma statements we have assumed that the consideration paid in excess of the historical book value of net assets acquired is related to the step-up in fair value of Texas Genco’s emission credit inventory, a step-up in the value of Texas Genco’s fixed assets, and an increase in liabilities for assumed out-of-market contracts. Once the Acquisition is closed, the purchase price and allocation may change significantly from the pro forma amounts included herein based on the results of appraisals, changes in market prices, and other analyses, which the Company is obtaining. The other analyses include actuarial studies of employee benefit plans, income tax effects of the Acquisition, analyses of operations to identify assets for disposition and the evaluation of staffing requirements necessary to meet future business needs. Ultimately, the excess of the purchase price over the fair value of the net tangible and identified intangible assets acquired will be recorded as goodwill.

     The following summarizes the estimated pro forma purchase price and allocation impact of the Acquisition on NRG’s financial statements at September 30, 2005:

						(in millions)
Cash paid to Sellers						$	4,031
Fair value of 10% Mandatorily Redeemable Preferred Stock issued to Sellers							368
NRG common stock issued to Sellers1							1,606
Fees and transaction costs
Fees for early repayment of existing Texas Genco debt			99
Investment banker fees			17
Total capitalized acquisition expenses							116
Total pro forma Purchase Price							6,121
Purchase price allocation:
Net book value of Texas Genco assets and liabilities acquired							773
Write-off of Texas Genco deferred financing fees							(109	)
Step-up in fixed assets							4,943
Step-up in emission credit inventory							1,309
Increase in out-of-market contracts2							(2,506	)
Elimination of Texas Genco goodwill							(791	)
Increase in current deferred tax assets							391
Increase in non-current deferred tax liabilities							(260	)
NRG goodwill							2,371
Total allocated						$	6,121

     The WCP Acquisition is a step acquisition as our original equity investment was initiated in a prior period. The purchase price of each acquisition is determined separately per the consideration given at the date of each transaction. Therefore, the purchase price allocation is determined separately based on the fair value for the percentage of net assets acquired at the date of each transaction. The WCP Acquisition will be accounted for using the purchase method of accounting and, accordingly, the purchase price will be allocated to the percentage of assets acquired and liabilities assumed based on the estimated fair value of such assets and liabilities at the date of the transaction. As it is difficult to estimate a pro forma allocation of purchase price without completed asset appraisals, we have made a preliminary allocation estimate based on the latest available information. For purposes of these pro forma statements we have assumed that the consideration paid below the historical book value of net assets acquired is related to the reduction in fair value of WCP’s fixed assets, with an offsetting increase in fair value in WCP’s land and an increase in the fair value of WCP’s emission credit inventory. Once the WCP Acquisition is closed, the purchase price and allocation may change significantly from the pro forma amounts included herein based on the results of appraisals, changes in market prices and analyses of the income tax effects of the acquisition.

     The following summarizes the estimated pro forma purchase price and allocation impact of the WCP Acquisition on NRG’s financial statements at September 30, 2005:

		(in millions)
Cash paid to Dynegy, Inc.		$	160
Fair value of NRG’s 50% investment in Rocky Road LLC			45
Total pro forma Purchase Price of WCP Acquisition			205
Purchase price allocation:
Net book value of 50% of WCP assets and liabilities acquired			318
Incremental reduction in value in 50% of WCP’s fixed assets			(120	)
Incremental increase in value in 50% of WCP’s land			24
Incremental increase in 50% of WCP’s emission credit inventory			19
Total allocation			241
Excess over cost, or Negative Goodwill		$	(36	)
Negative Goodwill is assigned proportionately to reduce the value of fixed assets			(13	)
Negative Goodwill is assigned proportionately to reduce the value of land			(16	)
Negative Goodwill is assigned proportionately to reduce the value of emission credit inventory			(7	)
Total amount allocated after assignment of Negative Goodwill		$	205

     Per our current valuation of WCP’s assets and liabilities, the transaction included an element of an excess over cost, or Negative Goodwill, which has been proportionately allocated to reduce the value of WCP’s acquired assets as noted in the table above. Following the proportionate allocation of Negative Goodwill, the incremental increase/(decrease) in value to the acquired assets is as follows:

Final incremental decrease in value in 50% of WCP’s fixed assets			(133	)
Final incremental increase in value in 50% of WCP’s land			8
Final incremental increase in value in 50% of WCP’s emission credit inventory			12

     We have not associated any deferred taxes to the WCP Acquisition as we believe that the value of the assets and liabilities acquired will be very similar for tax and financial reporting purposes, and any basis differences will only be generated after the closing once timing differences due to depreciation and amortization arise. On a pro forma basis, there are is no basis difference as of September 30, 2005.

Pro Forma Combined Condensed Balance Sheet as of September 30, 2005

		September 30, 2005 (unaudited)
		Historical												Pro Forma Adjustments
		NRG Energy				Texas Genco				West Coast																								WCP								Pro Forma NRG
(in thousands)		Inc.				LLC				Power LLC(26)				Audrain (1)				Refinancing								Acquisition								Acquisition (22)								Combined
Current Assets
Cash and cash equivalents		$	504,336			$	222,393			$	176,612			$	15,000			$	(269,209	)			(2	)		$	(336,417	)			(9	)		$	(160,000	)			(23	)		$	152,715
Restricted cash			91,508				—				—				—				—								—								—								91,508
Accounts receivable, net			308,839				212,385				48,372				—				—								—								—								569,596
Current portion of notes receivable			24,934				—				—				—				—								—								—								24,934
Income taxes receivable			31,237				—				—				—				—								—								—								31,237
Inventory			203,547				113,918				16,618				(1,064	)			—								—								—								333,019
Derivative instruments valuation			451,545				—				88,816				—				—								—								—								540,361
Prepayments and other current assets			129,289				7,931				26,340				—				—								—								—								163,560
Collateral on deposit in support of energy risk management activities			631,436				—				10,000				—				—								—								—								641,436
Deferred income taxes			44,832				—				—				—				—								391,221				(10	)			—								436,053
Current assets held for sale and discontinued operations			—				23,497				—				—				—								—								—								23,497
Total current assets			2,421,503				580,124				366,758				13,936				(269,209	)							54,804								(160,000	)							3,007,916
Property, plant and equipment, net			3,226,714				3,541,822				380,920				(171,000	)			—								4,942,801				(10	)			(289,842	)			(23)(24)				11,631,415
Other assets
Goodwill — Texas Genco LLC			—				790,893				—				—				—								(790,893	)			(10	)			—								—
Goodwill — NRG Energy, Inc.			—				—				—				—				—								2,371,026				(10	)			—								2,371,026
Equity investments in affiliates			651,412				—				—				—				—								—								(223,066	)			(24	)			428,346
Notes receivable, less current portion			712,020				—				—				(239,930	)			—								—								—								472,090
Intangible assets, net			268,897				769,332				3,844				—				—								1,309,007				(10	)			12,354				(23	)			2,363,434
Derivative instruments, net			31,973				—				—				—				—								—								—								31,973
Funded letter of credit			350,000				—				—				—				(350,000	)			(3	)			—								—								—
Other non-current assets			132,848				111,160				—				—				720				(4	)			(44,795	)			(11	)			—								199,933
Nuclear decommissioning trust			—				305,392				—				—				—								—								—								305,392
Total other assets			2,147,150				1,976,777				3,844				(239,930	)			(349,280	)							2,844,345								(210,712	)							6,172,194
Total assets		$	7,795,367			$	6,098,723			$	751,522			$	(396,994	)		$	(618,489	)						$	7,841,950							$	(660,554	)						$	20,811,525

Pro Forma Combined Condensed Balance Sheet as of September 30, 2005 (cont’d)

		September 30, 2005 (unaudited)
		Historical												Pro Forma Adjustments
		NRG Energy				Texas Genco				West Coast																								WCP								Pro Forma NRG
(in thousands)		Inc.				LLC				Power LLC				Audrain (1)				Refinancing								Acquisition								Acquisition (22)								Combined
Liabilities
Current portion of long-term debt			176,024				18,045				—				—				(80,000	)			(5	)			610,200				(12	)			—								724,269
Accounts payable — trade			152,968				168,913				17,206				—				—								—								—								339,087
Derivative instruments valuation			973,143				145,255				88,643				—				—								—								—								1,207,041
Other bankruptcy settlement			175,945				—				—				(172,321	)			—								—								—								3,624
Accrued expenses and other current liabilities			389,396				154,763				4,894				—				(84,019	)			(6	)			(86,426	)			(13	)			—								378,608
Out-of market contracts			—				249,419				—				—				—								1,076,150				(10	)			—								1,325,569
Total current liabilities			1,867,476				736,395				110,743				(172,321	)			(164,019	)							1,599,924								—								3,978,198
Long-term debt and capital leases			2,866,374				2,724,865				—				(239,930	)			(364,837	)			(7	)			1,923,763				(14	)			—								6,910,235
10% Mandatorily Redeemable Preferred Stock			—				—				—				—				—								368,123				(15	)			—								368,123
Deferred income taxes			103,199				181,513				—				—				—								259,983				(10	)			—								544,695
Derivative instruments valuation			198,554				188,023				—				—				—								—								—								386,577
Nuclear decommissioning reserve			—				291,829				—				—				—								—								—								291,829
Nuclear decommissioning trust liability			—				293,771				—				—				—								—								—								293,771
Out-of-market contracts			302,639				689,552				—				—				—								1,429,895				(10	)			—								2,422,086
Other non-current liabilities			190,897				219,663				5,472				—				—								—								—								416,032
Total liabilities			5,529,139				5,325,611				116,215				(412,251	)			(528,856	)							5,581,688								—								15,611,546
Minority Interest			869				—				—				—				—								—								—								869
3.625% Convertible Preferred Stock			246,191				—				—				—				—								—								—								246,191
Stockholders’ equity 4%
Convertible Preferred Stock			406,155				—				—				—				—								—								—								406,155
5.5% Convertible Preferred Stock			—				—				—				—				—								486,250				(16	)			—								486,250
Members’ equity			—				1,073,871				635,307				—				—								(1,073,871	)			(17	)			(635,307	)			(23	), (24)			—
Common stock			1,000				—				—				—				—								396				(18	)			—								1,396
Additional paid-in capital			2,427,322				—				—				—				—								1,912,460				(19	)			—								4,339,782
Retained earnings			203,973				—				—				15,257				(89,633	)			(8	)			(29,261	)			(20	)			(25,247	)			(25	)			75,089
Less treasury stock, at cost			(663,529	)			—				—				—				—								663,529				(21	)			—								—
Accumulated other comprehensive loss			(355,753	)			(300,759	)			—				—				—								300,759				(17	)			—								(355,753	)
Total Stockholders’ Equity			2,019,168				773,112				635,307				15,257				(89,633	)							2,260,262								(660,554	)							4,952,919
Total Liabilities and Stockholders’ Equity		$	7,795,367			$	6,098,723			$	751,522			$	(396,994	)		$	(618,489	)						$	7,841,950							$	(660,554	)						$	20,811,525

Footnotes to Pro Forma Combined Balance Sheet as of September 30, 2005

(1)

On December 8, 2005 NRG Energy, Inc. signed an Asset and Purchase Sale Agreement with AmerenUE to sell all of the assets of Audrain. For purposes of these pro forma statements we have reflected the sale of assets of Audrain as a discontinued operation. The purchase price is $115 million, and the expected gain for the sale of Audrain is approximately $15 million before tax.

I. Refinancing of NRG’s Long-Term Debt

(2)

Reflects the proceeds from new debt issued by NRG for refinancing purposes and the payment to retire NRG existing debt:

Payment to retire NRG’s existing term loan		$	(446,625	)
Payment to retire NRG’s existing Second Priority Notes			(1,080,412	)
Payment to retire NRG’s existing revolver balance			(80,000	)
Payment of accrued interest for NRG’s old debt structure			(25,376	)
Refinancing portion of proceeds from issuing the new term loan			446,625
Refinancing portion of proceeds from issuing the new unsecured senior notes			1,080,412
Payment of a premium fee for the retirement of NRG’s existing debt			(130,000	)
Payment of financing fees for the new debt structure			(33,833	)
Total		$	(269,209	)

(3)

Reflects the retirement of the existing letter of credit facility. We have assumed that the new synthetic letter of credit facility totaling $1 billion will remain off-balance sheet. The existing letter of credit facility required a deposit of $350 million, which will be released upon entering into the new facility.

(4)

Reflects adjustment for the reduction of the old debt structure deferred financing costs, and the increase in deferred financing costs for the new debt structure:

Write-off of existing NRG deferred financing costs		$	(33,113	)
Addition of new deferred financing costs			33,833
Total		$	720

(5)

Movement for current portion of long-term debt for the new and old debt structure:

Reduction of current portion of NRG’s existing term loan		$	(4,500	)
Reduction of NRG’s existing revolver balance			(80,000	)
Increase for current portion of new term loan			4,500
Total		$	(80,000	)

(6)

To record the reduction in accrued expenses for the payment of accrued interest and the current tax effect of the financing expenses:

Reduction in accrued interest due to payment		$	(25,376	)
Reduction in accrued taxes payable due to the write off of financing costs and incurring premium fees			(58,643	)
Total		$	(84,019	)

(7)

Movement for non-current portion of long-term debt related to the existing debt and proceeds from new debt issued by NRG:

Reduction of non-current portion of NRG’s existing term loan		$	(442,125	)
Reduction of non-current portion of NRG’s existing Second Priority Notes			(1,080,412	)
Reduction of non-current portion of NRG’s existing funded letter of credit facility			(350,000	)
Write-off of premium from NRG’s existing debt			(14,837	)
Addition to non-current debt which reflects the refinancing portion of the new term loan			442,125
Addition to non-current debt which reflects the refinancing portion of the new unsecured senior notes			1,080,412
Total		$	(364,837	)

(8)

Reflects write-offs of deferred financing fees associated with NRG’s existing debt structure, and fees related to the refinancing:

Write-off of deferred finance costs associated with NRG’s existing debt			(33,113	)
Write-off of premium from NRG’s existing debt			14,837
Payment of a premium fee for the retirement of NRG’s existing debt			(130,000	)
Tax effect of the above adjustments			58,643
Total		$	(89,633	)

II. Acquisition of Texas Genco

(9)

Reflects the proceeds from new debt issued by NRG, issuance of common and preferred stock as a source of funds to acquire Texas Genco, less payments to the Texas Genco shareholders and payments to retire Texas Genco existing debt:

Payment of accrued interest for Texas Genco’s old debt structure			(26,437	)
Payment to retire Texas Genco’s existing term loan			(1,614,000	)
Payment to retire Texas Genco’s existing Senior Notes			(1,125,000	)
Payment to Sellers			(4,030,699	)
Proceeds from issuing the acquisition financing portion of the new term loan			2,753,375
Proceeds from issuing the acquisition financing portion of the new unsecured senior notes			2,519,588
Proceeds from issuance of 23,474,178 shares of common stock at $42.60 a share, net of issue costs			970,000
Proceeds from issuance of 500,000 shares of preferred stock at $1,000 a share, net of issue costs			486,250
Payment of the Bridge Loan Commitment Fee			(44,625	)
Fees for early repayment of existing Texas Genco debt			(99,000	)
Investment banker fees			(16,700	)
Payment of financing fees for the acquisition financing portion of the new debt structure			(109,169	)
Total		$	(336,417	)

(10)

The preliminary total consideration for the purchase of Texas Genco is comprised of the following:

Cost of 19,346,788 NRG common shares issued to Sellers from treasury			663,529
Value in excess of cost of 19,346,788 NRG common shares issued to Sellers from treasury			214,235
Par value of 16,059,532 newly issued NRG common shares to Sellers			161
Value in excess of par value of 16,059,532 newly issued NRG common shares to Sellers			728,460
Sub-total			1,606,385
Cash paid to Sellers			4,030,699
Fair value of 10% Mandatorily Redeemable Preferred Stock issued to Sellers			368,123
Fees for early repayment of existing Texas Genco debt			99,000
Investment banker fees			16,700
Total		$	6,120,907

The preliminary purchase price allocation is as follows:

Elimination of Members Equity			1,073,871
Elimination of Accumulated Other Comprehensive Loss			(300,759	)
Net book value of Texas Genco assets and liabilities acquired			773,112
Write-off of Texas Genco deferred financing fees			(109,339	)
Step-up in Fixed Assets of Texas Genco			4,942,801
Step-up in emission credit inventory of Texas Genco			1,309,007
Incremental assumption of a liability for the fair value of current out-of-market contracts			(1,076,150	)
Incremental assumption of a liability for the fair value of non-current out-of-market contracts			(1,429,895	)
Goodwill recorded by Texas Genco from prior acquisition			(790,893	)
Increase in current deferred tax asset			391,221
Increase in non-current deferred tax liability			(259,983	)
Goodwill			2,371,026
Total		$	6,120,907

     Due to the lack of asset appraisals and a future closing date, it is very difficult to estimate a pro forma allocation of purchase price. However, for purposes of these pro forma statements, we have assumed that the consideration in excess of the net assets acquired is related to a step-up in the value of Texas Genco’s fixed assets, a step-up in the value of Texas Genco’s emission credit inventory and goodwill. Once the Acquisition is closed, the purchase price and allocation may change significantly from the pro forma amounts included herein based on the results of appraisals, changes in market prices, the purchase price and allocation to net assets acquired and liabilities assumed and other analyses, which the Company is obtaining. The other analyses include actuarial studies of employee benefit plans, income tax effects of the Acquisition, analyses of operations to identify assets for disposition and the evaluation of staffing requirements necessary to meet future business needs. Ultimately, the excess of the purchase price over the fair value of the net tangible and identified intangible assets acquired will be recorded as goodwill.

(11)

Reflects adjustment for the reduction of Texas Genco’s old debt structure deferred financing costs, and the increase in deferred financing costs for the acquisition financing:

Write-off of existing Texas Genco deferred financing costs		$	(109,339	)
Write-off of Bridge Loan Commitment Fee			(44,625	)
Addition of new deferred financing costs for the acquisition financing			109,169
Total		$	(44,795	)

(12)

Movement for current portion of long-term debt related to the Texas Genco existing debt and proceeds from the new debt issued by NRG for the acquisition financing:

Reduction of current portion of Texas Genco’s existing term loan			(16,300	)
Addition to current debt which reflects the acquisition financing of the new term loan			626,500
Total		$	610,200

(13)

To record the reduction in accrued expenses for the payment of accrued interest and the current tax effect of the acquisition financing expenses and to accrue for an expense related to change of control expenses:

Reduction in Texas Genco’s accrued interest due to payment		$	(26,437	)
Reduction in accrued expenses due to payment of the Bridge Loan Commitment Fee			(44,625	)
Increase in accrued expenses related to change of control clause			3,781
Reduction in accrued taxes payable			(19,145	)
Total		$	(86,426	)

(14)

Movement for non-current portion of long-term debt related to the Texas Genco existing debt and proceeds from the new debt issued by NRG for the acquisition financing:

Reduction of non-current portion of Texas Genco’s existing term loan			(1,597,700	)
Reduction of non-current portion of Texas Genco’s existing unsecured senior notes			(1,125,000	)
Addition to non-current debt which reflects the acquisition financing of the new term loan			2,126,875
Addition to non-current debt which reflects the acquisition financing of the new unsecured senior notes			2,519,588
Total		$	1,923,763

(15)

Reflects the value of the 10% Mandatorily Redeemable Preferred Shares issued to the Sellers for the purchase of Texas Genco as described in the Agreement. These preferred shares are considered to be a debt instrument as they are repayable at the earliest of (a) seven years and six months from the issue date; or (b) on a date of a change of control.

(16)

Reflects the proceeds net of issuance costs for the issuance of 500,000 shares of 5.5% Mandatorily Convertible Preferred Stock at $1,000 a share.

(17)

Elimination of Texas Genco’s historical members equity and accumulated other comprehensive loss.

(18)

Reflects the par value of 16,059,532 shares of NRG’s common stock issued to Sellers due to the acquisition, and the par value of 23,474,178 shares of NRG common stock issued to the public.

(19)

Reflects excess of fair value of $45.37 a share over par value for 16,059,532 shares of common stock issued to Sellers due to the acquisition, the excess of fair value of $42.60 over par value for the issue of 23,474,178 shares of NRG common stock to the public and the excess of fair value of $45.37 a share over cost for the 19,346,788 shares of NRG common stock issued to Sellers from NRG’s treasury.

Fair value in excess of par value of newly issued NRG common shares to Sellers		$	728,460
Fair value in excess of par value for the issue of NRG common stock to the public			969,765
Fair value in excess of cost of NRG common shares issued to Sellers from treasury			214,235
Total		$	1,912,460

(20)

Reflects write-offs of Bridge Loan Commitment Fee and change of control expenses:

Write-off of Bridge Loan Commitment Fee			(44,625	)
Expenses related to change of control clauses			(3,781	)
Tax effect of the above adjustments			19,145
Total		$	(29,261	)

(21)

Reflects the issue of 19,346,788 shares of NRG common stock to Sellers from NRG’s treasury, at cost.

III. Acquisition of WCP and Sale of Rocky Road:

(22)

On December 27, 2005, NRG entered into purchase and sale agreements for projects co-owned with Dynegy. Under the agreements, NRG will acquire Dynegy’s 50% ownership interest in WCP, and become the sole owner of WCP’s 1,808 MW of generation in Southern California. In addition, NRG is selling to Dynegy its 50% ownership interest in Rocky Road, a 330 MW gas-fueled, simple cycle peaking plant located in Dundee, Illinois. Both of these transactions are conditioned upon one another and

		NRG will pay Dynegy a net purchase price of $160 million at closing. NRG will fund the net purchase price with cash held by the WCP partnership. NRG anticipates closing both transactions during the first quarter 2006.
(23)		The total consideration for the WCP Acquisition is comprised of the following:

Cash paid to Dynegy, Inc.			160,000
Fair value of our 50% investment in Rocky Road			45,000
Total pro forma Purchase Price for the WCP Acquisition		$	205,000

The preliminary purchase price allocation is as follows:

Purchase price allocation:
Net book value of 50% of WCP assets and liabilities acquired			317,654
Incremental reduction in value in 50% of WCP’s fixed assets			(120,255	)
Incremental increase in value in 50% of WCP’s land			24,576
Incremental increase in value in 50% of WCP’s emission credit inventory			18,751
Total allocation			240,726
Excess over cost, or Negative Goodwill		$	(35,726	)
Negative Goodwill is assigned proportionately to reduce the value of fixed assets			(12,970	)
Negative Goodwill is assigned proportionately to reduce the value of land			(16,359	)
Negative Goodwill is assigned proportionately to reduce the value of emission credit inventory			(6,397	)
Total amount allocated after assignment of Negative Goodwill		$	205,000

     Per our current valuation of WCP’s assets and liabilities, the transaction included an element of an excess over cost, or Negative Goodwill, which has been proportionately allocated to reduce the value of WCP’s acquired assets as noted in the table above. Following the proportionate allocation of negative goodwill, the incremental increase/(decrease) in value to the acquired assets is as follows:

Final incremental decrease in value in 50% of WCP’s fixed assets			(133,225	)
Final incremental increase in value in 50% of WCP’s land			8,217
Final incremental increase in value in 50% of WCP’s emission credit inventory			12,354

     We have not associated any deferred taxes to the WCP Acquisition as we believe that the value of the assets and liabilities acquired will be equal for tax and financial reporting purposes.

     As it is difficult to estimate a pro forma allocation of purchase price without completed asset appraisals, we have made a preliminary allocation estimate based on the latest available information. For purposes of these pro forma statements we have assumed that the consideration paid below the historical book value of net assets acquired is related to the reduction in the fair value of WCP’s fixed assets, with an offsetting increase in fair value in WCP’s land and an increase in the fair value of WCP’s emission credit inventory. Once the WCP Acquisition is closed, the purchase price and allocation may change significantly from the pro forma amounts included herein based on the results of appraisals, changes in market prices and analyses of the income tax effects of the acquisition.

(24)

The reduction in our equity investments reflects the sale of Rocky Road and consolidation of our WCP investment:

Equity investment in Rocky Road			70,247
Equity investment in WCP			152,819
Total			223,066

The allocation of NRG’s equity investment’s carrying value for 50% of WCP is as follows:

Current carrying value of NRG’s 50% investment in WCP			152,819
Allocation of current carrying value:
Net book value of 50% of WCP’s assets and liabilities acquired			317,653
Incremental reduction in value in 50% of WCP’s fixed assets			(164,834	)
Total allocation			152,819

The total reduction in value of WCP’s fixed assets is as follows:

Current WCP Acquisition’s incremental decrease in value WCP’s fixed assets			(133,225	)
Current WCP Acquisition’s incremental increase in value of WCP’s land			8,217
Incremental reduction in value of WCP’s fixed assets as reflected in our 50% equity investment in WCP			(164,834	)
Total			(289,842	)

(25)		We have determined that the fair value of our equity investment in Rocky Road is equal to the negotiated price of $45 million. The current carrying value of our investment in Rocky Road is $70.2 million and we therefore expect to record in the fourth quarter of 2005 an other than temporary impairment in our investment. On a pro forma basis the total impairment is in the amount of $25.2 million. As the tax basis of Rocky Road is higher than the consideration received and it is not probable that we can utilize any future benefit from this capital loss, there is no tax expense/(benefit) related to this transaction.
(26)		Certain items from WCP's balance sheet have been reclassified to match NRG's balance sheet classifications. The amount of $10 million has been moved from “Prepayments and other current assets” to “Collateral on deposit in support of energy risk management activities”. We have also reduced inventory by $3.8 million to reflect the classification of emission credits as an intangible asset. We have also condensed the amount of $16.3 million from “Accounts payable affiliates” with “Accounts Payable”.

IV. Supplementary information:

Non-recurring charges — we have not included the following non-recurring charges in the Pro forma Statement of Operations for the year ended December 31, 2004:

Premium fee for the retirement of NRG’s existing debt		$	130,000
Bridge loan commitment fee			44,625
Total		$	174,625

Pro Forma Combined Statement of Operations for the Nine Months Ended September 30, 2005

		Nine Months Ended September 30, 2005 (unaudited)
		Historical								NRG Energy, Inc				Pro Forma								Pro Forma Adjustments
		NRG Energy,								after Discontinued				Combined Texas				Historical																								WCP								Pro Forma NRG
(in thousands)		Inc.				Audrain (2)				Operations				Genco LLC (1)				WCP				ROFR (3)				Refinancing								Acquisition								Acquisition (10)								Combined
Operating Revenues
Revenues from majority-owned operations		$	1,942,828			$	(4,955	)		$	1,937,873			$	1,999,827			$	216,127			$	35,623				—							$	990,740				(6	)		$	—							$	5,180,190
Operating Costs and Expenses
Cost of majority-owned operations			1,555,737				(4,370	)			1,551,367				1,306,275				190,461				21,413				—								84,000				(7	)			1,297				(11	)			3,154,813
Depreciation and amortization			144,317				—				144,317				146,728				16,726				2,370				—								187,500				(8	)			(37,258	)			(12	)			460,383
General, administrative and development			149,641				(249	)			149,392				70,032				2,831				—				—								—								—								222,255
Other charges
Gain on sale of assets			—				—				—				(28,356	)			(2	)			—				—								—								—								(28,358	)
Corporate relocation charges			5,651				—				5,651				—				—				—				—								—								—								5,651
Restructuring and impairment charges			6,223				—				6,223				—				—				—				—								—								—								6,223
Total operating costs and expenses			1,861,569				(4,619	)			1,856,950				1,494,679				210,016				23,783				—								271,500								(35,961	)							3,820,967
Operating Income			81,259				(336	)			80,923				505,148				6,111				11,840				—								719,240								35,961								1,359,223
Other Income (Expense)
Minority interest in earnings of consolidated subsidiaries			(36	)			—				(36	)			—				—				—				—								—								—								(36	)
Equity in earnings of unconsolidated affiliates			82,501				—				82,501				—				—				—				—								—								(22,392	)			(13	)			60,109
Gain on sales of equity method investments			15,894				—				15,894				—				—				—				—								—								—								15,894
Other income, net			43,208				—				43,208				4,274				4,654				662				—								(14,535	)		(16	)				(3,840	)			(14	)			34,423
Refinancing expenses			(44,036	)			—				(44,036	)			—				—				—				—								—								—								(44,036	)
Interest expense			(150,598	)			—				(150,598	)			(141,723	)			—				—				24,311				(4	)			(150,727	)			(9	)			—								(418,737	)
Total other expense			(53,067	)			—				(53,067	)			(137,449	)			4,654				662				24,311								(165,262	)							(26,232	)							(352,383	)
Income From Continuing Operations Before Income Taxes			28,192				(336	)			27,856				367,699				10,765				12,502				24,311								553,978								9,729								1,006,840
Income Tax Expense			21,201				—				21,201				24,066				—				4,376				9,615				(5	)			324,983				(5	)			8,106				(15	)			392,347
Income From Continuing Operations		$	6,991			$	(336	)		$	6,655			$	343,633			$	10,765			$	8,126			$	14,696							$	228,995							$	1,623							$	614,493
Weighted average number of common shares outstanding — Basic			85,860								85,860																																								144,740
Basic EPS from continuing operations		$	(0.08	)						$	(0.08	)																																						$	4.01
Weighted average number of common shares outstanding — Diluted			85,860								85,860																																								166,392
Diluted EPS from continuing operations		$	(0.08	)						$	(0.08	)																																						$	3.69