GEN 2014 09.30 10Q
                                                                                                                                                                                                                                                                                

 
 
 
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
x
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
 
 
 
For the Quarterly Period Ended: September 30, 2014
 
 
 
o
 
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

GenOn Energy, Inc.
(Exact name of registrant as specified in its charter)
75-0655566 (I.R.S. Employer Identification No.)
Commission File Number: 001-16455

GenOn Americas Generation, LLC
(Exact name of registrant as specified in its charter)
51-0390520 (I.R.S. Employer Identification No.)
Commission File Number: 333-63240

GenOn Mid-Atlantic, LLC
(Exact name of registrant as specified in its charter)
58-2574140 (I.R.S. Employer Identification No.)
Commission File Number: 333-61668

Delaware
(State or other jurisdiction of incorporation or organization)
 
(609) 524-4500
(Registrants' telephone number, including area code)
 
 
 
211 Carnegie Center, Princeton, New Jersey
(Address of principal executive offices)
 
08540
(Zip Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (As a voluntary filer not subject to filing requirements, the registrant nevertheless filed all reports which would have been required to be filed by Section 15(d) of the Exchange Act during the preceding 12 months had the registrant been required to file reports pursuant to Section 15(d) of the Exchange Act solely as a result of having registered debt securities under the Securities Act of 1933.)
GenOn Energy, Inc.
o  
Yes  
o  
No
 
GenOn Americas Generation, LLC
o  
Yes 
o  
No
 
GenOn Mid-Atlantic, LLC
o  
Yes 
o  
No
 

                                                                                                                                                                                                                                                                                

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
GenOn Energy, Inc.
x
Yes  
o  
No
 
GenOn Americas Generation, LLC
x
Yes 
o  
No
 
GenOn Mid-Atlantic, LLC
x
Yes 
o  
No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
GenOn Energy, Inc.
o
o
x
o
GenOn Americas Generation, LLC
o
o
x
o
GenOn Mid-Atlantic, LLC
o
o
x
o
 
 
 
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
GenOn Energy, Inc.
o  
Yes  
x
No
 
GenOn Americas Generation, LLC
o  
Yes 
x
No
 
GenOn Mid-Atlantic, LLC
o  
Yes 
x
No
 
Each Registrant’s outstanding equity interests are held by its respective parent and there are no equity interests held by nonaffiliates.
Registrant
 
Parent
 
GenOn Energy, Inc.
 
NRG Energy, Inc.
 
GenOn Americas Generation, LLC
 
NRG Americas, Inc.
 
GenOn Mid-Atlantic, LLC
 
NRG North America LLC
 
This combined Form 10-Q is separately filed by GenOn Energy, Inc., GenOn Americas Generation, LLC and GenOn Mid-Atlantic, LLC. Information contained in this combined Form 10-Q relating to GenOn Energy, Inc., GenOn Americas Generation, LLC and GenOn Mid-Atlantic, LLC is filed by such registrant on its own behalf and each registrant makes no representation as to information relating to registrants other than itself.
NOTE: WHEREAS GENON ENERGY, INC., GENON AMERICAS GENERATION, LLC AND GENON MID-ATLANTIC, LLC MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q, THIS COMBINED FORM 10-Q IS BEING FILED WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION H(2).
 
 
 
 
 
 

                                                                                                                                                                                                                                                                                

TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 


1
                                                                                                                                                                                                                                                                                

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
(GenOn, GenOn Americas Generation and GenOn Mid-Atlantic)
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The words "believes," "projects," "anticipates," "plans," "expects," "intends," "estimates" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Registrants’ actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors, risks and uncertainties include the factors described under Item 1A - Risk Factors, in Part I, Item 1A of the Registrants' Annual Report on Form 10-K for the year ended December 31, 2013, including, but not limited to, the following:
•
General economic conditions, changes in the wholesale power markets and fluctuations in the cost of fuel;
•
Volatile power supply costs and demand for power;
•
Hazards customary to the power production industry and power generation operations such as fuel and electricity price volatility, unusual weather conditions, catastrophic weather-related or other damage to facilities, unscheduled generation outages, maintenance or repairs, unanticipated changes to fuel supply costs or availability due to higher demand, shortages, transportation problems or other developments, environmental incidents, or electric transmission or gas pipeline system constraints and the possibility that the Registrants may not have adequate insurance to cover losses as a result of such hazards;
•
The effectiveness of the Registrants’ risk management policies and procedures, and the ability of the Registrants’ counterparties to satisfy their financial commitments;
•
The collateral demands of counterparties and other factors affecting the Registrants' liquidity position and financial condition;
•
The Registrants’ ability to operate their businesses efficiently, manage capital expenditures and costs tightly, and generate earnings and cash flows from their asset-based businesses in relation to their debt and other obligations;
•
The Registrants’ ability to enter into contracts to sell power and procure fuel on acceptable terms and prices;
•
The liquidity and competitiveness of wholesale markets for energy commodities;
•
Government regulation, including compliance with regulatory requirements and changes in market rules, rates, tariffs and environmental laws and increased regulation of carbon dioxide and other greenhouse gas emissions;
•
Price mitigation strategies and other market structures employed by ISOs or RTOs that result in a failure to adequately compensate NRG's generation units for all of its costs;
•
The Registrants’ ability to borrow additional funds and access capital markets, as well as GenOn’s substantial indebtedness and the possibility that the Registrants may incur additional indebtedness going forward; and
•
Operating and financial restrictions placed on the Registrants and their subsidiaries that are contained in the indentures governing GenOn’s outstanding notes, and in debt and other agreements of certain of the Registrants’ subsidiaries and project affiliates generally.

Forward-looking statements speak only as of the date they were made, and the Registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors that could cause the Registrants’ actual results to differ materially from those contemplated in any forward-looking statements included in this Quarterly Report on Form 10-Q should not be construed as exhaustive.

2
                                                                                                                                                                                                                                                                                

GLOSSARY OF TERMS
When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below:
2013 Form 10-K
 
The Registrants' Annual Report on Form 10-K for the year ended December 31, 2013
Ancillary Services
 
Services that ensure reliability and support the transmission of electricity from generation sites to customer loads. Such services include regulation service, reserves and voltage support
ASC
 
The FASB Accounting Standards Codification, which the FASB established as the source of authoritative U.S. GAAP
ASU
 
Accounting Standards Updates which reflect updates to the ASC
Bankruptcy Court
 
United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division
CAIR
 
Clean Air Interstate Rule
CenterPoint
 
CenterPoint Energy, Inc. and its subsidiaries, on and after August 31, 2002, and Reliant Energy, Incorporated and its subsidiaries prior to August 31, 2002
CO2
 
Carbon dioxide
CSAPR
 
Cross-State Air Pollution Rule
CWA
 
Clean Water Act
EPA
 
United States Environmental Protection Agency
Exchange Act
 
The Securities Exchange Act of 1934, as amended
FASB
 
Financial Accounting Standards Board
FERC
 
Federal Energy Regulatory Commission
GenOn
 
GenOn Energy, Inc. and, except where the context indicates otherwise, its subsidiaries
GenOn Americas Generation
 
GenOn Americas Generation, LLC and, except where the context indicates otherwise, its subsidiaries
GenOn Energy Holdings
 
GenOn Energy Holdings, Inc. and, except where the context indicates otherwise, its subsidiaries
GenOn Mid-Atlantic
 
GenOn Mid-Atlantic, LLC and, except where the context indicates otherwise, its subsidiaries, which include the coal generation units at two generating facilities under operating leases
ISO
 
Independent System Operator, also referred to as RTO
LIBOR
 
London Inter-Bank Offered Rate
MC Asset Recovery
 
MC Asset Recovery, LLC
MDE
 
Maryland Department of the Environment
Mirant
 
GenOn Energy Holdings, Inc. (formerly known as Mirant Corporation) and, except where the context indicates otherwise, its subsidiaries
Mirant/RRI Merger
 
The merger completed on December 3, 2010 of Mirant Corporation and RRI Energy Inc. to form GenOn Energy, Inc.
Mirant Debtors
 
GenOn Energy Holdings, Inc. (formerly known as Mirant Corporation) and certain of its subsidiaries
MISO
 
Midcontinent Independent System Operator, Inc.
MMBtu
 
Million British Thermal Units
MW
 
Megawatt
MWh
 
Saleable megawatt hours net of internal/parasitic load megawatt-hours
Net Exposure
 
Counterparty credit exposure to GenOn, GenOn Americas Generation or GenOn Mid-Atlantic, as applicable, net of collateral
NERC
 
North American Electric Reliability Corporation
NOL
 
Net Operating Loss
NOV
 
Notice of violation
NOx
 
Nitrogen oxide
NPNS
 
Normal Purchase Normal Sale
NRC
 
U.S. Nuclear Regulatory Commission

3
                                                                                                                                                                                                                                                                                

NRG
 
NRG Energy, Inc. and, except where the context indicates otherwise, its subsidiaries
NRG Americas
 
NRG Americas, Inc. (formerly known as GenOn Americas, Inc.)
NRG Merger
 
The merger completed on December 14, 2012, whereby GenOn became a wholly owned subsidiary of NRG
NYISO
 
New York Independent System Operator
NYSPSC
 
New York State Public Service Commission
OCI
 
Other comprehensive income
PADEP
 
Pennsylvania Department of Environmental Protection
PJM
 
PJM Interconnection, LLC
PJM market
 
The wholesale and retail electric market operated by PJM primarily in all or parts of Delaware, the District of Columbia, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia and West Virginia
Registrants
 
GenOn, GenOn Americas Generation and GenOn Mid-Atlantic, collectively
REMA
 
NRG REMA LLC (formerly known as GenOn REMA, LLC)
RTO
 
Regional Transmission Organization
Securities Act
 
The Securities Act of 1933, as amended
SO2
 
Sulfur dioxide
U.S.
 
United States of America
U.S. GAAP
 
Accounting principles generally accepted in the United States

4
                                                                                                                                                                                                                                                                                

PART I - FINANCIAL INFORMATION 
ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
GENON ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
 
(In millions)
Operating Revenues
 
 
 
 
 
 
 
Operating revenues
$
713

 
$
794

 
$
2,300

 
$
1,934

Operating revenues — affiliate
(4
)
 
17

 
17

 
32

Total operating revenues
709

 
811

 
2,317

 
1,966

Operating Costs and Expenses
 
 
 
 
 
 
 
Cost of operations
385

 
445

 
1,388

 
1,317

Cost of operations — affiliate
67

 
66

 
358

 
139

Depreciation and amortization
52

 
70

 
172

 
207

Impairment loss
60

 
—

 
60

 
—

Selling, general and administrative
19

 
30

 
60


83

Selling, general and administrative — affiliate
33

 
37

 
99

 
74

Acquisition-related transaction and integration costs
1

 
13

 
3

 
54

Total operating costs and expenses
617

 
661

 
2,140

 
1,874

 Loss on sale of assets
—

 
—

 
(6
)
 
—

Operating Income
92

 
150

 
171

 
92

Other Expense
 
 
 
 
 
 
 
Other income, net
2

 
2

 
4

 
4

Interest expense
(46
)
 
(48
)
 
(140
)
 
(145
)
Interest expense - affiliate
(2
)
 
(3
)
 
(9
)
 
(9
)
Loss on debt extinguishment
—

 
—

 
—

 
(11
)
Total other expense
(46
)
 
(49
)
 
(145
)
 
(161
)
Income/(Loss) Before Income Taxes
46

 
101

 
26

 
(69
)
Income tax expense/(benefit)
—


—

 
2

 
(6
)
Net Income/(Loss)
$
46

 
$
101

 
$
24

 
$
(63
)

See accompanying notes to condensed consolidated financial statements.

5
                                                                                                                                                                                                                                                                                

GENON ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(Unaudited)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
 
(In millions)
Net Income/(Loss)
$
46

 
$
101

 
$
24

 
$
(63
)
Other comprehensive (loss)/income net of reclassifications, net of tax of $0:
 
 
 
 
 
 
 
Unrealized loss on derivatives
—

 
(18
)
 
—

 
(1
)
Defined benefit plans
(5
)
 
—

 
3

 
30

Other comprehensive (loss)/income
(5
)
 
(18
)
 
3

 
29

Comprehensive Income/(Loss)
$
41

 
$
83

 
$
27

 
$
(34
)

See accompanying notes to condensed consolidated financial statements.

6
                                                                                                                                                                                                                                                                                

GENON ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
September 30, 2014
 
December 31, 2013
 
(unaudited)
 
 
 
(In millions)
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
968

 
$
760

Funds deposited by counterparties
—

 
56

Accounts receivable — trade
105

 
178

Inventory
424

 
443

Derivative instruments
447

 
464

Derivative instruments — affiliate
4

 
5

Cash collateral paid in support of energy risk management activities
135

 
62

Current assets held-for-sale
17

 
17

Prepayments and other current assets
154

 
177

Total current assets
2,254

 
2,162

Property, plant and equipment, net of accumulated depreciation of $417 and $248
3,053

 
3,176

Other Assets
 
 
 
Intangible assets, net of accumulated amortization of $65 and $34
73

 
65

Derivative instruments
161

 
181

Derivative instruments — affiliate
2

 
1

Assets held-for-sale
18

 
—

Other non-current assets
179

 
149

Total other assets
433

 
396

Total Assets
$
5,740

 
$
5,734

LIABILITIES AND STOCKHOLDER'S EQUITY
 
 
 
Current Liabilities
 
 
 
Current portion of long-term debt and capital leases
$
8

 
$
5

Accounts payable
125

 
187

Accounts payable — affiliate
19

 
72

Derivative instruments
405

 
160

Derivative instruments — affiliate
14

 
3

Cash collateral received in support of energy risk management activities
—

 
56

Accrued expenses and other current liabilities
295

 
266

Total current liabilities
866

 
749

Other Liabilities
 
 
 
Long-term debt and capital leases
3,117

 
3,128

Derivative instruments
48

 
18

Out-of-market contracts
988

 
1,045

Other non-current liabilities
380

 
481

Total non-current liabilities
4,533

 
4,672

Total Liabilities
5,399

 
5,421

Commitments and Contingencies


 


Stockholder's Equity
 
 
 
Common stock: $0.001 par value, 1 share authorized and issued at September 30, 2014 and December 31, 2013
—

 
—

Additional paid-in capital
325

 
325

Accumulated deficit
(90
)
 
(114
)
Accumulated other comprehensive income
106

 
102

Total Stockholder's Equity
341

 
313

Total Liabilities and Stockholder's Equity
$
5,740

 
$
5,734

See accompanying notes to condensed consolidated financial statements.

7
                                                                                                                                                                                                                                                                                

GENON ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine months ended September 30,
 
2014
 
2013
 
(In millions)
Cash Flows from Operating Activities
 
 
 
Net income/(loss)
$
24

 
$
(63
)
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization
172

 
207

Amortization of financing costs and debt discount/premiums
(43
)
 
(57
)
Amortization of out-of-market contracts and emission allowances
(17
)
 
(33
)
Amortization of unearned equity compensation
—

 
8

Adjustment to loss on debt extinguishment
—

 
(28
)
Loss on sale of asset
6

 
—

Impairment loss
60

 
—

Changes in derivative instruments
323

 
200

Changes in collateral deposits supporting energy risk management activities
(73
)
 
113

Changes in other working capital
(173
)
 
136

Net Cash Provided by Operating Activities
279

 
483

Cash Flows from Investing Activities
 
 
 
 Net proceeds from sale of NRG Marsh Landing
—

 
175

Capital expenditures
(125
)
 
(241
)
Decrease in restricted cash, net
—

 
18

Purchase of emission allowances, net of proceeds
—

 
(14
)
Proceeds from sale of assets, net of cash disposed of
50

 
—

Other
5

 
—

Net Cash Used by Investing Activities
(70
)
 
(62
)
Cash Flows from Financing Activities
 
 
 
Proceeds from issuance of long-term debt
—

 
110

Payments for short and long-term debt
(1
)
 
(578
)
Net Cash Used by Financing Activities
(1
)
 
(468
)
Net Increase/(Decrease) in Cash and Cash Equivalents
208

 
(47
)
Cash and Cash Equivalents at Beginning of Period
760

 
825

Cash and Cash Equivalents at End of Period
$
968

 
$
778


See accompanying notes to condensed consolidated financial statements.

8
                                                                                                                                                                                                                                                                                

GENON AMERICAS GENERATION, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
 
(In millions)
Operating Revenues
 
 
 
 
 
 
 
Operating revenues
$
667

 
$
769

 
$
2,123

 
$
1,834

Operating revenues — affiliate
(25
)
 
—

 
110

 
105

Total operating revenues
642

 
769

 
2,233

 
1,939

Operating Costs and Expenses
 
 
 
 
 
 
 
Cost of operations
198

 
300

 
753

 
679

Cost of operations — affiliate
335

 
333

 
1,181

 
1,037

Depreciation and amortization
21

 
26

 
70

 
79

Selling, general and administrative
2

 
6

 
7

 
8

Selling, general and administrative — affiliate
20

 
15

 
62

 
57

Total operating costs and expenses
576

 
680

 
2,073

 
1,860

  Loss on sale of assets
—

 
—

 
(6
)
 
—

Operating Income
66

 
89

 
154

 
79

Other Expense
 
 
 
 
 
 
 
Interest expense
(17
)
 
(16
)
 
(50
)
 
(49
)
Interest expense — affiliate
(2
)
 
(2
)
 
(6
)
 
(5
)
Total other expense
(19
)
 
(18
)
 
(56
)
 
(54
)
Income Before Income Taxes
47

 
71

 
98

 
25

Income tax
—

 
—

 
—

 
—

Net Income
$
47

 
$
71

 
$
98

 
$
25


See accompanying notes to condensed consolidated financial statements.

9
                                                                                                                                                                                                                                                                                

GENON AMERICAS GENERATION, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
September 30, 2014
 
December 31, 2013
 
(unaudited)
 
 
 
(In millions)
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
126

 
$
63

Accounts receivable — trade
95

 
151

Note receivable — affiliate
331

 
299

Inventory
240

 
270

Derivative instruments
447

 
462

Derivative instruments — affiliate
300

 
84

Cash collateral paid in support of energy risk management activities
125

 
50

Prepayments and other current assets
99

 
105

Total current assets
1,763

 
1,484

Property, plant and equipment, net of accumulated depreciation of $162 and $96
1,095

 
1,194

Other Assets
 
 
 
Intangible assets, net of accumulated amortization of $63 and $34
72

 
64

Derivative instruments
161

 
181

Derivative instruments — affiliate
32

 
8

Other non-current assets
85

 
32

Total other assets
350

 
285

Total Assets
$
3,208

 
$
2,963

LIABILITIES AND MEMBER'S EQUITY
 
 
 
Current Liabilities
 
 
 
Current portion of long-term debt and capital leases
$
5

 
$
5

Accounts payable
44

 
90

Accounts payable — affiliate
104

 
86

Derivative instruments
405

 
160

Derivative instruments — affiliate
273

 
107

Cash collateral received in support of energy risk management activities
—

 
56

Accrued expenses and other current liabilities
122

 
93

Total current liabilities
953

 
597

Other Liabilities
 
 
 
Long-term debt and capital leases
932

 
943

Derivative instruments
48

 
18

Derivative instruments — affiliate
45

 
23

Out-of-market contracts
554

 
575

Other non-current liabilities
105

 
116

Total non-current liabilities
1,684

 
1,675

Total Liabilities
2,637

 
2,272

Commitments and Contingencies


 


Member’s Equity
 
 
 
Member’s interest
571

 
691

Total Member’s Equity
571

 
691

Total Liabilities and Member’s Equity
$
3,208

 
$
2,963

See accompanying notes to condensed consolidated financial statements.

10
                                                                                                                                                                                                                                                                                

GENON AMERICAS GENERATION, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine months ended September 30,
 
2014
 
2013
 
(In millions)
Cash Flows from Operating Activities
 
 
 
Net income
$
98

 
$
25

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
70

 
79

Amortization of debt premiums
(7
)
 
(6
)
Amortization of out-of-market contracts and emission allowances
10

 
(6
)
Loss on disposals and sales of assets
6

 
5

Changes in derivative instruments
258

 
183

Changes in collateral deposits supporting energy risk management activities
(131
)
 
49

Changes in other working capital
49

 
(68
)
Net Cash Provided by Operating Activities
353

 
261

Cash Flows from Investing Activities
 
 
 
Capital expenditures
(25
)
 
(44
)
Decrease in note receivable — affiliate
(32
)
 
(101
)
Purchase of emission allowances, net of proceeds
—

 
(14
)
Proceeds from sale of assets, net of cash disposed of
50

 
—

Net Cash Used by Investing Activities
(7
)
 
(159
)
Cash Flows from Financing Activities
 
 
 
Payments for short and long-term debt
—

 
(3
)
Capital contributions
37

 
37

Distributions to member
(320
)
 
(160
)
Net Cash Used by Financing Activities
(283
)
 
(126
)
Net Increase/(Decrease) in Cash and Cash Equivalents
63

 
(24
)
Cash and Cash Equivalents at Beginning of Period
63

 
148

Cash and Cash Equivalents at End of Period
$
126

 
$
124


See accompanying notes to condensed consolidated financial statements.

11
                                                                                                                                                                                                                                                                                

GENON MID-ATLANTIC, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
 
(In millions)
Operating Revenues
 
 
 
 
 
 
 
Operating revenues
$
46

 
$
19

 
$
(110
)
 
$
25

Operating revenues — affiliate
199

 
278

 
878

 
613

Total operating revenues
245

 
297

 
768

 
638

Operating Costs and Expenses
 
 
 
 
 
 
 
Cost of operations
141

 
64

 
535

 
216

Cost of operations — affiliate
25

 
112

 
26

 
245

Depreciation and amortization
18


22

 
61

 
60

Selling, general and administrative — affiliate
16


15

 
51

 
48

Total operating costs and expenses
200

 
213

 
673

 
569

Operating Income
45

 
84

 
95

 
69

Other Expense
 
 
 
 
 
 
 
Interest expense
—

 
(1
)
 
(1
)
 
(1
)
Interest expense — affiliate
(1
)
 
(1
)
 
(3
)
 
(3
)
Total other expense
(1
)
 
(2
)
 
(4
)
 
(4
)
Income Before Income Taxes
44

 
82

 
91

 
65

Income tax
—

 
—

 
—

 
—

Net Income
$
44

 
$
82

 
$
91

 
$
65


See accompanying notes to condensed consolidated financial statements.

12
                                                                                                                                                                                                                                                                                

GENON MID-ATLANTIC, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
September 30, 2014
 
December 31, 2013
 
(unaudited)
 
 
 
(In millions)
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
129

 
$
64

Accounts receivable — trade
5

 
4

Accounts receivable — affiliate
—

 
35

Inventory
145

 
158

Derivative instruments
126

 
298

Derivative instruments — affiliate
59

 
53

Prepayments and other current assets
76

 
81

Total current assets
540

 
693

Property, plant and equipment, net of accumulated depreciation of $138 and $77
934

 
987

Other Assets
 
 
 
Intangible assets, net of accumulated amortization of $1 and $0
10

 
11

Derivative instruments
16

 
60

Derivative instruments — affiliate
101

 
96

Other non-current assets
78

 
25

Total other assets
205

 
192

Total Assets
$
1,679

 
$
1,872

LIABILITIES AND MEMBER'S EQUITY
 
 
 
Current Liabilities
 
 
 
Current portion of long-term debt and capital leases
$
5

 
$
5

Accounts payable
17

 
16

Accounts payable — affiliate
8

 
—

Derivative instruments
5

 
—

Derivative instruments — affiliate
104

 
64

Accrued expenses and other current liabilities
60

 
49

Total current liabilities
199

 
134

Other Liabilities
 
 
 
Long-term debt and capital leases
1

 
5

Derivative instruments — affiliate
18

 
9

Out-of-market contracts
553

 
575

Other non-current liabilities
59

 
71

Total non-current liabilities
631

 
660

Total Liabilities
830

 
794

Commitments and Contingencies


 


Member’s Equity
 
 
 
Member’s interest
849

 
1,078

Total Member’s Equity
849

 
1,078

Total Liabilities and Member’s Equity
$
1,679

 
$
1,872


See accompanying notes to condensed consolidated financial statements.

13
                                                                                                                                                                                                                                                                                

GENON MID-ATLANTIC, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine months ended September 30,
 
2014
 
2013
 
(In millions)
Cash Flows from Operating Activities
 
 
 
Net income
$
91

 
$
65

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
61

 
60

Amortization of out-of-market contracts and emission allowances
(12
)
 
(8
)
Loss on disposals and sales of assets
—

 
5

Changes in derivative instruments
259

 
181

Changes in collateral deposits supporting energy risk management activities
—

 
(14
)
Changes in other working capital
(3
)
 
(97
)
Net Cash Provided by Operating Activities
396

 
192

Cash Flows from Investing Activities
 
 
 
Capital expenditures
(11
)
 
(38
)
Net Cash Used by Investing Activities
(11
)
 
(38
)
Cash Flows from Financing Activities
 
 
 
Payments for short and long-term debt
—

 
(3
)
Distributions to member
(320
)
 
(160
)
Net Cash Used by Financing Activities
(320
)
 
(163
)
Net Increase/(Decrease) in Cash and Cash Equivalents
65

 
(9
)
Cash and Cash Equivalents at Beginning of Period
64

 
135

Cash and Cash Equivalents at End of Period
$
129

 
$
126


See accompanying notes to condensed consolidated financial statements.

14
                                                                                                                                                                                                                                                                                

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  
(Unaudited)
Note 1 — Basis of Presentation (GenOn, GenOn Americas Generation and GenOn Mid-Atlantic)
GenOn Energy, Inc., a wholly owned subsidiary of NRG, is a wholesale power generator engaged in the ownership and operation of power generation facilities, with approximately 19,583 MW of net electric generating capacity located in the U.S.
GenOn Americas Generation is a wholesale power generator with approximately 7,596 MW of net electric generating capacity located, in many cases, near major metropolitan areas. GenOn Americas Generation's electric generating capacity is part of the 19,583 MW of net electric generating capacity of GenOn.
GenOn Mid-Atlantic operates and owns or leases 4,683 MW of net electric generating capacity in Maryland near Washington, D.C. GenOn Mid-Atlantic’s electric generating capacity is part of the 7,596 MW of net electric generating capacity of GenOn Americas Generation. GenOn Mid-Atlantic’s generating facilities serve the Eastern PJM markets.
GenOn Americas Generation and GenOn Mid-Atlantic are Delaware limited liability companies and indirect wholly owned subsidiaries of GenOn. GenOn Mid-Atlantic is an indirect wholly owned subsidiary of GenOn Americas Generation.
The Registrants sell power from their generation portfolio, offer capacity or similar products to retail electric providers and others, and provide Ancillary Services to support system reliability.
On December 14, 2012, NRG completed the acquisition of GenOn, referred to herein as the NRG Merger.
This is a combined quarterly report of the Registrants for the quarter ended September 30, 2014. The notes to the condensed consolidated financial statements apply to the Registrants as indicated parenthetically next to each corresponding disclosure. The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with the SEC's regulations for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The following notes should be read in conjunction with the accounting policies and other disclosures as set forth in the notes to the Registrants' financial statements set forth in the Registrants' 2013 Form 10-K. Interim results are not necessarily indicative of results for a full year.
In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all material adjustments consisting of normal and recurring accruals necessary to present fairly the Registrants' consolidated financial positions as of September 30, 2014, cash flows for the nine months ended September 30, 2014 and 2013 and the results of operations and comprehensive income/(loss) for the three and nine months ended September 30, 2014 and 2013.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Certain prior year depreciation amounts have been recast to revise provisional purchase accounting estimates for the NRG Merger.
Reclassifications
Certain prior year amounts have been reclassified for comparative purposes.  The reclassification did not affect results from operations. 

15
                                                                                                                                                                                                                                                                                

Note 2 — Summary of Significant Accounting Policies (GenOn, GenOn Americas Generation and GenOn Mid-Atlantic)
Impairment losses
During the three months ended September 30, 2014, GenOn determined that it will pursue mothballing the 463 MW natural gas-fired Osceola facility, in Saint Cloud, Florida. GenOn considered this to be an indicator of impairment and performed an impairment test for these assets under ASC 360, Property, Plant and Equipment. The carrying amount of the assets was lower than the future net cash flows expected to be generated by the assets and as a result, the assets are considered to be impaired. GenOn measured the impairment loss as the difference between the carrying amount and the fair value of the assets. Due to the location of the facility, it was determined that the best indicator of fair value is the market value of the combustion turbines. GenOn recorded an impairment loss of approximately $60 million, which represents the excess of the carrying value over the fair market value.
Assets Held for Sale
During the three months ended September 30, 2014, GenOn entered into a separate agreement to sell its 50% interest in the Sabine Cogen, L.P. This transaction is expected to close in the fourth quarter of 2014. As a result, GenOn has classified the related assets as "held-for-sale" in the consolidated balance sheet as of September 30, 2014.
Recent Accounting Developments
ASU 2014-09 - In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU No. 2014-09. The amendments of ASU No. 2014-09 complete the joint effort between the FASB and the International Accounting Standards Board, or IASB, to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards, or IFRS, and to improve financial reporting. The guidance in ASU No. 2014-09 provides that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for the goods or services provided and establishes the following steps to be applied by an entity: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies the performance obligation. The guidance of ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods therein. Early adoption is not permitted. The Registrants are currently evaluating the impact of the standard on the Registrants' results of operations, cash flows and financial position.
ASU 2013-11 - In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740) Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, or ASU No. 2013-11.  The amendments of ASU No. 2013-11, which were adopted on January 1, 2014, require an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction of a deferred tax asset for a net operating loss, or NOL, a similar tax loss or tax credit carryforward rather than a liability when the uncertain tax position would reduce the NOL or other carryforward under the tax law of the applicable jurisdiction and the entity intends to use the deferred tax asset for that purpose. The adoption of this standard did not impact the Registrants' results of operations or cash flows.
Note 3 — Fair Value of Financial Instruments (GenOn, GenOn Americas Generation and GenOn Mid-Atlantic)
This footnote should be read in conjunction with the complete description under Note 4, Fair Value of Financial Instruments, to the Registrants' 2013 Form 10-K.
For cash and cash equivalents, funds deposited by counterparties, accounts receivable, note receivable — affiliate, accounts payable, accrued liabilities, restricted cash, and cash collateral paid and received in support of energy risk management activities, the carrying amount approximates fair value because of the short-term maturity of those instruments and are classified as Level 1 within the fair value hierarchy.
The estimated carrying amounts and fair values of GenOn and GenOn Americas Generation’s debt are as follows:
GenOn
 
As of September 30, 2014
 
As of December 31, 2013
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
 
(In millions)
Long and short-term debt
$
3,117

 
$
2,828

 
$
3,120

 
$
3,058

The fair value of long and short-term debt that is estimated using reported market prices for instruments that are publicly traded is classified as Level 2 within the fair value hierarchy.

16
                                                                                                                                                                                                                                                                                

GenOn Americas Generation
 
As of September 30, 2014
 
As of December 31, 2013
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
 
(In millions)
Long and short-term debt
$
931

 
$
786

 
$
938

 
$
883

The fair value of long and short-term debt is estimated using reported market prices for instruments that are publicly traded and is classified as Level 2 within the fair value hierarchy.
Recurring Fair Value Measurements
Derivative assets and liabilities are carried at fair market value. Realized and unrealized gains and losses included in earnings that are related to energy derivatives are recorded in operating revenues and cost of operations.
GenOn
The following tables present assets and liabilities (including affiliate amounts) measured and recorded at fair value on GenOn’s consolidated balance sheet on a recurring basis and their level within the fair value hierarchy:
 
As of September 30, 2014
 
Fair Value
 
Level 1 (a)
 
Level 2 (a)
 
Level 3
 
Total
 
(In millions)
Derivative assets:
 
 
 
 
 
 
 
Commodity contracts
$
116

 
$
482

 
$
16

 
$
614

Derivative liabilities:
 
 
 
 
 
 
 
Commodity contracts
$
23

 
$
408

 
$
36

 
$
467

Other assets (b)
$
21

 
$
—

 
$
—

 
$
21

(a) There were no transfers during the three and nine months ended September 30, 2014 between Levels 1 and 2.
(b) Relates to mutual funds held in a rabbi trust for non-qualified deferred compensation plans for certain key and highly compensated employees.
 
As of December 31, 2013
 
Fair Value
 
Level 1 (a)
 
Level 2 (a)
 
Level 3
 
Total
 
(In millions)
Derivative assets:
 
 
 
 
 
 
 
Commodity contracts
$
141

 
$
507

 
$
3

 
$
651

Derivative liabilities:
 
 
 
 
 
 
 
Commodity contracts
$
25

 
$
149

 
$
7

 
$
181

Other assets (b)
$
37

 
$
—

 
$
—

 
$
37

(a) There were no transfers during the year ended December 31, 2013 between Levels 1 and 2.
(b) Relates to mutual funds held in a rabbi trust for non-qualified deferred compensation plans for certain key and highly compensated employees.

17
                                                                                                                                                                                                                                                                                

The following tables reconcile, for the three and nine months ended September 30, 2014 and 2013, the beginning and ending balances for derivatives that are recognized at fair value in GenOn's consolidated financial statements at least annually using significant unobservable inputs:
 
Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
 
Derivatives (a)
 
Derivatives (a)
 
(In millions)
Beginning balance
$
(44
)
 
$
3

 
$
(4
)
 
$
17

Total gains/(losses) included in earnings — realized/unrealized
1

 
1

 
3

 
(15
)
Purchases
22

 
1

 
(19
)
 
3

Transfers into Level 3 (b)
1

 
—

 
—

 
—

Ending balance
$
(20
)
 
$
5

 
$
(20
)
 
$
5

(Losses)/gains for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held as of September 30
$
—

 
$
—

 
$
(1
)
 
$
1

(a) Consists of derivative assets and liabilities, net.
(b) Transfers in/out of level 3 are related to the availability of external broker quotes and are valued as of the end of the reporting period.
GenOn Americas Generation
The following tables present assets and liabilities (including affiliate amounts) measured and recorded at fair value on GenOn Americas Generation's consolidated balance sheet on a recurring basis and their level within the fair value hierarchy:
 
As of September 30, 2014
 
Fair Value
 
Level 1 (a)
 
Level 2 (a)
 
Level 3
 
Total
 
(In millions)
Derivative assets:
 
 
 
 
 
 
 
Commodity contracts
$
123

 
$
786

 
$
31

 
$
940

Derivative liabilities:
 
 
 
 
 
 
 
Commodity contracts
$
47

 
$
675

 
$
49

 
$
771

(a) There were no transfers during the three and nine months ended September 30, 2014 between Levels 1 and 2.
 
As of December 31, 2013
 
Fair Value
 
Level 1 (a)
 
Level 2 (a)
 
Level 3
 
Total
 
(In millions)
Derivative assets:
 
 
 
 
 
 
 
Commodity contracts
$
153

 
$
575

 
$
7

 
$
735

Derivative liabilities:
 
 
 
 
 
 
 
Commodity contracts
$
74

 
$
226

 
$
8

 
$
308

(a) There were no transfers during the year ended December 31, 2013 between Levels 1 and 2.

18
                                                                                                                                                                                                                                                                                

The following tables reconcile, for the three and nine months ended September 30, 2014 and 2013, the beginning and ending balances for GenOn Americas Generation's derivatives that are recognized at fair value in the consolidated financial statements at least annually using significant unobservable inputs:
 
Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
 
Derivatives (a)
 
Derivatives (a)
 
(In millions)
Beginning balance
$
(41
)
 
$
3

 
$
(1
)
 
$
17

Total gains/(losses) included in earnings — realized/unrealized
1

 
—

 
1

 
(16
)
Purchases
22

 
1

 
(18
)
 
3

Ending balance
$
(18
)
 
$
4

 
$
(18
)
 
$
4

Gains/(losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held as of September 30
$
1

 
$
(1
)
 
$
—

 
$
—

(a) Consists of derivative assets and liabilities, net.
GenOn Mid-Atlantic
The following tables present assets and liabilities (including affiliate amounts) measured and recorded at fair value on GenOn Mid-Atlantic's consolidated balance sheet on a recurring basis and their level within the fair value hierarchy:
 
As of September 30, 2014
 
Fair Value
 
Level 1 (a)
 
Level 2 (a)
 
Level 3
 
Total
 
(In millions)
Derivative assets:
 
 
 
 
 
 
 
Commodity contracts
$
92

 
$
209

 
$
1

 
$
302

Derivative liabilities:
 
 
 
 
 
 
 
Commodity contracts
$
17

 
$
91

 
$
19

 
$
127

(a) There were no transfers during the three and nine months ended September 30, 2014 between Levels 1 and 2.
 
As of December 31, 2013
 
Fair Value
 
Level 1 (a)
 
Level 2 (a)
 
Level 3
 
Total
 
(In millions)
Derivative assets:
 
 
 
 
 
 
 
Commodity contracts
$
87

 
$
420

 
$
—

 
$
507

Derivative liabilities:
 
 
 
 
 
 
 
Commodity contracts
$
13

 
$
60

 
$
—

 
$
73

(a) There were no transfers during the year ended December 31, 2013 between Levels 1 and 2.

19
                                                                                                                                                                                                                                                                                

The following tables reconcile, for the three and nine months ended September 30, 2014 and 2013, the beginning and ending balances for GenOn Mid-Atlantic's derivatives that are recognized at fair value in the consolidated financial statements at least annually using significant unobservable inputs:
 
Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
 
Derivatives (a)
 
Derivatives (a)
 
(In millions)
Beginning balance
$
(41
)
 
$
2

 
$
—

 
$
7

Total gains/(losses) included in earnings — realized/unrealized
1

 
—

 
—

 
(7
)
Purchases
22

 
1

 
(18
)
 
3

Ending balance
$
(18
)
 
$
3

 
$
(18
)
 
$
3

Gains for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held as of September 30
$
1

 
$
—

 
$
—

 
$
1

(a) Consists of derivative assets and liabilities, net.
Derivative Fair Value Measurements
A portion of the Registrants' contracts are exchange-traded contracts with readily available quoted market prices. A majority of the Registrants' contracts are non-exchange-traded contracts valued using prices provided by external sources, primarily price quotations available through brokers or over-the-counter and on-line exchanges. The remainder of the assets and liabilities represent contracts for which external sources or observable market quotes are not available for the whole term or for certain delivery months. These contracts are valued using various valuation techniques including but not limited to internal models that apply fundamental analysis of the market and corroboration with similar markets. As of September 30, 2014, contracts valued with prices provided by models and other valuation techniques make up 3% of GenOn's derivative assets and 8% of GenOn's derivative liabilities, 3% of GenOn Americas Generation’s derivative assets and 6% of GenOn Americas Generation's derivative liabilities and 0% of GenOn Mid-Atlantic’s derivative assets and 15% of GenOn Mid-Atlantic's derivative liabilities.
The fair value of each contract is discounted using a risk free interest rate. In addition, the Registrants apply a credit reserve to reflect credit risk which is calculated based on published default probabilities. The Registrants' credit reserves were as follows:
 
As of September 30, 2014
 
As of December 31, 2013
 
(In millions)
GenOn
$
1

 
$
1

GenOn Americas Generation
1

 
1

GenOn Mid-Atlantic
1

 
3

Concentration of Credit Risk
In addition to the credit risk discussion as disclosed in Note 2, Summary of Significant Accounting Policies, to the Registrants' 2013 Form 10-K, the following is a discussion of the concentration of credit risk for the Registrants’ financial instruments. Credit risk relates to the risk of loss resulting from non-performance or non-payment by counterparties pursuant to the terms of their contractual obligations. The Registrants are exposed to counterparty credit risk through various activities including wholesale sales and fuel purchases.

20
                                                                                                                                                                                                                                                                                

Counterparty Credit Risk
The Registrants' counterparty credit risk policies are disclosed in their 2013 Form 10-K. As of September 30, 2014, GenOn's counterparty credit exposure was $269 million and GenOn held no collateral (cash and letters of credit) against those positions, resulting in a net exposure of $269 million. Approximately 78% of GenOn's exposure before collateral is expected to roll off by the end of 2015. As of September 30, 2014, GenOn Americas Generation’s counterparty credit exposure was $262 million and GenOn Americas Generation held no collateral (cash and letters of credit) against those positions, resulting in a net exposure of $262 million. Approximately 79% of GenOn Americas Generation’s exposure before collateral is expected to roll off by the end of 2015. As of September 30, 2014, GenOn Mid-Atlantic’s counterparty credit exposure was $142 million and GenOn Mid-Atlantic held no collateral (cash and letters or credit) against those positions, resulting in a net exposure of $142 million. 100% of GenOn Mid-Atlantic’s exposure before collateral is expected to roll off by the end of 2015. The following tables highlight net counterparty credit exposure by industry sector and by counterparty credit quality. Net counterparty credit exposure is defined as the aggregate net asset position for the Registrants with counterparties where netting is permitted under the enabling agreement and includes all cash flow, mark-to-market, NPNS and non-derivative transactions. The exposure is shown net of collateral held and includes amounts net of receivables or payables.
GenOn
Category
Net Exposure (a)
(% of Total)
Financial institutions
68
%
Utilities, energy merchants, marketers and other
22

ISOs
10

Total as of September 30, 2014
100
%
Category
Net Exposure (a)
(% of Total)
Investment grade
97
%
Non-rated
3

Total as of September 30, 2014
100
%
(a) Counterparty credit exposure excludes transportation contracts because of the unavailability of market prices.
GenOn has counterparty credit risk exposure to certain counterparties, each of which represent more than 10% of the total net exposure discussed above. The aggregate of such counterparties' exposure was $163 million. Changes in hedge positions and market prices will affect credit exposure and counterparty concentration. Given the credit quality, diversification and term of the exposure in the portfolio, GenOn does not anticipate a material impact on its financial position or results of operations from nonperformance by any of its counterparties.
GenOn Americas Generation
Category
Net Exposure (a)
(% of Total)
Financial institutions
70
%
Utilities, energy merchants, marketers and other
20

ISOs
10

Total as of September 30, 2014
100
%
 
Category
Net Exposure (a)
(% of Total)
Investment grade
99
%
Non-rated
1

Total as of September 30, 2014
100
%
(a) Counterparty credit exposure excludes transportation contracts because of the unavailability of market prices.
GenOn Americas Generation has counterparty credit risk exposure to certain counterparties, each of which represent more than 10% of the total net exposure discussed above. The aggregate of such counterparties' exposure was $163 million. Changes in hedge positions and market prices will affect credit exposure and counterparty concentration. Given the credit quality, diversification and term of the exposure in the portfolio, GenOn Americas Generation does not anticipate a material impact on its financial position or results of operations from nonperformance by any of its counterparties.

21
                                                                                                                                                                                                                                                                                

GenOn Mid-Atlantic
Category
Net Exposure (a)
(% of Total)
Financial institutions
100
%
Category
Net Exposure (a)
(% of Total)
Investment grade
100
%
(a) Counterparty credit exposure excludes transportation contracts because of the unavailability of market prices.
GenOn Mid-Atlantic has counterparty credit risk exposure to certain counterparties, each of which represent more than 10% of the total net exposure discussed above. The aggregate of such counterparties' exposure was $136 million. Changes in hedge positions and market prices will affect credit exposure and counterparty concentration. Given the credit quality, diversification and term of the exposure in the portfolio, GenOn Mid-Atlantic does not anticipate a material impact on its financial position or results of operations from nonperformance by any of its counterparties.
Note 4 — Accounting for Derivative Instruments and Hedging Activities (GenOn, GenOn Americas Generation and GenOn Mid-Atlantic)
This footnote should be read in conjunction with the complete description under Note 5, Accounting for Derivative Instruments and Hedging Activities, to the 2013 Form 10-K.
Energy-Related Commodities (GenOn)
As of September 30, 2014, GenOn had energy-related derivative financial instruments extending through 2017.
Volumetric Underlying Derivative Transactions (GenOn, GenOn Americas Generation and GenOn Mid-Atlantic)
The following table summarizes the net notional volume buy/(sell) of the Registrants’ open derivative transactions broken out by commodity, excluding those derivatives that qualified for the NPNS exception as of September 30, 2014 and December 31, 2013. Option contracts are reflected using delta volume. Delta volume equals the notional volume of an option adjusted for the probability that the option will be in-the-money at its expiration date.
 
 
GenOn
 
GenOn Americas Generation
 
GenOn Mid-Atlantic
 
 
Total Volume
 
Total Volume
 
Total Volume
 
 
As of September 30, 2014
 
As of December 31, 2013
 
As of September 30, 2014
 
As of December 31, 2013
 
As of September 30, 2014
 
As of December 31, 2013
Commodity
Units
(In millions)
Coal
Short Ton
10

 
6
 
7

 
4
 
7

 
4
Natural Gas
MMBtu
(47
)
 
(111)
 
(55
)
 
(113)
 
(59
)
 
(119)
Power
MWh
(38
)
 
(26)
 
(19
)
 
(14)
 
(18
)
 
(14)
The decrease in the natural gas position was the result of buying back a portion of the gas hedges and replacing them with power hedges, as well as the settlement of positions during the period.
Fair Value of Derivative Instruments (GenOn, GenOn Americas Generation and GenOn Mid-Atlantic)
The following tables summarize the fair value within the derivative instrument valuation on the balance sheet:
GenOn
 
Fair Value
 
Derivative Assets
 
Derivative Liabilities
 
September 30, 2014
 
December 31, 2013
 
September 30, 2014
 
December 31, 2013
 
(In millions)
Derivatives Not Designated as Cash Flow Hedges:
 
 
 
 
 
 
 
Commodity contracts current
$
451

 
$
469

 
$
419

 
$
163

Commodity contracts long-term
163

 
182

 
48

 
18

Total Derivatives Not Designated as Cash Flow Hedges
$
614

 
$
651

 
$
467

 
$
181


22
                                                                                                                                                                                                                                                                                

GenOn Americas Generation
 
Fair Value
 
Derivative Assets
 
Derivative Liabilities
 
September 30, 2014
 
December 31, 2013
 
September 30, 2014
 
December 31, 2013
 
(In millions)
Derivatives Not Designated as Cash Flow Hedges:
 
 
 
 
 
 
 
Commodity contracts current
$
747

 
$
546

 
$
678

 
$
267

Commodity contracts long-term
193

 
189

 
93

 
41

Total Derivatives Not Designated as Cash Flow Hedges
$
940

 
$
735

 
$
771

 
$
308

GenOn Mid-Atlantic
 
Fair Value
 
Derivative Assets
 
Derivative Liabilities
 
September 30, 2014
 
December 31, 2013
 
September 30, 2014
 
December 31, 2013
 
(In millions)
Derivatives Not Designated as Cash Flow Hedges:
 
 
 
 
 
 
 
Commodity contracts current
$
185

 
$
351

 
$
109

 
$
64

Commodity contracts long-term
117

 
156

 
18

 
9

Total Derivatives Not Designated as Cash Flow Hedges
$
302

 
$
507

 
$
127

 
$
73

The Registrants have elected to present derivative assets and liabilities on the balance sheet on a trade-by-trade basis and do not offset amounts at the counterparty master agreement level. In addition, collateral received or paid on the Registrants' derivative assets or liabilities are recorded on a separate line item on the balance sheet. The following tables summarize the offsetting of derivatives by counterparty master agreement level and collateral received or paid:
GenOn
 
 
Gross Amounts Not Offset in the Statement of Financial Position
Description
 
Gross Amounts of Recognized Assets / Liabilities
 
Derivative Instruments
 
Cash Collateral (Held) / Posted
 
Net Amount
September 30, 2014
 
(In millions)
Commodity contracts:
 
 
 
 
 
 
 
 
Derivative assets
 
$
608

 
$
(435
)
 
$
—

 
$
173

Derivative assets - affiliate
 
6

 
(6
)
 
—

 
—

Derivative liabilities
 
(453
)
 
435

 
3

 
(15
)
Derivative liabilities - affiliate
 
(14
)
 
6

 
—

 
(8
)
Total derivative instruments
 
$
147

 
$
—


$
3


$
150

GenOn Americas Generation
 
 
Gross Amounts Not Offset in the Statement of Financial Position
Description
 
Gross Amounts of Recognized Assets / Liabilities
 
Derivative Instruments
 
Cash Collateral (Held) / Posted
 
Net Amount
September 30, 2014
 
(In millions)
Commodity contracts:
 
 
 
 
 
 
 
 
Derivative assets
 
$
608

 
$
(435
)
 
$
—

 
$
173

Derivative assets - affiliate