GENON MID-ATLANTIC, LLC 10-Q

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, 2012

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 333-63240

GenOn Americas Generation, LLC

(Exact Name of Registrant as Specified in Its Charter)

51-0390520

(I.R.S. Employer Identification No.)

Commission File Number: 333-61668

GenOn Mid-Atlantic, LLC

(Exact Name of Registrant as Specified in Its Charter)

58-2574140

(I.R.S. Employer Identification No.)

Delaware
(State or Other Jurisdiction of Incorporation or Organization)

1000 Main Street,
Houston, Texas		77002
(Address of Principal Executive Offices)		(Zip Code)

(832) 357-3000

(Registrant’s Telephone Number, Including Area 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 Securities Exchange Act of 1934 solely as a result of having registered debt securities under the Securities Act of 1933.)

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 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 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 Americas Generation, LLC	o Yes x No
GenOn Mid-Atlantic, LLC	o Yes x No

All of the registrant’s outstanding membership interests are held by its parent and there are no membership interest held by nonaffiliates.

Registrant		Parent
GenOn Americas Generation, LLC		GenOn Americas, Inc.
GenOn Mid-Atlantic, LLC		GenOn North America, LLC

This combined Form 10-Q is separately filed by GenOn Americas Generation, LLC and GenOn Mid-Atlantic, LLC. Information contained in this combined Form 10-Q relating to 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 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).

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TABLE OF CONTENTS

	Glossary of Certain Defined Terms	iv
	Cautionary Statement Regarding Forward-Looking Information	vii

PART I
FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	1
	GenOn Americas Generation, LLC:
	Condensed Consolidated Statements of Operations (Unaudited) Three and Nine Months Ended September 30, 2012 and 2011	1
	Condensed Consolidated Balance Sheets (Unaudited) September 30, 2012 and December 31, 2011	2
	Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2012 and 2011	3
	GenOn Mid-Atlantic, LLC:
	Condensed Consolidated Statements of Operations (Unaudited) Three and Nine Months Ended September 30, 2012 and 2011	4
	Condensed Consolidated Balance Sheets (Unaudited) September 30, 2012 and December 31, 2011	5
	Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2012 and 2011	6
	Combined Notes to Condensed Consolidated Financial Statements (Unaudited)	7

ITEM 2.	MANAGEMENT’S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION	42
	Overview	42
	Hedging Activities	42
	Dodd-Frank Act	43
	Capital Expenditures and Capital Resources	43
	Environmental Matters	44
	Regulatory Matters	46
	Commodity Prices and Generation Volumes	46
	Capacity Sales	47
	Results of Operations	47
	Financial Condition	56
	Liquidity and Capital Resources	56
	Historical Cash Flows	59
	Recently Adopted Accounting Guidance	62

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	63

ITEM 4.	CONTROLS AND PROCEDURES	63
	Effectiveness of Disclosure Controls and Procedures	63
	Changes in Internal Control over Financial Reporting	63

PART II
OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	64
ITEM 1A.	RISK FACTORS	64
ITEM 6.	EXHIBITS
	GenOn Americas Generation, LLC	65
	GenOn Mid-Atlantic, LLC	66

iii

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Glossary of Certain Defined Terms

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.

Bankruptcy Court		United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division.

baseload generating units		units designed to satisfy minimum baseload requirements of the system, produce electricity at an essentially constant rate and run continuously.

CAIR		Clean Air Interstate Rule.

CAISO		California Independent System Operator.

capacity		amount of energy that could have been generated at continuous full-power operation during the period.

CFTC		U.S. Commodity Futures Trading Commission.

Clean Air Act		Federal Clean Air Act.

Clean Water Act		Federal Water Pollution Control Act.

CO2		carbon dioxide.

CSAPR		Cross-State Air Pollution Rule.

dark spread		the difference between power prices and the cost to generate electricity with coal.

D.C. Circuit		the United States Court of Appeals for the District of Columbia Circuit.

Dodd-Frank Act		the Dodd-Frank Wall Street Reform and Consumer Protection Act.

EPA		United States Environmental Protection Agency.

EPC		engineering, procurement and construction.

Exchange Act		Securities Exchange Act of 1934, as amended.

FASB		Financial Accounting Standards Board.

FERC		Federal Energy Regulatory Commission.

GAAP		United States generally accepted accounting principles.

GenOn		GenOn Energy, Inc. (formerly known as RRI Energy, Inc.) and, except where the context indicates otherwise, its subsidiaries, after giving effect to the Mirant/RRI Merger.

GenOn Americas		GenOn Americas, Inc.

GenOn Americas Generation		GenOn Americas Generation, LLC.

GenOn California North		GenOn California North, LLC.

GenOn Chalk Point		GenOn Chalk Point, LLC.

GenOn credit facilities		senior secured term loan and revolving credit facility of GenOn and certain of its subsidiaries.

GenOn Energy Holdings		GenOn Energy Holdings, Inc. (formerly known as Mirant Corporation) and, except where the context indicates otherwise, its subsidiaries.

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GenOn Energy Management		GenOn Energy Management, LLC.

GenOn Energy Services		GenOn Energy Services, LLC.

GenOn Marsh Landing		GenOn Marsh Landing, LLC.

GenOn Mid-Atlantic		GenOn Mid-Atlantic, LLC and its subsidiaries, which include the baseload units at two generating facilities under operating leases.

GenOn North America		GenOn North America, LLC.

GenOn Potomac River		GenOn Potomac River, LLC.

intermediate generating units		units designed to satisfy system requirements that are greater than baseload and less than peaking.

ISO		independent system operator.

ISO-NE		Independent System Operator-New England.

LIBOR		London InterBank Offered Rate.

MADEP		Massachusetts’ Department of Environmental Protection.

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 pursuant to the Mirant/RRI Merger Agreement.

Mirant/RRI Merger Agreement		the agreement by and among Mirant Corporation, RRI Energy, Inc. and RRI Energy Holdings, Inc. dated as of April 11, 2010.

Mirant Debtors		GenOn Energy Holdings, Inc. (formerly known as Mirant Corporation) and certain of its subsidiaries.

MPSC		Maryland Public Service Commission.

MW		megawatt.

MWh		megawatt hour.

NAAQS		National Ambient Air Quality Standards.

net generating capacity		net summer capacity.

NOL		net operating loss.

NOV		notice of violation.

NOx		nitrogen oxides.

NPDES		national pollutant discharge elimination system.

NRG		NRG Energy, Inc.

NRG Merger		the merger contemplated in the NRG Merger Agreement.

NRG Merger Agreement		the agreement by and among NRG Energy, Inc., Plus Merger Corporation and GenOn Energy, Inc. dated as of July 20, 2012.

NYISO		New York Independent System Operator.

NYMEX		New York Mercantile Exchange.

OTC		over-the-counter.

peaking generating units		units designed to satisfy demand requirements during the periods of greatest or peak load on the system.

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PEPCO		Potomac Electric Power Company.

PG&E		Pacific Gas & Electric Company.

PJM		PJM Interconnection, LLC.

Plan		the plan of reorganization that was approved in conjunction with Mirant Corporation’s, GenOn Americas Generation’s and GenOn Mid-Atlantic’s emergence from bankruptcy protection on January 3, 2006.

PPA		power purchase agreement.

retirement		the unit has been removed from service and is unavailable for service and not expected to return to service in the future.

ROC		Risk Oversight Committee.

RRI Energy		RRI Energy, Inc., which changed its name to GenOn Energy, Inc. in connection with the Mirant/RRI Merger.

RTO		regional transmission organization.

scrubbers		flue gas desulfurization emissions controls.

Securities Act		Securities Act of 1933, as amended.

SO2		sulfur dioxide.

spark spread		the difference between power prices and the cost to generate electricity with natural gas.

Stone & Webster		Stone & Webster, Inc.

SWD		surface water discharge.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

In addition to historical information, the information presented in this report includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements involve known and unknown risks and uncertainties and relate to our revenues, income, capital structure and other financial items, future events, our future financial performance or our projected business results and our view of economic and market conditions. In some cases, one can identify forward-looking statements by words such as “may,” “will,” “should,” “could,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “expect,” “intend,” “seek,” “plan,” “think,” “anticipate,” “estimate,” “predict,” “target,” “potential” or “continue” or the negative of these terms or comparable words.

Forward-looking statements are only predictions. Actual events or results may differ materially from any forward-looking statement as a result of various factors, which include:

· more stringent (or changes in the application of) environmental laws and regulations (including the cumulative effect of many such regulations) that restrict our ability or render it uneconomic to operate our assets, including regulations related to air emissions, disposal of ash and other byproducts, wastewater discharge and cooling water systems;

· changes in market conditions, including developments in the supply, demand, volume and pricing of electricity and other commodities such as coal and natural gas in the energy markets, including efforts to reduce demand for electricity and to encourage the development of renewable sources of electricity, and the extent and timing of the entry of additional competition in our markets;

· legislative and regulatory initiatives regarding deregulation, regulation or restructuring of the industry of generating, transmitting and distributing electricity (the electricity industry); changes in state, federal and other regulations affecting the electricity industry (including rate and other regulations); changes in tax laws and regulations to which we and our subsidiaries are subject; and changes in, or changes in the application of, other laws and regulations to which we and our subsidiaries and affiliates are or could become subject;

· conflicts between reliability needs and environmental rules, particularly with increasingly stringent environmental restrictions;

· price mitigation strategies employed by ISOs or RTOs that reduce our revenue and may result in a failure to compensate our generating units adequately for all of their costs;

· legal and political challenges to or changes in the rules used to calculate payments for capacity, energy and ancillary services or the establishment of bifurcated markets, incentives or other market design changes that give preferential treatment to new generating facilities over existing generating facilities;

· the failure of our generating facilities to perform as expected, including outages for unscheduled maintenance or repair;

· our failure to use new or advanced power generation technologies;

· strikes, union activity or labor unrest;

· our ability to develop or recruit capable leaders and our ability to retain or replace the services of key employees;

· weather and other natural phenomena, including hurricanes and earthquakes;

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· our failure to provide a safe working environment for our employees and visitors thereby increasing our exposure to additional liability, loss of productive time, other costs and a damaged reputation;

· hazards customary to the power generation industry, including those listed in this cautionary statement and elsewhere in this report, and the possibility that we may not have adequate insurance to cover losses resulting from such hazards or the inability of our insurers to provide agreed upon coverage;

· the ability of GenOn Americas Generation to execute the business plan in northern California, including entering into new arrangements for sales of capacity, energy and other products from its existing generating facilities;

· our relative lack of geographic diversification of revenue sources resulting in concentrated exposure to the PJM market;

· our ability to enter into intermediate and long-term contracts to sell power or to hedge economically our expected future generation of power, and to obtain adequate supplies and deliveries of fuel for our generating facilities, at our required specifications and on terms and prices acceptable to us;

· failure to obtain adequate supplies of fuels, including from curtailments of the transportation of fuels;

· the cost and availability of emissions allowances;

· the curtailment of operations and reduced prices for electricity resulting from transmission constraints;

· terrorist activities, cyberterrorism and inadequate cybersecurity, or the occurrence of a catastrophic loss and the possibility that we may not have adequate insurance to cover losses resulting from such hazards or the inability of our insurers to provide agreed upon coverage;

· deterioration in the financial condition of our counterparties, including financial counterparties, and the failure of such parties to pay amounts owed to us beyond collateral posted or to perform obligations or services due to us;

· poor economic and financial market conditions, including impacts on financial institutions and other current and potential counterparties, and negative impacts on liquidity in the power and fuel markets in which we hedge economically and transact;

· increased credit standards, margin requirements, market volatility or other market conditions that could increase our obligations to post collateral beyond amounts that are expected, including additional collateral costs associated with OTC hedging activities as a result of new or proposed laws, rules and regulations governing derivative financial instruments (such as the Dodd-Frank Act and related pending rulemaking proceedings);

· our inability to access effectively the OTC and exchange-based commodity markets or changes in commodity market conditions and liquidity, including as a result of new or proposed laws, rules and regulations governing derivative financial instruments (such as the Dodd-Frank Act and related pending rulemaking proceedings), which may affect our ability to engage in hedging and, for GenOn Americas Generation, proprietary trading activities as expected, or may result in material losses from open positions;

· volatility in our gross margin as a result of changes in the fair value of our derivative financial instruments used in our hedging and GenOn Americas Generation’s proprietary trading activities and volatility in our cash flow from operations resulting from working capital requirements, including collateral, to support our hedging and GenOn Americas Generation’s proprietary trading activities;

· the disposition of pending or threatened litigation, including environmental litigation;

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· our ability to access contractors and equipment necessary to operate and maintain our generating facilities and to design, engineer, procure and construct capital improvements required or deemed advisable;

· the inability of GenOn Americas Generation’s operating subsidiaries to generate sufficient cash to support their operations;

· the ability of lenders under GenOn’s revolving credit facility to perform their obligations;

· GenOn Americas Generation’s consolidated indebtedness and the possibility that GenOn Americas Generation or its subsidiaries may incur additional indebtedness in the future;

· restrictions on the ability of GenOn Americas Generation’s subsidiaries to pay dividends, make distributions or otherwise transfer funds to GenOn Americas Generation, including restrictions on GenOn Mid-Atlantic contained in its operating lease documents, which may affect GenOn Americas Generation’s ability to access the cash flows of those subsidiaries to make debt service and other payments;

· failure or inability to comply with provisions of GenOn Mid-Atlantic’s leases, GenOn Americas Generation’s affiliates’ loan agreements and debt, which may lead to a breach and, if not remedied, result in an event of default thereunder, which could result in such lessors, lenders and debt holders exercising remedies, limit access to needed liquidity and damage our reputation and relationships with financial institutions;

· covenants contained in our credit facilities, debt and leases that restrict our current and future operations, particularly our ability to respond to changes or take certain actions that may be in our long-term best interests;

· our ability to borrow additional funds and access capital markets; and

· the successful and timely completion of the proposed NRG Merger, which could be materially and adversely affected by, among other things, resolving any litigation brought in connection with the proposed NRG Merger, the timing and terms and conditions of required stockholder, governmental and regulatory approvals, and the ability to maintain relationships with employees, customers or suppliers as well as the ability to integrate the businesses and realize cost savings.

Many of these risks, uncertainties and assumptions are beyond our ability to control or predict. All forward-looking statements contained herein are expressly qualified in their entirety by cautionary statements contained throughout this report. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the date they are made. We undertake no obligation to update publicly or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report.

In addition to the discussion of certain risks in “Management’s Narrative Analysis of the Results of Operations and Financial Condition” and the accompanying combined notes to GenOn Americas Generation’s and GenOn Mid-Atlantic’s interim financial statements, other factors that could affect our future performance are set forth in our 2011 Annual Report on Form 10-K. Our filings and other important information are also available on our investor relations page at www.genon.com/investors.aspx.

Certain Terms

As used in this report, unless the context requires otherwise, “we,” “us,” “our” and “GenOn Americas Generation” refer to GenOn Americas Generation, LLC and its consolidated subsidiaries and “GenOn Mid-Atlantic” refer to GenOn Mid-Atlantic, LLC and its consolidated subsidiaries.

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PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GENON AMERICAS GENERATION, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of GenOn Energy, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(in millions)

Operating revenues (including unrealized gains (losses) of $(243), $37, $(199) and $(70), respectively)	$	690		$	929		$	1,861		$	2,182
Operating revenues—affiliate (including unrealized gains (losses) of $76, $(27), $39 and $(19), respectively)	158			(16		)	193			(3		)
Total operating revenues	848			913			2,054			2,179
Cost of fuel, electricity and other products (including unrealized (gains) losses of $(55), $11, $19 and $(18), respectively)	231			210			638			513
Cost of fuel, electricity and other products—affiliate (including unrealized (gains) losses of $5, $(1), $(4) and $(1), respectively)	491			494			944			994
Total cost of fuel, electricity and other products	722			704			1,582			1,507
Gross Margin (excluding depreciation and amortization)	126			209			472			672
Operating Expenses:
Operations and maintenance	71			73			212			270
Operations and maintenance—affiliate	57			53			176			172
Depreciation and amortization	41			42			122			124
Impairment losses	—			128			—			128
Gain on sales of assets, net	—			(6		)	(1		)	(5		)
Loss on sales of assets, net—affiliate	—			2			—			2
Total operating expenses	169			292			509			691
Operating Loss	(43		)	(83		)	(37		)	(19		)
Other Income (Expense), net:
Interest expense	(18		)	(19		)	(54		)	(70		)
Interest expense—affiliate	(1		)	(4		)	(4		)	(4		)
Other, net	—			—			—			(23		)
Total other expense, net	(19		)	(23		)	(58		)	(97		)
Net Loss	$	(62	)	$	(106	)	$	(95	)	$	(116	)

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements

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GENON AMERICAS GENERATION, LLC AND SUBSIDIARIES
(Wholly-Owned Indirect Subsidiary of GenOn Energy, Inc.)

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	September 30, 2012			December 31, 2011
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	335		$	267
Funds on deposit	142			316
Receivables, net	255			288
Receivables, net—affiliate	24			22
Notes receivable—affiliate	187			181
Derivative contract assets	632			977
Derivative contract assets—affiliate	64			44
Inventories	234			257
Prepaid rent and other expenses	119			113
Total current assets	1,992			2,465
Property, plant and equipment, gross	3,958			3,894
Accumulated depreciation and amortization	(1,062		)	(960		)
Property, Plant and Equipment, net	2,896			2,934
Noncurrent Assets:
Intangible assets, net	26			28
Derivative contract assets	588			731
Derivative contract assets—affiliate	44			29
Prepaid rent	412			386
Other	21			16
Total noncurrent assets	1,091			1,190
Total Assets	$	5,979		$	6,589
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
Current portion of long-term debt	$	5		$	4
Accounts payable and accrued liabilities	400			509
Payables, net—affiliate	137			93
Notes payable—affiliate	88			47
Derivative contract liabilities	379			700
Derivative contract liabilities—affiliate	95			76
Other	22			25
Total current liabilities	1,126			1,454
Noncurrent Liabilities:
Long-term debt, net of current portion	858			862
Derivative contract liabilities	141			100
Derivative contract liabilities—affiliate	68			89
Other	106			119
Total noncurrent liabilities	1,173			1,170
Commitments and Contingencies
Member’s Equity:
Member’s interest	3,680			3,965
Total member’s equity	3,680			3,965
Total Liabilities and Member’s Equity	$	5,979		$	6,589

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements

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GENON AMERICAS GENERATION, LLC AND SUBSIDIARIES
(Wholly-Owned Indirect Subsidiary of GenOn Energy, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended September 30,
	2012			2011
	(in millions)
Cash Flows from Operating Activities:
Net loss	$	(95	)	$	(116	)
Adjustments to reconcile net loss and changes in operating assets and liabilities to net cash provided by operating activities:
Depreciation and amortization	122			124
Impairment losses	—			128
Gain on sales of assets, net	(1		)	(3		)
Unrealized losses	175			70
Excess materials and supplies inventory reserve	6			—
Lower of cost or market inventory adjustments	45			1
Loss on early extinguishment of debt	—			23
Reversal of Potomac River settlement obligation	(31		)	—
Large scale remediation and settlement costs	(3		)	30
Other, net	—			(2		)
Changes in operating assets and liabilities	16			12
Total adjustments	329			383
Net cash provided by operating activities	234			267
Cash Flows from Investing Activities:
Capital expenditures	(175		)	(130		)
Proceeds from the sales of assets	1			9
Restricted funds on deposit, net	166			700
Issuance of notes receivable—affiliate	(6		)	(164		)
Net cash provided by (used in) investing activities	(14		)	415
Cash Flows from Financing Activities:
Repayment of long-term debt	(3		)	(1,404		)
Issuance of notes payable—affiliate	41			34
Capital contributions	—			474
Distributions to member	(190		)	(100		)
Net cash used in financing activities	(152		)	(996		)
Net Increase (Decrease) in Cash and Cash Equivalents	68			(314		)
Cash and Cash Equivalents, beginning of period	267			514
Cash and Cash Equivalents, end of period	$	335		$	200

Supplemental Disclosures:
Cash paid for interest, net of amounts capitalized	$	35		$	59
Cash refunds received for income taxes	$	—		$	1
Supplemental Disclosure for Non-Cash Financing Activities:
Conversion to equity of notes payable to affiliate	$	—		$	2

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements

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GENON MID-ATLANTIC, LLC AND SUBSIDIARIES
(Wholly-Owned Indirect Subsidiary of GenOn Energy, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(in millions)

Operating revenues (including unrealized gains (losses) of $(88), $(3), $(95) and $(42), respectively)	$	(27	)	$	41		$	108		$	85
Operating revenues—affiliate (including unrealized gains (losses) of $(49), $0, $(41) and $(39), respectively)	228			287			621			821
Total operating revenues	201			328			729			906
Cost of fuel, electricity and other products (including unrealized (gains) losses of $0)	2			4			8			13
Cost of fuel, electricity and other products—affiliate (including unrealized (gains) losses of $(46), $9, $26 and $(18), respectively)	101			170			363			410
Total cost of fuel, electricity and other products	103			174			371			423
Gross Margin (excluding depreciation and amortization)	98			154			358			483
Operating Expenses:
Operations and maintenance	54			53			156			216
Operations and maintenance—affiliate	42			43			125			125
Depreciation and amortization	30			30			89			89
Impairment losses	—			94			—			94
Gain on sales of assets, net	—			—			(1		)	—
Total operating expenses	126			220			369			524
Operating Loss	(28		)	(66		)	(11		)	(41		)
Other Expense, net:
Interest expense	—			—			(1		)	(1		)
Interest expense—affiliate	(1		)	(3		)	(3		)	(3		)
Total other expense, net	(1		)	(3		)	(4		)	(4		)
Net Loss	$	(29	)	$	(69	)	$	(15	)	$	(45	)

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements

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GENON MID-ATLANTIC, LLC AND SUBSIDIARIES
(Wholly-Owned Indirect Subsidiary of GenOn Energy, Inc.)

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	September 30, 2012			December 31, 2011
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	171		$	68
Funds on deposit	32			198
Receivables, net	21			25
Receivables, net—affiliate	39			44
Derivative contract assets	248			208
Derivative contract assets—affiliate	96			191
Inventories	135			167
Prepaid rent and other expenses	105			100
Total current assets	847			1,001
Property, plant and equipment, gross	3,109			3,054
Accumulated depreciation and amortization	(694		)	(610		)
Property, Plant and Equipment, net	2,415			2,444
Noncurrent Assets:
Intangible assets, net	16			16
Derivative contract assets	403			526
Derivative contract assets—affiliate	101			105
Prepaid rent	412			386
Other	2			—
Total noncurrent assets	934			1,033
Total Assets	$	4,196		$	4,478
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
Current portion of long-term debt	$	5		$	4
Accounts payable and accrued liabilities	124			151
Payables, net—affiliate	31			44
Derivative contract liabilities	7			—
Derivative contract liabilities—affiliate	126			168
Other	22			24
Total current liabilities	315			391
Noncurrent Liabilities:
Long-term debt, net of current portion	10			14
Derivative contract liabilities	4			—
Derivative contract liabilities—affiliate	78			68
Other	67			78
Total noncurrent liabilities	159			160
Commitments and Contingencies
Member’s Equity:
Member’s interest	3,722			3,927
Total member’s equity	3,722			3,927
Total Liabilities and Member’s Equity	$	4,196		$	4,478

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements

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GENON MID-ATLANTIC, LLC AND SUBSIDIARIES
(Wholly-Owned Indirect Subsidiary of GenOn Energy, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended September 30,
	2012			2011
	(in millions)
Cash Flows from Operating Activities:
Net loss	$	(15	)	$	(45	)
Adjustments to reconcile net loss and changes in operating assets and liabilities to net cash provided by operating activities:
Depreciation and amortization	89			89
Impairment losses	—			94
Gain on sales of assets, net	(1		)	—
Unrealized losses	162			63
Excess materials and supplies inventory reserve	4			—
Lower of cost or market inventory adjustments	45			1
Reversal of Potomac River settlement obligation	(31		)	—
Large scale remediation and settlement costs	(3		)	30
Changes in operating assets and liabilities	31			14
Total adjustments	296			291
Net cash provided by operating activities	281			246
Cash Flows from Investing Activities:
Capital expenditures	(151		)	(126		)
Proceeds from the sales of assets	—			1
Restricted funds on deposit, net	166			(166		)
Net cash provided by (used in) investing activities	15			(291		)
Cash Flows from Financing Activities:
Repayment of long-term debt	(3		)	(3		)
Distributions to member	(190		)	(100		)
Capital contributions	—			30
Net cash used in financing activities	(193		)	(73		)
Net Increase (Decrease) in Cash and Cash Equivalents	103			(118		)
Cash and Cash Equivalents, beginning of period	68			202
Cash and Cash Equivalents, end of period	$	171		$	84

Supplemental Disclosures:
Cash refunds received for income taxes	$	—		$	1

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements

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GENON AMERICAS GENERATION, LLC AND SUBSIDIARIES
GENON MID-ATLANTIC, LLC AND SUBSIDIARIES

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Description of Business and Accounting and Reporting Policies

Background

GenOn Americas Generation is a wholesale generator with 9,247 MW of net electric generating capacity located, in many cases, near major metropolitan load centers in the Eastern PJM and Northeast regions and northern California. GenOn Americas Generation also operates integrated asset management and proprietary trading operations. See note 2 for a discussion of one generating facility that we retired in 2012 and one that we expect to retire in 2013.

GenOn Mid Atlantic operates and owns or leases 4,727 MW of net electric generating capacity in the Washington, D.C. area. GenOn Mid-Atlantic’s electric generating capacity is part of the 9,247 MW of net electric generating capacity of GenOn Americas Generation. GenOn Mid-Atlantic’s generating facilities serve the Eastern PJM markets. The PJM ISO operates the largest centrally dispatched control area in the United States.

We are Delaware limited liability companies and indirect wholly-owned subsidiaries of GenOn. GenOn Mid-Atlantic is a wholly-owned subsidiary of GenOn North America and an indirect wholly-owned subsidiary of GenOn Americas Generation.

We have a number of service arrangements for labor and administrative services with GenOn Energy Services. GenOn Energy Management provides services to certain operating subsidiaries of GenOn Americas, outside of GenOn Americas Generation, which include the bidding and dispatch of the generating units, fuel procurement and the execution of contracts, including economic hedges, to reduce price risk. See note 5.

Proposed Merger with NRG

On July 20, 2012, GenOn entered into the NRG Merger Agreement with NRG Energy, Inc. and a direct wholly-owned subsidiary of NRG. Upon the terms and subject to the conditions set forth in the NRG Merger Agreement, which has been approved by the boards of directors of GenOn and NRG, a wholly-owned subsidiary of NRG will merge with and into GenOn, with GenOn continuing as the surviving corporation and a wholly owned subsidiary of NRG.

The NRG Merger is intended to qualify as a tax-free reorganization under the IRC, as amended, so that none of GenOn, NRG or any of GenOn’s stockholders generally will recognize any gain or loss in the transaction, except with respect to cash received in lieu of fractional shares of NRG common stock.

Completion of the NRG Merger is contingent upon, among other things, (a) approvals by NRG stockholders of the issuance of NRG common stock in the NRG Merger and the approval and adoption of the amendment to NRG’s certificate of incorporation to allow the size of NRG’s board of directors to be increased to 16 in connection with the closing of the NRG Merger, at a meeting to be held on November 9, 2012, (b) adoption of the NRG Merger Agreement by GenOn’s stockholders, at a meeting to be held on November 9, 2012, (c) effectiveness of an NRG registration statement on Form S-4, which occurred on October 5, 2012, and approval of the New York Stock Exchange listing for the NRG common stock to be issued in the NRG Merger, (d) expiration or termination of the applicable Hart-Scott-Rodino Act waiting period, which occurred on September 21, 2012 and (e) receipt of all required regulatory approvals, including approvals from the Public Utility Commission of Texas, which occurred on October 25, 2012, the FERC and the New York Public Service Commission.

GenOn and NRG are also subject to restrictions on their respective ability to solicit alternative acquisition proposals and to provide information to, and engage in discussion with, third parties, except under limited circumstances to permit GenOn’s or NRG’s board of directors to comply with their respective fiduciary duties. The

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NRG Merger Agreement contains termination rights for both GenOn and NRG and further provides that, upon termination of the NRG Merger Agreement under specified circumstances, NRG may be required to pay a termination fee of $120 million to GenOn and GenOn may be required to pay NRG a termination fee of $60 million.

We anticipate completing the NRG Merger by the first quarter of 2013. Prior to the completion of the NRG Merger, we and NRG will continue to operate as independent companies. Except for specific references to the pending NRG Merger, the disclosures contained in this report on Form 10-Q relate solely to us. Information concerning the proposed NRG Merger is included in a joint proxy statement/prospectus contained in the registration statement on Form S-4, which NRG filed with the Securities and Exchange Commission in connection with the NRG Merger on October 5, 2012.

Basis of Presentation

The consolidated interim financial statements and notes (interim financial statements) are unaudited, omit certain disclosures and should be read in conjunction with our audited consolidated financial statements and notes in our 2011 Annual Report on Form 10-K. These interim financial statements have been prepared in accordance with GAAP from records maintained by us. All significant intercompany accounts and transactions have been eliminated in consolidation. The interim financial statements reflect all normal recurring adjustments necessary, in management’s opinion, to present fairly our financial position and results of operations for the reported periods. Amounts reported for interim periods may not be indicative of a full year period because of seasonal fluctuations in demand for electricity and energy services, changes in commodity prices, and changes in regulations, timing of maintenance and other expenditures, dispositions, changes in interest expense and other factors. Certain prior period amounts have been reclassified to conform to the current period financial statement presentation.

At September 30, 2012 and December 31, 2011, substantially all of our subsidiaries are wholly-owned and located in the United States. We do not consolidate two power generating facilities, which are under operating leases.

The preparation of interim financial statements in conformity with GAAP requires management to make various estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the interim financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Our significant estimates include:

· estimating the fair value of certain derivative contracts;

· estimating the inventory reserve;

· estimating the useful lives of long-lived assets;

· estimating future costs and the valuation of asset retirement obligations;

· estimating future cash flows in determining impairments of long-lived assets and definite-lived intangible assets; and

· estimating losses to be recorded for contingent liabilities.

We evaluate events that occur after the balance sheet date but before the financial statements are issued for potential recognition or disclosure. Based on the evaluation, we determined that there were no material subsequent events for recognition or disclosure other than those disclosed herein.

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Funds on Deposit

Funds on deposit are included in current and noncurrent assets in the consolidated balance sheets. Funds on deposit include the following:

GenOn Americas Generation

	September 30, 2012		December 31, 2011
	(in millions)

Cash collateral posted – energy trading and marketing	$	90	$	118
Cash collateral posted – other operating activities(1)	59		38
GenOn Mid-Atlantic restricted cash(2)	—		166
Total current and noncurrent funds on deposit	149		322
Less: Current funds on deposit	142		316
Total noncurrent funds on deposit	$	7	$	6

(1) Includes $32 million related to the Potomac River obligation under the 2008 agreement with the City of Alexandria, which were returned to us in October 2012. See note 2.

(2) Represents cash reserved in respect of interlocutory liens related to the scrubber contract litigation, which was settled in June 2012. See note 8.

GenOn Mid-Atlantic

	September 30, 2012		December 31, 2011
	(in millions)

Cash collateral posted(1)	$	32	$	32
GenOn Mid-Atlantic restricted cash(2)	—		166
Total current and noncurrent funds on deposit	32		198
Less: Current funds on deposit	32		198
Total noncurrent funds on deposit	$	—	$	—

(1) Represents amount related to the Potomac River obligation under the 2008 agreement with the City of Alexandria, which were returned to us in October 2012. See note 2.

(2) Represents cash reserved in respect of interlocutory liens related to the scrubber contract litigation, which was settled in June 2012. See note 8.

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Inventories

Inventories were comprised of the following:

GenOn Americas Generation

	September 30, 2012		December 31, 2011
	(in millions)
Fuel inventory:
Coal	$	67	$	92
Fuel oil	61		68
Natural gas	—		1
Other	1		3
Materials and supplies(1)	70		74
Purchased emissions allowances	35		19
Total inventories	$	234	$	257

(1) Amount is net of an inventory reserve of $6 million and $0 at September 30, 2012 and December 31, 2011, respectively. See note 2.

GenOn Mid-Atlantic

	September 30, 2012		December 31, 2011
	(in millions)
Fuel inventory:
Coal	$	67	$	92
Fuel oil	18		20
Other	1		3
Materials and supplies(1)	49		52
Total inventories	$	135	$	167

(1) Amount is net of an inventory reserve of $4 million and $0 at September 30, 2012 and December 31, 2011, respectively. See note 2.

During the three months ended September 30, 2012 and 2011, GenOn Americas Generation recorded $11 million and $0, respectively, and during the nine months ended September 30, 2012 and 2011, GenOn Americas Generation recorded $45 million and $1 million, respectively, for lower of average cost or market valuation adjustments in cost of fuel, electricity and other products.

During the three months ended September 30, 2012 and 2011, GenOn Mid-Atlantic recorded $11 million and $0, respectively, and during the nine months ended September 30, 2012 and 2011, GenOn Mid-Atlantic recorded $45 million and $1 million, respectively, for lower of average cost or market valuation adjustments in cost of fuel, electricity and other products.

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Capitalization of Interest Cost (GenOn Americas Generation)

GenOn Americas Generation incurred the following interest costs:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(in millions)

Total interest costs	$	19		$	20		$	57		$	72
Capitalized and included in property, plant and equipment, net	(1		)	(1		)	(3		)	(2		)
Interest expense	$	18		$	19		$	54		$	70

The amounts of capitalized interest above include interest accrued. During the three months ended September 30, 2012 and 2011, no cash was paid for interest. During the nine months ended September 30, 2012 and 2011, cash paid for interest was $37 million and $60 million, respectively, of which $2 million and $1 million, respectively were capitalized.

Guarantees and Indemnifications (GenOn Americas Generation)

GenOn generally conducts its business through various holding companies, including GenOn Americas Generation, and various operating subsidiaries, which enter into contracts as part of their business activities. In certain instances, the contractual obligations of such subsidiaries are guaranteed by, or otherwise supported by, GenOn or another of its subsidiaries, including by letters of credit issued under the GenOn credit facilities. At September 30, 2012, $134 million of letters of credit was posted by GenOn for the benefit of GenOn Americas Generation.

In addition, GenOn Americas Generation and its subsidiaries enter into various contracts that include indemnification and guarantee provisions. Examples of these contracts include financing and lease arrangements, purchase and sale agreements, agreements to purchase or sell commodities, construction agreements and agreements with vendors. Although the primary obligation of GenOn Americas Generation or a subsidiary under such contracts is to pay money or render performance, such contracts may include obligations to indemnify the counterparty for damages arising from the breach thereof and, in certain instances, other existing or potential liabilities. In many cases GenOn Americas Generation’s maximum potential liability cannot be estimated because some of the underlying agreements contain no limits on potential liability.

Recently Adopted Accounting Guidance

Fair Value Measurement and Disclosure. We adopted FASB accounting guidance for the first quarter of 2012 that requires disclosure of the following:

· quantitative information about the unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy;

· for those fair value measurements categorized within Level 3 of the fair value hierarchy, both the valuation processes used and the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs, if any; and

· the categorization by level of the fair value hierarchy for items that are not measured at fair value in the statement of financial position but for which the fair value is required to be disclosed.

See note 3 for these additional disclosures.

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New Accounting Guidance Not Yet Adopted at September 30, 2012

Balance Sheet Offsetting. In December 2011, the FASB issued updated guidance to provide enhanced disclosures such that users of the financial statements will be able to better evaluate the effect or potential effect of netting arrangements in the balance sheet. The guidance requires improved information about financial instruments and derivative instruments that are either offset according to specific guidance or subject to an enforceable master netting agreement or similar arrangement. The disclosures will provide both net and gross information for these assets and liabilities. Although we do not currently elect to offset assets and liabilities within the scope of the guidance, expanded disclosures will be required starting for the first quarter of 2013, along with retrospective presentation of prior periods.

2. Retirements of Generating Facilities

Potomac River Generating Facility

During 2011, GenOn Mid-Atlantic entered into an agreement with the City of Alexandria, Virginia to remove permanently from service the 482 MW Potomac River generating facility. The agreement, which amends our Project Schedule and Agreement, dated July 2008 with the City of Alexandria, provides for the retirement of the Potomac River generating facility on October 1, 2012, subject to the determination of PJM that the retirement of the facility will not affect reliability and the consent of PEPCO. PJM made the necessary determination and in June 2012 PEPCO gave its consent. As a result, the Potomac River generating facility was retired in October 2012. Upon retirement of the Potomac River generating facility, all funds in the escrow account ($32 million) established under the July 2008 agreement were distributed to us in October 2012. We therefore reversed $31 million and $1 million of the previously recorded obligation under the 2008 agreement with the City of Alexandria as a reduction in operations and maintenance expense during the second and fourth quarters of 2012, respectively.

Contra Costa Generating Facility

A subsidiary of GenOn Americas Generation entered into an agreement with PG&E in September 2009 for 674 MW at Contra Costa for the period from November 2011 through April 2013. At the end of the agreement, and subject to any necessary regulatory approvals, we have agreed to retire the Contra Costa facility.

Expenses, Property, Plant and Equipment, and Materials and Supplies Inventory Related to Retirements

In connection with our decision to retire the generating facilities, we evaluated our materials and supplies inventory and determined that we have excess inventory. GenOn Americas Generation and GenOn Mid-Atlantic established a reserve of $6 million and $4 million, respectively, recorded to operations and maintenance expense during the first quarter of 2012 relating to excess inventory. We will continue to monitor the inventory balances and could make changes to the reserve in the future. At September 30, 2012, the aggregate carrying value of property, plant and equipment, net and materials and supplies inventory, net for the Potomac River and Contra Costa generating facilities was $4 million and $1 million, respectively, for GenOn Americas Generation and $0 and $1 million, respectively, for GenOn Mid-Atlantic. In addition to the excess materials and supplies inventory reserve recorded in the first quarter, GenOn Americas Generation and GenOn Mid-Atlantic incurred $4 million during the three months ended September 30, 2012 for costs to retire the Potomac River and Contra Costa generating facilities, which is included in operations and maintenance expense. We expect to incur additional costs in the future in connection with the deactivations, such as severance and other plant shutdown costs.

If market conditions and/or environmental and regulatory factors or assumptions change in the future, forecasted returns on investments necessary to comply with environmental regulations could change resulting in possible incremental investments if returns improve or deactivation of additional generating units or facilities if returns deteriorate. Such deactivations could result in additional charges, including impairments, severance costs and other plant shutdown costs.

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3. Financial Instruments

Derivatives and Hedging Activities

In connection with the business of generating electricity, we are exposed to energy commodity price risk associated with the acquisition of fuel and emissions allowances needed to generate electricity, the price of electricity produced and sold, and the fair value of fuel inventories. Through our asset management activities, we enter into a variety of exchange-traded and OTC energy and energy-related derivative financial instruments, such as forward contracts, futures contracts, option contracts and financial swap agreements to manage exposure to commodity price risks. These contracts have varying terms and durations, which range from a few days to years, depending on the instrument. GenOn Americas Generation’s proprietary trading activities also utilize similar derivative contracts in markets where it has a physical presence to attempt to generate incremental gross margin. GenOn Americas Generation’s fuel oil management activities use derivative financial instruments to hedge economically the fair value of physical fuel oil inventories, optimize the approximately two million barrels of storage capacity that it owns, and attempt to profit from market opportunities related to timing and/or differences in the pricing of various products. The open positions in GenOn Americas Generation’s trading activities comprising proprietary trading and fuel oil management activities expose it to risks associated with changes in energy commodity prices.

Derivative financial instruments are recorded in the consolidated balance sheets at fair value, except for derivative contracts that qualify for and for which we have elected the normal purchase or normal sale exceptions, which are not reflected in the consolidated balance sheet or results of operations prior to accrual of the settlement. We present our derivative contract assets and liabilities on a gross basis (regardless of master netting arrangements with the same counterparty). Cash collateral amounts are also presented on a gross basis.

During the second quarter of 2012, we could no longer assert that physical delivery was probable for the remaining coal agreements for which we had elected the normal purchase exception. As such, the normal purchase exception was removed, and we are required to apply fair value accounting to these contracts in the current period and prospectively.

If certain criteria are met, a derivative financial instrument may be designated as a fair value hedge or cash flow hedge. We did not have any derivative financial instruments designated as fair value or cash flow hedges for accounting purposes during the nine months ended September 30, 2012 or 2011.

For our derivative financial instruments, changes in such instruments’ fair values are recognized currently in earnings. Our derivative financial instruments are categorized based on the business objective the instrument is expected to achieve: asset management or trading, which includes GenOn Americas Generation’s proprietary trading and fuel oil management. For asset management activities, changes in fair value and settlement of derivative financial instruments used to hedge electricity economically are reflected in operating revenue and changes in fair value and settlement of derivative financial instruments used to hedge fuel economically are reflected in cost of fuel, electricity and other products in the consolidated statements of operations. Changes in the fair value and settlements of derivative financial instruments for GenOn Americas Generation’s proprietary trading and fuel oil management activities are recorded on a net basis as operating revenue in the consolidated statements of operations.

We also consider risks associated with interest rates, counterparty credit and our own non-performance risk when valuing derivative financial instruments. The nominal value of the derivative contract assets and liabilities is discounted to account for time value using a LIBOR forward interest rate curve based on the tenor of the transactions being valued.

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GenOn Americas Generation

The following table presents the fair value of GenOn Americas Generation’s derivative financial instruments (including amounts with affiliates):

											Net Derivative
	Derivative Contract Assets				Derivative Contract Liabilities						Contract
	Current		Long-Term		Current			Long-Term			Assets (Liabilities)
	(in millions)
September 30, 2012
Commodity Contracts:
Asset management	$	522	$	623	$	(304	)	$	(197	)	$	644
Trading activities	174		9		(170		)	(12		)	1
Total derivatives	$	696	$	632	$	(474	)	$	(209	)	$	645
December 31, 2011
Commodity Contracts:
Asset management	$	562	$	757	$	(314	)	$	(186	)	$	819
Trading activities	459		3		(462		)	(3		)	(3		)
Total derivatives	$	1,021	$	760	$	(776	)	$	(189	)	$	816

The following table presents the net gains (losses) for derivative financial instruments (including amounts with affiliates) recognized in income in the consolidated statements of operations:

	Three Months Ended September 30,
	2012						2011
Derivatives Not Designated as Hedging Instruments	Operating Revenues			Cost of Fuel, Electricity and Other Products			Operating Revenues			Cost of Fuel, Electricity and Other Products
	(in millions)
Asset Management Commodity Contracts:
Unrealized	$	(164	)	$	50		$	(1	)	$	(10	)
Realized(1)(2)	82			(13		)	57			(15		)
Total asset management	$	(82	)	$	37		$	56		$	(25	)

Trading Commodity Contracts:
Unrealized	$	(3	)	$	—		$	11		$	—
Realized(1)(2)	8			—			(13		)	—
Total trading	$	5		$	—		$	(2	)	$	—

Total derivatives	$	(77	)	$	37		$	54		$	(25	)

(1) Represents the total cash settlements of derivative financial instruments during each reporting period (composed of the sum of the quarterly settlements) that existed at the beginning of each respective period.

(2) Excludes settlement value of fuel contracts classified as inventory.

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	Nine Months Ended September 30,
	2012						2011
Derivatives Not Designated as Hedging Instruments	Operating Revenues			Cost of Fuel, Electricity and Other Products			Operating Revenues			Cost of Fuel, Electricity and Other Products
	(in millions)
Asset Management Commodity Contracts:
Unrealized	$	(161	)	$	(15	)	$	(88	)	$	19
Realized(1)(2)	338			(41		)	188			(39		)
Total asset management	$	177		$	(56	)	$	100		$	(20	)

Trading Commodity Contracts:
Unrealized	$	1		$	—		$	(1	)	$	—
Realized(1)(2)	3			—			(8		)	—
Total trading	$	4		$	—		$	(9	)	$	—

Total derivatives	$	181		$	(56	)	$	91		$	(20	)

(2) Excludes settlement value of fuel contracts classified as inventory.

The following tables present the notional quantity on long (short) positions for derivative financial instruments:

	Notional Volumes at September 30, 2012
Derivative Instruments	Derivative Contract Assets		Derivative Contract Liabilities		Net Derivative Contracts
	(in millions)
Commodity Contracts (in equivalent MWh):
Power(1)	(1	)	(38	)	(39	)
Natural gas	1		(1	)	—
Coal	(1	)	15		14

(1) Includes MWh equivalent of natural gas transactions used to hedge power economically.

	Notional Volumes at December 31, 2011
Derivative Instruments	Derivative Contract Assets		Derivative Contract Liabilities	Net Derivative Contracts
	(in millions)
Commodity Contracts (in equivalent MWh):
Power(1)	(97	)	61	(36	)
Natural gas	(9	)	10	1
Coal	3		8	11

(1) Includes MWh equivalent of natural gas transactions used to hedge power economically.

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GenOn Mid-Atlantic

The following table presents the fair value of GenOn Mid-Atlantic’s derivative financial instruments:

											Net Derivative
											Contract
	Derivative Contract Assets				Derivative Contract Liabilities						Assets
	Current		Long-Term		Current			Long-Term			(Liabilities)
	(in millions)
September 30, 2012
Commodity Contracts:
Asset management	$	248	$	403	$	(7	)	$	(4	)	$	640
Asset management—affiliate	96		101		(126		)	(78		)	(7		)
Total derivatives	$	344	$	504	$	(133	)	$	(82	)	$	633
December 31, 2011
Commodity Contracts:
Asset management	$	208	$	526	$	—		$	—		$	734
Asset management—affiliate	191		105		(168		)	(68		)	60
Total derivatives	$	399	$	631	$	(168	)	$	(68	)	$	794

The following table presents the net gains (losses) for derivative financial instruments recognized in income in the consolidated statements of operations:

	Three Months Ended September 30,
	2012						2011
Derivatives Not Designated as Hedging Instruments	Operating Revenues			Cost of Fuel, Electricity and Other Products			Operating Revenues			Cost of Fuel, Electricity and Other Products
	(in millions)
Asset Management Commodity Contracts:
Unrealized	$	(137	)	$	46		$	(3	)	$	(9	)
Realized(1)(2)	82			(1		)	54			—
Total asset management	$	(55	)	$	45		$	51		$	(9	)

(2) Excludes settlement value of fuel contracts classified as inventory.

	Nine Months Ended September 30,
	2012						2011
Derivatives Not Designated as Hedging Instruments	Operating Revenues			Cost of Fuel, Electricity and Other Products			Operating Revenues			Cost of Fuel, Electricity and Other Products
	(in millions)
Asset Management Commodity Contracts:
Unrealized	$	(136	)	$	(26	)	$	(81	)	$	18
Realized(1)(2)	326			(4		)	176			—
Total asset management	$	190		$	(30	)	$	95		$	18

(2) Excludes settlement value of fuel contracts classified as inventory.

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The following tables present the notional quantity on long (short) positions for derivative financial instruments:

	Notional Volumes at September 30, 2012
Derivative Instruments	Derivative Contract Assets		Derivative Contract Liabilities		Net Derivative Contracts
	(in millions)
Commodity Contracts (in equivalent MWh):
Power(1)	(30	)	(9	)	(39	)
Coal	(1	)	15		14

(1) Includes MWh equivalent of natural gas transactions used to hedge power economically.

	Notional Volumes at December 31, 2011
Derivative Instruments	Derivative Contract Assets		Derivative Contract Liabilities	Net Derivative Contracts
	(in millions)
Commodity Contracts (in equivalent MWh):
Power(1)	(56	)	19	(37	)
Coal	3		8	11

(1) Includes MWh equivalent of natural gas transactions used to hedge power economically.

Fair Value Measurements

Fair Value Hierarchy and Valuation Techniques. We apply recurring fair value measurements to our financial assets and liabilities. In estimating fair value, we generally use a market approach and incorporate assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation techniques. The fair value measurement inputs we use vary from readily observable prices for exchange-traded instruments to price curves that cannot be validated through external pricing sources. Based on the observability of the inputs used in the valuation techniques, the financial assets and liabilities carried at fair value in the financial statements are classified as follows:

Level 1: Represents unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date. This category primarily includes natural gas and crude oil futures traded on the NYMEX and swaps cleared against NYMEX prices. Interest bearing funds are also valued using Level 1 inputs.

Level 2: Represents quoted market prices for similar assets or liabilities in active markets, quoted market prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data. This category primarily includes non-exchange-traded derivatives such as OTC forwards, swaps and options, and certain energy derivative instruments that are cleared and settled through exchanges.

Level 3: Represents commodity derivative instruments whose fair value is estimated based on internally developed models and methodologies utilizing significant inputs that are generally less readily observable from market sources (such as implied volatilities and correlations). The OTC, complex or structured derivative instruments that are transacted in less liquid markets with limited pricing information are included in Level 3. Examples are coal contracts, power transmission congestion products, less liquid power and natural gas contracts, and options valued using internally developed inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls must be determined based on the lowest level input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset or liability.

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A significant amount of the fair value of our derivative contract assets and liabilities is based on observable quoted prices from exchanges and indicative quoted prices from independent brokers in active markets that regularly facilitate our transactions. An active market is considered to have transactions with sufficient frequency and volume to provide pricing information on an ongoing basis. We think that these prices represent the best available information for valuation purposes. In determining the fair value of derivative contract assets and liabilities, we use third-party market pricing where available. For transactions classified in Level 1 of the fair value hierarchy, we use the unadjusted published settled prices on the valuation date. For transactions classified in Level 2 of the fair value hierarchy, we value these transactions using indicative quoted prices from independent brokers or other widely-accepted valuation methodologies. Transactions are classified in Level 2 if substantially all (greater than 90%) of the fair value can be corroborated using observable market inputs such as transactable broker quotes. In accordance with the exit price objective under the fair value measurements accounting guidance, the fair value of our derivative contract assets and liabilities is determined based on the net underlying position of the recorded derivative contract assets and liabilities using bid prices for assets and ask prices for liabilities. The quotes we obtain from brokers are non-binding in nature, but are from brokers that typically transact in the market being quoted and are based on their knowledge of market transactions on the valuation date. We typically obtain multiple broker quotes as of the valuation date that extend for the tenor of the underlying contracts for each delivery location. The number of quotes that we can obtain depends on the relative liquidity of the delivery location on the valuation date. If multiple broker quotes are received for a contract, we use an average of the quoted bid or ask prices. If only one broker quote is received for a delivery location and it cannot be validated through other external sources, we will assign the quote to a lower level within the fair value hierarchy. In some instances, we may combine broker quotes for a liquid delivery hub with broker quotes for the price spread between the liquid delivery hub and the delivery location under the contract. We also may apply interpolation techniques to value monthly strips if broker quotes are only available on a seasonal or annual basis. We perform validation procedures on the broker quotes at least monthly. The validation procedures include reviewing the quotes for accuracy and comparing them to our internal price curves. In certain instances, we may exclude from consideration a broker quote if it is a clear outlier and other quotes are obtained. At September 30, 2012, we obtained broker quotes for 100% of our delivery locations classified in Level 2 of the fair value hierarchy.

Inactive markets are considered to be those markets with few transactions, noncurrent pricing or prices that vary over time or among market makers. Our transactions in Level 3 of the fair value hierarchy may involve transactions whereby observable market data, such as broker quotes, are not available for substantially all of the tenor of the contract or we are only able to obtain indicative broker quotes that cannot be corroborated by observable market data. In such cases, we may apply valuation techniques such as extrapolation and other quantitative methods to determine fair value. Our techniques for fair value estimation include assumptions for market prices, including market price volatility and the volatility of the spread between multiple market prices. Proprietary models may also be used to estimate the fair value of derivative contract assets and liabilities that may be structured or otherwise tailored. The degree of estimation increases for longer duration contracts, contracts with multiple pricing features, option contracts and off-hub delivery points. At September 30, 2012, GenOn Americas Generation’s assets and liabilities classified as Level 3 in the fair value hierarchy represented 3% of its total derivative contract assets and 19% of its total derivative contract liabilities. At September 30, 2012, GenOn Mid-Atlantic’s assets and liabilities classified as Level 3 in the fair value hierarchy represented 1% of its total derivative contract assets and 45% of its total derivative contract liabilities.

The fair value of our derivative contract assets and liabilities is also affected by assumptions as to time value, credit risk and non-performance risk. The nominal value of derivatives is discounted to account for time value using a LIBOR forward interest rate curve based on the tenor of the transaction. Derivative contract assets are reduced to reflect the estimated default risk of counterparties on their contractual obligations. The counterparty default risk for our overall net position is measured based on published spreads on credit default swaps for counterparties, where available, or proxies based upon published spreads, applied to our current exposure and potential loss exposure from the financial commitments in our risk management portfolio. The fair value of derivative contract liabilities is reduced to reflect the estimated risk of default on contractual obligations to counterparties and is measured based on published default rates of our debt, where available, or proxies based upon published spreads. Credit risk and non-performance risk are calculated with consideration of our master netting agreements with counterparties and our exposure is reduced by cash collateral posted to us against these obligations.

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Information about Sensitivity to Changes in Significant Unobservable Inputs. The significant unobservable inputs used in the fair value measure of our commodity instruments categorized within Level 3 of the fair value hierarchy are estimates of future market volatility, estimates of forward congestion power price spreads and estimates of counterparty credit risk and our own non-performance risk. These assumptions are generally independent of each other. Volatility curves and power prices spreads are generally based on observable markets where available, or derived from historical prices and forward market prices from similar observable markets when not available. Increases in the price or volatility of the spread on a long position would result in a higher fair value measurement. Increases in the price or volatility of the spread on a short position would result in a lower fair value measurement. A change in the assumption used for the probability of default is accompanied by a directionally similar change in the adjustment to reflect the estimated default risk of counterparties on their contractual obligations, or the estimated risk of default on our own contractual obligations to counterparties.

Risk Management. The Risk and Finance Oversight Committee of GenOn’s Board of Directors is responsible for oversight of the risk management of our commercial activities and enterprise risk management. In order to ensure proper daily oversight of our commercial risk controls, the Risk and Finance Oversight Committee has established the ROC with membership determined by GenOn’s Chief Executive Officer. The ROC is responsible for ensuring that the necessary policies, procedures and systems are in place to measure, monitor and report on the risks associated with our commercial activities. The ROC is also responsible for safeguarding proprietary models against the negative impact of inadequate model control by providing oversight and control to model development, back-testing and verification, automation, security and revision control. The ROC must approve new valuation models or fundamental modifications to existing models. Model forecasts are back-tested annually and the results reviewed with the ROC.

Comprehensive, accurate and timely reporting and monitoring is essential to effectively manage market, credit and operational risks and to protect against large unanticipated losses. Management has established reporting and monitoring functions, which include daily and weekly reporting, to inform the ROC and GenOn’s Chief Risk Officer of its activities. The chair of the ROC reports to the Risk and Finance Oversight Committee on a quarterly basis, or more frequently, if events and circumstances dictate.

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GenOn Americas Generation

Fair Value of Derivative Instruments and Certain Other Assets. The fair value measurements of GenOn Americas Generation’s financial assets and liabilities (including amounts with affiliates) by class are as follows:

	September 30, 2012
	Level 1(1)		Level 2(1)(2)		Level 3			Total Fair Value
	(in millions)
Derivative contract assets:
Commodity Contracts
Asset Management:
Power	$	148	$	969	$	12		$	1,129
Fuel	1		1		14		(3)	16
Total Asset Management	149		970		26			1,145
Trading Activities	16		151		16			183
Total derivative contract assets	$	165	$	1,121	$	42		$	1,328

Derivative contract liabilities:
Commodity Contracts
Asset Management:
Power	$	110	$	268	$	13		$	391
Fuel	2		1		107		(3)	110
Total Asset Management	112		269		120			501
Trading Activities	18		155		9			182
Total derivative contract liabilities	$	130	$	424	$	129		$	683

Interest-bearing funds(4)	$	369	$	—	$	—		$	369

(1) Transfers between Level 1 and Level 2 are recognized as of the end of the reporting period. There were no transfers during the nine months ended September 30, 2012.

(2) Option contracts comprised 1% of GenOn Americas Generation’s net derivative contract assets.

(3) Primarily relates to coal.

(4) Represents investments in money market funds and is included in cash and cash equivalents, funds on deposit and other noncurrent assets in the consolidated balance sheet. Of interest-bearing funds, GenOn Americas Generation had $331 million included in cash and cash equivalents, $32 million included in funds on deposit and $6 million included in other noncurrent assets.

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	December 31, 2011
	Level 1(1)		Level 2(1)(2)			Level 3			Total Fair Value
	(in millions)
Derivative contract assets:
Commodity Contracts
Asset Management:
Power	$	118	$	1,169		$	17		$	1,304
Fuel	2		—			13		(3)	15
Total Asset Management	120		1,169			30			1,319
Trading Activities	124		302			36			462
Total derivative contract assets	$	244	$	1,471		$	66		$	1,781

Derivative contract liabilities:
Commodity Contracts
Asset Management:
Power	$	108	$	298		$	9		$	415
Fuel	19		(9		)	75		(3)	85
Total Asset Management	127		289			84			500
Trading Activities	142		309			14			465
Total derivative contract liabilities	$	269	$	598		$	98		$	965

Interest-bearing funds(4)	$	421	$	—		$	—		$	421

(1) Transfers between Level 1 and Level 2 are recognized as of the end of the reporting period. There were no significant transfers during 2011.

(2) Option contracts comprised 1% of GenOn Americas Generation’s net derivative contract assets.

(3) Primarily relates to coal.

(4) Represents investments in money market funds and is included in cash and cash equivalents, funds on deposit and other noncurrent assets in the consolidated balance sheet. Of interest-bearing funds, GenOn Americas Generation had $249 million included in cash and cash equivalents, $166 million included in funds on deposit and $6 million included in other noncurrent assets.

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The following is a reconciliation of changes (comprised of the sum of the quarterly changes) in fair value of net commodity derivative contract assets and liabilities (including amounts with affiliates) classified as Level 3 during the nine months ended September 30, 2012 and 2011:

	Net Derivatives Contracts (Level 3)
	Asset Management			Trading Activities			Total
	(in millions)

Balance, January 1, 2012 (net asset (liability))	$	(54	)	$	22		$	(32	)
Total gains (losses) realized/unrealized:
Included in earnings(1)	(98		)	12			(86		)
Purchases(2)	—			—			—
Issuances(2)	—			—			—
Settlements (3)	58			(27		)	31
Transfers into Level 3(4)	—			—			—
Transfers out of Level 3(4)	—			—			—
Balance, September 30, 2012 (net asset (liability))	$	(94	)	$	7		$	(87	)

Balance, January 1, 2011 (net asset (liability))	$	(68	)	$	2		$	(66	)
Total gains (losses) realized/unrealized:
Included in earnings(1)	—			9			9
Purchases(2)	—			—			—
Issuances(2)	—			—			—
Settlements(3)	11			(5		)	6
Transfers into Level 3(4)	—			—			—
Transfers out of Level 3(4)	12			—			12
Balance, September 30, 2011 (net asset (liability))	$	(45	)	$	6		$	(39	)

(1) Represents the fair value, as of the end of each reporting period, of Level 3 contracts entered into during each reporting period and the gains and losses attributable to Level 3 contracts that existed as of the beginning of each reporting period and were still held at the end of each reporting period.

(2) Contracts entered into during each reporting period are reported with other changes in fair value.

(3) Represents the reversal of previously recognized unrealized gains and losses from settlement of contracts during each reporting period.

(4) Denotes the total contracts that existed at the beginning of each reporting period and were still held at the end of each reporting period that were either previously categorized as a higher level for which the inputs to the model became unobservable or assets and liabilities that were previously classified as Level 3 for which the lowest significant input became observable during each reporting period. Amounts reflect fair value as of the end of each reporting period.

The following tables present the amounts included in income related to derivative contract assets and liabilities (including amounts with affiliates) classified as Level 3:

	Three Months Ended September 30,
	2012							2011
	Operating Revenues			Cost of Fuel, Electricity and Other Products		Total		Operating Revenues			Cost of Fuel, Electricity and Other Products			Total
	(in millions)

Gains (losses) included in income	$	(20	)	$	46	$	26	$	(3	)	$	(7	)	$	(10	)
Gains (losses) included in income (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at September 30	$	(18	)	$	45	$	27	$	(2	)	$	(6	)	$	(8	)

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	Nine Months Ended September 30,
	2012									2011
	Operating Revenues			Cost of Fuel, Electricity and Other Products			Total			Operating Revenues		Cost of Fuel, Electricity and Other Products		Total
	(in millions)

Gains (losses) included in income	$	(24	)	$	(31	)	$	(55	)	$	7	$	20	$	27
Gains (losses) included in income (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at September 30	$	(21	)	$	(72	)	$	(93	)	$	8	$	22	$	30

Information about Sensitivity to Changes in Significant Unobservable Inputs. The following table presents the range of sensitivity of unobservable inputs used in fair value measurements categorized within Level 3 of the fair value hierarchy:

(1) Excludes immaterial unobservable inputs related to power transmission congestion products, power swaps, physical gas premiums on transactions and credit valuation adjustments related to counterparty credit risk.

(2) Represents the range of the credit default swap spread curves used in the valuation analysis that we think market participants might use when pricing the contracts.

At September 30, 2012, net fair value asset of $6 million for power transactions and net fair value liability of $92 million for fuel transactions classified as Level 3 were priced based on unadjusted indicative broker quotes that cannot be corroborated by observable market data. Quantitative information is excluded for these fair value measurements.

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GenOn Mid-Atlantic

Fair Value of Derivative Instruments and Certain Other Assets. The fair value measurements of GenOn Mid-Atlantic’s financial assets and liabilities (including amounts with affiliates) by class are as follows:

	September 30, 2012
	Level 1(1)		Level 2(1) (2)		Level 3			Total Fair Value
	(in millions)
Derivative contract assets:
Commodity Contracts
Asset Management:
Power	$	58	$	786	$	—		$	844
Fuel	—		—		4		(3)	4
Total derivative contract assets	$	58	$	786	$	4		$	848

Derivative contract liabilities:
Commodity Contracts
Asset Management:
Power	$	20	$	99	$	—		$	119
Fuel	—		—		96		(3)	96
Total derivative contract liabilities	$	20	$	99	$	96		$	215

Interest-bearing funds(4)	$	203	$	—	$	—		$	203

(1) Transfers between Level 1 and Level 2 are recognized as of the end of the reporting period. There were no transfers during the nine months ended September 30, 2012.

(2) Option contracts comprised less than 1% of GenOn Mid-Atlantic’s net derivative contract assets.

(3) Primarily relates to coal.

(4) Represents investments in money market funds and is included in cash and cash equivalents and funds on deposit in the consolidated balance sheet. Of interest-bearing funds, GenOn Mid-Atlantic had $171 million included in cash and cash equivalents and $32 million included in funds on deposit.

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	December 31, 2011
	Level 1(1)		Level 2(1) (2)		Level 3			Total Fair Value
	(in millions)
Derivative contract assets:
Commodity Contracts
Asset Management:
Power	$	39	$	982	$	—		$	1,021
Fuel	—		—		9		(3)	9
Total derivative contract assets	$	39	$	982	$	9		$	1,030

Derivative contract liabilities:
Commodity Contracts
Asset Management:
Power	$	29	$	131	$	1		$	161
Fuel	3		—		72		(3)	75
Total derivative contract liabilities	$	32	$	131	$	73		$	236

Interest-bearing funds(4)	$	230	$	—	$	—		$	230

(1) Transfers between Level 1 and Level 2 are recognized as of the end of the reporting period. There were no significant transfers during 2011.

(2) Option contracts comprised less than 1% of GenOn Mid-Atlantic’s net derivative contract assets.

(3) Primarily relates to coal.

(4) Represents investments in money market funds and is included in cash and cash equivalents and funds on deposit in the consolidated balance sheet. Of interest-bearing funds, GenOn Mid-Atlantic had $64 million included in cash and cash equivalents and $166 million included in funds on deposit.

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	Asset Management
	(in millions)

Balance, January 1, 2012 (net asset (liability))	$	(64	)
Total gains (losses) realized/unrealized:
Included in earnings(1)	(99		)
Purchases(2)	—
Issuances(2)	—
Settlements(3)	71
Transfers into Level 3(4)	—
Transfers out of Level 3(4)	—
Balance, September 30, 2012 (net asset (liability))	$	(92	)
Balance, January 1, 2011 (net asset (liability))	$	(69	)
Total gains (losses) realized/unrealized:
Included in earnings(1)	(5		)
Purchases(2)	—
Issuances(2)	—
Settlements(3)	13
Transfers into Level 3(4)	—
Transfers out of Level 3(4)	12
Balance, September 30, 2011 (net asset (liability))	$	(49	)

(2) Contracts entered into during each reporting period are reported with other changes in fair value.

(3) Represents the reversal of previously recognized unrealized gains and losses from settlement of contracts during each reporting period.

The following tables present the amounts included in income related to derivative contract assets and liabilities (including amounts with affiliates) classified as Level 3:

	Three Months Ended September 30,
	2012						2011
	Operating Revenues		Cost of Fuel, Electricity and Other Products		Total		Operating Revenues			Cost of Fuel, Electricity and Other Products			Total
	(in millions)

Gains (losses) included in income	$	—	$	46	$	46	$	(5	)	$	(7	)	$	(12	)
Gains (losses) included in income (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at September 30	$	—	$	45	$	45	$	(7	)	$	(7	)	$	(14	)

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	Nine Months Ended September 30,
	2012								2011
	Operating Revenues		Cost of Fuel, Electricity and Other Products			Total			Operating Revenues			Cost of Fuel, Electricity and Other Products		Total
	(in millions)

Gains (losses) included in income	$	1	$	(29	)	$	(28	)	$	—		$	20	$	20
Gains (losses) included in income (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at September 30	$	—	$	(70	)	$	(70	)	$	(2	)	$	21	$	19

(1) Excludes immaterial unobservable inputs related to power transmission congestion products and credit valuation adjustment related to counterparty credit risk.

(2) Represents the range of the credit default swap spread curves used in the valuation analysis that we think market participants might use when pricing the contracts.

At September 30, 2012, net fair value liability of $93 million for fuel transactions classified as Level 3 were priced based on unadjusted indicative broker quotes that cannot be corroborated by observable market data. Quantitative information is excluded for these fair value measurements.

Counterparty Credit Concentration Risk

We are exposed to the default risk of the counterparties with which we transact. We manage our credit risk by entering into master netting agreements and requiring most counterparties to post cash collateral or other credit enhancements based on the net exposure and the credit standing of the counterparty. We also have non-collateralized power hedges entered into by GenOn Mid-Atlantic. These transactions are senior unsecured obligations of GenOn Mid-Atlantic and the counterparties and have not required either party to post cash collateral for initial margin. Since April 2012, the counterparties, in some cases, have been required to post cash collateral to secure credit exposure above an agreed threshold as a result of changes in power or natural gas prices. At September 30, 2012 and December 31, 2011, $107 million and $4 million, respectively, of cash collateral posted to GenOn Americas Generation by counterparties under master netting agreements were included in accounts payable and accrued liabilities in GenOn Americas Generation’s consolidated balance sheets. Our credit valuation adjustment on derivative contract assets was $8

Quantitative Information about Level 3 Fair Value Measurements(1)

Net Fair Value at
September 30, 2012

Valuation
Techniques

Unobservable Input

Range (Weighted
Average)

(in millions)

Credit valuation adjustment

Internal model

Own credit risk

20% to (20)%