Stock-Based Compensation

NRG Energy, Inc. Long-Term Incentive Plan

On April 27, 2017, the NRG LTIP was amended to increase the number of shares available for issuance by 3,000,000. As of December 31, 2018 and 2017, a total of 25,000,000 shares of NRG common stock were authorized for issuance under the NRG LTIP. There were 8,564,611 and 8,724,595 shares of common stock remaining available for grants under the NRG LTIP as of December 31, 2018 and 2017, respectively. The NRG LTIP is subject to adjustments in the event of reorganization, recapitalization, stock split, reverse stock split, stock dividend, and a combination of shares, merger or similar change in NRG's structure or outstanding shares of common stock.

Upon adoption of the amended NRG LTIP effective April 27, 2017, no shares of NRG common stock remain available for future issuance under the NRG GenOn LTIP. As of December 31, 2018 and 2017, there were 520,182 and 1,369,880 shares of common stock remaining available for grants under the NRG GenOn LTIP, respectively.

Non-Qualified Stock Options

NRG recognizes compensation costs for NQSOs over the requisite service period for the entire award. The maximum contractual term is 10 years for NRG's outstanding NQSOs. No NQSOs were granted in 2018, 2017 or 2016.

The following table summarizes the Company's NQSO activity and changes during the year:



	Shares^(a)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
					(In years)	(In millions)
Outstanding at December 31, 2017	1,285,858		$	25.49	3	$	6
Expired	(36,866	)	43.64
Exercised	(969,058	)	24.93
Outstanding at December 31, 2018	279,934		25.04		2	4
Exercisable at December 31, 2018	279,934		25.04		2	4

(a) As of December 31, 2018, 26,430 NQSOs granted to employees of GenOn remain outstanding and exercisable

The following table summarizes the total intrinsic value of options exercised and the cash received from the exercises of options:



	Year Ended December 31,
	2018		2017		2016
	(In millions)
Total intrinsic value of options exercised	$	10	$	1	$	—
Cash received from options exercised	24		4		—

There were no options exercised during the year ended December 31, 2016.

Restricted Stock Units

As of December 31, 2018, RSUs granted under the Company's LTIPs typically have three-year graded vesting schedules beginning on the grant date. Fair value of the RSUs is based on the closing price of NRG common stock on the date of grant. The following table summarizes the Company's non-vested RSU awards and changes during the year:



	Units^(a)		Weighted Average Grant Date Fair Value per Unit
Non-vested at December 31, 2017	2,377,813		$	14.63
Granted	447,309		28.90
Forfeited	(315,569	)	18.93
Vested	(1,051,471	)	17.67
Non-vested at December 31, 2018	1,458,082		16.16

(a) As of December 31, 2018, 7,319 RSUs granted to GenOn employees remain outstanding

The total fair value of RSUs vested during the years ended December 31, 2018, 2017, and 2016, was $42 million, $19 million, and $11 million, respectively. The weighted average grant date fair value of RSUs granted during the years ended December 31, 2018, 2017, and 2016 was $28.90, $12.44, and $11.54, respectively.

Deferred Stock Units

DSUs represent the right of a participant to be paid one share of NRG common stock at the end of a deferral period established under the terms of the award. DSUs granted under the Company's LTIPs are fully vested at the date of issuance. Fair value of the DSUs, which is based on the closing price of NRG common stock on the date of grant, is recorded as compensation expense in the period of grant.

The following table summarizes the Company's outstanding DSU awards and changes during the year:



	Units^(a)		Weighted Average Grant Date Fair Value per Unit
Outstanding at December 31, 2017	427,148		$	21.54
Granted	61,645		33.43
Converted to Common Stock	(156,878	)	23.59
Outstanding at December 31, 2018	331,915		22.94

(a) There were no DSUs granted to GenOn employees and outstanding as of December 31, 2018 and 2017

The aggregate intrinsic values for DSUs outstanding as of December 31, 2018, 2017, and 2016 were approximately $13 million, $12 million, and $6 million, respectively. The aggregate intrinsic values for DSUs converted to common stock for the years ended December 31, 2018, 2017, and 2016 were $0 million, $4 million, and $1 million, respectively. The weighted average grant date fair value of DSUs granted during the years ended December 31, 2018, 2017, and 2016 was $33.43, $16.76, and $16.85, respectively.

Performance Stock Units

PSUs entitle the recipient to stock upon vesting. The amount of the award is subject to the Company's achievement of certain performance measures over the vesting period. As of December 31, 2018, non-vested PSUs consist of Market Stock Units, or MSUs, and Relative Performance Stock Units, or RPSUs.

Relative Performance Stock Units — RPSUs are restricted grants where the quantity of shares increases and decreases alongside the Company's Total Shareholder Return, or TSR, relative to the TSR of the Company's current proxy peer group and the total returns of select indexes, or Peer Group. Each RPSU represents the potential to receive NRG common stock after the completion of the performance period, typically three years of service from the date of grant. The number of shares of NRG common stock to be paid (if any) as of the vesting date for each RPSU will depend on the Company’s percentile rank within the Peer Group. The number of shares of common stock to be paid as of the vesting date for each RPSU is linearly interpolated for TSR performance between the following points: (i) 0% if ranked below the 25th percentile; (ii) 25% if ranked at the 25th percentile; (iii) 100% if ranked at the 55th percentile (or the 65th percentile if the Company's absolute TSR is less than negative 15%); and (iv) 200% if ranked at the 75th percentile or above. The value of the common stock on the date of grant is based on the closing price of NRG common stock on the date of grant.

Market Stock Units — MSUs are restricted grants where the quantity of shares increases and decreases alongside the Company's TSR. Each MSU represents the potential to receive NRG common stock after the completion of the performance period, typically three years of service from the date of grant. The number of shares of common stock to be paid as of the vesting date for each MSU is : (i) zero shares, if the TSR has decreased by more than 25% over the performance period, (ii) three-quarters of one share, if the TSR has decreased by 25% over the performance period; (iii) interpolated between three-quarters of one share and one share, if the TSR has decreased less than 25% over the performance period; (iv) one share, if there is no change in TSR over the performance period; (v) interpolated between one share and two shares, if TSR increases less than 100% during the performance period; and (vi) two shares, if the TSR increases 100% over the performance period. The value of the common stock on the date of grant is based on the closing price of NRG common stock on the date of grant. The Company last granted MSUs during the year ended December 31, 2016.

The following table summarizes the Company's non-vested PSU awards and changes during the year:



	Units^(a)		Weighted Average Grant-Date Fair Value per Unit
Non-vested at December 31, 2017	1,858,821		$	18.27
Granted	372,147		35.36
Forfeited	(134,473	)	22.26
Vested	(385,861	)	30.31
Non-vested at December 31, 2018	1,710,634		19.12

(a) There were no PSUs granted to GenOn employees and outstanding as of December 31, 2018

The weighted average grant date fair value of PSUs granted during the years ended December 31, 2018, 2017 and 2016, was $35.36, $15.91 and $14.73, respectively.

The fair value of PSUs is estimated on the date of grant using a Monte Carlo simulation model and expensed over the service period, which equals the vesting period. Significant assumptions used in the fair value model with respect to the Company's PSUs are summarized below:



	2018		2017		2016
	RPSUs		RPSUs		MSUs
Expected volatility	47.52	%	43.96	%	34.33	%
Expected term (in years)	3		3		3
Risk free rate	2.01	%	1.5	%	1.31	%

For the years ended December 31, 2018 and 2017, expected volatility is calculated based on NRG's historical stock price volatility data over the period commensurate with the expected term of the PSU, which equals the vesting period.

Supplemental Information

The following table summarizes NRG's total compensation expense recognized for the years presented, as well as total non-vested compensation costs not yet recognized and the period over which this expense is expected to be recognized as of December 31, 2018, for each of the types of awards issued under the LTIPs. Minimum tax withholdings of $19 million, $5 million, and $5 million for the years ended December 31, 2018, 2017, and 2016, respectively, are reflected as a reduction to additional paid-in capital on the Company's consolidated balance sheets and are reflected as operating activities on the Company's consolidated statements of cash flows.



										Non-vested Compensation Cost
	Compensation Expense									Unrecognized Total Cost		Weighted Average Recognition Period Remaining (In years)
	Year Ended December 31,									As of December 31,
Award	2018			2017			2016			2018		2018
	(In millions, except weighted average data)
NQSOs^(a)	$	—		$	—		$	—		$	—	0.00
RSUs	12			15			12			9		0.89
DSUs	2			2			2			—		0.00
MSUs	4			5			2			—		0.03
RPSUs	7			3			—			10		1.32
PRSUs^(b)	16			13			4			14		1.17
Total^(c)	$	41		$	38		$	20		$	33
Tax detriment recognized	$	(4	)	$	(5	)	$	(4	)

(a) All NQSOs granted under the Company's LTIP were fully vested as of December 31, 2018, 2017, and 2016

(b) Phantom Restricted Stock Units, PRSUs, are liability-classified time-based awards that typically vest ratably over a three-year period. The amount to be paid upon vesting is based on NRG's closing stock price for the period

(c) Does not include compensation expense of $1 million, $6 million, and $4 million for each of the years ended December 31, 2018, 2017, and 2016, which was recorded in loss from discontinued operations in the Company's consolidated statements of operations