On March 10, 2023 (the "Acquisition Closing Date"), the Company completed the acquisition of Vivint Smart Home Inc., pursuant to the Agreement and Plan of Merger, dated as of December 6, 2022, by and among the Company, Vivint and Jetson Merger Sub, Inc., a wholly-owned subsidiary of the Company (“Merger Sub”) pursuant to which Merger Sub merged with and into Vivint, with Vivint surviving the merger as a wholly-owned subsidiary of the Company. Dedicated to redefining the home experience with intelligent products and services, Vivint brings nearly two million customers to NRG. Vivint's single, expandable platform incorporates artificial intelligence and machine learning into its operating system and its vertically integrated business model includes hardware, software, sales, installation, support and professional monitoring, enabling superior customer experiences and a complete end-to-end smart home experience. The acquisition accelerates the realization of NRG's consumer-focused growth strategy and creates a leading essential home services platform fueled by market-leading brands, unparalleled insights, proprietary technologies and complementary sales channels.

The acquisition has been recorded as a business combination under ASC 805, with identifiable assets and liabilities acquired provisionally recorded at their estimated fair values on the Acquisition Closing Date. The initial accounting for the business combination is not complete because the evaluation necessary to assess the fair value of certain net assets acquired and the amount of goodwill to be recognized is still in process. The provisional amounts are subject to revision until the evaluations are completed to the extent that additional information is obtained about the facts and circumstances that existed as of the Acquisition Closing Date.


	(In millions)
Vivint common shares outstanding as of March 10, 2023 of 216,901,639 at $12.00 per share	$	2,603
Other Vivint equity instruments (Cash out RSUs and PSUs, Stock Appreciation Rights, Private Placement Warrants)	6
Total Cash Consideration	$	2,609
Fair value of acquired Vivint equity awards attributable to pre-combination service	14
Total Consideration	$	2,623


	(In millions)
Current Assets
Cash and cash equivalents	$	120
Accounts receivable, net	60
Inventory	113
Prepayments and other current assets	37
Total current assets	330
Property, plant and equipment, net	49
Other Assets
Operating lease right-of-use assets, net	35
Goodwill(a)	3,692





Intangibles assets, net	2,500
Deferred income taxes	451
Other non-current assets	14
Total other assets	6,692
Total Assets	$	7,071

Current Liabilities
Current portion of long-term debt and finance leases	$	14
Current portion of operating lease liabilities	13
Accounts payable	109
Derivatives instruments	80
Deferred revenue current	517
Accrued expenses and other current liabilities	207
Total current liabilities	940
Other Liabilities
Long-term debt and finance leases	2,572
Non-current operating lease liabilities	28
Derivatives instruments	32
Deferred income taxes	18
Deferred revenue non-current	835
Other non-current liabilities	23
Total other liabilities	3,508
Total Liabilities	$	4,448

Vivint Purchase Price	$	2,623

(a) Goodwill arising from the acquisition is attributed to the value of the platform acquired, cross-selling opportunities, customer growth and the synergies expected from combining the operations of Vivint with NRG's existing businesses. None of the goodwill recorded is expected to be deductible for tax purposes.

The fair values of intangible assets as of the Acquisition Closing Date were measured primarily based on significant inputs that are observable and unobservable in the market and thus represent Level 2 and Level 3 measurements, respectively. Significant inputs were as follows:

Customer relationships — Customer relationships, reflective of Vivint’s customer base, were valued using an excess earning method of the income approach, and is classified as level 3. Under this approach, the Company estimated the present

value of expected future cash flows resulting from existing customer relationships, considering attrition and charges for contributory assets (such as net working capital, fixed assets, workforce, trade name and technology) utilized in the business, discounted using a weighted average cost of capital of comparable companies. The customer relationships are amortized to depreciation and amortization, ratably based on discounted future cash flows.

Technology – Developed technology was valued using a "relief from royalty" method of the income approach, and is classified as Level 3. Under this approach, the fair value was estimated to be the present value of royalties saved which assumed the value of the asset based on discounted cash flows of the amount that would be paid by a hypothetical market participant had they not owned the asset and instead licensed the asset from another company. The estimated cash flows from the developed technology considered the obsolescence factor and was discounted using a weighted average cost of capital of comparable companies. The developed technology is amortized to depreciation and amortization, ratably based on discounted future cash flows.

Trade name — Trade name was valued using a "relief from royalty" method of the income approach, and is classified as level 3. Under this approach, the fair value is estimated to be the present value of royalties saved which assumed the value of the asset based on discounted cash flows of the amount that would be paid by a hypothetical market participant had they not owned the asset and instead licensed the asset from another company. The estimated cash flows from the trade name considered the expected probable use of the asset and was discounted using a weighted average cost of capital of comparable companies. The trade name is amortized to depreciation and amortization, on a straight line basis, over the expected life of the asset.

The Company acquired $2.7 billion in aggregate principal of Vivint’s 2027 Senior Secured Notes, 2029 Senior notes and 2028 Senior Secured Term Loan (together, the Acquired Vivint’s Debt) which were recorded at fair value as of the Acquisition Closing Date. The difference between the fair value at the Acquisition Closing Date and the principal outstanding of the Acquired Vivint’s Debt, of $152 million, is being amortized through interest expense over the remaining term of the debt. The Acquired Vivint’s Debt are classified as level 2 and were measured at fair value using observable market inputs based on interest rates at the Acquisition Closing Date. For additional discussion see Note 8, Long-term Debt and Finance Leases.

The derivative liabilities are recorded in connection with the contractual future payment obligations with the financing providers under Vivint’s Consumer Financing Program. The fair values of the derivatives liabilities as of the Acquisition Closing Date were valued using a discounted cash flow model, with inputs consisting of available market data, such as market yield discount rates, as well as unobservable internally derived assumptions, such as collateral prepayment rates, collateral default rates and loss severity rates. These derivatives are priced using a credit valuation adjustment methodology, and are classified as level 3. Changes to the fair value are recorded through other income, net in the Consolidated Statement of Operations. For additional discussion see Note 7, Accounting for Derivative Instruments and Hedging Activities.

The following table provides pro forma combined financial information of NRG and Vivint, after giving effect to the Vivint acquisition and related financing transactions as if they had occurred on January 1, 2022. The pro forma financial information has been prepared for illustrative and informational purposes only, and is not intended to project future operating results or be indicative of what the Company's financial performance would have been had the transactions occurred on the date acquired. No effect has been given to operating synergies.

(i)Income statement effects of fair value adjustments based on the preliminary purchase price allocation including amortization of intangible assets, reversal of historical Vivint amortization of capitalized contract costs and reversal of historical Vivint other income recorded for the change in fair value of warrant derivative liabilities, as the warrants are assumed to be cashed out upon the close of the Acquisition.

(ii)Adjustments to record additional stock-based compensation expense related to acquired Vivint equity awards in the 2022 period. Additionally, one-time stock-based compensation expense related primarily to the acceleration of Vivint equity awards is removed from the three months ended March 31, 2023 and reflected in the 2022 period.

On January 6, 2023, the Company closed on the sale of land and related generation assets from the Astoria site, within the East region of operations, for initial proceeds of $212 million, subject to transaction fees of $3 million and certain indemnifications, resulting in a $199 million gain. As part of the transaction, NRG entered into an agreement to lease the land back for the purpose of operating the Astoria gas turbines. The lease agreement is expected to terminate by the end of the year.