Stock-Based Compensation

NRG Energy, Inc. Long-Term Incentive Plan

As of December 31, 2016 and 2015, a total of 22,000,000 shares of NRG common stock were authorized for issuance under the NRG LTIP, and 5,558,390 shares of NRG common stock were authorized for issuance under the NRG GenOn LTIP. The NRG LTIP and the NRG GenOn LTIP are 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. There were 7,487,058 and 6,240,648 shares of common stock remaining available for grants under the NRG LTIP as of December 31, 2016 and 2015, respectively. There were 960,904 and 1,671,633 shares of common stock remaining available for grants under the NRG GenOn LTIP as of December 31, 2016 and 2015, respectively.

Non-Qualified Stock Options

NQSOs granted under the NRG LTIP and the NRG GenOn LTIP typically have three-year graded vesting schedules beginning on the grant date and become exercisable at the end of the requisite service period. 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 2016, 2015 or 2014.

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



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
					(In years)	(In millions)
Outstanding at December 31, 2015	2,071,913		$	32.27	3	$	—
Forfeited	(548,994	)	52.34
Outstanding at December 31, 2016	1,522,919		25.03		3	—
Exercisable at December 31, 2016	1,522,919		25.03		3	—

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



	Year Ended December 31,
	2016		2015		2014
	(In millions)
Total intrinsic value of options exercised	$	—	$	2	$	7
Cash received from options exercised	—		9		21

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

Restricted Stock Units

As of December 31, 2016, 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		Weighted Average Grant-Date Fair Value per Unit
Non-vested at December 31, 2015	2,261,996		$	27.59
Granted	1,226,957		11.54
Forfeited	(592,163	)	22.91
Vested	(916,649	)	26.07
Non-vested at December 31, 2016	1,980,141		19.29

The total fair value of RSUs vested during the years ended December 31, 2016, 2015, and 2014, was $11 million, $10 million and $26 million, respectively. The weighted average grant date fair value of RSUs granted during the years ended December 31, 2016, 2015, and 2014 was $11.54, $27.31, and $29.90, 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		Weighted Average Grant-Date Fair Value per Unit
Outstanding at December 31, 2015	427,578		$	21.88
Granted	102,147		16.85
Converted to Common Stock	(76,051	)	18.37
Outstanding at December 31, 2016	453,674		21.54

The aggregate intrinsic values for DSUs outstanding as of December 31, 2016, 2015, and 2014 were approximately $6 million, $5 million, and $10 million respectively. The aggregate intrinsic values for DSUs converted to common stock for the years ended December 31, 2016, 2015, and 2014 were $1 million, less than a million, and $1 million, respectively. The weighted average grant date fair value of DSUs granted during the years ended December 31, 2016, 2015, and 2014 was $16.85, $25.14 and $35.63, respectively.

Market Stock Units

MSUs are restricted grants where the quantity of shares increases and decreases alongside the Company's Total Shareholder Return, or 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 NRG common stock to be paid (if any) as of the vesting date for each MSU will depend on the TSR. The number of shares of common stock to be paid as of the vesting date for each MSU is equal to: (i) three quarters of one share of common stock if the TSR has decreased by no more than 25% over the performance period; (ii) one share of common stock, if there is no change in TSR over the performance period; and (iii) two shares of common stock if the TSR increases 100% or more over the performance period. If there is more than a 25% reduction in TSR over the performance period, no common stock will be paid. If the TSR is between 75% and 100% over the performance period, shares awarded are interpolated. 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 following table summarizes the Company's non-vested MSU awards and changes during the year:



	Units		Weighted Average Grant-Date Fair Value per Unit
Non-vested at December 31, 2015	1,980,157		$	29.54
Granted	806,409		14.73
Forfeited	(1,499,963	)	27.76
Vested	(4,015	)	33.81
Non-vested at December 31, 2016	1,282,588		21.47

The weighted average grant date fair value of MSUs granted during the years ended December 31, 2016, 2015 and 2014, was $14.73, $26.68 and $31.90, respectively.

The fair value of MSUs 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 MSUs are summarized below:



	2016		2015
Expected volatility	34.33	%	24.08%-25.20%
Expected term (in years)	3		1-3
Risk free rate	1.31	%	0.25%-1.07%

For the years ended December 31, 2016 and 2015, expected volatility is calculated based on NRG's historical stock price volatility data over the period commensurate with the expected term of the MSU, 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, 2016 for each of the types of awards issued under the LTIPs. Minimum tax withholdings of $5 million, $21 million, and $16 million for the years ended December 31, 2016, 2015, and 2014, respectively, are reflected as a reduction to additional paid-in capital on the Company's consolidated balance sheet and are reflected as operating activities on the Company's consolidated statement 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	2016			2015			2014			2016		2016
	(In millions, except weighted average data)
NQSOs^(a)	$	—		$	—		$	1		$	—	—
RSUs	14			23			20			12		1.46
DSUs	2			2			2			—		—
MSUs	3			16			19			7		1.54
PRSUs^(b)	5			—			—			8		1.30
Total	$	24		$	41		$	42		$	27
Tax detriment recognized	$	(4	)	$	(12	)	$	(8	)

(a) All NQSOs granted under the Company's LTIP were fully vested as of December 31, 2016 and 2015.

(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.