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          <NonNumbericText>&lt;div&gt;&lt;!-- 2.0.3575.42229 --&gt;&lt;div&gt;&lt;!-- body --&gt;&lt;p class="Heading2A" style="margin-top: 0in; margin-right: 0in; margin-bottom: 10.0pt; margin-left: .3in; text-indent: -.3in; font-size: 10.0pt; font-family: 'Times New Roman Bold'; layout-grid-mode: line; font-weight: bold;"&gt;&lt;a name="_AUCdd26af82cc364c5b8cce1adc041a8e6d"&gt;(1)&lt;font class="_mt"&gt;&amp;#160;&amp;#160;&amp;#160;&amp;#160; Background and Basis of Presentation&lt;/font&gt;&lt;/a&gt;&lt;/p&gt; &lt;p class="MsoNormal" style="margin: 0in; margin-bottom: .0001pt; font-size: 10.0pt; font-family: 'Times New Roman'; layout-grid-mode: line; text-indent: .3in;"&gt;&lt;font class="_mt"&gt;&lt;font class="_mt"&gt;&lt;i&gt;Background&lt;/i&gt;.&lt;font class="_mt"&gt;&amp;#160; &amp;#8220;RRI Energy&amp;#8221; refers to RRI Energy, Inc. and &amp;#8220;we,&amp;#8221; &amp;#8220;us&amp;#8221; and &amp;#8220;our&amp;#8221; refer to RRI Energy, Inc. and its consolidated subsidiaries.&lt;font class="_mt"&gt;&amp;#160; We provide energy, capacity, ancillary and other energy services to wholesale customers in competitive energy markets in the United States through our ownership and operation of and contracting for power generation capacity.&lt;font class="_mt"&gt;&amp;#160; Our business consists of four reportable segments.&lt;font class="_mt"&gt;&amp;#160; &lt;font class="_mt"&gt;See note 20.&lt;/font&gt;&lt;/font&gt;&lt;/font&gt;&lt;/font&gt;&lt;/font&gt;&lt;/font&gt;&lt;/font&gt;&lt;/p&gt; &lt;p class="MsoNormal" style="margin: 0in; margin-bottom: .0001pt; font-size: 10.0pt; font-family: 'Times New Roman'; layout-grid-mode: line;"&gt;&lt;font class="_mt"&gt;&lt;font class="_mt"&gt;&amp;nbsp;&lt;/font&gt;&lt;/font&gt;&lt;/p&gt; &lt;p class="Paragraph" style="margin-top: 0in; margin-right: 0in; margin-bottom: 10.0pt; margin-left: 0in; text-indent: .3in; font-size: 10.0pt; font-family: 'Times New Roman';"&gt;&lt;font class="_mt"&gt;&lt;font class="_mt"&gt;RRI Energy, a Delaware corporation, was formed in August 2000 by CenterPoint Energy, Inc.&lt;font class="_mt"&gt;&amp;#160; (CenterPoint) (known as Reliant Energy, Incorporated at the time) in connection with the planned separation of its regulated and unregulated operations.&lt;font class="_mt"&gt;&amp;#160; CenterPoint transferred substantially all of its unregulated businesses to us.&lt;font class="_mt"&gt;&amp;#160; In May&amp;nbsp;2001, Reliant Energy became a publicly traded company and in September&amp;nbsp;2002, CenterPoint distributed its remaining ownership of our common stock to its shareholders.&lt;/font&gt;&lt;/font&gt;&lt;/font&gt;&lt;/font&gt;&lt;/font&gt;&lt;/p&gt; &lt;p class="Paragraph" style="margin-top: 0in; margin-right: 0in; margin-bottom: 10.0pt; margin-left: 0in; text-indent: .3in; font-size: 10.0pt; font-family: 'Times New Roman';"&gt;&lt;font class="_mt"&gt;&lt;font class="_mt"&gt;We sold our retail business in three transactions occurring in December&amp;nbsp;2008, May&amp;nbsp;2009 and December&amp;nbsp;2009.&lt;font class="_mt"&gt;&amp;#160; We began reporting this business as discontinued operations in the first quarter of 2009.&lt;font class="_mt"&gt;&amp;#160; In connection with the Texas retail sale, we changed our name to RRI Energy, Inc. from Reliant Energy, Inc. effective May 2, 2009.&lt;font class="_mt"&gt;&amp;#160; See note&amp;nbsp;23.&lt;/font&gt;&lt;/font&gt;&lt;/font&gt;&lt;/font&gt;&lt;/font&gt;&lt;/p&gt; &lt;p class="Paragraph" style="margin-top: 0in; margin-right: 0in; margin-bottom: 10.0pt; margin-left: 0in; text-indent: .3in; font-size: 10.0pt; font-family: 'Times New Roman';"&gt;&lt;font class="_mt"&gt;&lt;font class="_mt"&gt;&lt;i&gt;Basis of Presentation&lt;/i&gt;.&lt;font class="_mt"&gt;&amp;#160; All significant intercompany transactions have been eliminated.&lt;/font&gt;&lt;/font&gt;&lt;/font&gt;&lt;/p&gt; &lt;p class="Paragraph" style="margin-top: 0in; margin-right: 0in; margin-bottom: 10.0pt; margin-left: 0in; text-indent: .3in; font-size: 10.0pt; font-family: 'Times New Roman';"&gt;&lt;font class="_mt"&gt;&lt;font class="_mt"&gt;&lt;i&gt;Channelview&lt;/i&gt;&lt;font class="_mt"&gt;.&lt;font class="_mt"&gt;&amp;#160; 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