Accounting for Derivative Instruments and Hedging Activities (GenOn, GenOn Americas Generation and GenOn Mid-Atlantic)

This footnote should be read in conjunction with the complete description under Note 5, Accounting for Derivative Instruments and Hedging Activities, to the Registrants' 2016 Form 10-K.

Energy-Related Commodities (GenOn)

As of September 30, 2017, GenOn had energy-related derivative financial instruments extending through 2019.

Volumetric Underlying Derivative Transactions (GenOn, GenOn Americas Generation and GenOn Mid-Atlantic)

The following table summarizes the net notional volume buy/(sell) of the Registrants’ open derivative transactions broken out by commodity, excluding those derivatives that qualified for the NPNS exception, as of September 30, 2017 and December 31, 2016. Option contracts are reflected using delta volume. Delta volume equals the notional volume of an option adjusted for the probability that the option will be in-the-money at its expiration date.



		GenOn			GenOn Americas Generation			GenOn Mid-Atlantic
		Total Volume			Total Volume			Total Volume
		As of September 30, 2017		As of December 31, 2016	As of September 30, 2017		As of December 31, 2016	As of September 30, 2017		As of December 31, 2016
Commodity	Units	(In millions)
Coal	Short Ton	2		5	1		4	1		4
Natural Gas	MMBtu	72		138	13		30	13		23
Power	MWh	(12	)	(35)	(3	)	(12)	(3	)	(11)

Fair Value of Derivative Instruments (GenOn, GenOn Americas Generation and GenOn Mid-Atlantic)

The following tables summarize the fair value within the derivative instrument valuation on the balance sheet:

GenOn



	Fair Value
	Derivative Assets				Derivative Liabilities
	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
	(In millions)
Derivatives Not Designated as Cash Flow Hedges:
Commodity contracts current	$	39	$	108	$	35	$	105
Commodity contracts long-term	17		16		6		17
Total Derivatives Not Designated as Cash Flow Hedges	$	56	$	124	$	41	$	122

GenOn Americas Generation



	Fair Value
	Derivative Assets				Derivative Liabilities
	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
	(In millions)
Derivatives Not Designated as Cash Flow Hedges:
Commodity contracts current	$	69	$	180	$	71	$	185
Commodity contracts long-term	25		34		23		32
Total Derivatives Not Designated as Cash Flow Hedges	$	94	$	214	$	94	$	217

GenOn Mid-Atlantic



	Fair Value
	Derivative Assets				Derivative Liabilities
	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
	(In millions)
Derivatives Not Designated as Cash Flow Hedges:
Commodity contracts current	$	10	$	44	$	14	$	44
Commodity contracts long-term	2		4		—		2
Total Derivatives Not Designated as Cash Flow Hedges	$	12	$	48	$	14	$	46

The Registrants have elected to present derivative assets and liabilities on the balance sheet on a trade-by-trade basis and do not offset amounts at the counterparty master agreement level. In addition, collateral received or paid on the Registrants' derivative assets or liabilities are recorded on a separate line item on the balance sheet. The following tables summarize the offsetting of derivatives by counterparty master agreement level and collateral received or paid:

GenOn



	Gross Amounts Not Offset in the Statement of Financial Position
Description	Gross Amounts of Recognized Assets / Liabilities			Derivative Instruments			Cash Collateral (Held) / Posted		Net Amount
September 30, 2017	(In millions)
Commodity contracts:
Derivative assets	$	45		$	(15	)	$	—	$	30
Derivative assets - affiliate	11			(11		)	—		—
Derivative liabilities	(28		)	15			2		(11		)
Derivative liabilities - affiliate	(13		)	11			2		—
Total derivative instruments	$	15		$	—		$	4	$	19



	Gross Amounts Not Offset in the Statement of Financial Position
Description	Gross Amounts of Recognized Assets / Liabilities			Derivative Instruments			Cash Collateral (Held) / Posted		Net Amount
December 31, 2016	(In millions)
Commodity contracts:
Derivative assets	$	70		$	(39	)	$	—	$	31
Derivative assets - affiliate	54			(54		)	—		—
Derivative liabilities	(56		)	39			1		(16		)
Derivative liabilities - affiliate	(66		)	54			12		—
Total derivative instruments	$	2		$	—		$	13	$	15

GenOn Americas Generation



	Gross Amounts Not Offset in the Statement of Financial Position
Description	Gross Amounts of Recognized Assets / Liabilities			Derivative Instruments			Cash Collateral (Held) / Posted		Net Amount
September 30, 2017	(In millions)
Commodity contracts:
Derivative assets	$	45		$	(15	)	$	—	$	30
Derivative assets - affiliate	49			(49		)	—		—
Derivative liabilities	(28		)	15			2		(11		)
Derivative liabilities - affiliate	(66		)	49			2		(15		)
Total derivative instruments	$	—		$	—		$	4	$	4



	Gross Amounts Not Offset in the Statement of Financial Position
Description	Gross Amounts of Recognized Assets / Liabilities			Derivative Instruments			Cash Collateral (Held) / Posted		Net Amount
December 31, 2016	(In millions)
Commodity contracts:
Derivative assets	$	70		$	(39	)	$	—	$	31
Derivative assets - affiliate	144			(144		)	—		—
Derivative liabilities	(56		)	39			1		(16		)
Derivative liabilities - affiliate	(161		)	144			12		(5		)
Total derivative instruments	$	(3	)	$	—		$	13	$	10

GenOn Mid-Atlantic



	Gross Amounts Not Offset in the Statement of Financial Position
Description	Gross Amounts of Recognized Assets / Liabilities			Derivative Instruments			Cash Collateral (Held) / Posted		Net Amount
September 30, 2017	(In millions)
Commodity contracts:
Derivative assets - affiliate	$	12		$	(12	)	$	—	$	—
Derivative liabilities - affiliate	(14		)	12			—		(2		)
Total derivative instruments	$	(2	)	$	—		$	—	$	(2	)



	Gross Amounts Not Offset in the Statement of Financial Position
Description	Gross Amounts of Recognized Assets / Liabilities			Derivative Instruments			Cash Collateral (Held) / Posted		Net Amount
December 31, 2016	(In millions)
Commodity contracts:
Derivative assets - affiliate	$	48		$	(46	)	$	—	$	2
Derivative liabilities - affiliate	(46		)	46			—		—
Total derivative instruments	$	2		$	—		$	—	$	2

Impact of Derivative Instruments on the Statements of Operations (GenOn, GenOn Americas Generation and GenOn Mid-Atlantic)

Unrealized gains and losses associated with changes in the fair value of derivative instruments are reflected in current period earnings.

During 2016, the Registrants' underwent the process of closing out and financially settling certain open positions with counterparties. The closure and financial settlements with these counterparties were necessary to manage the increases in collateral posting requirements following rating agency downgrades and reduce expected collateral costs associated with exchange cleared hedge transactions.

The following tables summarize the pre-tax effects of economic hedges. These amounts are included within operating revenues and cost of operations.

GenOn



	Three months ended September 30,						Nine months ended September 30,
(In millions)	2017			2016			2017		2016
Unrealized mark-to-market results
Reversal of previously recognized unrealized losses/(gains) on settled positions related to economic hedges	$	9		$	(29	)	$	7	$	(145	)
Net unrealized (losses)/gains on open positions related to economic hedges	(28		)	(68		)	9		(43		)
Total unrealized (losses)/gains	$	(19	)	$	(97	)	$	16	$	(188	)



	Three months ended September 30,						Nine months ended September 30,
(In millions)	2017			2016			2017		2016
Revenue from operations — energy commodities	$	(23	)	$	(142	)	$	7	$	(233	)
Cost of operations	4			45			9		45
Total impact to statements of operations	$	(19	)	$	(97	)	$	16	$	(188	)

As discussed above, GenOn realized approximately $38 million due to the closure and financial settlement of all open positions with one of GenOn's counterparties during the second quarter of 2016, for which $18 million, $19 million and $1 million would have otherwise been realized during the remainder of 2016, and in 2017 and 2018, respectively. In addition, GenOn realized $98 million due to the closure and financial settlement of certain open positions with an additional counterparty during the third quarter of 2016, for which $82 million, $13 million and $3 million would have otherwise been realized in 2017, 2018, and 2019, respectively. GenOn had entered into additional transactions with NRG Power Marketing LLC and an external counterparty in order to re-hedge the positions settled with certain counterparties.

During the second quarter of 2017, GenOn realized $5 million due to the closure and financial settlement of all open positions with an additional GenOn counterparty for which $4 million and $1 million would have otherwise been realized during the remainder of 2017 and 2018, respectively. In July 2017, GenOn opened an exchange clearing account with a third party financial institution and posted $20 million of initial collateral.

GenOn Americas Generation



	Three months ended September 30,						Nine months ended September 30,
(In millions)	2017			2016			2017		2016
Unrealized mark-to-market results
Reversal of previously recognized unrealized losses/(gains) on settled positions related to economic hedges	$	11		$	(46	)	$	2	$	(165	)
Net unrealized (losses)/gains on open positions related to economic hedges	(13		)	6			6		(23		)
Total unrealized (losses)/gains	$	(2	)	$	(40	)	$	8	$	(188	)



	Three months ended September 30,						Nine months ended September 30,
(In millions)	2017			2016			2017			2016
Revenue from operations — energy commodities	$	(6	)	$	(75	)	$	(1	)	$	(228	)
Cost of operations	4			35			9			40
Total impact to statements of operations	$	(2	)	$	(40	)	$	8		$	(188	)

As discussed above, GenOn Americas Generation realized approximately $35 million due to the closure and financial settlement of all open positions with one of GenOn Americas Generation's counterparties during the second quarter of 2016, for which $16 million and $19 million would have otherwise been realized during the remainder of 2016 and in 2017, respectively. In addition, GenOn Americas Generation realized $50 million due to the closure and financial settlement of certain open positions with an additional counterparty during the third quarter of 2016, for which $46 million, and $4 million would have otherwise been realized in 2017, and 2018, respectively. GenOn had entered into additional transactions with NRG Power Marketing LLC and an external counterparty in order to re-hedge the positions settled with certain counterparties.

During the second quarter of 2017, GenOn Americas Generation realized $5 million due to the closure and financial settlement of all open positions with an additional GenOn Americas Generation counterparty for which $4 million and $1 million would have otherwise been realized during the remainder of 2017 and 2018, respectively. In July 2017, GenOn opened an exchange clearing account with a third party financial institution and posted $20 million of initial collateral.

GenOn Mid-Atlantic



	Three months ended September 30,						Nine months ended September 30,
(In millions)	2017			2016			2017			2016
Unrealized mark-to-market results
Reversal of previously recognized unrealized losses/(gains) on settled positions related to economic hedges	$	7		$	(47	)	$	(3	)	$	(146	)
Net unrealized (losses)/gains on open positions related to economic hedges	(12		)	4			1			(18		)
Total unrealized losses	$	(5	)	$	(43	)	$	(2	)	$	(164	)



	Three months ended September 30,						Nine months ended September 30,
(In millions)	2017			2016			2017			2016
Revenue from operations — energy commodities	$	(10	)	$	(83	)	$	(2	)	$	(203	)
Cost of operations	5			40			—			39
Total impact to statements of operations	$	(5	)	$	(43	)	$	(2	)	$	(164	)

As discussed above, GenOn Mid-Atlantic realized approximately $35 million due to the closure and financial settlement of all open positions with one of GenOn Mid-Atlantic's counterparties during the second quarter of 2016, for which $16 million and $19 million would have otherwise been realized during the remainder of 2016 and in 2017, respectively. In addition, GenOn Mid-Atlantic realized $50 million due to the closure and financial settlement of certain open positions with an additional counterparty during the third quarter of 2016, for which $46 million, and $4 million would have otherwise been realized in 2017, and 2018, respectively. GenOn had entered into additional transactions with NRG Power Marketing LLC and an external counterparty in order to re-hedge the positions settled with certain counterparties.

In addition, during the second quarter of 2017 GenOn Mid-Atlantic realized $5 million due to the closure and financial settlement of all open positions with an additional GenOn Mid-Atlantic counterparty for which $4 million and $1 million would have otherwise been realized during the remainder of 2017 and 2018, respectively.

Credit Risk Related Contingent Features (GenOn, GenOn Americas Generation and GenOn Mid-Atlantic)

Certain of GenOn and GenOn Americas Generation’s hedging agreements contain provisions that require the Registrants to post additional collateral if the counterparty determines that there has been deterioration in credit quality, generally termed "adequate assurance" under the agreements, or require the Registrants to post additional collateral if there were a one notch downgrade in the Registrants’ credit rating. The collateral required for contracts that have adequate assurance clauses that are in net liability positions as of September 30, 2017, was $1 million for GenOn and GenOn Americas Generation. As of September 30, 2017, no collateral was required for contracts with credit rating contingent features that are in a net liability position for GenOn and GenOn Americas Generation. GenOn and GenOn Americas Generation are also party to certain marginable agreements under which no collateral was due as of September 30, 2017. As of September 30, 2017, GenOn Mid-Atlantic did not have any financial instruments with credit-risk-related contingent features.

See Note 5, Fair Value of Financial Instruments, for discussion regarding concentration of credit risk.