DAVID PORTER, CHAIRMAN TRAVIS L. INTERJMDIRECTOR CHRISTI CRADDICK, RYAN RAILROAD COMMISSION OF TEXAS SURFACE MINING AND RECLAMATION DIVISION May 9, 2016 CERTIFIED MAIL-RETURN RECEIPT 91 7108 2133 3938 6068 9960 Mr. Michael G. Altavilla Mine Compliance and Lands Superintendent Texas Westmoreland Coal Company (TWCC) P. O. Box 915 Jewett, Texas 75846-0915 RE: ewett Mine, Permit No. 32G Jewett Area Mine, Permit No. 47A 2015 Audited Financial Information Review (Fiscal Year Ending December 31, 2015) Texas Westmoreland Coal Company (TWCC) and NRG Energy, Inc. (NRG) Dear Mr. Altavilla: Review of your audited annual ?nancial information for the year ending December 31, 2015, is complete. You submitted this information by letter dated March 31, 2016, providing the most current, audited ?nancial information for TWCC and NRG, third-party guarantor for self-bonds. Attached are the memoranda dated May 4, 2016, documenting the Staff?s legal and ?nancial review of this information. The approved bond instruments for Permit No. 32G total $71,000,000 and consist of a self?bond in the amount of $57,500,000 and a surety bond in the amount of $13,500,000. The approved bond instruments for Permit No. 47A total $36,500,000 and consist of a self-bond in the amount of $18,500,000 and a surety bond in the amount of $18,000,000. Based on the annual ?nancial information provided, Staff?s review indicates that NRG no longer meets any of the requirements of for the existing self?bond instruments. The current self-bonds for Permit Nos. 32G and 47A in the amounts of $57,500,000 and $18,500,000, respectively, are no longer in compliance with the requirements of In accordance with ?12.3 TWCC must submit and receive approval of a replacement bond for each permit within 90 days. Please submit as soon as possible, but no later than 30 days from the date of this letter, replacement bonds to provide total bond coverage in an amount not less than the current recommended minimum bond amount for each permit. The current minimum recommended bond amount for Permit No. 32G is described in the approval of Revision No. 73 and is $56,117,622. The current minimum recommended bond amount for Permit No. 47A is described in the approval of Revision No. 29 and is $30,567,176. 1701 NORTH CONGRESS AVENUE POST OFFICE BOX 12967 AUSTIN, TEXAS 78711-2967 TDD 800/735-2989 1k AN EQUAL OPPORTUNITY EMPLOYER Mr. Michael Altavilla May 9, 2016 Page 2 If you have any questions, do not hesitate to give me a call. Sincerely, Travis L. Wootton, Interim Director Surface Mining and Reclamation Division Attachments File Reference Nos. 1609701 and 1609702 xc: Natalie Dubiel, Attorney, OGC-Special Counsel Section (w/out attachment) Bob Hopper, Financial Reporting Manager, Financial Services (w/out attachment) DAVID PORTER, CHAIRMAN CHRISTI CRADDICK, COMMISSIONER RYAN SITTON, COMMISSIONER ALEXANDER C. SCHOCH, GENERAL COUNSEL RAILROAD COMMISSION OF TEXAS OFFICE OF GENERAL COUNSEL INTERNAL MEMORANDUM Railroad Commission TO: Travis Wootton, Interim Dlrector ofTexas Surface Mining and Reclamation Division RECEIVED MAY 0 5 2018 FROM: Natalie Dubiel, Attorney q/l? . - General Counsel Section, Of ice of General Counsel Surface Mining Division SUBJECT: Texas Westmoreland Coal Company (TWCC) Jewett Mine, Permit No. 32G Jewett Area Mine, Permit No. 47A 2015 Financial Information (Year Ending December 31, 2015) Texas Westmoreland Coal Company and NRG Energy, Inc. DATE: May 4, 2016 By memorandum dated April 7, 2016, the Surface Mining and Reclamation Division requested that the Office of General Counsel review the documents submitted by the Texas Westmoreland Coal Company via cover letter dated March 31, 2016 (Attachment 1) to determine if TWCC and its third-party guarantor NRG Energy, Inc. meet the requirements of 16 Tex. Admin. Code Pursuant to 16 Tex. Admin. Code an applicant that is self?bonded shall submit to the Commission an update of the information required under 16 Tex. Admin. Code within 90 days of the close of the fiscal year following the issuance of the self?bond. When the self-bond is guaranteed by a third-party guarantor, the third?party guarantor must also meet the requirements of 16 Tex. Admin. Code and 16 Tex. Admin. Code Within 90 days of the close of the fiscal year, TWCC submitted information responsive to 16 Tex. Admin. Code Specifically, TWCC submitted documentation showing that it continues to meet the requirements of 16 Tex. Admin. Code and that its third-party guarantor, NRG, continues to meet the requirements of 16 Tex. Admin. Code and 16 Tex. Admin. Code However, TWCC did not submit documentation to show that NRG meets the requirements of 16 Tex. Admin. Code I. APPLICANT: TEXAS WESTMORELAND COAL COMPANY A. 16 Tex. Admin. Code An applicant must submit information sufficient to meet the requirements of 16 Tex. Admin. Code TWCC submitted documentation showing that it meets 1701 NORTH CONGRESS AVENUE POST OFFICE BOX 12967 AUSTIN, TEXAS 78711-2967 1* PHONE: 512/463-7149 FAX: 512/463-6684 TDD 800/735-2989 0R TDY 512/463-7284 AN EQUAL OPPORTUNITY EMPLOYER the requirements of 16 Tex. Admin. Code An explanation of subsections and are detailed below. 1. 16 Tex. Admin. Code Pursuant to 16 Tex. Admin. Code an applicant must submit ?financial statements for its most recently completed fiscal year accompanied by a report prepared by an independent certified public accountant in conformity with generally accepted accounting principles and containing the accountant?s audit opinion or review opinion of the financial statements with no adverse opinion.? TWCC submitted financial statements for the year ended December 31, 2015 with a Report of Independent Auditors (Attachment 21). The Report of Independent Auditors is from the accounting firm Ernst and Young, LLP. The Report of Independent Auditors is dated March 30, 2016 and contains no adverse opinion, as follows: In our opinion, the financial statements [accompanying the Report of Independent Auditors] present fairly, in all material respects, the financial position of Texas Westmoreland Coal Company at December 31, 2015, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. (Attachment 2). Therefore, TWCC submitted documentation sufficient to meet the requirements of 16 Tex. Admin. Code 2. 16 Admin. Code Pursuant to 16 Tex. Admin. Code an applicant must submit ?unaudited financial statements for completed quarters in the current fiscal year.? TWCC submitted documentation responsive to 16 Tex. Admin. Code (and thus 16 Tex. Admin. Code Via cover letter dated March 31, 2016 (Attachment 1). March 31, 2016 is before the close of the first quarter in current fiscal year. Therefore, TWCC submitted unaudited financial statements for all quarters completed in the current fiscal year and meets the requirements of 16 Tex. Admin. Code 3. 16 Tex. Admin. Code Pursuant to 16 Tex. Admin. Code an applicant with self-bond and a third-party guarantor is required to submit ?additional information as may be requested by the Commission.? By letter dated October 21, 2008, SMRD requested that TWCC submit quarterly unaudited financials for TWCC and its parent company Westmoreland Coal Company until further notice. At an open conference on October 22, 2010, the Commission approved request to require TWCC to submit unaudited quarterly financial statements for both TWCC and Westmoreland Coal Company. Via cover letter dated March 31, 2016, TWCC submitted audited financial statements for TWCC for the fiscal year ended December 31, 2015, and the Form 10-K for Westmoreland Coal Company for the fiscal year ended December 31, 2015. 1 Please note that the attached exhibits are only portions of the documents submitted by TWCC that are relevant to this Memorandum. submission is responsive to the Commission?s request for quarterly unaudited financial statements. Thus, TWCC meets the requirements of 16 Tex. Admin. Code Westmoreland Coal Company?s Form shows a total Westmoreland Coal Company deficit of <$601,884,000> (Attachment 3, Page 77). Net worth, as defined in 16 Tex. Admin. Code equals total assets minus total liabilities (which is also equal to shareholder?s equity). The Form 10-K list total assets of $1,502,396,000 and total liabilities of $2,104,280,000 (Attachment 3, Pages 76?77). Thus, based on the financial information provided, Westmoreland Coal Company?s net worth is <$601,884,000> ($1,502,396,000 $2,104,280,000 Tangible net worth, as defined in 16 Tex. Admin. Code equals net worth minus intangible assets, such as goodwill. Form for Westmoreland Coal Company values the intangible assets (?Intangible assets, net of accumulated at $29,190,000 (Attachment 3, Page 76). Thus, calculated from the financial information provided, Westmoreland Coal Company?s tangible net worth is <$631,074,000> - $29,190,000 Therefore, TWCC submitted documentation showing that TWCC meets the requirements of 16 Tex. Admin. Code However, the Form for Westmoreland Coal Company for the year ended December 31, 2015, shows that Westmoreland Coal Company has significant negative net worth and does not ease concerns regarding the financial viability of Westmoreland Coal Company. II. THIRD-PARTY GUARANTOR. NRG ENERGY. INC. A. 16 Tex. Admin. Code To meet the requirements of 16 Tex. Admin. Code a third-party guarantor must meet the requirements of 16 Tex. Admin. Code or TWCC did not submit documentation showing that NRG meets the requirements of 16 Tex. Admin. Code (ii) or 1. 16 Tex. Admin. Code To meet the requirements of 16 Tex. Admin. Code a third-party guarantor must have a ?current rating for its most recent bond issuance of or higher as issued by either Moody?s Investors Service or Standard and Poor?s Corporation.? TWCC submitted current ratings from Moody?s Investors Service showing only a ?Ba3? rating for NRG (Attachment 3, Page 88). TWCC submitted current ratings form Standard and Poor?s Rating Services showing only a rating for NRG (Attachment 3, Page 88). Therefore, TWCC did not submit documentation showing that NRG meets the requirements of 16 Tex. Admin. Code 2. 16 Tex. Admin. Code To meet the requirements of 16 Tex. Admin. Code a third-party guarantor must have ?a tangible net worth of at least $10 million, a ratio of total liabilities to net worth of 2.5 or less, and a ratio of current assets to current liabilities of 1.2 or greater.? NRG does not meet the requirements of 16 Tex. Admin. Code TWCC submitted the Form 10-K for NRG (Attachment 4) for the fiscal year ended December 31, 2015. The financial statements for NRG are located on pages 127 and 128 of the Form 10-K for NRG. All calculations below proceed from these audited financial statements for NRG (please note that all relevant numbers are circled on Attachment 4). Net worth, as defined in 16 Tex. Admin. Code is equal to total assets minus total liabilities. The balance sheet for NRG for its fiscal year ended December 31, 2015 lists total assets of $32,882,000,000 (Attachment 4, Page 127) and total liabilities of $27,117,000,000 (Attachment 5, Page 128). Therefore, net worth is $5,765,000,000: Net Worth $5 ,765,000,000 Total Assets - Total Liabilities $32,882,000,000 - $27,117,000,000 Tangible net worth, as defined in 16 Tex. Admin. Code equals net worth minus intangible assets such as goodwill and rights to patents or royalties. Page 127 of the Form 10K for NRG values Goodwill at $999,000,000 and Intangibles (?Intangible assets, net of accumulated amortization of $1,525 and $1,402?) at $2,310,000,000. Thus, tangible net worth is: Net Worth - Goodwill Intangibles Tangible Net Worth $5,765 ,000,000 - $(999,000,000 2,310,000,000) $2,456,000,000 The balance sheet for NRG for its fiscal year ended December 31, 2015 lists total liabilities at $27,117,000,000 (Attachment 4, Page 128). As calculated above, net worth is $5,765,000,000. Therefore, ratio of total liabilities to net worth is 4.70: Total Liabilities $27,1 17,000,000 Net Worth $5,765,000,000 4.70 The balance sheet for NRG for its fiscal year ended December 31, 2015 lists total current assets at $7,391,000,000 (Attachment 4, Page 127). current liabilities are $4,375,000,000 (Attachment 4, Page 128). Therefore, ratio of current assets to current liabilities is 1.69: $7,391,000,000 $4,375,000,000 Current Assets Current Liabilities 1.69 As seen above, NRG has a tangible net worth of at least $10 million ($5,765,000,000) and ratio of current assets to current liabilities is greater than the minimum 1.2 allowed by 16 Tex. Admin. Code (1.69). However, NRG does not have a ratio of total liabilities to net worth of 2.5 or less (4.70). Therefore, TWCC did not submit adequate documentation to show that NRG meets the requirements of 16 Tex. Admin. Code 3. 16 Tex. Admin. Code To meet the requirements of 16 Tex. Admin. Code a third-party guarantor must have ?fixed assets in the United States totaling at least $20 million, a ratio of total liabilities to net worth of 2.5 times or less, and a ratio of current assets to current liabilities of 1.2 times or greater.? RG does not meet the requirements of 16 Tex. Admin. Code NRG has fixed assets in the United States totaling more than $20 million. According to the 2015 Form for NRG, NRG has assets of property, plant and equipment, net of depreciation and amortization, totaling $18,732,000,000 (Attachment 4, Page 127). amount of fixed assets in the US. exceeds the minimum requirement of $20 million. Additionally, NRG has a ratio of current assets to current liabilities 1.2 times or greater (please see the calculation above of a ratio of 1.69 under 16 Tex. Admin. Code However, NRG does not have a ratio of total liabilities to net worth of 2.5 times or less (please see the calculation above of a ratio of 4.70 under 16 Tex. Admin. Code Therefore, TWCC did not submit documentation to show that NRG meets the requirements of 16 Tex. Admin. Code 4. 16 Tex. Admin. Code To meet the requirements of 16 Tex. Admin. Code a third?party guarantor must have an investment?grade rating for its most recent bond issuance of ?Baa3? or higher from Moody?s Investors Service and or higher from Standard and Poor?s Corporation, and the third-party guarantor must also the requirements of either subclause I or subclause II of 16 Tex. Admin. Code As laid out below, NRG does not meet the bond issuance rating requirements of 16 Tex. Admin. Code but does meet the requirements of subclause II. a. Bond Issuance Ratings TWCC submitted current ratings from Moody?s Investors Service showing only a ?Ba3? rating for NRG (Attachment 3, Page 88). TWCC submitted current ratings form Standard and Poor?s Rating Services showing only a rating for NRG (Attachment 3, Page 88). Therefore, TWCC did not submit documentation showing that NRG meets the bond issuance rating requirements of 16 Tex. Admin. Code b. 16 Tex. Admin. Code To meet the requirements of 16 Tex. Admin. Code a third?party guarantor must: have a net worth of at least $100 million and fixed assets in the US. totaling at least $200 million; have issued and currently have outstanding securities pursuant to the provisions of the Securities Act of 1933 and is subject to the periodic financial reporting requirements established by the Securities and Exchange Act of 1934; and must have a total amount of outstanding and proposed self-bonds for surface coal mining and reclamation operations not exceeding 16 2/3 percent (16.67%) of the third-party guarantor?s net worth in the United States. NRG has a net worth greater than $100 million (please see the calculation above of net worth totaling $5,765,000,000 under 16 Tex. Admin. Code Additionally, NRG has fixed assets in the US. totaling more than $200 million (please see the calculation above of fixed assets totaling $18,732,000,000 under 16 Tex. Admin. Code NRG is subject to the periodic financial reporting requirements established by the Securities and Exchange Act of 1934 and has issued and currently has outstanding securities pursuant to the Securities Act of 1933 as evidenced by the annual filing of the Forms 10-Q and total amount of outstanding and proposed guaranteed bonds for surface mining and reclamation operations is less than 16.67% of net worth in the United States. NRG currently serves as third-party guarantor for two self?bonds with third-party guarantee for for $57,500,000 for the ewett Mine (Permit No. 32G) and one for $18,500,000 for the Jewett Area Mine (Permit No. 47A). Thus, the total amount of outstanding and proposed bonds backed by NRG is $76,000,000 ($57,500,000 $18,500,000 $76,000,000). As calculated above, net worth is $5,765,000,000. The total amount of self-bonds is 1.32% of net worth, less than the maximum 16.67%: Total Guaranteed Bonds $76,000,000 Net Worth $5 ,765 ,000,000 1.32% TWCC submitted documentation showing that NRG: 1) has a net worth of at least $100 million and fixed assets in the US. totaling at least $200 million; (2) currently is subject to the periodic financial reporting requirements established by the Securities Act of 1933 and the Securities and Exchange Act of 1934; and (3) guarantees a total amount of surface mining and reclamation operations bonds less than 16.67% of net worth in the United States. Therefore, TWCC submitted adequate documentation to show that NRG meets the requirements of 16 Tex. Admin. Code However, because NRG did not meet the bond issuance rating requirements from either Moody?s Investors Service or Standard and Poor?s Corporation, it does not the requirements of 16 Tex. Admin. Code Even though NRG did meet the requirements of subclause (II) of 16 Tex. Admin. Code it fails the bond issuance rating requirements. Thus, TWCC did not submit documentation to show that its third-party guarantor, NRG, meets the requriements of 16 Tex. Admin. Code B. 16 Tex. Admin. Code To meet the requirements of 16 Tex. Admin. Code a third?party guarantor must meet the requirements of 16 Tex. Admin. Code TWCC submitted documentation showing that NRG continues to meet the requirements of 16 Tex. Admin. Code 1. 16 Tex. Admin. Code Pursuant to 16 Tex. Admin. Code a third?party guarantor must submit ?financial statements for its most recently completed fiscal year accompanied by a report prepared by an independent certified public accountant in conformity with generally accepted accounting principles and containing the accountant?s audit opinion or review opinion of the financial statements with no adverse opinion.? TWCC submitted documentation showing that NRG meets the requirements of 16 Tex. Admin. Code TWCC submitted the Form 10-K for NRG (Attachment 4) for the fiscal years ended December 31, 2015. Page 116 of the Form for NRG is a Report of Independent Registered Public Accounting Firm from the accounting firm KPMG, LLP in Philadelphia, The Report of Independent Auditors is dated February 29, 2016 and contains no adverse opinion, as follows: In our opinion, NRG Energy, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of NRG Energy, Inc. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive (loss)/income, cash ?ows, and stockholders? equity for each of the years in the three-year period ended December 31, 2015, and our report dated February 29, 2016 expressed an unqualified opinion on those consolidated financial statements. Therefore, TWCC submitted documentation showing that NRG meets the requirements of 16 Tex. Admin. Code 2. 16 Tex. Admin. Code Pursuant to 16 Tex. Admin. Code an applicant must submit unaudited financial statements for a third-party guarantor for ?completed quarters in its current fiscal year.? TWCC submitted documentation on behalf of NRG responsive to 16 Tex. Admin. Code (and thus 16 Tex. Admin. Code via cover letter dated March 31, 2016 (Attachment 1). March 31, 2016 is before the close of the first quarter in current fiscal year. Therefore, TWCC submitted unaudited financial statements on behalf of NRG for all quarters completed in the current fiscal year and meets the requirements of 16 Tex. Admin. Code C. 16 Tex. Admin. Code Pursuant to 16 Tex. Admin. Code for the Commission to accept a self- bond with third?party guarantor, ?the total amount of the guarantor?s present and proposed self- bonds and guaranteed self-bonds for surface and coal mining reclamation operations shall not exceed 25 percent of the guarantor?s tangible net worth in the United States.? TWCC submitted documentation showing that NRG meets the requirements of 16 Tex. Admin. Code tangible net worth is $2,456,000,000 (please see the calculation above of net worth under 16 Tex. Admin. Code NRG currently serves as third?party guarantor for two self?bonds with third-party guarantee for for $57,500,000 for the Jewett Mine (Permit No. 32G) and one for $18,500,000 for the Jewett Area Mine (Permit No. 47A). Thus, the total amount of outstanding and proposed bonds backed by NRG is $76,000,000 ($57,500,000 $18,500,000 $76,000,000). Therefore, the total amount of self? bonds backed by NRG is 3.10% of tangible net worth in the United States: Total Self-Bonds Tangible Net Worth $76,000,000 $2,456,000,000 3.10% The total amount of self-bonds backed by NRG is less than 25% of tangible net worth in the United States. Therefore, TWCC submitted documentation showing that NRG continues to meet the requirements of 16 Tex. Admin. Code CONCLUSION Within 90 days of the close of the fiscal year, TWCC submitted information responsive to 16 Tex. Admin. Code Specifically, TWCC submitted documentation showing that it meets the requirements of 16 Tex. Admin. Code TWCC also submitted documentation to show that its third?party guarantor, NRG, meets the requirements of 16 Tex. Admin. Code and 16 Tex. Admin. Code However, TWCC did not submit documentation to show that its third-party guarantor, NRG, meets the requirements of 16 Tex. Admin. Code because NRG does not meet the bond issuance credit rating requirements. If you have any questions, please call Natalie Dubiel at (512) 463-2299. cc: Adriaan Kanaar, Financial Services DAVID PORTER, CHAIRMAN JOHN E. CAUDLE, DIRECTOR CHRISTI CRADDICK, COWSSIONER RYAN SITTON, COWSSIONER RAILROAD COMMISSION OF TEXAS SURFACE MINING AND RECLAMATION DIVISION MEMORANDUM TO: Alex Schoch, General Counsel Of?ce of General Counsel Financial Services FROM: John E. Caudle, Director Surface Mining and Reclamation Division SUBJECT: Texas Westmoreland Coal Company (TWCC) Jewett Mine, Permit NO. 32G ewett Area Mine, Permit No. 47A 2015 Financial Information Review (Year Ending December 3 1, 2015) Texas Westmoreland Coal Company and NRG Energy, Inc. DATE: April 7, 2016 Section Of the Texas Coal Mining Regulations requires an applicant that is self-bonded to annually ?le updated ?nancial information in accordance with and (D). This updated information is reviewed by the Commission to ensure that the applicant (and third-party guarantor, if appropriate) continues to meet ?nancial criteria for self-bonding. TWCC submitted its attached annual ?nancial report by letter dated March 31, 2016, for the ?scal year ending December 31, 2015, to address this ?ling requirement. TWCC also provided the attached 2015 annual ?nancial report for NRG Energy, Inc., the third-party guarantor of the self-bonds accepted for permits. The reclamation bonds on ?le with the Commission for Permit Nos. 32G and 47A consist of surety bond instruments in the amount of $13,500,000 (Permit No. 32G) and $18,000,000 (Permit No. 47A), both approved by Orders dated June 12, 2012, and self-bonds with third-party guarantee in the amounts of $57,500,000 (Permit NO. 32G) and $18,500,000 (Permit NO. 47A), both approved by Orders dated March 22, 2011. The most recent Staff reclamation cost estimate for Permit NO. 32G was approved on September 30, 2015, and is $56,117,622. The most recent Staff reclamation cost estimate for Permit No. 47A was approved on February 5, 2015, and is $30,567,176. I am requesting that the Of?ce of General Counsel coordinate, with assistance from Financial Services, review of financial standing and advise if they still meet the criteria under which the Commission approved their current collateral bond and self-bond instruments. Your review of the attached ?nancial information is requested within thirty (30) days. Martin Alvarez of my Staff has been assigned to assist you as necessary. Please call me or Mr. Alvarez if you have any questions. 1 Caudle, Director Attachment File Reference Nos. 1609701 and 1609702 1701 NORTH CONGRESS AVENUE if POST OFFICE BOX 12967 if AUSTIN, TEXAS 78711-2967 11? TDD 800/735?2989 if AN EQUAL OPPORTUNITY EMPLOYER Attachment 1 A Subsidiary of WESTMORELAND COAL COMPANY --.. . P. 0. Box 915, JEWETT, TX 75846 (903) 626-5485 March 31, 2016 (Via Overnight Delivery) John E. Caudle, P.E., Director Surface Mining and Reclamation Division Railroad Commission of Texas Box 12967 Austin, TX 78711?2967 RE: Jewett Mine, Permit No. 32G Jewett EIF Area Mine, Permit No. 47A 2015 Financial Information Self-Bond with Third-Party Guarantor Dear Mr. Caudle: TEXAS WESTMORELAND COAL C0. ?]ewettM1'116 Railroad Commission of Texas RECEIVED APR 05 Z?l? Surface Mining Division Enclosed are three sets of the 2015 Securities and Exchange Commission Form 10-Ks for NRG Energy, Inc. and Westmoreland Coal Co., as well as the 2015 audited financial statements report for Texas Westmoreland Coal Co. This information is submitted to comply with Section for the Jewett Mine, Permit No. 32G and Jewett Area Mine, Permit No. 47A self-bond with third-party guarantor for both permits. A CD containing the electronic version of the files is also enclosed for Staff to use. if you have any questions, please call. My number is 903.626.5485 ext 387. Sincerely, MWA.W Michael G. Altavilla Mine Compliance and Lands Superintendent Enclosures Cc: Env. Serv. File Janet Bowman (w/o Enclosure) Jeff Gonzales (w/o Enclosure) Elaine Parisher (w/o Enclosure) Energy for Texas .. Reclaiming for Texans Attachment 2 FINANCIAL STATEMENTS Texas Westmoreland Coal Company (An Indirect Wholly Owned Subsidiary of Westmoreland Coal Company) Year Ended December 31, 2015 With Report of Independent Auditors Ernsta Young LLP Tet +1 720 931 4000 Suue3300 Bx:+172093l4444 370 17th Street ey.com Building a better Denver. CO 80202 working world Report of Independent Auditors The Board of Directors Texas Westmoreland Coal Company We have audited the accompanying ?nancial statements of Texas Westmoreland Coal Company (the Company) (an indirect wholly owned subsidiary of Westmoreland Coal Company), which comprise the balance sheet as of December 31, 2015, and the related statements of income and comprehensive income, shareholder?s de?cit and cash ?ows for the year then ended, and the related notes to the ?nancial statements. Management?s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these ?nancial statements in conformity with US. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of ?nancial statements that are free of material misstatement, whether due to fraud or error. Auditor?s Responsibility Our responsibility is to express an opinion on these ?nancial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about Whether the ?nancial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the ?nancial statements. The procedures selected depend on the auditor?s judgment, including the assessment of the risks of material misstatement of the ?nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity?s preparation and fair presentation of the ?nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity?s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of signi?cant accounting estimates made by management, as well as evaluating the overall presentation of the ?nancial statements. We believe that the audit evidence we have obtained is suf?cient and appropriate to provide a basis for our audit opinion. 1603?1855805 zinen?ter firm of Ernsl Si Yeunu Global EY Building a better working world Opinion In our opinion, the ?nancial statements referred to above present fairly, in all material respects, I: the ?nancial position of Texas Westmoreland Coal Company at December 31, 2015, and the results of its operations and its cash ?ows for the year then ended in conformity with U.S. I I generally accepted accounting principles. ?mitf Mu? 1 March 30, 2016 1603-1855805 A member firm of Ernst Young Global Limited Attachment 3 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC. 20549 FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the ?scal year ended December 31, 2015 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001?11155 WESTMORELAND COAL COMPANY (Exact name of registrant as speci?ed in its charter) Delaware 23-1128670 (State or otherjurisdiction of (IRS. Employer incorporation or organization) Identi?cation No.) 9540 South Maroon Circle, Suite 200 Englewood, CO 80112 (Address of principal executive of?ces) (Zip Code) Registrant?s telephone number, including area code: (855) 922-6463 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Exchange on Which Registered Common Stock, par value $0.01 per share NASDAQ Global Market Indicate by check mark if the registrant is a well-known seasoned issuer, as de?ned in Rule 405 of the Securities Act. Yes El No Indicate by check mark if the registrant is not required to ?le reports pursuant to Section 13 or Section 15(d) of the Act. Yes El No Indicate by check mark whether the registrant (1) has ?led all reports required to be ?led by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to ?le such reports), and (2) has been subject to such ?ling requirements for the past 90 days. Yes No El Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (?232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such ?les). Yes No El Indicate by check mark if disclosure of delinquent ?lers pursuant to Item 405 of Regulation S-K (?229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant?s knowledge, in de?nitive proxy or information statements incorporated by reference in Part of this or any amendment to this Form 10-K. El Table of Contents WESTMORELAN COAL COMPANY AND SUBSIDIARIES Consolidated Balance Sheets December31, December 31, 2015 2014 (In thousands) Assets Current assets: Cash and cash equivalents 22,936 55 14,258 Receivables: Trade 134,141 143,052 Loan and lease receivables 6,157 0,403 contractual third-party reclamation receivables 8,1120 12.4 62 Other 11,598 19,923 159,916 185,930 Inventories 121,858 133,855 Other current assets 16,103 13,645 Total current assets 320,813 347,688 Property, plant and equipment: Land and mineral rights 476,447 500,226 Plant and equipment 790,677 956,1 [2 1,267,124 1,456,338 Less accumulated depreciation, depletion and amortization 554,008 52 8,6 76 Net property, plant and equipment 713,116 927,662 Loan and lease receivables 49,313 73.180 Advanced coal royalties 19,781 17,508 Reclamation deposits 77,364 77,907 Restricted investments and bond collateral 140,807 164,389 Contractual third-party reclamation receivables, less current portion 36,915 104,02] Investment in joint venture 27,3 74 33,409 Erangihle assets, net oi?aceumulated amortization (?8159 million and $15.3 million at December 31, 2015 and December 31, 2014. respectiver 29,190 31,315 hOther assets 37,723 39,416 [Total Assets 1,502,396] 3,816,495 See accompanying Notes to Consolidated Financial Statements. 76 Current installments of long-term debt 3% 38,852 43,136 Revolving lines of credit 1,970 9,576 Accounts payable and accrued expenses: Trade and other accmed liabilities 109,850 149,514 Interest payable 15,527 2,699 Production taxes 46,895 45,747 Postretirement medical bene?ts 13,855 13,263 Pension and SERP 368 368 Deferred revenue 10,715 13,175 Asset retirement obligations 43,950 43,289 Other current liabilities 30,688 53,130 Total current liabilities 312,670 373,897 Long-term debt, less current installments 1,004,892 932,075 Workers? compensation, less current portion 5,068 6,315 Excess of black lung bene?t obligation over trust assets 17,220 11,252 Postretirement medical costs, less current portion 285,518 293,156 Pension and SERP obligations, less current portion 44,808 49,779 Defen?ed revenue, less current portion 24,613 35,255 Asset retirement obligations, less current portion 375,813 409,456 Intangible liabilities, net of accumulated amortization of $9.8 million at December 31, 2015 and $13.5 million at December 31, 2014, respectively 3,470 4,538 Deferred income taxes 21,769 Other liabilities 30,208 28,448 [Total liabilities 7 2,104,28(Ll 2,165,940 Sliarelmlders' deficit: Preferred stock of $1.00 par value Authorized 5,000,000 shares; no issued and outstanding shares at December 31, 2015 and 91,669 shares issued and outstanding at December 31, 2014 92 Common stock of $0.01 par value as of December 31, 2015 and $2.50 par value as of December 31, 2014 Authorized 30,000,000 shares; Issued and outstanding 18,162,148 shares at December 31, 2015 and 17,102,777 shares at December 31, 2014, respectively 182 42,756 Other paid?in capital 240,721 185,644 Accumulated other comprehensive loss (171,300) (124,296) Accumulated de?cit (672,219) (468,902) Total shareholders? de?cit (602,616) (364,706) Noncontrolling interests in consolidated subsidiaries 732 15,261 i i? (601,884)i (349,445) Total Liabilities and 7? 3? 1,502,396 1,816,495 Table of Contents WESTMORELAND COAL COMPANY AND SUBSIDIARIES Consolidated Balance Sheets (Continued) December3l, 2015 December 31, 2014 (1n thousands) Liabilities and Shareholders? De?cit Current liabilities: See accompanying Notes to Consolidated Financial Statements. 77 As disclosed in Item 15 ?Note 12, Debt and Capital Leases, to the Consolidated Financial Statements, certain of GenOn's senior unsecured notes mature in 2017 and 2018.1fGenOn is not able to re?nance these notes prior to their maturities, it may have an adverse impact on GenOn's ?nancial position. GenOn will consider all options available to it, including re?nancing the notes, potential sales ofcertain generating assets or issuances ofnew debt securities. Given current economic and market conditions, including the depressed commodity markets, GenOn may be unable to complete these actions on a timely basis or on satisfactory terms or at all. These actions also may not be sufficient to enable GenOn to continue to satisfy its related cash commitments as they become due. GenOn?s ?nancial position continues to be adversely affected by a sustained decline in natural gas prices and its resulting effect on wholesale power prices. In addition, GenOn Mid?Atlantic and REMA are currently unable to make distributions ofeash and certain other restricted payments to GenOn. If gas and power prices remain depressed, GenOn may be unable to generate suf?cient cash ?ow from operations to meets its long-term liquidity requirements, including operating, maintenance and capital expenditures and debt service payments. Credit Ratings Credit rating agencies rate a ?rm?s public debt securities. These ratings are utilized by the debt markets in evaluating a ?rm's credit risk. Ratings influence the price paid to issue new debt securities by indicating to the market the Company's ability to pay principal, interest and preferred dividends. Rating agencies evaluate a ?rrn's industry, cash ?ow, leverage, liquidity, and hedge pro?le, among other factors, in their credit analysis ofa ?nn's credit risk. On October 2, 2015, Standard Poor's, or lowered its corporate credit ratings on GenOn, GenOn Mid?Atlantic, REMA and GenOn Americas Generation to ?om B-. The ratings outlook for GenOn, GenOn Mid-Atlantic, REMA and GenOn Americas Generation is stable. also lowered the issue ratings on the GenOn senior notes, the pass-through certi?cates at GenOn Mid?Atlantic and the GenOn Americas Generation senior notes to from B. The issue rating on the pass-through certi?cates was lowered by to from On September 18, 2015, reaf?rmed its corporate credit ratings on NRG Yield, Inc. and the Senior Notes due 2024. The rating outlook is stable. On October 6, 2015, Moody's lowered its corporate credit ratings on NRG Yield, Inc. and the NRG Yield Operating LLC Senior Notes due 2024 to Ba2 from Bal, respectively. The rating outlook is stable. On October21, 2015, reaffirmed its corporate credit ratings on NRG Energy, Inc. and its secured and unsecured debt. The following table summarizes the credit ratings as ofDecember 31, 2015: - -- - ?r "stars-a ?l NRG Energy, Inc. BB- Stable Ba3 Stable 1 7.625% SeniorNotes, due 2018 rii" 8.25% Senior Notes, due 2020 BB- B1 7.875% SeniorNotes, due 2021 BB- B1 6.25% Senior Notes, due 2022 BB- B1 6.625% Senior Notes, due 2023 B1 6.25% Senior Notes, due 2024 B1 Term Loan Facility, due 2018 Baa3 GenOn 7.875% Senior Notes, due 2017 B- B3 GenOn 9.500% Senior Notes, due 2018 B- B3 GenOn 9.875% Senior Notes, due 2020 B- B3 GenOn Americas Generation 8.500% Senior Notes, due 2021 B- Caal GenOn Americas Generation 9.125% SeniorNotes, due 2031 B- Caal NRG Yield, Inc. Stable Ba2 Stable 5.375% NRG Yield Operating LLC SeniorNotes, due 2024 Ba2 Sources afLiqur'dr'ty The principal sources ofliquidity for ?iture operating and capital expenditures are expected to be derived from new and existing ?nancing arrangements, existing cash on hand, cash ?ows from operations and cash proceeds from future sales of assets to NRG Yield, Inc. As described in Item 15 ?Note 12, Debt and Capital Leases, to the Consolidated Financial Statements, the Company's ?nancing arrangements consist mainly of the Senior Credit Facility, the Senior Notes. the GenOn Senior Notes, the GenOn Americas Generation Senior Notes, the NRG Yield 2019 Convertible Notes, the NRG Yield 2020 Convertible Notes, the Yield Operating seniorunsecured notes, the NRG Yield, Inc. revolving credit facility, and project-related ?nancings. 88 Attachment 4 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC. 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year ended December 3 1, 2015. El TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from to . Commission ?le No. 001?15891 NRG Energy, Inc. (Exact name of registrant as speci?ed in its charter) Delaware 41-1724239 (State or other jurisdiction of incorporation or organization) (IRS. Employer Identy?ican'on N0.) 211 Carnegie Center Princeton, New Jersey 08540 (Address ofprincioa! executive o?ices) (Zip Code) (609) 524-4500 Re istraiit's tei'e hone number, area code) 8' 3 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Exchange on Which Registered Common Stock, par value $0.01 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as de?ned in Rule 405 of the Securities Act. Yes No Indicate by check mark if he registrant is not required to ?le reports pursaant to Section 13 or Section 15(d) of the Exchange Act. Yes El No Indicate by check mark whether U16 regis?n?ant (1) has ?led all reports to be ?led by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that die registrant was required to ?le such reports), and (2) has been subject to such ?ling requirements for the past 90 days. Yes No El Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (?232.405 of this chapter) during the preceding 12 months (or for such Shorter period that the registrant was required to submit and post such ?les). Yes No El Indicate by check mark if disclosure of delinquent ?lers pursuant to Item 405 of Regulation 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant?s knowledge, in de?nitive proxy or information statements incorporated by reference in Part of this Form 10-K or any amendment to this Form 10? Indicate by check mark whether the registrant is a large accelerated ?ler, an accelerated ?ler, a non?accelerated ?ler, or a smaller reporting company. See the de?nitions of large accelerated filer," "accelerated ?ler" and "smaller reporting company" in Rule 12b?2 of the Exchange Act. Large accelerated ?ler Accelerated ?ler El Non-accelerated ?ler El Smaller reporting company El (Do not check if a smaller reporting c0mpany) Indicate by check mark whether the registrant is a shell company (as de?ned in Rule 12b-2 of the Act). Yes El No As of the last business day of die most recently completed second ?scal quarter, die aggregate market Value of the common stock of the registrant held by non-af?liates was approximately $6,713,289,37l based on the closing sale price of $22.88 as reported on the New York Stock Exchange. Indicate me number of shares outstanding of each of the registrant's classes ofcommon stock as of the latest practicable date. Class Outstanding at Januarv31, 2016 Common Stock, par value $0.01 per share 314,890,647 Documents Incorporated by Reference: Portions of the Registrant's de?nitive Proxy Statement relating to its 2016 Annual Meeting of Stockholders are incorporated by reference into Part of this Annual Report on Form REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders NRG Energy, Inc: We have audited NRG Energy, Inc.?s internal control over ?nancial reporting as of December 31, 2015, based on criteria established in Internal Control 7 Integrated Framework (2013) issued by the Committee of Sponsoring Organizations ofthe Treadway Commission (COSO). NRG Energy, Inc?s management is responsible for maintaining effective internal control over ?nancial reporting and for its assessment ofthe effectiveness ofintemal control over ?nancial reporting, included in the accompanying Management?s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company?s internal control over ?nancial reporting based on our audit. We conducted our audit in accordance with the standards ofthe Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective intemal control over ?nancial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over ?nancial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of intemal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company?s internal control over ?nancial reporting is a process designed to provide reasonable assurance regarding the reliability of ?nancial reporting and the preparation of ?nancial statements for external purposes in accordance with generally accepted accounting principles. Acompany's internal control over ?nancial reporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that, in reasonable detail, accurately and fairly re?ect the transactions and dispositions ofthe assets ofthe company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of?nancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures ofthe company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunautlrorized acquisition, use, or disposition ofthe company?s assets that could have a material effect on the ?nancial statements. Because ofits inherent limitations, internal control over ?nancial reporting may not prevent or detect misstatements. Also, projections ofany evaluation of effectiveness to ?rture periods are subject to the risk that controls may become inadequate because ofchanges in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate. In our opinion, NRG Energy, Inc. maintained, in all material respects, effective internal control over ?nancial reporting as ofDecember 31, 2015, based on criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations ofthe Treadway Commission (COSO). We also have audited, in accordance with the standards ofthe Public Company Accounting Oversight Board (United States), the consolidated balance sheets Energy, Inc. and subsidiaries as ofDecember 31, 2015 and 2014, and the related consolidated statements ofoperations, comprehensive (loss)/income, cash ?ows, and stockholders? equity for each of the years in the three-year period ended December 31, 2015, and our report dated February 29, 2016 expressed an unquali?ed opinion on those consolidated ?nancial statements. (signed) KPMG LLP Philadelphia, PA February 29, 2016 116 NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, 2015 2014 (In millions) ASSETS Current Assets Cash and cash equivalents 5 1.5.18 :5 2,1 1 5 Funds deposited by counterparties NM 7? Restricted cash 414 45? Accounts receivable trade, less allowance for doubt?il accounts of$21 and $23 LI I ,322 hts?t?ff 1252 L247 Derivative instruments L9 5 3.4 2 5 paid inl?snnpoit ot?ener?gy risk management aetivities 568 18 Renewable energy grant receivable 13 135 Cuttent assets held-for-sale 6 Prepayments andLher current assets 442 447 Totaleurrent assets 1,391 8.403 Property, Plant and Equipment 1 In service 24,909 29,487 Under construction 627 770 Total property, plant and etiuipment 25 .536 30,2 Less accumulated depreciation ((1,304) ("3.390) ~Wet property, plant and equipment IEJJZ I 22.36? Other Assets Equi-ty investments in ~a??iliates 1,045 "I'll Notes receivable. less current portion 53 12 Goodwin 2.5 14 Intangible assets, net ot'accumulated amortization of$ ,5 25 and $1,402 23?13) 2,567 trust 111ml 56! 585 Derivative instruments 3'05 480 D?fe'rred income taxes I ti? 1.530 Non~cunent assets held-f0 r?sale 105 3' Utiier mono-current assets 1,2 14 U145 Total other assets 6,759 9,691 [iota] Assets 5 32,882 I 40,466 See notes to Consolidated Financial Statements. 127 NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) LIABILITIES AND EQUITY Current Liabilities cogent?portion of long-teim debt and capital leases Accounts payable De?ifativeinstiuments Accrued interest e?XpenSe Other accrued expenses Cu??e'nt liabilities held-for-sale Other current liabilities As of December 31, 2015 2014 (In millions, except share data) Other Liabilities Longs-termdebt and gapital leases Nuclear decommissioning reserve Nuclear decommissioning liability Postretirement and other bene?t obligations Defeired incom?'t??s Derivative instruments Non-current liabilities held-for?sale (linemen-current liabilities Total Liabilities Redeemable nonconia'olling interest in subsidiaries Commitments and Contingencies Stockholders' Equity Additional paid-in capital Retained Accumulated other comprehensive loss Noncontrolling interest 481 4 7-1 869 I A 1,72 2,054 Cash collateral received in support ofenergy risk management activities 106 72 242 252 568 553 2 386 394 Wes 4.359 18,983 19.70493 438 Outioii-ma?get contracts, net of accumulated amortization of $664 and $562 1 ,l 46 .244 .4 900 847 Total non?current liabilities 22,742 23,621 27,1 23.430 2.822% convertible perpetual preferred stock; value; 250,000 shares issued and outstanding 302 291 29 19 Common stock; $0.01 par value; 500,000,000 shares authorized; 416,939,950 and 415,506,176 shares issued; and 314,190,042 and 336,662,624 shares outstanding at December 31,2015 and 2014 4 4 8,296 8.327 (3,007) 3.588 Less treasury stock, at cost; 102,749,908 and 78,843,552 shares at December3 l, 2015 and 2014 (2,413) .983] (173) {174] 2,727 1,914 Total Stockholders' Equity 5,434 11,676 32,882 40,466 Total Liabilities and Stockholders' Equity See notes to Consolidated Financial Statements. 128 RAILROAD COMMISSION OF TEXAS David Porter, Chairman Christi Craddick, Commissioner Ryan Sitton, Commissioner Financial Services INTERNAL MEMORANDUM TO: John E. Caudle, Director Surface Mining and Reclamation Division (SMRD) THROUGH: Bob Hopper, Financial Reporting Manager Financial Services Railroad Mon 0chan FROM: Adriaan Kanaar RECEIVED Financial Services 0 l' 16 . DATE May 4, 20 sum Mining Wm SUBJECT: Texas Westmoreland Coal Company (TWCC) Permit Nos. 32G and 47A Audited Annual Financial Statements 2015 NRG Energy, Inc. (NRG) File Reference Nos. 1609701 and 1609702 Texas Westmoreland Coal Company (TWCC) As requested in your memorandum dated April 7, 2016, Financial Services has reviewed the audited annual ?nancial statements for Texas Westmoreland Coal Company (TWCC) and its third party guarantor NRG Energy, Inc. (NRG) that were submitted by TWCC. Speci?cally, the Surface Mining and Reclamation Division (SMRD) requested review of submission to determine if TWCC and NRG continued to meet the requirements for the self-bonds for Permit Nos. 32G and 47A. TWCC submitted documentation showing that TWCC continues to meet the requirement of 16 TEX. ADMIN. CODE however, NRG does not continue to meet the requirements of 16 TEX. ADMIN. CODE Therefore, TWCC and NRG do not continue to meet the ?nancial requirem_ent_s under which the self-bonds were approved. Attached is a worksheet showing that NRG does not continue to meet the ?nancial requirements of 16 TEX. ADMIN. CODE To meet the requirements of 16 TEX. ADMIN. CODE a third party guarantor of a self-bond must meet the requirements of one of 16 TEX. ADMIN. CODE or audited ?nancial statements for the year ended December 31, 2015, show that NRG does not meet any of the requirements of 16 TEX. ADMIN. CODE To meet the requirements of 16 TEX. ADMIN. CODE the amount of self?bonds backed by the third party guarantor cannot exceed 25% of the third party guarantor?s tangible net worth in the United States. audited ?nancial statements for the year ended December 31, 2015, show that the amount of self-bonds backed by NRG is equal to 3.09% of tangible net worth in the United States. Therefore, TWCC submitted documentation showing that NRG continues to meet the requirements of 16 TEX. ADMIN. CODE 16 TEX. ADMIN. CODE requires a surface mining self-bond applicant to submit annual audited ?nancial statements within 90 days of the close of the ?scal year both the applicant and its third party guarantor. By letter dated March 31, 2016, TWCC submitted audited financial statements for the year ended December 31, 2015, for both TWCC and NRG. Therefore, TWCC and NRG continue to meet the requirements of 16 TEX. ADMIN. CODE Texas Westmoreland Coal Company (TWCC) Review of Audited Financial Statements 2015 NRG Energy, Inc. (NRG) April 28, 2016 Page 2 In summary, while audited ?nancial statements for the year ending December 31, 2015 meet the requirements of 16 TEX. ADMIN. CODE and (B), they do not meet the requirements of 16 TEX. ADMIN. CODE and therefore do not continue to meet the ?nancial requirements under which the self-bonds were approved. Please contact Adriaan Kanaar at (512) 463-8850 if you have any questions regarding this review. cc: Alex Schoch, Of?ce of General Counsel Self-Bond -- Annual Financial Review -- Permit Nos. 326 47A as Westmoreland Coal Company 3rd Party Guarantor NRG Energy - Audited Financial Statements Section Applicant must meet one or more of the following: Criterion #1 Current rating for its most recent bond issuance of or higher as issued by either Moody's Investor Service or Standard and Poor's Tangible net worth of at least $10 million *Owner's Equity Intangibles Goodwill total assets - total liabilities=net worth (owner's equity) Tangible net worth FAILS Requirement 2 Ratio of total liabilities to net worth of 2.5 times or less Total Liabilities *Net Worth Ratio LiabilitiesINet Worth MEETS Requirement 3 Ratio of current assets to current liabilities of 1.2 times or greater Current Assets Current Liabilities Ratio Current Asset/Liabilities noes Nor Meet the requirements of 16 TAC 5,765,000,000 (2,310,000,000) (999,000,000) 2,456,000,000 27,117,000,000 5.765.000.000 4.70 7,391,000,000 4,375,000,000 1.69 Corporation Reference FAILS Current Rating Moody Ba3 PG 88 A Standard and Poor BB- PG 88 noes nor [Meet the requirements of 16 TAC Criterion #2 12.3090) (2) (0)10) Musl meet all of the following requirements: MEETS Requirement 1 Reference PG 127 PG, 128D PG.127C PG 1278 Calculation PG. 128 PG 127 128D Calculation PG 127 PG 128F Calculation Criterion #3 Must meet ail of the following reqwrements: MEETS Requirement 1 Fixed assets in US total at least $20 million Fixed Assets FAILS Requirement 2 18,732,000,000 Ratio of total liabilities to net worth of 2.5 times or less Total Liabilities 27,117,000,000 *Net Worth Ratio LiabilitiesiNet Worth MEETS Requirement 3 5,765,000,000 4.70 Ratio of current assets to current liabilities of 1.2 times or greater Current Assets Current Liabilities Ratio Current AssetiLiabilities I DOES NOT Meet the requirements of 16 TAC 4,375,000,000 1.69 Reference PG, 128 PG. 127 K8: PG. 128 Calculation PG. 127 P6128 Calculation Criterion #4 FAILS MEETS MEETS FAILS FAILS MEETS Must meet first requirement and either two or three: Regirement 1 Has investment?grade rating for its most recent bond issuance of "Baa3" or higher from Moody's Investor Service and or higher from Standard and Poor's Corporation Investment-Grade Rating Moody Standard and Poor Requirement 2 Must meet all of the following requirements #1 Tangible net worth of at least $10 million Tangible net worth #2 333 BB- Fixed assets in US total at least $20 million Fixed Assets #3 Ratio of total liabilities to net worth of 2 5 times or less 0R less then industry median reported by Dun and Bradstreet for applicant's primary SIC code Total Liabilities 2,456,000,000 18,732,000,000 27,117.000,000 *Net Worth Ratio LiabilitieslNet Worth #4 5,765,000.000 4.70 Ratio of current assets to current liabilities that is equal or greater than industry median reported by Dun and Bradstreet for applicant's primary SIC code 0R current credit rating of or higher from industry median Current Assets 7.391.000.0013 Current Liabilities Ratio Current Asset/Liabilities Current Credit Rating OR Requirement 3 4,375,000,000 1.69 NIA Must meet all of the following requirements: #1 *Net worth of at least $100 million Net worth #2 5,765,000,000 Reference PG 88A PG 888 Calculated Above PG 127J PG. 128D PG 127 PG. 128 Calculation PG 127E PG 128F Calculation PG 127 8: PG. 128 MEETS Fixed assets in US total at least $20 million Fixed Assets 18,732.000,000 PG. 127 MEETS #3 Has outstanding securities pursuant to the provision of the Securities Act of 1933 and subject to periodic financial reporting requirements established by the Securities Act of 1934 YES Per 10-K #4 MEETS Applicant's present and proposed self-bonds and guaranteed self-bonds for surface mining and reclamations operations not exceed 16.67% of the guarantor's net worth in US. Bonds (permit No. 32F - $57.5m and permit No 47A - $18 5m) 75900300 Memo *Net Worth 5,765,000,000 PG 127' PG 128 16.67% Test 1.32% Calculation noes nor Meet the requirements of 16 TAC Section 12.309ii114HBl Limit on Amounts of Third-Party Guarantee Applicant's present and proposed self-bonds and guaranteed self-bonds for surface mining and reclamations operations not exceed 25% of the guarantor's tangible net worth in US. MEETS Bonds (permit N0. 32l- - 355/ cm and permit N0. $16.bm) 76_000_000 Memo Tangible Net Worth 2,456,000,000 Calculated Above 25% Test 3.09% Calculation I DOES [Meet the requirements of 16 TAC As disclosed in Item 15 Note 12, Debt and Capital Leases, to the Consolidated Financial Statements, certain ofGenOn?s senior unsecured notes mature in 2017 and 2018. If GenOn is not able to re?nance these notes prior to their maturities, it may have an adverse impact on GenOn?s ?nancial position. GenOn will consider all options available to it, including re?nancing the notes, potential sales ofcertain generating assets or issuances ofnew debt securities. Given current economic and market conditions, including the depressed commodity markets, GenOn may be unable to complete these actions on a timely basis or on satisfactory terms or at all. These actions also may not be suf?cient to enable GenOn to continue to satisfy its related cash commitments as they become due. GenOn?s ?nancial position continues to be adversely affected by a sustained decline in natural gas prices and its resulting effect on wholesale power prices. In addition, GenOn Mid-Atlantic and REMA are currently unable to make distributions of cash and certain other restricted payments to GenOn. If gas and power prices remain depressed, GenOn may be unable to generate suf?cient cash ?ow from operations to meets its long?term liquidity requirements, including operating, maintenance and capital expenditures and debt service payments. Credit Ratings Credit rating agencies rate a ?rm's public debt securities. These ratings are utilized by the debt markets in evaluating a fnrn's credit risk. Ratings in?uence the price paid to issue new debt securities by indicating to the market the Company's ability to pay principal, interest and preferred dividends. Rating agencies evaluate a ?rm's industry, cash flow, leverage, liquidity, and hedge pro?le, among other factors, in their credit analysis ofa ?rrn's credit risk. On October 2, 2015, Standard Poor's, or lowered its corporate credit ratings on GenOn, GenOn Mid-Atlantic, REMA and GenOn Americas Generation to from B-. The ratings outlook for GenOn, GenOn Mid-Atlantic, REMA and GenOn Americas Generation is stable. also lowered the issue ratings on the GenOn senior notes, the pass-through certi?cates at GenOn Mid?Atlantic and the GenOn Americas Generation Senior notes to from B. The issue rating on the pass-through certi?cates of REMA was lowered by to from On September 18, 2015, reaf?rmed its corporate credit ratings on NRG Yield, Inc. and the Senior Notes due 2024. The rating outlook is stable. On October 6, 2015, Moody's lowered its corporate credit ratings on NRG Yield, Inc. and the NRG Yield Operating LLC Senior Notes due 2024 to Ba2 from Bal, respectively. The rating outlook is stable. On October 21, 2015, reaf?rmed its corporate credit ratings on NRG Energy, Inc. and its secured and unsecured debt. The following table summarizes the credit ratings as of December 31, 2015: A Moody?s NRG Energy, Inc. Stable (15) Ba3 Stable 7.625% Senior Notes, due 2018 B1 8.25% Senior Notes, due 2020 BB- Bl 7.875% Senior Notes, due 2021 BB- B1 6.25% Senior Notes, due 2022 BB- B1 6.625% Senior Notes, due 2023 BB- B1 6.25% Senior Notes, due 2024 BB- Bl Term Loan Facility, due 2018 Baa3 GenOn 7.875% Senior Notes, due 2017 B3 GenOn 9.500% Senior Notes, due 2018 B- B3 GenOn 9.875% Senior Notes, due 2020 B- B3 GenOn Americas Generation 8.500% Senior Notes, due 2021 B- Caal GenOn Americas Generation 9.125% Senior Notes. due 2031 B- Caal NRG Yield, Inc. Stable Ba2 Stable 5.375% NRG Yield Operating LLC Senior Notes, due 2024 Sources of Liquidity The principal sources of liquidity for NRG's future operating and capital expenditures are expected to be derived from new and existing ?nancing arrangements, existing cash on hand, cash ?ows from operations and cash proceeds from future sales of assets to NRG Yield, Inc. As described in Item 15 Note 12, Debt and Capital Leases, to the Consolidated Financial Statements, the Company's ?nancing arrangements consist mainly of the Senior Credit Facility, the Senior Notes, the GenOn Senior Notes, the GenOn Americas Generation Senior Notes, the NRG Yield 2019 Convertible Notes, the NRG Yield 2020 Convertible Notes, the Yield Operating senior unsecured notes, the NRG Yield, Inc. revolving credit facility, and project?related ?nancings. 88 NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, 2015 2.014 (In millions) ASSETS Current Assets Cash and cash equivalents 5 1,518 2,116 Funds deposited by counterparties 106 72 Restricted cash 414 457 Accounts receivable trade, less allowance for doubtful accounts of $21 and $23 1,157 1,322 Inventory 1,252 1,247 Den?vative instruments 1,915 2,425 Cash collateral paid in support of energy risk management activities 5 68 187 Renewable energy grant receivable 13 135 Current assets held?for-sale 6 Prepayments and other current assets 442 447 Total current assets 7,391 8,408 Property, Plant and Equipment In service 24,909 29,487 Under construction 627 770 Total property, plant and equipment 25,536 30,257 Less accumulated depreciation (6,804) (7,890) Net property, plant and equipment 18,732 22,367 Other Assets l? as Equity investments in af?liates 1,045 771 Notes receivable, less current portion 53 72 Goodwill 999 2,574 Intangible assets, net of accumulated amortization of $1,525 and $1,402 1' 2,310 2,567 Nuclear decommissioning trust fund 561 5 8 5 Derivative instruments 305 480 Deferred income taxes 167 1,580 Non?current assets held-for?sale 105 17 Other non-current assets 1,214 1,045 Total other assets 6,759 9,691 Total Assets 32,882 5 40,466 See notes to Consolidated Financial Statements. 127 NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) As of December 31, 2015 2014 (In millions, except share data) LIABILITIES AND EQUITY Current Liabilities Current portion oflong-teim debt and capital leases 481 474 Accounts payable 869 1,060 Derivative instruments 1,721 2,054 Cash collateral received in support of energy risk management activities 106 72 Accrued interest expense 242 252 Other accrued expenses 5 6 8 5 5 3 Current liabilities held?for?sale 2 - Other current liabilities 3 8 6 394 Total current liabilities l? 4,3 75 4,859 Other Liabilities Long-term debt and capital leases 18,9 83 19,701 Nuclear decommissioning reServe 326 310 Nuclear decommissioning trust liability 283 333 Postretirement and other bene?t obligations 5 88 727 Deferred income taxes 19 21 Derivative instruments 493 43 8 Out-of-market contracts, net of accumulated amortization of $664 and $562 1,146 1,244 Non?current liabilities held?for?sale 4 Other non-current liabilities 900 847 Total non-current liabilities . 22,742 23,621 Total Liabilities (El 27,1 17 28,480 - 2.822% convertible perpetual preferred stock; $0.01 par value; 250,000 shares issued and outstanding 302 291 Redeemable noncontrolling interest in subsidiaries 29 19 Commitments and Contingencies Stockholders' Equity Common stock; $0.01 par value; 500,000,000 shares authorized; 416,93 9,950 and 415,506,176 shares issued; and 314,190,042 and 33 6,662,624 shares outstanding at December 31, 2015 and 2014 4 4 Additional paid?in capital 8,296 8,3 27 Retained (3 ,007) 3 ,5 8 8 Less treasury stock, at cost; 102,749,908 and 78,843,552 shares at December 31, 2015 and 2014 (2,413) (1,983) Accumulated other comprehensive loss (173) (174) Noncontrolling interest 2,727 .914 Total Stockholders' Equity . 'pt' 5,434 11,676 Total Liabilities and Stockholders? Equity J, 32,882 40,466 See notes to Consolidated Financial Statements. 128