NRG GENERATING U S INC, DEF 14A, 1998-04-28

NRG GENERATING U S INC
DEF 14A, 1998-04-28
COGENERATION SERVICES & SMALL POWER PRODUCERS

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SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. _____ )

Filed by the Registrant X

Filed by a Party other than the Registrant

Check the appropriate box:

Preliminary Proxy Statement Confidential, For Use of the
Commission Only (as permitted
X Definitive Proxy Statement by Rule 14a-6(e)(2))
Definitive Additional Materials
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

NRG Generating (U.S.) Inc.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)

Payment of Filing Fee (Check the appropriate box):

X No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:

<PAGE>

[NRG Generating (U.S.) Inc. Letterhead]

1221 Nicollet Mall, Suite 610
Minneapolis, MN 55403-2444
Telephone: 612-373-8834
Fax: 612-373-8833

April 27, 1998

Dear Stockholder,

On behalf of the Board of Directors, I cordially invite you
to attend the 1998 Annual Meeting of Stockholders of NRG
Generating (U.S.) Inc. (the "Company"), which will be held at the
IDS Center, 50th Floor, 710 Marquette Avenue, Minneapolis,
Minnesota 55402, on Thursday, May 21, 1998, commencing at 1:00
p.m., local time (CDT). The matters to be acted upon at the
meeting are described in the attached Notice of Annual Meeting of
Stockholders and Proxy Statement.

Your vote on the business to be considered at the meeting is
important, regardless of the number of shares you own. Whether
or not you plan to attend the meeting, please complete, date,
sign and promptly return the accompanying proxy in the enclosed
prepaid envelope prior to the meeting so that your shares may be
represented at the Annual Meeting. Returning the proxy does not
deprive you of your right to attend the meeting and to vote your
shares in person.

Sincerely yours,

/s/ Karen A. Brennan
Karen A. Brennan
Secretary

<PAGE>

NRG Generating (U.S.) Inc.
1221 Nicollet Mall, Suite 610
Minneapolis, Minnesota 55403-2444

Notice of Annual Meeting of Stockholders
To be held on May 21, 1998

Notice is hereby given that the Annual Meeting of
Stockholders of NRG Generating (U.S.) Inc., a Delaware
corporation (the "Company"), will be held on Thursday, May 21,
1998, at 1:00 p.m., Central Daylight Time, at the IDS Center,
50th Floor, 710 Marquette Avenue, Minneapolis, Minnesota 55402
for the following purposes:
1. To elect eight directors for terms expiring at the
1999 annual meeting of stockholders;
2. To ratify the appointment of Price Waterhouse LLP
as the Company's independent public accountants;
3. To consider and vote upon a proposal to amend the
Company's Certificate of Incorporation to change
the Company's name to Cogeneration Corporation of
America;
4. To consider and vote upon a proposal to adopt the
NRG Generating (U.S.) Inc. 1998 Stock Option Plan;
and
5. To transact such other business as may properly
come before the meeting or any adjournment
thereof.

The Board of Directors has fixed the close of business on
April 10, 1998 as the record date for determining the
stockholders entitled to notice of, and to vote at, the Annual
Meeting or any adjournment thereof. A list of such stockholders
will be maintained at the Company's headquarters during the ten-
day period prior to the date of the Annual Meeting and will be
available for inspection by stockholders, for any purpose germane
to the meeting, during ordinary business hours. Please mark,
sign and date the enclosed proxy card and mail it promptly in the
accompanying envelope.

By Order of the Board of Directors,

/s/ Karen A. Brennan
Karen A. Brennan
Secretary

Minneapolis, Minnesota
April 27, 1998

IMPORTANT

WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN
THE ENVELOPE WHICH HAS BEEN PROVIDED. IN THE EVENT YOU ATTEND
THE ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR
SHARES IN PERSON.

<PAGE>

NRG Generating (U.S.) Inc.
1221 Nicollet Mall, Suite 610
Minneapolis, Minnesota 55403-2444
(612) 373-8834

Proxy Statement
Annual Meeting of Stockholders
To be held on May 21, 1998

General Information

The Board of Directors (the "Board of Directors") of NRG
Generating (U.S.) Inc., a Delaware corporation (the "Company"),
is furnishing this Proxy Statement to the holders of common
stock, par value $.01 per share (the "Common Stock"), of the
Company in connection with the solicitation of proxies for use at
the Annual Meeting of Stockholders (the "Annual Meeting") to be
held at 1:00 p.m., Central Daylight Time, on Thursday, May 21,
1998 and at any and all adjournments thereof.

A proxy delivered pursuant to this solicitation is revocable
at the option of the person giving the same at any time before it
is exercised. A proxy may be revoked, prior to its exercise, by
executing and delivering a later dated proxy card, by delivering
written notice of the revocation of the proxy to the Secretary of
the Company prior to the Annual Meeting, or by attending and
voting at the Annual Meeting. Attendance at the Annual Meeting,
in and of itself, will not constitute a revocation of a proxy.
Unless previously revoked, the shares represented by the enclosed
proxy will be voted in accordance with the stockholder's
directions if the proxy is duly executed and returned prior to
the Annual Meeting. If no directions are specified, the shares
will be voted FOR the election of the director nominees
recommended by the Board of Directors, FOR the ratification of
the appointment of Price Waterhouse LLP as the Company's
independent public accountants, FOR approval of the amendment to
the Company's certificate of incorporation to change the
Company's name to Cogeneration Corporation of America, FOR
approval of the adoption of the NRG Generating (U.S.) Inc. 1998
Stock Option Plan and in accordance with the discretion of the
named proxies on other matters properly brought before the Annual
Meeting.

The Company will bear the expense of preparing, printing and
mailing this Proxy Statement and soliciting the proxies sought
hereby. In addition to the use of the mails, proxies may be
solicited by officers, directors and employees of the Company,
who will not receive additional compensation therefor, in person,
or by telephone, telegraph or facsimile transmission. The Company
also will request brokerage firms, banks, nominees, custodians
and fiduciaries to forward proxy materials to the beneficial
owners of shares of Common Stock as of the record date and will
provide reimbursement for the cost of forwarding the proxy
materials in accordance with customary practice. Your cooperation
in promptly signing and returning the enclosed proxy card will
help to avoid additional expense.

This Proxy Statement and the enclosed proxy card are first
being mailed to stockholders on or about April 30, 1998. A
copy of the Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, as filed with the Securities and Exchange
Commission (the "Commission"), is being mailed with this Proxy
Statement.

<PAGE>

Quorum and Voting Requirements

The close of business on April 10, 1998 has been fixed as
the record date (the "Record Date") for the determination of
stockholders of the Company entitled to notice of and to vote at
the 1998 Annual Meeting of Stockholders (the "Annual Meeting").
Only stockholders of record at the close of business on the
Record Date will be entitled to notice of, and to vote at, the
Annual Meeting. On that date, the Company had outstanding
6,836,769 shares of its Common Stock. Each share of Common Stock
entitles the holder to one vote.

At the Annual Meeting, a quorum will consist of a majority
of the votes entitled to be cast by the holders of all shares of
Common Stock that are outstanding and entitled to vote.
Abstentions will be treated as present for purposes of
determining a quorum while shares held by a broker that the
broker fails to vote ("broker non-votes") will not be treated as
present for quorum purposes.

With regard to the election of directors ("Proposal One"),
votes may be cast for or votes may be withheld from each nominee.
Directors will be elected by plurality vote. Therefore, votes
that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may not be specified with
respect to the election of directors and, under applicable
Delaware law, broker non-votes will have no effect on the outcome
of the election of directors.

With regard to the ratification of independent public
accountants ("Proposal Two") and the adoption of the NRG
Generating (U.S.) Inc. 1998 Stock Option Plan ("Proposal Four"),
votes may be cast for or against the matter, or stockholders may
abstain from voting on each matter. Approval of Proposal Two and
Proposal Four each requires the affirmative vote of at least a
majority of the shares of Common Stock present or represented by
proxy at the meeting and entitled to vote. Therefore,
abstentions will have the effect of votes against the approval of
the matter. However, under applicable Delaware law, a broker non-
vote will have no effect on the outcome of Proposal Two or
Proposal Four.

With regard to the approval of the proposal to amend the
Company's certificate of incorporation to change the Company's
name to Cogeneration Corporation of America ("Proposal Three"),
votes may be cast for or against the matter, or stockholders may
abstain from voting on the matter. Approval of Proposal Three
requires the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual
Meeting. Since the required vote is based upon the number of
outstanding shares of Common Stock rather than the shares
actually voted in person or by proxy at the Annual Meeting, the
failure of a holder to submit a proxy or to vote in person at the
meeting (including abstentions and broker non-votes) will have
the same effect, for purposes of approval of Proposal Three, as a
vote against approval and adoption of Proposal Three.

<PAGE>

Proposal One:
Election of Directors

Action will be taken at the Annual Meeting for the election
of eight directors, each of whom will serve until the 1999 Annual
Meeting and until his or her successor is elected and qualified.
Proxies cannot be voted for a greater number of persons than the
number of nominees named therein.

The Company's Restated By-laws provide that no fewer than
two of the nominees of the Board of Directors must consist of
independent directors who are nominated by the Independent
Directors Committee. The Independent Directors Committee has
nominated Lawrence I. Littman and Charles J. Thayer to serve as
Independent Directors and has determined that each of them has
met the applicable By-law qualifications. If elected, these
individuals will constitute the Independent Directors Committee.

The Board of Directors has no reason to believe that any of
the nominees for director will not be available to stand for
election as director. However if some unexpected occurrence
should require the substitution by the Board of Directors or the
Independent Directors Committee of some other person or persons
for any one or more of the nominees, the proxies may be voted in
accordance with the discretion of the named proxies FOR such
substitute nominees.

The name, age, principal occupation for the last five years,
selected biographical information and period of service as a
director of the Company of each of the nominees for election as
director are set forth below.

David H. Peterson, age 56, has served as a Director of the
Company since April 1996 and Chairman of the Board of Directors
of the Company from April 1996 to December 1996 and since January
1998. He has also served as Chairman of the Board of NRG Energy,
Inc. ("NRG Energy") since January 1994, Chief Executive Officer
since November 1993, and President and a Director since 1989.
Mr. Peterson was also Chief Operating Officer of NRG Energy from
1992 to November 1993. NRG Energy owns approximately 45% of the
outstanding Common Stock of the Company and is a wholly-owned
subsidiary of Northern States Power Company ("NSP") that is
principally engaged in the acquisition, development and operation
of, and ownership of interests in, independent power production
and cogeneration facilities, thermal energy production and
transmission facilities, and resource recovery facilities. Prior
to joining NRG Energy, Mr. Peterson was Vice President, Non-
Regulated Generation for NSP, and he has served in various other
management positions with NSP during the last 20 years.

Julie A. Jorgensen, age 36, has served as a Director of the
Company since January 1998. Ms. Jorgensen has been Corporate
Secretary of NRG Energy since October 1997 and Senior Counsel
since June 1997. She was Vice President and General Counsel of
NRG Energy from December 1994 until June 1997, Assistant General
Counsel from January 1994 to December 1994 and Counsel from
January 1993 to January 1994.

Lawrence I. Littman, age 67, has served as an Independent
Director of the Company since April 1996. Since May 1996, Mr.
Littman has been a director of Car One, a division of Liberty Cab
& Limousine Company ("Liberty"). He was Chief Executive Officer
of Liberty from 1967

<PAGE>

to 1992 and General Manager from 1992 to May 1996. From 1984 to
June 1993, he served as Chief Executive Officer of Lil Stable,
Inc.

Craig A. Mataczynski, age 37, has served as a Director and
Assistant Secretary of the Company since April 1996. He has also
served as Vice President of U.S. Business Development for NRG
Energy since December 1994. From May 1993 to January 1995, Mr.
Mataczynski was President of NEO Corporation ("NEO"), a wholly-
owned subsidiary of NRG Energy that develops small electric
generation projects within the United States. Prior to joining
NEO, Mr. Mataczynski served from 1982 to June 1994 in various
managerial capacities at NSP, including Director, Strategy and
Development from March 1993 to June 1994 and Director, Power
Supply Finance from 1990 to March 1993.

Robert T. Sherman, Jr., age 45, has served as President,
Chief Executive Officer and a Director of the Company since May
1997. From 1991 to May 1997, Mr. Sherman was Vice President at
Cogen Technologies, Inc., a privately-held company developing
cogeneration projects. From 1985 to 1991, he served in various
capacities as a senior officer of CRSS Capital, Inc., a wholly-
owned subsidiary of CRSS Inc. that provides energy services to
industrial companies.

Spyros S. Skouras, Jr., age 44, has served as Director of
the Company since July 1995. He has also served as Senior Vice
President of Wexford Management LLC ("Wexford") since April 1995.
Prior to joining Wexford, Mr. Skouras was President of Skouras
Capital from 1991 to March 1995 and Chief Operating Officer of
Prudential-Grace Lines, Inc. from 1976 to 1990.

Charles J. Thayer, age 54, has served as an Independent
Director of the Company since April 1996. He has also served as
Managing Director of Chartwell Capital Ltd., a private NASD
member investment firm, since 1989. He was Chairman and Interim
Chief Executive Officer of Sunbeam Corporation from January 1993
to August 1993, Vice Chairman from April 1996 to August 1996 and
a director from 1990 to April 1997. Mr. Thayer has served as
Trustee of the Cystic Fibrosis Foundation since 1980 and
currently serves as Vice Chairman of the foundation and as
Chairman of the Board of Cystic Fibrosis Services. He is an
Advisory Director of the Louisville Community Development Bank.
Mr. Thayer is also a director of Digital Wireless Corporation.

Ronald J. Will, age 57, has served as a Director of the
Company since April 1996. He has also served as Vice President,
Operations and Engineering for NRG Energy since March 1994, and
as Vice President, Operations from 1992 to March 1994. Prior to
joining NRG Energy, he was President and Chief Executive Officer
of NRG Thermal Corporation, a wholly-owned subsidiary of NRG
Energy that provides customers with thermal services, from 1991
to 1992. Mr. Will served in a variety of positions with Norenco
Corporation, a wholly-owned thermal services subsidiary of NRG
Energy, including Vice President and General Manager from 1989 to
1991.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES
LISTED IN PROPOSAL ONE.

<PAGE>

Proposal Two:
Ratification of Independent Public Accountants

Price Waterhouse LLP ("Price Waterhouse") has served as the
Company's independent public accountants since April 30, 1996,
and has been reappointed by the Board of Directors to serve in
that capacity for the fiscal year ending December 31, 1998. A
representative of Price Waterhouse will be available at the
Annual Meeting to respond to appropriate questions and will be
given an opportunity to make a statement on behalf of Price
Waterhouse, if desired.

Although not formally required, the Board of Directors has
submitted the reappointment of the independent auditors of the
Company to the stockholders for ratification as a matter of sound
corporate practice. If the stockholders do not ratify the
appointment of Price Waterhouse, the Board of Directors will
reconsider the reappointment of the independent auditors. If the
stockholders ratify the appointment, the Board of Directors, in
its sole discretion, may still direct the appointment of other
independent auditors at any time if the Board of Directors
believes that such a change would be in the best interests of the
Company.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE AS
THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS.

Proposal Three:
Approval of the Amendment to the Company's Certificate of
Incorporation

On April 23, 1998, the Company's Board of Directors
approved a proposal to amend the Certificate of Incorporation to
change the Company's name to "Cogeneration Corporation of
America." This amendment to the Certificate of Incorporation
would be effective immediately upon filing the amended
Certificate of Incorporation with the Delaware Secretary of
State, which the Company anticipates filing as soon as
practicable after the Annual Meeting.

When the Company emerged from bankruptcy on April 30, 1996,
it changed its name from O'Brien Environmental Energy, Inc. to
NRG Generating (U.S.) Inc. The Company's Board of Directors has
approved the proposal to change the Company's name to
"Cogeneration Corporation of America" primarily to reduce the
likelihood that investors and others will confuse the Company
with its 45% stockholder, NRG Energy, Inc. In addition, the
Board of Directors also believes that the proposed new name will
reflect the Company's current and proposed business operations
and will assist the Company in attracting a broader spectrum of
investors, thereby benefiting both the Company and its
stockholders.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF
THE PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO CHANGE THE COMPANY'S NAME TO "COGENERATION CORPORATION OF
AMERICA."

<PAGE>

Proposal Four:
Approval of the NRG Generating (U.S.) Inc. 1998 Stock Option Plan

On April 20, 1998, the Board of Directors of the Company
adopted the NRG Generating (U.S.) Inc. 1998 Stock Option Plan
(the "1998 Plan") which authorizes the Company to grant options
to purchase up to 250,000 shares of the Company's Common Stock.
The Company will not receive consideration for such option
grants. The Compensation Committee of the Board of Directors
retained a compensation consultant in February 1998 to review and
recommend appropriate changes in the Company's compensation
policy. The 1998 Plan incorporates certain recommendations of
the compensation consultant, including (i) the number of shares
reserved for issuance under the 1998 Plan and (ii) allowing
certain key third parties who contribute or are able to
contribute to the success of the Company to participate in the
1998 Plan.

Under the 1998 Plan, the Company has the authority to grant
both nonqualified stock options ("NQSOs") and incentive stock
options ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). In order
for the Company to issue ISOs under the 1998 Plan, stockholder
approval of the 1998 Plan is required under both the Code and the
1998 Plan. Accordingly, the 1998 Plan is being submitted to the
stockholders for their approval so that the Company may issue
such ISOs.

Major Provisions of the 1998 Plan

The following summary of the 1998 Plan outlined below is
qualified in its entirety by reference to the full text of the
1998 Plan, which is set forth in the attached Appendix A. The
major provisions of the 1998 Plan are as follows:

Purpose: The purpose of the 1998 Plan is to maximize the
long-term success of the Company, to ensure a balanced emphasis
on both current and long-term performance, to enhance
participants' identification with stockholders' interests and to
facilitate the attraction and retention of key individuals with
outstanding abilities. The 1998 Plan provides for the grant to
members of the Board of Directors, officers and key employees of
the Company and its subsidiaries and such other individuals,
including but not limited to employees of the Company's
affiliates, who occupy responsible managerial, professional or
advisory positions and who have the capability of making a
substantial contribution to the success of the Company, of
options to purchase shares of the Common Stock of the Company.

Administration: In adopting the 1998 Plan, the Board of
Directors designated the Compensation Committee (the "Committee")
to administer the 1998 Plan. In order to allow for the Company's
maximum tax deductibility under Section 162(m) of the Code, the
Committee may delegate certain of its responsibilities under the
1998 Plan to a subcommittee composed solely of "outside
directors" as such term is defined under Section 162(m).
References in this discussion of the 1998 Plan to the Committee
shall be deemed to include the Committee or any other committee
or person whom the Board of Directors designates to administer
the 1998 Plan.

Eligibility: The persons who are eligible to receive awards
pursuant to the 1998 Plan are members of the Board of Directors
(including any director emeritus), officers and key employees of
the Company and its subsidiaries and such other individuals,
including but not limited to

<PAGE>

employees of the Company's affiliates, who occupy responsible
managerial, professional or advisory or other positions and who
have made or have the capability of making a substantial
contribution to the success of the Company, as the Committee
selects from time to time. The Company estimates that at the
present time approximately 110 of its employees are eligible to
participate in the 1998 Plan. In addition, each of the eight
directors who are not employees or officers of the Company and
any director emeritus are eligible to participate in the 1998
Plan.

Option Types: The 1998 Plan permits the Committee to grant,
in its discretion, ISOs and NQSOs. Stock options designated as
ISOs will comply with Section 422 of the Code. The Company's
officers and key employees and employees of its subsidiaries are
eligible to receive either ISOs or NQSOs under the 1998 Plan.
Other individuals, including directors, who are not employees or
officers of the Company may only receive NQSOs under the 1998
Plan.

Option Price: The Committee determines the exercise price
per share of the options but, in the case of ISOs, the price will
in no event be less than the Fair Market Value (as defined in the
1998 Plan) of a share of Common Stock on the date the ISO is
granted.

Time and Manner of Exercise: Options may be exercised in
whole at any time, or in part from time to time, with respect to
whole shares only, within the period permitted for exercise and
shall be exercised by written notice to the Company. Payment for
shares of Common Stock purchased upon exercise of an option shall
be made in cash or by optionee's personal check, certified check
or bank draft or, in the Committee's discretion (which in the
case of an ISO will be determined at the time of the grant): (i)
in shares of Common Stock owned by the optionee or with shares of
Common Stock withheld from the shares otherwise deliverable to
the optionee upon exercise of an option; (ii) by delivery of an
irrevocable direction to a securities broker to sell shares of
Common Stock and deliver all or a portion of the proceeds to the
Company in payment for the Common Stock; (iii) by delivery of the
optionee's promissory note; or (iv) in any combination of the
foregoing. In addition to the payment of the option price, the
participant shall pay to the Company in cash or in Common Stock
the amount the Company is required to withhold or pay under
federal or state law with respect to the exercise of the option
or, in the alternative, the number of shares delivered by the
Company under exercise of the option shall be appropriately
reduced to reimburse the Company for such payment.

Change in Control: The Committee has the discretion to
provide in any stock option under the 1998 Plan that, in the
event of a change of control or a corporate transaction, such
option will become immediately exercisable and remain exercisable
for the full remaining term of the option (without regard to
termination of the optionee's employment). Under the 1998 Plan,
a "change of control" occurs upon (i) the acquisition of more
than 50% of the voting power of the Company by any person, (ii) a
change in the composition of the members of the Board over a
three-year period or less to include a majority of persons not
serving on the Board at the beginning of the period or
nominated by such persons, or (iii) the merger or consolidation
of the Company into NRG Energy. Under the plan, a "corporate
transaction" consists of approval by the stockholders of (i) a
merger or consolidation in which the Company is not the surviving
entity, (ii) the sale of all or substantially all of the assets
of the Company, or (iii) any reverse merger or other acquisition
or business combination in which the Company is the surviving
entity in which holders of the Company's voting securities prior
to the merger do not own at least 50% of the voting power of the
Company after the merger.

<PAGE>

Nontransferability: During the lifetime of the participant,
options awarded under the 1998 Plan may be exercised only by such
person or by such person's guardian or legal representative.

Amendment or Termination of the 1998 Plan: The Board of
Directors may terminate and in any respect amend or modify the
1998 Plan, except that stockholder approval is required in order
to (i) increase the total number of shares of Common Stock
available under the 1998 Plan (unless such increase is a result
of changes in capitalization as described in the 1998 Plan);
(ii) materially increase the benefits accruing to participants
under the 1998 Plan; (iii) materially modify the requirements as
to eligibility for participation in the 1998 Plan; (iv) extend
the period during which any option may be granted or exercised;
or (v) extend the term of the 1998 Plan. Except as otherwise
provided in the 1998 Plan, no amendment, modification, or
termination of the 1998 Plan shall in any manner adversely affect
the rights of any participant under the 1998 Plan without the
consent of such participant.

Federal Income Tax Consequences of the 1998 Plan

Incentive Stock Options

Under the Code, an employee generally recognizes no regular
taxable income as the result of the grant or exercise of an ISO.
However, an amount equal to the difference between the fair
market value of the stock on the date of exercise and the
exercise price will be treated as an item of adjustment in the
year of exercise for purposes of the alternative minimum tax.

The Company will not be allowed a deduction for federal
income tax purposes in connection with the grant or exercise of
an ISO, regardless of the applicability of the alternative
minimum tax to the optionee. The Company will be entitled to a
deduction, however, to the extent that ordinary income is
recognized by the optionee upon a disqualifying disposition (see
below).

Upon a sale or exchange of the shares at least two years
after the grant of an ISO and one year after exercise of the
option, gain or loss will be recognized by the optionee equal to
the difference between the sale price and the exercise price.
Such gain or loss will be characterized for federal income tax
purposes as long-term capital gain or loss. The Company is not
entitled to any deduction under these circumstances.

If any optionee disposes of shares acquired upon issuance of
an ISO prior to completion of either of the above holding
periods, the optionee will have made a "disqualifying
disposition" of the shares. In such event, the optionee will
recognize ordinary income at the time of disposition equal to the
difference between the exercise price and the lower of the fair
market value of the stock at the date of the option exercise or
the sale price of the stock. The Company generally will be
entitled to a deduction in the same amount as the ordinary income
recognized by the optionee on a disqualifying disposition.

If the sale price of the stock is lower than the exercise
price, the optionee generally will be entitled to a capital loss
equal to the difference. If the sale price of the stock exceeds
the fair market value of the stock on the date of option
exercise, the optionee will recognize capital gain

<PAGE>

on such disqualifying disposition in an amount equal to the
difference between (i) the amount realized by the optionee
upon such disqualifying disposition of the stock and (ii) the
exercise price, increased by the total amount of ordinary income,
if any, recognized by the optionee upon such disqualifying
disposition (as described in the second sentence of the preceding
paragraph). Any such capital gain or loss resulting from a
disqualifying disposition of shares acquired upon exercise of an
ISO will be long-term capital gain or loss if the shares with
respect to which such gain or loss is realized have been held for
more than twelve months.

Nonqualified Stock Options

An optionee generally recognizes no taxable income as the
result of the grant of any NQSO, assuming that the option does
not have a readily ascertainable fair market value at the time it
is granted (which is usually the case with plans of this type).
Upon exercise of an NQSO, an optionee will normally recognize
ordinary compensation income for federal tax purposes equal to
the excess, if any, of the then fair market value of the shares
over the exercise price. Optionees who are employees will be
subject to withholding with respect to income recognized upon
exercise of an NQSO.

The Company will be entitled to a tax deduction to the
extent and in the year that ordinary income is recognized by the
exercising optionee, so long as the optionee's total compensation
is deemed reasonable in amount.

Upon a sale of shares acquired pursuant to the exercise of
an NQSO, any difference between the sale price and the fair
market value of the shares on the date of exercise will be
treated as capital gain or loss, and will qualify for long-term
capital gain or loss treatment if the shares have been held for
more than twelve months.

Information Regarding New Plan Benefits

Awards under the 1998 Plan are based upon the Company's
performance. Accordingly, future awards ("new plan benefits")
under the Stock Incentive Plan are not determinable at this time.
Reference is made to the section captioned "Executive and
Director Compensation" of this Proxy Statement for detailed
information on stock incentive awards and exercises of such
awards by certain executive officers under the 1996 Stock Option
Plan and the 1997 Stock Option Plan.

Market Price of the Common Stock

The closing price of the Common Stock as quoted on the
Nasdaq National Market was $15.50 per share on March 31, 1998.
As of such date the approximate aggregate market value of the
shares of Common Stock available for issuance under the 1998 Plan
was $3,875,000.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF
THE 1998 PLAN.

<PAGE>

Other Matters

The Board of Directors knows of no other matters to be
brought before the Annual Meeting. However, if any other matters
are properly brought before the Annual Meeting, it is the
intention of the named proxies in the accompanying proxy to vote
in accordance with their judgment on such matters.

Additional Information

Executive Officers of the Company

The executive officers of the Company are elected annually
and serve at the pleasure of the Board of Directors. The
following sets forth certain information with respect to the
executive officers of the Company.

Robert T. Sherman, Jr., age 45, has served as President,
Chief Executive Officer and a Director of the Company since May
1997. See "Proposal One: Election of Directors" for
biographical information concerning Mr. Sherman.

Timothy P. Hunstad, age 40, has served as Vice President and
Chief Financial Officer of the Company since September 1996.
Prior to joining the Company, he was President of NEO from
January 1995 until September 1996 and Managing Director, Finance
of NRG Energy from July 1994 until December 1994. Mr. Hunstad
served as Treasurer of NRG Australia, Ltd., a wholly-owned
project subsidiary of NRG Energy, from March 1993 until June 1994
and Director, Project Finance of NRG Energy from 1992 until March
1993. Previously, he was employed with E.F. Johnson Company, an
electronics company, as Director of Corporate Development from
1991 until 1992.

Richard C. Stone, age 49, has served as a Vice President of
the Company since September 1997. He was Vice President of
Business Development for Wheelabrator Environmental Systems Inc.,
the waste-to-energy and cogeneration subsidiary of Wheelabrator
Technologies Inc., from 1989 to September 1997.

Committees and Meetings of the Board of Directors

The following discussion of meetings of the Board of
Directors and the committees thereof includes meetings held
during the Company's fiscal year ended December 31, 1997.

During the fiscal year ended December 31, 1997, the Board of
Directors of the Company met five times. No member of the Board
of Directors attended fewer than 75% of the total number of
meetings held by the Board of Directors and the committees on
which such director served during that period.

The Company's Board of Directors currently has three
committees: an Audit Committee, an Independent Directors
Committee and a Compensation Committee. In addition, the
Compensation Committee has a Stock Option Subcommittee. The
principal functions of these

<PAGE>

committees and the names of the directors currently serving as
members of such committees are set forth below.

Audit Committee. The members of the Audit Committee are
Spyros S. Skouras, Jr., Charles J. Thayer and Ronald J. Will.
The Audit Committee has such powers, authority and
responsibilities as are normally incident to the functions of an
Audit Committee. Typical Audit Committee functions are to
initiate or review the results of all audits or investigations
into the business affairs of the Company and its subsidiaries,
conduct pre- and post- audit reviews with the Company's
management, financial employees and independent auditors, and
review the Company's quarterly and annual financial statements
and reports. The Audit Committee met two times during the fiscal
year ended December 31, 1997.

Independent Directors Committee. The members of the
Independent Directors Committee are Spyros S. Skouras, Jr.,
Lawrence I. Littman and Charles J. Thayer. The Independent
Directors Committee has three members, two of whom must be
Independent Directors. Prior to the annual meeting, the
Independent Directors Committee nominates those individuals who
will serve as Independent Directors on the Board of Directors as
well as constitute the three members of the Independent Directors
Committee. It designates the individuals to fill any vacancies
on the Board of Directors that are to be filled by a member of
the Independent Directors Committee and that arise between annual
meetings of stockholders. The Independent Directors Committee
also has the sole authority and responsibility to make all
decisions and take all actions on behalf of the Company under
certain agreements between NRG Energy and the Company, including
the Co-Investment Agreement. See "Compensation Committee
Interlocks and Insider Participation." The Independent Directors
Committee met seven times during the fiscal year ended
December 31, 1997.

Compensation Committee and the Stock Option Subcommittee.
The members of the Compensation Committee are Charles J. Thayer,
Lawrence I. Littman, Craig A. Mataczynski and David H. Peterson.
Messrs. Thayer and Littman also serve on the Stock Option
Subcommittee of the Compensation Committee. The Compensation
Committee and its Stock Option Subcommittee administer the NRG
Generating (U.S.) Inc. 1996 Stock Option Plan (the "1996 Plan")
and the NRG Generating (U.S.) Inc. 1997 Stock Option Plan (the
"1997 Plan," and collectively with the 1996 Plan, the "Plans"),
respectively. The Compensation Committee and the Stock Option
Subcommittee each has the powers and authority granted to it
by any incentive compensation plan for employees of the Company
or any of its subsidiaries and such other powers, authority and
responsibilities as may be determined by the Board of Directors.
The Compensation Committee determines the compensation of (a)
employees of the Company who are directors of the Company; and
(b) after receiving and considering the recommendation of the
chief executive officer and the president of the Company, all
other employees of the Company who are officers of the Company or
who occupy such other positions as may be designated by the
Compensation Committee. The Compensation Committee met six times
during the fiscal year ended December 31, 1997. The Stock Option
Subcommittee of the Compensation Committee met once during the
fiscal year ended December 31, 1997.

<PAGE>

Report of the Compensation Committee on Executive Compensation

Notwithstanding anything to the contrary set forth in any of
the Company's previous filings under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), that might incorporate future filings,
including this Proxy Statement, in whole or in part, the
following report and the Performance Graph shall not be
incorporated by reference into any such filings.

The following is the Compensation Committee's report to the
stockholders of NRG Generating (U.S.) Inc. with respect to the
compensation of the Company's executive officers and the
resulting actions taken by the Company for the fiscal year ended
December 31, 1997.

Policy

The Compensation Committee's objective is to provide a
competitive compensation program that will attract and retain
talented executives who are critical to the Company's long-term
success, motivate key senior officers to achieve strategic
business objectives and reward them for their achievements, and
align the interests of the executives with the interests of
stockholders through periodic grants of stock options. The
components of the compensation program, as described below,
clearly link the interests of management with those of the
stockholders.

At present, the executive compensation program of the
Company comprises salary, an annual cash incentive program, long
term incentive opportunity in the form of stock options and
certain broad-based employee benefit programs offered by the
Company. The Compensation Committee retained the services of a
compensation consultant in early 1998 to review the Company's
compensation programs and, as a result of this competitive
review, the stockholders are being asked to approve the 1998
Stock Incentive Plan, as a method of providing future long-term
incentives, in the form of compensation tied to the performance
of the Company's Common Stock, to executive management, new
executives, directors and other key employees of the Company, as
well as certain key third parties, who contribute or are able to
contribute to the growth of the Company.

To assist with the process of establishing salaries for
executive officers for 1997, the human resources department of
NRG Energy provided certain survey information that compared
compensation practices for other companies engaged in the
Independent Power Producer ("IPP") industry. The majority of the
companies in the IPP industry compensation survey are
subsidiaries of public utilities rather than stockholder owned
companies. As a result, the Compensation Committee targets a
larger portion of executive compensation in the form of
compensation tied to the performance of the Company's Common
Stock in order to better align the interests of executive
management with the stockholders of the Company.

Executive Compensation Objectives

The Compensation Committee's objective is to provide a
competitive compensation program that will attract and retain the
expertise required for managing in the fast-changing independent
power industry sector. Further, the objective is to provide the
appropriate incentives

<PAGE>

to match compensation with performance in both the short term as
well as the long term. The components of the compensation program
as described below clearly link the interests of management with
those of the stockholders.

Total executive compensation (base salary plus incentive
compensation) is compared with similar companies in the IPP
industry. Generally, the Compensation Committee will target
total pay levels that are near the median of the group (adjusted
for company size) although a larger portion of the Company's pay
will be targeted to incentive compensation as compared with the
comparison group. The Compensation Committee established the
compensation for the Company's recently-hired Vice President
based on the competitive recommendations of the executive search
firm retained to conduct the extensive search for this position.

Executive Compensation Components

Total executive compensation during the year ended December
31, 1997 consists of three primary components: base salary, short-
term-incentive and long-term incentive compensation.

Base Salary

Base salary levels are largely determined by comparison with
the salaries of similar positions in the IPP industry sector
through surveys collected by the Human Resources group of member
IPPs. The Company's compensation program includes a short-term
incentive component that is included for market comparison
purposes.

Short-Term Incentive Compensation

The Short-Term Incentive Plan is a cash bonus plan which is
designed to support the achievement of important business
objectives that will result in the Company's long-term success.
Participation in the short-term plan is limited and is approved
annually by the Compensation Committee. Short-term incentive
award potential varies by position with actual awards linked to
financial and business development goals.

Long-Term Incentive Compensation

Long-term incentives for executive officers and the
operations manager are currently provided through grants of stock
options under the 1996 Plan and the 1997 Plan. Stock options
provide gains to executives only if, in the long term, the
Company's Common Stock price improves over the fair market value
of the stock (as determined under the Plans) on the date options
are granted. The Plans permit the grant of nonqualified stock
options or incentive stock options ("ISOs"). As discussed in the
section captioned "Executive and Director Compensation - Stock
Option Grants and Related Information," the following ISOs were
granted to the executive officers of the Company during the
fiscal year ended December 31, 1997:

<PAGE>

Position Incremental Vesting Performance-Based
Vesting
President and Chief
Executive Officer 105,000 shares 100,000 shares
Vice President 50,000 shares 50,000 shares

The option grants with incremental vesting vest in three
equal annual installments beginning on the first anniversary of
the date of the grant. The options with performance-based
vesting vest half if the price of the Common Stock equals or
exceeds $25.00 per share for 20 consecutive trading days before
December 31, 1999 and vest half if the price of the Common Stock
equals or exceeds $35.00 per share for 20 consecutive trading
days before December 31, 2001.

The Compensation Committee of the Board of Directors
retained a compensation consultant in February 1998 to review and
recommend appropriate changes in the Company's compensation
policy. The 1998 Plan incorporates certain recommendations of
the compensation consultant, including (i) the number of shares
reserved for issuance under the 1998 Plan and (ii) allowing
certain third parties to be eligible for the 1998 Plan.

Following the Company's emergence from bankruptcy in 1996,
option grants were utilized by the Company to attract new
individuals to the Company's Board of Directors and management
team. These options vested incrementally in three equal annual
installments beginning on the first anniversary of the date of
grant in order to encourage long-term performance. In order to
encourage the retention of these key individuals, the
Compensation Committee anticipates that the Company may grant
additional options to certain of such individuals that could have
the effect of perpetuating such annual installments in some
reasonable fashion. The Compensation Committee expects that the
Company may grant options to eligible participants, who do not
hold Company options but who could be incentivized to generate
benefits for the Company if they held options. In addition, the
Compensation Committee expects that the Company may grant options
to selected individuals, including certain key third parties who
contribute to the growth of the Company, with vesting based on
specific annual performance targets or specific project
achievements which may include achievement of earnings targets
and progress towards growth objectives.

Compensation of Chief Executive Officer

Based on the competitive recommendations of an executive
search firm retained by the Company, the Board of Directors
established a compensation range for the position of Chief
Executive Officer in early 1997, when the Compensation Committee
of the Board of Directors conducted an extensive search to fill
such position with the assistance of such search firm. The
Company's compensation agreement with Robert T. Sherman, Jr. was
negotiated at the time of his election as President and Chief
Executive Officer and a Director, and the Board of Directors
approved the compensation for Mr. Sherman on May 1, 1997 in
connection with his appointment as President and Chief Executive
Officer. Mr. Sherman's salary and cash incentive for 1997 were
established as a condition of his employment contract for 1997,
which provided that Mr. Sherman would receive an annual base
salary of $210,000 (prorated for the period of time he served
during 1997) and bonuses totaling $166,000.

<PAGE>

In addition, pursuant to his employment contract, the
Company granted Mr. Sherman options to purchase an aggregate of
205,000 shares of Common Stock. Pursuant to his employment
contract, the Company granted the Chief Executive Officer an
option to purchase 105,000 shares of Common Stock at $11.584 (the
fair market value of the Common Stock at the time of the option
grant) with vesting in three equal annual installments beginning
on the first anniversary of the date of the grant in order to
encourage long-term performance. In addition, Mr. Sherman was
granted an option to purchase 100,000 shares of Common Stock with
an exercise price of $11.584 per share and vesting as follows:
(i) 50,000 shares vest when the price of the Common Stock equals
or exceeds $25.00 per share for 20 consecutive trading days
before December 31, 1999 and (ii) 50,000 shares vest when the
price of the Common Stock equals or exceeds $35.00 per share for
20 consecutive trading days before December 31, 2001. Such a
performance option encourages progress towards growth objectives
and aligns the interests of the Chief Executive Officer with the
interests of the stockholders.

Compensation of Former Chief Executive Officer

The Company's former Chief Executive Officer, Leonard A.
Bluhm, is an employee of NRG Energy and his services as Chief
Executive Officer were leased to the Company pursuant to a Leased
Employee Agreement with NRG Energy. Mr. Bluhm's compensation was
paid by NRG Energy, which was reimbursed by the Company, and was
not related to the qualitative or quantitative performance of the
Company.

Summary

The Compensation Committee's objective in setting executive
compensation and in establishing the appropriate balance between
fixed and long-term compensation is designed to clearly link pay
and performance. Very simply, executives are rewarded when and
to the extent stockholders are rewarded. To achieve these goals,
the Compensation Committee annually reviews pay programs and
makes modifications as it deems necessary to continue to attract,
retain and motivate talented, experienced executives.

Charles J. Thayer, Chairman
Lawrence I. Littman
Craig A. Mataczynski
David H. Peterson

<PAGE>

Executive and Director Compensation

The following table sets forth all compensation, including
bonuses and other payments, paid or accrued by the Company during
the fiscal year ended December 31, 1997 ("fiscal year 1997"), the
12-month period ended December 31, 1996 ("transition period
1996") and the fiscal year ended June 30, 1996 ("fiscal year
1996") to all individuals who served as the Company's chief
executive officer during fiscal year 1997 and the highest-paid
executive officer whose cash compensation exceeded $100,000
during the fiscal year ended December 31, 1997 (collectively, the
"Named Executive Officers").

Summary Compensation Table

Long-Term
Compens-
Annual Compensation ation
Awards
Securities
Other Annual Underlying
Salary Bonus Compensation Options/
Name and Principal Position Year ($) ($) ($) SARs (#)
<S> <C> <C> <C> <C> <C>
Robert T. Sherman, Jr. Fiscal Year 1997 (3) 140,000 166,000 73,886(1) 205,000(2)
President and Chief
Executive Officer

Timothy P. Hunstad Fiscal Year 1997 127,125 29,167 18,032(4) -
Vice President and Chief Transition Period 1996 46,667 20,000 - 75,000(5)
Financial Officer (6)

Leonard A. Bluhm Fiscal Year 1997 7,252 - - -
Former President and Chief Transition Period 1996 77,502 40,000 - 105,000(7)
Executive Officer (8) Fiscal Year 1996 25,834 - - -
</TABLE>
____________
(1) Includes compensation of $30,058 and $38,554 relating to a
car program and a relocation program, respectively.
(2) This option was granted pursuant to the 1997 Plan.
(3) Mr. Sherman became President and Chief Executive Officer on
May 1, 1997. Compensation covers the period May 1 to December 31, 1997.
(4) Includes compensation of $9,040 and $7,130 relating to a car
program and life and health insurance, respectively.
(5) This option was granted pursuant to the 1996 Plan.
(6) On September 1, 1996, Mr. Hunstad became Vice President and
Chief Financial Officer of the Company.
(7) The exercise price of such option is the fair market value
at the time the option was awarded. On January 9, 1997, options
to purchase 75,000 shares of the Common Stock were cancelled in
connection with Mr. Bluhm's resignation as President.
(8) Mr. Bluhm became President and Chief Executive Officer on
April 30, 1996. He resigned as President of the Company and Chief
Executive Officer effective December 31, 1996 and April 30, 1997,
respectively. He is an employee of NRG Energy and his services
as President were leased to the Company pursuant to a Leased
Employee Agreement with NRG Energy. Mr. Bluhm's compensation was
paid by NRG Energy, which was reimbursed by the Company. See
"Executive and Director Compensation - Compensation Committee
Interlocks and Insider Participation."

<PAGE>

On March 28, 1997, the Company and Mr. Sherman entered into
an employment agreement (the "Employment Agreement") pursuant to
which Mr. Sherman is employed as President and Chief Executive
Officer of the Company. Under the Employment Agreement, Mr.
Sherman was entitled during 1997 to receive an annual base salary
of $210,000 (prorated for the period of time he served during
1997) and a bonus of 60% of such annual base salary. In
addition, pursuant to the Employment Agreement the Company paid
Mr. Sherman a $40,000 signing bonus and granted him options to
purchase an aggregate of 205,000 shares of Common Stock. Such
options contain a change of control provision which provides for
the acceleration of such options, to the extent not then vested,
upon a "change in control" and certain other "corporate
transactions" as defined in the 1997 Plan. The Employment
Agreement also contains restrictive covenants which restrict Mr.
Sherman with respect to work product and his ability to compete
with the Company and to appropriate certain business
opportunities during his employment and for one year following
the date of termination of his employment.

Director Compensation

Each non-employee director of the Company receives an
annual retainer fee of $14,000, and is entitled to a $1,000 fee
paid quarterly for each Board of Directors meeting attended in
person ($500 for telephonic attendance) and $500 for each
scheduled committee meeting attended in person ($250 for
telephonic attendance) and reimbursement of reasonable expenses
incurred in attending meetings of the Board of Directors and its
Committees. Each director, including each director emeritus, is
eligible to receive grants of nonqualified options to purchase
Common Stock under the Plans. The Company's sole Director
Emeritus is Leonard A. Bluhm, who served as President of the
Company from April 30, 1996 to December 31, 1996, Chief Executive
Officer from April 30, 1996 to April 30, 1997, a Director from
September 20, 1996 to January 23, 1998 and Chairman of the Board
of Directors from December 31, 1996 to January 23, 1998. Mr.
Bluhm receives no compensation for serving as a Director
Emeritus.

<PAGE>

Stock Option Grants and Related Information

The following table sets forth information concerning stock
option grants during the fiscal year ended December 31, 1997 to
the Named Executive Officers:

Option Grants during Fiscal Year 1997

Individual Grants Potential Realizable
Value At Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Exercise Price Appreciation for
Underlying Granted to Price Expiration Option Term
Name Options Employees in ($/Sh Date 5% ($) 10% ($)
Granted (#) Fiscal Year
<S> <C> <C> <C> <C> <C> <C>
Robert T. Sherman, Jr. 105,000(1)(2) 34.4 11.584 5/1/07 764,937 1,938,500
100,000(2)(3) 32.8 11.584 5/1/07 728,511 1,846,191

Timothy P. Hunstad - - - - - -

Leonard A. Bluhm - - - - - -
</TABLE>
____________

(1) This option was granted pursuant to the 1997 Plan and
incrementally vests in three equal annual installments beginning
on May 1, 1998.

(2) This option may become immediately exercisable as to all
shares covered by the option and remain exercisable for the full
remaining term of the option (without regard to termination of
the optionee's employment) in the event of a "change in control"
and certain other "corporate transactions" as defined in the 1997
Plan.

(3) This option was granted pursuant to the 1997 Plan and vests
as follows: 50,000 shares vest when the price of the Common
Stock equals or exceeds $25.00 per share for 20 consecutive
trading days before December 31, 1999 and (ii) 50,000 shares vest
when the price of the Common Stock equals or exceeds $35.00 per
share for 20 consecutive trading days before December 31, 2001.

None of the Named Executive Officers exercised any stock
options during the fiscal year ended December 31, 1997. The
following table sets forth information concerning the value of
unexercised options held by the Named Executive Officers as of
December 31, 1997.

<PAGE>

Aggregated Option/SAR Exercises During Fiscal 1997 and
December 31, 1997 Option/SAR Values

Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options at
at December 31, 1997 (#) December 31, 1997 ($) (1)
<S> <C> <C> <C>
<C>
Name Exercisable Unexercisable Exercisable Unexercisable
Robert T. Sherman, Jr. - 205,000 - 1,699,655
Timothy P. Hunstad 25,000 50,000 360,938 721,875
Leonard A. Bluhm 10,000 20,000 144,375 288,750
</TABLE>
____________

(1) Represents the excess of the fair market value of the Common
Stock of $19.875 per share (the closing selling price of the
Common Stock as quoted on the Nasdaq National Market on
December 31, 1997) above the exercise price of the options.

Compensation Committee Interlocks and Insider Participation

The members of the Compensation Committee during the fiscal
year ended December 31, 1997 were Charles J. Thayer, Leonard A.
Bluhm, Lawrence I. Littman and David H. Peterson. As of January
23, 1998, Craig A. Mataczynski replaced Mr. Bluhm as a member of
the Compensation Committee.

Mr. Peterson is Chairman of the Board, President and Chief
Executive Officer of NRG Energy, which holds approximately 45% of
the Common Stock of the Company. In addition, Mr. Mataczynski is
a Vice President of NRG Energy, and Mr. Bluhm has served as
Executive Vice President and Chief Financial Officer of NRG
Energy since January 1, 1997. Mr. Bluhm served until April 30,
1997 as Chief Executive Officer of the Company under a Leased
Employee Agreement with NRG Energy and currently serves as a
Director Emeritus of the Company. The following describes
certain transactions between the Company and NRG Energy.

Administrative Transactions

On January 31, 1996, the Company entered into a Management
Services Agreement with NRG Energy. The Management Services
Agreement provides that NRG Energy will provide management,
administrative, operation, maintenance and certain other services
to the Company in connection with the day to day business of the
Company. The Company expensed approximately $562,000 during the
fiscal year ended December 31, 1997 pursuant to the Management
Services Agreement with NRG Energy. In addition, the Company
entered into a Leased Employee Agreement dated May 1, 1996 with
NRG Energy, whereby NRG Energy agreed to lease its employee,
Leonard A. Bluhm, to the Company to perform the duties of
President and Chief Executive Officer of the Company. For the
fiscal year ended December 31, 1997, the Company paid NRG Energy
$7,252 which included the salary paid to Mr. Bluhm and other
amounts necessary to reimburse NRG Energy for expenditures
associated with or resulting from Mr. Bluhm's employment.

<PAGE>

Co-Investment Agreement

On April 30, 1996, the Company also entered into a Co-
Investment Agreement with NRG Energy. Pursuant to the Co-
Investment Agreement, NRG Energy agreed to offer to the Company
ownership interests in certain power projects which were
initially developed by NRG Energy or with respect to which NRG
Energy has entered into a binding acquisition agreement with a
third party. If any eligible project reaches certain contract
milestones (which include the execution of a binding PPA and fuel
supply agreement and the completion of a feasibility and
engineering study) by April 30, 2003, NRG Energy has agreed to
offer to sell to the Company all of NRG Energy's ownership
interest in such project. Eligible projects include, with
certain exceptions and exclusions, proposed or existing electric
power plants within the United States which NRG Energy initially
develops or in which NRG Energy proposes to acquire an ownership
interest. NRG Energy is obligated under the Co-Investment
Agreement to offer to the Company, during the three year period
ending on April 30, 1999, projects with an aggregate equity value
of at least $60.0 million or a minimum of 150 net MW. As of the
date of this Report, ownership interests in projects with an
aggregate of more than 130 net MW have been offered under the Co-
Investment Agreement, including the 117 net MW Morris Project
described below.

Among the exclusions from the Co-Investment Agreement are
(i) any ownership interest in a project which is below a level
that would cause the project (or its owners) to be in violation
of the relevant power purchase agreement or applicable state or
federal law upon the generation of electricity for sale by such
project, (ii) any indirect ownership interest held by NRG Energy
in an eligible project arising from NRG Energy's direct or
indirect ownership of equity interests in the Company, (iii) any
ownership interest in a facility below 25 MW in capacity, and
(iv) any ownership interest that is retained in order to later be
sold in an exempt transaction. Exempt transactions include (i)
any sale or disposition of an ownership interest that is
consummated as a result of a foreclosure or conveyance in lieu of
foreclosure of liens or security interests, (ii) any sale or
disposition of an ownership interest to a third party that is or
will become a participant in the eligible project, where the
obligation to sell the interest is incidental to the provision of
services or the contribution of assets to the project and is
created prior to the execution and delivery of a binding power
purchase agreement and fuel supply agreement and the completion
of an engineering and feasibility study with respect to the
project, and (iii) any sale or disposition of an ownership
interest as part of a larger transaction involving the sale of
all or substantially all of the assets of NRG Energy or the sale
of an equity interest in NRG Energy, provided that the person
acquiring the ownership interest agrees to be bound by the Co-
Investment Agreement.

In December 1997, a wholly-owned subsidiary of the Company
purchased the Morris Project from NRG Energy. The Morris
Project, with an aggregate of 117 net MW, had been offered under
the Co-Investment Agreement. The Company recently has initiated
an arbitration proceeding pursuant to the terms of the Co-
Investment Agreement to resolve a dispute with NRG Energy
concerning the rights and obligations of the Company and NRG
Energy with respect to a 110 MW cogeneration project which the
Company contends NRG Energy agreed to sell to an unrelated third
party without fulfilling its obligations with respect to such
project under the Co-Investment Agreement. NRG Energy has advised
the Company that it believes that it had no obligation to offer
the project to the Company.

<PAGE>

To facilitate the Company's ability to acquire ownership
interests which may be offered pursuant to its Co-Investment
Agreement, NRG Energy has agreed to finance the Company's
purchase of such ownership interests at commercially competitive
terms to the extent funds are unavailable to the Company on
comparable terms from other sources. Any such financing provided
by NRG Energy under the terms of the Co-Investment Agreement is
required to be recourse to the Company and secured by a lien on
the ownership interest acquired. Such financing also is required
to be repaid from the net proceeds received by the Company from
offerings of equity or debt securities of the Company (when
market conditions permit such offerings to be made on favorable
terms) after taking into account the working capital and other
cash requirements of the Company as determined by its Board of
Directors. During the fiscal year ended December 31, 1997, NRG
Energy provided approximately $818,000 in project and
construction management services rendered in connection with the
Gray's Ferry Project partnership of which the Company is one-
third owner.

In light of the Company's internal development activities,
the Company does not expect the Co-Investment Agreement to serve
as the primary source of future project development activities.

Sale of Power Operations, Inc.

Power Operations, Inc. ("Power Operations"), then a wholly-
owned subsidiary of the Company, assumed operations and
maintenance responsibilities for the Company's Newark facility
and the Company's Parlin facility, in each case replacing the
former operator, on November 8, 1996, and December 31, 1996,
respectively. Effective January 1, 1997, Power Operations was
sold by the Company to NRG Energy for $10.00 plus the amount of
Power Operations' outstanding accounts receivable and an
indemnification by NRG Energy to the Company for certain
potential losses or other liabilities that might occur with
respect to the termination of the prior operator of the Newark
and Parlin facilities and the assumption by Power Operations of
operations and maintenance responsibilities for such facilities.
The terms of this transaction were approved by the Independent
Directors Committee of the Company's Board of Directors as
required by the Company's By-laws.

NRG Energy Option

In March 1996, NRG Energy and NRGG (Schuylkill) Cogeneration
Inc. ("NSC"), a wholly-owned subsidiary of the Company, entered
into a $10.0 million loan agreement (the "Cogeneration Note") to
provide a means of funding an NSC capital contribution obligation
to the Grays Ferry Cogeneration Partnership. In connection with
NRG Energy's assistance with the Gray's Ferry project, its
financing and the Note, the Company granted NRG Energy the right
to convert a portion of borrowings under the note to Common Stock
of the Company (the "Option"). On November 25, 1997, NRG Energy
exercised such option and reduced the outstanding principal
amount of the Note by $3.0 million in exchange for 396,255 shares
of the Company's Common Stock.

Morris Project Acquisition

In December 1997, NRGG Funding Inc. ("NRGG Funding"), a
wholly-owned subsidiary of the Company, completed its acquisition
from NRG Energy of all of NRG Energy's interest in a 117

<PAGE>

MW project located in Morris, Illinois by acquiring 100% of the
interests in NRG (Morris) Cogen, LLC ("Morris LLC"). Morris LLC
has the exclusive right to build and operate a cogeneration plant
to be located in Morris, Illinois within a petrochemical
manufacturing facility, which is owned by Equistar Chemicals LP
("Equistar"), a joint venture of Millennium Chemicals Inc. and
Lyondell Petrochemical Company. A 25-year agreement has been
executed for the sale of steam and electric output from the
project. NRG Energy commenced construction of the Morris Project
in September 1997 with commercial operation currently expected to
occur in the fourth quarter of 1998.

NRGG Funding agreed to assume all of the obligations of NRG
Energy and to provide future equity contributions to Morris LLC
which are limited to the lesser of 20% of the total project cost
or $22.0 million. NRG Energy has guaranteed to the Morris
Project's lenders that NRGG Funding will make these future equity
contributions, and the Company has guaranteed to NRG Energy the
obligation of NRGG Funding to make these future equity
contributions. In addition, Morris LLC is obligated to pay NRG
Energy $1.0 million as and when permitted under the project's
principal loan agreement. Morris LLC has previously paid $4.0
million to NRG Energy in connection with the financial closing of
the construction financing of the Morris Project.

The Company intends to arrange financing (the terms and
manner of which have not been determined by the Company) to fund
the required future equity contributions to Morris LLC. NRG
Energy is obligated under a Supplemental Loan Agreement between
the Company, NRGG Funding and NRG Energy to loan NRGG Funding and
the Company (as co-borrower) the full amount of such equity
contributions by NRGG Funding, all at NRGG Funding's option. Any
such loan will be secured by a lien on all of the membership
interests of Morris LLC and will be fully recourse to NRGG
Funding and the Company.

Other Transactions

Effective May 23, 1996, NRG Energy guaranteed payment of pre-
existing liabilities of NRG Generating (Newark) Cogeneration Inc.
("Newark") and NRG Generating (Parlin) Cogeneration Inc.
("Parlin"), wholly-owned subsidiaries of the Company, of up to $5
million, which amount will be reduced as certain defined
milestones are reached and eliminated no later than May 23, 2001.
On June 28, 1996, NRG Energy advanced Parlin approximately $56
million to pay off the Parlin nonrecourse financing which
included a $3.1 million cost to terminate an interest rate swap
agreement. At December 31, 1997, loans aggregating approximately
$4.4 million remained outstanding to NRG Energy.

Under an agreement dated April 30, 1996, the Parlin project
sells up to 9 MW of power to NRG Parlin, Inc. ("NPI"), a wholly-
owned subsidiary of NRG Energy. NPI resells this power at retail
to E.I. du Pont under an agreement extending until 2021. Total
sales to NPI were $1.3 million in 1997.

Related Party Transactions

The Company entered into a Liquidating Asset Agreement with
Wexford Management LLC ("Wexford") pursuant to which Wexford was
granted authority to liquidate certain assets of

<PAGE>

the Company, for which Wexford is to receive an asset liquidation
fee. The maximum fee available to Wexford is $1,500,000. During
the fiscal year ended December 31, 1997, Wexford was paid
$1,219,000 under the terms of the Liquidating Asset Agreement.
Spyros S. Skouras, Jr., a Director of the Company, is Senior Vice
President of Wexford.

See "Executive and Director Compensation - Compensation
Committee Interlocks and Insider Participation" above for a
description of certain transactions and relationships between the
Company and NRG Energy. David H. Peterson, the Chairman of the
Board of Directors of the Company, is Chairman of the Board,
President and Chief Executive Officer of NRG Energy; Mr. Bluhm is
Executive Vice President and Chief Financial Officer of NRG
Energy; Craig A. Mataczynski, and Ronald J. Will, Directors of
the Company, are Vice Presidents of NRG Energy; and Julie A.
Jorgensen, a Director of the Company, is Senior Counsel and
Corporate Secretary of NRG Energy. Until September 1, 1996, Mr.
Hunstad, who is the Vice President and Chief Financial Officer of
the Company, was President of NEO Corporation, a wholly-owned
subsidiary of NRG Energy.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding
shares of Common Stock beneficially owned as of April 10, 1998
(except as otherwise noted below) by each (i) person believed by
the Company to own beneficially more than five percent of the
outstanding shares of Common Stock, (ii) director (which does not
include a director emeritus) and (iii) named executive officer
set forth in the Summary Compensation Table herein and the
directors (which does not include a director emeritus) and
executive officers of the Company as a group, and the percentage
of the outstanding shares of Common Stock represented thereby.
Other than as set forth below, no director or executive officer
of the Company is known to be the beneficial owner of any shares
of Common Stock. Except as noted below, the Company believes that
each of the persons listed has sole investment and voting power
with respect to the shares included in the table.

<PAGE>

Shares Beneficially Owned (1)
Name Number of Shares Percent
NRG Energy, Inc. (2)
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403-2445 3,254,288 47.60%
Wexford Capital Partners II, LP (3)
411 West Putnam Avenue
Greenwich, CT 06830 443,976 6.49
David H. Peterson (4) 11,000 *
Leonard A. Bluhm (5) 11,500 *
Julie A. Jorgensen - -
Lawrence I. Littman (6) 10,070 *
Craig A. Mataczynski (7) 10,500 *
Robert T. Sherman, Jr. (8) 40,000 *
Spyros S. Skouras, Jr. (3)(6) 453,976 6.63
Charles J. Thayer (9) 30,000 *
Ronald J. Will (10) 12,500 *
Timothy P. Hunstad (11) 25,500 *
Directors and Executive Officers as a 593,546 8.53
group (10 persons) (12)
____________

* Represents less than 1.0% of the outstanding shares of
Common Stock.

(1) Under the rules of the Commission, a person is deemed to be
a beneficial owner of a security if he or she has or shares the
power to vote or to direct the voting of such security, or the
power to dispose or to direct the disposition of such security.
A person is also deemed to be a beneficial owner of any
securities that such person has the right to acquire beneficial
ownership of within 60 days as well as any securities owned by
such person's spouse, children or relatives living in the same
household. Accordingly, more than one person may be deemed to be
a beneficial owner of the same securities.

(2) Includes 3,106,612 shares as to which NRG Energy has sole
voting and investment power, and 147,676 shares as to which NRG
Energy has sole voting power only. The foregoing information is
as of the date set forth in and based solely on a Schedule 13D
filed April 14, 1998 and furnished to the Company by NRG Energy.

(3) Includes 348,672 shares owned by Wexford Capital Partners
II, LP and 95,304 shares owned by Wexford Overseas Partners Fund
I, LP. Through an investment management agreement, Wexford
Management LLC, which manages the funds, has sole voting and
investment power of the funds. Mr. Skouras serves as Senior Vice
President of Wexford

<PAGE>

Management LLC. The address for Mr. Skouras is c/o Wexford
Management LLC, 411 West Putnam Avenue, Greenwich, CT 06830. This
information is as of the date set forth in and based on the
Schedule 13D filed May 8, 1997 and other information furnished
to the Company by Wexford Management LLC.

(4) Includes 10,000 shares issuable upon exercise of stock
options that may be exercised within 60 days of April 10, 1998.
In addition, Mr. Peterson beneficially owns approximately 12,956
shares of NSP Common Stock, including approximately 3,854 shares
through an employee stock ownership plan and 9,102 shares
issuable upon exercise of NSP stock options that may be exercised
within 60 days of April 10, 1998.

(5) Includes 10,000 shares issuable upon exercise of stock
options that may be exercised within 60 days of April 10, 1998.
In addition, Mr. Bluhm beneficially owns 4,980 shares of NSP
Common Stock, including 2,750 shares issuable upon exercise of
NSP stock options that may be exercised within 60 days of April
10, 1998.

(6) Includes 10,000 shares issuable upon exercise of stock
options that may be exercised within 60 days of April 10, 1998.

(7) Includes 10,000 shares issuable upon exercise of stock
options that may be exercised within 60 days. In addition, Mr.
Mataczynski beneficially owns 1,251 shares of NSP Common Stock,
including 503 shares through an employee stock ownership plan and
748 shares issuable upon exercise of NSP stock options that may
be exercised within 60 days of April 10, 1998.

(8) Includes 35,000 shares issuable upon exercise of stock
options that may be exercised within 60 days of April 10, 1998.
In addition, Mr. Sherman beneficially owns 100 shares of NSP
Common Stock.

(9) Includes 10,000 shares issuable upon exercise of stock
options that may be exercised within 60 days of April 10, 1998
and 10,000 shares owned by Chartwell Capital Ltd. Mr. Thayer is
the principal and Managing Director of Chartwell Capital Ltd.

(10) Represents 2,500 shares of Common Stock held jointly with
spouse and 10,000 shares issuable upon exercise of stock options
that may be exercised within 60 days of April 10, 1998. In
addition, Mr. Will beneficially owns 7,665 shares of NSP Common
Stock, including (i) 2,636 shares issuable upon exercise of NSP
stock options that may be exercised within 60 days, (ii) 1,990
shares of NSP Common Stock which are owned by Mr. Will's spouse
and for which he shares investment power, and (iii) 99 shares of
NSP Common Stock which he owns jointly with his spouse and for
which he shares investment power.

(11) Includes 25,000 shares issuable upon exercise of stock
options that may be exercised within 60 days of April 10, 1998.

(12) Includes 120,000 shares issuable upon exercise of stock
options that may be exercised within 60 days of April 10, 1998.

<PAGE>

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company's
directors and executive officers, and persons who beneficially
own more than 10% of any class of the Company's equity
securities, to file with the Commission initial reports ("Form
3") of beneficial ownership and reports of changes ("Form 4") in
beneficial ownership of Common Stock and other equity securities
of the Company. Officers, directors and greater than 10%
beneficial owners are required by Commission regulation to
furnish the Company with copies of all Section 16(a) reports they
file. To the Company's knowledge, based solely on a review of
the copies of such reports furnished to the Company and written
representations that no other reports were required, all Section
16(a) filing requirements applicable to its officers, directors
and greater than 10% beneficial owners were complied with for the
fiscal year ended December 31, 1997, except for the failure to
timely file Ms. Jorgensen's Initial Report on Form 3, which has
since been filed, and Mr. Sherman's failure to report one
transaction on a timely basis, which has since been reported.

Stockholder Proposals and Nomination of Director Candidates

The 1999 Annual Meeting of Stockholders ("1999 Annual
Meeting") is anticipated to be held in May 1999. A notice of
intent ("Notice of Intent") of a stockholder of the Company to
make a nomination or to bring any other matter before the 1999
Annual Meeting must comply with the applicable requirements set
forth in the Company's Restated By-laws and must be received not
more than 180 days and not less than 120 days in advance of the
1999 Annual Meeting by the secretary of the Company at the
Company's principal executive offices, 1221 Nicollet Mall, Suite
610, Minneapolis, Minnesota 55403-2444; however, if the 1999
Annual Meeting is held on a date more than 30 days before or
after May 21, 1999, any stockholder who wishes to have a proposal
included in the Company's proxy statement for the 1999 Annual
Meeting must deliver a copy of the proposal to the Company a
reasonable time before the proxy solicitation is made. The
Company reserves the right to decline to include in the Company's
proxy materials any stockholder's proposal which does not comply
with the rules of the Commission for inclusion therein. The
Company will furnish copies of the applicable By-law provisions
which set forth the requirements for the Notice of Intent upon
written request to the Secretary of the Company at the
aforementioned address.

Performance Graph

The closing price of the Company's Common Stock on April 10,
1998 was $15.00 per share. The following performance graph
compares the percentage change in the cumulative weighted average
total return on the common stock of the Company with the total
cumulative returns during the same period of (i) the Nasdaq
Composite Index and (ii) an index of comparable peer issuers
constructed by the Company. The index of comparable peer issuers
is composed of AES Corporation, Calpine Corporation, California
Energy Company Inc. and Trigen Energy Corporation during the
periods that each company has been publicly traded. In
compliance with Commission Regulations, the returns of each of
the comparable companies have been weighted according to
capitalization during the period from May 1, 1996, the first
trading day after the Company emerged from bankruptcy protection
with a new capital structure. The

<PAGE>

graph assumes that the value of the investment in the Company's
Common Stock and each index was $100 on May 1, 1996, and that all
dividends were reinvested.

NRG Generating Weighted Nasdaq
(U.S.) Inc. Comparables Composites

May 1996 100 100 100
December 1996 149 162 122
December 1997 263 284 147

The foregoing Notice and Proxy Statement are sent by order
of the Board of Directors.

/s/ Karen A. Brennan
Karen A. Brennan
Secretary

April 27, 1998

<PAGE>

Appendix A

NRG GENERATING (U.S.) INC.
1998 STOCK OPTION PLAN

Effective as of the 20th day of April, 1998.

<PAGE>

NRG GENERATING (U.S.) INC.
1998 STOCK OPTION PLAN

ARTICLE I

1.1 Name and Purpose. The name of this Plan is the
"NRG Generating (U.S.) Inc. 1998 Stock Option Plan"
(the "Plan"). Its purpose is (a) to maximize the long-
term success of NRG Generating (U.S.) Inc. (the
"Company"), (b) to ensure a balanced emphasis on both
current and long-term performance, (c) to enhance
Participants' identification with shareholders'
interests, and (d) to facilitate the attraction and
retention of key individuals with outstanding ability.

1.2 Definitions. Whenever used in the Plan, the
following terms shall have the meaning set forth below:

(a) "Board of Directors" or "Board" shall
mean the Board of Directors of NRG Generating
(U.S.) Inc. as constituted from time to time.

(b) "Change of Control" shall have the
meaning ascribed by Section 5.5 hereof.

(d) "Common Stock" shall mean the common
voting shares of the Company.

(e) "Committee" shall mean the Compensa-
tion Committee of the Board. However, if such
Compensation Committee shall not be comprised
solely of at least two "outside directors" as such
term is defined in Treasury Regulation section
1.162-27(e)(3), then the Committee may delegate
any or all of its authority under this Plan to
such other committee or subcommittee of the Board
as may have been or may be designated or appointed
by the Board which is so comprised. If
administration is so delegated to another
committee or subcommittee, such committee or
subcommittee shall have, in connection with the
delegated administration of the Plan, the powers
theretofore possessed by the Committee and
references in the Plan to the Committee shall
thereafter include references to such committee or
subcommittee.

(f) "Company" shall mean NRG Generating
(U.S.) Inc. or any successor thereto.

(g) "Corporate Transaction" shall have the
meaning ascribed by Section 5.5(b) hereof.

A-2

<PAGE>

(h) "Disability" shall mean total and
permanent disability as defined in Code Section
22(e).

(i) "Employee" shall mean any person who is
currently a common law employee of the Company or
any of its Subsidiaries.

(j) "Effective Date" shall mean the date the
Plan is adopted by the Board, subject to approval
by the shareholders of the Company at a meeting
held within twelve (12) months following the date
of adoption by the Board.

(k) "Fair Market Value" or "FMV" shall mean
the fair market value of the Common Stock, which
shall be determined as follows:

(i) if the Common Stock is listed
on any established stock exchange or a national
market system, including, without limitation, the
Nasdaq National Market, its fair market value
shall be the closing selling price on the date of
grant for such stock on the principal securities
exchange or national market system on which the
Common Stock is at the time listed for trading.
If there are no sales of Common Stock on that
date, then the closing selling price for the
Common Stock on the next preceding day for which
such closing selling price is quoted shall be
determinative of fair market value; or

(ii) if the Common Stock is not
traded on an exchange or a national market system,
its Fair Market Value shall be determined in good
faith by the Committee, possibly based upon, but
not limited to, a fair market value concept
averaged over the twenty (20) trading days (or
five (5) trading days if the Common Stock is
traded on the Nasdaq SmallCap Market or a similar
market system) preceding the date of the grant of
an option or other relevant date, and such
determination shall be conclusive and binding on
all persons.

In no event shall the Fair Market Value equal
less than the par value of the Common Stock.

(l) "Incentive Stock Option" shall mean a
stock option within the meaning of Section 422 of
the Code granted pursuant to Section 4.1 hereof.

(m) "Nonqualified Stock Option" shall mean
an Option, other than an Incentive Stock Option,
granted pursuant to Section 4.1 hereof.

(n) "Option" shall mean, individually and
collectively, an Incentive Stock Option and a
Nonqualified Stock Option to purchase Common
Stock.

A-3

<PAGE>

(o) "Option Price" shall mean the price per
share of Common Stock set by the Committee upon
the grant of an Option.

(p) "Parent" shall mean any corporation
which qualifies as a parent of the Company under
the definition of "parent corporation" under Code
Section 424(e).

(q) "Participant" shall mean any person who
satisfies the criteria set forth in Article III
hereof.

(r) "Person" shall mean any individual,
partnership, association, corporation, trust or
other legal entity.

(s) "Separation Date" shall mean, as
determined by the Committee, the date on which a
Participant's Service as a member of the Board
terminates or employment with the Company or
Subsidiary terminates for reasons other than
transfer of employment to a Parent or Subsidiary.
Whether any leave of absence shall constitute
termination of employment for purposes of this
Plan shall be determined in each case by the
Committee at its sole discretion.

(t) "Subsidiary" shall mean a subsidiary
corporation of the Company as defined in Code
Section 424(f).

(u) "Termination for Cause" shall mean the
termination of the Participant's employment with
or services to the Company for any of the
following reasons: (i) any act of malfeasance or
wrongdoing affecting the Company, its Parent or
its Subsidiaries, (ii) the breach of any covenant
not to compete, or employment contact, with the
Company, its Parent or its Subsidiaries, (iii)
engaging in any other conduct which would warrant
Participant's discharge for cause, excluding
general dissatisfaction with the performance of
Participant's duties, but including any act of
disloyalty or conduct clearly tending to bring
discredit upon the Company, its Parent or its
Subsidiaries.

Where the context requires, words in the masculine
gender shall include the feminine and neuter genders, words
in the singular shall include the plural, and words in the
plural shall include the singular.

1.3 Plan Duration. The Plan shall remain in effect
for ten (10) years from the Effective Date or until
terminated by the Board, whichever comes first.

A-4

<PAGE>

ARTICLE II

2.1 Plan Administration.

(a) The Plan shall be administered by the
Committee. The Committee is authorized to
establish such rules and to appoint such agents as
it deems appropriate for the proper administration
of the Plan, and to make such determinations
(which shall be sufficiently evidenced if set
forth in any written action of the Committee or in
any written stock option agreement) and to take
such steps in connection with the Plan or the
benefits provided hereunder as it deems necessary
or advisable. The Committee also is authorized to
delegate administrative functions to others to the
extent such action is not inconsistent with the
express provisions of this Plan.

(b) The Committee shall have the authority,
in its sole discretion and from time to time to
take the following actions:

(i) select those individuals who meet
the participation requirements of the Plan;

(ii) grant Options provided by the Plan
in such form and amount as the Committee shall
determine;

(iii) impose such limitations,
restrictions and conditions upon any such Options
as the Committee shall deem appropriate; and

(iv) interpret the Plan, adopt, amend
and rescind rules and regulations related to the
Plan, and make all other determinations and take
all other action necessary or advisable for the
implementation and administration of the Plan.

(c) The decision of the Committee with
respect to any question arising as to the grant of
an Option to a Participant in the Plan, the term,
form and amount of Options under the Plan, or any
other matter concerning the Plan shall be final,
conclusive, and binding on both the Company and
the Participants.

ARTICLE III

3.1 Eligibility. The Participants in the Plan shall
be selected by the Committee from the directors of the
Company, the officers and key Employees of the Company
or its Subsidiaries, and such other individuals,
including but not limited to employees of the Company's
affiliates, who occupy responsible managerial,
professional, advisory or other positions and who have
the capability of making or who have

A-5

<PAGE>

made a substantial contribution to the success of
the Company. In making this selection and in
determining the form and amount of Options, the
Committee shall consider any factors deemed relevant,
including the individual's functions, responsibilities,
value of services to the Company or its Subsidiaries
and past and potential contributions to the Company's
profitability and sound growth. Participants who are
not otherwise Employees may receive Nonqualified Stock
Options but may not receive Incentive Stock Options
under the Plan.

ARTICLE IV

4.1 Options. The Committee shall determine the forms
and amounts of Options for Participants. All Options
shall be subject to the terms and conditions of the
Plan and to such other terms and conditions consistent
with the Plan as the Committee deems appropriate.
Options under the Plan need not be uniform and
Incentive Stock Options and Nonqualified Stock Options
may be granted in one agreement. Options may take the
following forms, in the Committee's sole discretion:

(a) Incentive Stock Options.

(i) The Committee may grant Incentive
Stock Options within the meaning of Code Section
422 to purchase Common Stock. In addition to
other restrictions contained in the Plan, an
Incentive Stock Option (1) shall not be exercised
more than ten (10) years following the date of
grant, (2) shall not have an Option Price less
than the FMV of Common Stock on the date the
Incentive Stock Option is granted, (3) shall
otherwise comply with Code Section 422, and (4)
shall be designated in writing as an "Incentive
Stock Option" by the Committee. The date an
Incentive Stock Option is granted shall mean the
date selected by the Committee as of which the
Committee allots a specific number of shares to a
Participant pursuant to the Plan. Notwithstanding
the foregoing, the Option Price of an Incentive
Stock Option granted to any owner of 10% or more
of the total combined voting power of the Company,
its Parent or Subsidiaries shall be no less than
110% of FMV and such Option shall be not
exercisable after the expiration of five years
from the date of its grant. No Incentive Stock
Option shall be granted to any Participant who is
not an Employee.

(ii) The grant of an Incentive Stock
Option shall be evidenced by a written Incentive
Stock Option Agreement, executed by the Company
and the holder of an Incentive Stock Option,
stating the number of shares of Common Stock
subject to the Incentive Stock Option evidenced
thereby, and in such form as the Committee may
from time to time determine.

A-6

<PAGE>

(b) Nonqualified Stock Options.

(i) The Committee may grant
Nonqualified Stock Options to purchase Common
Stock which are not intended to qualify as
Incentive Stock Options under Code Section 422 and
which are designated in writing by the Committee
as "Nonqualified Stock Options." At the time of
the grant, the Committee shall determine the
Option exercise period, the Option Price, and such
other conditions or restrictions on the exercise
of the Nonqualified Stock Option as the Committee
deems appropriate.

(ii) The Committee shall cause the
Company to enter into a written Nonqualified Stock
Option Agreement with the Participant stating that
the Options are Nonqualified Stock Options, the
number of shares of Common Stock subject to the
Nonqualified Stock Option, any conditions and
restrictions on the exercise of the Option imposed
by the Plan and the Committee, and in such form as
the Committee shall from time to time determine.

4.2 Option Exercise. Except as otherwise provided in
Article V hereof, an Incentive Stock Option may not be
exercised at any time unless the holder thereof is then
an Employee of the Company, its Parent or Subsidiary.
Options may be exercised in whole at any time, or in
part from time to time, with respect to whole shares
only, within the period permitted for the exercise
thereof, and shall be exercised by written notice of
intent to exercise the Option with respect to a
specified number of shares delivered to the Company's
Secretary at the Company's principal office, and
payment in full to the Company at said office of the
amount of the Option Price for the number of shares of
Common Stock with respect to which the Option is then
being exercised. In addition to and at the time of
payment of the Option Price, the Participant shall pay
to the Company in cash or in Common Stock, the full
amount, if any, that the Company is required to
withhold or pay under federal or state law with respect
to the exercise of the Option. Alternatively, the
number of shares delivered by the Company upon exercise
of the Option shall be appropriately reduced to
reimburse the Company for such payment.

4.3 Payment. Payment of the purchase price upon
exercise of any Option granted under this Plan shall be
made in cash or by optionee's personal check, certified
check or bank draft, payable to the order of the
Company in lawful money of the United States; provided,
however, that the Committee, in its sole discretion,
may permit an optionee to pay the Option Price in whole
or in part (a) with shares of Common Stock owned by the
optionee or with shares of Common Stock withheld from
the shares otherwise deliverable to the optionee upon
exercise of an Option (in each case only to the extent
that such an exercise of the Option would not result in
an accounting compensation charge with respect to the
shares used to pay the Option Price); (b) by delivery
on a form prescribed by the Committee of an irrevocable
direction to a securities broker approved by the
Committee to sell shares of

A-7

<PAGE>

Common Stock and deliver all or a portion of the
proceeds to the Company in payment for the Common
Stock; (c) by delivery of the optionee's promissory
note with such recourse, interest, security, and
redemption provisions as the Committee in its
discretion determines appropriate; or (d) in any
combination of the foregoing. Any such alternative
permissible methods of exercise of any Incentive Stock
Option shall be set forth in the stock option agreement
relating to such Incentive Stock Option. In the event
the Option Price is paid in whole or in part with
shares of Common Stock such shares shall be valued at
their FMV as of the date of exercise of the Option.
Such shares shall be delivered along with any portion
to be paid in cash or by promissory note within five
(5) days after the date of exercise. If the
Participant fails to pay the Option Price within such
five (5) day period, the Committee shall have the right
to take whatever action it deems appropriate, including
terminating the Option or voiding the exercise of the
Option. The Company shall not issue or transfer Common
Stock upon the exercise of an Option until the Option
Price is paid in full.

ARTICLE V

5.1 Termination of Employment or Service as a
Director. Except as provided in this Article V or
except as otherwise determined by the Committee
(including for example, and not in the way of
limitation, in the case of a Participant who on the
date of grant is neither a director of the Company nor
an employee of the Company or a Subsidiary), all
Options under the Plan shall terminate upon the
termination of the Participant's employment or service
as a director of the Company as of the Participant's
Separation Date.

5.2 Death of a Participant. In the event of the death
of a Participant prior to the exercise of all Options
granted to such Participant, all unexercised Options
shall become immediately exercisable and the
administrator of the deceased Participant's estate, the
executor under his or her will, or the person(s) to
whom the Options shall have been validly transferred by
such executor or administrator pursuant to the will or
laws of intestate succession shall have the right,
within one year from the date of such Participant's
death, but not beyond the expiration date of the
Options, to exercise such Options.

5.3 Retirement or Termination.

(a) In the event of termination of a
Participant's employment with the Company prior to
the exercise of all Incentive Stock Options
granted to the Participant, such Participant shall
have the right, within three (3) months of the
date of such termination of employment, but not
beyond the expiration date of such Options, to
exercise such Incentive Stock Options to the
extent exercisable on his Separation Date.

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(b) In the event of the termination of a
Participant's employment or service prior to the
exercise of all Nonqualified Stock Options granted
to the Participant, such Participant shall have
the right, within three (3) months of his
Separation Date, but not beyond the expiration
date of such Nonqualified Stock Options, to
exercise such Nonqualified Stock Options, to the
extent exercisable on his Separation Date.

5.4 Disability.

(a) In the event of the termination of a
Participant's employment by Disability prior to
the exercise of all Incentive Stock Options
granted to the Participant, all unexercised
Incentive Stock Options shall become immediately
exercisable and such Participant or his legal
representative shall have the right, within twelve
(12) months of his Separation Date, but not beyond
the expiration date of such Incentive Stock
Options, to exercise such Incentive Stock Options.

(b) In the event of the termination of a
Participant's employment by Disability prior to
the exercise of all Nonqualified Stock Options
granted to the Participant, all unexercised
Nonqualified Stock Options shall become
immediately exercisable and such Participant or
his legal representative shall have the right,
within twelve (12) months of his Separation Date,
but not beyond the expiration date of such
Nonqualified Stock Options, to exercise such
Nonqualified Stock Options.

5.5 Change of Control.

(a) For purposes of this Section 5.5, a
"Change in Control" shall be deemed to occur upon:

(i) the direct or indirect
acquisition by any Person or related group of
Persons (other than an acquisition from or by
the Company or by a Company-sponsored
employee benefit plan) of beneficial
ownership (within the meaning of Rule 13d-3
of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of securities
possessing more than fifty (50%) of the total
combined voting power of the Company's
outstanding Common Stock;

(ii) a change in the composition of
the Board over a period of thirty-six (36)
months or less such that a majority of the
Board members (rounded up to the next whole
number) ceases, by reason of one or more
contested elections for Board membership or
by one or more actions by written consent of
shareholders, to be comprised of individuals
who either (1) have been Board members
continuously

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since the beginning of such period or
(2) have been elected or nominated for
election as Board members during such
period by at least a majority of the Board
members described in clause (1) who were
still in office at the time such election or
nomination was approved by the Board; or

(iii) the merger or
consolidation of the Company into NRG Energy,
Inc.

(b) For purposes of this Section 5.5, a
"Corporate Transaction" shall be deemed to occur
upon any of the following transactions to which
the Company is a party:

(i) approval by the Company's
shareholders of a merger or consolidation in
which the Company is not the surviving
entity, except for a transaction the
principal purpose of which is to change the
state in which the Company is incorporated;

(ii) approval by the Company's
shareholders of the sale, transfer or other
disposition of all or substantially all of
the assets of the Company (including the
capital stock of the Company's subsidiary
corporations) in connection with a complete
liquidation or dissolution of the Company; or

(iii) approval by the Company's
shareholders of any reverse merger in which
the Company is the surviving entity but in
which securities possessing more than fifty
(50%) of the total combined voting power of
the Company's outstanding securities are
transferred to a Person or Persons different
from those who held such securities
immediately prior to such merger.

(c) In its discretion, the Committee may
provide in any stock option agreement (or in an
amendment thereto) evidencing an Option hereunder
that, in the event of any Corporate Transaction or
an event giving rise to a Change in Control, any
outstanding options covered by such an agreement
shall be fully vested, nonforfeitable and become
exercisable as of the date of the Change in
Control or Corporate Transaction or as otherwise
determined in accordance with this Section 5.5(c).
However, the Committee may provide in any such
agreement that, in the case of a Corporate
Transaction, the Committee may determine that an
outstanding Option will not be so accelerated if
and to the extent (i) such Option is either to be
assumed by the successor or parent thereof or to
be replaced with a comparable Option to purchase
shares of the capital stock of the successor
corporation or parent thereof, or (ii) such Option
is to be replaced with a cash incentive program of
the successor corporation that preserves the
option spread existing at the

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time of the Corporate Transaction and
provides for subsequent payment in accordance with
the same vesting schedule applicable to such
Option. Any stock option agreement incorporating
a Change in Control or Corporate Transaction
acceleration provision shall provide that, with
respect to any Corporate Transaction described in
clauses (i) or (ii) of Section 5.5(b) above, the
Committee may, upon no less than 60 days notice to
the optionee (an "Acceleration Notice") determine
that such optionee's Options will terminate as of
the effective date of such Corporate Transaction,
in which event such Options shall be fully vested,
nonforfeitable and become exercisable immediately
as of the date of such Acceleration Notice.

(d) If the Committee determines to
incorporate a Change in Control or Corporate
Transaction acceleration provision in any option
agreement hereunder, the agreement shall provide
that, (i) in the event of a Change in Control or
Corporate Transaction described in clauses (a)(i),
(a)(ii) and (b)(iii) of Section 5.5 above or in
the event the Acceleration Notice is not timely
given, the Option shall remain exercisable for the
remaining term of the Option notwithstanding the
provisions of Article V hereof or any
corresponding provisions of the stock option
agreement, subject to any limitations thereto
which may be applicable to Incentive Stock Options
and (ii) in the event of a Corporate Transaction
described in clauses a(iii), b(i) or (b)(ii) of
Section 5.5 above, which is preceded by a timely
Acceleration Notice, the Option shall terminate as
of the effective date of the Corporate Transaction
described therein. In no event shall any Option
under the Plan be exercised after the expiration
of the term provided for in the related stock
option agreement.

(e) The Committee may provide in any option
agreement hereunder that, should the Company
dispose of its equity holding in any subsidiary
corporation effected by (i) merger or
consolidation involving that subsidiary; (ii) the
sale of all or distribution of substantially all
of the assets of that subsidiary; or (iii) the
Company's sale of or distribution to shareholders
of all or substantially all of the outstanding
capital stock of such subsidiary ("Subsidiary
Disposition") while a holder of the Option is
engaged in the performance of services for the
affected subsidiary corporation, then such Option
shall, immediately prior to the effective date of
such Subsidiary Disposition, become fully
exercisable with respect to all of such shares at
the time represented by such Option and may be
exercised with respect to any or all of such
shares. Any such Option shall remain so
exercisable until the expiration or sooner
termination of the term of the Option.

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<PAGE>

ARTICLE VI

6.1 Limitation of Shares of Common Stock Available
under the Plan.

(a) Shares of stock which may be issued
under the Plan shall be authorized and unissued or
treasury shares of Common Stock. The total number
of shares of Common Stock available to be granted
by the Committee as Options to the Participants
under the Plan, and the maximum number of shares
of Common Stock with respect to which Options may
be granted to any Participant during any calendar
year, shall not exceed 250,000 shares (which
number may be increased by the Committee, without
shareholder approval, to reflect adjustments
pursuant to Section 7.1 below).

(b) The grant of Incentive Stock Options and
Nonqualified Stock Options shall reduce the
available shares by the number of shares subject
to such Options.

(c) The lapse or cancellation of an
Incentive Stock Option or Nonqualified Stock
Option shall increase the available shares by the
number of shares released from such Option.

ARTICLE VII

7.1 Adjustment Upon Changes in Capitalization. In the
event of any change in the outstanding Common Stock by
reason of a stock dividend or distribution,
recapitalization, merger, consolidation, split-up,
combination, exchange of shares or the like, the
Committee shall appropriately adjust the number and
kind of shares which may be issued under the Plan, the
number and kind of shares subject to Options
theretofore granted under the Plan, the Option Price of
Options theretofore granted under the Plan, and any and
all other matters deemed appropriate by the Committee.

ARTICLE VIII

8.1 Employment. The establishment of the Plan and
Options hereunder shall not be construed as conferring
on any Participant any right to continued employment or
service and the employment or service of any
Participant may be terminated without regard to the
effect which such action might have upon him as a
Participant.

8.2 Rights as a Shareholder. The recipient of any
Option under the Plan shall have no rights as a
shareholder with respect thereto unless and until
certificates for shares of Common Stock are issued to
him.

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<PAGE>

8.3 Non-Assignability. During the life of the
Participant, Options awarded under this Plan shall be
exercisable only by such person or by such person's
guardian or legal representative.

8.4 Shareholder Approval. Continuance of the Plan for
purposes of granting Incentive Stock Options shall be
subject to approval by the shareholders of the Company
within twelve (12) months after the date the Plan is
adopted by the Board. Any Incentive Stock Options
granted hereunder shall become effective only upon such
shareholder approval. The Committee may grant
Incentive Stock Options or Nonqualified Stock Options
under the Plan prior to such shareholder approval, but
until shareholder approval is obtained, no such Option
shall be exercisable. In the event that such
shareholder approval is not obtained within the period
provided above, all Options previously granted pursuant
to the Plan shall terminate. If such shareholder
approval is obtained at a meeting of shareholders, the
Plan must be approved by a majority of the votes cast
at such meeting at which a quorum representing a
majority of all outstanding voting stock of the Company
is, either in person or by proxy, present and voting on
the Plan. If such shareholder approval is obtained by
written consent, it must be obtained by the written
consent of the holders of a majority of all outstanding
voting stock of the Company.

8.5 Amendment, Modification, and Termination of the
Plan. The Board, at any time, may terminate and in any
respect amend or modify the Plan; provided, however,
that no such action, without approval of the Company's
shareholders, may:

(a) increase the total number of shares of
Common Stock available under the Plan, other than
increases pursuant to Section 7.1 hereof;

(b) materially increase the benefits
accruing to Participants under the Plan;

(d) extend the period during which any
Option may be granted or exercised; or

(e) extend the term of the Plan.

Except as provided in Section 7.1 hereof, no
amendment, modification, or termination of the Plan
shall in any manner adversely affect the rights of any
Participant under the Plan without the consent of such
Participant.

8.6 Indemnification. Each person who is or shall have
been a member of the Board shall be indemnified and
held harmless by the Company against and from any loss,
cost, liability, or expense that may be imposed upon or
reasonably incurred by him in connection with or
resulting from any claim, action, suit, or proceeding
to which he may be a party or in which he may be
involved by reason of any action or failure

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<PAGE>

to act under the Plan and against and from any and
all amounts paid by him in satisfaction of judgment in
any such action, suit, or proceeding against him. Such
person shall give the Company an opportunity, at its
own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf.
The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's
Articles of Incorporation or Bylaws, as a matter of
law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.

8.7 Reliance on Reports. Each member of the Committee
shall be fully justified in relying or acting in good
faith upon any report made by the independent public
accountants of the Company and upon any other
information furnished in connection with the Plan by
any person or persons other than himself. In no event
shall any person who is or shall have been a member of
the Committee be liable for any determination made or
other action taken or any omission to act in reliance
upon any such report or information or for any action
taken, including the furnishing of information, or
failure to act, if in good faith.

8.8 Governing Law. To the extent that federal law
shall not be held to have preempted local law, this
Plan shall be governed by the laws of the State of
Delaware. If any provision of the Plan shall be held
invalid or unenforceable, the remaining provisions
hereof shall continue in full force and effect.

IN WITNESS WHEREOF, the Company has caused the NRG
Generating (U.S.) Inc. 1998 Stock Option Plan to be executed by
its duly authorized officer pursuant to resolutions of the Board
to be effective as of the 20th day of April, 1998.

NRG Generating (U.S.) Inc.

By: /s/ Timothy P. Hunstad
Timothy P. Hunstad
Vice President and Chief Financial Officer

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<PAGE>

NRG GENERATING (U.S.) INC.
1221 Nicollet Mall, Suite 610
Minneapolis, MN 55403-2444

COMMON STOCK PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
For Annual Meeting of Stockholders, May 21, 1998

The undersigned hereby appoints ROBERT T. SHERMAN, JR. and
TIMOTHY P. HUNSTAD, and each of them, proxies, with full power of
substitution and with discretionary authority, to represent and
to vote in accordance with the instructions set forth herein, all
shares of Common Stock of NRG Generating (U.S.) Inc. held of
record by the undersigned on April 10, 1998, at the Annual
Meeting of Stockholders to be held at the IDS Center, 50th Floor,
710 Marquette Avenue, Minneapolis, Minnesota 55402, at 1:00 p.m.
on Thursday, May 21, 1998, and any adjournments thereof.

1. Election of the following nominees to the Board of Directors
for one-year terms and until their successors are elected and
qualified.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
FOR all nominees listed below WITHHOLD AUTHORITY to vote
(except as marked to the contrary for all nominees listed
below) below

David H. Peterson Craig A. Mataczynski Charles J. Thayer
Julie A. Jorgensen Robert T. Sherman, Jr. Ronald J. Will
Lawrence I. Littman Spyros S. Skouras, Jr.

(INSTRUCTION: To withhold authority to vote for any individual
nominee, write the nominee's name in the space provided below.)

2. Ratification of the appointment of Price Waterhouse LLP as
the Company's independent public accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 2.
FOR AGAINST ABSTAIN

3. Approval of an amendment to the Company's Certificate of
Incorporation to change the Company's name to "Cogeneration
Corporation of America."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 3.
FOR AGAINST ABSTAIN

4. Approval of the adoption of the NRG Generating (U.S.) Inc.
1998 Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 4.
FOR AGAINST ABSTAIN

5. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE
DIRECTOR NOMINEES NAMED ABOVE AND "FOR" ITEMS 2, 3 AND 4.

Dated: , 1998
Signature

Signature if held jointly

Please sign exactly as name appears
on stock certificate. If stock is
held in the name of two or more
persons, all must sign. When
signing as attorney, as executor,
administrator, trustee, or
guardian, please give full title as
such. If a corporation, please
sign in full corporate name by
President or other authorized
officer. If a partnership, please
sign in partnership name by
authorized person.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.