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                                                                   EXHIBIT 10.45




                                (NRG LETTERHEAD)


December 18, 2002



Mr. George P. Schaefer
11 High Mountain Drive
Boonton, NJ 07005

RE:   LETTER OF UNDERSTANDING REGARDING SEVERANCE BENEFITS

Dear George:

NRG Energy, Inc. (the "Company") is delighted with your acceptance of the
position of Vice President and Treasurer of the Company effective December 18,
2002 (the "Effective Date"). This letter reflects the Company's contractual
obligation to you regarding the severance benefits to which you would be
entitled in the event of your termination of employment under the circumstances
described herein. However, it is not a contract of employment. You will be
classified as an "employee at will" and your employment will be subject to
termination at any time, with or without cause.

o     In consideration of your acceptance of employment with the Company, your
      execution of this letter agreement and your performance of the obligations
      hereunder, the Company will provide you with severance pay under the
      following circumstances: (i) in the event that the Company involuntarily
      terminates your employment without Cause (as defined below) or (ii) you
      resign your employment with Good Reason (as defined below) after the
      Effective Date, you will receive severance pay in the amount of one times
      your annual base salary (as in effect on your termination date). The
      severance pay will be paid in the form of a single lump sum payment,
      commencing as soon as practicable after your termination date. In addition
      the Company will pay a lump sum for all costs associated with your health
      benefits under COBRA for a period of 12 months from the effective date of
      your separation. The employee will be responsible for making the COBRA
      payments to the applicable COBRA third party administrator.

o     For purposes of this agreement, the term "Cause" shall mean a termination
      of your employment which is the result of any of the following: (i) your
      felony conviction or your plea of "no contest" to a felony; (ii) any fraud
      by you in connection with the performance of your duties as an employee of
      the Company; (iii) any act of gross negligence or gross misconduct by you
      in the performance of your duties as an employee of the Company; (iv) your
      repeated and continued neglect of your duties as an employee of the
      Company (other than your neglect resulting from your incapacity due to a
      physical or mental illness); provided, however, that an event described in
      item (iv) above shall not constitute Cause unless it is communicated by
      the Company in writing thirty (30) days from the date the Chief Executive
      Officer knows of such event and is not corrected by you in a manner which
      is reasonably satisfactory to the Company within thirty (30) days of your
      receipt of such written notice from the Company.


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                                                                 George Schaefer
                                                               December 18, 2002
                                                                          Page 2

o     For purposes of this agreement, "Good Reason" shall mean your resignation
      of your employment as a result of a material and adverse change in the
      scope of your position that results in (i) duties and responsibilities
      that are not substantially equivalent to those of the position for which
      you were hired and (ii) a reporting relationship below executive senior
      management (i.e., below a CEO, CFO, COO); provided, however, that a change
      described above shall not constitute Good Reason unless it is communicated
      by you to the Company in writing thirty (30) days from the date you know
      of such event and is not corrected by Company in a manner which is
      reasonably satisfactory to you within thirty (30) days of the Company's
      receipt of such written notice from you.

o     In the event your employment ends at any time as a result of your
      resignation without Good Reason, the Company shall pay you the full amount
      of the accrued but unpaid Salary you have earned through the date of your
      termination, plus a cash payment (calculated on the basis of your rate of
      Salary then in effect) for all unused vacation time which you may have
      accrued as of the date of termination, and any unpaid reimbursement for
      relocation, business or living expenses to which you are entitled.

o     You will not be entitled to receive severance benefits if you die, retire
      or become disabled while employed by the Company.

o     Severance payment(s) hereunder shall be an obligation of, and paid by, the
      Company.

o     All of the Company's obligations under this Agreement and your Employment
      letter shall be binding upon the Company.

o     The severance benefits specified in this agreement are in lieu of any
      other severance benefit to which you may be entitled under any other plan
      or program of the Company including, without limitation, benefits
      otherwise available under the NRG Energy, Inc. Involuntary Severance Plan.

o     This agreement and all the terms hereof are confidential. You may not
      disclose, publicize, or discuss any of the terms or conditions hereof with
      anyone, except your spouse, attorney and/or accountant. In the event that
      you disclose this agreement or any of its terms or conditions to your
      spouse, attorney and/or accountant, it shall be your duty to advise said
      individual(s) of the confidential nature of this agreement and to direct
      them not to disclose, publicize, or discuss any of the terms or conditions
      of this agreement with any other person. Violation of this confidentiality
      provision shall result in immediate termination of this agreement, loss of
      all severance benefits and, to the extent determined by the Company in its
      sole and absolute discretion, termination of employment for Cause.


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                                                                 George Schaefer
                                                               December 18, 2002
                                                                          Page 3

George, if you are in agreement with the terms of this Letter of Understanding,
please indicate your acceptance thereof by signing the enclosed copy of this
letter and returning it to me.

Sincerely,

/s/ RICHARD C. KELLY

Richard C. Kelly
President & COO
NRG Energy, Inc.



ACCEPTED:


/s/ GEORGE SCHAEFER                                      2/21/03
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George Schaefer                                            Date