Disaggregated Revenues
The following table represents the Company’s disaggregation of revenue from contracts with customers for the
three months ended
March 31, 2018
, along with the reportable segment for each category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2018
|
|
|
|
Generation
|
|
|
|
|
|
|
|
|
(In millions)
|
Retail
|
|
Gulf Coast
|
|
East/West
(a)
|
|
Subtotal
|
|
Renewables
|
|
NRG Yield
|
|
Eliminations
|
|
Total
|
Energy revenue
(a)(b)
|
$
|
—
|
|
|
$
|
371
|
|
|
$
|
218
|
|
|
$
|
589
|
|
|
$
|
77
|
|
|
$
|
114
|
|
|
$
|
(161
|
)
|
|
$
|
619
|
|
Capacity revenue
(a)(b)
|
—
|
|
|
67
|
|
|
140
|
|
|
207
|
|
|
—
|
|
|
82
|
|
|
(1
|
)
|
|
288
|
|
Retail revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mass customers
|
1,171
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
1,170
|
|
Business solutions customers
|
316
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
316
|
|
Total retail revenue
|
1,487
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
1,486
|
|
Mark-to-market for economic hedging activities
(c)
|
(6
|
)
|
|
(564
|
)
|
|
(10
|
)
|
|
(574
|
)
|
|
(10
|
)
|
|
—
|
|
|
484
|
|
|
(106
|
)
|
Contract amortization
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
(14
|
)
|
Other revenue
(a)(b)
|
—
|
|
|
86
|
|
|
16
|
|
|
102
|
|
|
19
|
|
|
46
|
|
|
(19
|
)
|
|
148
|
|
Total operating revenue
|
1,481
|
|
|
(37
|
)
|
|
364
|
|
|
327
|
|
|
86
|
|
|
225
|
|
|
302
|
|
|
2,421
|
|
Less: Lease revenue
|
6
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
64
|
|
|
181
|
|
|
—
|
|
|
252
|
|
Less: Derivative revenue
|
(6
|
)
|
|
(188
|
)
|
|
80
|
|
|
(108
|
)
|
|
(10
|
)
|
|
—
|
|
|
484
|
|
|
360
|
|
Less: Contract amortization
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
(14
|
)
|
Total revenue from contracts with customers
|
$
|
1,481
|
|
|
$
|
148
|
|
|
$
|
283
|
|
|
$
|
431
|
|
|
$
|
32
|
|
|
$
|
61
|
|
|
$
|
(182
|
)
|
|
$
|
1,823
|
|
(a) The following amounts of energy and capacity revenue relate to leases and are accounted for under ASC 840:
|
|
Retail
|
|
Gulf Coast
|
|
East/West
|
|
Subtotal
|
|
Renewables
|
|
NRG Yield
|
|
Eliminations
|
|
Total
|
Energy revenue
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
61
|
|
|
102
|
|
|
—
|
|
|
163
|
|
Capacity revenue
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
79
|
|
|
—
|
|
|
79
|
|
Other revenue
|
6
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
10
|
|
(b) The following amounts of energy and capacity revenue relate to derivative instruments and are accounted for under ASC 815.
|
|
Retail
|
|
Gulf Coast
|
|
East/West
|
|
Subtotal
|
|
Renewables
|
|
NRG Yield
|
|
Eliminations
|
|
Total
|
Energy revenue
|
—
|
|
|
371
|
|
|
61
|
|
|
432
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
432
|
|
Capacity revenue
|
—
|
|
|
—
|
|
|
26
|
|
|
26
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26
|
|
Other revenue
|
—
|
|
|
5
|
|
|
3
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
(c) Revenue relates entirely to unrealized gains and losses on derivative instruments accounted for under ASC 815.
|
Contract Amortization
Assets and liabilities recognized from power sales agreements assumed at Fresh Start and through acquisitions related to the sale of electric capacity and energy in future periods for which the fair value has been determined to be significantly less (more) than market are amortized to revenue over the term of each underlying contract based on actual generation and/or contracted volumes.
Lease Revenue
Certain of the Company’s revenues are obtained through PPAs or other contractual agreements. Many of these agreements are accounted for as operating leases under ASC 840 Leases. Certain of these leases have no minimum lease payments and all of the rent is recorded as contingent rent on an actual basis when the electricity is delivered. Judgment is required by management in determining the economic life of each generating facility, in evaluating whether certain lease provisions constitute minimum payments or represent contingent rent and other factors in determining whether a contract contains a lease and whether the lease is an operating lease or capital lease.
Contract Balances
The following table reflects the contract assets and liabilities included in the Company’s balance sheet as of
March 31, 2018
:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
March 31, 2018
|
Deferred customer acquisition costs
|
|
$
|
85
|
|
|
|
|
Accounts receivable, net - Contracts with customers
|
|
784
|
|
Accounts receivable, net - Leases
|
|
81
|
|
Accounts receivable, net - Derivative instruments
|
|
38
|
|
Total accounts receivable, net
|
|
903
|
|
|
|
|
Unbilled revenues (included within Accounts receivable, net - Contracts with customers)
|
|
292
|
|
|
|
|
Deferred revenues
|
|
63
|
|
The Company’s customer acquisition costs consist of broker fees, commission payments and other costs that represent incremental costs of obtaining the contract with customers for which the Company expects to recover. The Company amortizes these amounts over the estimated life of the customer contract. As a practical expedient, the Company expenses the incremental costs of obtaining a contract if the amortization period of the asset would have been one year or less.
When the Company receives consideration from the customer that is in excess of the amount due, such consideration is reclassified to deferred revenue, which represents a contract liability. Generally, the Company will recognize revenue from contract liabilities in the next period as the Company satisfies its performance obligations.
Recent Accounting Developments - Guidance Adopted in 2018
ASU 2017-07
— In March 2017, the FASB issued ASU No. 2017-07,
Compensation - Retirement Benefits (Topic 715)
, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, or ASU No. 2017-07. Current GAAP does not indicate where the amount of net benefit cost should be presented in an entity’s income statement and does not require entities to disclose the amount of net benefit cost that is included in the income statement. The amendments of ASU No. 2017-07 require an entity to report the service cost component of net benefit costs in the same line item as other compensation costs arising from services rendered by the related employees during the applicable service period. The other components of net benefit cost are required to be presented separately from the service cost component and outside the subtotal of income from operations. Further, ASU No. 2017-07 prescribes that only the service cost component of net benefit costs is eligible for capitalization. The Company adopted the amendments of ASU No. 2017-07 effective January 1, 2018. In connection with the adoption of the standard, the Company has applied the guidance retrospectively which resulted in an increase in cost of operations of
$4 million
and a corresponding increase in other income, net on the statement of operations for the
three months ended
March 31, 2017
.
ASU 2016-01
- In January 2016, the FASB issued ASU No. 2016-01,
Financial Instruments - Overall
(Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities
, or ASU No. 2016-01. The amendments of ASU No. 2016-01 eliminate available-for-sale classification of equity investments and require that equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) be generally measured at fair value with changes in fair value recognized in net income. Further, the amendments require that financial assets and financial liabilities be presented separately in the notes to the financial statements, grouped by measurement category and form of financial asset. The guidance in ASU No. 2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those annual periods. The Company adopted the amendments of ASU No. 2016-01 effective January 1, 2018. In connection with the adoption of the standard, the Company has applied the guidance on a modified retrospective basis, which resulted in no material adjustments recorded to the consolidated results of operations, cash flows, and statement of financial position.
Recent Accounting Developments - Guidance Not Yet Adopted
ASU 2016-02
— In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
, or Topic 842, with the objective to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and to improve financial reporting by expanding the related disclosures. The guidance in Topic 842 provides that a lessee that may have previously accounted for a lease as an operating lease under current GAAP should recognize the assets and liabilities that arise from a lease on the balance sheet. In addition, Topic 842 expands the required quantitative and qualitative disclosures with regards to lease arrangements. The Company will adopt the standard effective January 1, 2019, and expects to elect certain of the practical expedients permitted, including the expedient that permits the Company to retain its existing lease assessment and classification. The Company is currently working through an adoption plan which includes the evaluation of lease contracts compared to the new standard. While the Company is currently evaluating the impact the new guidance will have on its financial position and results of operations, the Company expects to recognize lease liabilities and right of use assets. The extent of the increase to assets and liabilities associated with these amounts remains to be determined pending the Company’s review of its existing lease contracts and service contracts which may contain embedded leases. While this review is still in process, NRG believes the adoption of Topic 842 will have a material impact on its financial statements. The Company is also monitoring recent changes to Topic 842 and the related impact on the implementation process.
Note 3
—
Discontinued Operations and Dispositions
This footnote should be read in conjunction with the complete description under
Note 3
,
Discontinued Operations, Acquisitions and Dispositions
, to the Company's
2017
Form 10-K.
Discontinued Operations
On June 14, 2017, the GenOn Entities filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. As a result of the bankruptcy filings, NRG has concluded that it no longer controls GenOn as it is subject to the control of the Bankruptcy Court; and, accordingly, NRG no longer consolidates GenOn for financial reporting purposes.
By eliminating a large portion of its operations in the PJM market with the deconsolidation of GenOn, NRG has concluded that GenOn meets the criteria for discontinued operations, as this represents a strategic shift in the markets in which NRG operates. As such, all prior period results for GenOn have been reclassified as discontinued operations.
Summarized results of discontinued operations were as follows:
|
|
|
|
|
|
Three months ended March 31, 2017
|
(In millions)
|
Operating revenues
|
$
|
381
|
|
Operating costs and expenses
|
(373
|
)
|
Other expenses
|
(44
|
)
|
Loss from operations of discontinued components, before tax
|
(36
|
)
|
Income tax expense
|
1
|
|
Loss from operations of discontinued components
|
(37
|
)
|
Interest income - affiliate
|
3
|
|
Loss from discontinued operations, net of tax
|
$
|
(34
|
)
|
Income recorded from discontinued operations was immaterial for the
three months ended
March 31, 2018
.
Restructuring Support Agreement
NRG, GenOn and certain holders representing greater than
93%
in aggregate principal amount of GenOn’s Senior Notes and certain holders representing greater than
93%
in aggregate principal amount of GenOn Americas Generation’s Senior Notes entered into a Restructuring Support Agreement that provides for a restructuring and recapitalization of the GenOn Entities through a prearranged plan of reorganization that was approved by the Bankruptcy Court pursuant to an order of confirmation. Completion of the agreed upon terms is contingent upon certain milestones in the Restructuring Support Agreement and the satisfaction or waiver or certain conditions precedent. Certain principal terms of the Restructuring Support Agreement and the plan of reorganization are detailed below:
|
|
1)
|
The dismissal of litigation and full releases from GenOn and GenOn Americas Generation in favor of NRG upon the earlier of the consummation of the GenOn Entities' plan of reorganization or the Settlement Agreement; a condition precedent to the consummation of the Settlement Agreement is a full release or indemnification in favor of NRG from any claims of GenOn Mid-Atlantic and REMA.
|
|
|
2)
|
NRG will provide settlement cash consideration to GenOn of
$261.3 million
, which will be paid in cash less any amounts owed to NRG under the intercompany secured revolving credit facility. As of
March 31, 2018
, GenOn owed NRG approximately
$125 million
under the intercompany secured revolving credit facility. See
Note 13
,
Related Party Transactions
, for further discussion of the intercompany secured revolving credit facility. The net liability for these amounts, along with the services credit described below, is recorded in accrued expenses and other current liabilities - affiliate as of
March 31, 2018
and
December 31, 2017
.
|
|
|
3)
|
NRG will retain the pension liability, including payment of approximately
$13 million
of 2017 pension contributions, for GenOn employees for service provided prior to the completion of the reorganization, which was paid in September 2017. GenOn’s pension liability as of
March 31, 2018
, was approximately
$91 million
. NRG will also retain the liability for GenOn’s post-employment and retiree health and welfare benefits, in an amount up to
$25 million
. These liabilities are recorded within other non-current liabilities as of
March 31, 2018
and
December 31, 2017
.
|
|
|
4)
|
The shared services agreement between NRG and GenOn was terminated and replaced as of the plan confirmation date with a transition services agreement. Under the transition services agreement, NRG will continue to provide the shared services and other separation services at an annualized rate of
$84 million
, subject to certain credits and adjustments. See
Note 13
,
Related Party Transactions
, for further discussion of the Services Agreement.
|
|
|
5)
|
NRG will provide a credit of
$28 million
to GenOn to apply against amounts owed under the transition services agreement. Any unused amount can be paid in cash at GenOn’s request. The credit was intended to reimburse GenOn for its payment of financing costs.
|
|
|
6)
|
NRG and GenOn have agreed to cooperate in good faith to maximize the value of certain development projects. Pursuant to this, GenOn made a one-time payment in the amount of
$15 million
to NRG in December 2017 as compensation for a purchase option with respect to the Canal 3 project. On March 22, 2018, NRG agreed to sell Canal 3 to Stonepeak Kestrel Holdings II LLC in conjunction with GenOn's sale of Canal Units 1 and 2 to Stonepeak Kestrel Holdings LLC. NRG expects to reimburse GenOn for
$13.5 million
of the one-time payment upon the close of the sale of Canal 3. This amount is recorded as a current liability as of
March 31, 2018
, and
December 31, 2017
.
|
GenMA Settlement
The Bankruptcy Court order confirming the plan of reorganization also approved the settlement terms agreed to among the GenOn Entities, NRG, the Consenting Holders, GenOn Mid-Atlantic, and certain of GenOn Mid-Atlantic’s stakeholders, or the GenMA Settlement, and directed the settlement parties to cooperate in good faith to negotiate definitive documentation consistent with the GenMA Settlement term sheet in order to pursue consummation of the GenMA Settlement. The definitive documentation effectuating the GenMA Settlement was finalized and effective as of April 27, 2018. Certain terms of the compromise with respect to NRG and GenOn Mid-Atlantic are as follows:
|
|
•
|
Settlement of all pending litigation and objections to the Plan (including with respect to releases and feasibility);
|
|
|
•
|
NRG provided
$37.5 million
in letters of credit as new qualifying credit support to GenOn Mid-Atlantic; and
|
|
|
•
|
NRG paid approximately
$6 million
as reimbursement of professional fees incurred by certain of GenOn Mid-Atlantic's stakeholders in connection with the GenMA Settlement.
|
Transfer of Assets Under Common Control
On March 30, 2018, as part of the Transformation Plan, the Company sold to NRG Yield, Inc.
100%
of NRG's interests in Buckthorn Renewables, LLC, which owns a
154
-MW construction-stage utility-scale solar generation project, located in Texas. NRG Yield, Inc. paid cash consideration of approximately
$42 million
, excluding working capital adjustments, and assumed non-recourse debt of approximately $
183 million
. Concurrently, an initial contribution of approximately
$19 million
was received from the third-party investor in the underlying tax equity partnership, which is included in noncontrolling interest.
On March 27, 2017, the Company sold to NRG Yield, Inc.: (i) a
16%
interest in the Agua Caliente solar project, representing ownership of approximately
46
net MW of capacity and (ii) NRG's interests in seven utility-scale solar projects located in Utah representing
265
net MW of capacity, which have reached commercial operations. NRG Yield, Inc. paid cash consideration of
$130 million
, plus
$1 million
in working capital adjustments, and assumed non-recourse debt of approximately
$328 million
.
Note 4
—
Fair Value of Financial Instruments
This footnote should be read in conjunction with the complete description under
Note 4
,
Fair Value of Financial Instruments
, to the Company's
2017
Form 10-K.
For cash and cash equivalents, funds deposited by counterparties, accounts and other receivables, accounts payable, restricted cash, and cash collateral paid and received in support of energy risk management activities, the carrying amount approximates fair value because of the short-term maturity of those instruments and are classified as Level 1 within the fair value hierarchy.
The estimated carrying amounts and fair values of NRG's recorded financial instruments not carried at fair market value are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2018
|
|
As of December 31, 2017
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
|
(In millions)
|
Assets:
|
|
|
|
|
|
|
|
Notes receivable
(a)
|
$
|
15
|
|
|
$
|
14
|
|
|
$
|
16
|
|
|
$
|
15
|
|
Liabilities:
|
|
|
|
|
|
|
|
Long-term debt, including current portion
(b)
|
16,559
|
|
|
16,687
|
|
|
16,603
|
|
|
16,894
|
|
(a) Includes the current portion of notes receivable which is recorded in prepayments and other current assets on the Company's consolidated balance sheets.
(b) Excludes deferred financing costs, which are recorded as a reduction to long-term debt on the Company's consolidated balance sheets.
The fair value of the Company's publicly-traded long-term debt is based on quoted market prices and is classified as Level 2 within the fair value hierarchy. The fair value of debt securities, non-publicly traded long-term debt and certain notes receivable of the Company are based on expected future cash flows discounted at market interest rates, or current interest rates for similar instruments with equivalent credit quality and are classified as Level 3 within the fair value hierarchy. The following table presents the level within the fair value hierarchy for long-term debt, including current portion as of
March 31, 2018
and
December 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2018
|
|
As of December 31, 2017
|
|
Level 2
|
|
Level 3
|
|
Level 2
|
|
Level 3
|
|
(In millions)
|
Long-term debt, including current portion
|
$
|
8,772
|
|
|
$
|
7,915
|
|
|
$
|
8,934
|
|
|
$
|
7,960
|
|
Recurring Fair Value Measurements
Debt securities, equity securities, and trust fund investments, which are comprised of various U.S. debt and equity securities, and derivative assets and liabilities, are carried at fair market value.
The following tables present assets and liabilities measured and recorded at fair value on the Company's condensed consolidated balance sheets on a recurring basis and their level within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2018
|
|
Fair Value
|
(In millions)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Investments in securities (classified within other non-current assets)
|
$
|
22
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
19
|
|
Nuclear trust fund investments:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
16
|
|
|
16
|
|
|
—
|
|
|
—
|
|
U.S. government and federal agency obligations
|
56
|
|
|
55
|
|
|
1
|
|
|
—
|
|
Federal agency mortgage-backed securities
|
92
|
|
|
—
|
|
|
92
|
|
|
—
|
|
Commercial mortgage-backed securities
|
16
|
|
|
—
|
|
|
16
|
|
|
—
|
|
Corporate debt securities
|
100
|
|
|
—
|
|
|
100
|
|
|
—
|
|
Equity securities
|
333
|
|
|
333
|
|
|
—
|
|
|
—
|
|
Foreign government fixed income securities
|
5
|
|
|
—
|
|
|
5
|
|
|
—
|
|
Other trust fund investments:
|
|
|
|
|
|
|
|
U.S. government and federal agency obligations
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
Derivative assets:
|
|
|
|
|
|
|
|
Commodity contracts
|
1,277
|
|
|
168
|
|
|
1,060
|
|
|
49
|
|
Interest rate contracts
|
92
|
|
|
—
|
|
|
92
|
|
|
—
|
|
Measured using net asset value practical expedient:
|
|
|
|
|
|
|
|
Equity securities — nuclear trust fund investments
|
62
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
2,072
|
|
|
$
|
576
|
|
|
$
|
1,366
|
|
|
$
|
68
|
|
Derivative liabilities:
|
|
|
|
|
|
|
|
Commodity contracts
|
1,024
|
|
|
224
|
|
|
729
|
|
|
71
|
|
Interest rate contracts
|
30
|
|
|
—
|
|
|
30
|
|
|
—
|
|
Total liabilities
|
$
|
1,054
|
|
|
$
|
224
|
|
|
$
|
759
|
|
|
$
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
Fair Value
|
(In millions)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Investments in securities (classified within other non-current assets)
|
$
|
22
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
19
|
|
Nuclear trust fund investments:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
47
|
|
|
45
|
|
|
2
|
|
|
—
|
|
U.S. government and federal agency obligations
|
43
|
|
|
42
|
|
|
1
|
|
|
—
|
|
Federal agency mortgage-backed securities
|
82
|
|
|
—
|
|
|
82
|
|
|
—
|
|
Commercial mortgage-backed securities
|
14
|
|
|
—
|
|
|
14
|
|
|
—
|
|
Corporate debt securities
|
99
|
|
|
—
|
|
|
99
|
|
|
—
|
|
Equity securities
|
334
|
|
|
334
|
|
|
—
|
|
|
—
|
|
Foreign government fixed income securities
|
5
|
|
|
—
|
|
|
5
|
|
|
—
|
|
Other trust fund investments:
|
|
|
|
|
|
|
|
U.S. government and federal agency obligations
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
Derivative assets:
|
|
|
|
|
|
|
|
Commodity contracts
|
745
|
|
|
191
|
|
|
509
|
|
|
45
|
|
Interest rate contracts
|
53
|
|
|
—
|
|
|
53
|
|
|
—
|
|
Measured using net asset value practical expedient:
|
|
|
|
|
|
|
|
Equity securities — nuclear trust fund investments
|
68
|
|
|
|
|
|
|
|
Total assets
|
$
|
1,513
|
|
|
$
|
616
|
|
|
$
|
765
|
|
|
$
|
64
|
|
Derivative liabilities:
|
|
|
|
|
|
|
|
Commodity contracts
|
693
|
|
|
257
|
|
|
359
|
|
|
77
|
|
Interest rate contracts
|
59
|
|
|
—
|
|
|
59
|
|
|
—
|
|
Total liabilities
|
$
|
752
|
|
|
$
|
257
|
|
|
$
|
418
|
|
|
$
|
77
|
|
There were
no
transfers during the
three
months ended
March 31, 2018
and
2017
between Levels 1 and 2. The following tables reconcile, for the
three
months ended
March 31, 2018
and
2017
, the beginning and ending balances for financial instruments that are recognized at fair value in the condensed consolidated financial statements, at least annually, using significant unobservable inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
|
|
Three months ended March 31, 2018
|
(In millions)
|
Debt Securities
|
|
Derivatives
(a)
|
|
Total
|
Beginning balance
|
$
|
19
|
|
|
$
|
(32
|
)
|
|
$
|
(13
|
)
|
Total gains — realized/unrealized:
|
|
|
|
|
|
|
Included in earnings
|
—
|
|
|
2
|
|
|
2
|
|
Purchases
|
—
|
|
|
1
|
|
|
1
|
|
Transfers into Level 3
(b)
|
—
|
|
|
4
|
|
|
4
|
|
Transfers out of Level 3
(b)
|
—
|
|
|
3
|
|
|
3
|
|
Ending balance as of March 31, 2018
|
$
|
19
|
|
|
$
|
(22
|
)
|
|
$
|
(3
|
)
|
Gains for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held as of March 31, 2018
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
|
(a)
|
Consists of derivative assets and liabilities, net.
|
|
|
(b)
|
Transfers into/out of Level 3 are related to the availability of external broker quotes and are valued as of the end of the reporting period. All transfers in/out are with Level 2.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
|
|
Three months ended March 31, 2017
|
(In millions)
|
Debt Securities
|
|
Trust Fund Investments
|
|
Derivatives
(a)
|
|
Total
|
Beginning balance
|
$
|
17
|
|
|
$
|
54
|
|
|
$
|
(68
|
)
|
|
$
|
3
|
|
Total gains — realized/unrealized:
|
|
|
|
|
|
|
|
Included in earnings
|
1
|
|
|
—
|
|
|
6
|
|
|
7
|
|
Included in nuclear decommissioning obligation
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
Purchases
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
Transfers into Level 3
(b)
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
(8
|
)
|
Transfers out of Level 3
(b)
|
—
|
|
|
—
|
|
|
10
|
|
|
10
|
|
Ending balance as of March 31, 2017
|
$
|
18
|
|
|
$
|
58
|
|
|
$
|
(56
|
)
|
|
$
|
20
|
|
Losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held as of March 31, 2017
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(15
|
)
|
|
$
|
(15
|
)
|
|
|
(a)
|
Consists of derivative assets and liabilities, net.
|
|
|
(b)
|
Transfers into/out of Level 3 are related to the availability of external broker quotes and are valued as of the end of the reporting period. All transfers in/out are with Level 2.
|
Derivative Fair Value Measurements
A portion of NRG's contracts are exchange-traded contracts with readily available quoted market prices. A majority of NRG's contracts are non-exchange-traded contracts valued using prices provided by external sources, primarily price quotations available through brokers or over-the-counter and on-line exchanges. The remainder of the assets and liabilities represent contracts for which external sources or observable market quotes are not available for the whole term or for certain delivery months or the contracts are retail and load following power contracts. These contracts are valued using various valuation techniques including but not limited to internal models that apply fundamental analysis of the market and corroboration with similar markets. As of
March 31, 2018
, contracts valued with prices provided by models and other valuation techniques make up
4%
of the total derivative assets and
7%
of the total derivative liabilities.
NRG's significant positions classified as Level 3 include physical and financial power executed in illiquid markets as well as financial transmission rights, or FTRs. The significant unobservable inputs used in developing fair value include illiquid power location pricing which is derived as a basis to liquid locations. The basis spread is based on observable market data when available or derived from historic prices and forward market prices from similar observable markets when not available. For FTRs, NRG uses the most recent auction prices to derive the fair value.
The following tables quantify the significant unobservable inputs used in developing the fair value of the Company's Level 3 positions as of
March 31, 2018
and
December 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Unobservable Inputs
|
|
March 31, 2018
|
|
Fair Value
|
|
|
|
Input/Range
|
|
Assets
|
|
Liabilities
|
|
Valuation Technique
|
|
Significant Unobservable Input
|
|
Low
|
|
High
|
|
Weighted Average
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
Power Contracts
|
$
|
38
|
|
|
$
|
63
|
|
|
Discounted Cash Flow
|
|
Forward Market Price (per MWh)
|
|
$
|
9
|
|
|
$
|
319
|
|
|
$
|
40
|
|
FTRs
|
11
|
|
|
8
|
|
|
Discounted Cash Flow
|
|
Auction Prices (per MWh)
|
|
(28
|
)
|
|
46
|
|
|
—
|
|
|
$
|
49
|
|
|
$
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Unobservable Inputs
|
|
December 31, 2017
|
|
Fair Value
|
|
|
|
Input/Range
|
|
Assets
|
|
Liabilities
|
|
Valuation Technique
|
|
Significant Unobservable Input
|
|
Low
|
|
High
|
|
Weighted Average
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
Power Contracts
|
$
|
34
|
|
|
$
|
65
|
|
|
Discounted Cash Flow
|
|
Forward Market Price (per MWh)
|
|
$
|
10
|
|
|
$
|
142
|
|
|
$
|
33
|
|
FTRs
|
11
|
|
|
12
|
|
|
Discounted Cash Flow
|
|
Auction Prices (per MWh)
|
|
(28
|
)
|
|
46
|
|
|
—
|
|
|
$
|
45
|
|
|
$
|
77
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides sensitivity of fair value measurements to increases/(decreases) in significant unobservable inputs as of
March 31, 2018
and
December 31, 2017
:
|
|
|
|
|
|
|
|
Significant Unobservable Input
|
|
Position
|
|
Change In Input
|
|
Impact on Fair Value Measurement
|
Forward Market Price Power
|
|
Buy
|
|
Increase/(Decrease)
|
|
Higher/(Lower)
|
Forward Market Price Power
|
|
Sell
|
|
Increase/(Decrease)
|
|
Lower/(Higher)
|
FTR Prices
|
|
Buy
|
|
Increase/(Decrease)
|
|
Higher/(Lower)
|
FTR Prices
|
|
Sell
|
|
Increase/(Decrease)
|
|
Lower/(Higher)
|
The fair value of each contract is discounted using a risk-free interest rate. In addition, the Company applies a credit reserve to reflect credit risk, which is calculated based on published default probabilities. As of
March 31, 2018
, the credit reserve resulted in a
$2 million
decrease in fair value in operating revenue and cost of operations. As of
December 31, 2017
, the credit reserve resulted in
no
change in fair value in operating revenue and cost of operations.
Concentration of Credit Risk
In addition to the credit risk discussion as disclosed in
Note 2
,
Summary of Significant Accounting Policies
, to the Company's
2017
Form 10-K, the following is a discussion of the concentration of credit risk for the Company's contractual obligations. Credit risk relates to the risk of loss resulting from non-performance or non-payment by counterparties pursuant to the terms of their contractual obligations. NRG is exposed to counterparty credit risk through various activities including wholesale sales, fuel purchases and retail supply arrangements, and retail customer credit risk through its retail load activities.
Counterparty Credit Risk
The Company's counterparty credit risk policies are disclosed in its
2017
Form 10-K. As of
March 31, 2018
, the Company's counterparty credit exposure, excluding credit risk exposure under certain long term agreements, was
$505 million
with net exposure of
$244 million
. NRG held collateral (cash and letters of credit) against those positions of
$264 million
. Approximately
83%
of the Company's exposure before collateral is expected to roll off by the end of
2019
. Counterparty credit exposure is valued through observable market quotes and discounted at a risk free interest rate. The following tables highlight net counterparty credit exposure by industry sector and by counterparty credit quality. Net counterparty credit exposure is defined as the aggregate net asset position for NRG with counterparties where netting is permitted under the enabling agreement and includes all cash flow, mark-to-market and NPNS, and non-derivative transactions. The exposure is shown net of collateral held, and includes amounts net of receivables or payables.
|
|
|
|
|
Net Exposure
(a) (b)
|
Category by Industry Sector
|
(% of Total)
|
Utilities, energy merchants, marketers and other
|
78
|
%
|
Financial institutions
|
22
|
|
Total as of March 31, 2018
|
100
|
%
|
|
|
|
|
|
Net Exposure
(a) (b)
|
Category by Counterparty Credit Quality
|
(% of Total)
|
Investment grade
|
78
|
%
|
Non-Investment grade/Non-Rated
|
22
|
|
Total as of March 31, 2018
|
100
|
%
|
|
|
(a)
|
Counterparty credit exposure excludes uranium and coal transportation contracts because of the unavailability of market prices.
|
|
|
(b)
|
The figures in the tables above exclude potential counterparty credit exposure related to RTOs, ISOs, registered commodity exchanges and certain long term contracts.
|
NRG has counterparty credit risk exposure to certain counterparties, each of which represent more than
10%
of total net exposure discussed above. The aggregate of such counterparties' exposure was
$65 million
as of
March 31, 2018
. Changes in hedge positions and market prices will affect credit exposure and counterparty concentration. Given the credit quality, diversification and term of the exposure in the portfolio, NRG does not anticipate a material impact on the Company's financial position or results of operations from nonperformance by any of NRG's counterparties.
RTOs and ISOs
The Company participates in the organized markets of CAISO, ERCOT, ISO-NE, MISO, NYISO and PJM, known as RTOs or ISOs. Trading in these markets is approved by FERC, or in the case of ERCOT, approved by the PUCT and includes credit policies that, under certain circumstances, require that losses arising from the default of one member on spot market transactions be shared by the remaining participants. As a result, the counterparty credit risk to these markets is limited to NRG’s share of overall market and are excluded from the above exposures.
Exchange Traded Transactions
The Company enters into commodity transactions on registered exchanges, notably ICE and NYMEX. These clearinghouses act as the counterparty and transactions are subject to extensive collateral and margining requirements. As a result, these commodity transactions have limited counterparty credit risk.
Long Term Contracts
Counterparty credit exposure described above excludes credit risk exposure under certain long term agreements, including California tolling agreements, Gulf Coast load obligations, and wind and solar PPAs. As external sources or observable market quotes are not available to estimate such exposure, the Company estimates its credit exposure for these contracts based on various techniques including, but not limited to, internal models based on a fundamental analysis of the market and extrapolation of observable market data with similar characteristics. Based on these valuation techniques, as of
March 31, 2018
, aggregate credit risk exposure managed by NRG to these counterparties was approximately
$4.1 billion
, including
$2.5 billion
related to assets of NRG Yield, Inc., for the next
five
years. This amount excludes potential credit exposures for projects with long-term PPAs that have not reached commercial operations. The majority of these power contracts are with utilities or public power entities with strong credit quality and public utility commission or other regulatory support. However, such regulated utility counterparties can be impacted by changes in government regulations or treatment by regulatory agencies which NRG is unable to predict.
Retail Customer Credit Risk
The Company is exposed to retail credit risk through the Company's retail electricity providers, which serve C&I customers and the Mass market. Retail credit risk results in losses when a customer fails to pay for services rendered. The losses may result from both nonpayment of customer accounts receivable and the loss of in-the-money forward value. The Company manages retail credit risk through the use of established credit policies that include monitoring of the portfolio and the use of credit mitigation measures such as deposits or prepayment arrangements.
As of
March 31, 2018
, the Company's retail customer credit exposure to C&I and Mass customers was diversified across many customers and various industries, as well as government entities.
Note 5
—
Nuclear Decommissioning Trust Fund
This footnote should be read in conjunction with the complete description under
Note 6
,
Nuclear Decommissioning Trust Fund
, to the Company's
2017
Form 10-K.
NRG's Nuclear Decommissioning Trust Fund assets are comprised of securities classified as available-for-sale and recorded at fair value based on actively quoted market prices. NRG accounts for the Nuclear Decommissioning Trust Fund in accordance with ASC 980,
Regulated Operations
, because the Company's nuclear decommissioning activities are subject to approval by the PUCT with regulated rates that are designed to recover all decommissioning costs and that can be charged to and collected from the ratepayers per PUCT mandate. Since the Company is in compliance with PUCT rules and regulations regarding decommissioning trusts and the cost of decommissioning is the responsibility of the Texas ratepayers, not NRG, all realized and unrealized gains or losses (including other-than-temporary impairments) related to the Nuclear Decommissioning Trust Fund are recorded to the Nuclear Decommissioning Trust liability and are not included in net income or accumulated OCI, consistent with regulatory treatment.
The following table summarizes the aggregate fair values and unrealized gains and losses (including other-than-temporary impairments) for the securities held in the trust funds, as well as information about the contractual maturities of those securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2018
|
|
As of December 31, 2017
|
(In millions, except otherwise noted)
|
Fair Value
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Weighted-average Maturities (In years)
|
|
Fair Value
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Weighted-average Maturities (In years)
|
Cash and cash equivalents
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
47
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
U.S. government and federal agency obligations
|
56
|
|
|
1
|
|
|
1
|
|
|
11
|
|
|
43
|
|
|
1
|
|
|
—
|
|
|
11
|
|
Federal agency mortgage-backed securities
|
92
|
|
|
—
|
|
|
2
|
|
|
23
|
|
|
82
|
|
|
1
|
|
|
1
|
|
|
23
|
|
Commercial mortgage-backed securities
|
16
|
|
|
—
|
|
|
1
|
|
|
22
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
20
|
|
Corporate debt securities
|
100
|
|
|
1
|
|
|
2
|
|
|
11
|
|
|
99
|
|
|
2
|
|
|
1
|
|
|
11
|
|
Equity securities
|
395
|
|
|
265
|
|
|
—
|
|
|
—
|
|
|
402
|
|
|
272
|
|
|
—
|
|
|
—
|
|
Foreign government fixed income securities
|
5
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
9
|
|
Total
|
$
|
680
|
|
|
$
|
267
|
|
|
$
|
6
|
|
|
|
|
$
|
692
|
|
|
$
|
276
|
|
|
$
|
2
|
|
|
|
The following table summarizes proceeds from sales of available-for-sale securities and the related realized gains and losses from these sales. The cost of securities sold is determined on the specific identification method.
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2018
|
|
2017
|
|
(In millions)
|
Realized gains
|
$
|
3
|
|
|
$
|
2
|
|
Realized losses
|
3
|
|
|
2
|
|
Proceeds from sale of securities
|
182
|
|
|
117
|
|
Note 6
—
Accounting for Derivative Instruments and Hedging Activities
This footnote should be read in conjunction with the complete description under
Note 5
,
Accounting for Derivative Instruments and Hedging Activities
, to the Company's
2017
Form 10-K.
Energy-Related Commodities
As of
March 31, 2018
, NRG had energy-related derivative instruments extending through
2031
. The Company marks these derivatives to market through the statement of operations.
Interest Rate Swaps
NRG is exposed to changes in interest rates through the Company's issuance of variable rate debt. In order to manage the Company's interest rate risk, NRG enters into interest rate swap agreements. As of
March 31, 2018
, NRG had interest rate derivative instruments on recourse debt extending through
2021
, which are not designated as cash flow hedges. The Company had interest rate swaps on non-recourse debt extending through
2041
, a portion of which are designated as cash flow hedges.
Volumetric Underlying Derivative Transactions
The following table summarizes the net notional volume buy/(sell) of NRG's open derivative transactions broken out by category, excluding those derivatives that qualified for the NPNS exception, as of
March 31, 2018
and
December 31, 2017
. Option contracts are reflected using delta volume. Delta volume equals the notional volume of an option adjusted for the probability that the option will be in-the-money at its expiration date.
|
|
|
|
|
|
|
|
|
|
|
|
Total Volume
|
|
|
March 31, 2018
|
|
December 31, 2017
|
Category
|
Units
|
(In millions)
|
Emissions
|
Short Ton
|
2
|
|
|
1
|
|
Coal
|
Short Ton
|
17
|
|
|
21
|
|
Natural Gas
|
MMBtu
|
(208
|
)
|
|
(17
|
)
|
Power
|
MWh
|
16
|
|
|
14
|
|
Capacity
|
MW/Day
|
(1
|
)
|
|
(1
|
)
|
Interest
|
Dollars
|
$
|
3,938
|
|
|
$
|
3,876
|
|
Equity
|
Shares
|
1
|
|
|
1
|
|
The increase in the natural gas position was primarily the result of additional generation hedge positions.
Fair Value of Derivative Instruments
The following table summarizes the fair value within the derivative instrument valuation on the balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Derivative Assets
|
|
Derivative Liabilities
|
|
March 31, 2018
|
|
December 31, 2017
|
|
March 31, 2018
|
|
December 31, 2017
|
|
(In millions)
|
Derivatives Designated as Cash Flow or Fair Value Hedges:
|
|
|
|
|
|
|
|
Interest rate contracts current
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
5
|
|
Interest rate contracts long-term
|
20
|
|
|
11
|
|
|
7
|
|
|
11
|
|
Total Derivatives Designated as Cash Flow or Fair Value Hedges
|
22
|
|
|
12
|
|
|
9
|
|
|
16
|
|
Derivatives Not Designated as Cash Flow or Fair Value Hedges:
|
|
|
|
|
|
|
|
Interest rate contracts current
|
13
|
|
|
9
|
|
|
7
|
|
|
15
|
|
Interest rate contracts long-term
|
57
|
|
|
32
|
|
|
14
|
|
|
28
|
|
Commodity contracts current
|
1,000
|
|
|
616
|
|
|
781
|
|
|
535
|
|
Commodity contracts long-term
|
277
|
|
|
129
|
|
|
243
|
|
|
158
|
|
Total Derivatives Not Designated as Cash Flow or Fair Value Hedges
|
1,347
|
|
|
786
|
|
|
1,045
|
|
|
736
|
|
Total Derivatives
|
$
|
1,369
|
|
|
$
|
798
|
|
|
$
|
1,054
|
|
|
$
|
752
|
|
The Company has elected to present derivative assets and liabilities on the balance sheet on a trade-by-trade basis and does not offset amounts at the counterparty master agreement level. In addition, collateral received or paid on the Company's derivative assets or liabilities are recorded on a separate line item on the balance sheet. The following table summarizes the offsetting of derivatives by counterparty master agreement level and collateral received or paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Statement of Financial Position
|
|
|
Gross Amounts of Recognized Assets / Liabilities
|
|
Derivative Instruments
|
|
Cash Collateral (Held) / Posted
|
|
Net Amount
|
As of March 31, 2018
|
|
(In millions)
|
Commodity contracts:
|
|
|
|
|
|
|
|
|
Derivative assets
|
|
$
|
1,277
|
|
|
$
|
(835
|
)
|
|
$
|
(201
|
)
|
|
$
|
241
|
|
Derivative liabilities
|
|
(1,024
|
)
|
|
835
|
|
|
120
|
|
|
(69
|
)
|
Total commodity contracts
|
|
253
|
|
|
—
|
|
|
(81
|
)
|
|
172
|
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
Derivative assets
|
|
92
|
|
|
(4
|
)
|
|
—
|
|
|
88
|
|
Derivative liabilities
|
|
(30
|
)
|
|
4
|
|
|
—
|
|
|
(26
|
)
|
Total interest rate contracts
|
|
62
|
|
|
—
|
|
|
—
|
|
|
62
|
|
Total derivative instruments
|
|
$
|
315
|
|
|
$
|
—
|
|
|
$
|
(81
|
)
|
|
$
|
234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Statement of Financial Position
|
|
|
Gross Amounts of Recognized Assets / Liabilities
|
|
Derivative Instruments
|
|
Cash Collateral (Held) / Posted
|
|
Net Amount
|
As of December 31, 2017
|
|
(In millions)
|
Commodity contracts:
|
|
|
|
|
|
|
|
|
Derivative assets
|
|
$
|
745
|
|
|
$
|
(578
|
)
|
|
$
|
(11
|
)
|
|
$
|
156
|
|
Derivative liabilities
|
|
(693
|
)
|
|
578
|
|
|
73
|
|
|
(42
|
)
|
Total commodity contracts
|
|
52
|
|
|
—
|
|
|
62
|
|
|
114
|
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
Derivative assets
|
|
53
|
|
|
(3
|
)
|
|
—
|
|
|
50
|
|
Derivative liabilities
|
|
(59
|
)
|
|
3
|
|
|
—
|
|
|
(56
|
)
|
Total interest rate contracts
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
Total derivative instruments
|
|
$
|
46
|
|
|
$
|
—
|
|
|
$
|
62
|
|
|
$
|
108
|
|
Accumulated Other Comprehensive Loss
The following table summarizes the effects of ASC 815 on the Company's accumulated OCI balance attributable to cash flow hedge derivatives, net of tax:
|
|
|
|
|
|
|
|
|
|
Interest Rate Contracts
|
|
Three months ended March 31,
|
|
2018
|
|
2017
|
|
(In millions)
|
Accumulated OCI beginning balance
|
$
|
(54
|
)
|
|
$
|
(66
|
)
|
Reclassified from accumulated OCI to income:
|
|
|
|
Due to realization of previously deferred amounts
|
4
|
|
|
3
|
|
Mark-to-market of cash flow hedge accounting contracts
|
19
|
|
|
2
|
|
Accumulated OCI ending balance, net of $6, and $14 tax
|
$
|
(31
|
)
|
|
$
|
(61
|
)
|
Losses expected to be realized from OCI during the next 12 months, net of $2 tax
|
$
|
(9
|
)
|
|
|
|
Amounts reclassified from accumulated OCI into income are recorded to interest expense for interest rate contracts.
The Company's regression analysis for Marsh Landing, Walnut Creek, and Avra Valley interest rate swaps, while positively correlated, no longer contain match terms for cash flow hedge accounting. As a result, the Company voluntarily de-designated the Marsh Landing, Walnut Creek, and Avra Valley cash flow hedges as of April 28, 2017, and will prospectively mark these derivatives to market through the income statement.
Impact of Derivative Instruments on the Statements of Operations
Unrealized gains and losses associated with changes in the fair value of derivative instruments not accounted for as cash flow hedges are reflected in current period consolidated results of operations.
The following table summarizes the pre-tax effects of economic hedges that have not been designated as cash flow hedges and trading activity on the Company's statement of operations. The effect of energy commodity contracts is included within operating revenues and cost of operations and the effect of interest rate contracts is included in interest expense.
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2018
|
|
2017
|
Unrealized mark-to-market results
|
(In millions)
|
Reversal of previously recognized unrealized losses on settled positions related to economic hedges
|
$
|
2
|
|
|
$
|
3
|
|
Net unrealized gains/(losses) on open positions related to economic hedges
|
194
|
|
|
(22
|
)
|
Total unrealized mark-to-market gains/(losses) for economic hedging activities
|
196
|
|
|
(19
|
)
|
Reversal of previously recognized unrealized gains on settled positions related to trading activity
|
(3
|
)
|
|
(15
|
)
|
Net unrealized gains on open positions related to trading activity
|
11
|
|
|
1
|
|
Total unrealized mark-to-market gains/(losses) for trading activity
|
8
|
|
|
(14
|
)
|
Total unrealized gains/(losses)
|
$
|
204
|
|
|
$
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2018
|
|
2017
|
|
(In millions)
|
Unrealized (losses)/gains included in operating revenues
|
$
|
(98
|
)
|
|
$
|
104
|
|
Unrealized gains/(losses) included in cost of operations
|
302
|
|
|
(137
|
)
|
Total impact to statement of operations — energy commodities
|
$
|
204
|
|
|
$
|
(33
|
)
|
Total impact to statement of operations — interest rate contracts
|
$
|
48
|
|
|
$
|
5
|
|
The reversals of acquired gain or loss positions were valued based upon the forward prices on the acquisition date. The roll-off amounts were offset by realized gains or losses at the settled prices and are reflected in operating revenue or cost of operations during the same period.
For the
three
months ended
March 31, 2018
, the
$194 million
unrealized gain from open economic hedge positions was primarily the result of an increase in value of forward purchases of ERCOT heat rate contracts due to ERCOT heat rate expansion.
For the
three
months ended
March 31, 2017
, the
$22 million
unrealized loss from open economic hedge positions was primarily the result of a decrease in value of forward purchases of natural gas, coal, and ERCOT electricity due to decreases in natural gas, coal, and ERCOT electricity prices.
Credit Risk Related Contingent Features
Certain of the Company's hedging agreements contain provisions that require the Company to post additional collateral if the counterparty determines that there has been deterioration in credit quality, generally termed “adequate assurance” under the agreements, or require the Company to post additional collateral if there were a one notch downgrade in the Company's credit rating. The collateral required for contracts with adequate assurance clauses that are in a net liability position as of
March 31, 2018
, was
$20 million
. The collateral required for contracts with credit rating contingent features that are in a net liability position as of
March 31, 2018
, was
$5 million
. The Company is also a party to certain marginable agreements under which it has a net liability position, but the counterparty has not called for the collateral due, which was approximately
$5 million
as of
March 31, 2018
.
See
Note 4
,
Fair Value of Financial Instruments
, to this Form 10-Q for discussion regarding concentration of credit risk.
Note 7
—
Debt and Capital Leases
This footnote should be read in conjunction with the complete description under
Note 12
,
Debt and Capital Leases
, to the Company's
2017
Form 10-K. Long-term debt and capital leases consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
(In millions, except rates)
|
March 31, 2018
|
|
December 31, 2017
|
|
March 31, 2018 interest rate %
(a)
|
|
|
|
Recourse debt:
|
|
|
|
|
|
Senior notes, due 2022
|
992
|
|
|
992
|
|
|
6.250
|
Senior notes, due 2024
|
733
|
|
|
733
|
|
|
6.250
|
Senior notes, due 2026
|
1,000
|
|
|
1,000
|
|
|
7.250
|
Senior notes, due 2027
|
1,250
|
|
|
1,250
|
|
|
6.625
|
Senior notes, due 2028
|
870
|
|
|
870
|
|
|
5.750
|
Term loan facility, due 2023
|
1,867
|
|
|
1,872
|
|
|
L+1.75
|
Tax-exempt bonds
|
465
|
|
|
465
|
|
|
4.125 - 6.00
|
Subtotal recourse debt
|
7,177
|
|
|
7,182
|
|
|
|
Non-recourse debt:
|
|
|
|
|
|
NRG Yield, Inc. Convertible Senior Notes, due 2019
|
345
|
|
|
345
|
|
|
3.500
|
NRG Yield, Inc. Convertible Senior Notes, due 2020
|
288
|
|
|
288
|
|
|
3.250
|
NRG Yield Operating LLC Senior Notes, due 2024
|
500
|
|
|
500
|
|
|
5.375
|
NRG Yield Operating LLC Senior Notes, due 2026
|
350
|
|
|
350
|
|
|
5.000
|
NRG Yield LLC and NRG Yield Operating LLC Revolving Credit Facility, due 2023
(b)
|
75
|
|
|
55
|
|
|
L+2.500
|
El Segundo Energy Center, due 2023
|
369
|
|
|
400
|
|
|
L+1.75 - L+2.375
|
Marsh Landing, due 2023
|
309
|
|
|
318
|
|
|
L+2.125
|
Alta Wind I - V lease financing arrangements, due 2034 and 2035
|
926
|
|
|
926
|
|
|
5.696 - 7.015
|
Walnut Creek, term loans due 2023
|
259
|
|
|
267
|
|
|
L+1.625
|
Utah Portfolio, due 2022
|
278
|
|
|
278
|
|
|
various
|
Tapestry, due 2021
|
158
|
|
|
162
|
|
|
L+1.625
|
CVSR, due 2037
|
731
|
|
|
746
|
|
|
2.339 - 3.775
|
CVSR HoldCo, due 2037
|
188
|
|
|
194
|
|
|
4.680
|
Alpine, due 2022
|
135
|
|
|
135
|
|
|
L+1.750
|
Energy Center Minneapolis, due 2025
|
83
|
|
|
83
|
|
|
5.95
|
Energy Center Minneapolis, due 2031
|
125
|
|
|
125
|
|
|
3.55
|
Viento, due 2023
|
163
|
|
|
163
|
|
|
L+3.00
|
Buckthorn Solar, due 2018 and 2025
|
183
|
|
|
169
|
|
|
L+1.750
|
NRG Yield - other
|
573
|
|
|
579
|
|
|
various
|
Subtotal NRG Yield debt (non-recourse to NRG)
(c)
|
6,038
|
|
|
6,083
|
|
|
|
Ivanpah, due 2033 and 2038
|
1,068
|
|
|
1,073
|
|
|
2.285 - 4.256
|
Carlsbad Energy Project
(c)
|
475
|
|
|
427
|
|
|
L+1.625 - 4.120
|
Agua Caliente, due 2037
|
815
|
|
|
818
|
|
|
2.395 - 3.633
|
Agua Caliente Borrower 1, due 2038
|
86
|
|
|
89
|
|
|
5.430
|
Cedro Hill, due 2025
(c)
|
149
|
|
|
151
|
|
|
L+1.75
|
Midwest Generation, due 2019
|
132
|
|
|
152
|
|
|
4.390
|
NRG Other Renewables
(c)
|
466
|
|
|
478
|
|
|
various
|
NRG Other
|
178
|
|
|
180
|
|
|
various
|
Subtotal other NRG non-recourse debt
|
3,369
|
|
|
3,368
|
|
|
|
Subtotal all non-recourse debt
|
9,407
|
|
|
9,451
|
|
|
|
Subtotal long-term debt (including current maturities)
|
16,584
|
|
|
16,633
|
|
|
|
Capital leases
|
4
|
|
|
5
|
|
|
various
|
Subtotal long-term debt and capital leases (including current maturities)
|
16,588
|
|
|
16,638
|
|
|
|
Less current maturities
(d)
|
(956
|
)
|
|
(688
|
)
|
|
|
Less debt issuance costs
|
(201
|
)
|
|
(204
|
)
|
|
|
Discounts
|
(25
|
)
|
|
(30
|
)
|
|
|
Total long-term debt and capital leases
|
$
|
15,406
|
|
|
$
|
15,716
|
|
|
|
(a) As of
March 31, 2018
, L+ equals
3 month LIBOR
plus x%, except for the Buckthorn Solar and Utah Solar Portfolio where L+ equals 1 month LIBOR plus x%.
(b) Applicable rate is determined by the Borrower Leverage Ratio, as defined in the credit agreement.
(c) Debt associated with the asset sales announced in February 2018
(d) The NRG Yield, Inc. Convertible Senior Notes, due 2019, become due in February 2019 and are recorded in current maturities as of March 31, 2018.
Recourse Debt
2023 Term Loan Facility
On March 21, 2018, NRG repriced the 2023 Term Loan Facility, reducing the interest rate margin by
50
basis points to
LIBOR
plus
1.75%
and reducing the
LIBOR
floor to
0.00%
.
Non-recourse Debt
NRG Yield LLC and NRG Yield Operating LLC Revolving Credit Facility
NRG Yield LLC and its direct wholly owned subsidiary, NRG Yield Operating LLC, are parties to a senior secured revolving credit facility, which can be used for cash and for the issuance of letters of credit. At
March 31, 2018
, there was
$67 million
of letters of credit issued under the revolving credit facility and outstanding borrowings of
$75 million
on the revolver. On April 30, 2018, NRG Yield LLC and NRG Yield Operating LLC refinanced the revolving credit facility, which extended the maturity of the facility to April 28, 2023, and decreased the overall cost of borrowing from L+
2.50%
to L+
1.75%
.
Project Financings
Agua Caliente Project Financing
On February 17, 2017, Agua Caliente Borrower 1 LLC and Agua Caliente Borrower 2 LLC, or Agua Caliente Holdco, the indirect owners of
51%
of the Agua Caliente solar facility, issued
$130 million
of senior secured notes under the Agua Caliente Holdco Financing Agreement, or 2038 Agua Caliente Holdco Notes, that bear interest at
5.43%
and mature on December 31, 2038. As described in
Note 3
,
Discontinued Operations and Dispositions
, on March 27, 2017, NRG Yield, Inc. acquired Agua Caliente Borrower 2 LLC from NRG. The debt is joint and several with respect to Agua Caliente Borrower 1 LLC and Agua Caliente Borrower 2 LLC and is secured by the equity interests of each borrower in the Agua Caliente solar facility.
Carlsbad Project Financing
On May 26, 2017, Carlsbad Energy Holdings, LLC entered into a note payable agreement with financial institutions for the issuance of up to
$407 million
of senior secured notes that bear interest at a rate of
4.12%
, and mature on October 31, 2038, and a credit agreement for a
$194 million
construction loan, that will convert to a term loan upon completion of the project as well as a letter of credit facility with an aggregate principal amount not to exceed
$83 million
, and a working capital loan facility with an aggregate principal amount not to exceed
$4 million
. As of
March 31, 2018
,
$475 million
was outstanding under both the note and the construction loan.
Note 8
—
Variable Interest Entities, or VIEs
Entities that are not Consolidated
NRG has interests in entities that are considered VIEs under ASC 810,
Consolidation
, but NRG is not considered the primary beneficiary. NRG accounts for its interests in these entities under the equity method of accounting.
Utility-Scale Solar Portfolio
—
Through its consolidated subsidiary, NRG Yield, Inc., the Company has equity interests in Four Brothers Solar, LLC, Granite Mountain Holdings, LLC, and Iron Springs Holdings, LLC which are accounted for as equity method investments as the Company does not have a controlling financial interest.
The assets have
20
-year PPAs with PacifiCorp. NRG's maximum exposure to loss is limited to its equity investment, which was
$338 million
as of
March 31, 2018
.
GenConn Energy LLC
—
Through its consolidated subsidiary, NRG Yield, Inc., the Company owns a
50%
interest in GCE Holding LLC, the owner of GenConn, which owns and operates
two
190
MW peaking generation facilities in Connecticut at NRG's Devon and Middletown sites. NRG's maximum exposure to loss is limited to its equity investment, which was
$100 million
as of
March 31, 2018
.
Entities that are Consolidated
The Company has a controlling financial interest in certain entities which have been identified as VIEs under ASC 810. These arrangements are primarily related to tax equity arrangements entered into with third-parties in order to finance the cost of solar energy systems under operating leases and wind facilities eligible for certain tax credits as further described in
Note 2
,
Summary of Significant Accounting Policies
to the Company's
2017
Form 10-K. For one of the tax equity arrangements, the Company has a deficit restoration obligation equal to
$81 million
as of
March 31, 2018
, which would be required to be funded if the arrangement were to be dissolved.
The summarized financial information for the Company's consolidated VIEs consisted of the following:
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31, 2018
|
|
December 31, 2017
|
Current assets
|
$
|
171
|
|
|
$
|
118
|
|
Net property, plant and equipment
|
2,712
|
|
|
2,337
|
|
Other long-term assets
|
665
|
|
|
658
|
|
Total assets
|
3,548
|
|
|
3,113
|
|
Current liabilities
|
111
|
|
|
96
|
|
Long-term debt
|
856
|
|
|
661
|
|
Other long-term liabilities
|
211
|
|
|
209
|
|
Total liabilities
|
1,178
|
|
|
966
|
|
Redeemable noncontrolling interest
|
80
|
|
|
78
|
|
Noncontrolling interests
|
646
|
|
|
507
|
|
Net assets less noncontrolling interests
|
$
|
1,644
|
|
|
$
|
1,562
|
|
Note 9
—
Changes in Capital Structure
As of
March 31, 2018
and
December 31, 2017
, the Company had
500,000,000
shares of common stock authorized. The following table reflects the changes in NRG's common stock issued and outstanding:
|
|
|
|
|
|
|
|
|
|
|
Issued
|
|
Treasury
|
|
Outstanding
|
Balance as of December 31, 2017
|
418,323,134
|
|
|
(101,580,045
|
)
|
|
316,743,089
|
|
Shares issued under LTIPs
|
1,081,994
|
|
|
—
|
|
|
1,081,994
|
|
Shares issued under ESPP
|
—
|
|
|
175,862
|
|
|
175,862
|
|
Shares repurchased
|
—
|
|
|
(3,114,748
|
)
|
|
(3,114,748
|
)
|
Balance as of March 31, 2018
|
419,405,128
|
|
|
(104,518,931
|
)
|
|
314,886,197
|
|
Employee Stock Purchase Plan
In January 2018,
175,862
shares of common stock were issued to employee accounts from treasury stock for the offering period of July 1, 2017 to December 31, 2017. In January 2018, NRG suspended the ESPP.
Share Repurchases
In February 2018, the Company's board of directors authorized the Company to repurchase
$1 billion
of its common stock, with the first
$500 million
program beginning as soon as permitted. In March
2018
, share repurchases were made as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of shares purchased
|
|
Average price paid per share
(a)
|
|
Amounts paid for shares purchased
(in millions)
(a)
|
Board Authorized Share Repurchases
|
|
|
|
|
|
March 2018
|
3,114,748
|
|
|
$
|
29.75
|
|
|
$
|
93
|
|
(a) The average price paid per share and amounts paid for shares purchased exclude the commissions of
$0.01
per share paid in connection with the share repurchase.
NRG Common Stock Dividends
The following table lists the dividends paid during the
three
months ended
March 31, 2018
:
|
|
|
|
|
|
First Quarter 2018
|
Dividends per Common Share
|
$
|
0.03
|
|
On
April 19, 2018
, NRG declared a quarterly dividend on the Company's common stock of
$0.03
per share, payable
May 15, 2018
, to stockholders of record as of
May 1, 2018
, representing
$0.12
per share on an annualized basis.
The Company's common stock dividends are subject to available capital, market conditions, and compliance with associated laws, regulations and other contractual obligations.
Note 10
—
Earnings/(Loss) Per Share
Basic earnings/(loss) per common share is computed by dividing net income/(loss) less accumulated preferred stock dividends by the weighted average number of common shares outstanding. Shares issued and treasury shares repurchased during the year are weighted for the portion of the year that they were outstanding. Diluted earnings/(loss) per share is computed in a manner consistent with that of basic income/(loss) per share while giving effect to all potentially dilutive common shares that were outstanding during the period. The reconciliation of NRG's basic and diluted loss per share is shown in the following table:
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
(In millions, except per share data)
|
2018
|
|
2017
|
Basic income/(loss) per share attributable to NRG Energy, Inc. common stockholders
|
Net income/(loss) attributable to NRG Energy, Inc.
|
$
|
279
|
|
|
$
|
(163
|
)
|
Weighted average number of common shares outstanding - basic
|
318
|
|
|
316
|
|
Earnings/(loss) per weighted average common share — basic
|
$
|
0.88
|
|
|
$
|
(0.52
|
)
|
Diluted income/(loss) per share attributable to NRG Energy, Inc. common stockholders
|
Weighted average number of common shares outstanding - diluted
|
318
|
|
|
316
|
|
Incremental shares attributable to the issuance of equity compensation (treasury stock method)
|
4
|
|
|
—
|
|
Total dilutive shares
|
322
|
|
|
316
|
|
Earnings/(loss) per weighted average common share — diluted
|
$
|
0.87
|
|
|
$
|
(0.52
|
)
|
The following table summarizes NRG’s outstanding equity instruments that are anti-dilutive and were not included in the computation of the Company’s diluted loss per share:
|
|
|
|
|
|
|
|
Three months ended March 31,
|
(In millions of shares)
|
2018
|
|
2017
|
Equity compensation plans
|
1
|
|
|
6
|
|
Total
|
1
|
|
|
6
|
|
Note 11
—
Segment Reporting
The Company's segment structure reflects how management currently makes financial decisions and allocates resources. The Company's businesses are segregated as follows: Generation, which includes generation, international and BETM; Retail, which includes Mass customers and Business Solutions, which includes C&I customers and other distributed and reliability products; Renewables, which includes solar and wind assets, excluding those in NRG Yield; NRG Yield; and corporate activities.
During 2017, NRG Yield acquired several projects totaling
555
MW from NRG. On March 30, 2018, the Company sold to NRG Yield, Inc.
100%
of NRG's interests in Buckthorn Renewables, LLC, which owns a
154
MW construction-stage utility-scale solar generation project, located in Texas. These acquisitions were treated as a transfer of entities under common control and accordingly, all historical periods have been recast to reflect the acquisition as if they had occurred at the beginning of the financial statement period.
On June 14, 2017, as described in
Note 3
,
Discontinued Operations and Dispositions
, NRG deconsolidated GenOn for financial reporting purposes. The financial information for all historical periods have been recast to reflect the presentation of GenOn as discontinued operations within the corporate segment.
NRG’s chief operating decision maker, its chief executive officer, evaluates the performance of its segments based on operational measures including adjusted earnings before interest, taxes, depreciation and amortization, or Adjusted EBITDA, free cash flow and capital for allocation, as well as net income/(loss).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
(a)
|
|
Generation
(a)
|
|
Renewables
(a)
|
|
NRG Yield
|
|
Corporate
(a)
|
|
Eliminations
|
|
Total
|
Three months ended March 31, 2018
|
|
|
(In millions)
|
Operating revenues
(a)
|
$
|
1,481
|
|
|
$
|
327
|
|
|
$
|
86
|
|
|
$
|
225
|
|
|
$
|
2
|
|
|
$
|
300
|
|
|
$
|
2,421
|
|
Depreciation and amortization
|
28
|
|
|
67
|
|
|
51
|
|
|
81
|
|
|
8
|
|
|
—
|
|
|
235
|
|
Reorganization costs
|
3
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
20
|
|
Equity in earnings/(losses) of unconsolidated affiliates
|
—
|
|
|
2
|
|
|
—
|
|
|
4
|
|
|
(1
|
)
|
|
(7
|
)
|
|
(2
|
)
|
Income/(loss) from continuing operations before income taxes
|
946
|
|
|
(536
|
)
|
|
(40
|
)
|
|
(1
|
)
|
|
(126
|
)
|
|
(11
|
)
|
|
232
|
|
Income/(loss) from continuing operations
|
946
|
|
|
(536
|
)
|
|
(34
|
)
|
|
—
|
|
|
(132
|
)
|
|
(11
|
)
|
|
233
|
|
Net Income/(Loss)
|
946
|
|
|
(536
|
)
|
|
(34
|
)
|
|
—
|
|
|
(132
|
)
|
|
(11
|
)
|
|
233
|
|
Net Income/(Loss) attributable to NRG Energy, Inc.
|
$
|
940
|
|
|
$
|
(536
|
)
|
|
$
|
1
|
|
|
$
|
21
|
|
—
|
|
$
|
(148
|
)
|
|
$
|
1
|
|
|
$
|
279
|
|
Total assets as of March 31, 2018
|
$
|
3,521
|
|
|
$
|
7,313
|
|
|
$
|
5,191
|
|
|
$
|
8,362
|
|
|
$
|
9,108
|
|
|
$
|
(9,743
|
)
|
|
$
|
23,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Operating revenues include inter-segment sales and net derivative gains and losses of:
|
$
|
1
|
|
|
$
|
(307
|
)
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
(300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
(a)
|
|
Generation
(a)
|
|
Renewables
(a)
|
|
NRG Yield
|
|
Corporate
(a)(b)
|
|
Eliminations
|
|
Total
|
Three months ended March 31, 2017
|
|
|
(In millions)
|
Operating revenues
(a)
|
$
|
1,335
|
|
|
$
|
965
|
|
|
$
|
95
|
|
|
$
|
221
|
|
|
$
|
10
|
|
|
$
|
(244
|
)
|
|
$
|
2,382
|
|
Depreciation and amortization
|
28
|
|
|
97
|
|
|
47
|
|
|
77
|
|
|
8
|
|
|
—
|
|
|
257
|
|
Equity in (losses)/earnings of unconsolidated affiliates
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
19
|
|
|
3
|
|
|
(4
|
)
|
|
5
|
|
(Loss)/income from continuing operations before income taxes
|
(31
|
)
|
|
37
|
|
|
(35
|
)
|
|
(3
|
)
|
|
(137
|
)
|
|
(4
|
)
|
|
(173
|
)
|
(Loss)/income from continuing operations
|
(34
|
)
|
|
37
|
|
|
(29
|
)
|
|
(2
|
)
|
|
(137
|
)
|
|
(4
|
)
|
|
(169
|
)
|
Loss from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(34
|
)
|
|
—
|
|
|
(34
|
)
|
Net (Loss)/Income
|
(34
|
)
|
|
37
|
|
|
(29
|
)
|
|
(2
|
)
|
|
(171
|
)
|
|
(4
|
)
|
|
(203
|
)
|
Net (Loss)/Income attributable to NRG Energy, Inc.
|
$
|
(33
|
)
|
|
$
|
37
|
|
|
$
|
(1
|
)
|
|
$
|
12
|
|
|
$
|
(171
|
)
|
|
$
|
(7
|
)
|
|
$
|
(163
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Operating revenues include inter-segment sales and net derivative gains and losses of:
|
$
|
1
|
|
|
$
|
209
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
26
|
|
|
$
|
—
|
|
|
$
|
244
|
|
(b) Includes other income - affiliate
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
48
|
|
|
$
|
—
|
|
|
$
|
48
|
|
Note 12
—
Income Taxes
Effective Tax Rate
The income tax provision consisted of the following:
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
(In millions except otherwise noted)
|
2018
|
|
2017
|
Income/(Loss) before income taxes
|
$
|
232
|
|
|
$
|
(173
|
)
|
Income tax benefit from continuing operations
|
(1
|
)
|
|
(4
|
)
|
Effective tax rate
|
(0.4
|
)%
|
|
2.3
|
%
|
For the
three
months ended
March 31, 2018
, NRG's overall effective tax rate was different than the statutory rate of
21%
primarily due to the tax benefit for the change in valuation allowance, the generation of PTCs from various wind facilities and the inclusion of consolidated partnerships partially offset by current state tax expense.
For the
three
months ended
March 31, 2017
, NRG's overall effective tax rate was different than the statutory rate of
35%
primarily due to the change in valuation allowance partially offset by the generation of PTCs and ITCs from various wind and solar facilities, respectively and current state tax expense.
Uncertain Tax Benefits
As of
March 31, 2018
, NRG has recorded a non-current tax liability of
$35 million
for uncertain tax benefits from positions taken on various state income tax returns, including accrued interest. For the
three
months ended
March 31, 2018
, NRG accrued an immaterial amount of interest relating to the uncertain tax benefits. As of
March 31, 2018
, NRG had cumulative interest and penalties related to these uncertain tax benefits of
$3 million
. The Company recognizes interest and penalties related to uncertain tax benefits in income tax expense.
NRG is subject to examination by taxing authorities for income tax returns filed in the U.S. federal jurisdiction and various state and foreign jurisdictions including operations located in Australia. The Company is no longer subject to U.S. federal income tax examinations for years prior to 2015. The Company is no longer subject to U.S. federal income tax examinations for years prior to 2015. With few exceptions, state and local income tax examinations are no longer open for years before 2010.
Note 13
—
Related Party Transactions
Services Agreement and Transition Services Agreement with GenOn
The Company provides GenOn with various management, personnel and other services, which include human resources, regulatory and public affairs, accounting, tax, legal, information systems, treasury, risk management, commercial operations, and asset management, as set forth in the services agreement with GenOn, or the Services Agreement. The initial term of the Services Agreement was through December 31, 2013, with an automatic renewal absent a request for termination. The fee charged was determined based on a fixed amount as described in the Services Agreement and was calculated based on historical GenOn expenses prior to the NRG Merger. The annual fees under the Services Agreement were approximately
$193 million
and management has concluded that this method of charging overhead costs is reasonable. As described in Note 3,
Discontinued Operations and Dispositions
, in connection with the Restructuring Support Agreement, NRG agreed to provide shared services to GenOn under the Services Agreement for an adjusted annualized fee of
$84 million
.
In December 2017, in conjunction with the confirmation of the GenOn Entities' plan of reorganization, the Services Agreement was terminated and replaced by the transition services agreement. Under the transition services agreement, NRG will continue to provide the shared services and other separation services at an annualized rate of
$84 million
, subject to certain credits and adjustments, until September 30, 2018, which GenOn can terminate earlier if NRG is provided
60
days' notice. NRG may provide additional separation services that are necessary for or reasonably related to the operation of GenOn's business after such date, subject to NRG's prior written consent, not to be unreasonably withheld. For the three months ended
March 31, 2018
, NRG recorded approximately
$21 million
against selling, general and administrative expenses post-Chapter 11 Filing. For the three months ended
March 31, 2017
, NRG recorded other income - affiliate related to these services of
$48 million
.
In addition, as described in
Note 3
,
Discontinued Operations and Dispositions
,
under the Restructuring Support Agreement, NRG has agreed to provide GenOn with a
$28 million
credit against amounts owed to NRG under the transition services agreement. The credit is intended to reimburse GenOn for its payment of financing costs. Any unused amount can be paid in cash at GenOn's request, subject to the terms and conditions of the transition services agreement.
Credit Agreement with GenOn
NRG and GenOn are party to a secured intercompany revolving credit agreement. The intercompany revolving credit agreement provided for a
$500 million
revolving credit facility, all of which was available for revolving loans and letters of credit. At
March 31, 2018
and
December 31, 2017
,
$86 million
and
$92 million
, respectively, of letters of credit were issued and outstanding under the NRG credit agreement for GenOn. Additionally, as of
March 31, 2018
and
December 31, 2017
, there were
$125 million
of loans outstanding under the intercompany secured revolving credit facility, which will be applied against the settlement cash consideration that will be paid to GenOn upon emergence from bankruptcy, as further discussed in
Note 3
,
Discontinued Operations and Dispositions
. In addition, the intercompany secured revolving credit facility contains customary covenants and events of default. As of
March 31, 2018
, GenOn was in default under the secured intercompany revolving credit agreement due to the filing of the Chapter 11 Cases.
As a result of the Chapter 11 Cases, no additional revolving loans or letters of credit are available to GenOn. Effective with completion of the reorganization, GenOn must repay NRG for all revolving loans outstanding, with such amount to be netted against the settlement payment owed from NRG to GenOn. Accordingly, the affiliate receivable is recorded net within accrued expenses and other current liabilities - affiliate on the consolidated balance sheet as of
March 31, 2018
, all of which is to be settled at emergence. Interest continues to accrue during the pendency of the Chapter 11 Cases and borrowings remain secured obligations.
Commercial Operations Agreement
NRG Power Marketing LLC has entered into physical and financial intercompany commodity and hedging transactions with GenOn and certain of its subsidiaries. Subject to applicable collateral thresholds, these arrangements may provide for the bilateral exchange of credit support based upon market exposure and potential market movements. The terms and conditions of the agreements are generally consistent with industry practices and other third party arrangements. As of
March 31, 2018
, derivative assets and liabilities associated with these transactions are recorded within NRG's derivative instruments balances on the consolidated balance sheet, with related revenues and costs within operating revenues and cost of operations, respectively. Additionally, as of
March 31, 2018
and
December 31, 2017
, the Company had
$28 million
and
$32 million
, respectively, of cash collateral posted in support of energy risk management activities by GenOn.
NRG will provide settlement cash consideration to GenOn of
$261.3 million
, which will be paid in cash less any amounts owed to NRG under the intercompany secured revolving credit facility.
Note 14
—
Commitments and Contingencies
This footnote should be read in conjunction with the complete description under
Note 22
,
Commitments and Contingencies
, to the Company's
2017
Form 10-K.
Commitments
First Lien Structure
NRG has granted first liens to certain counterparties on a substantial portion of the Company's assets, excluding assets acquired in the GenOn and EME (including Midwest Generation) acquisitions, assets held by NRG Yield, Inc. and NRG's assets that have project-level financing, to reduce the amount of cash collateral and letters of credit that it would otherwise be required to post from time to time to support its obligations under out-of-the-money hedge agreements for forward sales of power or MWh equivalents. The Company's lien counterparties may have a claim on NRG's assets to the extent market prices exceed the hedged price. As of
March 31, 2018
, hedges under the first lien were
in-the-money
for NRG on a counterparty aggregate basis.
Contingencies
The Company's material legal proceedings are described below. The Company believes that it has valid defenses to these legal proceedings and intends to defend them vigorously. NRG records reserves for estimated losses from contingencies when information available indicates that a loss is probable and the amount of the loss, or range of loss, can be reasonably estimated. As applicable, the Company has established an adequate reserve for the matters discussed below. In addition, legal costs are expensed as incurred. Management has assessed each of the following matters based on current information and made a judgment concerning its potential outcome, considering the nature of the claim, the amount and nature of damages sought, and the probability of success. Unless specified below, the Company is unable to predict the outcome of these legal proceedings or reasonably estimate the scope or amount of any associated costs and potential liabilities. As additional information becomes available, management adjusts its assessment and estimates of such contingencies accordingly. Because litigation is subject to inherent uncertainties and unfavorable rulings or developments, it is possible that the ultimate resolution of the Company's liabilities and contingencies could be at amounts that are different from its currently recorded reserves and that such difference could be material.
In addition to the legal proceedings noted below, NRG and its subsidiaries are party to other litigation or legal proceedings arising in the ordinary course of business. In management's opinion, the disposition of these ordinary course matters will not materially adversely affect NRG's consolidated financial position, results of operations, or cash flows.
Midwest Generation Asbestos Liabilities
— The Company, through its subsidiary, Midwest Generation, may be subject to potential asbestos liabilities as a result of its acquisition of EME. The Company is currently analyzing the scope of potential liability as it may relate to Midwest Generation. The Company believes that it has established an adequate reserve for these cases. On March 27, 2018, ComEd filed a Motion to Compel Payments of Claims seeking
$61 million
related to asbestos liabilities. On April 25, 2018, NRG filed an Omnibus Objection to All Remaining Claims of ComEd and Exelon.
Midwest Generation New Source Review Litigation
— In August 2009, the EPA and the Illinois Attorney General, or the Government Plaintiffs, filed a complaint, or the Governments’ Complaint, in the U.S. District Court for the Northern District of Illinois alleging violations of CAA PSD requirements by Midwest Generation arising from maintenance, repair or replacement projects at
six
Illinois coal-fired electric generating stations performed by Midwest Generation or ComEd, a prior owner of the stations, including alleged failures to obtain PSD construction permits and to comply with BACT requirements. The Government Plaintiffs also alleged violations of opacity and PM standards at the Midwest Generation plants. Finally, the Government Plaintiffs alleged that Midwest Generation violated certain operating permit requirements under Title V of the CAA allegedly arising from such claimed PSD, opacity and PM emission violations. Several environmental groups intervened as plaintiffs in this litigation and filed a complaint, or the Intervenors’ Complaint, which alleged opacity, PM and related Title V violations. Midwest Generation filed a motion to dismiss
nine
of the
ten
PSD counts in the Governments’ Complaint, and to dismiss the tenth PSD count to the extent the Governments’ Complaint sought civil penalties for that count. The trial court granted the motion in March 2010.
In June 2010, the Government Plaintiffs and Intervenors each filed an amended complaint. The Governments’ Amended Complaint again alleged that Midwest Generation violated PSD (based upon the same projects as alleged in their original complaint, but adding allegations that the Company was liable as the “successor” to ComEd), Title V and opacity and PM standards. It named EME and ComEd as additional defendants and alleged PSD violations (again, premised on the same projects) against them. The Intervenors’ Amended Complaint named only Midwest Generation as a defendant and alleged Title V and opacity/PM violations, as well as
one
of the
ten
PSD violations alleged in the Governments’ Amended Complaint. Midwest Generation again moved to dismiss all but
one
of the Government Plaintiffs’ PSD claims and the related Title V claims. Midwest Generation also filed a motion to dismiss the PSD claim in the Intervenors’ Amended Complaint and the related Title V claims. In March 2011, the trial court granted Midwest Generation’s partial motion to dismiss the Government Plaintiffs’ PSD claims. The trial court denied Midwest Generation’s motion to dismiss the PSD claim asserted in the Intervenors’ Amended Complaint, but noted that the plaintiffs would be required to convince the court that the statute of limitations should be equitably tolled. The trial court did not address other counts in the amended complaints that allege violations of opacity and PM emission limitations under the Illinois State Implementation Plan and related Title V claims. The trial court also granted the motions to dismiss the PSD claims asserted against EME and ComEd.
Following the trial court ruling, the Government Plaintiffs appealed the trial court’s dismissals of their PSD claims, including the dismissal of
nine
of the
ten
PSD claims against Midwest Generation and of the PSD claims against the other defendants. Those PSD claim dismissals were affirmed by the U.S. Court of Appeals for the Seventh Circuit in July 2013. In addition, in 2012, all but
one
of the environmental groups that had intervened in the case dismissed their claims without prejudice. As a result, only
one
environmental group remains a plaintiff intervenor in the case. On March 9, 2018, the Consent Decree which provides that Midwest Generation will be required to (x) pay
$500,000
to each of the State of Illinois and the Federal Government and (y) make and maintain certain operational improvements was lodged with the court.
Telephone Consumer Protection Act Purported Class Actions
—
Three
purported class action lawsuits have been filed against NRG Residential Solar Solutions, LLC —
one
in California and
two
in New Jersey. The plaintiffs generally allege misrepresentation by the call agents and violations of the TCPA, claiming that the defendants engaged in a telemarketing campaign placing unsolicited calls to individuals on the “Do Not Call List.” The plaintiffs seek statutory damages of up to
$1,500
per plaintiff, actual damages and equitable relief. On June 22, 2017, plaintiffs in the California case filed a motion for leave to file a second amended complaint to substitute new plaintiffs. Defendants filed an opposition to this motion on June 26, 2017. The court granted plaintiffs' motion to substitute new plaintiffs and on August 1, 2017, defendants filed an answer to the second amended complaint. On August 31, 2017, the court in the California case agreed that the litigation should be stayed pending final court approval of the New Jersey settlement. On July 12, 2017, the parties in the New Jersey action reached an agreement in principle to resolve the class allegations which was confirmed by a term sheet signed by the parties on July 28, 2017. On September 27, 2017, plaintiffs in the New Jersey case filed their motion for preliminary approval of the class settlement which was approved by the court on November 17, 2017. On May 1, 2018, the court granted plaintiffs' motion for final approval of the class action settlement.
California Department of Water Resources and San Diego Gas & Electric Company v. Sunrise Power Company LLC
— On January 29, 2016, CDWR and SDG&E filed a lawsuit against Sunrise Power Company, along with NRG and Chevron Power Corporation. In June 2001, CDWR and Sunrise entered into a
10
-year PPA under which Sunrise would construct and operate a generating facility and provide power to CDWR. At the time the PPA was entered into, Sunrise had a transportation services agreement, or TSA, to purchase natural gas from Kern River through April 30, 2018. In August 2003, CDWR entered into an agreement with Sunrise and Kern River in which CDWR accepted assignment of the TSA through the term of the PPA. After the PPA expired, Kern River demanded that any reassignment be to a party which met certain creditworthiness standards which Sunrise did not. As such, the plaintiffs brought this lawsuit against the defendants alleging breach of contract, breach of covenant of good faith and fair dealing and improper distributions. Plaintiffs generally claim damages of
$1.2 million
per month for the remaining
70
months of the TSA. On April 20, 2016, the defendants filed objections in response to the plaintiffs' complaint. The objections were granted on June 14, 2016; however, the plaintiffs were allowed to file amended complaints on July 1, 2016. On July 27, 2016, defendants filed objections to the amended complaints. On November 18, 2016, the court sustained the objections and allowed plaintiffs another opportunity to file a second amended lawsuit which they did on January 13, 2017. On April 21, 2017, the court issued an order sustaining the objections without leave to amend. On July 14, 2017, CDWR filed a notice of appeal. On January 10, 2018, CDWR filed its appellate brief. Defendants filed their opposition brief on April 10, 2018.
Braun v. NRG Yield, Inc.
— On April 19, 2016, plaintiffs filed a putative class action lawsuit against NRG Yield, Inc., the current and former members of its board of directors individually, and other parties in California Superior Court in Kern County, CA. Plaintiffs allege various violations of the Securities Act due to the defendants’ alleged failure to disclose material facts related to low wind production prior to the NRG Yield, Inc.'s June 22, 2015 Class C common stock offering. Plaintiffs seek compensatory damages, rescission, attorney’s fees and costs. The Defendants filed demurrers and a motion challenging jurisdiction on October 18, 2016. The case is currently stayed by agreement of the parties. On May 2, 2018, the court approved a joint stipulation which provides: (i) plaintiffs' opposition brief is due on or before July 30, 2018; (ii) defendants' reply brief is due on or before October 5, 2018; and (iii) a hearing on the motions is scheduled on October 30, 2018.
Griffoul v. NRG Residential Solar Solutions
— On February 28, 2017, plaintiffs, consisting of New Jersey residential solar customers, filed a purported class action lawsuit in New Jersey state court. Plaintiffs allege violations of the New Jersey Consumer Fraud Action and Truth-in-Consumer Contracts, Warranty and Notice Act with regard to certain provisions of their residential solar contracts. The plaintiffs seek damages and injunctive relief as to the proper allocation of the solar renewable energy credits. On June 6, 2017, the defendants filed a motion to compel arbitration or dismiss the lawsuit. Plaintiffs filed their opposition on June 29, 2017. On July 14, 2017, the court denied NRG's motion to compel arbitration or dismiss the case. On July 25, 2017, NRG filed a motion for reconsideration of the appeal, which was denied. On August 22, 2017, NRG filed a notice of appeal. After fully briefing the appeal, oral argument was heard on April 24, 2018.
Rice v. NRG
— On April 14, 2017, plaintiffs filed a purported class action lawsuit in the U.S. District Court for the Western District of Pennsylvania against NRG, First Energy Corporation and Matt Canastrale Contracting, Inc. Plaintiffs generally claim personal injury, trespass, nuisance and property damage related to the disposal of coal ash from GenOn's Elrama Power Plant and First Energy’s Mitchell and Hatfield Power Plants. Plaintiffs generally seek monetary damages, medical monitoring and remediation of their property. Plaintiffs filed an amended complaint on August 14, 2017. On October 20, 2017, NRG filed its answers and affirmative defenses.
Washington-St. Tammany and Claiborne Electric Cooperative v. LaGen
— On June 28, 2017, plaintiffs Washington-St. Tammany Electric Cooperative, Inc. and Claiborne Electric Cooperative, Inc. filed a lawsuit against Louisiana Generating, L.L.C., or LaGen, in the United States District Court for the Middle District of Louisiana. The plaintiffs claim breach of contract against LaGen for allegedly improperly charging the plaintiffs for costs related to the installation and maintenance of certain pollution control technology. Plaintiffs seek damages for the alleged improper charges and a declaration as to which charges are proper under the contract. On September 14, 2017, the court issued a scheduling order setting this case for trial on October 21, 2019. LaGen filed its answer and affirmative defenses on November 17, 2017.
GenOn Chapter 11 Cases
— On the Petition Date, the GenOn Entities filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. Under the Restructuring Support Agreement to which the GenOn Entities, NRG and certain of GenOn's and GenOn Americas Generation's senior unsecured noteholders are parties, each of them supported the Bankruptcy Court's approval of the plan of reorganization. GenOn has a customary "fiduciary out" under the Restructuring Support Agreement. If the plan of reorganization is not consummated, NRG may not be entitled to the benefits of the Settlement Agreement provided under the Restructuring Support Agreement and it will remain subject to any claims of GenOn and the noteholders, including claims relating to or arising out of any shared services and any other relationships or transactions between the companies. See
Note 3
,
Discontinued Operations and Dispositions
, for additional information related to the Chapter 11 Cases.
GenOn Noteholders' Lawsuit
—
On December 13, 2016, certain indenture trustees for an ad hoc group of holders, or the Noteholders, of the GenOn Energy, Inc.
7.875%
Senior Notes due 2017,
9.500%
Notes due 2018, and
9.875%
Notes due 2020, and the GenOn Americas Generation, LLC
8.50%
Senior Notes due 2021 and
9.125%
Senior Notes due 2031, along with certain of the Noteholders, filed a complaint in the Superior Court of the State of Delaware against NRG and GenOn alleging certain claims related to the Services Agreement between NRG and GenOn. Plaintiffs generally seek return of all monies paid under the Services Agreement and any other damages that the court deems appropriate. On February 3, 2017, the court entered an order approving a Standstill Agreement whereby the parties agreed to suspend all deadlines in the case until March 1, 2017. The Standstill Agreement terminated on March 1, 2017. On April 30, 2017, the Noteholders filed an amended complaint that asserts (i) additional fraudulent transfer claims in relation to GenOn’s sale of the Marsh Landing project to NRG Yield LLC, (ii) alleged breaches of fiduciary duty by certain current and former officers and directors of GenOn in relation to the Services Agreement and the alleged usurpation of corporate opportunities concerning the Mandalay and Canal projects and (iii) claims against NRG for allegedly aiding and abetting such claimed breaches of fiduciary duties. In addition to NRG and GenOn, the amended complaint names NRG Yield LLC and certain current and former officers and directors of GenOn as defendants. The plaintiffs, among other things, generally seek return of all monies paid under the services agreement and any other damages that the court deems appropriate. On December 14, 2017, a settlement agreement was executed between GenOn and NRG which should ultimately resolve this lawsuit.
Morgantown v. GenOn Mid-Atlantic
— On June 8, 2017, Morgantown and Dickerson Owner Lessors filed a lawsuit against GenOn Mid-Atlantic, LLC, NRG North America LLC, GenOn Americas Generation, LLC, NRG Americas, Inc., GenOn Energy Holdings, Inc., GenOn Energy, Inc., and NRG Energy, Inc. in New York State Supreme Court. The plaintiffs allege that they were overcharged by defendants for certain services outlined in a Services Agreement and that defendants caused a Qualified Credit Support portion of a Participation Agreement, or QCS Agreement, to be violated by causing the transfer of certain money outside the allowable confines set forth in the QCS Agreement. In addition, plaintiffs claim that the transfers were unfairly executed and done so in an effort to defraud plaintiffs and hinder their ability to continue to do business. As such, plaintiffs seek, among other things, the return of certain transferred funds and service charges paid and to bar defendants from executing additional transfers on plaintiffs’ behalf. On November 7, 2017, the Bankruptcy Court issued an order estimating the claims to be valued at
$0
. On December 14, 2017, a settlement agreement was executed between GenOn and NRG. On April 27, 2018, the parties executed a mutual release which in conjunction with the settlement agreement resolved this lawsuit.
BTEC v. NRG Texas Power
— On July 18, 2017, BTEC New Albany LLC, or BTEC, filed a lawsuit against NRG Texas Power LLC, or NRG Texas Power, in the Harris County District Court in Texas. On January 15, 2013, the parties entered into a Membership Interest and Purchase Agreement, or MIPA, whereby BTEC agreed to dismantle, transport and rebuild an electric power generation facility at the former P.H. Robinson Electric Generating Station in Bacliff, Texas. The MIPA required BTEC to meet a Guaranteed Commercial Completion Date of May 31, 2016. But even a year later, BTEC had not satisfied all of the contractually-required acceptance criteria. As a result and given that the MIPA expiration date passed on May 31, 2017, NRG elected to terminate the contract in June 2017. BTEC claims that NRG Texas Power breached the MIPA by improperly terminating it, and seeks a declaratory judgment as to the rights and obligations of the parties. In addition, BTEC seeks damages, interest and attorney’s fees. On August 14, 2017, NRG Texas Power served its answer to the lawsuit. On September 7, 2017, NRG Texas Power filed a counterclaim seeking damages in excess of
$48 million
. On March 21, 2018, BTEC filed a Second Amended Petition in which they supplemented their previous claims and added a claim for specific performance.
GenOn Related Contingencies
Actions Pursued by MC Asset Recovery
—
With Mirant Corporation's emergence from bankruptcy protection in 2006, certain actions filed by GenOn Energy Holdings and some of its subsidiaries against third parties were transferred to MC Asset Recovery, a wholly owned subsidiary of GenOn Energy Holdings. MC Asset Recovery is governed by a manager who is independent of NRG and GenOn. MC Asset Recovery is a disregarded entity for income tax purposes. Under the remaining action transferred to MC Asset Recovery, MC Asset Recovery seeks to recover damages from Commerzbank AG and various other banks, or the Commerzbank Defendants, for alleged fraudulent transfers that occurred prior to Mirant's bankruptcy proceedings. In December 2010, the U.S. District Court for the Northern District of Texas dismissed MC Asset Recovery's complaint against the Commerzbank Defendants. In January 2011, MC Asset Recovery appealed the District Court's dismissal of its complaint against the Commerzbank Defendants to the U.S. Court of Appeals for the Fifth Circuit, or the Fifth Circuit. In March 2012, the Fifth Circuit reversed the District Court's dismissal and reinstated MC Asset Recovery's amended complaint against the Commerzbank Defendants. On December 10, 2015, the District Court granted summary judgment in favor of the Commerzbank Defendants. On December 29, 2015, MC Asset Recovery filed a notice to appeal this judgment with the Fifth Circuit. On June 1, 2017, the Fifth Circuit affirmed the District Court's judgment. On June 12, 2017, MC Asset Recovery petitioned the Fifth Circuit for rehearing. The petition for rehearing was denied and a court order and judgment affirming the District Court's judgments was entered on July 17, 2017. The bankruptcy court is scheduled to hear a Motion for a Final Decree in the Mirant bankruptcy on June 13, 2018.
Natural Gas Litigation
—
GenOn is party to several lawsuits, certain of which are class action lawsuits, in state and federal courts in Kansas, Missouri, Nevada and Wisconsin. These lawsuits were filed in the aftermath of the California energy crisis in 2000 and 2001 and the resulting FERC investigations and relate to alleged conduct to increase natural gas prices in violation of state antitrust law and similar laws. The lawsuits seek treble or punitive damages, restitution and/or expenses. The lawsuits also name as parties a number of energy companies unaffiliated with NRG. In July 2011, the U.S. District Court for the District of Nevada, which was handling four of the five cases, granted the defendants' motion for summary judgment and dismissed all claims against GenOn in those cases. The plaintiffs appealed to the U.S. Court of Appeals for the Ninth Circuit, or the Ninth Circuit, which reversed the decision of the District Court. GenOn along with the other defendants in the lawsuit filed a petition for a writ of certiorari to the U.S. Supreme Court challenging the Ninth Circuit's decision and the U.S. Supreme Court granted the petition. On April 21, 2015, the U.S. Supreme Court affirmed the Ninth Circuit’s holding that plaintiffs’ state antitrust law claims are not field-preempted by the federal Natural Gas Act and the Supremacy Clause of the U.S. Constitution. The U.S. Supreme Court left open whether the claims were preempted on the basis of conflict preemption. The U.S. Supreme Court directed that the case be remanded to the U.S. District Court for the District of Nevada for further proceedings. On March 7, 2016, class plaintiffs filed their motions for class certification. On March 30, 2017, the court denied the plaintiffs' motions for class certification. On April 13, 2017, the plaintiffs petitioned the Ninth Circuit for interlocutory review of the court’s order denying class certification. On June 13, 2017, the Ninth Circuit granted plaintiffs' petition for interlocutory review. The appeal is fully briefed.
In May 2016 in
one
of the Kansas cases, the U.S. District Court for the District of Nevada granted the defendants' motion for summary judgment. Subsequently in December 2016, the plaintiffs filed a notice of appeal with the Ninth Circuit. The appeal was argued on February 16, 2018. On March 27, 2018, the Ninth Circuit reversed the District Court's decision. On April 10, 2018, the defendants filed a petition for rehearing. GenOn has agreed to indemnify CenterPoint against certain losses relating to these lawsuits.
In September 2012, the State of Nevada Supreme Court, which was handling the remaining case, affirmed dismissal by the Eighth Judicial District Court for Clark County, Nevada of all plaintiffs' claims against GenOn. In February 2013, the plaintiffs in the Nevada case filed a petition for a writ of certiorari to the U.S. Supreme Court. In June 2013, the U.S. Supreme Court denied the petition for a writ of certiorari, thereby ending
one
of the
five
lawsuits.
On February 26, 2018, GenOn filed objections to the proofs of claim filed in the Chapter 11 Cases by all of the plaintiffs in each of the four cases. GenOn filed that same day a motion seeking a schedule for a series of hearings to resolve the objections and asking the Bankruptcy Court to estimate all of the proofs of claim at zero dollars. The plaintiffs have objected to the request for Bankruptcy Court to estimate the proofs of claim. The Bankruptcy Court ordered briefing as to whether it had authority to resolve these claims.
Potomac River Environmental Investigation
—
In March 2013, NRG Potomac River LLC, a subsidiary of GenOn, received notice that the District of Columbia Department of Environment (now renamed the Department of Energy and Environment, or DOEE) was investigating potential discharges to the Potomac River originating from the Potomac River Generating facility site, a site where the generation facility is no longer in operation. In connection with that investigation, DOEE served a civil subpoena on NRG Potomac River LLC requesting information related to the site and potential discharges occurring from the site. NRG Potomac River LLC provided various responsive materials. In January 2016, DOEE advised NRG Potomac River LLC that DOEE believed various environmental violations had occurred as a result of discharges DOEE believes occurred to the Potomac River from the Potomac River Generating facility site and as a result of associated failures to accurately or sufficiently report such discharges. DOEE has indicated it believes that penalties are appropriate in light of the violations. NRG Potomac River LLC is currently reviewing the information provided by DOEE.
Natixis v. GenOn Mid-Atlantic
—
On February 16, 2018, Natixis Funding Corp. and Natixis, New York Branch filed a complaint in the Supreme Court of the State of New York against GenOn Mid-Atlantic, the owner lessors under GenOn Mid-Atlantic’s operating leases of the Dickerson and Morgantown coal generation units, and the lease indenture trustee under those leases. The plaintiffs’ allegations against GenOn Mid-Atlantic relate to a payment agreement between GenOn Mid-Atlantic and Natixis Funding Corp. to procure credit support for the payment of certain lease payments owed pursuant to the GenOn Mid-Atlantic operating leases for Morgantown and Dickerson. The plaintiffs seek approximately
$34 million
in damages arising from GenOn Mid-Atlantic’s purported breach of certain warranties in the payment agreement. On April 2, 2018, GenOn Mid-Atlantic removed the allegations against it to the U.S. District Court for the Southern District of New York. On April 11, 2018, the U.S. District Court for the Southern District of New York entered a briefing schedule on a forthcoming motion to remand by Natixis Funding Corp. and a forthcoming motion to transfer by GenOn Mid-Atlantic.
Note 15
—
Regulatory Matters
This footnote should be read in conjunction with the complete description under
Note 23
,
Regulatory Matters
, to the Company's
2017
Form 10-K.
NRG operates in a highly regulated industry and is subject to regulation by various federal and state agencies. As such, NRG is affected by regulatory developments at both the federal and state levels and in the regions in which NRG operates. In addition, NRG is subject to the market rules, procedures, and protocols of the various ISO and RTO markets in which NRG participates. These power markets are subject to ongoing legislative and regulatory changes that may impact NRG's wholesale and retail businesses.
In addition to the regulatory proceedings noted below, NRG and its subsidiaries are parties to other regulatory proceedings arising in the ordinary course of business or have other regulatory exposure. In management's opinion, the disposition of these ordinary course matters will not materially adversely affect NRG's consolidated financial position, results of operations, or cash flows.
National
Department of Energy Consideration of 202(c) and Defense Production Act
—
On March 29, 2018, FirstEnergy Solutions requested that the Department of Energy provide price supports for its coal and nuclear units by having the DOE issue an emergency must-run order under Section 202(c) of the Federal Power Act. A number of parties have filed comments with the DOE, including PJM, challenging the assertion that the FirstEnergy Solutions’ units are necessary for grid reliability. The DOE has not yet formally responded. Subsequently, Senator Manchin of West Virginia has requested that the Administration utilize the Defense Production Act to require coal and nuclear units to continue to operate. The assertion is that these plants are needed to maintain national security. No formal timeline for action on either proposal has been set by the Administration.
Zero-Emission Credits for Nuclear Plants in Illinois
— In 2016, Illinois enacted a Zero Emission Credit, or ZEC, program for selected nuclear units in Illinois. In total, the program directs over
$2.5 billion
over
ten
years to nuclear plants in Illinois that would otherwise retire. Pursuant to the legislation
,
the Illinois Power Agency, or IPA, conducts a competitive solicitation to procure ZECs, although both the Governor of Illinois and Exelon have already announced that the ZECs will be awarded to two Exelon-owned nuclear power plants in Illinois. These ZECs are out-of-market subsidies that threaten to artificially suppress market prices and interfere with the wholesale power market. On February 14, 2017, NRG, along with other companies, filed a complaint in the U.S. District Court for the Northern District of Illinois alleging that the state program is preempted by federal law and in violation of the dormant commerce clause. Another plaintiff group filed a similar complaint on the same day.
Subsequently, on March 31, 2017, NRG, along with other companies, filed a motion for preliminary injunction. On April 10, 2017, Exelon, as an intervenor defendant, and State defendants filed motions to dismiss. On July 14, 2017, Defendants' motions to dismiss were granted. On July 17, 2017, NRG, along with other companies, filed a notice of appeal to the U.S. Court of Appeals for the Seventh Circuit. Briefing is complete. Oral argument was held on January 3, 2018, with supplemental briefs filed on January 26, 2018. On February 21, 2018, the Seventh Circuit invited the U.S. to file an amicus brief in the proceeding.
Zero-Emission Credits for Nuclear Plants in New York
— On August 1, 2016, the NYSPSC issued its Clean Energy Standard, or CES, which provided for ZECs which would provide more than
$7.6 billion
over
12
years in out-of-market subsidy payments to certain selected nuclear generating units in the state. These ZECs are out-of-market subsidies that threaten to artificially suppress market prices and interfere with the wholesale power market. On October 19, 2016, NRG, along with other companies, filed a complaint in the U.S. District Court for the Southern District of New York, challenging the validity of the NYSPSC action and the ZEC program. On March 29, 2017, the U.S. District Court heard oral arguments on a motion to dismiss filed by defendants. On July 25, 2017, the defendants' motions to dismiss were granted. On August 24, 2017, NRG, along with other plaintiff companies, filed a notice of appeal to the U.S. Court of Appeals for the Second Circuit. Briefing is complete. Oral argument took place on March 12, 2018.
Department of Energy's Proposed Grid Resiliency Pricing Rule and Subsequent FERC Proceeding —
On September 29, 2017, the Department of Energy issued a proposed rulemaking titled the "Grid Resiliency Pricing Rule." The rulemaking directs FERC to take action to reform the ISO/RTO markets to value certain reliability and resiliency attributes of electric generation resources. On October 2, 2017, FERC issued a notice inviting comments. On October 4, 2017, FERC staff issued a series of questions requesting commenters to address. On October 23, 2017, NRG filed comments encouraging FERC to act expeditiously to modernize energy and capacity markets in a manner compatible with robust competitive markets. On January 8, 2018, FERC terminated the proposed rulemaking and opened a new proceeding asking each ISO/RTO to address specific questions focused on grid resilience. On March 9, 2018, the ISOs/RTOs filed comments to the questions posed by FERC.
East/West
Montgomery County Station Power Tax
—
On December 20, 2013, NRG received a letter from Montgomery County, Maryland requesting payment of an energy tax for the consumption of station power at the Dickerson Facility over the previous three years. Montgomery County seeks payment in the amount of
$22 million
, which includes tax, interest and penalties. NRG disputed the applicability of the tax. On December 11, 2015, the Maryland Tax Court reversed Montgomery County's assessment. Montgomery County filed an appeal, and on February 2, 2017, the Montgomery County Circuit Court affirmed the decision of the tax court. On February 17, 2017, Montgomery County filed an appeal to the Court of Special Appeals of Maryland. On April 24, 2018, the Court of Special Appeals of Maryland affirmed the lower court's decision.
Puente Power Project
— On October 5, 2017, the California Energy Commission, or CEC, the agency responsible for permitting the Puente Power Project, issued a statement on behalf of the committee of two Commissioners overseeing the permitting process stating their intention to issue a proposed decision that would deny a permit for the Puente Power Project. On October 16, 2017, NRG filed a motion to suspend the permitting proceeding for at least six months, which was granted on November 3, 2017. On April 20, 2018, NRG filed a motion requesting an additional extension of the suspension period to coincide with the CPUC’s final decision on SCE’s application seeking approval of resources procured through its Moorpark RFO, or until June 30, 2019, whichever is sooner.
Note 16
—
Environmental Matters
This footnote should be read in conjunction with the complete description under
Note 24
,
Environmental Matters
, to the Company's
2017
Form 10-K.
NRG is subject to a wide range of environmental laws in the development, construction, ownership and operation of projects. These laws generally require that governmental permits and approvals be obtained before construction and during operation of power plants. NRG is also subject to laws regarding the protection of wildlife, including migratory birds, eagles and threatened and endangered species. The electric generation industry has been facing requirements regarding GHGs, combustion byproducts, water discharge and use, and threatened and endangered species that have been put in place in recent years. However, under the current U.S. presidential administration, some of these rules are being reconsidered and reviewed. In general, future laws are expected to require the addition of emissions controls or other environmental controls or to impose certain restrictions on the operations of the Company's facilities, which could have a material effect on the Company's consolidated financial position, results of operations, or cash flows. Federal and state environmental laws generally have become more stringent over time, although this trend could slow or pause in the near term with respect to federal laws under the current U.S. presidential administration.
The EPA finalized CSAPR in 2011, which was intended to replace CAIR in January 2012, to address certain states' obligations to reduce emissions so that downwind states can achieve federal air quality standards. In December 2011, the D.C. Circuit stayed the implementation of CSAPR and then vacated CSAPR in August 2012 but kept CAIR in place until the EPA could replace it. In April 2014, the U.S. Supreme Court reversed and remanded the D.C. Circuit's decision. In October 2014, the D.C. Circuit lifted the stay of CSAPR. In response, the EPA in November 2014 amended the CSAPR compliance dates. Accordingly, CSAPR replaced CAIR on January 1, 2015. On July 28, 2015, the D.C. Circuit held that the EPA had exceeded its authority by requiring certain reductions that were not necessary for downwind states to achieve federal standards. Although the D.C. Circuit kept the rule in place, the court ordered the EPA to revise the Phase 2 (or 2017) (i) SO
2
budgets for four states including Texas and (ii) ozone-season NOx budgets for 11 states including Maryland, New Jersey, New York, Ohio, Pennsylvania and Texas. On October 26, 2016, the EPA finalized the CSAPR Update Rule, which reduces future NOx allocations and discounts the current banked allowances to account for the more stringent 2008 Ozone NAAQS and to address the D.C. Circuit's July 2015 decision. This rule has been challenged in the D.C. Circuit. The Company believes its investment in pollution controls and cleaner technologies leave the fleet well-positioned for compliance.
In February 2012, the EPA promulgated standards (the MATS rule) to control emissions of HAPs from coal and oil-fired electric generating units. The rule established limits for mercury, non-mercury metals, certain organics and acid gases, which had to be met beginning in April 2015 (with some units getting a 1-year extension). In June 2015, the U.S. Supreme Court issued a decision in the case of Michigan v. EPA, and held that the EPA unreasonably refused to consider costs when it determined that it was "appropriate and necessary" to regulate HAPs emitted by electric generating units. The U.S. Supreme Court did not vacate the MATS rule but rather remanded it to the D.C. Circuit for further proceedings. In December 2015, the D.C. Circuit remanded the MATS rule to the EPA without vacatur. On April 25, 2016, the EPA released a supplemental finding that the benefits of this regulation outweigh the costs to address the U.S. Supreme Court's ruling that the EPA had not properly considered costs. This finding has been challenged in the D.C. Circuit. On April 18, 2017, the EPA asked the D.C. Circuit to postpone oral argument that had been scheduled for May 18, 2017 because the EPA is closely reviewing the supplemental finding to determine whether it should reconsider all or part of the rule. On April 27, 2017, the D.C. Circuit granted EPA's request to postpone the oral argument and hold the case in abeyance. While NRG cannot predict the final outcome of this rulemaking, NRG believes that because it has already invested in pollution controls and cleaner technologies, the fleet is well-positioned to comply with the MATS rule.
Water
In August 2014, the EPA finalized the regulation regarding the use of water for once through cooling at existing facilities to address impingement and entrainment concerns. NRG anticipates that more stringent requirements will be incorporated into some of its water discharge permits over the next several years as NPDES permits are renewed.
Effluent Limitations Guidelines
— In November 2015, the EPA revised the Effluent Limitations Guidelines for Steam Electric Generating Facilities, which would have imposed more stringent requirements (as individual permits were renewed) for wastewater streams from flue gas desulfurization, or FGD, fly ash, bottom ash, and flue gas mercury control. In April 2017, the EPA granted two petitions to reconsider the rule and also administratively stayed some of the deadlines. On September 18, 2017, the EPA promulgated a final rule that (i) postpones the compliance dates to preserve the status quo for FGD wastewater and bottom ash transport water by two years to November 2020 until the EPA completes its next rulemaking and (ii) withdrew the April 2017 administrative stay. The legal challenges have been suspended while the EPA reconsiders and likely modifies the rule. Accordingly, the Company has largely eliminated its estimate of the environmental capital expenditures that would have been required to comply with permits incorporating the revised guidelines. The Company will revisit these estimates after the rule is revised.
Byproducts, Wastes, Hazardous Materials and Contamination
In April 2015, the EPA finalized the rule regulating byproducts of coal combustion (e.g., ash and gypsum) as solid wastes under the RCRA. On September 13, 2017, the EPA granted the petition for reconsideration that the Utility Solid Waste Activities Group filed in May 2017. The Company has evaluated the impact of the new rule on the Company's consolidated financial position, results of operations, or cash flows and has accrued its environmental and asset retirement obligations under the rule based on current estimates as of
March 31, 2018
.
East/West
New Source Review
— The EPA and various states have been investigating compliance of electric generating facilities with the pre-construction permitting requirements of the CAA known as “new source review,” or NSR. In 2007, Midwest Generation received an NOV from the EPA alleging that past work at Crawford, Fisk, Joliet, Powerton, Waukegan and Will County generating stations violated NSR and other regulations. These alleged violations are the subject of litigation described in
Note 14
,
Commitments and Contingencies
.
Additionally, in April 2013, the Connecticut Department of Energy and Environmental Protection issued four NOVs alleging that past work at oil-fired combustion turbines at the Torrington Terminal, Franklin, Branford and Middletown generating stations violated regulations regarding NSR.
Note 17
—
Condensed Consolidating Financial Information
As of
March 31, 2018
, the Company had outstanding
$4.8 billion
of Senior Notes due from 2022 to 2028, as shown in
Note 7
,
Debt and Capital Leases
. These Senior Notes are guaranteed by certain of NRG's current and future 100% owned domestic subsidiaries, or guarantor subsidiaries. These guarantees are both joint and several. The non-guarantor subsidiaries include all of NRG's foreign subsidiaries and certain domestic subsidiaries, and NRG Yield, Inc. and its subsidiaries.
Unless otherwise noted below, each of the following guarantor subsidiaries fully and unconditionally guaranteed the Senior Notes as of
March 31, 2018
:
|
|
|
|
Ace Energy, Inc.
|
New Genco GP, LLC
|
NRG Northeast Affiliate Services Inc.
|
Allied Home Warranty GP LLC
|
Norwalk Power LLC
|
NRG Norwalk Harbor Operations Inc.
|
Allied Warranty LLC
|
NRG Advisory Services LLC
|
NRG Operating Services, Inc.
|
Arthur Kill Power LLC
|
NRG Affiliate Services Inc.
|
NRG Oswego Harbor Power Operations Inc.
|
Astoria Gas Turbine Power LLC
|
NRG Arthur Kill Operations Inc.
|
NRG PacGen Inc.
|
Bayou Cove Peaking Power, LLC
|
NRG Astoria Gas Turbine Operations Inc.
|
NRG Portable Power LLC
|
BidURenergy, Inc.
|
NRG Bayou Cove LLC
|
NRG Power Marketing LLC
|
Cabrillo Power I LLC
|
NRG Business Services LLC
|
NRG Reliability Solutions LLC
|
Cabrillo Power II LLC
|
NRG Cabrillo Power Operations Inc.
|
NRG Renter's Protection LLC
|
Carbon Management Solutions LLC
|
NRG California Peaker Operations LLC
|
NRG Retail LLC
|
Cirro Group, Inc.
|
NRG Cedar Bayou Development Company, LLC
|
NRG Retail Northeast LLC
|
Cirro Energy Services, Inc.
|
NRG Connected Home LLC
|
NRG Rockford Acquisition LLC
|
Conemaugh Power LLC
|
NRG Connecticut Affiliate Services Inc.
|
NRG Saguaro Operations Inc.
|
Connecticut Jet Power LLC
|
NRG Construction LLC
|
NRG Security LLC
|
Cottonwood Development LLC
|
NRG Curtailment Solutions, Inc
|
NRG Services Corporation
|
Cottonwood Energy Company LP
|
NRG Development Company Inc.
|
NRG SimplySmart Solutions LLC
|
Cottonwood Generating Partners I LLC
|
NRG Devon Operations Inc.
|
NRG South Central Affiliate Services Inc.
|
Cottonwood Generating Partners II LLC
|
NRG Dispatch Services LLC
|
NRG South Central Generating LLC
|
Cottonwood Generating Partners III LLC
|
NRG Distributed Energy Resources Holdings LLC
|
NRG South Central Operations Inc.
|
Cottonwood Technology Partners LP
|
NRG Distributed Generation PR LLC
|
NRG South Texas LP
|
Devon Power LLC
|
NRG Dunkirk Operations Inc.
|
NRG Texas C&I Supply LLC
|
Dunkirk Power LLC
|
NRG El Segundo Operations Inc.
|
NRG Texas Gregory LLC
|
Eastern Sierra Energy Company LLC
|
NRG Energy Efficiency-L LLC
|
NRG Texas Holding Inc.
|
El Segundo Power, LLC
|
NRG Energy Labor Services LLC
|
NRG Texas LLC
|
El Segundo Power II LLC
|
NRG ECOKAP Holdings LLC
|
NRG Texas Power LLC
|
Energy Alternatives Wholesale, LLC
|
NRG Energy Services Group LLC
|
NRG Warranty Services LLC
|
Energy Choice Solutions LLC
|
NRG Energy Services International Inc.
|
NRG West Coast LLC
|
Energy Plus Holdings LLC
|
NRG Energy Services LLC
|
NRG Western Affiliate Services Inc.
|
Energy Plus Natural Gas LLC
|
NRG Generation Holdings, Inc.
|
O'Brien Cogeneration, Inc. II
|
Energy Protection Insurance Company
|
NRG Greenco LLC
|
ONSITE Energy, Inc.
|
Everything Energy LLC
|
NRG Home & Business Solutions LLC
|
Oswego Harbor Power LLC
|
Forward Home Security, LLC
|
NRG Home Services LLC
|
Reliant Energy Northeast LLC
|
GCP Funding Company, LLC
|
NRG Home Solutions LLC
|
Reliant Energy Power Supply, LLC
|
Green Mountain Energy Company
|
NRG Home Solutions Product LLC
|
Reliant Energy Retail Holdings, LLC
|
Gregory Partners, LLC
|
NRG Homer City Services LLC
|
Reliant Energy Retail Services, LLC
|
Gregory Power Partners LLC
|
NRG Huntley Operations Inc.
|
RERH Holdings, LLC
|
Huntley Power LLC
|
NRG HQ DG LLC
|
Saguaro Power LLC
|
Independence Energy Alliance LLC
|
NRG Identity Protect LLC
|
Somerset Operations Inc.
|
Independence Energy Group LLC
|
NRG Ilion Limited Partnership
|
Somerset Power LLC
|
Independence Energy Natural Gas LLC
|
NRG Ilion LP LLC
|
Texas Genco GP, LLC
|
Indian River Operations Inc.
|
NRG International LLC
|
Texas Genco Holdings, Inc.
|
Indian River Power LLC
|
NRG Maintenance Services LLC
|
Texas Genco LP, LLC
|
Keystone Power LLC
|
NRG Mextrans Inc.
|
Texas Genco Services, LP
|
Louisiana Generating LLC
|
NRG MidAtlantic Affiliate Services Inc.
|
US Retailers LLC
|
Meriden Gas Turbines LLC
|
NRG Middletown Operations Inc.
|
Vienna Operations Inc.
|
Middletown Power LLC
|
NRG Montville Operations Inc.
|
Vienna Power LLC
|
Montville Power LLC
|
NRG New Roads Holdings LLC
|
WCP (Generation) Holdings LLC
|
NEO Corporation
|
NRG North Central Operations Inc.
|
West Coast Power LLC
|
NRG conducts much of its business through and derives much of its income from its subsidiaries. Therefore, the Company's ability to make required payments with respect to its indebtedness and other obligations depends on the financial results and condition of its subsidiaries and NRG's ability to receive funds from its subsidiaries. There are no restrictions on the ability of any of the guarantor subsidiaries to transfer funds to NRG. However, there may be restrictions for certain non-guarantor subsidiaries.
The following condensed consolidating financial information presents the financial information of NRG Energy, Inc., the guarantor subsidiaries and the non-guarantor subsidiaries in accordance with Rule 3-10 under the SEC Regulation S-X. The financial information may not necessarily be indicative of results of operations or financial position had the guarantor subsidiaries or non-guarantor subsidiaries operated as independent entities.
In this presentation, NRG Energy, Inc. consists of parent company operations. Guarantor subsidiaries and non-guarantor subsidiaries of NRG are reported on an equity basis. For companies acquired, the fair values of the assets and liabilities acquired have been presented on a push-down accounting basis.
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the three months ended March 31, 2018
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
NRG Energy, Inc.
(Note Issuer)
|
|
Eliminations
(a)
|
|
Consolidated
|
|
(In millions)
|
Operating Revenues
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
$
|
1,483
|
|
|
$
|
885
|
|
|
$
|
—
|
|
|
$
|
53
|
|
|
$
|
2,421
|
|
Operating Costs and Expenses
|
|
|
|
|
|
|
|
|
|
Cost of operations
|
1,082
|
|
|
409
|
|
|
14
|
|
|
53
|
|
|
1,558
|
|
Depreciation and amortization
|
73
|
|
|
154
|
|
|
8
|
|
|
—
|
|
|
235
|
|
Selling, general and administrative
|
98
|
|
|
32
|
|
|
61
|
|
|
—
|
|
|
191
|
|
Reorganization costs
|
2
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
20
|
|
Development costs
|
—
|
|
|
9
|
|
|
4
|
|
|
—
|
|
|
13
|
|
Total operating costs and expenses
|
1,255
|
|
|
604
|
|
|
105
|
|
|
53
|
|
|
2,017
|
|
Gain/(loss) on sale of assets
|
3
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
2
|
|
Operating Income/(Loss)
|
231
|
|
|
280
|
|
|
(105
|
)
|
|
—
|
|
|
406
|
|
Other Income/(Expense)
|
|
|
|
|
|
|
|
|
|
Equity in earnings of consolidated subsidiaries
|
210
|
|
|
—
|
|
|
330
|
|
|
(540
|
)
|
|
—
|
|
Equity in losses of unconsolidated affiliates
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|
(2
|
)
|
Other income/(expense), net
|
21
|
|
|
(11
|
)
|
|
3
|
|
|
(16
|
)
|
|
(3
|
)
|
Loss on debt extinguishment, net
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
Interest expense
|
(3
|
)
|
|
(72
|
)
|
|
(92
|
)
|
|
|
|
|
(167
|
)
|
Total other income/(expense)
|
228
|
|
|
(84
|
)
|
|
238
|
|
|
(556
|
)
|
|
(174
|
)
|
Income Before Income Taxes
|
459
|
|
|
196
|
|
|
133
|
|
|
(556
|
)
|
|
232
|
|
Income tax expense/(benefit)
|
113
|
|
|
48
|
|
|
(162
|
)
|
|
—
|
|
|
(1
|
)
|
Net Income
|
346
|
|
|
148
|
|
|
295
|
|
|
(556
|
)
|
|
233
|
|
Less: Net (loss)/income attributable to noncontrolling interest and redeemable noncontrolling interests
|
—
|
|
|
(46
|
)
|
|
16
|
|
|
(16
|
)
|
|
(46
|
)
|
Net Income Attributable to
NRG Energy, Inc.
|
$
|
346
|
|
|
$
|
194
|
|
|
$
|
279
|
|
|
$
|
(540
|
)
|
|
$
|
279
|
|
|
|
(a)
|
All significant intercompany transactions have been eliminated in consolidation.
|
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
For the three months ended March 31, 2018
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
NRG Energy, Inc.
(Note Issuer)
|
|
Eliminations
(a)
|
|
Consolidated
|
|
(In millions)
|
Net Income
|
$
|
346
|
|
|
$
|
148
|
|
|
$
|
295
|
|
|
$
|
(556
|
)
|
|
$
|
233
|
|
Other Comprehensive (Loss)/Income, net of tax
|
|
|
|
|
|
|
|
|
|
Unrealized gain on derivatives, net
|
—
|
|
|
16
|
|
|
15
|
|
|
(17
|
)
|
|
14
|
|
Foreign currency translation adjustments, net
|
(2
|
)
|
|
(2
|
)
|
|
(3
|
)
|
|
5
|
|
|
(2
|
)
|
Defined benefit plans, net
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Other comprehensive (loss)/income
|
(2
|
)
|
|
14
|
|
|
11
|
|
|
(12
|
)
|
|
11
|
|
Comprehensive Income
|
344
|
|
|
162
|
|
|
306
|
|
|
(568
|
)
|
|
244
|
|
Less: Comprehensive (loss)/income attributable to noncontrolling interest and redeemable noncontrolling interest
|
—
|
|
|
(46
|
)
|
|
24
|
|
|
(16
|
)
|
|
(38
|
)
|
Comprehensive Income Attributable to NRG Energy, Inc.
|
$
|
344
|
|
|
$
|
208
|
|
|
$
|
282
|
|
|
$
|
(552
|
)
|
|
$
|
282
|
|
|
|
(a)
|
All significant intercompany transactions have been eliminated in consolidation.
|
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
March 31, 2018
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
NRG Energy, Inc.
(Note Issuer)
|
|
Eliminations
(a)
|
|
Consolidated
|
ASSETS
|
(In millions)
|
Current Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
43
|
|
|
$
|
371
|
|
|
$
|
350
|
|
|
$
|
—
|
|
|
$
|
764
|
|
Funds deposited by counterparties
|
241
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
241
|
|
Restricted cash
|
8
|
|
|
399
|
|
|
—
|
|
|
—
|
|
|
407
|
|
Accounts receivable, net
|
610
|
|
|
290
|
|
|
3
|
|
|
—
|
|
|
903
|
|
Inventory
|
323
|
|
|
205
|
|
|
—
|
|
|
—
|
|
|
528
|
|
Derivative instruments
|
932
|
|
|
207
|
|
|
12
|
|
|
(136
|
)
|
|
1,015
|
|
Cash collateral paid in support of energy risk management activities
|
211
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
211
|
|
Accounts receivable - affiliate
|
509
|
|
|
141
|
|
|
491
|
|
|
(1,068
|
)
|
|
73
|
|
Current assets - held for sale
|
—
|
|
|
89
|
|
|
—
|
|
|
—
|
|
|
89
|
|
Prepayments and other current assets
|
154
|
|
|
134
|
|
|
38
|
|
|
—
|
|
|
326
|
|
Total current assets
|
3,031
|
|
|
1,836
|
|
|
894
|
|
|
(1,204
|
)
|
|
4,557
|
|
Property, plant and equipment, net
|
2,500
|
|
|
11,196
|
|
|
240
|
|
|
(25
|
)
|
|
13,911
|
|
Other Assets
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
511
|
|
|
1
|
|
|
7,374
|
|
|
(7,886
|
)
|
|
—
|
|
Equity investments in affiliates
|
—
|
|
|
1,010
|
|
|
1
|
|
|
—
|
|
|
1,011
|
|
Goodwill
|
360
|
|
|
179
|
|
|
—
|
|
|
—
|
|
|
539
|
|
Intangible assets, net
|
439
|
|
|
1,290
|
|
|
—
|
|
|
(3
|
)
|
|
1,726
|
|
Nuclear decommissioning trust fund
|
680
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
680
|
|
Derivative instruments
|
245
|
|
|
118
|
|
|
38
|
|
|
(47
|
)
|
|
354
|
|
Deferred income tax
|
264
|
|
|
(34
|
)
|
|
(94
|
)
|
|
—
|
|
|
136
|
|
Non-current assets held-for-sale
|
—
|
|
|
157
|
|
|
—
|
|
|
—
|
|
|
157
|
|
Other non-current assets
|
73
|
|
|
489
|
|
|
119
|
|
|
—
|
|
|
681
|
|
Total other assets
|
2,572
|
|
|
3,210
|
|
|
7,438
|
|
|
(7,936
|
)
|
|
5,284
|
|
Total Assets
|
$
|
8,103
|
|
|
$
|
16,242
|
|
|
$
|
8,572
|
|
|
$
|
(9,165
|
)
|
|
$
|
23,752
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt and capital leases
|
$
|
—
|
|
|
$
|
935
|
|
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
956
|
|
Accounts payable
|
510
|
|
|
241
|
|
|
36
|
|
|
—
|
|
|
787
|
|
Accounts payable — affiliate
|
1,662
|
|
|
(121
|
)
|
|
(441
|
)
|
|
(1,068
|
)
|
|
32
|
|
Derivative instruments
|
857
|
|
|
69
|
|
|
—
|
|
|
(136
|
)
|
|
790
|
|
Cash collateral received in support of energy risk management activities
|
240
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
240
|
|
Current liabilities held-for-sale
|
—
|
|
|
80
|
|
|
—
|
|
|
—
|
|
|
80
|
|
Accrued expenses and other current liabilities
|
236
|
|
|
146
|
|
|
280
|
|
|
—
|
|
|
662
|
|
Accrued expenses and other current liabilities-affiliate
|
—
|
|
|
—
|
|
|
161
|
|
|
—
|
|
|
161
|
|
Total current liabilities
|
3,505
|
|
|
1,350
|
|
|
57
|
|
|
(1,204
|
)
|
|
3,708
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
|
Long-term debt and capital leases
|
244
|
|
|
8,387
|
|
|
6,775
|
|
|
—
|
|
|
15,406
|
|
Nuclear decommissioning reserve
|
272
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
272
|
|
Nuclear decommissioning trust liability
|
400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
400
|
|
Deferred income taxes
|
112
|
|
|
64
|
|
|
(156
|
)
|
|
—
|
|
|
20
|
|
Derivative instruments
|
224
|
|
|
87
|
|
|
—
|
|
|
(47
|
)
|
|
264
|
|
Out-of-market contracts, net
|
62
|
|
|
139
|
|
|
—
|
|
|
—
|
|
|
201
|
|
Non-current liabilities held-for-sale
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
Other non-current liabilities
|
419
|
|
|
324
|
|
|
393
|
|
|
—
|
|
|
1,136
|
|
Total non-current liabilities
|
1,733
|
|
|
9,008
|
|
|
7,012
|
|
|
(47
|
)
|
|
17,706
|
|
Total liabilities
|
5,238
|
|
|
10,358
|
|
|
7,069
|
|
|
(1,251
|
)
|
|
21,414
|
|
Redeemable noncontrolling interest in subsidiaries
|
—
|
|
|
80
|
|
|
—
|
|
|
—
|
|
|
80
|
|
Stockholders’ Equity
|
2,865
|
|
|
5,804
|
|
|
1,503
|
|
|
(7,914
|
)
|
|
2,258
|
|
Total Liabilities and Stockholders’ Equity
|
$
|
8,103
|
|
|
$
|
16,242
|
|
|
$
|
8,572
|
|
|
$
|
(9,165
|
)
|
|
$
|
23,752
|
|
|
|
(a)
|
All significant intercompany transactions have been eliminated in consolidation.
|
NRG ENERGY, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATING STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2018
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
NRG Energy, Inc.
(Note Issuer)
|
|
Eliminations
(a)
|
|
Consolidated
|
|
(In millions)
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
346
|
|
|
$
|
148
|
|
|
$
|
295
|
|
|
$
|
(556
|
)
|
|
$
|
233
|
|
Adjustments to reconcile net income to net cash provided/(used) by operating activities:
|
|
|
|
|
|
|
|
|
|
Distributions from unconsolidated affiliates
|
—
|
|
|
13
|
|
|
—
|
|
|
(3
|
)
|
|
10
|
|
Equity in losses of unconsolidated affiliates
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
2
|
|
Depreciation and amortization
|
73
|
|
|
154
|
|
|
8
|
|
|
—
|
|
|
235
|
|
Provision for bad debts
|
17
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
15
|
|
Amortization of nuclear fuel
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
Amortization of financing costs and debt discount/premiums
|
—
|
|
|
10
|
|
|
4
|
|
|
—
|
|
|
14
|
|
Adjustment for debt extinguishment
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
Amortization of intangibles and out-of-market contracts
|
3
|
|
|
19
|
|
|
—
|
|
|
—
|
|
|
22
|
|
Amortization of unearned equity compensation
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
Changes in deferred income taxes and liability for uncertain tax benefits
|
114
|
|
|
27
|
|
|
(144
|
)
|
|
—
|
|
|
(3
|
)
|
Changes in nuclear decommissioning trust liability
|
34
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34
|
|
Changes in derivative instruments
|
5
|
|
|
(220
|
)
|
|
(14
|
)
|
|
(18
|
)
|
|
(247
|
)
|
Changes in collateral deposits in support of energy risk management activities
|
162
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
163
|
|
Gain on sale of emission allowances
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
(Gain)/loss on sale of assets
|
(3
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
Changes in other working capital
|
(442
|
)
|
|
22
|
|
|
(296
|
)
|
|
577
|
|
|
(139
|
)
|
Net Cash Provided/(Used) by Operating Activities
|
314
|
|
|
174
|
|
|
(131
|
)
|
|
—
|
|
|
357
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
Dividends from NRG Yield, Inc.
|
—
|
|
|
—
|
|
|
25
|
|
|
(25
|
)
|
|
—
|
|
Acquisition of Drop Down Assets, net of cash acquired
|
—
|
|
|
(42
|
)
|
|
—
|
|
|
42
|
|
|
—
|
|
Acquisition of business, net of cash acquired
|
(2
|
)
|
|
(60
|
)
|
|
—
|
|
|
—
|
|
|
(62
|
)
|
Capital expenditures
|
(61
|
)
|
|
(276
|
)
|
|
(21
|
)
|
|
—
|
|
|
(358
|
)
|
Decrease in notes receivable
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
Purchases of emission allowances
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
Proceeds from sale of emission allowances
|
23
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
Investments in nuclear decommissioning trust fund securities
|
(216
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(216
|
)
|
Proceeds from the sale of nuclear decommissioning trust fund securities
|
182
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
182
|
|
Proceeds from sale of assets, net of cash disposed of
|
10
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
11
|
|
Change in investments in unconsolidated affiliates
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Net Cash (Used)/Provided by Investing Activities
|
(81
|
)
|
|
(372
|
)
|
|
4
|
|
|
17
|
|
|
(432
|
)
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from NRG Yield, Inc.
|
—
|
|
|
(25
|
)
|
|
—
|
|
|
25
|
|
|
—
|
|
Payment from/(for) intercompany loans
|
18
|
|
|
80
|
|
|
(98
|
)
|
|
—
|
|
|
—
|
|
Acquisition of Drop Down Assets, net of cash acquired
|
—
|
|
|
—
|
|
|
42
|
|
|
(42
|
)
|
|
—
|
|
Payment of dividends to common and preferred stockholders
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
(10
|
)
|
Payment for treasury stock
|
—
|
|
|
—
|
|
|
(93
|
)
|
|
—
|
|
|
(93
|
)
|
Proceeds from issuance of long-term debt
|
—
|
|
|
179
|
|
|
—
|
|
|
—
|
|
|
179
|
|
Payments for short and long-term debt
|
—
|
|
|
(222
|
)
|
|
(6
|
)
|
|
—
|
|
|
(228
|
)
|
Contributions from, net of distributions to noncontrolling interests in subsidiaries
|
—
|
|
|
110
|
|
|
—
|
|
|
—
|
|
|
110
|
|
Payment of debt issuance costs
|
—
|
|
|
(6
|
)
|
|
(1
|
)
|
|
—
|
|
|
(7
|
)
|
Net Cash Provided/(Used) by Financing Activities
|
18
|
|
|
116
|
|
|
(166
|
)
|
|
(17
|
)
|
|
(49
|
)
|
Net Increase/(Decrease) in Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash
|
251
|
|
|
(82
|
)
|
|
(293
|
)
|
|
—
|
|
|
(124
|
)
|
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at Beginning of Period
|
41
|
|
|
852
|
|
|
643
|
|
|
—
|
|
|
1,536
|
|
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at End of Period
|
$
|
292
|
|
|
$
|
770
|
|
|
$
|
350
|
|
|
$
|
—
|
|
|
$
|
1,412
|
|
|
|
(a)
|
All significant intercompany transactions have been eliminated in consolidation.
|
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the three months ended March 31, 2017
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
NRG Energy, Inc.
(Note Issuer)
|
|
Eliminations
(a)
|
|
Consolidated
|
|
(In millions)
|
Operating Revenues
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
$
|
1,599
|
|
|
$
|
867
|
|
|
$
|
—
|
|
|
$
|
(84
|
)
|
|
$
|
2,382
|
|
Operating Costs and Expenses
|
|
|
|
|
|
|
|
|
|
Cost of operations
|
1,260
|
|
|
664
|
|
|
18
|
|
|
(80
|
)
|
|
1,862
|
|
Depreciation and amortization
|
99
|
|
|
150
|
|
|
8
|
|
|
—
|
|
|
257
|
|
Selling, general and administrative
|
96
|
|
|
46
|
|
|
118
|
|
|
—
|
|
|
260
|
|
Development costs
|
—
|
|
|
12
|
|
|
5
|
|
|
—
|
|
|
17
|
|
Total operating costs and expenses
|
1,455
|
|
|
872
|
|
|
149
|
|
|
(80
|
)
|
|
2,396
|
|
Other income - affiliate
|
—
|
|
|
—
|
|
|
48
|
|
|
—
|
|
|
48
|
|
Gain on sale of assets
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Operating Income/(Loss)
|
146
|
|
|
(5
|
)
|
|
(101
|
)
|
|
(4
|
)
|
|
36
|
|
Other (Expense)/Income
|
|
|
|
|
|
|
|
|
|
|
Equity in (losses)/earnings of consolidated subsidiaries
|
(42
|
)
|
|
1
|
|
|
68
|
|
|
(27
|
)
|
|
—
|
|
Equity in (losses)/earnings of unconsolidated affiliates
|
(1
|
)
|
|
7
|
|
|
(1
|
)
|
|
—
|
|
|
5
|
|
Other (expense)/income, net
|
(2
|
)
|
|
5
|
|
|
7
|
|
|
3
|
|
|
13
|
|
Loss on debt extinguishment, net
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
Interest expense
|
(4
|
)
|
|
(104
|
)
|
|
(117
|
)
|
|
—
|
|
|
(225
|
)
|
Total other expense
|
(49
|
)
|
|
(93
|
)
|
|
(43
|
)
|
|
(24
|
)
|
|
(209
|
)
|
Income/(Loss) from Continuing Operations Before Income Taxes
|
97
|
|
|
(98
|
)
|
|
(144
|
)
|
|
(28
|
)
|
|
(173
|
)
|
Income tax expense/(benefit)
|
19
|
|
|
(46
|
)
|
|
25
|
|
|
(2
|
)
|
|
(4
|
)
|
Income/(Loss) from Continuing Operations
|
78
|
|
|
(52
|
)
|
|
(169
|
)
|
|
(26
|
)
|
|
(169
|
)
|
(Loss)/income from discontinued operations, net of income tax
|
—
|
|
|
(37
|
)
|
|
3
|
|
|
—
|
|
|
(34
|
)
|
Net Income/(Loss)
|
78
|
|
|
(89
|
)
|
|
(166
|
)
|
|
(26
|
)
|
|
(203
|
)
|
Less: Net loss attributable to noncontrolling interest and redeemable noncontrolling interest
|
—
|
|
|
(38
|
)
|
|
(3
|
)
|
|
1
|
|
|
(40
|
)
|
Net Income/(Loss) Attributable to NRG Energy, Inc.
|
$
|
78
|
|
|
$
|
(51
|
)
|
|
$
|
(163
|
)
|
|
$
|
(27
|
)
|
|
$
|
(163
|
)
|
|
|
(a)
|
All significant intercompany transactions have been eliminated in consolidation.
|
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
For the three months ended March 31, 2017
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
NRG Energy, Inc.
(Note Issuer)
|
|
Eliminations
(a)
|
|
Consolidated
|
|
(In millions)
|
Net Income/(Loss)
|
$
|
78
|
|
|
$
|
(89
|
)
|
|
$
|
(166
|
)
|
|
$
|
(26
|
)
|
|
$
|
(203
|
)
|
Other Comprehensive Income, net of tax
|
|
|
|
|
|
|
|
|
|
Unrealized gain on derivatives, net
|
—
|
|
|
5
|
|
|
4
|
|
|
(5
|
)
|
|
4
|
|
Foreign currency translation adjustments, net
|
5
|
|
|
4
|
|
|
7
|
|
|
(9
|
)
|
|
7
|
|
Defined benefit plans, net
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
Other comprehensive income
|
5
|
|
|
10
|
|
|
10
|
|
|
(14
|
)
|
|
11
|
|
Comprehensive Income/(Loss)
|
83
|
|
|
(79
|
)
|
|
(156
|
)
|
|
(40
|
)
|
|
(192
|
)
|
Less: Comprehensive loss attributable to noncontrolling interest and redeemable noncontrolling interest
|
—
|
|
|
(37
|
)
|
|
(3
|
)
|
|
1
|
|
|
(39
|
)
|
Comprehensive Income/(Loss) Attributable to NRG Energy, Inc.
|
$
|
83
|
|
|
$
|
(42
|
)
|
|
$
|
(153
|
)
|
|
$
|
(41
|
)
|
|
$
|
(153
|
)
|
|
|
(a)
|
All significant intercompany transactions have been eliminated in consolidation.
|
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
NRG Energy, Inc.
(Note Issuer)
|
|
Eliminations
(a)
|
|
Consolidated
|
ASSETS
|
(In millions)
|
Current Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
348
|
|
|
$
|
643
|
|
|
$
|
—
|
|
|
$
|
991
|
|
Funds deposited by counterparties
|
37
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37
|
|
Restricted cash
|
4
|
|
|
504
|
|
|
—
|
|
|
—
|
|
|
508
|
|
Accounts receivable, net
|
768
|
|
|
307
|
|
|
4
|
|
|
—
|
|
|
1,079
|
|
Inventory
|
338
|
|
|
194
|
|
|
—
|
|
|
—
|
|
|
532
|
|
Derivative instruments
|
625
|
|
|
81
|
|
|
9
|
|
|
(89
|
)
|
|
626
|
|
Cash collateral paid in support of energy risk management activities
|
170
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
171
|
|
Accounts receivable - affiliate
|
709
|
|
|
213
|
|
|
(129
|
)
|
|
(698
|
)
|
|
95
|
|
Current assets held-for-sale
|
8
|
|
|
107
|
|
|
—
|
|
|
—
|
|
|
115
|
|
Prepayments and other current assets
|
116
|
|
|
118
|
|
|
27
|
|
|
—
|
|
|
261
|
|
Total current assets
|
2,775
|
|
|
1,873
|
|
|
554
|
|
|
(787
|
)
|
|
4,415
|
|
Property, plant and equipment, net
|
2,502
|
|
|
11,194
|
|
|
238
|
|
|
(26
|
)
|
|
13,908
|
|
Other Assets
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
305
|
|
|
—
|
|
|
7,581
|
|
|
(7,886
|
)
|
|
—
|
|
Equity investments in affiliates
|
—
|
|
|
1,036
|
|
|
2
|
|
|
—
|
|
|
1,038
|
|
Goodwill
|
360
|
|
|
179
|
|
|
—
|
|
|
—
|
|
|
539
|
|
Intangible assets, net
|
454
|
|
|
1,295
|
|
|
—
|
|
|
(3
|
)
|
|
1,746
|
|
Nuclear decommissioning trust fund
|
692
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
692
|
|
Derivative instruments
|
121
|
|
|
40
|
|
|
31
|
|
|
(20
|
)
|
|
172
|
|
Deferred income taxes
|
377
|
|
|
(7
|
)
|
|
(236
|
)
|
|
—
|
|
|
134
|
|
Non-current assets held for sale
|
—
|
|
|
43
|
|
|
—
|
|
|
—
|
|
|
43
|
|
Other non-current assets
|
50
|
|
|
461
|
|
|
158
|
|
|
(38
|
)
|
|
631
|
|
Total other assets
|
2,359
|
|
|
3,047
|
|
|
7,536
|
|
|
(7,947
|
)
|
|
4,995
|
|
Total Assets
|
$
|
7,636
|
|
|
$
|
16,114
|
|
|
$
|
8,328
|
|
|
$
|
(8,760
|
)
|
|
$
|
23,318
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt and capital leases
|
$
|
—
|
|
|
$
|
667
|
|
|
$
|
59
|
|
|
$
|
(38
|
)
|
|
$
|
688
|
|
Accounts payable
|
545
|
|
|
281
|
|
|
55
|
|
|
—
|
|
|
881
|
|
Accounts payable — affiliate
|
751
|
|
|
(201
|
)
|
|
181
|
|
|
(698
|
)
|
|
33
|
|
Derivative instruments
|
535
|
|
|
108
|
|
|
—
|
|
|
(88
|
)
|
|
555
|
|
Cash collateral received in support of energy risk management activities
|
37
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37
|
|
Current liabilities held-for-sale
|
—
|
|
|
72
|
|
|
—
|
|
|
—
|
|
|
72
|
|
Accrued expenses and other current liabilities
|
290
|
|
|
175
|
|
|
425
|
|
|
—
|
|
|
890
|
|
Accrued expenses and other current liabilities - affiliate
|
—
|
|
|
—
|
|
|
161
|
|
|
—
|
|
|
161
|
|
Total current liabilities
|
2,158
|
|
|
1,102
|
|
|
881
|
|
|
(824
|
)
|
|
3,317
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
|
Long-term debt and capital leases
|
244
|
|
|
8,733
|
|
|
6,739
|
|
|
—
|
|
|
15,716
|
|
Nuclear decommissioning reserve
|
269
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
269
|
|
Nuclear decommissioning trust liability
|
415
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
415
|
|
Deferred income taxes
|
112
|
|
|
64
|
|
|
(155
|
)
|
|
—
|
|
|
21
|
|
Derivative instruments
|
110
|
|
|
107
|
|
|
—
|
|
|
(20
|
)
|
|
197
|
|
Out-of-market contracts, net
|
66
|
|
|
141
|
|
|
—
|
|
|
—
|
|
|
207
|
|
Non-current liabilities held-for-sale
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
8
|
|
Other non-current liabilities
|
410
|
|
|
321
|
|
|
391
|
|
|
—
|
|
|
1,122
|
|
Total non-current liabilities
|
1,626
|
|
|
9,374
|
|
|
6,975
|
|
|
(20
|
)
|
|
17,955
|
|
Total Liabilities
|
3,784
|
|
|
10,476
|
|
|
7,856
|
|
|
(844
|
)
|
|
21,272
|
|
Redeemable noncontrolling interest in subsidiaries
|
—
|
|
|
78
|
|
|
—
|
|
|
—
|
|
|
78
|
|
Stockholders’ Equity
|
3,852
|
|
|
5,560
|
|
|
472
|
|
|
(7,916
|
)
|
|
1,968
|
|
Total Liabilities and Stockholders’ Equity
|
$
|
7,636
|
|
|
$
|
16,114
|
|
|
$
|
8,328
|
|
|
$
|
(8,760
|
)
|
|
$
|
23,318
|
|
|
|
(a)
|
All significant intercompany transactions have been eliminated in consolidation.
|
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2017
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
NRG Energy, Inc.
(Note Issuer)
|
|
Eliminations
(a)
|
|
Consolidated
|
|
(In millions)
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
$
|
78
|
|
|
$
|
(89
|
)
|
|
$
|
(166
|
)
|
|
$
|
(26
|
)
|
|
$
|
(203
|
)
|
(Loss)/income from discontinued operations
|
—
|
|
|
(37
|
)
|
|
3
|
|
|
—
|
|
|
(34
|
)
|
Net income/(loss) from continuing operations
|
78
|
|
|
(52
|
)
|
|
(169
|
)
|
|
(26
|
)
|
|
(169
|
)
|
Adjustments to reconcile net income/(loss) to net cash (used)/provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Distributions from unconsolidated affiliates
|
—
|
|
|
18
|
|
|
—
|
|
|
(5
|
)
|
|
13
|
|
Equity in losses/(earnings) of unconsolidated affiliates
|
1
|
|
|
(7
|
)
|
|
1
|
|
|
—
|
|
|
(5
|
)
|
Depreciation and amortization
|
99
|
|
|
150
|
|
|
8
|
|
|
—
|
|
|
257
|
|
Provision for bad debts
|
8
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
9
|
|
Amortization of nuclear fuel
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
Amortization of financing costs and debt discount/premiums
|
—
|
|
|
11
|
|
|
4
|
|
|
—
|
|
|
15
|
|
Amortization of intangibles and out-of-market contracts
|
6
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
30
|
|
Amortization of unearned equity compensation
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
8
|
|
Changes in deferred income taxes and liability for uncertain tax benefits
|
19
|
|
|
(46
|
)
|
|
28
|
|
|
—
|
|
|
1
|
|
Changes in nuclear decommissioning trust liability
|
36
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
36
|
|
Changes in derivative instruments
|
(4
|
)
|
|
43
|
|
|
(1
|
)
|
|
—
|
|
|
38
|
|
Changes in collateral deposits in support of energy risk management activities
|
(136
|
)
|
|
9
|
|
|
—
|
|
|
—
|
|
|
(127
|
)
|
Gain on sale of assets
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
Changes in other working capital
|
(118
|
)
|
|
458
|
|
|
(601
|
)
|
|
63
|
|
|
(198
|
)
|
Net cash (used)/provided by continuing operations
|
(1
|
)
|
|
609
|
|
|
(722
|
)
|
|
32
|
|
|
(82
|
)
|
Cash provided by discontinued operations
|
—
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
15
|
|
Net Cash (Used)/Provided by Operating Activities
|
(1
|
)
|
|
624
|
|
|
(722
|
)
|
|
32
|
|
|
(67
|
)
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
Dividends from NRG Yield, Inc.
|
—
|
|
|
—
|
|
|
22
|
|
|
(22
|
)
|
|
—
|
|
Intercompany dividends
|
—
|
|
|
—
|
|
|
129
|
|
|
(129
|
)
|
|
—
|
|
Acquisition of Drop Down Assets, net of cash acquired
|
—
|
|
|
(131
|
)
|
|
—
|
|
|
131
|
|
|
—
|
|
Acquisition of businesses, net of cash acquired
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
Capital expenditures
|
(64
|
)
|
|
(168
|
)
|
|
(4
|
)
|
|
—
|
|
|
(236
|
)
|
Decrease in notes receivable
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
Purchases of emission allowances
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
Proceeds from sale of emission allowances
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
Investments in nuclear decommissioning trust fund securities
|
(153
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(153
|
)
|
Proceeds from the sale of nuclear decommissioning trust fund securities
|
117
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
117
|
|
Proceeds from sale of assets, net of cash disposed of
|
11
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
14
|
|
Change in investments in unconsolidated affiliates
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
Other
|
18
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
Net cash (used)/provided by continuing operations
|
(69
|
)
|
|
(307
|
)
|
|
147
|
|
|
(20
|
)
|
|
(249
|
)
|
Cash used by discontinued operations
|
—
|
|
|
(32
|
)
|
|
—
|
|
|
—
|
|
|
(32
|
)
|
Net Cash (Used)/Provided by Investing Activities
|
(69
|
)
|
|
(339
|
)
|
|
147
|
|
|
(20
|
)
|
|
(281
|
)
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
Dividends from NRG Yield, Inc.
|
—
|
|
|
(22
|
)
|
|
—
|
|
|
22
|
|
|
—
|
|
Payments (for)/from intercompany loans
|
65
|
|
|
(428
|
)
|
|
395
|
|
|
(32
|
)
|
|
—
|
|
Acquisition of Drop Down Assets, net of cash acquired
|
—
|
|
|
—
|
|
|
131
|
|
|
(131
|
)
|
|
—
|
|
Intercompany dividends
|
—
|
|
|
(129
|
)
|
|
—
|
|
|
129
|
|
|
—
|
|
Payment of dividends to common and preferred stockholders
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
(9
|
)
|
Net receipts from settlement of acquired derivatives that include financing elements
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Proceeds from issuance of long-term debt
|
—
|
|
|
167
|
|
|
26
|
|
|
—
|
|
|
193
|
|
Payments for short and long-term debt
|
—
|
|
|
(146
|
)
|
|
(31
|
)
|
|
—
|
|
|
(177
|
)
|
Distributions to, net of contributions from, noncontrolling interests in subsidiaries
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
Payment of debt issuance costs
|
—
|
|
|
(10
|
)
|
|
(4
|
)
|
|
—
|
|
|
(14
|
)
|
Other - contingent consideration
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
Net cash provided/(used) by continuing operations
|
65
|
|
|
(582
|
)
|
|
508
|
|
|
(12
|
)
|
|
(21
|
)
|
Cash used by discontinued operations
|
—
|
|
|
(132
|
)
|
|
—
|
|
|
—
|
|
|
(132
|
)
|
Net Cash Provided/(Used) by Financing Activities
|
65
|
|
|
(714
|
)
|
|
508
|
|
|
(12
|
)
|
|
(153
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
Change in cash from discontinued operations
|
—
|
|
|
(149
|
)
|
|
—
|
|
|
—
|
|
|
(149
|
)
|
Net Decrease in Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash
|
(5
|
)
|
|
(287
|
)
|
|
(67
|
)
|
|
—
|
|
|
(359
|
)
|
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at Beginning of Period
|
13
|
|
|
1,050
|
|
|
323
|
|
|
—
|
|
|
1,386
|
|
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at End of Period
|
$
|
8
|
|
|
$
|
763
|
|
|
$
|
256
|
|
|
$
|
—
|
|
|
$
|
1,027
|
|
|
|
(a)
|
All significant intercompany transactions have been eliminated in consolidation.
|