2016
Form 10-K
Stockholder information
STOCK TRANSFER AGENT AND REGISTRAR
Shareholder correspondence should be mailed to:
Computershare
P.O. BOX 30170
College Station, TX 77842-3170
STOCKHOLDER INQUIRIES
Overnight correspondence should be sent to:
Computershare
211 Quality Circle, Suite 210
College Station, TX 77845
1.866.214.2213
Email:
shareholder@computershare.com
Online inquires:
https://www-us.computershare.com/investor/Contact
Website:
www.computershare.com/investor
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Computershare
P.O. BOX 30170
College Station, TX 77842-3170
STOCK LISTING
NRG’s common stock is listed on the New York Stock Exchange
under the ticker symbol NRG.
FINANCIAL INFORMATION
NRG’s Annual Report on Form 10-K, Proxy Statement and other SEC Filings
are available at www.nrg.com under the Investors section.
10DEC201611130881
Dear Fellow NRG Stockholders,
2016 was a year of change for NRG. We announced a new mission for our company. We simplified our
business model, focusing on our core strengths—generation and retail. We began a concerted effort to
increase financial flexibility, focusing on strengthening the balance sheet and operating a lower-cost
platform. And we pursued all of these changes while continuing to deliver strong financial and
operational results.
The catalyst for many of the changes to our business is the continued disruption in the electric power
industry. From the abundance of low-cost natural gas to the increasing role of renewables, our industry
is changing and so is the business model needed to succeed. In adapting to this change, the business
model that will create long-term value is one that leverages current strengths and creates efficiencies.
With this in mind, we began our refocusing efforts in late 2015. We developed a plan to enhance our
entire platform, with objectives including deleveraging, cost reductions and divestments. As part of this
plan, we also made a commitment to you, our shareholders, to simplify our value proposition and bring
a renewed sense of financial discipline to our decision making.
The strengthened foundation we have today positions NRG for both near-term and longer-term value
creation; however, there is still more to do. Our total shareholder return in 2016 was 6.4% and while this
return outpaced our sector peers I know we can do better. You can expect that we will work every day
to further strengthen our business and optimize our portfolio.
I am excited about the opportunities ahead and proud of what we have achieved during my first year as
CEO.
Strengthening our Foundation
Strengthening the NRG foundation began with simplification, both in terms of perception and internal
structure. We made the decision to refocus our business on our core expertise and set targets for cost
reductions, portfolio repositioning and debt reduction, while providing better visibility into capital
allocation decision making.
First, we identified and executed on corporate streamlining and cost-cutting initiatives, resulting in over
half a billion dollars of total costs savings. This represents a 13% reduction from our 2015 baseline.
Second, we began divesting from several underperforming and non-core parts of the business. We
scaled back our residential solar and electric vehicles charging businesses while reintegrating our
renewable generation business to maintain a strong position in this growing market. We also identified
assets that could be sold at value, generating $550 million in proceeds, which surpassed our initial
$500 million target.
Third, we better aligned our capital structure to the current market cycle. We recognize that power
prices in many of our markets has been subdued for several years—driven by a variety of factors
including weather, natural gas prices, renewable energy and changes in fuel mix. Having begun our
deleveraging efforts in 2015 with $250 million in corporate-level debt retired during the fourth quarter,
we sought to create greater financial flexibility and ensure the strength of our balance sheet during the
1
current market cycle, devoting over 60 cents of every dollar of our allocated capital to deleveraging and
convertible preferred stock redemption in 2016. Through these efforts, we repurchased $1 billion of
corporate-level debt and extended $6 billion in corporate-level debt maturities past 2020. In the
process, we also reduced annual corporate cash interest payments and preferred dividends by
$100 million, enhancing our ability to deliver robust free cash flow.
We also continued to optimize our fleet. We successfully converted three plants representing 2.2
gigawatts (GW) from burning coal to natural gas, significantly improving their competitiveness in the
market. Late in 2016, we finished construction of our Petra Nova carbon capture project at our WA
Parish plant in Texas, bringing this first of its kind technology online both on time and on budget. We
continued to develop our renewables business to position ourselves favorably against the back drop of
our country’s changing fuel mix and opportunities for strong cash flows through long-term contracts.
During 2016, we acquired 1.7 GW of operating or in-development wind and solar assets. Today, NRG
and NRG Yield’s combined 4.7 GW renewable portfolio is one of the largest in the country.
Our commitment to strengthening our company continues as we look to 2017 and beyond. We
accomplished a lot in 2016, but I believe in continuous improvement and will never stop looking for ways
to optimize our business. We have already committed to further reducing our corporate-level debt by
$600 million in 2017, and we remain focused on additional cost-cutting and portfolio repositioning
initiatives.
Continuing our Transformation
While we are focused on creating value for our shareholders today and into the future, we must also
remain vigilant. Creating sustained value requires constant monitoring of the greatest forces of change in
our industry so that we can properly adapt our business and execution.
A shift in generation fuel mix, emerging energy technologies, evolving consumer preference, and
environmental regulation, have all driven the competitive power industry to change the business model
needed to succeed over the longer term. While sufficient at the outset of competitive power markets,
the pure-play Independent Power Producer (IPP) model without the benefits of retail and portfolio
diversity has become outdated and is unlikely to create sustained value in the evolving power sector.
The successful competitive power company of the future will be integrated and diversified but also able
to grow efficiently within one flexible platform that is cost-efficient and practices prudent financial
management. This company must deliver energy reliably and safely while working to reduce its
environmental footprint over time, recognizing the role that our industry plays in moving toward a
cleaner energy future. This is the NRG model, and the many steps we have taken to transform our
business leave us uniquely positioned in our industry:
• The scale of our core—Generation/Retail—integrated platform allows us to realize unique
operational synergies and efficiencies;
• Our diversified portfolio and business lines create a stable base of earnings and free cash flow
while maintaining significant upside to a market recovery: More than two thirds of our 2016
economic gross margin came from sources not directly correlated to the price of natural gas;
• Our retail platform empowers residential, commercial and industrial consumers by offering
products and services that can be tailored to their specific energy needs;
• Through our strategic partnership with NRG Yield, we are able to capitalize on growth
opportunities and quickly replenish capital at strong returns;
• Recognizing the cyclical nature of our business, we remain disciplined in pursuing a cycle-
appropriate capital structure;
2
• We are committed to sustainability, creating a positive impact on our communities and reducing
the environmental footprint of our fleet while ensuring long-term competitiveness: increasing our
mix of newer, cleaner energy sources, retrofitting assets with environmental controls,
implementing carbon capture technologies, converting assets from coal to gas;
• And importantly, we maintain an unwavering commitment to safety, achieving top decile safety
performance in 2016 and our second best safety year on record.
Creating a business that is able to not just weather but thrive in volatile, evolving markets is not easy;
however, I am certain that NRG’s unique platform is well-positioned for sustained success in this
evolving sector.
Protecting Competitive Markets
Thinking more broadly about our sector, the preservation and fostering of competitive markets is an
integral driver of consumer benefits and choice. Competition is at the heart of innovation and brings
many benefits to consumers: cost efficiencies, higher quality products and services and greater control
and empowerment. This is true for all industries, especially in the electricity sector.
On the generation side, several market participants and states have recently shown support for
out-of-market contracts and subsidies to keep otherwise uneconomic power plants online. This runs
counter to the fundamental principles of competitive markets that are intended to keep efficient units
online and force inefficient units to retire. These actions may bring short-term gains but they harm the
market and the entire value chain of energy generation and consumption—not to mention the
unintended consequences of suppressing innovation.
On the retail side, competition is just as important and NRG will continue to push for market
mechanisms that encourage innovative new offerings and consumer choice. For both parts of our
business—generation and retail—NRG will continue to be a vocal advocate of competitive markets.
Looking Forward
2016 was a great start to a new beginning for NRG and looking forward to 2017, you should expect us
to maintain a relentless focus on sustained value creation so that as our industry evolves, we will be at
the forefront.
I thank all of my NRG colleagues for their relentless focus on execution throughout the past year and I
thank you, our shareholders, for your support as we continue on this journey together.
Sincerely,
3MAR201721523181
MAURICIO GUTIERREZ
President and Chief Executive Officer
3
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 2016.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to .
Commission file No. 001-15891
NRG Energy, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
41-1724239
(I.R.S. Employer Identification No.)
804 Carnegie Center, Princeton, New Jersey
(Address of principal executive offices)
08540
(Zip Code)
(609) 524-4500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Exchange on Which Registered
Common Stock, par value $0.01
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
(Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
As of the last business day of the most recently completed second fiscal quarter, the aggregate market value of the common stock of the registrant held
by non-affiliates was approximately $4,180,823,320 based on the closing sale price of $14.99 as reported on the New York Stock Exchange.
Indicate the number of shares outstanding of each of the registrant's classes of common stock as of the latest practicable date.
Class
Common Stock, par value $0.01 per share
Outstanding at January 31, 2017
315,972,715
Documents Incorporated by Reference:
Portions of the Registrant's definitive Proxy Statement relating to its 2017 Annual Meeting of Stockholders
are incorporated by reference into Part III of this Annual Report on Form 10-K
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3/4/17 3:01 AM
TABLE OF CONTENTS
GLOSSARY OF TERMS
PART I
Item 1 — Business
Item 1A — Risk Factors Related to NRG Energy, Inc.
Item 1B — Unresolved Staff Comments
Item 2 — Properties
Item 3 — Legal Proceedings
Item 4 — Mine Safety Disclosures
PART II
Item 5 — Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6 — Selected Financial Data
Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A — Quantitative and Qualitative Disclosures About Market Risk
Item 8 — Financial Statements and Supplementary Data
Item 9 — Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A — Controls and Procedures
Item 9B — Other Information
PART III
Item 10 — Directors, Executive Officers and Corporate Governance
Item 11 — Executive Compensation
Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13 — Certain Relationships and Related Transactions, and Director Independence
Item 14 — Principal Accounting Fees and Services
PART IV
Item 15 — Exhibits, Financial Statement Schedules
Item 16 — Form 10-K Summary
EXHIBIT INDEX
3
10
10
35
54
55
61
61
62
62
64
66
121
124
125
125
127
128
128
131
131
132
132
133
133
254
244
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Glossary of Terms
When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below:
2016 Revolving Credit Facility
The Company's $2.5 billion revolving credit facility, a component of the 2016 Senior
Credit Facility. The revolving credit facility consists of $289 million of Tranche A
Revolving Credit Facility, due 2018, and $2.2 billion of Tranche B Revolving Credit
Facility, due 2021
2016 Senior Credit Facility
NRG's senior secured credit facility, comprised of the 2016 Revolving Credit Facility and
the 2023 Term Loan Facility
2023 Term Loan Facility
The Company's $1.9 billion term loan facility due 2023, a component of the 2016 Senior
Credit Facility
AEP
Alta Wind Assets
ARO
ARRA
ASC
ASU
American Electric Power
Seven wind facilities that total 947 MW located in Tehachapi, California and a portfolio of
land leases
Asset Retirement Obligation
American Recovery and Reinvestment Act of 2009
The FASB Accounting Standards Codification, which the FASB established as the source of
authoritative GAAP
Accounting Standards Updates – updates to the ASC
Average realized prices
Volume-weighted average power prices, net of average fuel costs and reflecting the impact
of settled hedges
AZNMSNV
Backlog
BACT
Baseload
BETM
BRA
BTU
Buffalo Bear
Business Solutions
CAA
CAIR
CAISO
CCF
CCPI
CDD
CDFW
CDWR
CEC
Arizona, New Mexico and Southern Nevada
Projects that are under construction, contracted, or awarded and represents a higher level of
execution certainty
Best Available Control Technology
Units expected to satisfy minimum baseload requirements of the system and produce
electricity at an essentially constant rate and run continuously
Boston Energy Trading and Marketing LLC
Base Residual Auction
British Thermal Unit
Buffalo Bear, LLC, the operating subsidiary of Tapestry Wind LLC, which owns the
Buffalo Bear project
NRG's business solutions group, which includes demand response, commodity sales,
energy efficiency and energy management services
Clean Air Act
Clean Air Interstate Rule
California Independent System Operator
Carbon Capture Facility
Clean Coal Power Initiative
Cooling Degree Day
California Department of Fish and Wildlife
California Department of Water Resources
California Energy Commission
CenterPoint
CenterPoint Energy Houston Electric, LLC
CERT
CFTC
C&I
CES
CO2
CO2e
COD
Combustion Emissions Reduction Technologies, LLC
U.S. Commodity Futures Trading Commission
Commercial, industrial and governmental/institutional
Clean Energy Standard
Carbon Dioxide
Carbon Dioxide Equivalents
Commercial Operation Date
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ComEd
Company
Consolidated Appropriations
Act
CPP
CPS
CPUC
CSAPR
CVSR
CWA
D.C. Circuit
DGPV Holdco 1
DGPV Holdco 2
Direct Energy
Distributed Solar
DNREC
Dodd-Frank Act
Dominion
Drop Down Assets
DSI
DSU
Dunkirk Power
Economic gross margin
Commonwealth Edison
NRG Energy, Inc.
Consolidated Appropriations Act of 2016
Clean Power Plan
Combined Pollutant Standard
California Public Utilities Commission
Cross-State Air Pollution Rule
California Valley Solar Ranch
Clean Water Act
U.S. Court of Appeals for the District of Columbia Circuit
NRG DGPV Holdco 1 LLC
NRG DGPV Holdco 2 LLC
Direct Energy Business Marketing, LLC
Solar power projects that primarily sell power to customers for usage on site, or are
interconnected to sell power into a local distribution grid
Delaware Department of Natural Resources and Environmental Control
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2012
Dominion Resources, Inc.
Collectively, the June 2014 Drop Down Assets, the January 2015 Drop Down Assets, the
November 2015 Drop Down Assets and the September 2016 Drop Down Assets
Dry Sorbent Injection
Deferred Stock Unit
Dunkirk Power LLC
Sum of energy revenue, capacity revenue, retail revenue and other revenue, less cost of fuels
and other cost of sales
EGU
ELG
Electric Utility Generating Unit
Effluent Limitations Guidelines
El Segundo Energy Center
NRG West Holdings LLC, the subsidiary of Natural Gas Repowering LLC, which owns the
El Segundo Energy Center project
EME
EMAAC
Edison Mission Energy
Eastern Mid-Atlantic Area Council
Energy Plus Holdings
Energy Plus Holdings LLC
EPA
EPC
EPSA
ERCOT
ERISA
ESA
ESCO
ESP
ESPP
ESPS
EWG
U.S. Environmental Protection Agency
Engineering, Procurement and Construction
The Electric Power Supply Association
Electric Reliability Council of Texas, the Independent System Operator and the regional
reliability coordinator of the various electricity systems within Texas
The Employee Retirement Income Security Act of 1974
Energy Services Agreement
Energy Service Company
Electrostatic Precipitator
Amended and Restated Employee Stock Purchase Plan
Existing Source Performance Standards
Exempt Wholesale Generator
Exchange Act
The Securities Exchange Act of 1934, as amended
FASB
FCM
Financial Accounting Standards Board
Forward Capacity Market
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FERC
FFB
FirstEnergy
FPA
FRCC
Fresh Start
FTRs
GAAP
GenConn
GenOn
Federal Energy Regulatory Commission
Federal Financing Bank
FirstEnergy Corp.
Federal Power Act
Florida Reliability Coordinating Council
Reporting requirements as defined by ASC-852, Reorganizations
Financial Transmission Rights
Accounting principles generally accepted in the U.S.
GenConn Energy LLC
GenOn Energy, Inc.
GenOn Americas Generation
GenOn Americas Generation, LLC
GenOn Americas Generation
Senior Notes
GenOn Americas Generation's $695 million outstanding unsecured senior notes consisting of
$366 million of 8.5% senior notes due 2021 and $329 million of 9.125% senior notes due
2031
GenOn Mid-Atlantic
GenOn Senior Notes
GenOn Mid-Atlantic, LLC and, except where the context indicates otherwise, its subsidiaries,
which include the coal generation units at two generating facilities under operating leases
GenOn's $1.8 billion outstanding unsecured senior notes consisting of $691 million of 7.875%
senior notes due 2017, $649 million of 9.5% senior notes due 2018, and $490 million of
9.875% senior notes due 2020
GHG
Goal Zero
Greenhouse Gas
Goal Zero LLC
Green Mountain Energy
Green Mountain Energy Company
GWh
HAP
HDD
Heat Rate
High Desert
HLBV
HLM
IASB
ICAP
ICE
IFRS
ILU
IPA
IPPNY
ISO
ISO-NE
ITC
Gigawatt Hour
Hazardous Air Pollutant
Heating Degree Day
A measure of thermal efficiency computed by dividing the total BTU content of the fuel burned
by the resulting kWhs generated. Heat rates can be expressed as either gross or net heat rates,
depending whether the electricity output measured is gross or net generation and is generally
expressed as BTU per net kWh
TA - High Desert, LLC, the operating subsidiary of NRG Solar Mayfair LLC, which owns
the High Desert project
Hypothetical Liquidation at Book Value
High Lonesome Mesa, LLC
Independent Accounting Standards Board
New York Installed Capacity
Intercontinental Exchange
International Financial Reporting Standards
Illinois Union Insurance Company
Illinois Power Authority
Independent Power Producers of New York
Independent System Operator, also referred to as RTOs
ISO New England Inc.
Investment Tax Credit
January 2015 Drop Down
Assets
The Laredo Ridge, Tapestry and Walnut Creek projects, which were sold to NRG Yield,
Inc. on January 2, 2015
June 2014 Drop Down Assets
The High Desert, Kansas South and El Segundo Energy Center projects, which were sold to
NRG Yield, Inc. on June 30, 2014
JX Nippon
Kansas South
JX Nippon Oil Exploration (EOR) Limited
NRG Solar Kansas South LLC, the operating subsidiary of NRG Solar Kansas South
Holdings LLC, which owns the RE Kansas South project
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KPPH
kV
kWh
LA DEQ
LaGen
Laredo Ridge
LIBOR
LSE
LTIPs
MAAC
Marsh Landing
Mass Market
MATS
MDE
Merger
Merger Agreement
1,000 Pounds Per Hour
Kilovolts
Kilowatt-hour
Louisiana Department of Environmental Quality
Louisiana Generating LLC
Laredo Ridge Wind, LLC, the operating subsidiary of Mission Wind Laredo, LLC, which
owns the Laredo Ridge project
London Inter-Bank Offered Rate
Load Serving Entities
Collectively, the NRG Long-Term Incentive Plan, as amended, and the NRG GenOn Long-
Term Incentive Plan
Mid-Atlantic Area Council
NRG Marsh Landing, LLC (formerly known as GenOn Marsh Landing, LLC)
Residential and small commercial customers
Mercury and Air Toxics Standards
Maryland Department of the Environment
The merger completed on December 14, 2012 by NRG and GenOn pursuant to the Merger
Agreement
The agreement by and among NRG, GenOn and Plus Merger Corporation, dated as of July
20, 2012
Midwest Generation
Midwest Generation, LLC
MISO
MMBtu
MOPR
MSU
MW
MWh
MWt
NAAQS
NEPGA
NEPOOL
NERC
Midcontinent Independent System Operator, Inc.
Million British Thermal Units
Minimum Offer Price Rule
Market Stock Unit
Megawatts
Saleable megawatt hour net of internal/parasitic load megawatt-hour
Megawatts Thermal Equivalent
National Ambient Air Quality Standards
New England Power Generators Association
New England Power Pool
North American Electric Reliability Corporation
Net Capacity Factor
Net Exposure
Net Generation
NextEra
NJDEP
NOL
NOV
November 2015 Drop Down
Assets
NOx
NPDES
NPNS
The net amount of electricity that a generating unit produces over a period of time divided by
the net amount of electricity it could have produced if it had run at full power over that time
period. The net amount of electricity produced is the total amount of electricity generated
minus the amount of electricity used during generation
Counterparty credit exposure to NRG, net of collateral
The net amount of electricity produced, expressed in kWhs or MWhs, that is the total amount
of electricity generated (gross) minus the amount of electricity used during generation.
NextEra Energy Resources, LLC
New Jersey Department of Environmental Protection
Net Operating Loss
Notice of Violation
75% of the Class B interests of NRG Wind TE Holdco, which owns a portfolio of 12 wind
facilities totaling 814 net MW
Nitrogen Oxides
National Pollutant Discharge Elimination System
Normal Purchase Normal Sale
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NQSO
NRC
NRG
Non-Qualified Stock Option
U.S. Nuclear Regulatory Commission
NRG Energy, Inc.
NRG GenOn LTIP
NRG 2010 Stock Plan for GenOn Employees (formerly the GenOn Energy, Inc. 2010 Omnibus
Incentive Plan, which was assumed by NRG in connection with the Merger)
NRG LTIP
NRG Long-Term Incentive Plan, as amended
NRG Wind TE Holdco
NRG Wind TE Holdco LLC
NRG Yield
Reporting segment including the projects owned by NRG Yield, Inc.
NRG Yield 2019 Convertible
Notes
$345 million aggregate principal amount of 3.50% Convertible Senior Notes due 2019
issued by NRG Yield, Inc.
NRG Yield 2020 Convertible
Notes
$287.5 million aggregate principal amount of 3.25% Convertible Notes due 2020 issued by
NRG Yield, Inc.
NRG Yield, Inc.
NRG Yield, Inc., the owner of 55.3% of the economic interests of NRG Yield LLC with a
controlling interest, and issuer of publicly held shares of Class A and Class C common stock
NRG Yield Operating 2024
Senior Notes
NRG Yield Operating 2026
Senior Notes
NRG Yield LLC
NSPS
NSR
Nuclear Decommissioning
Trust Fund
Nuclear Waste Policy Act
NYAG
NYISO
NYMEX
NYSERDA
NYSPSC
OCI
PADEP
Peaking
PER
PG&E
Pipeline
Pinnacle
PJM
PM
POJO
PPA
PPTA
PSD
PTC
PUCN
PUCO
NRG Yield Operating LLC's $500 million of 5.375% unsecured senior notes due 2024
NRGY Yield Operating LLC's $350 million of 5.00% unsecured senior notes due 2026
NRG Yield LLC, which owns, through its wholly owned subsidiary, NRG Yield Operating
LLC, all of the assets set forth in the NRG Yield segment
New Source Performance Standards
New Source Review
NRG's nuclear decommissioning trust fund assets, which are for the Company's portion of
the decommissioning of the STP, units 1 & 2
U.S. Nuclear Waste Policy Act of 1982
State of New York Office of Attorney General
New York Independent System Operator
New York Mercantile Exchange
New York State Energy Research and Development Authority
New York State Public Service Commission
Other Comprehensive Income
Pennsylvania Department of Environmental Protection
Units expected to satisfy demand requirements during the periods of greatest or peak load
on the system
Peak Energy Rate
Pacific Gas and Electric Company
Projects that range from identified lead to shortlisted with an offtake, and represents a
lower level of execution certainty
Pinnacle Wind, LLC, the operating subsidiary of Tapestry Wind LLC, which owns the Pinnacle
project
PJM Interconnection, LLC
Particulate Matter
Powerton and Joliet, of which the Company leases 100% interests in Unit 7 and Unit 8 of the
Joliet generating facility and the Powerton generating facility, through Midwest Generation
Power Purchase Agreement
Power Purchase Tolling Agreement
Prevention of Significant Deterioration
Production Tax Credit
Public Utilities Commission of Nevada
Public Utility Commission of Ohio
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PUCT
PUHCA
PURPA
QF
RAPA
RCRA
Public Utility Commission of Texas
Public Utility Holding Company Act of 2005
Public Utility Regulatory Policies Act of 1978
Qualifying Facility under PURPA
Resource Adequacy Purchase Agreement
Resource Conservation and Recovery Act of 1976
Recurring Customers
Customers that subscribe to one or more recurring services, such as electricity, natural gas
and protection products, the majority of which are retail electricity customers in Texas and
the Northeast
Reliant Energy
REMA
Repowering
RESA
Retail
Revolving Credit Facility
RFP
RGGI
RMR
ROFO Agreement
RPM
RPS
RPV Holdco
RSSA
RSU
RTO
Sabine
Reliant Energy Retail Services, LLC
NRG REMA LLC, which in addition to its asset under ownership, leases a 100% interest in
the Shawville generating facility and 16.7% and 16.5% interests in the Keystone and
Conemaugh generating facilities, respectively
Technologies utilized to replace, rebuild, or redevelop major portions of an existing electrical
generating facility to achieve a substantial emissions reduction, increase facility capacity and
improve system efficiency
Retail Electric Supply Association
Reporting segment that includes NRG's residential and small commercial businesses which
go to market as Reliant, NRG and other brands owned by NRG, as well as Business Solutions
Prior to June 30, 2016, the Company's $2.5 billion revolving credit facility due 2018, a
component of the Senior Credit Facility. On June 30, 2016, the Company replaced the Senior
Credit Facility, including the Revolving Credit Facility, with the 2016 Senior Credit Facility
Request For Proposal
Regional Greenhouse Gas Initiative
Reliability Must-Run
Second Amended and Restated Right of First Offer Agreement by and between NRG
Energy, Inc. and NRG Yield, Inc.
Reliability Pricing Model
Renewable Portfolio Standards
NRG RPV Holdco 1 LLC
Reliability Support Service Agreement
Restricted Stock Unit
Regional Transmission Organization
Sabine Cogen, L.P.
SACCWIS
Statewide Advisory Committee on Cooling Water Intake Structures
SCE
SCR
SDG&E
SEC
SECA
Securities Act
Senior Credit Facility
Senior Notes
Southern California Edison Company
Selective Catalytic Reduction Control System
San Diego Gas & Electric
U.S. Securities and Exchange Commission
Seams Elimination Charge/Cost Adjustments/Assignments
The Securities Act of 1933, as amended
Prior to June 30, 2016, the Company's senior secured facility, comprised of the Term Loan
Facility and the Revolving Credit Facility. On June 30, 2016, the Company replaced the Senior
Credit Facility with the 2016 Senior Credit Facility
NRG's $5.4 billion outstanding unsecured senior notes consisting of $398 million of 7.625%
senior notes due 2018, $207 million of 7.875% senior notes due 2021, $992 million of 6.25%
senior notes due 2022, $869 million of 6.625% senior notes due 2023 and $733 million of
6.25% senior notes due 2024, $1.0 billion of the 7.25% senior notes due 2026 and $1.25 billion
of the 6.625% senior notes due 2027
SERC
Southeastern Electric Reliability Council
September 2016 Drop Down
Assets
The CVSR Holdco interest, which was sold to NRG Yield, Inc. on September 1, 2016
8
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Seward
SF6
Shelby
Sherwin
SIFMA
SNF
SO2
S&P
SSR
STP
STPNOC
SunPower
Taloga
TCPA
Term Loan Facility
Texas Genco
Thermal Business
TOU
TSA
TSR
TVA
TWCC
TWh
UNFCCC
UPMC
U.S.
U.S. DOE
Utility Scale Solar
VaR
VCP
VIE
Walnut Creek
WECC
Yield Operating
The Seward Power Generating Station, a 525 MW coal-fired facility in Pennsylvania
Sulfur Hexafluoride
The Shelby County Generating Station, a 352 MW natural gas-fired facility in Illinois
Sherwin Alumina Company
Securities Industry and Financial Markets Association
Spent Nuclear Fuel
Sulfur Dioxide
Standard & Poor's
System Support Resource
South Texas Project — nuclear generating facility located near Bay City, Texas in which
NRG owns a 44% interest
South Texas Project Nuclear Operating Company
SunPower Corporation, Systems
Taloga Wind, LLC, the operating subsidiary of Tapestry Wind LLC, which owns the Taloga
project
Telephone Consumer Protection Act
Prior to June 30, 2016, the Company's $2.0 billion term loan facility due 2018, a component
of the Senior Credit Facility. On and after June 30, 2016, the 2023 Term Loan Facility, a
component of the 2016 Senior Credit Facility
Texas Genco LLC
NRG Yield, Inc.’s thermal business, which consists of thermal infrastructure assets that provide
steam, hot water and/or chilled water, and in some instances electricity, to commercial
businesses, universities, hospitals and governmental units
Time-of-use
Transportation Services Agreement
Total Shareholder Return
Tennessee Valley Authority
Texas Westmoreland Coal Co.
Terawatt Hour
United Nations Framework Convention on Climate Change
University of Pittsburgh Medical Center
United States of America
U.S. Department of Energy
Solar power projects, typically 20 MW or greater in size (on an alternating current basis), that
are interconnected into the transmission or distribution grid to sell power at a wholesale level
Value at Risk
Voluntary Clean-Up Program
Variable Interest Entity
NRG Walnut Creek, LLC, the operating subsidiary of WCEP Holdings, LLC, which owns
the Walnut Creek project
Western Electricity Coordinating Council
NRG Yield Operating LLC
9
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Item 1 — Business
General
PART I
NRG Energy, Inc., or NRG or the Company, is a leading integrated power company built on the strength of the nation's
largest and most diverse competitive electric generation portfolio and leading retail electricity platform. NRG aims to create a
sustainable energy future by producing, selling and delivering electricity and related products and services in major competitive
power markets in the U.S. in a manner that delivers value to all of NRG's stakeholders. The Company owns and operates
approximately 47,000 MW of generation; engages in the trading of wholesale energy, capacity and related products; transacts
in and trades fuel and transportation services; and directly sells energy, services, and innovative, sustainable products and services
to retail customers under the names “NRG”, "Reliant" and other retail brand names owned by NRG. NRG was incorporated as
a Delaware corporation on May 29, 1992.
Strategy
NRG's strategy is to maximize stockholder value through the safe production and sale of reliable and affordable power to
its customers in the markets served by the Company, while positioning the Company to meet the market's increasing demand
for sustainable, low carbon and customized energy solutions for the benefit of the end-use energy consumer. This strategy is
intended to enable the Company to achieve sustainable growth at reasonable margins while de-risking the Company in terms
of reduced and mitigated exposure both to environmental risk and cyclical commodity price risk. At the same time, the Company's
relentless commitment to safety for its employees, customers and partners continues unabated.
To effectuate the Company’s strategy, NRG is focused on: (i) excellence in operating performance of its existing assets
including repowering its power generation assets at premium sites and optimal hedging of generation assets and retail load
operations; (ii) serving the energy needs of end-use residential, commercial and industrial customers in competitive markets
through multiple brands and channels with a variety of retail energy products and services differentiated by innovative features,
premium service, sustainability, and loyalty/affinity programs; (iii) investing in alternative power generation technologies in its
wholesale business, like wind and solar, and deploying innovative energy solutions for consumers within its retail businesses;
and (iv) engaging in a proactive capital allocation plan focused on achieving the regular return of and on stockholder capital
within the dictates of prudent balance sheet management, including pursuing selective acquisitions, joint ventures, divestitures
and investments.
Business Overview
The Company’s core businesses include wholesale conventional generation, retail electricity including personal power
solutions and Business Solutions (included in the Retail segment, effective in January 2017), contracted generation owned by
NRG Yield, Inc. (included in the NRG Yield segment) and renewable utility scale and distributed generation assets that are
constructed or in development and that are not otherwise owned by NRG Yield, Inc. (included in the Renewables segment).
Generation
The Company’s wholesale power generation business includes the Company's wholesale operations including plant
operations, commercial operations, EPC, energy services and other critical related functions. In addition to the traditional
functions, the wholesale power generation business also includes NRG’s conventional distributed generation business, consisting
of reliability, combined heat and power and large-scale distributed generation.
The wholesale generation business is capital-intensive and commodity-driven with numerous industry participants that
compete on the basis of the location of their plants, fuel mix, plant efficiency and the reliability of the services offered. The
Company has one of the largest and most diversified power generation portfolios in the U.S., with approximately 42,000 MW
of fossil fuel and nuclear generation capacity at 85 plants as of December 31, 2016. The Company's power generation assets
are diversified by fuel-type, dispatch level and region, which helps mitigate the risks associated with fuel price volatility and
market demand cycles. NRG's U.S. baseload and intermediate facilities provide the Company with a significant source of cash
flow, while its peaking facilities provide NRG with opportunities to capture significant upside potential that can arise during
periods of high demand, which typically drive higher energy prices. As of December 31, 2016, less than 25% of the Company's
consolidated operating revenues were derived from coal-fired operating assets.
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Wholesale power generation is a regional business that is currently highly fragmented and diverse in terms of industry
structure. As such, there is a wide variation in terms of the capabilities, resources, nature and identities of the companies the
Company competes with depending on the market. Competitors include regulated utilities, municipalities, cooperatives and
other independent power producers, and power marketers or trading companies, including those owned by financial institutions.
Many of the Company's generation assets, however, are located within densely populated areas that tend to have higher wholesale
pricing as a result of relatively favorable local supply-demand balance. The Company has generation assets located in or near
Houston, New York City, Chicago, Washington D.C., New Jersey, southwestern Connecticut, Pittsburgh, Cleveland, and the Los
Angeles, San Diego, and San Francisco metropolitan areas. These facilities, some of which are aging, are often ideally situated
for repowering or the addition of new capacity because their location and existing infrastructure give them significant advantages
over undeveloped sites. The Company believes that its extensive generation portfolio provides many asset optimization
opportunities. During 2016, the Company completed gas conversion projects on facilities totaling more than 2,200 MW. The
Company currently has over 1,000 MW targeted for Repowering initiatives, all of which are under development or construction.
In addition, the Company continuously evaluates opportunities for development of new generation, on both a merchant
and contracted basis. As such, the majority of the Company's current developments are in response to RFPs for new generation
and/or generating capacity backed by contracts with credit-worthy counterparties. Many RFPs are issued by regulated utilities
or electric system operators in response to reliability or renewable power mandates. The Company competes against other power
plant developers when responding to these RFPs. The number and type of competitors vary based on the location, generation
type, project size and counterparty specified in the RFP. Bids are awarded based on many factors including price, location of
existing generation, prior experience developing generation resources similar to that specified in the RFP, and creditworthiness.
Retail
Retail provides energy and related services as well as personal power to Mass Market consumers through various brands
and sales channels across the U.S. Retail also includes C&I customers and other distributed and reliability products which are
within NRG's Business Solutions group. In 2016, Retail delivered approximately 42 TWhs and served approximately 2.8 million
mass Recurring Customers. Retail's results make it the largest competitive Mass Market energy retailer in the U.S. and Texas,
and one of the top six Mass Market energy retailers in the Eastern and Midwestern U.S. The majority of Retail's sales come in
the competitive retail energy markets of Connecticut, Delaware, Illinois, Maryland, Massachusetts, New Jersey, New York,
Ohio, Pennsylvania and Texas, as well as the District of Columbia.
Mass Market consumers make purchase decisions based on a variety of factors, including price, customer service, brand,
product choices and value-added features. These consumers purchase products through a variety of sales channels, including
direct sales, call centers, websites, brokers and brick-and-mortar stores. Through its broad range of service offerings and value
propositions, Retail is able to attract, retain, and increase the value of its customer relationships. Retail's brands are recognized
for exemplary customer service, innovative smart energy and technology product offerings and environmentally friendly
solutions.
Included in Retail is the Company's Business Solutions group, which focuses on providing distributed products and services
as businesses seek greater reliability, cleaner power or other benefits that they cannot obtain from the grid. These solutions
include system power, distributed generation, solar and wind products, carbon management and specialty services, backup
generation, storage and distributed solar, demand response and energy efficiency. In providing on-site energy solutions, the
Company often benefits from its ability to supply energy products from its wholesale generation portfolio to commercial and
industrial retail customers.
The Company also provides energy services including operations, maintenance, technical, development and asset
management services to its own facilities and to external customers.
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Renewables
The Company’s renewables business focuses on the acquisition, development and operation and maintenance of utility
scale wind and solar, community solar and distributed solar generation assets as well as the management and operations of the
renewable generation assets owned by NRG Yield, Inc. A substantial portion of the utility scale wind and solar generation
facilities contained within the Company’s renewables business are subject to the ROFO Agreement between the Company and
NRG Yield, Inc. In 2016, the Company acquired 1,637 MW of utility scale solar and wind projects and 107 MW of distributed
generation and community solar projects that are currently under development or in operation across 12 states. The renewables
business has in-house expertise that covers the full spectrum of development capabilities to execute on utility, distributed
generation, and community solar projects. The asset management and operations and maintenance groups within the renewables
business manage a portfolio of wind and solar assets across 26 states, serving as the primary commercial asset manager on the
vast majority of assets owned by NRG and NRG Yield, Inc. In addition, the operations and maintenance groups self-perform
plant operations on 2,675 MW on the consolidated fleet of assets owned by NRG and NRG Yield, Inc. and 224 MW on assets
owned by third parties.
The utility wind and solar generation business targets strategic partnerships with utilities, municipalities and large national
corporations for offsite wind and solar solutions. The distributed solar business targets partnerships with companies,
municipalities, schools and communities to provide on-site and virtual net metering off-site renewable generation. The
community solar business targets relationships with companies and municipalities as well as residential homeowners to provide
off-site solar generation under community solar regulations and tariffs. In addition to assets in operation, as of December 31,
2016, the Company held a backlog of in-construction, contracted and awarded projects of 543 MW, and a pipeline of 3,268 MW
across the utility and distributed solar renewables markets.
Similar to the wholesale business, the renewables business also competes for new generation opportunities through both
RFPs and bilateral solicitations. The renewables business selects markets and projects to compete based on resource relative to
the value of the power, while seeking to make use of NRG capabilities in a competitive landscape. The number and type of
competitors vary based on location, generation type, project size and counterparty. The renewables business competes with
traditional utilities as well as companies that provide products and services in the downstream solar and wind energy value
chains.
NRG Yield
NRG Yield, Inc. is a publicly-traded, dividend growth-oriented company formed to serve as the primary vehicle through
which NRG owns, operates and acquires diversified contracted renewable and conventional generation and thermal infrastructure
assets. As of December 31, 2016, NRG owns a 55.1% voting interest in the outstanding common stock of NRG Yield, Inc. NRG
Yield, Inc.’s contracted generation portfolio collectively represents 4,563 net MW as of December 31, 2016. Each of the assets
sells substantially all of its output pursuant to long-term, fixed price offtake agreements with creditworthy counterparties. NRG
Yield, Inc. also owns thermal infrastructure assets with an aggregate steam and chilled water capacity of 1,319 net MWt and
electric generation capacity of 123 net MW. These thermal infrastructure assets provide steam, hot water and/or chilled water,
and in some instances electricity, to commercial businesses, universities, hospitals and governmental units in multiple locations,
principally through long-term contracts or pursuant to rates regulated by state utility commissions.
NRG Yield, Inc. provides the Company with a more competitive cost of capital consistent with the lower risk profile of
long-term contracted or regulated assets. As such, NRG believes that it directly benefits from NRG Yield, Inc.’s growth through
its controlling interest in NRG Yield, Inc. and by providing NRG Yield, Inc. a platform of growth through the completion of
future sales of assets pursuant to the ROFO Agreement. The proceeds of such future sales are expected to provide the Company
with a portion of the capital utilized under its capital allocation program.
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GenOn Liquidity
As disclosed in Item 15 - Note 1, Nature of Business, and Note 12, Debt and Capital Leases, to the Consolidated Financial
Statements, $691 million of GenOn's Senior Notes, excluding $8 million of associated premiums, are current within the GenOn
consolidated balance sheet as of December 31, 2016 and are due on June 15, 2017. GenOn's future profitability continues to
be adversely affected by (i) a sustained decline in natural gas prices and its resulting effect on wholesale power prices and
capacity prices, and (ii) the inability of GenOn Mid-Atlantic and REMA to make distributions of cash and certain other restricted
payments to GenOn. Based on current projections, GenOn is not expected to have sufficient liquidity to repay the Senior Notes
due in June 2017. As a result of these factors, there is substantial doubt about GenOn's ability to continue as a going concern.
As a result of the substantial doubt about GenOn’s ability to continue as a going concern, along with additional factors, there is
substantial doubt about certain of GenOn’s subsidiaries’ ability to continue as a going concern.
The Company, GenOn's parent company, has no obligation to provide any financial support to GenOn other than under
the secured intercompany revolving credit agreement between the Company and GenOn and NRG Americas. As of December
31, 2016, $228 million was available to be used by GenOn under the $500 million revolving credit agreement. As controlled
group members, ERISA requires that NRG and GenOn are jointly and severally liable for the NRG Pension Plan for Bargained
Employees and the NRG Pension Plan, including the pension liabilities associated with GenOn employees.
GenOn is currently considering all options available to it, including negotiations with creditors, refinancing the GenOn
Senior Notes, potential sales of certain generating assets as well as the possibility for a need to file for protection under Chapter
11 of the U.S. Bankruptcy Code. During 2016, GenOn appointed two independent directors, retained advisors and established
a separate audit committee as part of this process. Any resolution may have a material impact on the Company's statement of
operations, cash flows and financial position.
As of December 31, 2016, GenOn represents 15.6% of the Company's consolidated total assets, 16.9% of the Company's
consolidated total liabilities and contributed $94 million to the Company's consolidated cash from operations in 2016.
NRG Operations
The NRG businesses described above are all supported through the NRG operational infrastructure, which begins with the
Company’s asset fleet and the associated commercial and retail operations. The images below illustrate NRG's U.S. power
generation and net capacity capabilities as of December 31, 2016, as well as customer, load and regional information surrounding
the operation of NRG’s retail businesses:
13
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 13
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14
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 14
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The following table summarizes NRG's global generation portfolio as of December 31, 2016:
Global Generation Portfolio(a)
(In MW)
Generation
East
West
Other
Generation Type
Natural gas(e)
Coal(f)
Oil(g)
Nuclear
Wind
Utility Scale Solar
Distributed Solar
Total generation capacity(h)
Capacity attributable to
noncontrolling interest(h)
Total net generation capacity
Gulf
Coast
8,635
5,114
—
1,136
—
—
—
8,444
7,465
5,477
—
—
—
—
6,085
—
—
—
—
—
—
14,885
21,386
6,085
—
—
—
14,885
21,386
6,085
Renewables (b)
—
NRG
Yield (c)
1,878
—
—
—
961
987
105
—
190
—
2,005
610
9
2,053
4,692
(638)
1,415
(2,110)
2,582
Corporate(d)
Total
Global
— 25,186
— 13,184
—
—
—
—
114
114
5,667
1,136
2,966
1,597
228
49,964
— (2,748)
114
47,216
144
605
—
—
—
—
—
749
—
749
(a) All Utility Scale Solar and Distributed Solar facilities are described in MW on an alternating current basis. MW figures provided represent nominal
summer net MW capacity of power generated as adjusted for the Company's owned or leased interest excluding capacity from inactive/mothballed units.
(b) Includes Distributed Solar capacity from assets held by DGPV Holdco 1 and DGPV Holdco 2. Excludes 100 MW related to the High Lonesome Mesa
facility, which was transferred to lien holders on March 31, 2016.
(c) Does not include NRG Yield, Inc.'s thermal converted (MWt) capacity, which is part of the NRG Yield operating segment.
(d) The Distributed Solar figure within "Corporate" includes the aggregate production capacity of installed and activated residential solar energy systems.
Also includes capacity from operating portfolios of residential solar assets held by RPV Holdco.
(e) New Castle Units 3, 4, and 5 and Joliet Units 6, 7, and 8, totaling 1,651 MW, were moved to natural gas from coal following the completion of natural
gas addition and conversion projects, respectively, in the second quarter of 2016. Natural gas generation portfolio does not include 878 MW related to
Aurora and 450 MW related to Rockford, which were both sold on July 12, 2016. Natural gas generation portfolio includes 597 MW related to Shawville
which completed a natural gas addition in the second quarter of 2016 and 275 MW related to Choctaw Unit 1 which is in forced outage and expected to
return to service in December 2017.
(f) Coal generation portfolio does not include 94 MW related to Avon Lake 7, which was deactivated in April 2016. New Castle Units 3, 4, and 5 and Joliet
Units 6, 7, and 8, totaling 1,651 MW were moved from coal -to natural gas following completion of natural gas addition and conversion projects, respectively,
in the second quarter of 2016. Does not include 597 MW related to Shawville which completed a natural gas addition project in the second quarter of
2016. Coal generation portfolio does not include 525 MW related to the Seward generating facility and 380 MW related to the Huntley generating facility,
which were sold and deactivated in the first quarter of 2016, respectively.
(g) Oil generation portfolio does not include 104 MW related to the Astoria Oil Turbines which were deactivated in the first quarter of 2016.
(h) NRG Yield's total generation capacity includes 6 MWs for noncontrolling interest for Spring Canyon II and III. NRG Yield's total generation capacity
net of this noncontrolling interest was 4,686 MWs.
NRG's portfolio diversification and commercial operations hedging strategy provides the Company with reliable future
cash flows. NRG has hedged a portion of its coal and nuclear capacity with decreasing hedge levels through 2021. Over a third
of the Company's generation is in markets with forward capacity markets that extend three years into the future. These capacity
revenues not only enhance the reliability of future cash flows but are not correlated to natural gas prices. NRG also has cooperative
load contract obligations in the Gulf Coast region extending through various dates in 2025, which largely hedges a portion of
the Company's generation in this region. In addition, as of December 31, 2016, the Company had purchased fuel forward under
fixed price contracts, with contractually-specified price escalators, for approximately 30% of its expected coal requirement from
2017 to 2021. The Company enters into additional hedges when it deems market conditions to be favorable.
The Company also has the advantage of being able to supply its retail businesses with its own generation, which can reduce
the need to sell and buy power from other institutions and intermediaries, resulting in lower transaction costs and credit exposures.
This combination of generation and retail allows for a reduction in actual and contingent collateral, through offsetting transactions
and by reducing the need to hedge the retail power supply through third parties.
The generation and retail combination also provides stability in cash flows, as changes in commodity prices generally have
offsetting impacts between the two businesses. The offsetting nature of generation and retail, in relation to changes in market
prices, is an integral part of NRG's goal of providing a reliable source of future cash flow for the Company.
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NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 15
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When developing new renewable and conventional power generation facilities, NRG typically secures long-term PPAs,
which insulate the Company from commodity market volatility and provide future cash flow stability. These PPAs are typically
contracted with high credit quality local utilities and typically have durations from 10 years to as much as 25 years.
Commercial Operations Overview
NRG seeks to maximize profitability and manage cash flow volatility through the marketing, trading and sale of energy,
capacity and ancillary services into spot, intermediate and long-term markets and through the active management and trading
of emissions allowances, fuel supplies and transportation-related services. The Company's principal objectives are the realization
of the full market value of its asset base, including the capture of its extrinsic value, the management and mitigation of commodity
market risk and the reduction of cash flow volatility over time.
NRG enters into power sales and hedging arrangements via a wide range of products and contracts, including PPAs, fuel
supply contracts, capacity auctions, natural gas derivative instruments and other financial instruments. In addition, because
changes in power prices in the markets where NRG operates are generally correlated to changes in natural gas prices, NRG uses
hedging strategies that may include power and natural gas forward sales contracts to manage the commodity price risk primarily
associated with the Company's coal and nuclear generation assets. The objective of these hedging strategies is to stabilize the
cash flow generated by NRG's portfolio of assets.
NRG also trades electric power, natural gas and related commodity and financial products, including forwards, futures,
options and swaps, through its ownership of BETM, which is also an energy management service provider for primarily third-
party generating assets. Certain other NRG entities trade to a lesser extent, utilizing similar products as well as oil and weather
products. The Company seeks to generate profits from volatility in the price of electricity, capacity, fuels and transmission
congestion by buying and selling contracts in wholesale markets under guidelines approved by the Company's risk management
committee.
Coal and Nuclear Operations
The following table summarizes NRG's U.S. coal and nuclear capacity and the corresponding revenues and average natural
gas prices and positions resulting from coal and nuclear hedge agreements extending beyond December 31, 2016 and through
2020 for the Company's Gulf Coast region:
Gulf Coast
Net Coal and Nuclear Capacity (MW) (a)
Forecasted Coal and Nuclear Capacity (MW) (b)
Total Coal and Nuclear Sales (GWh) (c)
Percentage Coal and Nuclear Capacity Sold Forward (d)
Total Forward Hedged Revenues (e)
Weighted Average Hedged Price ($ per MWh) (e)
Average Equivalent Natural Gas Price ($ per MMBtu) (e)
Gross Margin Sensitivities
2017
2018
2019
2020
Annual
Average for
2017-2020
(Dollars in millions unless otherwise stated)
6,250
4,959
6,250
4,411
39,002
19,624
6,250
4,119
8,471
6,250
4,198
7,653
6,250
4,422
18,687
90%
51%
23%
21%
46%
$ 1,429
$ 36.63
$ 3.68
$
$
$
$
747
$ 429
$ 406
38.07
$50.68
$53.07
3.91
$ 4.83
$ 4.99
76
$ 124
$ 147
$
$
$
$
$
$
$
—
—
—
—
—
—
—
Gas Price Sensitivity Up $0.50/MMBtu on Coal and Nuclear Units
$
1
Gas Price Sensitivity Down $0.50/MMBtu on Coal and Nuclear Units
$ — $
(69)
$ (113)
$ (124)
Heat Rate Sensitivity Up 1 MMBtu/MWh on Coal and Nuclear Units
Heat Rate Sensitivity Down 1 MMBtu/MWh on Coal and Nuclear Units
$
$
53
(36)
$
$
100
(79)
$
$
91
(71)
$
$
96
(77)
(a) Net coal and nuclear capacity represents nominal summer net MW capacity of power generated as adjusted for the Company's ownership position excluding
capacity from inactive/mothballed units, see Item 2 - Properties for units scheduled to be deactivated.
(b) Forecasted generation dispatch output (MWh) based on forward price curves as of December 31, 2016, which is then divided by number of hours in a
(c)
given year to arrive at MW capacity. The dispatch takes into account planned and unplanned outage assumptions.
Includes amounts under power sales contracts and natural gas hedges. The forward natural gas quantities are reflected in equivalent GWh based on forward
market implied heat rate as of December 31, 2016, and then combined with power sales to arrive at equivalent GWh hedged. The coal and nuclear sales
include swaps and delta of options sold which is subject to change. For detailed information on the Company's hedging methodology through use of
derivative instruments, see discussion in Item 15 - Note 5, Accounting for Derivative Instruments and Hedging Activities, to the Consolidated Financial
Statements. Includes inter-segment sales from the Company's wholesale power generation business to the retail business.
(d) Percentage hedged is based on total coal and nuclear sales as described in (c) above divided by the forecasted coal and nuclear capacity.
(e) Represents U.S. coal and nuclear sales, including energy revenue and demand charges.
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The following table summarizes NRG's U.S. coal capacity and the corresponding revenues and average natural gas prices
and positions resulting from coal hedge agreements extending beyond December 31, 2016 and through 2020 for the East region:
East
2017
2018
2019
2020
Annual
Average for
2017-2020
Net Coal Capacity (MW) (a)
Forecasted Coal Capacity (MW) (b)
Total Coal Sales (GWh) (c)
Percentage Coal Capacity Sold Forward (d)
Total Forward Hedged Revenues (e)
Weighted Average Hedged Price ($ per MWh) (e)
Average Equivalent Natural Gas Price ($ per MMBtu) (e)
Gross Margin Sensitivities
Gas Price Sensitivity Up $0.50/MMBtu on Coal Units
Gas Price Sensitivity Down $0.50/MMBtu on Coal Units
Heat Rate Sensitivity Up 1 MMBtu/MWh on Coal Units
Heat Rate Sensitivity Down 1 MMBtu/MWh on Coal Units
(Dollars in millions unless otherwise stated)
7,465
3,688
31,905
7,465
3,200
5,265
7,465
2,483
455
99%
19%
2%
7,167
2,141
81
—%
7,391
2,878
9,427
30%
$ 1,162
$
175
$
16
$
2
$
$ 36.41
$ 33.27
$ — $ — $
$
3.69
$
3.29
$ — $ — $
$
$
$
$
64
(35)
64
(35)
$
$
$
$
206
(162)
119
(99)
$
$
$
$
230
(159)
121
(95)
$
$
$
$
215
(140)
110
(86)
$
$
$
$
—
—
—
—
—
—
—
(a) Net coal capacity represents nominal summer net MW capacity of power generated as adjusted for the Company's ownership position excluding capacity
from inactive/mothballed units, see Item 2 - Properties for units scheduled to be deactivated.
(b) Forecasted generation dispatch output (MWh) based on forward price curves as of December 31, 2016, which is then divided by number of hours in a
given year to arrive at MW capacity. The dispatch takes into account planned and unplanned outage assumptions.
(c)
Includes amounts under power sales contracts and natural gas hedges. The forward natural gas quantities are reflected in equivalent GWh based on forward
market implied heat rate as of December 31, 2016, and then combined with power sales to arrive at equivalent GWh hedged. The coal sales include swaps
and delta of options sold which is subject to change. For detailed information on the Company's hedging methodology through use of derivative instruments,
see discussion in Item 15 - Note 5, Accounting for Derivative Instruments and Hedging Activities, to the Consolidated Financial Statements. Includes
inter-segment sales from the Company's wholesale power generation business to the retail business.
(d) Percentage hedged is based on total coal sales as described in (c) above divided by the forecasted coal capacity.
(e) Represents U.S. coal sales, including energy revenue and demand charges, excluding revenues derived from capacity auctions.
Capacity and Other Contracted Revenue Sources
NRG's revenues and cash flows benefit from capacity/demand payments and other contracted revenue sources, originating
from market clearing capacity prices, Resource Adequacy contracts, tolling arrangements, PPAs and other long-term contractual
arrangements:
• Capacity auctions — The Company's largest sources of capacity revenues are capacity auctions in PJM, ISO-NE, and
NYISO. Both ISO-NE and PJM operate a pay-for-performance model where capacity payments are modified based
on real-time performance, where NRG's actual revenues will be the combination of revenues based on the cleared
auction MWs plus the net of any over- and under-performance of NRG's fleet. In addition, MISO has an annual auction,
known as the Planning Resource Auction, or PRA. The Gulf Coast assets situated in the MISO market may participate
in this auction. Recent changes have made the decision to import external capacity into the PJM market more
complicated, and the Company is evaluating the feasibility of continuing to import.
• Resource Adequacy and bilateral contracts — In California, there is a resource adequacy requirement that is satisfied
through bilateral contracts. The Company's newer generation in California is contracted under long-term tolling
agreements. Certain other sites in California have short-term tolling agreements or resource adequacy contracts. In
addition, NRG earns demand payments from its long-term full-requirements load contracts with nine Louisiana
distribution cooperatives, which expire in 2025. NRG also had full requirements contracts in PJM in 2016. Demand
payments from the current long-term contracts are tied to summer peak demand and provide a mechanism for recovering
a portion of the costs associated with new or changed environmental laws or regulations. In Texas, capacity and
contracted revenues are through bilateral contracts with load serving entities.
•
Long-term PPAs — Output from the majority of renewable energy assets and certain conventional energy plants is sold
through long-term PPAs and tolling agreements to a single counterparty, which is often a utility or commercial customer.
17
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Fuel Supply and Transportation
NRG's fuel requirements consist of various forms of fossil fuel (including coal, natural gas and oil) and nuclear fuel. The
prices of fossil fuels are highly volatile. The Company obtains its fossil fuels from multiple suppliers and through multiple
transporters. Although availability is generally not an issue, localized shortages, transportation availability, delays arising from
extreme weather conditions and supplier financial stability issues can and do occur. The preceding factors related to the sources
and availability of raw materials are fairly uniform across the Company's business segments and fuel products used.
Coal — The Company believes it is adequately hedged, using forward coal supply agreements, for its domestic coal
consumption for 2017. NRG actively manages its coal requirements based on forecasted generation, market volatility and its
inventory on site. As of December 31, 2016, NRG had purchased forward contracts to provide fuel for approximately 27% of
the Company's expected requirements from 2017 through 2021, including expected coal inventory draw down. NRG purchased
approximately 25 million tons of coal in 2016, of which 84% was Powder River Basin coal and lignite. For fuel transport, NRG
has entered into various rail and barge transportation and rail car lease agreements with varying tenures that provide for most
of the Company's transportation requirements of Powder River Basin coal for the next 5 years and for all of the Company's
transportation requirements of Appalachian and Colorado coal for the next two years.
The following table shows the percentage of the Company's coal requirements from 2017 through 2021 that have been
purchased forward as of December 31, 2016:
2017
2018
2019
2020
2021
Percentage of
Company's
Requirement (a)
95%
41%
—%
—%
—%
(a)
Includes expected coal inventory draw down.
Natural Gas — NRG operates a fleet of mid-merit and peaking natural gas plants across all its U.S. wholesale regions.
Fuel needs are managed on a spot basis, especially for peaking assets, as the Company does not believe it is prudent to forward
purchase natural gas for these types of units, the dispatch of which is highly unpredictable. The Company contracts for natural
gas storage services as well as natural gas transportation services to deliver natural gas when needed.
Nuclear Fuel — STP's owners satisfy their fuel supply requirements by: (i) acquiring uranium concentrates and contracting
for conversion of the uranium concentrates into uranium hexafluoride; (ii) contracting for enrichment of uranium hexafluoride;
and (iii) contracting for fabrication of nuclear fuel assemblies. Through its proportionate participation in STPNOC, which is the
NRC-licensed operator of STP and responsible for all aspects of fuel procurement, NRG is party to a number of long-term
forward purchase contracts with many of the world's largest suppliers covering STP's requirements for uranium concentrates
with only approximately 25% of STP's requirements outstanding for the duration of the operating license. Similarly, NRG is
party to long-term contracts to procure STP's requirements for conversion and enrichment services and fuel fabrication for the
life of the operating license.
Retail Operations
In 2016, NRG's retail businesses sold electricity to residential, commercial and industrial consumers at either fixed, indexed
or variable prices. Residential and smaller commercial consumers typically contract for terms ranging from one month to two
years while industrial contracts are often between one year and five years in length. In 2016, NRG's retail businesses sold
approximately 61 TWhs of electricity. In any given year, the quantity of TWhs sold can be affected by weather, economic
conditions and competition. The wholesale supply is typically purchased as the load is contracted from a combination of NRG's
wholesale portfolio and other third parties. The ability to choose supply from the market or the Company's portfolio allows for
an optimal combination to support and stabilize retail margins.
18
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 18
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Operational Statistics
The following are industry statistics for the Company's fossil and nuclear plants, as defined by the NERC, and are more
fully described below:
Annual Equivalent Availability Factor, or EAF — Measures the percentage of maximum generation available over time
as the fraction of net maximum generation that could be provided over a defined period of time after all types of outages and
deratings, including seasonal deratings, are taken into account.
Net Heat Rate — The net heat rate represents the total amount of fuel in BTU required to generate one net kWh provided.
Net Capacity Factor — The net amount of electricity that a generating unit produces over a period of time divided by the
net amount of electricity it could have produced if it had run at full power over that time period. The net amount of electricity
produced is the total amount of electricity generated minus the amount of electricity used during generation.
The tables below present these performance metrics for the Company's U.S. power generation portfolio, including leased
facilities and those accounted for through equity method investments, for the years ended December 31, 2016 and 2015:
Year Ended December 31, 2016
Fossil and Nuclear Plants
Net Owned
Capacity (MW)
Net Generation
(MWh)
(In thousands)
Annual Equivalent
Availability Factor
Average Net Heat
Rate BTU/kWh
Net Capacity
Factor
14,879
21,386
6,085
2,053
4,692
51,100
35,423
4,369
3,883
11,174
86.9%
79.5
88.7
96.8
97.9
9,846
10,397
8,292
—
8,859
39.2%
18.4
8.3
40.1
25.5
Year Ended December 31, 2015
Fossil and Nuclear Plants
Net Owned
Capacity (MW)
Net Generation
(MWh)
(In thousands)
Annual Equivalent
Availability Factor
Average Net Heat
Rate BTU/kWh
Net Capacity
Factor
14,941
23,579
6,085
1,966
4,565
57,678
46,286
4,542
3,790
11,142
85.7%
84.0
86.4
95.0
95.7
9,651
10,477
9,189
—
8,651
44.4%
21.6
8.1
39.4
22.9
Generation
Gulf Coast
East
West
Renewables
NRG Yield (a)
Generation
Gulf Coast
East
West
Renewables
NRG Yield (a)
(a) NRG Yield includes thermal generation.
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The generation performance by region for the three years ended December 31, 2016, 2015, and 2014, is shown below:
Generation
Gulf Coast
Coal
Gas
Nuclear (a)
Total Gulf Coast
East
Coal
Oil
Gas
Total East
West
Gas
Total West
Renewables
Solar
Wind
Total Renewables
NRG Yield
Solar
Wind
Gas and Dual-Fuel
Total NRG Yield (b)
(a) MWh information reflects the Company's undivided interest in total MWh generated by STP.
(b) Total NRG Yield includes thermal heating and chilled water generation.
2016
Net Generation
2015
(In thousands of MWh)
2014
24,620
16,921
9,559
51,100
24,614
1,432
9,377
35,423
4,369
4,369
1,690
2,193
3,883
1,226
6,010
3,938
11,174
29,301
19,804
8,573
57,678
36,245
1,583
8,458
46,286
4,542
4,542
1,509
2,281
3,790
1,212
5,199
4,731
11,142
36,794
13,967
9,111
59,872
42,939
1,269
6,983
51,191
4,241
4,241
1,220
2,125
3,345
1,250
3,427
4,396
9,073
20
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 20
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Segment Review
The Company's segment structure reflects how management currently makes financial decisions and allocates resources.
During January 2017, the Company's businesses are segregated as follows: Generation (previously named Generation/Business),
which includes generation, international and BETM (previously part of Corporate); Retail (previously named Retail Mass) which
includes Mass customers (previously NRG Home Retail), and Business Solutions, which includes C&I customers and other
distributed and reliability products (previously in the Generation segment); Renewables (previously named NRG Renew), which
includes solar and wind assets, excluding those in NRG Yield; NRG Yield; and corporate activities. The Company's corporate
segment include residential solar (previously part of NRG Home) and electric vehicle services. During 2016, the Company
began reporting the results of its residential solar business in its corporate segment and its international business in its Generation
segment. Intersegment sales are accounted for at market. The Company has recast data from prior periods to reflect changes in
reportable segments to conform to the current year presentation. NRG Yield includes certain of the Company's contracted
generation assets. On September 1, 2016, NRG Yield acquired the remaining 51.05% interest in CVSR Holdco LLC, which
indirectly owns the CVSR solar facility, from the Company. This acquisition was accounted for as transfers of entities under
common control and accordingly, all historical periods have been recast to reflect this change.
Revenues
The following table contains a summary of NRG's operating revenues by segment for the years ended December 31, 2016,
2015 and 2014, as discussed in Item 15 — Note 18, Segment Reporting, to the consolidated financial statements. Refer to that
footnote for additional financial information about NRG's business segments and geographic areas, including a profit measure
and total assets. In addition, refer to Item 2 — Properties, to the consolidated financial statements for information about facilities
in each of NRG's business segments.
Year Ended December 31, 2016
Energy
Revenues
Capacity
Revenues
Retail
Revenues
Mark-to-
Market
Activities
Contract
Amortization
Other
Revenues(a)
Total
Operating
Revenues(b)
Generation
Retail
Renewables
NRG Yield
Corporate and Eliminations (b)
Total
5,679
6,336
417
1,021
(1,102)
$ 12,351
(a) Primarily consists of revenues generated by the Thermal business (NRG Yield segment), operation and maintenance revenues and unrealized trading
$ 4,506
2
375
575
(989)
$ 4,469
$ 1,565
82
—
345
(22)
$ 1,970
15
(1)
(1)
(68)
—
(55) $
6,239
—
—
35
6,274
380
15
49
169
(55)
558
— $
$
$
$
$
$
(In millions)
(787) $
(1)
(6)
—
(71)
(865) $
activities, primarily at BETM (Generation segment).
(b) Energy revenues include inter-segment sales primarily between Generation and Retail.
Year Ended December 31, 2015
Energy
Revenues
Capacity
Revenues
Retail
Revenues
Mark-to-
Market
Activities
Contract
Amortization
Other
Revenues(c)
Total
Operating
Revenues(d)
Generation
Retail
Renewables
NRG Yield
Corporate and Eliminations (d)
Total
7,546
6,914
392
953
(1,131)
$ 14,674
(c) Primarily consists of revenues generated by the Thermal business (NRG Yield segment), operation and maintenance revenues and unrealized trading
$ 5,716
—
359
489
(1,070)
$ 5,494
$ 1,831
116
—
341
(14)
$ 2,274
15
—
(1)
(54)
—
(40) $
6,778
—
—
28
6,806
238
16
37
179
(86)
384
— $
$
$
$
$
$
(In millions)
(254) $
4
(3)
(2)
11
(244) $
activities, primarily at BETM (Generation segment).
(d) Energy revenues include inter-segment sales primarily between Generation and Retail.
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Year Ended December 31, 2014
Energy
Revenues
Capacity
Revenues
Retail
Revenues(f)
Mark-to-
Market
Activities
Contract
Amortization
Other
Revenues(e)
Total
Operating
Revenues(f)
9,288
Generation
7,393
Retail
344
Renewables
828
NRG Yield
Corporate and Eliminations(f)
(1,985)
$ 15,868
Total
(e) Primarily consists of revenues generated by the Thermal business (NRG Yield segment), operation and maintenance revenues and unrealized trading
$ 6,601
—
302
352
(1,833)
$ 5,422
$ 1,786
1
1
321
(22)
$ 2,087
16
1
(1)
(29)
—
(13) $
7,372
—
—
4
7,376
350
19
38
182
(94)
495
— $
$
$
$
$
$
$
(In millions)
535
$
—
4
2
(40)
501
activities, primarily at BETM (Generation segment).
(f) Energy revenues include inter-segment sales primarily between Generation and Retail.
Seasonality and Price Volatility
Annual and quarterly operating results of the Company's wholesale power generation segments can be significantly affected
by weather, including wind resource availability, and energy commodity price volatility. Significant other events, such as the
demand for natural gas, interruptions in fuel supply infrastructure and relative levels of hydroelectric capacity can increase
seasonal fuel and power price volatility. The preceding factors related to seasonality and price volatility are fairly uniform across
the Company's wholesale generation business segments.
The sale of electric power to retail customers is also a seasonal business with the demand for power generally peaking
during the summer months. As a result, net working capital requirements for the Company's retail operations generally increase
during summer months along with the higher revenues, and then decline during off-peak months. Weather may impact operating
results and extreme weather conditions could materially affect results of operations. The rates charged to retail customers may
be impacted by fluctuations in total power prices and market dynamics like the price of natural gas, transmission constraints,
competitor actions, and changes in market heat rates.
Market Framework
Organized Energy Markets in CAISO, ERCOT, ISO-NE, MISO, NYISO and PJM
The majority of NRG's fleet operates in one of the organized energy markets, known as RTOs or ISOs. Each organized
market administers day-ahead and real-time centralized bid-based energy and ancillary services markets pursuant to tariffs
approved by FERC, or in the case of ERCOT, market rules approved by the PUCT. These tariffs and rules dictate how the energy
markets operate, how market participants make bilateral sales with one another, and how entities with market-based rates are
compensated. Established prices reflect the value of energy at the specific location and time it is delivered, which is known as
the Locational Marginal Price, or LMP. Each market is subject to market mitigation measures designed to limit the exercise of
locational market power. These market structures facilitate NRG's sale of power and capacity products at market-based rates.
Other than ERCOT, each of the ISO regions also operates a capacity or resource adequacy market that provides an opportunity
for generating and demand response resources to earn revenues to offset their fixed costs that are not recovered in the energy
and ancillary services markets. The ISOs are also responsible for transmission planning and operations.
Gulf Coast
NRG's Gulf Coast wholesale power generation business is principally located in the ERCOT and MISO markets. The
ERCOT market is one of the nation's largest and historically fastest growing power markets. ERCOT is an energy only market,
and has implemented market rule changes to provide pricing more reflective of higher energy value when operating reserves
are scarce or constrained. NRG also operates generation assets that are principally located within MISO, participating in the
MISO day-ahead and real-time energy and ancillary services markets. Additionally, MISO employs a one-year forward resource
adequacy construct, in which capacity resources can compete for fixed cost recovery in the capacity auction. NRG continues
to provide full requirements service to LSEs, including cooperatives and municipalities in the MISO region.
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East
NRG's generation and demand response assets located in the East region of the U.S. are within the control areas of ISO-
NE, NYISO and PJM. Each of the market regions in the East region provides for robust competition in the day-ahead and real-
time energy and ancillary services markets. Additionally, the East region receives a significant portion of its revenues from
capacity markets in ISO-NE, NYISO and PJM. PJM and ISO-NE use a three-year forward capacity auction construct, while
NYISO uses a month-ahead capacity auction construct. Capacity market prices are sensitive to design parameters, as well as
additions of new capacity. Both ISO-NE and PJM operate a pay-for-performance model where capacity payments are modified
based on real-time generator performance. In such markets, NRG’s actual revenues will be the combination of cleared auction
prices times the quantity of MWs cleared, plus the net of any over-performance “bonus payments” and any under-performance
charges. In both markets, bidding rules allow for the incorporation of a risk premium into generator bids.
West
NRG operates a fleet of natural gas fired facilities located entirely within the CAISO footprint. The CAISO operates day-
ahead and real-time locational markets for energy and ancillary services, while managing congestion primarily through nodal
prices. The CAISO system facilitates NRG's sale of power, ancillary services and capacity products at market-based rates, either
within the CAISO's centralized energy and ancillary service markets or bilaterally pursuant to tolling arrangements or other
capacity sales with California's LSEs. The CPUC also determines capacity requirements for LSEs and for specified local areas
utilizing inputs from the CAISO. Both the CAISO and CPUC rules require LSEs to contract with sufficient generation resources
in order to maintain minimum levels of generation within defined local areas. Additionally, the CAISO has independent authority
to contract with needed resources under certain circumstances, typically either when LSEs have failed to procure sufficient
resources, or system conditions change unexpectedly. NRG is also pursuing Repowering projects at several southern California
sites pursuant to long-term contracts.
Renewables
NRG operates a fleet of utility scale and distributed renewable generating assets across the U.S. Many states have
implemented their own renewable portfolio standards requiring LSEs to provide a given percentage of their energy sales from
renewable resources. As a result, a number of LSEs have entered into long-term PPAs with the NRG's utility scale renewable
generating facilities. There are examples of states increasing their RPS from initially stated levels, such as California’s recently
enacted 50% RPS by 2030 and Hawaii’s goal of achieving 100% renewables by 2045. In addition, given the cost competitiveness
of renewables, LSEs are procuring renewables in excess of their RPS obligations. In December 2015, the U.S. Congress extended
the 30% solar ITC so that projects which begin construction in 2016 through 2019 will continue to qualify for the 30% ITC.
Projects beginning construction in 2020 and 2021 will be eligible for the ITC at the rates of 26% and 22%, respectively. The
same legislation also extended the 10-year wind PTC for wind projects which begin construction in years 2016 through
2019. Wind projects which begin construction in the years 2017, 2018 and 2019 are eligible for PTC at 80%, 60% and 40% of
the statutory rate per kWh, respectively.
Retail
NRG's retail businesses sell energy and related services as well as portable power and battery solutions to customers across
the country. In most of the states that have introduced retail competition, NRG's retail businesses competitively offer retail power,
natural gas, portable power or other value-enhancing services to end-use customers. Each retail choice state establishes its own
retail competition laws and regulations, and the specific operational, licensing, and compliance requirements vary on a state-
by-state basis. In the East markets, incumbent utilities currently provide default service and as a result typically serve a majority
of residential customers. In Texas, NRG’s retail business activities are subject to standards and regulations adopted by the PUCT
and ERCOT, including the requirement for retailers to be certified by the PUCT in order to contract with end-users to sell
electricity. A majority of the retail load is in the ERCOT market region and is served by competitive retail suppliers, except
certain areas that are served by municipal utilities and electric cooperatives that have not opted into competitive choice. Regulated
terms and conditions of default service, as well as any movement to replace default service with competitive services, as is done
in ERCOT, can affect customer participation in retail competition. The attractiveness of NRG's retail offerings in each state
may be impacted by the rules, regulations, market structure and communication requirements from public utility commissions
across the country.
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Regulatory Matters
As owners of power plants and participants in wholesale and retail energy markets, certain NRG entities are subject to
regulation by various federal and state government agencies. These include the CFTC, FERC, NRC and the PUCT, as well as
other public utility commissions in certain states where NRG's generating, thermal, or distributed generation assets are located.
In addition, NRG is subject to the market rules, procedures and protocols of the various ISO and RTO markets in which it
participates. Likewise, certain NRG entities participating in the retail markets are subject to rules and regulations established
by the states in which NRG entities are licensed to sell at retail. NRG must also comply with the mandatory reliability requirements
imposed by NERC and the regional reliability entities in the regions where NRG operates.
NRG's operations within the ERCOT footprint are not subject to rate regulation by FERC, as they are deemed to operate
solely within the ERCOT market and not in interstate commerce. These operations are subject to regulation by the PUCT, as
well as to regulation by the NRC with respect to NRG's ownership interest in STP.
Federal Regulation
CFTC
The CFTC, among other things, regulates the trading of swaps, futures and many commodities under the Commodity
Exchange Act, or CEA. Since 2010, there have been a number of reforms to the regulation of the derivatives markets, both in
the U.S. and internationally. These regulations, and any further changes thereto, or adoption of additional regulations, including
any regulations relating to position limits on futures and other derivatives or margin for derivatives, could negatively impact
NRG’s ability to hedge its portfolio in an efficient, cost-effective manner by, among other things, potentially decreasing liquidity
in the forward commodity and derivatives markets or limiting NRG’s ability to utilize non-cash collateral for derivatives
transactions.
FERC
FERC, among other things, regulates the transmission and the wholesale sale by public utilities of electricity in interstate
commerce under the authority of the FPA. Under existing regulations, FERC determines whether an entity owning a generation
facility is an EWG as defined in the PUHCA. FERC also determines whether a generation facility meets the ownership and
technical criteria of a QF under PURPA. The transmission of electric energy occurring wholly within ERCOT is not subject to
FERC's rate jurisdiction under Sections 203 or 205 of the FPA. Each of NRG's non-ERCOT U.S. generating facilities either
qualifies as a QF, or the subsidiary owning the facility qualifies as an EWG.
Public utilities are required to obtain FERC's acceptance, pursuant to Section 205 of the FPA, of their rate schedules for
the wholesale sale of electricity. Generally all of NRG's non-QF generating and power marketing entities located outside of
ERCOT make sales of electricity pursuant to market-based rates, as opposed to traditional cost-of-service regulated rates.
Current Administration and Changeover at FERC — FERC is currently without a quorum and cannot issue orders in
contested proceedings until a new Commissioner is appointed. FERC’s day-to-day work can continue through authority that
has been delegated to FERC Staff. With a new administration and three vacant positions at FERC, NRG’s business may be
affected because its generation fleet is subject to changes in FERC regulatory policy.
State Regulation
In Texas, NRG's operations within the ERCOT footprint are not subject to rate regulation by FERC, as they are deemed
to operate solely within the ERCOT market and not in interstate commerce. These operations are subject to regulation by the
PUCT, as well as to regulation by the NRC with respect to NRG's ownership interest in STP.
In New York, NRG's generation subsidiaries are electric corporations subject to "lightened" regulation by the NYSPSC.
As such, the NYSPSC exercises its jurisdictional authority over certain non-rate aspects of the facilities, including safety,
retirements, and the issuance of debt secured by recourse to NRG's generation assets located in New York. NRG currently has
blanket authorization from the NYSPSC for the issuance of $15 billion of debt. Additionally, the NYSPSC has provided GenOn
Bowline with a separate debt authorization of $1.488 billion.
In California, NRG's generation subsidiaries are subject to regulation by the CPUC with regard to certain non-rate aspects
of the facilities, including health and safety, outage reporting and other aspects of the facilities' operations. Additionally, the
competitiveness of many of NRG's new businesses depends on state competition and other policies.
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Nuclear Operations
NRG South Texas LP is a 44% owner of a joint undivided interest in STP, the other owners of STP being the City of Austin,
Texas (16%) and the City Public Service Board of San Antonio (40%). STP Nuclear Operating Company, or STPNOC, was
founded by the then-owners in 1997 to operate the plant and it is the operator licensee and holder of the Facility Operating
Licenses NPF-76 and NPF-80. STPNOC is a nonstock, nonprofit, nonmember corporation. Each owner of STP appoints a board
member (and the three directors then choose a fourth director who also serves as the chief executive officer of STPNOC). A
participation agreement establishes an owners' committee with voting interests consistent with ownership interests.
As a holder of an ownership interest in STP, NRG South Texas LP is an NRC licensee and is subject to NRC regulation.
The NRC license gives the Company the right only to possess an interest in STP but not to operate it. As a possession-only
licensee, i.e., non-operating co-owner, the NRC's regulation of NRG South Texas LP is primarily focused on the Company's
ability to meet its financial and decommissioning funding assurance obligations. In connection with the NRC license, the
Company and its subsidiaries have a support agreement to provide up to $120 million to support operations at STP.
Decommissioning Trusts — Upon expiration of the operating licenses for the two generating units at STP, currently
scheduled for 2027 and 2028, the co-owners of STP are required under federal law to decontaminate and decommission the STP
facility. Under NRC regulations, a power reactor licensee generally must pre-fund the full amount of its estimated NRC
decommissioning obligations unless it is a rate-regulated utility, or a state or municipal entity that sets its own rates, or has the
benefit of a state-mandated non-bypassable charge available to periodically fund the decommissioning trust such that the trust,
plus allowable earnings, will equal the estimated decommissioning obligations by the time the decommissioning is expected to
begin.
NRG South Texas LP, through its 44% ownership interest, is the beneficiary of decommissioning trusts that have been
established to provide funding for decontamination and decommissioning of STP. CenterPoint and AEP collect, through rates
or other authorized charges to their electric utility customers, amounts designated for funding NRG South Texas LP's portion
of the decommissioning of the facility. See also Item 15 — Note 6, Nuclear Decommissioning Trust Fund, to the Consolidated
Financial Statements for additional discussion.
In the event that the funds from the trusts are ultimately determined to be inadequate to decommission the STP facilities,
the original owners of the Company's STP interests, CenterPoint and AEP, each will be required to collect, through their PUCT-
authorized non-bypassable rates or other charges to customers, additional amounts required to fund NRG South Texas LP's
obligations relating to the decommissioning of the facility. Following the completion of the decommissioning, if surplus funds
remain in the decommissioning trusts, those excesses will be refunded to the respective rate payers of CenterPoint or AEP, or
their successors.
STP License Amendment — STP Unit 1 was operating with a single-cycle license amendment issued on December 11,
2015 after a control rod was determined to be inoperable following a scheduled refueling and maintenance outage. The approved
license amendment to support STP Unit 1 operation with the inoperable control rod and the associated control rod drive shaft
removed was granted by the NRC on December 21, 2016.
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Regional Regulatory Developments
NRG is affected by rule/tariff changes that occur in the ISO regions. For further discussion on regulatory developments
see Item 15 — Note 23, Regulatory Matters, to the Consolidated Financial Statements.
East Region
PJM
2019/2020 PJM Auction Results — On May 24, 2016, PJM announced the results of its 2019/2020 base residual auction.
NRG cleared approximately 11,155 MW of Capacity Performance product and 371 MW of Base Capacity product in the
2019/2020 base residual auction. NRG’s expected capacity revenues from the base residual auction for the 2019/2020 delivery
year are approximately $569 million.
The table below provides a detailed description of NRG’s 2019/2020 base residual auction results from May 24, 2016:
Base Capacity Product
Capacity Performance Product
COMED
EMAAC
MAAC
RTO
Total
Zone
Cleared Capacity (MW)(a)(b)
65
103
10
193
371
Price
($/MW-day)
Cleared Capacity (MW)(a)(b)
Price
($/MW-day)
$
$
$
$
182.77
99.77
80.00
80.00
3,738
895
5,972
550
11,155
$
$
$
$
202.77
119.77
100.00
100.00
(a) Includes imports. Does not include capacity sold by NRG Curtailment Specialists. Excludes cleared capacity related to Aurora and Rockford, the
sales of which were completed on July 12, 2016.
(b) Includes GenOn.
PJM Capacity Performance Appeals — On or about July 8, 2016, four petitions were filed at the D.C. Circuit seeking
review of the FERC orders approving PJM’s Capacity Performance revisions to its forward capacity market after motions for
rehearing at FERC were denied on May 10, 2016. NRG intervened in these matters on July 29, 2016. On December 9, 2016,
NRG, along with other generators and industry trade groups, filed a joint brief in support of FERC's decision. Briefing is complete
and oral argument occurred in February 2017. This case governs capacity revenues already received by NRG, as well as the
revenues for forward periods.
PJM Seasonal Capacity Proceeding — On November 17, 2016, PJM proposed to enhance the ability of capacity storage
resources, intermittent resources, demand response, energy efficiency, and environmentally limited resources, or collectively
the seasonal capacity performance resources, to participate in the BRA and qualify as a resource providing the capacity
performance product through aggregation. NRG filed comments specifically supporting PJM’s proposal to modify the
aggregation rules to allow seasonal capacity resources to aggregate across LDAs and to allow aggregations through RPM auctions.
On January 23, 2017, PJM amended its proposal to address questions from FERC. The outcome of this proceeding could have
a material impact on future PJM capacity prices.
Complaints Related to Extension of Base Capacity — In 2015, FERC approved changes to PJM’s capacity market, which
included moving from the Base Capacity product to the higher performance Capacity Performance product over the course of
a five year transition. Under this transition, as of the May 2017 BRA, the Base Capacity product will no longer be available.
Several parties have filed complaints at FERC seeking to maintain the RPM Base Capacity product for at least one more delivery
year or until such time as PJM develops a model for seasonal resources to participate. If the transition is delayed, capacity prices
could be materially impacted. The matters are pending at FERC.
MOPR Revisions — On May 2, 2013, FERC accepted PJM's proposal to substantially revise its Minimum Offer Price
Rule, or MOPR. Among other things, FERC approved the portions of the PJM proposal that exempt many new entrants from
demonstrating that their proposed projects are economic, as well as providing a similar exemption for public power entities and
certain self-supply entities. This exemption is subject to certain conditions designed to limit the financial incentive of such
entities to suppress market prices. On June 3, 2013, NRG filed a request for rehearing of the FERC order and subsequently
protested the manner in which PJM proposed to implement the FERC order. On October 15, 2015, FERC denied the requests
for rehearing and accepted PJM’s compliance filing. NRG, along with other parties, filed a petition for review of FERC's decision
with the D.C. Circuit. Briefing is complete. The case is pending at the D.C. Circuit.
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Illinois Zero Emission Credit Legislation and Related PJM Complaint — Pursuant to legislation in Illinois, the Illinois
Power Agency is to procure contracts for Zero Emission Credits, or ZECs, through a process that would take into account
environmental benefits, including the preservation of zero emission facilities. The procurement would be subject to review by
the Illinois Commerce Commission. These ZECs are out-of-market subsidies that threaten to artificially suppress prices in the
PJM auctions. On February 14, 2017, NRG, along with other companies, filed a complaint in the District Court for the Northern
District of Illinois; another plaintiff group filed a similar complaint on the same day.
As a result of the ZEC scheme adopted by the Illinois legislature and to address the effect of subsidies set to be paid to
Illinois to certain nuclear units, on January 9, 2017, NRG and other generators and its trade association filed a joint amendment
to the pending complaint seeking to apply the MOPR in the capacity market to existing resources that receive out-of-market
subsidies. This amendment is to the March 21, 2016 complaint filed by NRG and other companies related to ratepayer-funded
subsidies approved by the PUCO.
Midwest Generation, LLC Reactive Power Compensation — On June 21, 2016, FERC issued an order directing MWG to
make a compliance filing setting forth refunds for payments received in violation of its 2004 reactive power settlement or to
show cause why it has not violated the settlement. FERC also ordered MWG to revise its tariff to reflect the costs of units
continuing to provide reactive power or show cause why it should not be required to do so. The Commission also referred this
matter to the Commission's Office of Enforcement. On June 30, 2016, MWG filed a revised tariff, and on July 22, 2016, MWG
made a compliance filing as ordered by FERC. On October 13, 2016, FERC found that MWG should only be liable for refunds
that accrued after bankruptcy on April 1, 2014 through June 30, 2016. MWG is currently in settlement discussions regarding
its revised reactive power schedule. The matter is still pending at the Commission's Office of Enforcement.
New England
2020/2021 ISO-NE Auction Results — On February 6, 2017, ISO-NE announced the results of its 2020/2021 forward
capacity auction. NRG cleared 2,641 MW at $5.297 KW per month providing expected annual capacity revenues of $167.9
million. The 333 MWs at Canal Unit 3, which previously cleared the tenth forward capacity auction with a seven year price
lock at a price of $7.17 KW per month for the 2020/2021 deliverability year, are excluded from these results.
Peak Energy Rent Adjustment Complaint — On September 30, 2016, the New England Power Generators Association, or
NEPGA, filed a complaint against ISO-NE asking FERC to find the Peak Energy Rent, or PER, unjust and unreasonable. On
January 9, 2017, FERC granted NEPGA’s complaint requiring a change to how the PER strike price is calculated and determine
any refunds during the time period provided for in the complaint. The first FERC-ordered settlement conference occurred on
February 16, 2017.
Performance Incentive Proposal — On January 17, 2014, ISO-NE filed at FERC to revise its forward capacity market, or
FCM, by making a resource’s forward capacity market compensation dependent on resource output during short intervals of
operating reserve scarcity. The ISO-NE proposal would replace the existing shortage event penalty structure with a new
performance incentive mechanism, resulting in capacity payments to resources that would be the combination of two components:
(1) a base capacity payment and (2) a performance payment or charge. The performance payment or charge would be entirely
dependent upon the resource’s delivery of energy or operating reserves during scarcity conditions, and could be larger than the
base payment.
On May 30, 2014, FERC found that most of the provisions in the ISO-NE proposal, with modifications, together with an
increase to the reserve constraint penalty factors, provided a just and reasonable structure. FERC instituted a proceeding for
further hearings and required ISO-NE to make a compliance filing to modify its proposal and adopt the increases to the reserve
constraint penalty factors. FERC denied rehearing. The NEPGA filed a petition for review of FERC's decision with the D.C.
Circuit. Briefing is complete.
New York
Dunkirk Power Reliability Service and Natural Gas Addition — On February 13, 2014, Dunkirk Power LLC and National
Grid agreed to a term sheet for a 10-year agreement to govern the addition of natural gas-burning capabilities to the Dunkirk
facility. This term sheet, known as the DNG Agreement Term Sheet, was approved by the NYSPSC on June 13, 2014. On
February 27, 2015, Entergy filed a complaint in the U.S. District Court for the Northern District of New York alleging that the
NYSPSC’s approval of the DNG Agreement Term Sheet impermissibly interfered with FERC’s exclusive jurisdiction over the
wholesale markets. Entergy moved to withdraw the lawsuit, and on November 18, 2016, the U.S. District Court dismissed the
lawsuit with prejudice.
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New York Clean Energy Standard and Zero Emission Credit Nuclear Bailout — On August 1, 2016, the NYSPSC issued
its Clean Energy Standard, or CES, order. The CES order included three main components: (i) a commitment to move New
York to 50% renewables by 2030; (ii) new renewable energy credit pricing for both new and existing renewable facilities; and
(iii) a ZEC that 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. The stated purpose of the ZECs is to keep nuclear units running even though they would be
uneconomic and likely retire if they received compensation only from the FERC-jurisdictional wholesale power market. The
ZECs would have the effect of suppressing wholesale market prices and interfere with the wholesale market. On October 19,
2016, NRG, along with other entities, 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 December 9, 2016, Exelon, the NYSPSC and other
parties filed a motion to dismiss the complaint. On January 6, 2017, NRG, along with other parties, filed an opposition to the
motions to dismiss. The motions are pending before the U.S. District Court.
Independent Power Producers of New York (IPPNY) Complaint — On January 9, 2017, EPSA requested FERC to promptly
direct the NYISO to file tariff provisions to address pending market concerns related to out of market payments to existing
generation in the NYISO. This request was prompted by the ZEC program initiated by the NYSPSC. This request follows
IPPNY’s complaint at FERC against the NYISO on May 10, 2013, as amended on March 25, 2014. The generators asked FERC
to direct the NYISO to require that capacity from existing generation resources that would have exited the market but for out-
of-market payments. Failure to implement buyer-side mitigation measures could result in uneconomic entry, which artificially
decreases capacity prices below competitive market levels.
New York Public Service Commission Retail Energy Market Proceedings — On February 23, 2016, the NYSPSC issued
what it refers to as its “Retail Reset” order, or Reset Order, in docket 12-M-0476 et al. Among other things, the Reset Order
instituted a price cap on energy supply offers and required many retail providers to seek affirmative consent from certain retail
customers over a very short period of time to retain those customers. Retail suppliers who cannot meet these conditions will be
required to return their customers to energy supply service provided by the local utility. On July 25, 2016, the New York Supreme
Court vacated part of the Reset Order on procedural grounds and remanded the matter to the NYSPSC for further consideration.
Additionally, the Court affirmed the NYSPSC’s authority to regulate Energy Service Companies prices. The matter is now on
appeal before the Supreme Court of New York, Appellate Division. On December 2, 2016 in the same docket, the NYSPSC
issued notice of an evidentiary proceeding and collaborative process to determine the future structure of the retail energy market
in New York. The outcome of this evidentiary and collaborative process, combined with the outcome of the appeal of the Reset
Order, could affect the viability of the New York retail energy market.
Gulf Coast Region
ERCOT
Greens Bayou Unit 5 RMR Status — On March 29, 2016, NRG filed notice with ERCOT of its intent to mothball Greens
Bayou Unit 5. On May 27, 2016, ERCOT made a final determination that the unit is needed for reliability must-run, or RMR,
service to address potential operational contingencies. On June 14, 2016, the ERCOT Board confirmed ERCOT’s determination
and approved a two-year RMR agreement, effective June 1, 2016 through June 30, 2018; provided, however, ERCOT may
terminate the RMR agreement at any time upon 90 days' notice. ERCOT has a standard form contract that provides for recovery
of the operating costs of the unit, together with additional performance metrics and incentives. The estimated budget for the
unit is $58 million for the contract period, which amount does not include any incentives. Under the RMR agreement, the unit
is only available to ERCOT during the months of June through September. On July 13, 2016, ERCOT issued a request for
proposals for alternatives to the RMR agreement. No alternatives were selected by ERCOT. As a result of rule changes, ERCOT
determined that the RMR agreement is only needed until a new 1,100 MW combined cycle plant at Colorado Bend Generating
Station comes on line, expected in mid-2017.
MISO
Revisions to MISO Capacity Construct — On November 20, 2015, FERC issued a final order denying NRG’s request for
rehearing of a 2012 FERC order approving the MISO capacity construct. NRG filed a petition for review of FERC’s decision
with the D.C. Circuit on the grounds that FERC’s order denies merchant generators in MISO’s footprint any reasonable
opportunity to recover their fixed costs. On November 2, 2016, NRG filed its initial brief and briefing continues. The eventual
outcome of this proceeding could impact MISO’s attempts to redesign its capacity markets and thereby affect the value of NRG’s
uncontracted assets within the MISO footprint.
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MISO Forward Capacity Market Design for Retail Choice States— MISO staff has proposed revisions to its market design
by implementing a three-year Forward Resource Auction for Illinois and the portion of Michigan with Retail Choice Load with
a Sloped Demand Curve. On November 1, 2016, MISO filed its proposal with FERC. On December 14, 2016, NRG filed a
protest to MISO’s proposal. On February 2, 2017, FERC rejected MISO’s proposal.
West Region
CAISO
Carlsbad Energy Center — On May 21, 2015, the CPUC approved the Carlsbad Energy Center PPTA for a nominally
rated 500 MW five unit natural gas peaking plant. On December 7, 2015, three parties filed two petitions for a writ of review
with the California Court of Appeal appealing the CPUC's decision. On November 30, 2016, the California Court of Appeals
issued a decision affirming the CPUC's approval of the PPTA. The period in which to seek review of that decision in the
California Supreme Court has passed, and the CPUC’s decision is now final.
Puente Power Project — On May 26, 2016, the CPUC approved the resource adequacy purchase agreement, or RAPA,
between SCE and NRG for the construction of the 262 MW natural gas peaking Puente Power Project. On July 1, 2016, four
different parties sought rehearing of the CPUC's approval of the RAPA. On December 1, 2016, the CPUC affirmed approval of
the RAPA in a rehearing decision. On January 4, 2017, a petition for writ of review was filed in the California Court of Appeal
seeking to reverse the CPUC's approval of the RAPA.
Environmental Matters
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. New requirements regarding GHGs, combustion byproducts, water discharge and use,
and threatened and endangered species have been put in place in recent years. Future laws may require the addition of emissions
controls or other environmental controls or impose restrictions on the operations of the Company's facilities, which could have
a material effect on the Company's operations. Complying with environmental laws involves significant capital and operating
expenses. NRG decides to invest capital for environmental controls based on the relative certainty of the requirements, an
evaluation of compliance options, and the expected economic returns on capital.
A number of regulations with the potential to affect the Company and its facilities are in development, under review or
have been recently promulgated by the EPA, including ESPS/NSPS for GHGs, ash disposal requirements, NAAQS revisions
and implementation and effluent guidelines. NRG is currently reviewing the outcome and any resulting impact of recently
promulgated regulations and cannot fully predict such impact until legal challenges are resolved and the new presidential
administration decides how to proceed with some of the more controversial regulations. Federal and state environmental laws
generally have become more stringent over time, although this trend could change in the near term with respect to federal laws
under the new U.S. presidential administration.
Air
The CAA and the resulting regulations (as well as similar state and local requirements) have the potential to affect air
emissions, operating practices and pollution control equipment required at power plants. Under the CAA, the EPA sets NAAQS
for certain pollutants including SO2, ozone, and PM2.5. Many of the Company's facilities are located in or near areas that are
classified by the EPA as not achieving certain NAAQS (non-attainment areas). The relevant NAAQS have historically become
more stringent. The Company maintains a comprehensive compliance strategy to address continuing and new requirements.
Complying with increasingly stringent NAAQS could require the installation of additional emissions control equipment at some
NRG facilities or retiring of units if installing such controls is not economical. Significant changes to air regulatory programs
affecting the Company are described below.
Ozone NAAQS — On October 26, 2015, the EPA promulgated a rule that reduces the ozone NAAQS to 0.070 ppm. If it
survives legal challenges, this more stringent NAAQS will obligate the states to develop plans to reduce NOx (an ozone precursor),
which could affect some of the Company's units.
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Cross-State Air Pollution Rule — 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)
SO2 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.
MATS — 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. 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.
Clean Power Plan — The attention in recent years on GHG emissions has resulted in federal regulations and state legislative
and regulatory action. In October 2015, the EPA finalized the Clean Power Plan, or CPP, addressing GHG emissions from existing
EGUs. On February 9, 2016, the U.S. Supreme Court stayed the CPP. The D.C. Circuit, sitting en banc, heard oral argument on
the legal challenges to the CPP in September 2016. Due to the ongoing litigation and the potential impact of the new U.S.
presidential administration, the Company believes the CPP is not likely to survive.
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CO2 Emissions — NRG emits CO2 when generating electricity at most of its facilities. The graphs presented below illustrate
NRG's U.S. Scope 1 emissions of CO2e for 2014, 2015 and 2016. The percentage of Scope 1 emissions covered under emissions-
limiting regulations is 18% and the percentage of Scope 1 emissions covered under emission-reporting regulations is 82%. NRG
anticipates reductions in its future emissions profile as the Company modernizes the fleet through repowering, improves
generation efficiencies, and explores methods to capture CO2. From 2015 to 2016, the Company's CO2e emissions decreased
from 86 million metric tons to approximately 66 million metric tons, representing a 19% reduction year over year. Factors leading
to the decreased emissions include reductions in fleetwide annual net generation due to an overall decrease in market demand
and a market-driven shift towards increased generation from natural gas over coal. The Company's goal is to reduce its total
U.S. Scope 1, 2 and 3 CO2e emissions by 50% by 2030, and 90% by 2050, using 2014 as a baseline.
The effects from federal, regional or state regulation of GHGs on the Company's financial performance will depend on a
number of factors, including the outcome of the legal challenges, regulatory design, level of GHG reductions, the availability
of offsets, actions of the new U.S. presidential administration, and the extent to which NRG would be entitled to receive CO2
emissions credits without having to purchase them in an auction or on the open market. Thereafter, under any such legislation
or regulation, the impact on NRG would depend on the Company's level of success in developing and deploying low and no
carbon technologies.
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. 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 December 31, 2016.
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Domestic Site Remediation Matters
Under certain federal, state and local environmental laws, a current or previous owner or operator of any facility, including
an electric generating facility, may be required to investigate and remediate releases or threatened releases of hazardous or toxic
substances or petroleum products at the facility. NRG may be responsible for property damage, personal injury and investigation
and remediation costs incurred by a party in connection with hazardous material releases or threatened releases. These laws,
including the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended by the Superfund
Amendments and Reauthorization Act of 1986, or SARA, impose liability without regard to whether the owner knew of or
caused the presence of the hazardous substances, and the courts have interpreted liability under such laws to be strict (without
fault) and joint and several. Cleanup obligations can often be triggered during the closure or decommissioning of a facility, in
addition to spills during its operations. Further discussions of affected NRG sites can be found in Item 15 — Note 24,
Environmental Matters, to the Consolidated Financial Statements.
Nuclear Waste — The federal government's program to construct a nuclear waste repository at Yucca Mountain, Nevada
was discontinued in 2010. Since 1998, the U.S. DOE has been in default of the federal government's obligations to begin accepting
spent nuclear fuel, or SNF, and high-level radioactive waste, or HLW, under the U.S. Nuclear Waste Policy Act of 1982, or the
Nuclear Waste Policy Act. Owners of nuclear plants, including the owners of STP, had been required to enter into contracts
setting out the obligations of the owners and the U.S. DOE, including the fees to be paid by the owners for the U.S. DOE's
services to license a spent fuel repository. Effective May 16, 2014, the U.S. DOE stopped collecting the fees.
On February 5, 2013, STPNOC entered into a settlement agreement with the U.S. DOE for payment of damages relating
to the U.S. DOE's failure to accept SNF and HLW under the Nuclear Waste Policy Act through December 31, 2013, which was
extended through an addendum dated January 24, 2014, to December 31, 2016. On December 12, 2016, STPNOC received the
federal government's offer of another three-year extension of payment for continued failure to accept SNF and HLW. The
proposal has been reviewed for adequacy and, with advice of counsel, was accepted. There are no facilities for the reprocessing
or permanent disposal of SNF currently in operation in the U.S., nor has the NRC licensed any such facilities. STPNOC currently
stores all SNF generated by its nuclear generating facilities in on-site storage pools. Since STPNOC's SNF storage pools do
not have sufficient storage capacity for the life of the units, STPNOC is proceeding to construct dry cask storage capability on-
site. STPNOC plans to continue to assert claims against the U.S. DOE for damages relating to the U.S. DOE's failure to accept
SNF and HLW.
Under the federal Low-Level Radioactive Waste Policy Act of 1980, as amended, the state of Texas is required to provide,
either on its own or jointly with other states in a compact, for the disposal of all low-level radioactive waste generated within
the state. STP's warehouse capacity is adequate for on-site storage until a site in Andrews County, Texas becomes fully operational.
Water
Clean Water Act — The Company is required under the CWA to comply with intake and discharge requirements,
requirements for technological controls and operating practices. As with air quality regulations, federal and state water regulations
have become more stringent and imposed new requirements.
Once Through Cooling Regulation — In August 2014, 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 will impose more stringent requirements (as individual permits are renewed) for wastewater
streams from flue gas desulfurization, fly ash, bottom ash, and flue gas mercury control. The Company estimates that it would
cost approximately $200 million over the next eight years (the majority of the cost would be incurred after 2019) to comply
with this rule at 11 coal-fired plants. This regulation has been challenged and is subject to legal uncertainty. The change in U.S.
presidential administration increases the likelihood that the legal challenges will succeed. The Company decides to invest capital
for environmental controls based on: the certainty of regulations; evaluation of different technologies; options to convert to gas;
and the expected economic returns on the capital. Over the next several years, the Company will decide whether to proceed
with these investments at each of the plants as permits are renewed based on, among other things, the legal certainty of the
regulation and market conditions at that time.
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Regional Environmental Developments
East Region
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 Item 15 — Note 22, Commitments and Contingencies. In January 2009, GenOn received an NOV from the EPA alleging that
past work at Keystone, Portland and Shawville generating stations violated regulations regarding NSR. In June 2011, GenOn
received an NOV from the EPA alleging that past work at Avon Lake and Niles generating stations violated NSR. In December
2007, the NJDEP filed suit alleging that NSR violations occurred at the Portland generating station, which suit was resolved
pursuant to a July 2013 Consent Decree. 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.
Burton Island Old Ash Landfill — In January 2006, NRG's Indian River Power LLC was notified that it may be a potentially
responsible party with respect to Burton Island Old Ash Landfill, a historic captive landfill located at the Indian River facility.
On October 1, 2007, NRG signed an agreement with DNREC to investigate the site through the Voluntary Clean-up Program,
or the VCP. On February 4, 2008, DNREC issued findings that no further action was required in relation to surface water and
that a previously planned shoreline stabilization project would satisfactorily address shoreline erosion. The landfill itself required
a Remedial Investigation and Feasibility Study to determine the type and scope of any additional required work. DNREC
approved the Feasibility Study in December 2012. In January 2013, DNREC proposed a remediation plan based on the Feasibility
Study. The remediation plan was approved in October 2013. In December 2015, DNREC approved the Company's remediation
design and the Company's Long Term Stewardship Plan. The cost of completing the work required by the approved remediation
plan is consistent with amounts budgeted in early 2016 and on track for completion in 2017. The estimated cost to comply with
the Long-Term Stewardship Plan was added to the liability in December 2016.
In addition to the VCP, on May 29, 2008, DNREC requested that NRG's Indian River Power LLC participate in the
development and performance of a Natural Resource Damage Assessment at the Burton Island Old Ash Landfill. NRG is
currently working with DNREC and other trustees to close out the assessment process.
RGGI — The Company operates generating units in Connecticut, Delaware, Maryland, Massachusetts, and New York that
are subject to RGGI, which is a regional cap and trade system. In 2013, each of these states finalized a rule that reduced and
will continue to reduce the number of allowances through 2020. The nine RGGI states are re-evaluating the program and may
alter the rules to further reduce the number of allowances. The revisions being currently contemplated could adversely impact
NRG's results of operations, financial condition and cash flows.
Massachusetts Global Warming Solutions Act Proposed Regulation — In May 2016, the Massachusetts Supreme Judicial
Court held that Massachusetts DEP had not complied with the 2008 Global Warming Solutions Act, which requires establishing
limits for sources of GHGs. The Court held that participation in RGGI was not sufficient. In December 2016, the Massachusetts
DEP proposed a regulation that would limit GHG emissions from large electric generating facilities located in Massachusetts.
A final regulation is expected by August 2017. If promulgated in its current form, the regulation may limit the operations of
affected facilities.
Gulf Coast Region
Texas Regional Haze — In January 2016, the EPA promulgated a final rule that requires 15 coal-fired units (at eight plants
in Texas) to reduce their SO2 rates at various times over the next five years if the rule survives legal challenges. This Regional
Haze rule was promulgated under the portion of the CAA that seeks to improve visibility at national parks. Eight of these 15
units already have scrubbers and seven do not. NRG owns two of the affected units, Limestone units 1 and 2, which already
have scrubbers. The rule requires that the Limestone units reduce their SO2 emission rates by 2019. In July 2016, the U.S.
Court of Appeals for the Fifth Circuit stayed the rule pending resolution of the legal challenges. On December 2, 2016, the EPA
filed a motion in the Fifth Circuit for partial voluntary remand and partial lifting of the stay, but did not request vacatur of the
final rule.
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Illinois Union Insurance Company Litigation — On October 2, 2015, the U.S. District Court for the Middle District of
Louisiana issued an order granting LaGen’s motion for summary judgment on its claims for declaratory judgment and breach
of contract against ILU for its failure to indemnify LaGen for the costs LaGen paid pursuant to the consent decree that resolved
the NSR lawsuit which was brought by the U.S. EPA and LA DEQ against LaGen related to Big Cajun II. The court entered
judgment in favor of LaGen for approximately $27 million. In addition, the court ruled that LaGen is entitled to approximately
$7 million for future consent decree costs as they are incurred. On October 14, 2015, ILU filed a motion to stay execution of
the judgment, which was granted on October 19, 2015. Also, on October 14, 2015, ILU filed a notice to appeal the judgment.
On January 14, 2016, the U.S. District Court granted LaGen's motion for attorney's fees of approximately $2 million for the
indemnity phase of the litigation. On January 29, 2016, ILU filed an appeal brief with the U.S. Court of Appeals for the Fifth
Circuit. The Court of Appeals issued a decision on August 4, 2016 which vacated the summary judgment ruling and remanded
the case to the U.S. District Court. The remanded case has been set for trial on May 8, 2017.
Environmental Capital Expenditures
NRG estimates that environmental capital expenditures from 2017 through 2021 required to comply with environmental
laws will be approximately $134 million which includes $61 million for GenOn and $42 million for Midwest Generation. These
costs are primarily associated with the cost of complying with anticipated ELG requirements.
Customers
NRG sells to a wide variety of customers. No individual customer accounted for 10% or more of NRG's total revenue in
2016. The Company owns and operates power plants to generate and sell power to wholesale customers such as utilities and
other intermediaries. The Company also directly sells to end-use customers in the residential, commercial and industrial sectors.
NRG also receives significant revenues from PJM in its capacity as the regional transmission organization for the PJM footprint.
Employees
As of December 31, 2016, NRG and its consolidated subsidiaries, including GenOn and NRG Yield, Inc., had 8,763,
employees, approximately 30% of whom were covered by U.S. bargaining agreements. During 2016, the Company did not
experience any labor stoppages or labor disputes at any of its facilities.
Available Information
NRG's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are available free of charge through the
Company's website, www.nrg.com, as soon as reasonably practicable after they are electronically filed with, or furnished to, the
SEC. The Company also routinely posts press releases, presentations, webcasts, and other information regarding the Company
on the Company's website.
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Item 1A — Risk Factors Related to NRG Energy, Inc.
Risks Related to the Operation of NRG's Business
There is substantial doubt about GenOn's ability continue as a going concern. GenOn’s inability to continue as a going concern
could have a material impact on the Company.
As disclosed in Item 15 - Note 1, Nature of Business, and Note 12, Debt and Capital Leases, to this Form 10-K, as of
December 31, 2016, $691 million of GenOn's Senior Notes outstanding, excluding $8 million of associated premiums, are current
within the GenOn consolidated balance sheet and are due on June 15, 2017. GenOn's future profitability continues to be adversely
affected by (i) a sustained decline in natural gas prices and its resulting effect on wholesale power prices and capacity prices, and
(ii) the inability of GenOn Mid-Atlantic and REMA to make distributions of cash and certain other restricted payments to GenOn.
Based on current projections, GenOn is not expected to have sufficient liquidity exclusive of cash subject to the restrictions under
the GenOn Mid-Atlantic and REMA operating leases to repay the GenOn Senior Notes due in June 2017. As a result, there is
substantial doubt about GenOn's ability to continue as a going concern. As a result of the substantial doubt about GenOn’s ability
to continue as a going concern, along with additional factors, there is substantial doubt about certain of GenOn’s subsidiaries’
ability to continue as a going concern.
As of December 31, 2016, GenOn has consolidated cash and cash equivalents of $1.0 billion, of which $471 million and
$100 million is held by GenOn Mid-Atlantic and REMA, respectively. Under their respective operating leases, GenOn Mid-
Atlantic and REMA are not permitted to make any distributions and other restricted payments unless: (a) they satisfy the fixed
charge coverage ratio for the most recently ended period for four fiscal quarters; (b) they are projected to satisfy the fixed charge
coverage ratio for each of the two following periods of four fiscal quarters, commencing with the fiscal quarter in which such
payment is proposed to be made; and (c) no significant lease default or event of default has occurred and is continuing. Additionally,
GenOn Mid-Atlantic and REMA must be in compliance with the requirement to provide credit support to the owner lessors securing
their obligations to pay scheduled rent under their respective leases. As a result, GenOn Mid-Atlantic has not been able to make
distributions of cash and certain other restricted payments since the quarter ended March 31, 2014 which was the last quarterly
period for which GenOn Mid-Atlantic satisfied the conditions under its operating agreement. REMA has not satisfied the conditions
under its operating agreement to make distributions of cash and certain other restricted payments since GenOn was acquired by
NRG in December 2012.
The Company, GenOn's parent company, has no obligation to provide any financial support to GenOn other than under the
secured intercompany revolving credit agreement between the Company and GenOn and NRG Americas. As of December 31,
2016, $228 million was available to be used by GenOn under the $500 million revolving credit agreement. As controlled group
members, ERISA requires that NRG and GenOn are jointly and severally liable for the NRG Pension Plan for Bargained Employees
and the NRG Pension Plan, including the pension liabilities associated with GenOn employees.
GenOn is currently considering all options available to it, including negotiations with creditors, refinancing the GenOn Senior
Notes, potential sales of certain generating assets as well as the possibility for a need to file for protection under Chapter 11 of the
U.S. Bankruptcy Code. During 2016, GenOn appointed two independent directors, retained advisors and established a separate
audit committee as part of this process.
The Company cannot assure you that GenOn’s inability to continue as a going concern will not have a material impact on
the Company's statement of operations, cash flows and financial position including, among other things, if GenOn were to file for
bankruptcy protection.
As of December 31, 2016, GenOn represents 15.6% of the Company's consolidated total assets, 16.9% of the Company's
consolidated total liabilities and contributed $94 million to the Company's consolidated cash from operations in 2016.
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NRG's financial performance may be impacted by price fluctuations in the wholesale power and natural gas, coal and oil
markets and other market factors that are beyond the Company's control.
Market prices for power, capacity, ancillary services, natural gas, coal and oil are unpredictable and tend to fluctuate
substantially. Unlike most other commodities, electric power can only be stored on a very limited basis and generally must be
produced concurrently with its use. As a result, power prices are subject to significant volatility due to supply and demand
imbalances, especially in the day-ahead and spot markets. Long- and short-term power prices may also fluctuate substantially due
to other factors outside of the Company's control, including:
•
•
•
•
•
changes in generation capacity in the Company’s markets, including the addition of new supplies of power as a result of
the development of new plants, expansion of existing plants, the continued operation of uneconomic power plants due
to state subsidies, or additional transmission capacity;
environmental regulations and legislation;
electric supply disruptions, including plant outages and transmission disruptions;
changes in power transmission infrastructure;
fuel transportation capacity constraints or inefficiencies;
• weather conditions, including extreme weather conditions and seasonal fluctuations, including the effects of climate
change;
•
•
•
•
•
•
•
•
•
•
changes in commodity prices and the supply of commodities, including but not limited to natural gas, coal and oil;
changes in the demand for power or in patterns of power usage, including the potential development of demand-side
management tools and practices, distributed generation, and more efficient end-use technologies;
development of new fuels, new technologies and new forms of competition for the production of power;
fuel price volatility;
economic and political conditions;
regulations and actions of the ISOs and RTOs;
federal and state power regulations and legislation;
changes in law, including judicial decisions;
changes in prices related to RECs; and
changes in capacity prices and capacity markets.
Such factors and the associated fluctuations in power prices have affected the Company's wholesale power operating results
in the past and will continue to do so in the future.
Many of NRG's power generation facilities operate, wholly or partially, without long-term power sale agreements.
Many of NRG's facilities operate as "merchant" facilities without long-term power sales agreements for some or all of their
generating capacity and output and therefore are exposed to market fluctuations. Without the benefit of long-term power sales
agreements for these assets, NRG cannot be sure that it will be able to sell any or all of the power generated by these facilities at
commercially attractive rates or that these facilities will be able to operate profitably. This could lead to future impairments of the
Company's property, plant and equipment or to the closing of certain of its facilities, resulting in economic losses and liabilities,
which could have a material adverse effect on the Company's results of operations, financial condition or cash flows.
NRG's costs, results of operations, financial condition and cash flows could be adversely impacted by disruption of its fuel
supplies.
NRG relies on natural gas, coal and oil to fuel a majority of its power generation facilities. Delivery of these fuels to the
facilities is dependent upon the continuing financial viability of contractual counterparties as well as upon the infrastructure
(including rail lines, rail cars, barge facilities, roadways, riverways and natural gas pipelines) available to serve each generation
facility. As a result, the Company is subject to the risks of disruptions or curtailments in the production of power at its generation
facilities if no fuel is available at any price or if a counterparty fails to perform or if there is a disruption in the fuel delivery
infrastructure.
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NRG has sold forward a substantial portion of its coal and nuclear power in order to lock in long-term prices that it deemed
to be favorable at the time it entered into the forward power sales contracts. In order to hedge its obligations under these forward
power sales contracts, the Company has entered into long-term and short-term contracts for the purchase and delivery of fuel.
Many of the forward power sales contracts do not allow the Company to pass through changes in fuel costs or discharge the power
sale obligations in the case of a disruption in fuel supply due to force majeure events or the default of a fuel supplier or transporter.
Disruptions in the Company's fuel supplies may therefore require it to find alternative fuel sources at higher costs, to find other
sources of power to deliver to counterparties at a higher cost, or to pay damages to counterparties for failure to deliver power as
contracted. Any such event could have a material adverse effect on the Company's financial performance.
NRG also buys significant quantities of fuel on a short-term or spot market basis. Prices for all of the Company's fuels
fluctuate, sometimes rising or falling significantly over a relatively short period of time. The price NRG can obtain for the sale of
energy may not rise at the same rate, or may not rise at all, to match a rise in fuel or delivery costs. This may have a material
adverse effect on the Company's financial performance. Changes in market prices for natural gas, coal and oil may result from the
following:
• weather conditions;
•
•
•
•
•
•
•
•
•
seasonality;
demand for energy commodities and general economic conditions;
disruption or other constraints or inefficiencies of electricity, gas or coal transmission or transportation;
additional generating capacity;
availability and levels of storage and inventory for fuel stocks;
natural gas, crude oil, refined products and coal production levels;
changes in market liquidity;
federal, state and foreign governmental regulation and legislation; and
the creditworthiness and liquidity and willingness of fuel suppliers/transporters to do business with the Company.
NRG's plant operating characteristics and equipment, particularly at its coal-fired plants, often dictate the specific fuel quality
to be combusted. The availability and price of specific fuel qualities may vary due to supplier financial or operational disruptions,
transportation disruptions and force majeure. At times, coal of specific quality may not be available at any price, or the Company
may not be able to transport such coal to its facilities on a timely basis. In this case, the Company may not be able to run the coal
facility even if it would be profitable. Operating a coal facility with different quality coal can lead to emission or operating problems.
If the Company had sold forward the power from such a coal facility, it could be required to supply or purchase power from
alternate sources, perhaps at a loss. This could have a material adverse impact on the financial results of specific plants and on the
Company's results of operations.
Changes in the price of coal and natural gas could cause the Company to hold excess coal inventories and incur contract
termination costs.
Low natural gas prices can cause natural gas to be the more cost-competitive fuel compared to coal for generating electricity.
Because the Company enters into guaranteed supply contracts to provide for the amount of coal needed to operate its base load
coal-fired generating facilities, the Company may experience periods where it holds excess amounts of coal if fuel pricing results
in the Company reducing or idling coal-fired generating facilities. In addition, the Company may incur costs to terminate supply
contracts for coal in excess of its generating requirements.
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Volatile power supply costs and demand for power could adversely affect the financial performance of NRG's retail businesses.
Although NRG is the primary provider of its retail businesses' wholesale electricity supply requirements, the retail businesses
purchase a significant portion of their supply requirements from third parties. As a result, financial performance depends on the
ability to obtain adequate supplies of electric generation from third parties at prices below the prices it charges its customers.
Consequently, the Company's earnings and cash flows could be adversely affected in any period in which the retail businesses'
wholesale electricity supply costs rise at a greater rate than the rates it charges to customers. The price of wholesale electricity
supply purchases associated with the retail businesses' energy commitments can be different than that reflected in the rates charged
to customers due to, among other factors:
•
•
•
•
•
varying supply procurement contracts used and the timing of entering into related contracts;
subsequent changes in the overall price of natural gas;
daily, monthly or seasonal fluctuations in the price of natural gas relative to the 12-month forward prices;
transmission constraints and the Company's ability to move power to its customers; and
changes in market heat rate (i.e., the relationship between power and natural gas prices).
The retail businesses' earnings and cash flows could also be adversely affected in any period in which its customers' actual
usage of electricity significantly varies from the forecasted usage, which could occur due to, among other factors, weather events,
competition and economic conditions.
There may be periods when NRG will not be able to meet its commitments under forward sale obligations at a reasonable cost
or at all.
A substantial portion of the output from NRG's coal and nuclear facilities has been sold forward under fixed price power
sales contracts through 2017 and the Company also sells forward the output from its intermediate and peaking facilities when it
deems it commercially advantageous to do so. The Company also sells fixed price gas as a proxy for power. Because the obligations
under most of these agreements are not contingent on a unit being available to generate power, NRG is generally required to deliver
power to the buyer, even in the event of a plant outage, fuel supply disruption or a reduction in the available capacity of the unit.
To the extent that the Company does not have sufficient lower cost capacity to meet its commitments under its forward sale
obligations, the Company would be required to supply replacement power either by running its other, higher cost power plants or
by obtaining power from third-party sources at market prices that could substantially exceed the contract price. If NRG fails to
deliver the contracted power, it would be required to pay the difference between the market price at the delivery point and the
contract price, and the amount of such payments could be substantial.
In the Gulf Coast region, NRG has long-term contracts with rural cooperatives that require it to serve all of the cooperatives'
requirements at prices for energy that generally reflect the cost of coal-fired generation. On December 19, 2013, the Entergy
region joined the MISO RTO, which employs a two settlement market in which NRG submits bids for energy to cover its load
obligations and submits offers to sell energy from its resources. Given the “full requirements” obligation contained in the
cooperative contracts, and the possibility of unplanned forced outages of its generation, NRG may be exposed to locational market
prices as a net buyer of energy for certain periods, which could have a negative impact on NRG's financial returns from its Gulf
Coast region.
NRG's trading operations and use of hedging agreements could result in financial losses that negatively impact its results of
operations.
The Company typically enters into hedging agreements, including contracts to purchase or sell commodities at future dates
and at fixed prices, in order to manage the commodity price risks inherent in its power generation operations. These activities,
although intended to mitigate price volatility, expose the Company to other risks. When the Company sells power forward, it gives
up the opportunity to sell power at higher prices in the future, which not only may result in lost opportunity costs but also may
require the Company to post significant amounts of cash collateral or other credit support to its counterparties. The Company also
relies on counterparty performance under its hedging agreements and is exposed to the credit quality of its counterparties under
those agreements. Further, if the values of the financial contracts change in a manner that the Company does not anticipate, or if
a counterparty fails to perform under a contract, it could harm the Company's business, operating results or financial position.
NRG does not typically hedge the entire exposure of its operations against commodity price volatility. To the extent it does
not hedge against commodity price volatility, the Company's results of operations and financial position may be improved or
diminished based upon movement in commodity prices.
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NRG may engage in trading activities, including the trading of power, fuel and emissions allowances that are not directly
related to the operation of the Company's generation facilities or the management of related risks. These trading activities take
place in volatile markets and some of these trades could be characterized as speculative. The Company would expect to settle
these trades financially rather than through the production of power or the delivery of fuel. This trading activity may expose the
Company to the risk of significant financial losses which could have a material adverse effect on its business and financial condition.
NRG may not have sufficient liquidity to hedge market risks effectively.
The Company is exposed to market risks through its power marketing business, which involves the sale of energy, capacity
and related products and the purchase and sale of fuel, transmission services and emission allowances. These market risks include,
among other risks, volatility arising from location and timing differences that may be associated with buying and transporting fuel,
converting fuel into energy and delivering energy to a buyer.
NRG undertakes these marketing activities through agreements with various counterparties. Many of the Company's
agreements with counterparties include provisions that require the Company to provide guarantees, offset of netting arrangements,
letters of credit, a first lien on assets and/or cash collateral to protect the counterparties against the risk of the Company's default
or insolvency. The amount of such credit support that must be provided typically is based on the difference between the price of
the commodity in a given contract and the market price of the commodity. Significant movements in market prices can result in
the Company being required to provide cash collateral and letters of credit in very large amounts. The effectiveness of the Company's
strategy may be dependent on the amount of collateral available to enter into or maintain these contracts, and liquidity requirements
may be greater than the Company anticipates or will be able to meet. Without a sufficient amount of working capital to post as
collateral in support of performance guarantees or as a cash margin, the Company may not be able to manage price volatility
effectively or to implement its strategy. An increase in the amount of letters of credit or cash collateral required to be provided to
the Company's counterparties may negatively affect the Company's liquidity and financial condition.
Further, if any of NRG's facilities experience unplanned outages, the Company may be required to procure replacement
power at spot market prices in order to fulfill contractual commitments. Without adequate liquidity to meet margin and collateral
requirements, the Company may be exposed to significant losses, may miss significant opportunities, and may have increased
exposure to the volatility of spot markets.
The accounting for NRG's hedging activities may increase the volatility in the Company's quarterly and annual financial
results.
NRG engages in commodity-related marketing and price-risk management activities in order to financially hedge its exposure
to market risk with respect to electricity sales from its generation assets, fuel utilized by those assets and emission allowances.
NRG generally attempts to balance its fixed-price physical and financial purchases and sales commitments in terms of
contract volumes and the timing of performance and delivery obligations through the use of financial and physical derivative
contracts. These derivatives are accounted for in accordance with the FASB ASC 815, Derivatives and Hedging, or ASC 815,
which requires the Company to record all derivatives on the balance sheet at fair value with changes in the fair value resulting
from fluctuations in the underlying commodity prices immediately recognized in earnings, unless the derivative qualifies for cash
flow hedge accounting treatment. Whether a derivative qualifies for cash flow hedge accounting treatment depends upon it meeting
specific criteria used to determine if the cash flow hedge is and will remain appropriate for the term of the derivative. All economic
hedges may not necessarily qualify for cash flow hedge accounting treatment. As a result, the Company's quarterly and annual
results are subject to significant fluctuations caused by changes in market prices.
Competition in wholesale power markets may have a material adverse effect on NRG's results of operations, cash flows and
the market value of its assets.
NRG has numerous competitors in all aspects of its business, and additional competitors may enter the industry. Because
many of the Company's facilities are old, newer plants owned by the Company's competitors are often more efficient than NRG's
aging plants, which may put some of the Company's plants at a competitive disadvantage to the extent the Company's competitors
are able to consume the same or less fuel as the Company's plants consume. Over time, the Company's plants may be squeezed
out of their markets or may be unable to compete with these more efficient plants.
In NRG's power marketing and commercial operations, NRG competes on the basis of its relative skills, financial position
and access to capital with other providers of electric energy in the procurement of fuel and transportation services, and the sale of
capacity, energy and related products. In order to compete successfully, the Company seeks to aggregate fuel supplies at competitive
prices from different sources and locations and to efficiently utilize transportation services from third-party pipelines, railways
and other fuel transporters and transmission services from electric utilities.
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Other companies with which NRG competes may have greater liquidity, greater access to credit and other financial resources,
lower cost structures, more effective risk management policies and procedures, greater ability to incur losses, longer-standing
relationships with customers, greater potential for profitability from ancillary services or greater flexibility in the timing of their
sale of generation capacity and ancillary services than NRG does.
NRG's competitors may be able to respond more quickly to new laws or regulations or emerging technologies, or to devote
greater resources to the construction, expansion or refurbishment of their power generation facilities than NRG can. In addition,
current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with
third parties. Accordingly, it is possible that new competitors or alliances among current and new competitors may emerge and
rapidly gain significant market share. There can be no assurance that NRG will be able to compete successfully against current
and future competitors, and any failure to do so would have a material adverse effect on the Company's business, financial condition,
results of operations and cash flow.
Operation of power generation facilities involves significant risks and hazards customary to the power industry that could have
a material adverse effect on NRG's revenues and results of operations, and NRG may not have adequate insurance to cover
these risks and hazards.
The ongoing operation of NRG's facilities involves risks that include the breakdown or failure of equipment or processes,
performance below expected levels of output or efficiency and the inability to transport the Company's product to its customers
in an efficient manner due to a lack of transmission capacity. Unplanned outages of generating units, including extensions of
scheduled outages due to mechanical failures or other problems occur from time to time and are an inherent risk of the Company's
business. Unplanned outages typically increase the Company's operation and maintenance expenses and may reduce the Company's
revenues as a result of selling fewer MWh or non-performance penalties or require NRG to incur significant costs as a result of
running one of its higher cost units or obtaining replacement power from third parties in the open market to satisfy the Company's
forward power sales obligations. NRG's inability to operate the Company's plants efficiently, manage capital expenditures and
costs, and generate earnings and cash flow from the Company's asset-based businesses could have a material adverse effect on
the Company's results of operations, financial condition or cash flows. While NRG maintains insurance, obtains warranties from
vendors and obligates contractors to meet certain performance levels, the proceeds of such insurance, warranties or performance
guarantees may not be adequate to cover the Company's lost revenues, increased expenses or liquidated damages payments should
the Company experience equipment breakdown or non-performance by contractors or vendors.
Power generation involves hazardous activities, including acquiring, transporting and unloading fuel, operating large pieces
of rotating equipment and delivering electricity to transmission and distribution systems. In addition to natural risks such as
earthquake, flood, lightning, hurricane and wind, other hazards, such as fire, explosion, structural collapse and machinery failure
are inherent risks in the Company's operations. These and other hazards can cause significant personal injury or loss of life, severe
damage to and destruction of property, plant and equipment, contamination of, or damage to, the environment and suspension of
operations. The occurrence of any one of these events may result in NRG being named as a defendant in lawsuits asserting claims
for substantial damages, including for environmental cleanup costs, personal injury and property damage and fines and/or penalties.
NRG maintains an amount of insurance protection that it considers adequate, but the Company cannot provide any assurance that
its insurance will be sufficient or effective under all circumstances and against all hazards or liabilities to which it may be subject.
A successful claim for which the Company is not fully insured could hurt its financial results and materially harm NRG's financial
condition. NRG cannot provide any assurance that its insurance coverage will continue to be available at all or at rates or on terms
similar to those presently available. Any losses not covered by insurance could have a material adverse effect on the Company's
financial condition, results of operations or cash flows.
Maintenance, expansion and refurbishment of power generation facilities involve significant risks that could result in
unplanned power outages or reduced output and could have a material adverse effect on NRG's results of operations, cash
flows and financial condition.
Many of NRG's facilities are old and require periodic upgrading, improvement, maintenance and repair. Any unexpected
failure, including failure associated with breakdowns, forced outages or any unanticipated capital expenditures could result in
reduced profitability.
NRG cannot be certain of the level of capital expenditures that will be required due to changing environmental and safety
laws (including changes in the interpretation or enforcement thereof), needed facility repairs and unexpected events (such as natural
disasters or terrorist attacks). The unexpected requirement of large capital expenditures could have a material adverse effect on
the Company's liquidity and financial condition.
If NRG significantly modifies a unit, the Company may be required to install the best available control technology or to
achieve the lowest achievable emission rates as such terms are defined under the new source review provisions of the CAA, which
would likely result in substantial additional capital expenditures.
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The Company may incur additional costs or delays in the development, construction and operation of new plants, improvements
to existing plants, or the implementation of environmental control equipment at existing plants and may not be able to recover
their investment or complete the project.
The Company is developing or constructing new generation facilities, improving its existing facilities and adding
environmental controls to its existing facilities. The development, construction, expansion, modification and refurbishment of
power generation facilities involve many risks, including:
•
•
•
•
•
•
inability to obtain sufficient funding on reasonable terms and/or necessary government financial incentives;
delays in obtaining necessary permits and licenses;
inability to sell down interests in a project or develop successful partnering relationships;
environmental remediation of soil or groundwater at contaminated sites;
interruptions to dispatch at the Company's facilities;
supply interruptions;
• work stoppages;
•
labor disputes;
• weather interferences;
•
•
•
•
unforeseen engineering, environmental and geological problems, including those related to climate change;
unanticipated cost overruns;
exchange rate risks; and
failure of contracting parties to perform under contracts, including EPC contractors.
Any of these risks could cause NRG's financial returns on new investments to be lower than expected or could cause the
Company to operate below expected capacity or availability levels, which could result in lost revenues, increased expenses, higher
maintenance costs and penalties. Insurance is maintained to protect against these risks, warranties are generally obtained for limited
periods relating to the construction of each project and its equipment in varying degrees, and contractors and equipment suppliers
are obligated to meet certain performance levels. The insurance, warranties or performance guarantees, however, may not be
adequate to cover increased expenses. As a result, a project may cost more than projected and may be unable to fund principal and
interest payments under its construction financing obligations, if any. A default under such a financing obligation could result in
the Company losing its interest in a power generation facility.
Furthermore, where the Company has partnering relationships with a third party, the Company is subject to the viability and
performance of the third party. The Company's inability to find a replacement contracting party, particularly an EPC contractor,
where the original contracting party has failed to perform, could result in the abandonment of the development and/or construction
of such project, while the Company could remain obligated on other agreements associated with the project, including PPAs.
If the Company is unable to complete the development or construction of a facility or environmental control, or decides to
delay, downsize, or cancel such project, it may not be able to recover its investment in that facility or environmental control.
Furthermore, if construction projects are not completed according to specification, the Company may incur liabilities and suffer
reduced plant efficiency, higher operating costs and reduced net income.
NRG and its subsidiaries have guaranteed the performance of third parties, which may result in substantial costs in the event
of non-performance.
NRG and its subsidiaries have issued certain guarantees of the performance of others, which obligate NRG and its subsidiaries
to perform in the event that the third parties do not perform. In the event of non-performance by the third parties, NRG could incur
substantial cost to fulfill their obligations under these guarantees. Such performance guarantees could have a material impact on
the operating results, financial condition, or cash flows of the Company.
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The Company's development programs are subject to financing and public policy risks that could adversely impact NRG's
financial performance or result in the abandonment of such development projects.
While NRG currently intends to develop and finance its more capital intensive projects on a non-recourse or limited recourse
basis through separate project financed entities and intends to seek additional investments in most of these projects from third
parties, NRG anticipates that it will need to make significant equity investments in these projects. NRG may also decide to develop
and finance some of the projects, such as smaller gas-fired and renewable projects, using corporate financial resources rather than
non-recourse debt, which could subject NRG to significant capital expenditure requirements and to risks inherent in the development
and construction of new generation facilities. In addition to providing some or all of the equity required to develop and build the
proposed projects, NRG's ability to finance these projects on a non-recourse basis is contingent upon a number of factors, including
the terms of the EPC contracts, construction costs, PPAs and fuel procurement contracts, capital markets conditions, the availability
of tax credits and other government incentives for certain new technologies. To the extent NRG is not able to obtain non-recourse
financing for any project or should credit rating agencies attribute a material amount of the project finance debt to NRG's credit,
the financing of the development projects could have a negative impact on the credit ratings of NRG.
NRG may also choose to undertake the repowering, refurbishment or upgrade of current facilities based on the Company's
assessment that such activity will provide adequate financial returns. Such projects often require several years of development
and capital expenditures before commencement of commercial operations, and key assumptions underpinning a decision to make
such an investment may prove incorrect, including assumptions regarding construction costs, timing, available financing and future
fuel and power prices.
Furthermore, the viability of the Company's renewable development projects are contingent on public policy mechanisms
including production and investment tax credits, cash grants, loan guarantees, accelerated depreciation tax benefits, renewable
portfolio standards, or RPS, and carbon-related mandates or controls. These mechanisms have been implemented at the state and
federal levels to support the development of renewable generation, demand-side and smart grid, and other clean infrastructure
technologies. The availability and continuation of public policy support mechanisms will drive a significant part of the economics
and viability of the Company's development program and expansion into clean energy investments.
The Company’s renewables business has a pipeline of projects across the utility scale and distributed generation markets,
including both organically developed projects and projects acquired from third-parties. If a number of the projects fail to
proceed to construction or are not completed, the Company’s business, financial condition or operating results could be
materially adversely affected.
The development process is long and includes many steps such as project siting, financing, construction, permitting,
government approvals and the negotiation of project development agreements. There can be no assurance that the projects in the
Company’s renewables project pipeline will be completed on schedule or within budget, generate revenues, receive the necessary
financing for construction, among other risks. As the Company develops its renewables project pipeline, some of the projects in
the pipeline may not be completed or proceed to construction as a result of various factors. These factors may include changes in
applicable laws and regulations, including government incentives, environmental concerns regarding a project or changes in the
economics related to a project, including the ability to finance a particular project. If a number of projects are not completed, the
Company’s business, financial condition or operating results could be materially adversely affected.
Supplier and/or customer concentration at certain of NRG's facilities may expose the Company to significant financial credit
or performance risks.
NRG often relies on a single contracted supplier or a small number of suppliers for the provision of fuel, transportation of
fuel and other services required for the operation of certain of its facilities. If these suppliers cannot perform, the Company utilizes
the marketplace to provide these services. There can be no assurance that the marketplace can provide these services as, when and
where required or at comparable prices.
At times, NRG relies on a single customer or a few customers to purchase all or a significant portion of a facility's output,
in some cases under long-term agreements that account for a substantial percentage of the anticipated revenue from a given facility.
The Company has also hedged a portion of its exposure to power price fluctuations through forward fixed price power sales and
natural gas price swap agreements. Counterparties to these agreements may breach or may be unable to perform their obligations.
NRG may not be able to enter into replacement agreements on terms as favorable as its existing agreements, or at all. If the
Company was unable to enter into replacement PPAs, the Company would sell its plants' power at market prices. If the Company
is unable to enter into replacement fuel or fuel transportation purchase agreements, NRG would seek to purchase the Company's
fuel requirements at market prices, exposing the Company to market price volatility and the risk that fuel and transportation may
not be available during certain periods at any price.
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The failure of any supplier or customer to fulfill its contractual obligations to NRG could have a material adverse effect on
the Company's financial results. Consequently, the financial performance of the Company's facilities is dependent on the credit
quality of, and continued performance by, suppliers and customers.
The Company's retail businesses may lose a significant number of retail customers due to competitive marketing activity by
other retail electricity providers which could adversely affect the financial performance of the Company's retail businesses.
The Company's retail businesses face competition for customers. Competitors may offer different products, lower prices,
and other incentives, which may attract customers away from NRG's retail businesses. In some retail electricity markets, the
principal competitor may be the incumbent utility. The incumbent utility has the advantage of long-standing relationships with
its customers and strong brand recognition. Furthermore, NRG's retail businesses may face competition from a number of other
energy service providers, other energy industry participants, or nationally branded providers of consumer products and services,
who may develop businesses that will compete with NRG and its retail businesses.
NRG relies on power transmission facilities that it does not own or control and that are subject to transmission constraints
within a number of the Company's core regions. If these facilities fail to provide NRG with adequate transmission capacity,
the Company may be restricted in its ability to deliver wholesale electric power to its customers and the Company may either
incur additional costs or forego revenues. Conversely, improvements to certain transmission systems could also reduce revenues.
NRG depends on transmission facilities owned and operated by others to deliver the wholesale power it sells from the
Company's power generation plants to its customers. If transmission is disrupted, or if the transmission capacity infrastructure is
inadequate, NRG's ability to sell and deliver wholesale power may be adversely impacted. If a region's power transmission
infrastructure is inadequate, the Company's recovery of wholesale costs and profits may be limited. If restrictive transmission
price regulation is imposed, the transmission companies may not have sufficient incentive to invest in expansion of transmission
infrastructure. The Company also cannot predict whether transmission facilities will be expanded in specific markets to
accommodate competitive access to those markets.
In addition, in certain of the markets in which NRG operates, energy transmission congestion may occur and the Company
may be deemed responsible for congestion costs if it schedules delivery of power between congestion zones during times when
congestion occurs between the zones. If NRG were liable for such congestion costs, the Company's financial results could be
adversely affected.
The Company has a significant amount of generation located in load pockets, making that generation valuable, particularly
with respect to maintaining the reliability of the transmission grid. Expansion of transmission systems to reduce or eliminate these
load pockets could negatively impact the value or profitability of the Company's existing facilities in these areas.
The Company’s use and enjoyment of real property rights for its projects may be adversely affected by the rights of lienholders
and leaseholders that are superior to those of the grantors of those real property rights to the Company.
Solar and wind projects generally are, and are likely to be, located on land occupied by the project pursuant to long-term
easements and leases. The ownership interests in the land subject to these easements and leases may be subject to mortgages
securing loans or other liens (such as tax liens) and other easement and lease rights of third parties (such as leases of oil or mineral
rights) that were created prior to the project’s easements and leases. As a result, the project’s rights under these easements or leases
may be subject, and subordinate, to the rights of those third parties. The Company performs title searches and obtains title insurance
to protect itself against these risks. Such measures may, however, be inadequate to protect the Company against all risk of loss of
its rights to use the land on which the renewable projects are located, which could have a material adverse effect on the Company’s
business, financial condition and results of operations.
One of the Company's subsidiaries is a publicly traded corporation, NRG Yield, Inc., which may involve a greater exposure
to legal liability than the Company's historic business operations.
One of the Company's subsidiaries is NRG Yield, Inc., a publicly traded corporation. NRG's controlling voting interest in
NRG Yield, Inc. and the position of certain of its executive officers that are serving on the Board of Directors of NRG Yield, Inc.
or as executive officers may increase the possibility of claims of breach of fiduciary duties including claims of conflicts of interest
related to NRG Yield, Inc. Any liability resulting from such claims could have a material adverse effect on NRG's future business,
financial condition, results of operations and cash flows.
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Because NRG owns less than a majority of the ownership interests of some of its project investments, the Company cannot
exercise complete control over their operations.
NRG has limited control over the operation of some project investments and joint ventures because the Company's investments
are in projects where it beneficially owns less than a majority of the ownership interests. NRG seeks to exert a degree of influence
with respect to the management and operation of projects in which it owns less than a majority of the ownership interests by
negotiating to obtain positions on management committees or to receive certain limited governance rights, such as rights to veto
significant actions. However, the Company may not always succeed in such negotiations. NRG may be dependent on its co-
venturers to operate such projects. The Company's co-venturers may not have the level of experience, technical expertise, human
resources management and other attributes necessary to operate these projects optimally. The approval of co-venturers also may
be required for NRG to receive distributions of funds from projects or to transfer the Company's interest in projects.
NRG may be unable to integrate the operations of acquired entities in the manner expected.
NRG enters into acquisitions that result in various benefits, including, among other things, cost savings and operating
efficiencies. Achieving the anticipated benefits of these acquisitions depends on whether the businesses can be integrated into
NRG in an efficient and effective manner. The integration process could take longer than anticipated and could result in the loss
of valuable employees, the disruption of NRG's businesses, processes and systems or inconsistencies in standards, controls,
procedures, practices, policies and compensation arrangements, any of which could adversely affect the Company's ability to
achieve the anticipated benefits of the acquisitions. NRG may have difficulty addressing possible differences in corporate cultures
and management philosophies. Failure to achieve these anticipated benefits could result in increased costs or decreases in the
amount of expected revenues and could adversely affect NRG's future business, financial condition, operating results and prospects.
Future acquisition activities may have materially adverse effects.
NRG may seek to acquire additional companies or assets in the Company's industry or which complement the Company's
industry. The acquisition of companies and assets is subject to substantial risks, including the failure to identify material problems
during due diligence, the risk of over-paying for assets, the ability to retain customers and the inability to arrange financing for
an acquisition as may be required or desired. Further, the integration and consolidation of acquisitions requires substantial human,
financial and other resources and, ultimately, the Company's acquisitions may not be successfully integrated. There can be no
assurances that any future acquisitions will perform as expected or that the returns from such acquisitions will support the
indebtedness incurred to acquire them or the capital expenditures needed to develop them.
NRG's business, financial condition and results of operations could be adversely impacted by strikes or work stoppages by its
unionized employees or inability to replace employees as they retire.
As of December 31, 2016, approximately 30% of NRG's employees at its U.S. generation plants were covered by collective
bargaining agreements. In the event that the Company's union employees strike, participate in a work stoppage or slowdown or
engage in other forms of labor strife or disruption, NRG would be responsible for procuring replacement labor or the Company
could experience reduced power generation or outages. Although NRG's ability to procure such labor is uncertain, contingency
staffing planning is completed as part of each respective contract negotiations. Strikes, work stoppages or the inability to negotiate
future collective bargaining agreements on favorable terms could have a material adverse effect on the Company's business,
financial condition, results of operations and cash flows. In addition, a number of the Company's employees at NRG's plants are
close to retirement. The Company's inability to replace retiring workers could create potential knowledge and expertise gaps as
such workers retire.
Changes in technology may impair the value of NRG's power plants.
Research and development activities are ongoing to provide alternative and more efficient technologies to produce power,
including "clean" coal and coal gasification, wind, photovoltaic (solar) cells, energy storage, and improvements in traditional
technologies and equipment, such as more efficient gas turbines. Advances in these or other technologies could reduce the costs
of power production to a level below what the Company has currently forecasted, which could adversely affect its cash flows,
results of operations or competitive position.
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Risks that are beyond NRG's control, including but not limited to acts of terrorism or related acts of war, natural disaster,
hostile cyber intrusions or other catastrophic events could have a material adverse effect on NRG's financial condition, results
of operations and cash flows.
NRG's generation facilities and the facilities of third parties on which they rely may be targets of terrorist activities, as well
as events occurring in response to or in connection with them, that could cause environmental repercussions and/or result in full
or partial disruption of the facilities ability to generate, transmit, transport or distribute electricity or natural gas. Strategic targets,
such as energy-related facilities, may be at greater risk of future terrorist activities than other domestic targets. Hostile cyber
intrusions, including those targeting information systems as well as electronic control systems used at the generating plants and
for the distribution systems, could severely disrupt business operations and result in loss of service to customers, as well as
significant expense to repair security breaches or system damage. Any such environmental repercussions or disruption could result
in a significant decrease in revenues or significant reconstruction or remediation costs, beyond what could be recovered through
insurance policies which could have a material adverse effect on the Company's financial condition, results of operations and cash
flows. In addition, significant weather events or terrorist actions could damage or shut down the power transmission and distribution
facilities upon which the Company's retail businesses are dependent. Power supply may be sold at a loss if these events cause a
significant loss of retail customer load.
The operation of NRG’s businesses is subject to cyber-based security and integrity risk.
Numerous functions affecting the efficient operation of NRG’s businesses are dependent on the secure and reliable storage,
processing and communication of electronic data and the use of sophisticated computer hardware and software systems. The
operation of NRG’s generation plants, including STP, and of NRG's energy and fuel trading businesses are reliant on cyber-based
technologies and, therefore, subject to the risk that such systems could be the target of disruptive actions, particularly through
cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, or otherwise be
compromised by unintentional events. As a result, operations could be interrupted, property could be damaged and sensitive
customer information could be lost or stolen, causing NRG to incur significant losses of revenues, other substantial liabilities and
damages, costs to replace or repair damaged equipment and damage to NRG's reputation. In addition, NRG may experience
increased capital and operating costs to implement increased security for its cyber systems and plants.
The Company's retail businesses are subject to the risk that sensitive customer data may be compromised, which could result
in an adverse impact to its reputation and/or the results of operations of the Company's retail businesses.
The Company's retail businesses require access to sensitive customer data in the ordinary course of business. Examples of
sensitive customer data are names, addresses, account information, historical electricity usage, expected patterns of use, payment
history, credit bureau data, credit and debit card account numbers, driver's license numbers, social security numbers and bank
account information. NRG's retail businesses may need to provide sensitive customer data to vendors and service providers, who
require access to this information in order to provide services, such as call center operations, to NRG's retail businesses. If a
significant breach occurred, the reputation of NRG and its retail businesses may be adversely affected, customer confidence may
be diminished, or NRG and its retail businesses may be subject to legal claims, any of which may contribute to the loss of customers
and have a negative impact on the business and/or results of operations.
Risks Related to Governmental Regulation and Laws
NRG's business is subject to substantial governmental regulation and may be adversely affected by legislative or regulatory
changes, as well as liability under, or any future inability to comply with, existing or future regulations or requirements.
NRG's business is subject to extensive U.S. federal, state and local laws and foreign laws. Compliance with the requirements
under these legal and regulatory regimes may cause the Company to incur significant additional costs, and failure to comply with
such requirements could result in the shutdown of a non-complying facility, the imposition of liens, fines, and/or civil or criminal
liability.
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Public utilities under the FPA are required to obtain FERC acceptance of their rate schedules for wholesale sales of electricity.
Except for ERCOT generating facilities and power marketers, all of NRG's non-qualifying facility generating companies and
power marketing affiliates in the U.S. make sales of electricity in interstate commerce and are public utilities for purposes of the
FPA. FERC has granted each of NRG's generating and power marketing companies that make sales of electricity outside of ERCOT
the authority to sell electricity at market-based rates. FERC's orders that grant NRG's generating and power marketing companies
market-based rate authority reserve the right to revoke or revise that authority if FERC subsequently determines that NRG can
exercise market power in transmission or generation, create barriers to entry, or engage in abusive affiliate transactions. In addition,
NRG's market-based sales are subject to certain market behavior rules, and if any of NRG's generating and power marketing
companies were deemed to have violated those rules, they are subject to potential disgorgement of profits associated with the
violation and/or suspension or revocation of their market-based rate authority. If NRG's generating and power marketing companies
were to lose their market-based rate authority, such companies would be required to obtain FERC's acceptance of a cost-of-service
rate schedule and could become subject to the accounting, record-keeping, and reporting requirements that are imposed on utilities
with cost-based rate schedules. This could have a material adverse effect on the rates NRG charges for power from its facilities.
Substantially all of the Company's generation assets are also subject to the reliability standards promulgated by the designated
Electric Reliability Organization (currently NERC) and approved by FERC. If NRG fails to comply with the mandatory reliability
standards, NRG could be subject to sanctions, including substantial monetary penalties and increased compliance obligations.
NRG is also affected by legislative and regulatory changes, as well as changes to market design, market rules, tariffs, cost allocations,
and bidding rules that occur in the existing ISOs. The ISOs that oversee most of the wholesale power markets impose, and in the
future may continue to impose, mitigation, including price limitations, offer caps, non-performance penalties and other mechanisms
to address some of the volatility and the potential exercise of market power in these markets. These types of price limitations and
other regulatory mechanisms may have a material adverse effect on the profitability of NRG's generation facilities that sell energy
and capacity into the wholesale power markets.
The regulatory environment has undergone significant changes in the last several years due to state and federal policies
affecting wholesale and retail competition and the creation of incentives for the addition of large amounts of new renewable
generation and, in some cases, transmission. These changes are ongoing, and the Company cannot predict the future design of
the wholesale power markets or the ultimate effect that the changing regulatory environment will have on NRG's business. In
addition, in some of these markets, interested parties have proposed material market design changes, including the elimination of
a single clearing price mechanism, as well as proposals to reinstate the vertical monopoly utility of the markets or require divestiture
by generating companies to reduce their market share. If competitive restructuring of the electric power markets is reversed,
discontinued, or delayed, the Company's business prospects and financial results could be negatively impacted. In addition, since
2010, there have been a number of reforms to the regulation of the derivatives markets, both in the United States and internationally.
These regulations, and any further changes thereto, or adoption of additional regulations, including any regulations relating to
position limits on futures and other derivatives or margin for derivatives, could negatively impact NRG’s ability to hedge its
portfolio in an efficient, cost-effective manner by, among other things, potentially decreasing liquidity in the forward commodity
and derivatives markets or limiting NRG’s ability to utilize non-cash collateral for derivatives transactions.
NRG’s business may be affected by state interference in the competitive wholesale marketplace.
NRG’s legacy generation and competitive retail businesses rely on a competitive wholesale marketplace. The competitive
wholesale marketplace may be undermined by out-of-market subsidies provided by states or state entities, including bailouts of
uneconomic nuclear plants, imports of power from Canada, renewable mandates or subsidies, as well as out-of-market payments
to new generators. These out-of-market subsidies to existing or new generation undermine the competitive wholesale marketplace,
which can lead to premature retirement of existing facilities, including those owned by the Company. If these measures continue,
capacity and energy prices may be suppressed, and the Company may not be successful in its efforts to insulate the competitive
market from this interference.
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Government regulations providing incentives for renewable generation could change at any time and such changes may
adversely impact NRG's business, revenues, margins, results of operations and cash flows.
The Company's growth strategy depends in part on government policies that support renewable generation and enhance the
economic viability of owning renewable electric generation assets. Renewable generation assets currently benefit from various
federal, state and local governmental incentives such as ITCs, PTCs, cash grants in lieu of ITCs, loan guarantees, RPS programs,
modified accelerated cost-recovery system of depreciation and bonus depreciation. For example, in December 2015, the U.S.
Congress enacted an extension of the 30% solar ITC so that projects which began construction in 2016 through 2019 will continue
to qualify for the 30% ITC. Projects beginning construction in 2020 and 2021 will be eligible for the ITC at the rates of 26% and
22%, respectively. The same legislation also extended the 10-year wind PTC for wind projects which began construction in 2016
through 2019. Wind projects which begin construction in the years 2017, 2018 and 2019 are eligible for PTCs at 80%, 60% and
40% of the statutory rate per kWh, respectively.
Many states have adopted RPS programs mandating that a specified percentage of electricity sales come from eligible sources
of renewable energy. However, the regulations that govern the RPS programs, including pricing incentives for renewable energy,
or reasonableness guidelines for pricing that increase valuation compared to conventional power (such as a projected value for
carbon reduction or consideration of avoided integration costs), may change. If the RPS requirements are reduced or eliminated,
it could lead to fewer future power contracts or lead to lower prices for the sale of power in future power contracts, which could
have a material adverse effect on the Company's future growth prospects.
Such material adverse effects may result from decreased revenues, reduced economic returns on certain project company
investments, increased financing costs, and/or difficulty obtaining financing. Furthermore, the ARRA included incentives to
encourage investment in the renewable energy sector, such as cash grants in lieu of ITCs, bonus depreciation and expansion of
the U.S. DOE loan guarantee program. It is uncertain what loan guarantees may be made by the U.S. DOE loan guarantee program
in the future. In addition, the cash grant in lieu of ITCs program only applies to facilities that commenced construction prior to
December 31, 2011, which commencement date may be determined in accordance with the safe harbor if more than 5% of the
total cost of the eligible property was paid or incurred by December 31, 2011.
If the Company is unable to utilize various federal, state and local government incentives to acquire additional renewable
assets in the future, or the terms of such incentives are revised in a manner that is less favorable to the Company, it may suffer a
material adverse effect on the business, financial condition, results of operations and cash flows.
The integration of the Capacity Performance product into the PJM market and the Pay-for-Performance mechanism in ISO-
NE could lead to substantial changes in capacity income and non-performance penalties, which could have a material adverse
effect on NRG’s results of operations, financial condition and cash flows.
Both ISO-NE and PJM operate a pay-for-performance model where capacity payments are modified based on real-time
generator performance. Capacity market prices are sensitive to design parameters, as well as additions of new capacity. NRG
may experience substantial changes in capacity income and non-performance penalties, which could have a material adverse effect
on NRG’s results of operations, financial condition and cash flows.
Certain of NRG's long-term bilateral contracts result from state-mandated procurements and could be declared invalid by a
court of competent jurisdiction.
A significant portion of NRG’s revenues are derived from long-term bilateral contracts with utilities that are regulated by
their respective states, and have been entered into pursuant to certain state programs. Certain long-term contracts that other
companies have with state-regulated utilities have been challenged in federal court and have been declared unconstitutional on
the grounds that the rate for energy and capacity established by the contracts impermissibly conflicts with the rate for energy and
capacity established by FERC pursuant to the FPA. If certain of the Company's state-mandated agreements with utilities are ever
held to be invalid, NRG may be unable to replace such contracts, which could have a material adverse effect on NRG's business,
financial condition, results of operations and cash flows.
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NRG's ownership interest in a nuclear power facility subjects the Company to regulations, costs and liabilities uniquely
associated with these types of facilities.
Under the Atomic Energy Act of 1954, as amended, or AEA, ownership and operation of STP, of which NRG indirectly owns
a 44% interest, is subject to regulation by the NRC. Such regulation includes licensing, inspection, enforcement, testing, evaluation
and modification of all aspects of nuclear reactor power plant design and operation, environmental and safety performance, technical
and financial qualifications, decommissioning funding assurance and transfer and foreign ownership restrictions. The current
facility operating licenses for STP expire on August 20, 2027 (Unit 1) and December 15, 2028 (Unit 2). STP has applied for the
renewal of such licenses for a period of 20 years beyond the expirations of the current licenses. STP Unit 1 was operating with a
single-cycle license amendment issued on December 11, 2015 after a control rod was determined to be inoperable following a
scheduled refueling and maintenance outage. The approved license amendment to support STP Unit 1 operation with the inoperable
control rod and the associated control rod drive shaft removed was granted by the NRC on December 21, 2016.
There are unique risks to owning and operating a nuclear power facility. These include liabilities related to the handling,
treatment, storage, disposal, transport, release and use of radioactive materials, particularly with respect to spent nuclear fuel, and
uncertainties regarding the ultimate, and potential exposure to, technical and financial risks associated with modifying or
decommissioning a nuclear facility. The NRC could require the shutdown of the plant for safety reasons or refuse to permit restart
of the unit after unplanned or planned outages. New or amended NRC safety and regulatory requirements may give rise to additional
operation and maintenance costs and capital expenditures. Additionally, aging equipment may require more capital expenditures
to keep each of these nuclear power plants operating efficiently. This equipment is also likely to require periodic upgrading and
improvement. Any unexpected failure, including failure associated with breakdowns, forced outages, or any unanticipated capital
expenditures, could result in reduced profitability. STP will be obligated to continue storing spent nuclear fuel if the U.S. DOE
continues to fail to meet its contractual obligations to STP made pursuant to the U.S. Nuclear Waste Policy Act of 1982 to accept
and dispose of STP's spent nuclear fuel. See also Item 1 — Regulatory Matters — Nuclear Operations - Decommissioning Trusts
and Item 1 — Environmental Matters — Federal Environmental Initiatives — Nuclear Waste for further discussion. Costs
associated with these risks could be substantial and could have a material adverse effect on NRG's results of operations, financial
condition or cash flow to the extent not covered by the Decommissioning Trusts or recovered from ratepayers. In addition, to the
extent that all or a part of STP is required by the NRC to permanently or temporarily shut down or modify its operations, or is
otherwise subject to a forced outage, NRG may incur additional costs to the extent it is obligated to provide power from more
expensive alternative sources — either NRG's own plants, third party generators or the ERCOT — to cover the Company's then
existing forward sale obligations. Such shutdown or modification could also lead to substantial costs related to the storage and
disposal of radioactive materials and spent nuclear fuel.
While STP maintains property and liability insurance for losses related to nuclear operations, there may be limitations on
the amounts and types of insurance commercially available. See also Item 15 — Note 22, Commitments and Contingencies,
Nuclear Insurance. An accident at STP or another nuclear facility could have a material adverse effect on NRG's financial condition,
its operational results, or liquidity as losses may exceed the insurance coverage available and/or may result in the obligation to
pay retrospective premium obligations.
NRG is subject to environmental laws that impose extensive and increasingly stringent requirements on the Company's ongoing
operations, as well as potentially substantial liabilities arising out of environmental contamination. These environmental
requirements and liabilities could adversely impact NRG's results of operations, financial condition and cash flows.
NRG is subject to the environmental laws of foreign and U.S., federal, state and local authorities. The Company must comply
with numerous environmental laws and obtain numerous governmental permits and approvals to build and operate the Company's
plants. Should NRG fail to comply with any environmental requirements that apply to its operations, the Company could be
subject to administrative, civil and/or criminal liability and fines, and regulatory agencies could take other actions seeking to curtail
the Company's operations. In addition, when new requirements take effect or when existing environmental requirements are
revised, reinterpreted or subject to changing enforcement policies, NRG's business, results of operations, financial condition and
cash flows could be adversely affected.
Federal and state environmental laws generally have become more stringent although this trend could change with respect
to federal laws under the new U.S. presidential administration.
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NRG's businesses are subject to physical, market and economic risks relating to potential effects of climate change.
Climate change may produce changes in weather or other environmental conditions, including temperature or precipitation
levels, and thus may impact consumer demand for electricity. In addition, the potential physical effects of climate change, such
as increased frequency and severity of storms, floods and other climatic events, could disrupt NRG's operations and cause it to
incur significant costs in preparing for or responding to these effects. These or other meteorological changes could lead to increased
operating costs, capital expenses or power purchase costs. Climate change could also affect the availability of a secure and
economical supply of water in some locations, which is essential for the continued operation of NRG's generation plants.
GHG regulation could increase the cost of electricity, particularly power generated by fossil fuels, and such increases could
have a depressive effect on regional economies. Reduced economic and consumer activity in NRG's service areas — both generally
and specific to certain industries and consumers accustomed to previously lower cost power — could reduce demand for the power
NRG generates and markets. Also, demand for NRG's energy-related services could be similarly reduced by consumers’ preferences
or market factors favoring energy efficiency, low-carbon power sources or reduced electricity usage.
Policies at the national, regional and state levels to regulate GHG emissions, as well as climate change, could adversely impact
NRG's results of operations, financial condition and cash flows.
NRG's GHG emissions for 2016 can be found in Item 1, Business — Environmental Matters. On October 23, 2015, the EPA
promulgated the final GHG emissions rules for new and existing fossil-fuel-fired electric generating units. The impact of these
newly promulgated rules and further legislation or regulation of GHGs on the Company's financial performance will depend on
a number of factors, including the actions of the new U.S. presidential administration, the outcome of the legal challenges to
promulgated regulations, and the extent to which NRG will be entitled to receive CO2 emissions credits without having to purchase
them in an auction or on the open market.
The Company operates generating units in Connecticut, Delaware, Maryland, Massachusetts, and New York that are subject
to RGGI, which is a regional cap and trade system. In 2013, each of these states finalized a rule that reduced and will continue to
reduce the number of allowances through 2020. The nine RGGI states are re-evaluating the program and may alter the rules to
further reduce the number of allowances. The revisions being currently contemplated could adversely impact NRG's results of
operations, financial condition and cash flows.
California has a CO2 cap and trade program for electric generating units greater than 25 MW. The impact on the Company
depends on the cost of the allowances and the ability to pass these costs through to customers.
On October 26, 2015, the EPA promulgated a rule that reduces the ozone NAAQS to 0.070 ppm. If it survives legal challenges,
this more stringent NAAQS will obligate the states to develop plans to reduce NOx (an ozone precursor), which could affect some
of the Company's units.
Hazards customary to the power production industry include the potential for unusual weather conditions, which could affect
fuel pricing and availability, the Company's route to market or access to customers, i.e., transmission and distribution lines, or
critical plant assets. To the extent that climate change contributes to the frequency or intensity of weather-related events, NRG's
operations and planning process could be affected.
NRG's retail businesses are subject to changing state rules and regulations that could have a material impact on the profitability
of its business lines.
The competitiveness of NRG's retail businesses is partially dependent on state regulatory policies that establish the structure,
rules, terms and conditions on which services are offered to retail customers. These state policies, which can include controls on
the retail rates NRG's retail businesses can charge, the imposition of additional costs on sales, restrictions on the Company's ability
to obtain new customers through various marketing channels and disclosure requirements, which can affect the competitiveness
of NRG's retail businesses. Additionally, state or federal imposition of net metering or RPS programs can make it more or less
expensive for retail customers to supplement or replace their reliance on grid power. NRG's retail businesses have limited ability
to influence development of these policies, and its business model may be more or less effective, depending on changes to the
regulatory environment.
49
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The Company's international operations are exposed to political and economic risks, commercial instability and events
beyond the Company's control in the countries in which it operates, which risks may negatively impact the Company's
business.
The Company's international operations are dependent upon products manufactured, purchased and sold in the U.S. and
internationally, including in countries with political and economic instability. In some cases, these countries have greater political
and economic volatility and greater vulnerability to infrastructure and labor disruptions than in NRG's other markets. The
Company's business could be negatively impacted by adverse fluctuations in freight costs, limitations on shipping and receiving
capacity, and other disruptions in the transportation and shipping infrastructure at important geographic points of exit and entry
for the Company's products. Operating and seeking to expand business in a number of different regions and countries exposes the
Company to a number of risks, including:
• multiple and potentially conflicting laws, regulations and policies that are subject to change;
•
•
•
•
imposition of currency restrictions on repatriation of earnings or other restraints;
imposition of burdensome tariffs or quotas;
national and international conflict, including terrorist acts; and
political and economic instability or civil unrest that may severely disrupt economic activity in affected countries.
The occurrence of one or more of these events may negatively impact the Company's business, results of operations and
financial condition.
The Company may potentially be affected by emerging technologies that may over time affect change in capacity markets and
the energy industry overall with the inclusion of distributed generation and clean technology.
Some technologies like, distributed renewable energy technologies, broad consumer adoption of electric vehicles and energy
storage devices could affect the price of energy. These distributed technologies may affect the financial viability of utility
counterparties and could have significant impacts on wholesale market prices.
Risks Related to Economic and Financial Market Conditions
NRG's level of indebtedness could adversely affect its ability to raise additional capital to fund its operations or return capital
to stockholders. It could also expose it to the risk of increased interest rates and limit its ability to react to changes in the
economy or its industry.
NRG's substantial debt could have negative consequences, including:
•
•
•
•
•
•
increasing NRG's vulnerability to general economic and industry conditions;
requiring a substantial portion of NRG's cash flow from operations to be dedicated to the payment of principal and interest
on its indebtedness, therefore reducing NRG's ability to pay dividends to holders of its preferred or common stock or to
use its cash flow to fund its operations, capital expenditures and future business opportunities;
limiting NRG's ability to enter into long-term power sales or fuel purchases which require credit support;
exposing NRG to the risk of increased interest rates because certain of its borrowings, including borrowings under its
senior secured credit facility are at variable rates of interest;
limiting NRG's ability to obtain additional financing for working capital including collateral postings, capital expenditures,
debt service requirements, acquisitions and general corporate or other purposes; and
limiting NRG's ability to adjust to changing market conditions and placing it at a competitive disadvantage compared to
its competitors who have less debt.
The indentures for NRG's notes and senior secured credit facility contain financial and other restrictive covenants that may
limit the Company's ability to return capital to stockholders or otherwise engage in activities that may be in its long-term best
interests. Furthermore, financial and other restrictive covenants contained in any project level subsidiary debt may limit the ability
of NRG to receive distributions from such subsidiary. NRG's failure to comply with those covenants could result in an event of
default which, if not cured or waived, could result in the acceleration of all of the Company's indebtedness.
50
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In addition, NRG's ability to arrange financing, either at the corporate level, a non-recourse project-level subsidiary or
otherwise, and the costs of such capital, are dependent on numerous factors, including:
•
•
•
general economic and capital market conditions;
credit availability from banks and other financial institutions;
investor confidence in NRG, its partners and the regional wholesale power markets;
• NRG's financial performance and the financial performance of its subsidiaries;
• NRG's level of indebtedness and compliance with covenants in debt agreements;
• maintenance of acceptable credit ratings;
•
•
cash flow; and
provisions of tax and securities laws that may impact raising capital.
NRG may not be successful in obtaining additional capital for these or other reasons. The failure to obtain additional capital
from time to time may have a material adverse effect on its business and operations.
Adverse economic conditions could adversely affect NRG’s business, financial condition, results of operations and cash
flows.
Adverse economic conditions and declines in wholesale energy prices, partially resulting from adverse economic conditions,
may impact NRG’s earnings. The breadth and depth of negative economic conditions may have a wide-ranging impact on the U.S.
business environment, including NRG’s businesses. In addition, adverse economic conditions also reduce the demand for energy
commodities. Reduced demand from negative economic conditions continues to impact the key domestic wholesale energy markets
NRG serves. The combination of lower demand for power and increased supply of natural gas has put downward price pressure
on wholesale energy markets in general, further impacting NRG’s energy marketing results. In general, economic and commodity
market conditions will continue to impact NRG’s unhedged future energy margins, liquidity, earnings growth and overall financial
condition. In addition, adverse economic conditions, declines in wholesale energy prices, reduced demand for power and other
factors may negatively impact the trading price of NRG’s common stock and impact forecasted cash flows, which may require
NRG to evaluate its goodwill and other long-lived assets for impairment. Any such impairment could have a material impact on
NRG’s financial statements.
Goodwill and/or other intangible assets not subject to amortization that NRG has recorded in connection with its acquisitions
are subject to mandatory annual impairment evaluations and as a result, the Company could be required to write off some or
all of this goodwill and other intangible assets, which may adversely affect the Company's financial condition and results of
operations.
In accordance with ASC 350, Intangibles — Goodwill and Other, or ASC 350, goodwill is not amortized but is reviewed
annually or more frequently for impairment and other intangibles are also reviewed at least annually or more frequently, if certain
conditions exist, and may be amortized. Any reduction in or impairment of the value of goodwill or other intangible assets will
result in a charge against earnings which could materially adversely affect NRG's reported results of operations and financial
position in future periods.
A valuation allowance may be required for NRG's deferred tax assets.
A valuation allowance may need to be recorded against the net deferred tax assets, which are predominantly related to NRG
Yield, Inc., that the Company estimates as more likely than not to be unrealizable, based on available evidence including cumulative
and forecasted pretax book earnings at the time the estimate is made. A valuation allowance related to deferred tax assets can be
affected by changes to tax laws, statutory tax rates and future taxable income levels. In the event that the Company determines
that it would not be able to realize all or a portion of its net deferred tax assets in the future, the Company would reduce such
amounts accordingly through a charge to income tax expense in the period in which that determination was made, which could
have a material adverse impact on the Company's financial condition and results of operations.
51
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The Company has made investments, and may continue to make investments, in new business initiatives predominantly focused
on consumer products and in markets that may not be successful, may not achieve the intended financial results or may result
in product liability and reputational risk that could adversely affect the Company.
NRG continues to pursue growth in its existing businesses and markets and further diversification across the competitive
energy value chain. NRG is continuing to pursue investment opportunities in renewables, consumer products and distributed
generation. Such initiatives may involve significant risks and uncertainties, including distraction of management from current
operations, inadequate return on capital, and unidentified issues not discovered in the diligence performed prior to launching an
initiative or entering a market.
As part of these initiatives, the Company may be liable to customers for any damage caused to customers’ homes, facilities,
belongings or property during the installation of Company products and systems, such as residential solar systems and mass market
back-up generators. In addition, shortages of skilled labor for Company projects could significantly delay a project or otherwise
increase its costs. The products that the Company sells or manufactures may expose the Company to product liability claims
relating to personal injury, death, or environmental or property damage, and may require product recalls or other actions. Although
the Company maintains liability insurance, the Company cannot be certain that its coverage will be adequate for liabilities actually
incurred or that insurance will continue to be available to the Company on economically reasonable terms, or at all. Further, any
product liability claim or damage caused by the Company could significantly impair the Company’s brand and reputation, which
may result in a failure to maintain customers and achieve the Company’s desired growth initiatives in these new businesses.
52
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 52
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K of NRG Energy, Inc., or NRG or the Company, includes forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities
Exchange Act of 1934, as amended, or Exchange Act. The words "believes," "projects," "anticipates," "plans," "expects," "intends,"
"estimates" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause NRG's actual results, performance and achievements,
or industry results, to be materially different from any future results, performance or achievements expressed or implied by such
forward-looking statements. These factors, risks and uncertainties include the factors described under Item 1A — Risk Factors
Related to NRG Energy, Inc. and the following:
• GenOn's and certain of its subsidiaries' ability to continue as a going concern;
• General economic conditions, changes in the wholesale power markets and fluctuations in the cost of fuel;
• Volatile power supply costs and demand for power;
• Hazards customary to the power production industry and power generation operations such as fuel and electricity price
volatility, unusual weather conditions, catastrophic weather-related or other damage to facilities, unscheduled generation
outages, maintenance or repairs, unanticipated changes to fuel supply costs or availability due to higher demand, shortages,
transportation problems or other developments, environmental incidents, or electric transmission or gas pipeline system
constraints and the possibility that NRG may not have adequate insurance to cover losses as a result of such hazards;
• The effectiveness of NRG's risk management policies and procedures, and the ability of NRG's counterparties to satisfy
their financial commitments;
• Counterparties' collateral demands and other factors affecting NRG's liquidity position and financial condition;
• NRG's ability to operate its businesses efficiently, manage capital expenditures and costs tightly, and generate earnings
and cash flows from its asset-based businesses in relation to its debt and other obligations;
• NRG's ability to enter into contracts to sell power and procure fuel on acceptable terms and prices;
• The liquidity and competitiveness of wholesale markets for energy commodities;
• Government regulation, including compliance with regulatory requirements and changes in market rules, rates, tariffs
and environmental laws and increased regulation of carbon dioxide and other GHG emissions;
• Changes in law, including judicial decisions;
•
Price mitigation strategies and other market structures employed by ISOs or RTOs that result in a failure to adequately
and fairly compensate NRG's generation units;
• NRG's ability to mitigate forced outage risk for units subject to capacity performance requirements in PJM, performance
incentives in ISO-NE, and scarcity pricing in ERCOT;
• NRG's ability to borrow funds and access capital markets, as well as NRG's substantial indebtedness and the possibility
that NRG may incur additional indebtedness going forward;
• NRG's ability to receive loan guarantees or cash grants to support development projects;
• Operating and financial restrictions placed on NRG and its subsidiaries that are contained in the indentures governing
NRG's outstanding notes, in NRG's 2016 Senior Credit Facility, and in debt and other agreements of certain of NRG
subsidiaries and project affiliates generally;
• Cyber terrorism and inadequate cybersecurity, or the occurrence of a catastrophic loss and the possibility that NRG
may not have adequate insurance to cover losses resulting from such hazards or the inability of NRG's insurers to
provide coverage;
• NRG's ability to develop and build new power generation facilities, including new renewable projects;
• NRG's ability to develop and innovate new products as retail and wholesale markets continue to change and evolve;
• NRG's ability to implement its strategy of finding ways to meet the challenges of climate change, clean air and protecting
natural resources while taking advantage of business opportunities;
• NRG's ability to increase cash from operations through operational and commercial initiatives, corporate efficiencies,
asset strategy, and a range of other programs throughout NRG to reduce costs or generate revenues;
• NRG's ability to sell assets to NRG Yield, Inc. and to close drop-down transactions;
• NRG's ability to achieve its strategy of regularly returning capital to stockholders;
• NRG's ability to obtain and maintain retail market share;
• NRG's ability to successfully evaluate investments and achieve intended financial results in new business and growth
initiatives;
• NRG's ability to engage in successful mergers and acquisitions activity;
53
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3/4/17 3:01 AM
• NRG's ability to successfully integrate, realize cost savings and manage any acquired businesses; and
• NRG's ability to develop and maintain successful partnering relationships.
Forward-looking statements speak only as of the date they were made, and NRG Energy, Inc. undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The
foregoing review of factors that could cause NRG's actual results to differ materially from those contemplated in any forward-
looking statements included in this Annual Report on Form 10-K should not be construed as exhaustive.
Item 1B — Unresolved Staff Comments
None.
54
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3/4/17 3:01 AM
Item 2 — Properties
Listed below are descriptions of NRG's interests in facilities, operations and/or projects owned or leased as of December 31,
2016. The MW figures provided represent nominal summer net MW capacity of power generated as adjusted for the Company's
owned or leased interest excluding capacity from inactive/mothballed units as of December 31, 2016. The following table
summarizes NRG's power production and cogeneration facilities by region:
Name of Facility
Power Market
Plant Type
Primary Fuel
Location
Rated MW
Capacity
Net MW
Capacity(a)
%
Owned
Gulf Coast Region
Bayou Cove
Big Cajun I
Big Cajun II
Big Cajun II
Big Cajun II
Cedar Bayou
Cedar Bayou 4
Choctaw(j)
Cottonwood
Greens Bayou
Gregory
Limestone
Petra Nova Cogen
San Jacinto
South Texas Project(b)
Sterlington
T.H. Wharton
W.A. Parish
W.A. Parish(c)
East Region
Arthur Kill
Astoria Gas Turbines
Avon Lake(j)
Avon Lake(j)
Blossburg(j)
Bowline(j)
Brunot Island(j)
Brunot Island(j)
Canal(j)
Chalk Point(j)
Chalk Point(j)
Chalk Point(j)
Cheswick(j)
Conemaugh(i)(j)
Conemaugh(i)(j)
Connecticut Jet Power
Devon
Dickerson(d)(j)
Dickerson(d)(j)
MISO
MISO
MISO
MISO
MISO
ERCOT
ERCOT
TVA(f)
MISO
ERCOT
ERCOT
ERCOT
ERCOT
ERCOT
ERCOT
MISO
ERCOT
ERCOT
ERCOT
NYISO
NYISO
PJM
PJM
PJM
NYISO
PJM
PJM
ISO-NE
PJM
PJM
PJM
PJM
PJM
PJM
ISO-NE
ISO-NE
PJM
PJM
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Natural Gas
Natural Gas
Coal
Natural Gas
Coal
Natural Gas
Natural Gas
Natural Gas
Natural Gas
Natural Gas
Natural Gas
Coal
Natural Gas
Natural Gas
Nuclear
Uranium
Natural Gas
Natural Gas
Coal
Natural Gas
LA
LA
LA
LA
LA
TX
TX
MS
TX
TX
TX
TX
TX
TX
TX
LA
TX
TX
TX
225
430
580
540
588
1,495
498
800
1,263
715
388
1,689
22
162
2,673
176
1,025
2,504
1,145
225
430
580
540
341
1,495
249
800
1,263
715
388
1,689
22
162
1,136
176
1,025
2,504
1,145
Total Gulf Coast Region
16,918
14,885
Natural Gas
Natural Gas
Coal
Oil
Natural Gas
Natural Gas
Natural Gas
Oil
Oil
Coal
Natural Gas
Oil
Coal
Coal
Oil
Oil
Oil
Coal
Natural Gas
55
NY
NY
OH
OH
PA
NY
PA
PA
MA
MD
MD
MD
PA
PA
PA
CT
CT
MD
MD
858
404
638
21
19
1,147
244
15
1,112
667
1,570
42
565
1,698
10
142
133
537
294
858
404
638
21
19
1,147
244
15
1,112
667
1,570
42
565
343
2
142
133
537
294
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
100.0
100.0
100.0
100.0
58.0
100.0
50.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
44.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
20.2
20.2
100.0
100.0
100.0
100.0
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 55
3/4/17 3:01 AM
Name of Facility
Power Market
Plant Type
Primary Fuel
Location
Rated MW
Capacity
Net MW
Capacity(a)
%
Owned
East Region (continued)
Dickerson(d)(j)
Fisk
Gilbert(j)
Hamilton(j)
Hunterstown CCGT(j)
Hunterstown CTS(j)
Indian River
Indian River
Joliet(e)
Keystone(i)(j)
Keystone(i)(j)
Martha's Vineyard(j)
Middletown
Montville
Morgantown(d)(j)
Morgantown(d)(j)
Mountain(j)
New Castle(j)
New Castle(j)
Niles(j)
Orrtanna(j)
Oswego
Portland(j)
Powerton(e)
Sayreville(j)
Shawnee(j)
Shawville(d)(j)
Shawville(d)(j)
SMECO
Titus(j)
Tolna(j)
Vienna
Warren(j)
Waukegan
Waukegan
Will County
West Region
Ellwood(j)
Encina(l)
Etiwanda(j)
Long Beach
Mandalay(j)
Midway-Sunset
Ormond Beach(j)
Pittsburg(j)(k)
PJM
PJM
PJM
PJM
PJM
PJM
PJM
PJM
PJM
PJM
PJM
ISO-NE
ISO-NE
ISO-NE
PJM
PJM
PJM
PJM
PJM
PJM
PJM
NYISO
PJM
PJM
PJM
PJM
PJM
PJM
PJM
PJM
PJM
PJM
PJM
PJM
PJM
PJM
CAISO
CAISO
CAISO
CAISO
CAISO
CAISO
CAISO
CAISO
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Fossil
Oil
Oil
Natural Gas
Oil
Natural Gas
Natural Gas
Coal
Oil
Natural Gas
Coal
Oil
Oil
Oil
Oil
Coal
Oil
Oil
Natural Gas
Oil
Oil
Oil
Oil
Oil
Coal
Natural Gas
Oil
Oil
Natural Gas
Natural Gas
Oil
Oil
Oil
Natural Gas
Coal
Oil
Coal
MD
IL
NJ
PA
PA
PA
DE
DE
IL
PA
PA
MA
CT
CT
MD
MD
PA
PA
PA
OH
PA
NY
PA
IL
NJ
PA
PA
PA
MD
PA
PA
MD
PA
IL
IL
IL
18
172
438
20
810
60
410
16
1,326
1,696
10
14
770
494
18
172
438
20
810
60
410
16
1,326
346
2
14
770
494
1,229
1,229
248
40
325
3
25
20
1,628
169
1,538
217
20
6
597
78
31
39
167
57
682
108
510
248
40
325
3
25
20
1,628
169
1,538
217
20
6
597
78
31
39
167
57
682
108
510
Total East Region
24,107
21,386
CA
CA
CA
CA
CA
CA
CA
CA
Natural Gas
Natural Gas
Natural Gas
Natural Gas
Natural Gas
Natural Gas
Natural Gas
Natural Gas
56
54
965
640
260
560
226
1,516
1,029
54
965
640
260
560
113
1,516
1,029
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
20.4
20.4
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 56
3/4/17 3:01 AM
Name of Facility
Power Market
Plant Type
Primary Fuel
Location
Rated MW
Capacity
Net MW
Capacity(a)
%
Owned
West Region (continued)
Saguaro Power Co.
San Diego Combustion
Turbines(g)
Sunrise
Watson
Other
Gladstone Power Station
Doga
Renewables
Agua Caliente(m)
Bingham Lake
Broken Bow(m)
Cedro Hill(m)
Community Solar
Community Wind North
Crofton Bluffs(m)
Distributed Solar
Eastridge
Four Brothers Solar
Granite Mountain
Guam
Iron Springs
Ivanpah(m)
Jeffers
Langford Wind Farm
Mountain Wind I(m)
Mountain Wind II(m)
Sherbino Wind Farm
Spanish Town
Stadiums
Westridge
NRG Yield
Alpine
Alta Wind
Avenal
Avra Valley
Blythe
Borrego
Buffalo Bear
WECC
CAISO
CAISO
CAISO
Fossil
Natural Gas
Fossil
Fossil
Fossil
Natural Gas
Natural Gas
Natural Gas
NV
CA
CA
CA
92
112
586
416
46
112
586
204
Total West Region
6,456
6,085
Fossil
Fossil
Coal
Natural Gas
AUS
TUR
Total Other
756
384
1,140
CAISO/WECC
Renewable
Solar
MISO
MISO
ERCOT
CAISO
MISO
MISO
Renewable Wind
Renewable Wind
Renewable Wind
Renewable
Solar
Renewable Wind
Renewable Wind
AZNMSNV/WECC Renewable
Solar
MISO
WECC
WECC
WECC
CAISO
MISO
ERCOT
WECC
WECC
ERCOT
MISO
Renewable Wind
Renewable
Solar
Renewable
Solar
Renewable
Solar
Solar
Renewable
Renewable
Solar
Renewable Wind
Renewable Wind
Renewable Wind
Renewable Wind
Renewable Wind
Solar
Renewable
Renewable
Solar
Renewable Wind
AZ
MN
NE
TX
CA
MN
NE
various
MN
UT
UT
Guam
UT
CA
MN
TX
WY
WY
TX
USVI
various
MN
Renewables capacity for Co-Owned Facilities with NRG Yield
Net Renewables
CAISO
CAISO
CAISO
CAISO
CAISO
CAISO
SPP
Renewable
Solar
Renewable Wind
Renewable
Solar
Renewable
Solar
Renewable
Solar
Renewable
Solar
Renewable Wind
57
CA
CA
CA
AZ
CA
CA
OK
290
15
80
150
6
30
42
105
10
320
130
26
80
390
50
150
61
80
150
4
6
18
2,193
66
947
45
26
21
26
19
605
144
749
148
15
13
47
6
30
8
105
10
160
65
26
40
195
50
150
19
25
75
4
6
17
1,214
201
1,415
66
947
23
26
21
26
19
50.0
100.0
100.0
49.0
80.0
37.5
51.0
99.0
16.0
31.0
100.0
99.0
20.0
100.0
99.0
50.0
50.0
100.0
50.0
50.1
99.9
100.0
31.0
31.0
50.0
100.0
100.0
96.9
100.0
100.0
50.0
100.0
100.0
100.0
100.0
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 57
3/4/17 3:01 AM
Name of Facility
Power Market
Plant Type
Primary Fuel
Location
Rated MW
Capacity
Net MW
Capacity(a)
%
Owned
NRG Yield (continued)
California Valley Solar Ranch CAISO/WECC
Renewable
Solar
Desert Sunlight
AZ DG Solar
PFMG DG Solar
Dover Cogeneration
El Segundo Energy Center
GenConn Devon
GenConn
High Desert
Kansas South
Laredo Ridge
Marsh Landing
Paxton Creek Cogeneration
Pinnacle
Princeton Hospital(h)
Roadrunner
South Trent Wind Farm
Spring Canyon II and III
Taloga
Tucson Convention Center
University of Bridgeport
Walnut Creek
CAISO
AZNMSNV
WECC
PJM
CAISO
ISO-NE
ISO-NE
WECC
WECC
MISO
CAISO
PJM
PJM
PJM
WECC
ERCOT
WECC
SPP
WECC
ISO-NE
CAISO
Renewable
Solar
Renewable
Solar
Renewable
Solar
Fossil
Fossil
Fossil
Fossil
Natural Gas
Natural Gas
Dual-fuel
Dual-fuel
Renewable
Solar
Renewable
Solar
Renewable Wind
Fossil
Fossil
Natural Gas
Natural Gas
Renewable Wind
Fossil
Natural Gas
Renewable
Solar
Renewable Wind
Renewable Wind
Renewable Wind
Fossil
Fossil
Fossil
Natural Gas
Natural Gas
Natural Gas
OK
IA
CA
AZ
DE
CA
CT
CT
CA
CA
NE
CA
PA
WV
NJ
NM
TX
CO
OK
AZ
CT
CA
NRG Yield net capacity for Co-Owned Facilities with NRG
Total NRG Yield
NRG's Noncontrolling Interest
Net NRG Yield
250
550
5
9
103
550
190
190
20
20
80
720
12
55
5
20
101
60
130
2
1
485
4,708
100.0
25.0
100.0
51.0
100.0
100.0
50.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
90.1
100.0
100.0
100.0
100.0
250
138
5
4
103
550
95
95
20
20
80
720
12
55
5
20
101
54
130
2
1
485
4,073
613
4,686
(2,104)
2,582
Corporate
Residential solar
Renewable
Solar
various
Total Corporate
114
114
114
114
100.0
Total
55,636
47,216
(a) Actual capacity can vary depending on factors including weather conditions, operational conditions, and other factors. Additionally, ERCOT requires periodic
demonstration of capability, and the capacity may vary individually and in the aggregate from time to time.
(b) Generation capacity figure consists of the Company's 44% interest in the two units at STP.
(c) W.A. Parish Unit Petra Nova GT2 (75 MW of the 1,220 MW at W.A. Parish Natural Gas) was mothballed for part of 2016 in connection with the Petra Nova
project and returned to service in the fourth quarter of 2016.
(d) GenOn Mid-Atlantic leases 100% interests in the Dickerson and Morgantown coal generation units through facility lease agreements expiring in 2029 and
2034, respectively. GenOn Mid-Atlantic owns 312 MW and 248 MW of peaking capacity at the Dickerson and Morgantown generating facilities, respectively.
REMA also leases a 100% interest in Shawville through a facility lease agreement expiring in 2026. GenOn operates the Dickerson, Morgantown and
Shawville facilities.
(e) NRG leases 100% interests in the Powerton facility and Units 7 and 8 of the Joliet facility through facility lease agreements expiring in 2034 and 2030,
respectively. NRG owns 100% interest in Joliet Unit 6. NRG operates the Powerton and Joliet facilities.
(f) Dual interconnect between TVA and MISO.
(g) These units are located on property owned by SDG&E under an annual license agreement. The Miramar and El Cajon sites (51 MW) retired on January, 1,
2017.
(h) The output of Princeton Hospital is primarily dedicated to serving the hospital. Excess power is sold to the local utility under its state-jurisdictional tariff.
(i) REMA has 16.45% and 16.67% leased interests in the Conemaugh and Keystone facilities, respectively, with NRG holding a 3.7% ownership interest in
each facility. GenOn operates the Conemaugh and Keystone facilities.
(j) Denotes a GenOn or GenOn subsidiary property.
(k) GenOn Americas Generation deactivated Pittsburg on January 1, 2017.
(l) NRG plans to deactivate Encina Unit 1 on March 1, 2017.
(m) Capacity attributable to noncontrolling interest for these Renewables facilities was 638 MWs as of December 31, 2016.
58
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Co-Owned Facilities between NRG and NRG Yield
Listed below are descriptions of NRG's interests in facilities, operations and/or projects owned or leased with NRG Yield as
of December 31, 2016. The MW figures provided represent nominal summer net MW capacity of power generated as adjusted
for the Company's owned or leased interest excluding capacity from inactive/mothballed units as of December 31, 2016. The
following table summarizes power production and cogeneration facilities that are co-owned by NRG and NRG Yield:
Power
Market
Plant Type
Primary
Fuel
Location
Rated
MW
Capacity
Net MW
Capacity for
Renewables
%
Owned
for
Renew-
ables
Net MW
Capacity for
NRG Yield
%
Owned
for NRG
Yield
Name of Facility
Crosswinds
Elbow Creek
Elkhorn Ridge
Forward
MISO
ERCOT
MISO
PJM
Renewable Wind
Renewable Wind
Renewable Wind
Renewable Wind
Goat Mountain Wind ERCOT
Renewable Wind
Hardin
Lookout
Odin
San Juan Mesa
Sleeping Bear
MISO
PJM
MISO
MISO
SPP
Spanish Fork, UT
Wildorado
WECC
ERCOT
Renewable Wind
Renewable Wind
Renewable Wind
Renewable Wind
Renewable Wind
Renewable Wind
Renewable Wind
CA
TX
NE
PA
TX
IA
PA
MN
NM
OK
UT
TX
Total
21
122
54
29
150
15
38
20
90
95
19
161
814
25.7
25.0
49.7
25.0
25.1
25.7
25.0
25.1
43.7
25.0
25.0
25.1
5
30
13
7
37
4
9
5
22
24
5
40
201
74.3
75.0
50.3
75.0
74.9
74.3
75.0
74.9
56.3
75.0
75.0
74.9
16
92
41
22
113
11
29
15
68
71
14
121
613
59
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Thermal Facilities
The Company's thermal businesses in Pittsburgh, Harrisburg and San Francisco are regulated by their respective state's Public
Utility Commission. The other thermal businesses are subject to contract terms with their customers. The Company's thermal
businesses are owned by NRG Yield LLC. The following table summarizes NRG's thermal steam and chilled water facilities as
of December 31, 2016:
Name and Location of
Facility
NRG Energy Center Minneapolis,
MN
NRG Energy Center San
Francisco, CA
NRG Energy Center Omaha, NE
NRG Energy Center Harrisburg,
PA
NRG Energy Center Phoenix, AZ
Thermal Energy
Purchaser
Approx. 100 steam and
55 chilled water
customers
Approx 180 steam
customers
Approx 60 steam and
65 chilled water
customers
Approx 130 steam and
5 chilled water
customers
Approx 35 chilled
water customers
NRG Energy Center Pittsburgh, PA Approx 25 steam and
NRG Energy Center San Diego,
CA
NRG Energy Center Dover, DE
NRG Energy Center Princeton, NJ
25 chilled water
customers
Approx 20 chilled
water customers
Kraft Foods Inc. and
Procter & Gamble
Company
Princeton HealthCare
System
Total Generating
Capacity (MWt)
%
Owned
100
100
Rated Megawatt
Thermal
Equivalent
Capacity (MWt)
Net Megawatt
Thermal
Equivalent
Capacity (MWt)
Generating
Capacity
322
136
133
322
136
133
Steam: 1,100 MMBtu/hr.
Chilled water: 38,700 tons
Steam: 454 MMBtu/hr.
100
12(a)
100
0(a)
100
Steam: 485 MMBtu/hr
Steam: 250 MMBtu/hr
Chilled water: 22,000 tons
Chilled water: 7,250 tons
142
9
77
0
142
73
77
26
108
13
108
13
Steam: 370 MMBtu/hr.
Chilled water: 3,600 tons
24(a)
100
12(a)
0(a)
100
100
100
100
5
104
14
28
88
49
31
66
21
17
1
104
2
0
88
49
Steam: 17 MMBtu/hr
Chilled water: 29,600 tons
Chilled water: 3,920 tons
Chilled water: 8,000 tons
Steam: 302 MMBtu/hr.
Chilled water: 13,874 tons
31 Chilled water: 7,425 tons
66
Steam: 225 MMBtu/hr.
21
17
Steam: 72 MMBtu/hr.
Chilled water: 4,700 tons
1,453
1,319
(a) Net MWt capacity excludes 134 MWt available under the right-to-use provisions contained in agreements between two of NRG Yield Inc.'s thermal facilities
and certain of its customers.
Other Properties
In addition, NRG owns several real properties and facilities relating to its generation assets, other vacant real property
unrelated to the Company's generation assets, interests in construction projects, and properties not used for operational purposes.
NRG believes it has satisfactory title to its plants and facilities in accordance with standards generally accepted in the electric
power industry, subject to exceptions that, in the Company's opinion, would not have a material adverse effect on the use or value
of its portfolio.
NRG leases its financial and commercial corporate headquarters at 804 Carnegie Center, Princeton, New Jersey, its operational
headquarters in Houston, Texas, its retail business offices and call centers, and various other office space.
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NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 60
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Item 3 — Legal Proceedings
See Item 15 — Note 22, Commitments and Contingencies, to the Consolidated Financial Statements for discussion of the
material legal proceedings to which NRG is a party.
Item 4 — Mine Safety Disclosures
Not applicable.
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PART II
Item 5 — Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Holders and Dividends
NRG's authorized capital stock consists of 500,000,000 shares of NRG common stock and 10,000,000 shares of preferred
stock. A total of 22,000,000 shares of the Company's common stock are authorized for issuance under the NRG LTIP. A total of
5,558,390 shares of NRG common stock were authorized for issuance under the NRG GenOn LTIP. For more information about
the NRG LTIP and the NRG GenOn LTIP, refer to Item 12 — Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters and Item 15 — Note 20, Stock-Based Compensation, to the Consolidated Financial Statements.
NRG's common stock is listed on the New York Stock Exchange and has been assigned the symbol: NRG. The high and
low sales prices, as well as the closing price for the Company's common stock on a per share basis for 2016 and 2015 are set forth
below:
Common Stock Price
High
Low
Closing
Dividends Per
Common Share
Fourth
Quarter
2016
Third
Quarter
2016
Second
Quarter
2016
First
Quarter
2016
Fourth
Quarter
2015
Third
Quarter
2015
Second
Quarter
2015
First
Quarter
2015
$
$
13.06
9.84
12.26
$
16.02
10.70
11.21
$
18.32
11.69
14.99
$
14.47
8.92
13.01
$
16.11
8.80
11.77
$
23.22
14.43
14.85
$
26.93
22.83
22.88
27.90
22.78
25.19
$
0.030
$
0.030
$
0.030
$
0.145
$
0.145
$
0.145
$
0.145
$
0.145
NRG had 315,443,011 shares outstanding as of December 31, 2016. As of January 31, 2017, there were 315,972,715 shares
outstanding, and there were 22,610 common stockholders of record.
On January 18, 2017, NRG declared a quarterly dividend on the Company's common stock of $0.030 per share, or $0.12
per share on an annualized basis, payable on February 15, 2017, to stockholders of record as of February 1, 2017.
The Company's common stock dividends are subject to available capital, market conditions, and compliance with associated
laws and regulations.
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NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 62
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Stock Performance Graph
The performance graph below compares NRG's cumulative total stockholder return on the Company's common stock for
the period December 31, 2011, through December 31, 2016, with the cumulative total return of the Standard & Poor's 500
Composite Stock Price Index, or S&P 500, and the Philadelphia Utility Sector Index, or UTY. NRG's common stock trades on
the New York Stock Exchange under the symbol "NRG."
The performance graph shown below is being furnished and compares each period assuming that $100 was invested on
December 31, 2011, in each of the common stock of NRG, the stocks included in the S&P 500 and the stocks included in the UTY,
and that all dividends were reinvested.
Comparison of Cumulative Total Return
NRG Energy, Inc.
S&P 500
UTY
Dec-2011
Dec-2012
Dec-2013
Dec-2014
Dec-2015
Dec-2016
$
$
100.00
100.00
100.00
$
127.98
116.00
99.44
$
162.56
153.57
110.35
$
155.29
174.60
142.29
$
69.83
177.01
133.39
74.30
198.18
156.59
63
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3/4/17 3:01 AM
Item 6 — Selected Financial Data
The following table presents NRG's historical selected financial data. This historical data should be read in conjunction with
the Consolidated Financial Statements and the related notes thereto in Item 15 and Item 7, Management's Discussion and Analysis
of Financial Condition and Results of Operations. The Company has completed several acquisitions and dispositions, as described
in Item 15 — Note 3, Business Acquisitions and Dispositions.
Year Ended December 31,
2016
2015
2014
2013
2012
(In millions except ratios and per share data)
$ 12,351
$ 14,674
$ 15,868
$ 11,295
$
8,422
15,655
11,371
8,432
Statement of income data:
Total operating revenues
Total operating costs and expenses, and other expenses (a)
Impairment losses (b)
Operating income/(loss)
Impairment losses on investments
(Loss)/income from continuing operations, net
Net (loss)/income attributable to NRG Energy, Inc.
Common share data:
Basic shares outstanding — average
Diluted shares outstanding — average
Shares outstanding — end of year
Per share data:
12,255
918
527
268
(891)
(774)
$
14,703
5,030
(4,040)
56
(6,436)
$ (6,382)
$
316
316
315
329
329
314
Net (loss)/income attributable to NRG — basic
$ (2.22)
$ (19.46)
$
Net (loss)/income attributable to NRG — diluted
Dividends declared per common share
Book value
Business metrics:
Cash flow from operations
Liquidity position (c)
Ratio of earnings to fixed charges
Ratio of earnings to fixed charges and preferred dividends
(2.22)
0.24
(19.46)
0.58
$ 14.09
$ 17.29
$ 2,072
$ 3,636
$ 1,309
$ 3,305
0.49
0.48
(3.27)
(3.18)
97
1,271
—
132
134
334
339
337
0.23
0.23
0.54
459
343
99
(352)
(386)
$
$
323
323
324
$ (1.22)
$
(1.22)
0.45
$
$
$
34.67
$ 32.33
1,510
3,940
1.14
1.06
$ 1,270
$ 3,695
0.45
0.45
$
$
$
—
350
2
315
295
232
234
323
1.23
1.22
0.18
31.83
1,149
3,362
0.84
0.83
Return on equity
Ratio of debt to total capitalization
Balance sheet data:
Current assets
Current liabilities
Property, plant and equipment, net
Total assets
Long-term debt, including current maturities, and capital
leases (d)
Total stockholders' equity
(a) Excludes impairment losses and impairment losses on investments.
(17.41)% (117.45)%
1.15%
(3.69)%
79.69 %
75.95 %
60.41%
57.60 %
2.87%
56.74%
$ 6,395
$ 7,391
$
8,408
$ 7,596
$
7,972
4,382
17,912
30,355
4,375
18,732
32,882
4,859
22,367
40,466
4,204
19,851
33,902
4,670
20,153
34,983
19,414
19,636
20,374
16,847
15,883
$ 4,446
$ 5,434
$ 11,676
$ 10,467
$ 10,269
(b)
Includes goodwill impairment as described in Item 15 - Note 11, Goodwill and Other Intangibles, to the Consolidated Financial Statements.
(c) Liquidity position is determined as disclosed in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, Liquidity
and Capital Resources, Liquidity Position. It excludes collateral funds deposited by counterparties of $2 million, $106 million, and $271 million as of
December 31, 2016, 2015, and 2014, respectively, which represents cash held as collateral from hedge counterparties in support of energy risk management
activities. It is the Company's intention to limit the use of these funds for repayment of the related current liability for collateral received in support of energy
risk management activities.
(d)
Includes debt issuance cost in 2016, 2015 and 2014.
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The following table provides the details of NRG's operating revenues:
2016
2015
2014
2013
2012
Year Ended December 31,
(In millions)
Energy revenue
Capacity revenue
Retail revenue
Mark-to-market for economic hedging activities
Contract amortization
Other revenues
$
5,458
$
6,564
$
7,255
$
5,606
$
1,992
6,239
(794)
(55)
613
2,288
6,778
(255)
(40)
470
2,109
7,372
541
(13)
589
1,860
6,297
(542)
(32)
433
Eliminations
Total operating revenues(a)
$
(a) Inter-segment sales and net derivative gains and losses included in operating revenues.
(1,102)
12,351
$
(1,131)
(1,985)
(2,327)
14,674
$
15,868
$
11,295
$
3,776
800
5,888
(450)
(97)
302
(1,797)
8,422
Energy revenue consists of revenues received from third parties as well as from the Company's retail businesses, for sales
of electricity in the day-ahead and real-time markets, as well as bilateral sales. It also includes energy sold through long-term
PPAs for renewable facilities. In addition, energy revenue includes revenues from the settlement of financial instruments and net
realized trading revenues.
Capacity revenue consists of revenues received from a third party at either the market or negotiated contract rates for making
installed generation capacity available in order to satisfy system integrity and reliability requirements. Capacity revenue also
includes revenues from the settlement of financial instruments. In addition, capacity revenue includes revenues received under
tolling arrangements, which entitle third parties to dispatch NRG's facilities and assume title to the electrical generation produced
from that facility.
Retail revenue, representing operating revenues of NRG's retail businesses, consists of revenues from retail sales to
residential, small business, commercial, industrial and governmental/institutional customers, revenues from the sale of excess
supply into various markets, primarily in Texas, as well as product sales.
Mark-to-market for economic hedging activities includes asset-backed hedges that have not been designated as cash flow
hedges and ineffectiveness on cash flow hedges.
Contract amortization revenue consists of the amortization of the intangible assets for net in-market C&I contracts established
in connection with the acquisitions of Reliant Energy and Green Mountain Energy, as well as acquired power contracts, gas
derivative instruments, and certain power sales agreements assumed at Fresh Start and Texas Genco purchase accounting dates
related to the sale of electric capacity and energy in future periods. These amounts are amortized into revenue over the term of
the underlying contracts based on actual generation or contracted volumes.
Other revenues include revenues generated by the Thermal Business consisting of revenues received from the sale of steam,
hot and chilled water generally produced at a central district energy plant and sold to commercial, governmental and residential
buildings for space heating, domestic hot water heating and air conditioning. It also includes the sale of high-pressure steam
produced and delivered to industrial customers that is used as part of an industrial process. Other revenues also consists of
operations and maintenance fees, or O&M fees, construction management services, or CMA fees, sale of natural gas and emission
allowances, and revenues from ancillary services. O&M fees consist of revenues received from providing certain unconsolidated
affiliates with services under long-term operating agreements. CMA fees are earned where NRG provides certain management
and oversight of construction projects pursuant to negotiated agreements such as for the GenConn, Cedar Bayou 4 and certain
solar construction projects. Ancillary services are comprised of the sale of energy-related products associated with the generation
of electrical energy such as spinning reserves, reactive power and other similar products. Other revenues also include unrealized
trading activities.
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Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations
The discussion and analysis below has been organized as follows:
• Executive Summary, including the business environment in which NRG operates, a discussion of regulation, weather,
competition and other factors that affect the business, and significant events that are important to understanding the results
of operations and financial condition;
• Results of operations, including an explanation of significant differences between the periods in the specific line items
of NRG's Consolidated Statements of Operations;
•
Financial condition addressing credit ratings, liquidity position, sources and uses of cash, capital resources and
requirements, commitments, and off-balance sheet arrangements; and
• Critical accounting policies which are most important to both the portrayal of the Company's financial condition and
results of operations, and which require management's most difficult, subjective or complex judgment.
As you read this discussion and analysis, refer to NRG's Consolidated Statements of Operations to this Form 10-K, which
presents the results of the Company's operations for the years ended December 31, 2016, 2015, and 2014, and also refer to Item 1
to this Form 10-K for more detailed discussion about the Company's business.
Executive Summary
NRG Energy, Inc., or NRG or the Company, is a leading integrated power company built on the strength of the nation's
largest and most diverse competitive electric generation portfolio and leading retail electricity platform. NRG aims to create a
sustainable energy future by producing, selling and delivering electricity and related products and services in major competitive
power markets in the U.S. in a manner that delivers value to all of NRG's stakeholders. The Company owns and operates
approximately 47,000 MW of generation; engages in the trading of wholesale energy, capacity and related products; transacts in
and trades fuel and transportation services; and directly sells energy, services, and innovative, sustainable products and services
to retail customers under the names “NRG”, "Reliant" and other retail brand names owned by NRG.
Business Environment
The industry dynamics and external influences affecting the Company and its businesses, and the power generation and
retail energy industry in general in 2016 and for the future medium term include:
Capacity Markets — Capacity markets are a major source of revenue for the Company. Centralized capacity markets exist
in ISO-NE, MISO, NYISO and PJM. Bilateral markets exist in CAISO and MISO. These auctions are either an annual market
held three years ahead of the delivery period as in the case of PJM and ISO-NE, or six months to one month ahead as in the case
of NYISO. Many variables affect the prices derived in these auctions. These variables include the load forecast, the target reserve
margin, rules surrounding demand response, capacity performance penalties, capacity imports and exports from the region, new
generation entrants, slope of the demand curve, generation retirements, the cost of retrofitting old generation to meet new
environmental rules, expected profitability of the plant itself in the energy market and various other auction rules. In theory, a
high capacity price should be an indication that the ISO doesn't have sufficient generation capacity against its needed reserve
margin and new construction should enter the market. Similarly, a low capacity price suggests the market is over-built and units
should retire. The Company has seen many swings in the pricing for capacity markets and the rules in many of the markets are
undergoing significant changes, as discussed in this Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Commodities Markets — The price of natural gas plays an important role in setting the price of electricity in many of the
regions where NRG operates power plants. Natural gas prices are driven by variables including demand from the industrial,
residential, and electric sectors, productivity across natural gas supply basins, costs of natural gas production, changes in pipeline
infrastructure, and the financial and hedging profile of natural gas consumers and producers. In 2016, average natural gas prices
at Henry Hub were 7.5% lower than 2015.
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If long-term gas prices further decrease or remain depressed, the Company is likely to encounter lower realized energy prices,
leading to lower energy revenues as higher priced hedge contracts mature and are replaced by contracts with lower gas and power
prices. NRG's retail gross margins have historically improved as natural gas prices decline and are likely to partially offset the
impact of declining gas prices on conventional wholesale power generation. To further mitigate this impact, NRG may increase
its percentage of coal and nuclear capacity sold forward using a variety of hedging instruments, as described under the heading
"Energy-Related Commodities" in Item 15 — Note 5, Accounting for Derivative Instruments and Hedging Activities, to the
Consolidated Financial Statements. The Company also mitigates declines in long-term gas prices through its increased investment
in renewable power generation supported by PPAs.
Natural gas prices are a primary driver of coal demand. The low priced commodity environment has stressed coal equities,
leading coal suppliers to file for bankruptcy protection, launch debt exchanges, rationalize assets, and cut production. If multiple
parties withdraw from the market, liquidity could be challenged in the short term. Inventory overhang will be utilized to offset
production losses. Coal prices are typically affected by the price of natural gas.
Electricity Prices — The price of electricity is a key determinant of the profitability of the Company. Many variables such
as the price of different fuels, weather, load growth and unit availability all coalesce to impact the final price for electricity and
the Company's profitability. The following table summarizes average on-peak power prices for each of the major markets in which
NRG operates for the years ended December 31, 2016, 2015, and 2014. For the year ended December 31, 2016 as compared to
the same period in 2015, and for the year ended December 31, 2015 as compared to the same period in 2014 the average on-peak
power prices decreased primarily due to the decrease in natural gas prices.
Region
Gulf Coast (b)
ERCOT - Houston
ERCOT - North
MISO - Louisiana Hub
$
East
NY J/NYC
NY A/West NY
NEPOOL
PEPCO (PJM)
PJM West Hub
West
CAISO - NP15
CAISO - SP15
Average on Peak Power Price ($/MWh)(a)
Year Ended December 31
2015
2014
2016
2016 vs 2015
Change %
2015 vs 2014
Change %
$
26.91
24.53
34.30
35.29
34.82
35.05
37.92
33.79
31.73
31.17
$
28.15
27.61
34.55
46.42
42.07
48.25
46.48
41.97
35.50
32.45
43.73
43.34
48.72
71.72
58.16
75.28
70.69
61.15
49.27
48.39
(4)%
(11)%
(1)%
(24)%
(17)%
(27)%
(18)%
(19)%
(11)%
(4)%
(36)%
(36)%
(29)%
(35)%
(28)%
(36)%
(34)%
(31)%
(28)%
(33)%
(a) Average on-peak power prices based on real time settlement prices as published by the respective ISOs.
(b) Gulf Coast region also transacts in PJM - West Hub.
The following table summarizes average realized power prices for each region in which NRG operates for the years ended
December 31, 2016, 2015 and 2014, which reflects the impact of settled hedges.
Region
Gulf Coast
East
West
Average Realized Power Price ($/MWh)
Year Ended December 31
2015
2014
2016
2016 vs 2015
Change %
2015 vs 2014
Change %
$
$
38.40
48.11
39.90
$
41.36
50.32
42.58
42.45
71.00
68.36
(7)%
(4)%
(6)%
(3)%
(29)%
(38)%
Though the average on peak power prices have decreased on average by 15% for the year ended December 31, 2016 as
compared to the same period in 2015, and decreased on average by 33% for the year ended December 31, 2015 as compared to
the same period in 2014, average realized prices by region for the Company have generally decreased at a slower rate year-
over-year due to the Company's multi-year hedging program and the success of the Company's commercial operations team in
optimizing the value of the Company's assets on a daily basis.
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Environmental Regulatory Landscape — The MATS rule, finalized in 2012, is the primary regulatory force behind the
decision to retrofit, repower or retire uncontrolled coal fired power plants. In June 2015, the U.S. Supreme Court held that the
EPA unreasonably refused to consider costs when it determined 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. A number of regulations on GHGs, ambient air
quality, coal combustion byproducts and water use with the potential for increased capital costs or operational impacts have been
finalized and are under review by the courts. The design, timing and stringency of these regulations and the legal outcomes will
affect the framework for the retrofit or retirement of existing fossil plants and deployment of new, cleaner technologies in the next
decade. See Item 1— Business, Environmental Matters, for further discussion.
Public Policy Support and Government Financial Incentives for Clean Infrastructure Development — Policy mechanisms
including production and investment tax credits, cash grants, loan guarantees, accelerated depreciation tax benefits, RPS, and
carbon trading plans have been implemented at the state and federal levels to support the development of renewable generation,
demand-side and smart grid, and other clean infrastructure technologies. The availability and continuation of public policy support
mechanisms will drive a significant part of the economics of the Company's development program. In December 2015, the U.S.
Congress enacted an extension of the 30% solar ITC so that projects which began construction in 2016 through 2019 will continue
to qualify for the 30% ITC. Projects beginning construction in 2020 and 2021 will be eligible for the ITC at the rates of 26% and
22% respectively. The same legislation also extended the 10 year wind PTC for wind projects which began construction in years
2016 through 2019. Wind projects which begin construction in the years 2017, 2018 and 2019 are eligible for PTC at 80%, 60%
and 40% of the statutory rate per kilowatt hour respectively.
Weather — Weather conditions in the regions of the U.S. in which NRG does business influence the Company's financial
results. Weather conditions can affect the supply and demand for electricity and fuels. Weather may also impact the availability
of the Company's generating assets. Changes in energy supply and demand may impact the price of these energy commodities in
both the spot and forward markets, which may affect the Company's results in any given period. Typically, demand for and the
price of electricity is higher in the summer and the winter seasons, when temperatures are more extreme. The demand for and
price of natural gas is also generally higher in the winter. However, all regions of the U.S. typically do not experience extreme
weather conditions at the same time, thus NRG is typically not exposed to the effects of extreme weather in all parts of its business
at once.
Wind and Solar Resource Availability — The availability of the wind and solar resources affects the financial performance
of the wind and solar facilities, which may impact the Company’s overall financial performance. Due to the variable nature of the
wind and solar resources, the Company cannot predict the availability of the wind and solar resources and the potential variances
from expected performance levels from quarter to quarter. To the extent the wind and solar resources are not available at expected
levels, it could have a negative impact on the Company’s financial performance for such periods.
Capital Market Conditions — The Company and its peer group, along with the broader energy sector, have recently
experienced volatile conditions in the capital markets, including debt and equity markets, due to continued depressed commodity
markets. These conditions, if they persist, may make it difficult for the Company, including GenOn and NRG Yield, Inc., to satisfy
debt obligations which mature over the next few years at a reasonable cost. Further, NRG Yield, Inc.’s growth strategy depends
on its ability to identify and acquire additional conventional and renewable facilities from the Company and unaffiliated third
parties. A prolonged disruption in the equity capital market conditions could make it difficult for NRG Yield, Inc. to obtain the
necessary financing to successfully acquire projects, which could impact a source of the Company’s liquidity.
Other Factors — A number of other factors significantly influence the level and volatility of prices for energy commodities
and related derivative products for NRG's business. These factors include:
•
•
•
•
•
•
•
seasonal, daily and hourly changes in demand;
extreme peak demands;
available supply resources;
transportation and transmission availability and reliability within and between regions;
location of NRG's generating facilities relative to the location of its load-serving opportunities;
procedures used to maintain the integrity of the physical electricity system during extreme conditions; and
changes in the nature and extent of federal and state regulations.
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These factors can affect energy commodity and derivative prices in different ways and to different degrees. These effects
may vary throughout the country as a result of regional differences in:
• weather conditions;
• market liquidity;
•
•
•
capability and reliability of the physical electricity and gas systems;
local transportation systems; and
the nature and extent of electricity deregulation.
Environmental Matters, Regulatory Matters and Legal Proceedings — Details of environmental matters are presented in
Item 15 — Note 24, Environmental Matters, to the Consolidated Financial Statements and Item 1— Business, Environmental
Matters, section. Details of regulatory matters are presented in Item 15 — Note 23, Regulatory Matters, to the Consolidated
Financial Statements and Item 1— Business, Regulatory Matters, section. Details of legal proceedings are presented in
Item 15 — Note 22, Commitments and Contingencies, to the Consolidated Financial Statements. Some of this information relates
to costs that may be material to the Company's financial results.
69
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Significant events during the year ended December 31, 2016
• Acquisitions — During 2016, the Company completed the acquisition of approximately 1,000 MWs of utility-scale solar
and wind assets and 29 MWs of distributed generation assets as discussed in more detail in Item 15 - Note 3, Business
Acquisitions and Dispositions, to the Consolidated Financial Statements.
• Dispositions — During 2016, the Company completed the sale of its Seward, Shelby, Rockford and Aurora generating
stations. In addition, the Company completed the sale of its majority interest in the EVgo business and the sale of real
property at the Potrero site, as discussed in more detail in Item 15 - Note 3, Business Acquisitions and Dispositions, to
the Consolidated Financial Statements.
• Debt Issuances — During 2016, the Company issued approximately $2.3 billion in recourse debt, approximately $0.5
billion in non-recourse debt and replaced its Term Loan Facility as discussed in more detail in Item 15 - Note 12, Debt
and Capital Leases, to the Consolidated Financial Statements.
• Debt Repurchases — During 2016, the Company repurchased $3.0 billion in aggregate principal of outstanding Senior
Notes for $3.1 billion, including accrued interest, as discussed in more detail in Item 15 - Note 12, Debt and Capital
Leases, to the Consolidated Financial Statements.
• Preferred Stock Repurchase — On June 13, 2016, the Company completed the repurchase from Credit Suisse of 100%
of the outstanding shares of its $344.5 million 2.822% preferred stock at a price of $226 million.
•
•
•
Impairment losses — During 2016, the Company recorded impairment losses of $918 million related to various facilities,
as well as goodwill for its Texas reporting units, as discussed in more detail in Item 15 — Note 10, Asset Impairments
and Note 11, Goodwill and Other Intangibles, to the Consolidated Financial Statements.
Impairment losses on investments — During 2016, the Company recorded impairment losses of $268 million related to
various investments as discussed in more detail in Item 15 — Note 10, Asset Impairments to the Consolidated Financial
Statements.
Transfers of Assets under Common Control — On September 1, 2016, the Company sold its remaining 51.05% interest
in CVSR Holdco LLC, which indirectly owns the CVSR solar facility, to NRG Yield, Inc. for total cash consideration of
$78.5 million, plus an immaterial working capital adjustment. NRG Yield, Inc. also assumed additional debt of $496
million, which represents 51.05% of the CVSR project level debt and 51.05% of the notes issued under the CVSR Holdco
Financing Agreement. In connection with the retrospective adjustment of prior periods, the Company now consolidates
CVSR and 100% of its debt, consisting of $771 million of project level debt and $200 million of notes issued under the
CVSR Holdco Financing Agreement as of September 1, 2016.
• Fleet Optimization — The Company completed four coal-to-gas projects at the Big Cajun II, Joliet, Shawville and New
Castle Generating Stations. Collectively, the modified units can generate more than 2,780 MW. Given the anticipated
reductions in carbon emissions resulting from these modifications, combined with the expected operating profiles for the
units, the four plants are expected to reduce their combined carbon footprint by more than 80%.
• Petra Nova Project Completion — The Company announced that its Petra Nova Carbon Capture Project, or the Petra
Nova Project, reached commercial operation in the fourth quarter of 2016. The Petra Nova Project is a commercial-scale
carbon capture system that captures CO2 in the processed flue gas from an existing unit at the WA Parish power plant in
Fort Bend County, southwest of Houston.
• Cottonwood Flooding — During March 2016, NRG's Cottonwood generating station was damaged by record flooding
of the nearby Sabine River. The generating station was returned to service in the third quarter of 2016. The Company
expects the restoration costs to be reimbursed through insurance recoveries. Through December 31, 2016, the Company
has expensed $2 million and collected $27.5 million of insurance proceeds from property damage and $10 million of
insurance proceeds from business interruption insurance. The Company is continuing to work with insurers on further
property and business interruption insurance recovery. The Company does not anticipate recognizing additional expenses
related to restoration costs.
70
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Operational Matters
Sherwin Bankruptcy
The Company's Gregory cogeneration plant provided steam, processed water and a small percentage of its electrical generation
to the Corpus Christi Sherwin Alumina plant pursuant to an Energy Service Agreement, or ESA. On January 11, 2016, Sherwin
Alumina Company, or Sherwin, filed a voluntary petition with the United States Bankruptcy Court for the Southern District of
Texas for relief under Title 11 of the United States Code. Sherwin agreed to pay all owed pre-petition amounts and, post-petition,
Sherwin performed its obligations under the ESA through September 2016 when it shut down its operations. On September 28,
2016, Sherwin filed a motion with the Bankruptcy Court to reject the ESA, which includes Gregory's lease, effective September
29, 2016. Gregory objected to the rejection and is asserting its right to remain on its leasehold. The Company is currently evaluating
potential options for the Gregory cogeneration plant.
71
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3/4/17 3:01 AM
Consolidated Results of Operations for the years ended 2016 and 2015
The following table provides selected financial information for the Company:
(in millions except otherwise noted)
Operating Revenues
Energy revenue (a)
Capacity revenue (a)
Retail revenue
Mark-to-market for economic hedging activities
Contract amortization
Other revenues (b)
Total operating revenues
Operating Costs and Expenses
Cost of sales (b)
Mark-to-market for economic hedging activities
Contract and emissions credit amortization (c)
Operations and maintenance
Other cost of operations
Total cost of operations
Depreciation and amortization
Impairment losses
Selling, marketing, general and administrative
Acquisition-related transaction and integration costs
Development costs
Total operating costs and expenses
Gain on sale of assets
Gain on postretirement benefits curtailment
Operating Income/(Loss)
Other Income/(Expense)
Equity in earnings of unconsolidated affiliates
Impairment losses on investments
Other income, net
Loss on sale of equity method investment
Net (loss)/gain on debt extinguishment
Interest expense
Total other expense
Loss before income taxes
Income tax expense
Net Loss
Less: Net loss attributable to noncontrolling interests and redeemable
noncontrolling interests
Net loss attributable to NRG Energy, Inc.
Business Metrics
Average natural gas price — Henry Hub ($/MMBtu)
Includes realized gains and losses from financially settled transactions.
Includes unrealized trading gains and losses.
(a)
(b)
(c) Includes amortization of SO2 and NOx credits and excludes amortization of RGGI credits.
72
Year Ended December 31,
2016
2015
Change
$
4,469
1,970
6,274
(865)
(55)
558
12,351
6,564
(580)
5
2,163
403
8,555
1,367
918
1,101
8
90
12,039
215
—
527
27
(268)
42
—
(142)
(1,061)
(1,402)
(875)
16
(891)
$
5,494
2,274
6,806
(244)
(40)
384
14,674
7,846
128
11
2,334
465
10,784
1,566
5,030
1,199
10
146
18,735
—
21
(4,040)
36
(56)
33
(14)
75
(1,128)
(1,054)
(5,094)
1,342
(6,436)
(1,025)
(304)
(532)
(621)
(15)
174
(2,323)
1,282
708
6
171
62
2,229
199
4,112
98
2
56
6,696
215
(21)
4,567
(9)
(212)
9
14
(217)
67
(348)
4,219
(1,326)
5,545
(117)
(774) $
(54)
(6,382) $
(63)
5,608
2.46
$
2.66
(8)%
$
$
$
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 72
3/4/17 3:01 AM
Gross Margin
The Company calculates gross margin in order to evaluate operating performance as operating revenues less cost of sales,
which includes cost of fuel, other costs of sales, contract and emission credit amortization and mark-to-market for economic
hedging activities.
Economic Gross Margin
In addition to gross margin, the Company evaluates its operating performance using the measure of economic gross margin,
which is not a GAAP measure and may not be comparable to other companies’ presentations or deemed more useful than the
GAAP information provided elsewhere in this report. Economic gross margin should be viewed as a supplement to and not a
substitute for the Company's presentation of gross margin, which is the most directly comparable GAAP measure. Economic
gross margin is not intended to represent gross margin. The Company believes that economic gross margin is useful to investors
as it is a key operational measure reviewed by the Company's chief operating decision maker. Economic gross margin is defined
as the sum of energy revenue, capacity revenue and other revenue, less cost of fuels and other cost of sales.
Economic gross margin does not include mark-to-market gains or losses on economic hedging activities, contract
amortization, emission credit amortization, or other operating costs.
The tables below present the composition and reconciliation of gross margin and economic gross margin which reflects the
Company's current view of reporting segments for the years ended December 31, 2016 and 2015:
(In millions except
otherwise noted)
Gulf
Coast
East
West
Other
Elimina
tions
Subtotal
Retail
Renewables
NRG
Yield
Corporate/
Eliminations
Total
Year Ended December 31, 2016
Generation
Energy revenue
$ 2,157
$ 2,071
$
Capacity revenue
Retail revenue
Mark-to-market for
economic hedging
activities
293
—
1,091
—
(515)
(269)
Contract amortization
Other revenue(a)
15
255
—
79
Operating revenue
2,205
2,972
Cost of fuel
Other costs of sales(b)
(994)
(392)
(948)
(352)
Mark-to-market for
economic hedging
activities
Contract and
emission credit
amortization
71
(21)
89
22
$
217
181
—
(3)
—
60
455
(121)
(28)
(17)
61
—
—
—
—
1
62
—
—
—
4
(2)
$
— $ 4,506
$
2
82
1,565
—
6,239
(787)
15
380
(1)
(1)
15
5,679
6,336
(2,063)
(8)
(772)
(4,680)
143
365
3
(6)
$
375
$
—
—
(6)
(1)
49
417
(3)
(11)
—
—
—
—
—
(15)
(15)
—
—
—
—
(33)
(28)
—
(6)
575
345
—
—
(68)
169
$
(989) $ 4,469
(22)
35
(71)
—
(55)
1,970
6,274
(865)
(55)
558
1,021
(1,102)
12,351
Gross margin
$
869
$ 1,783
$
293
$
60
$
(15) $ 2,990
$ 2,007
$
403
$
954
$
Less: Mark-to-market
for economic hedging
activities, net
Less: Contract and
emission credit
amortization, net
Economic gross
margin
Business Metrics
(444)
(180)
(20)
—
(6)
22
4
(2)
—
—
(644)
364
(6)
—
18
(7)
(1)
(74)
$ 1,319
$ 1,941
$
309
$
62
$
(15) $ 3,616
$ 1,650
$
410
$ 1,028
$
MWh sold (thousands)(c)(d)
56,170
43,045
5,438
MWh generated
(thousands)(e)
51,100
35,423
4,369
3,883
7,236
3,883
8,933
(a) Renewables Other revenue includes $20 million of intercompany revenue to NRG Yield.
(b) Includes purchased energy, capacity and emissions credits.
(c) MWh sold excludes generation at facilities in the West and NRG Yield that generate revenue under tolling agreements.
(d) Does not include MWh of 71 thousand or MWt of 1,966 thousand for thermal sold by NRG Yield.
(e) Does not include MWh of 275 thousand or MWt of 1,966 thousand for thermal generated by NRG Yield.
73
—
1,034
(2,107)
(4,457)
72
580
4
8
1
4
3
(5)
$ 6,362
(285)
(60)
$ 6,707
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 73
3/4/17 3:01 AM
(In millions except
otherwise noted)
Gulf
Coast
East
West
Other
Elimina
tions
Subtotal
Retail
Renewa
bles
NRG
Yield
Corporate/
Eliminations
Total
Year Ended December 31, 2015
Generation
Energy revenue
$ 2,548
$ 2,880
$ 269
$
Capacity revenue
Retail revenue
Mark-to-market for
economic hedging
activities
Contract amortization
Other revenue (a)
291
—
(66)
15
215
1,345
—
(198)
—
66
Operating revenue
3,003
4,093
Cost of fuel
Other costs of sales(b)
(1,214)
(1,398)
(352)
(493)
195
—
10
—
11
485
(159)
(33)
Mark-to-market for
economic hedging
activities
Contract and
emission credit
amortization
(17)
(78)
(18)
(20)
19
(2)
(2)
19
—
—
—
—
(40)
(21)
—
—
—
$
— $
5,716
$
— $
359
$
—
—
—
—
(14)
(14)
—
—
—
—
1,831
—
116
6,778
(254)
15
238
7,546
(2,771)
4
—
16
6,914
(9)
(878)
(5,235)
(113)
(5)
(4)
(6)
—
—
(3)
(1)
37
392
(4)
(12)
—
—
489
341
—
(2)
(54)
179
953
(43)
(28)
—
—
$
(1,070) $ 5,494
(14)
28
11
—
(86)
2,274
6,806
(244)
(40)
384
(1,131)
14,674
15
1,119
(2,812)
(5,034)
(11)
(128)
—
(11)
Gross margin
$ 1,400
$ 2,143
$ 273
$
(23) $
(14) $
3,779
$ 1,660
$
376
$
882
$
(8) $ 6,689
Less: Mark-to-market
for economic hedging
activities, net
Less: Contract and
emission credit
amortization, net
Economic gross
margin
Business Metrics
(83)
(276)
(8)
—
(5)
19
(2)
(2)
—
—
(367)
—
10
(6)
(3)
(1)
(2)
(54)
—
—
(372)
(51)
$ 1,488
$ 2,400
$ 283
$
(21) $
(14) $
4,136
$ 1,666
$
380
$
938
$
(8) $ 7,112
MWh sold (thousands)(c)(d)
61,599
57,235
6,317
MWh generated
(thousands)(e)
57,678
46,286
4,542
3,736
6,412
3,790
8,899
(a) Renewables Other revenue includes $11 million of intercompany revenue to NRG Yield.
(b) Includes purchased energy, capacity and emissions credits.
(c) MWh sold excludes generation at facilities in the West and NRG Yield that generate revenue under tolling agreements.
(d) Does not include MWh of 297 thousand or MWt of 1,946 thousand for thermal sold by NRG Yield.
(e) Does not include MWh of 297 thousand or MWt of 1,946 thousand for thermal generated by NRG Yield.
The table below represents the weather metrics for 2016 and 2015:
Years ended
December 31,
Quarters ended
December 31,
Quarters ended
September 30,
Quarters ended
June 30,
Quarters ended
March 31,
Weather
Metrics
Gulf
Coast(b)
East
West
Gulf
Coast(b)
East
West
Gulf
Coast(b)
East
West
Gulf
Coast(b)
East
West
Gulf
Coast(b)
East
West
2016
CDDs(a)
HDDs(a)
2015
CDDs
HDDs
10 year
average
CDDs
HDDs
2,966
1,529
1,415
4,391
925
1,990
2,871
1,888
1,336
4,697
1,111
1,948
362
545
286
556
87
1,530
88
1,246
240
754
74
1,624
55
759
127
813
57
842
1,655
—
1,652
—
1,597
4
947
32
824
26
746
76
666
14
772
7
631
22
873
53
892
47
969
77
348
578
391
465
347
526
199
243
195
315
171
370
76
931
33
2,251
41
33
1,285
2,960
5
974
17
813
90
29
3
1,092
2,499
1,154
(a) National Oceanic and Atmospheric Administration-Climate Prediction Center - A Cooling Degree Day, or CDD, represents the number of degrees that the mean temperature for a
particular day is above 65 degrees Fahrenheit in each region. A Heating Degree Day, or HDD, represents the number of degrees that the mean temperature for a particular day is
below 65 degrees Fahrenheit in each region. The CDDs/HDDs for a period of time are calculated by adding the CDDs/HDDs for each day during the period.
(b) CDDs/HDDs for the Gulf Coast region represent an average of cumulative population-weighted CDDs/HDDs for Texas and the West South-Central Climate region.
74
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Generation gross margin and economic gross margin
The tables below present the primary changes in Generation gross margin and economic gross margin, which include
intercompany sales, during the year ended December 31, 2016 compared to the same period in 2015:
(In millions)
Gulf Coast region
East region
West region
Other
Gross Margin
(increase/
(decrease))
Economic Gross
Margin (increase/
(decrease))
$
$
(531) $
(360)
20
83
(788) $
(169)
(459)
26
83
(519)
The tables below describe the decrease in Generation gross margin and economic gross margin by region:
Gulf Coast Region
Lower gross margin resulting from lower average realized energy prices due to a decline in natural gas prices
and increased wind generation in Texas
Lower gross margin primarily due to 11% lower coal generation and 21% lower gas generation in Texas, which
was driven by lower gas prices, increased wind generation in Texas, an increase in unplanned outages and
timing of planned outages
Higher gross margin resulting from a 12% increase in nuclear generation driven by reduced unplanned outages
and the timing of planned outages
Other
Decrease in economic gross margin
Decrease in mark-to-market for economic hedging primarily due to net unrealized gains/losses on open
positions related to economic hedges
Decrease in contract and emission credit amortization
Decrease in gross margin
(In millions)
$
(148)
(82)
55
6
(169)
(361)
(1)
(531)
$
$
75
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East Region
Lower gross margin due to a 24% decrease in generation primarily driven by the environmental control work at
Avon Lake and Powerton, fuel conversion projects at Joliet, Shawville and New Castle facilities and the sale
of the Seward, Aurora, Rockford and Shelby generating stations in 2016. In addition, there was a 3%
decrease in generation as a result of prior year winter weather conditions and current year planned outages
$
(295)
(In millions)
Lower gross margin driven by a 12% decrease in capacity volumes due to plant deactivations and asset sales
and a 7% decrease in PJM cleared auction capacity prices
Lower gross margin driven primarily by a 9% decrease in New York and New England hedged capacity prices
as well as the expiration of the Dunkirk RSS contract and a 7% decrease in capacity volume related to the
retirement of Huntley and certain units at the Astoria facility
Lower gross margin as a result of a 10% decrease in average realized energy prices due to a decline in natural
gas prices in 2016
Lower gross margin as a result of a decrease in ancillary services driven by lower generation in the current year
Higher gross margin due to the closure and financial settlement of hedge positions with counterparties that
would have otherwise been realized in 2017, 2018 and 2019
Changes in commercial optimization activities
Higher gross margin in 2016 due to a prior year lower cost of market adjustment for oil at Chalk Point and
Bowline
Other
Decrease in economic gross margin
Increase in mark-to-market for economic hedging primarily due to net unrealized gains/losses on open
positions related to economic hedges
Increase in contract and emission credit amortization
Decrease in gross margin
West Region
Gain on sale of excess emission credits
Lower gross margin due to a 6% decrease in capacity volumes and a 1% decrease in capacity prices due to
higher reserve margins driven by more competition in certain areas
Lower gross margin resulting from a 14% decrease in generation due to plant retirements and unfavorable
market conditions, partially offset by higher availability at the Sunrise power plant, as well as Pittsburg
generating station's merchant status due to toll expiration in the third quarter of 2015 and fewer planned
outages. There was also a 6% decrease in average realized energy prices
Increase in economic gross margin
Decrease in mark-to-market for economic hedging primarily due to net unrealized gains/losses on open
positions related to economic hedges
Increase in contract and emission credit amortization
Increase in gross margin
(144)
(99)
(76)
(24)
119
50
17
(7)
(459)
96
3
(360)
$
$
(In millions)
47
$
(14)
(7)
26
(12)
6
20
$
$
Other
Other gross margin and economic gross margin both increased $83 million for the year ended December 31, 2016, compared
to the same period in 2015, due to BETM gains on both over the counter and congestion strategies.
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Retail gross margin and economic gross margin
The following is a discussion of gross margin and economic gross margin for Retail.
(In millions except otherwise noted)
Retail revenue
Supply management revenue
Capacity revenues
Customer mark-to-market
Contract amortization
Other
Operating revenue (a)
Cost of sales (b)
Mark-to-market for economic hedging activities
Contract amortization
Gross margin
Less: Mark-to-market for economic hedging activities, net
Less: Contract and emission credit amortization
Economic gross margin
Business Metrics
Electricity sales volume (GWh) - Gulf Coast
Electricity sales volume (GWh) - All other regions
Natural gas sales volumes (MDth)
Average Retail Mass customer count (in thousands)
Ending Retail Mass customer count (in thousands)
$
$
$
Years ended December 31,
2016
2015
$
$
$
6,085
154
82
(1)
(1)
17
6,336
(4,688)
365
(6)
2,007
364
(7)
1,650
52,642
8,130
2,199
2,778
2,818
6,613
165
116
4
—
16
6,914
(5,244)
(4)
(6)
1,660
—
(6)
1,666
51,815
10,217
1,901
2,775
2,755
(a)
(b)
Includes intercompany sales of $4 million and $6 million in 2016 and 2015, respectively, representing sales from Retail to the Gulf Coast region.
Includes intercompany purchases of $994 million and $1,054 million in 2016 and 2015, respectively.
Retail gross margin increased $347 million and economic gross margin decreased $16 million for the year ended
December 31, 2016, compared to the same period in 2015, due to:
Higher gross margin due to lower supply costs of $452 million or approximately $7.00 per MWh driven by a
decrease in natural gas prices, partially offset by lower rates to customers of $431 million or approximately
$6.50 per MWh
Lower gross margin of $19 million due to the unfavorable impact of selling back excess supply and $3 million
in lower margin from a reduction in load of 86,000 MWhs due to milder weather conditions in 2016 as
compared to 2015
Lower gross margin due to lower volumes driven by lower average customer usage and mix
Decrease in economic gross margin
Increase in mark-to-market for economic hedging primarily due to net unrealized gains/losses on open
positions related to economic hedges
Decrease in contract and emission credit amortization
Increase in gross margin
Renewables gross margin and economic gross margin
(In millions)
$
$
$
21
(22)
(15)
(16)
364
(1)
347
Renewables gross margin increased $27 million and economic gross margin increased $30 million for the year ended
December 31, 2016, compared to the same period in 2015, primarily driven by a 15% increase in generation at both the Mountain
Wind I and II facilities, a 4% increase in generation at the Ivanpah solar plant and generation from the Guam solar plant that
reached COD in the third quarter of 2015.
77
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NRG Yield gross margin and economic gross margin
NRG Yield gross margin increased $72 million and economic gross margin increased $90 million for the year ended
December 31, 2016, compared to the same period in 2015, primarily related to a 26% increase in volume generated at Alta wind
projects as well as an increase in price per MWh at Alta X and XI wind projects as the PPAs began in January 2016 compared to
merchant prices in 2015.
Mark-to-market for Economic Hedging Activities
Mark-to-market for economic hedging activities includes asset-backed hedges that have not been designated as cash flow
hedges and ineffectiveness on cash flow hedges. Total net mark-to-market results increased by $87 million during the year ended
December 31, 2016, compared to the same period in 2015.
The breakdown of gains and losses included in operating revenues and operating costs and expenses by region was as follows:
Generation
Year Ended December 31, 2016
Gulf
Coast
East
West
Retail
Renewables Corporate
Elimination (a)
Total
(In millions)
Mark-to-market results in
operating revenues
Reversal of previously
recognized unrealized (gains)/
losses on settled positions
related to economic hedges
Reversal of acquired gain
positions related to economic
hedges
Net unrealized (losses)/gains on
open positions related to
economic hedges
Total mark-to-market (losses)/
gains in operating revenues
Mark-to-market results in
operating costs and expenses
Reversal of previously
recognized unrealized losses/
(gains) on settled positions
related to economic hedges
Reversal of acquired gain
positions related to economic
hedges
Net unrealized gains/(losses) on
open positions related to
economic hedges
Total mark-to-market gains/
(losses) in operating costs
and expenses
$
(389) $
(284) $
(4) $
(2) $
— $
— $
30
$
(649)
—
(48)
(126)
63
—
1
—
1
—
(6)
$
(515) $
(269) $
(3) $
(1) $
(6) $
—
1
1
—
(48)
(102)
(168)
$
(72) $
(865)
$
31
$
100
$
(2) $
305
$
— $
— $
(30) $
404
—
40
—
(12)
(11)
(3)
—
60
—
—
—
—
—
102
(12)
188
$
71
$
89
$
(17) $
365
$
— $
— $
72
$
580
(a) Represents the elimination of the intercompany activity between Retail and Generation.
78
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Generation
Year Ended December 31, 2015
Gulf Coast
East
West
Retail
Renewables
NRG Yield
Elimination(a)
Total
(In millions)
$
(408) $
(288) $
6
$
(1) $
(3) $
(2) $
(46) $ (742)
—
(84)
342
174
—
4
(66) $
(198) $
10
$
—
5
4
—
—
—
—
—
(84)
57
582
$
(3) $
(2) $
11
$ (244)
Mark-to-market results in
operating revenues
Reversal of previously
recognized unrealized (gains)/
losses on settled positions
related to economic hedges
Reversal of acquired gain
positions related to economic
hedges
Net unrealized gains on open
positions related to economic
hedges
Total mark-to-market (losses)/
gains in operating revenues
$
Mark-to-market results in
operating costs and expenses
Reversal of previously
recognized unrealized losses/
(gains) on settled positions
related to economic hedges
Reversal of acquired gain
positions related to economic
hedges
Net unrealized (losses)/gains on
open positions related to
economic hedges
Total mark-to-market gains/
(losses) in operating costs
and expenses
$
34
$
15
$
(1) $
373
$
— $
— $
46
$ 467
—
—
(18)
(4)
(51)
(93)
1
(373)
—
—
—
—
—
(22)
(57)
(573)
$
(17) $
(78) $
(18) $
(4) $
— $
— $
(11) $ (128)
(a) Represents the elimination of the intercompany activity between Retail and Generation.
Mark-to-market results consist of unrealized gains and losses on contacts that are yet to be settled. The settlement of these
transactions is reflected in the same revenue or cost caption as the items being hedged.
The reversals of acquired gain or loss positions were valued based upon the forward prices on the acquisition date.
For the year ended December 31, 2016, the $865 million loss in operating revenues from economic hedge positions was
driven primarily by the reversal of previously recognized unrealized gains on contracts that settled during the period, a decrease
in value of open positions as a result of increases in gas prices, in addition to the reversal of acquired contracts. The $580 million
gain in operating costs and expenses from economic hedge positions was driven primarily by the reversal of previously recognized
unrealized losses on contracts that settled during the period and an increase in the value of open positions as a result of increases
in coal and gas prices partially offset by the reversal of acquired contracts. As discussed in Item 15 — Note 5, Accounting for
Derivative Instruments and Hedging Activities, to the Consolidated Financial Statements, the reversal of previously recognized
gains and losses on settled positions related to economic hedges included in operating revenues and operating costs and expenses
during the year ended December 31, 2016 include any gains or losses associated with positions that were closed out and financially
settled with certain counterparties that would have otherwise been realized in future periods.
79
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In accordance with ASC 815, the following table represents the results of the Company's financial and physical trading of
energy commodities for the years ended December 31, 2016 and 2015. The realized and unrealized financial and physical trading
results are included in operating revenue. The Company's trading activities are subject to limits within the Company's Risk
Management Policy and are primarily transacted through BETM.
(In millions)
Trading gains/(losses)
Realized
Unrealized
Total trading gains/(losses)
Year ended December 31,
2016
2015
$
$
71
28
99
$
$
57
(76)
(19)
In addition, trading activities reflect an increase in gross margin of $88 million, reflected in the Generation segment, for
the year ended December 31, 2016, as compared to the same period in 2015.
Operations and Maintenance Expense
Generation
Gulf
Coast
East
West
Other
Elimin
ations
Retail
Renew
ables
NRG
Yield
Corporate
Elimin
ations
Total
(In millions)
Year Ended December 31, 2016
Year Ended December 31, 2015
$
$
590
$
935
656
$ 1,006
$
$
127
143
$
$
1
1
$
$
(15) $
248
(14) $
253
$
$
121
94
$
$
174
178
$
$
13
22
$
$
(31) $ 2,163
(5) $ 2,334
Operations and maintenance expenses decreased by $171 million for the year ended December 31, 2016, compared to the
same period in 2015, due to the following:
Decrease in Gulf Coast operations and maintenance expense primarily related to the timing of planned outages
at the Texas coal plants and STP
Decrease in East operating costs due to the sale of the Seward, Aurora, Rockford and Shelby generating
stations in 2016
Decrease in East operations and maintenance expense due primarily to deactivations of the Huntley, Dunkirk,
and Astoria facilities coupled with a decrease in maintenance costs related to Canal, Waukegan, and Bowline
facilities
Decrease in West operations and maintenance expense primarily due to the retirement of the El Segundo
facility and lower maintenance costs across the region
Increase in East operating costs driven by fuel conversion projects at the Joliet, New Castle, and Shawville
facilities and environmental control work at the Avon Lake and Powerton facilities
Increase in East operating costs due to environmental work at Maryland ash sites
Increase in Renewables operating costs due primarily to increased production at the Ivanpah solar plant,
Mountain Wind I and II facilities and the Guam solar plant which reached COD in the fourth quarter of 2015
Other
(In millions)
$
$
(66)
(63)
(52)
(17)
19
16
9
(17)
(171)
80
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Other Cost of Operations
Generation
Gulf
Coast
East
West
Other
Retail
Renewables
NRG
Yield
Corporate
Total
(In millions)
Year Ended December 31, 2016
Year Ended December 31, 2015
$
$
103
103
$
$
91
131
$
$
29
25
$
$
— $
— $
93
113
$
$
20
21
$
$
65
72
$
$
2
$
— $
403
465
Other cost of operations, comprised of asset retirement expense, insurance expense and property tax expense, decreased by
$62 million for the year ended December 31, 2016, compared to the same period in 2015, primarily due to a $29 million reduction
in property tax for the Chalk Point and Dickerson facilities located in the East region and a decrease in gross receipts taxes of $10
million related to lower retail revenue and $10 million related to a favorable settlement of a Texas sales tax audit.
Depreciation and Amortization
Generation
Gulf
Coast
East
West
Other
Retail
Renewables
NRG
Yield
Corporate
Total
Year Ended December 31, 2016
$ 432
$ 212
Year Ended December 31, 2015
$ 546
$ 299
$
$
57
51
$
1
(In millions)
$
$ 115
$ — $ 134
$
190
180
$ 297
$ 297
$
$
63
59
$ 1,367
$ 1,566
Depreciation and amortization expense decreased by $199 million for the year ended December 31, 2016, compared to the
same period in 2015, primarily due to a $116 million decrease related to the impairment of the Limestone and W.A. Parish facilities
located in the Gulf Coast region in 2015 and a $68 million decrease related to the impairment of the Dunkirk and Huntley facilities
located in the East region in 2015.
Impairment Losses
For the year ended December 31, 2016, the Company recorded impairment losses of $918 million related to various facilities,
as well as goodwill for its Texas reporting units, as further described in Item 15 — Note 10, Asset Impairments and Note 11,
Goodwill and Other Intangibles, to the Consolidated Financial Statements.
In 2015, the Company recorded impairment losses of $5,030 million related to various facilities, as well as goodwill for its
Texas and Home Solar reporting units, as further described in Item 15 — Note 10, Asset Impairments and Note 11, Goodwill and
Other Intangibles, to the Consolidated Financial Statements.
Selling, Marketing, General and Administrative Expenses
Year Ended December 31, 2016
Year Ended December 31, 2015
$
$
372
393
$
$
497
494
$
$
(In millions)
60
53
$
$
16
12
$
$
156
247
$
$
1,101
1,199
Generation
Retail
Renewables
NRG Yield
Corporate
Total
Selling, marketing, general and administrative expenses decreased by $98 million for the year ended December 31, 2016
compared to the same period in 2015, due primarily to a decrease in advertising and the continued focus on cost management.
Development Costs
Development costs decreased by $56 million for the year ended December 31, 2016, compared to the same period in 2015,
due to the strategic decision for a more focused development program primarily related to Renewables and the sale of EVgo in
2016.
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Gain on Sale of Assets
During the year ended December 31, 2016, the Company recognized a $215 million gain on sale of assets primarily related
to the sale of the Aurora generating station, the sale of real property at the Potrero location and the sale of the Shelby generating
station. The Company also sold a majority interest in its EVgo business to Vision Ridge Partners, which resulted in a loss on sale,
as described in Item 15 — Note 3, Business Acquisitions and Dispositions, to the Consolidated Financial Statements.
Impairment Losses on Investments
For the year ended December 31, 2016, the Company recorded other-than-temporary impairment losses of $268 million,
which is primarily due to other-than-temporary impairments on the Company's interests in Petra Nova Parish Holdings, Sherbino
and Community Wind North, as further described in Note 10, Asset Impairments.
For the year ended December 31, 2015, the Company recorded other-than-temporary impairment losses on certain of its cost
and equity method investments of $56 million, as further described in Item 15 — Note 10, Asset Impairments, to the Consolidated
Financial Statements.
(Loss)/Gain on Debt Extinguishment
A loss on debt extinguishment of $142 million was recorded for the year ended December 31, 2016, primarily driven by the
repurchase of NRG senior notes at a price above par value and the write-off of the unamortized debt issuance costs related to the
replacement of the 2018 Term Loan Facility with the new 2023 Term Loan Facility.
A gain on debt extinguishment of $75 million was recorded for the year ended December 31, 2015, primarily driven by the
repurchase of NRG senior notes due 2023 and 2024, GenOn senior notes due 2020 and GenOn Americas Generation senior notes
due 2021 and 2031 at a price below par value, combined with the write-off of unamortized premium.
Interest Expense
NRG's interest expense decreased by $67 million for the year ended December 31, 2016, compared to the same period in
2015, due to the following:
Decrease due to the repurchases of Senior Notes at the end of 2015 and 2016
Decrease in derivative interest expense from changes in fair value of interest rate swaps
Decrease due to the redemption of outstanding bonds related to NRG Peakers Finance Company
Decrease due to the termination of Alta X and XI term loans and the related interest rate swaps in 2015
Increase due to the replacement of the 2018 Term Loan Facility with the 2023 Term Loan Facility
Increase due to the issuance of NRG Yield Inc. 3.25% Convertible Senior Notes due 2020 and NRG Yield
Operating LLC Revolving Credit Facility issued in 2015
Increase due to the issuance of NRG Yield Operating LLC 5.00% Senior Notes due 2026
Increase due to $200 million of debt issued by CVSR Holdco in August 2016
Other
(In millions)
$
(63)
(19)
(8)
(6)
9
8
7
4
1
(67)
$
As a result of the reduction in corporate debt in 2016 and debt repurchases in 2015 as well as the extension of debt
maturities at a lower average coupon rate, the Company realized annual interest savings of approximately $87 million in 2016.
82
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Income Tax Expense
For the year ended December 31, 2016, NRG recorded income tax expense of $16 million on a pre-tax loss of $875 million.
For the same period in 2015, NRG recorded income tax expense of $1,342 million on a pre-tax loss of $5,094 million. The effective
tax rate was (1.8)% and (26.3)% for the years ended December 31, 2016 and 2015, respectively.
For the year ended December 31, 2016, NRG's overall effective tax rate was different than the statutory rate of 35% primarily
due to the change in valuation allowance, the impact of non-taxable equity earnings and current state tax expense, partially offset
by the generation of PTC's from various wind facilities.
Loss before income taxes
Tax at 35%
State taxes
Foreign operations
Federal and state tax credits, excluding PTCs
Valuation allowance
Book goodwill impairment
Impact of non-taxable entity earnings
Net interest accrued on uncertain tax positions
Production tax credits
Recognition of uncertain tax benefits
Tax expense attributable to consolidated partnerships
Impact of change in effective state tax rate
Other
Income tax expense
Effective income tax rate
Year Ended December 31,
2016
2015
(In millions
except as otherwise stated)
$
(875)
$
(5,094)
(306)
11
10
—
306
—
22
1
(26)
2
(1)
1
(4)
16
(1.8)%
$
(1,783)
(218)
1
(5)
3,039
340
(10)
(3)
(33)
(15)
12
19
(2)
1,342
(26.3)%
$
The effective income tax rate may vary from period to period depending on, among other factors, the geographic and business
mix of earnings and losses and changes in valuation allowances in accordance with ASC 740, Income Taxes, or ASC 740. These
factors and others, including the Company's history of pre-tax earnings and losses, are taken into account in assessing the ability
to realize deferred tax assets.
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests was $117 million for the year ended
December 31, 2016, compared to $54 million for the year ended December 31, 2015. For the years ended December 31, 2016,
and 2015, the net losses attributable to noncontrolling interests primarily reflect losses allocated to tax equity investors using the
hypothetical liquidation at book value, or HLBV, method, as well as NRG Yield, Inc.'s share of losses for the period.
83
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Consolidated Results of Operations for the years ended 2015 and 2014
The following table provides selected financial information for the Company:
Year Ended December 31,
2014 (a)
2015
Change
5,494
2,274
6,806
(244)
(40)
384
14,674
7,846
128
11
2,334
465
10,784
1,566
5,030
1,199
10
146
18,735
—
21
(4,040)
36
(56)
33
(14)
75
(1,128)
(1,054)
(5,094)
1,342
(6,436)
$
$
5,422
2,087
7,376
501
(13)
495
15,868
8,623
488
31
2,244
422
11,808
1,523
97
1,016
84
88
14,616
19
—
1,271
38
—
22
18
(95)
(1,119)
(1,136)
135
3
132
72
187
(570)
(745)
(27)
(111)
(1,194)
777
360
20
(90)
(43)
1,024
(43)
(4,933)
(183)
74
(58)
(4,119)
(19)
21
(5,311)
(2)
(56)
11
(32)
170
(9)
82
(5,229)
(1,339)
(6,568)
(54)
(6,382) $
(2)
134
$
(52)
(6,516)
2.66
$
4.41
(40)%
$
$
$
(In millions except otherwise noted)
Operating Revenues
Energy revenue (b)
Capacity revenue (b)
Retail revenue
Mark-to-market for economic hedging activities
Contract amortization
Other revenues (c)
Total operating revenues
Operating Costs and Expenses
Cost of sales (b)
Mark-to-market for economic hedging activities
Contract and emissions credit amortization (d)
Operations and maintenance
Other cost of operations
Total cost of operations
Depreciation and amortization
Impairment losses
Selling, marketing, general and administrative
Acquisition-related transaction and integration costs
Development costs
Total operating costs and expenses
Gain on sale of assets
Gain on postretirement benefits curtailment
Operating (Loss)/Income
Other Income/(Expense)
Equity in earnings of unconsolidated affiliates
Impairment losses on investments
Other income, net
(Loss)/gain on sale of equity method investment
Net gain/(loss) on debt extinguishment
Interest expense
Total other expense
(Loss)/Income before income tax expense
Income tax expense
Net (Loss)/Income
Less: Net loss attributable to noncontrolling interests and redeemable
noncontrolling interests
Net (loss)/income attributable to NRG Energy, Inc.
Business Metrics
Average natural gas price — Henry Hub ($/MMBtu)
Includes the results of EME from April 1, 2014, to December 31, 2014
Includes realized gains and losses from financially settled transactions.
(a)
(b)
(c) Includes unrealized trading gains and losses.
(d) Includes amortization of SO2 and NOx credits and excludes amortization of RGGI.
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Gross Margin
The Company calculates gross margin in order to evaluate operating performance as operating revenues less cost of sales,
which includes cost of fuel, other costs of sales, contract and emission credit amortization and mark-to-market for economic
hedging activities.
Economic Gross Margin
In addition to gross margin, the Company evaluates its operating performance using the measure of economic gross margin,
which is not a GAAP measure and may not be comparable to other companies’ presentations or deemed more useful than the
GAAP information provided elsewhere in this report. Economic gross margin should be viewed as a supplement to and not a
substitute for the Company's presentation of gross margin, which is the most directly comparable GAAP measure. Economic
gross margin is not intended to represent gross margin. The Company believes that economic gross margin is useful to investors
as it is a key operational measure reviewed by the Company's chief operating decision maker. Economic gross margin is defined
as the sum of energy revenue, capacity revenue and other revenue, less cost of fuels and other cost of sales.
Economic gross margin does not include mark-to-market gains or losses on economic hedging activities, contract
amortization, emission credit amortization, or other operating costs.
The tables below present the composition and reconciliation of gross margin and economic gross margin which reflects the
Company's current view of reporting segments for the years ended December 31, 2015 and 2014:
(In millions except
otherwise noted)
Gulf
Coast
East
West
Other
Elimin
ations
Subtotal
Retail
Renew
ables
NRG
Yield
Corporate/
Eliminations
Total
Year Ended December 31, 2015
Generation
Energy revenue
$ 2,548
$ 2,880
$
Capacity revenue
Retail revenue
Mark-to-market for
economic hedging
activities
Contract amortization
Other revenue (a)
291
—
(66)
15
215
1,345
—
(198)
—
66
Operating revenue
3,003
4,093
Cost of fuel
(1,214)
(1,398)
$
269
195
—
10
—
11
485
(159)
Other costs of sales
(b)
Mark-to-market for
economic hedging
activities
Contract and
emission credit
amortization
(352)
(493)
(33)
(17)
(78)
(18)
(20)
19
(2)
(2)
19
—
—
—
—
(40)
(21)
—
—
—
$ — $ 5,716
$ — $
359
$
1,831
—
116
6,778
(254)
15
238
4
—
16
7,546
6,914
(2,771)
(9)
—
—
(3)
(1)
37
392
(4)
489
341
—
(2)
(54)
179
953
(43)
$
(1,070) $ 5,494
(14)
28
11
—
(86)
2,274
6,806
(244)
(40)
384
(1,131)
14,674
15
(2,812)
(878)
(5,235)
(12)
(28)
1,119
(5,034)
(113)
(5)
(4)
(6)
—
—
—
—
(11)
(128)
—
(11)
—
—
—
—
(14)
(14)
—
—
—
—
Gross margin
$ 1,400
$ 2,143
$
273
$
(23) $
(14) $ 3,779
$ 1,660
$
376
$
882
$
(8) $ 6,689
Less: Mark-to-market
for economic hedging
activities, net
Less: Contract and
emission credit
amortization, net
Economic gross
margin
Business Metrics
MWh sold (thousands)(c)
(d)
MWh generated
(thousands)(e)
(83)
(276)
(5)
19
(8)
(2)
—
(2)
—
—
(367)
—
(3)
(2)
10
(6)
(1)
(54)
—
—
(372)
(51)
$ 1,488
$ 2,400
$
283
$
(21) $
(14) $ 4,136
$ 1,666
$
380
$
938
$
(8) $ 7,112
61,599
57,235
6,317
57,678
46,286
4,542
3,736
6,412
3,790
8,899
(a) Renewables Other revenue includes $11 million of intercompany revenue to NRG Yield.
(b) Includes purchased energy, capacity and emissions credits.
(c) MWh sold excludes generation at facilities in the West and NRG Yield that generate revenue under tolling agreements.
(d) Does not include MWh of 297 thousand or MWt of 1,946 thousand for thermal sold by NRG Yield.
(e) Does not include MWh of 297 thousand or MWt of 1,946 thousand for thermal generated by NRG Yield.
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(In millions except
otherwise noted)
Gulf
Coast
East
West
Other
Elimin
ations
Subtotal
Retail
Renew
ables
NRG
Yield
Corporate/
Eliminations
Total
Year Ended December 31, 2014
Generation
Energy revenue
$ 2,711
$ 3,523
$
Capacity revenue
Retail revenue
Mark-to-market for
economic hedging
activities
Contract amortization
Other revenue (a)
260
—
504
16
216
Operating revenue
3,707
1,269
—
42
—
107
4,941
Cost of fuel
Other costs of sales(b)
(1,494)
(1,924)
(391)
(413)
Mark-to-market for
economic hedging
activities
Contract and
emission credit
amortization
(23)
(40)
1
8
$
326
257
—
(11)
—
8
580
(235)
(31)
1
8
Gross margin
$ 1,759
$ 2,613
$
323
$
Less: Mark-to-market
for economic hedging
activities, net
Less: Contract and
emission credit
amortization, net
Economic gross
margin
Business Metrics
481
43
(10)
(24)
8
8
41
—
—
—
—
30
71
—
—
—
—
71
—
—
$ — $
6,601
$
— $
302
$
—
—
—
—
(11)
(11)
—
—
—
1,786
1
—
7,372
535
16
350
—
1
19
9,288
(3,653)
7,393
(16)
(835)
(5,941)
(21)
(508)
(1)
(25)
(6)
1
—
4
(1)
38
344
(4)
(7)
—
—
352
321
—
2
(29)
182
828
(61)
(28)
—
—
$
(1,833) $
5,422
(22)
4
(40)
—
(94)
2,087
7,376
501
(13)
495
(1,985)
15,868
157
1,765
(3,577)
(5,046)
41
—
(488)
(31)
$
(12) $
4,754
$
922
$
333
$
739
$
(22) $
6,726
—
514
(508)
4
2
(1)
(9)
(5)
(1)
(29)
1
—
13
(44)
$ 1,302
$ 2,562
$
325
$
71
$
(11) $
4,249
$ 1,435
$
330
$
766
$
(23) $
6,757
MWh sold (thousands)(c)(d)
63,860
49,619
4,769
MWh generated
(thousands)(e)
59,872
51,191
4,241
3,345
4,659
3,345
6,789
(a) Renewables Other revenue includes $8 million of intercompany revenue to NRG Yield.
(b) Includes purchased energy, capacity and emissions credits.
(c) MWh sold excludes generation at facilities in the West and NRG Yield that generate revenue under tolling agreements.
(d) Does not include MWh of 205 thousand or MWt of 2,060 thousand for thermal sold by NRG Yield.
(e) Does not include MWh of 224 thousand or MWt of 2,060 thousand for thermal generated by NRG Yield.
The table below represents the weather metrics for 2015 and 2014:
Years ended
December 31,
Quarter ended
December 31,
Quarter ended
September 30,
Quarter ended
June 30,
Quarter ended
March 31,
Weather
Metrics
Gulf
Coast(b)
East
West
Gulf
Coast(b)
East
West
Gulf
Coast(b)
East
West
Gulf
Coast(b)
East
West
Gulf
Coast(b)
East
West
2015
CDDs(a)
HDDs(a)
2014
CDDs
HDDs
10 year
average
CDDs
HDDs
2,871
1,888
1,336
4,697
1,111
1,948
2,737
2,157
1,068
5,122
1,157
1,712
286
556
246
748
88
1,246
62
1,655
247
762
72
1,655
127
813
103
610
49
828
1,652
—
1,559
3
1,598
4
824
26
667
67
751
74
772
7
803
3
611
24
892
47
888
95
968
80
391
465
313
528
337
538
195
315
250
226
160
383
41
33
1,285
2,960
44
26
1,311
2,872
17
813
1
873
89
27
1
1,053
2,445
1,168
(a) National Oceanic and Atmospheric Administration-Climate Prediction Center - A Cooling Degree Day, or CDD, represents the number of degrees that the
mean temperature for a particular day is above 65 degrees Fahrenheit in each region. A Heating Degree Day, or HDD, represents the number of degrees that
the mean temperature for a particular day is below 65 degrees Fahrenheit in each region. The CDDs/HDDs for a period of time are calculated by adding the
CDDs/HDDs for each day during the period.
(b) CDDs/HDDs for the Gulf Coast region represent an average of cumulative population-weighted CDDs/HDDs for Texas and the West South-Central Climate
region.
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Generation gross margin and economic gross margin
The tables below present the changes in Generation gross margin and economic gross margin which include intercompany
sales, during the year ended December 31, 2015, compared to the same period in 2014:
(In millions)
Gulf Coast region
East region
West region
Other
Gross Margin
(increase/
(decrease))
Economic Gross
Margin (increase/
(decrease))
$
$
(359) $
(470)
(50)
(94)
(973) $
186
(162)
(42)
(92)
(110)
The tables below describe the decrease in Generation gross margin and economic gross margin by region:
Gulf Coast Region
Higher gross margin which reflects a decrease in ERCOT merchant power prices, offset by the impact of
beneficial hedges, as well as a decrease in natural gas prices
Higher gross margin due to an increase in capacity revenue from higher pricing for certain South Central
facilities as well as an increase in average realized prices which reflects the impact of beneficial hedges
Higher gross margin from an increase in gas generation in Texas, which reflects lower supply costs from lower
natural gas prices
Lower gross margin due to lower coal generation in Texas, which was driven by lower natural gas prices
Lower capacity revenue due to the expiration of contracts in Texas and South Central
Lower coal gross margin due to lower coal generation in South Central, primarily for the conversion of Big
Cajun Unit 2 to gas
Lower gross margin from a decrease in nuclear generation driven by increased planned and unplanned outages
Change in commercial optimization activities and other
Increase in economic gross margin
Decrease in mark-to-market for economic hedging primarily due to net unrealized gains/losses on open
positions related to economic hedges
Increase in contract and emission credit amortization
Decrease in gross margin
(In millions)
$
$
$
174
139
28
(71)
(49)
(32)
(21)
18
186
(564)
19
(359)
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East Region
Lower gross margin due to a 27% decrease in coal generation as a result of prior year winter weather conditions
and plant deactivations
Lower gross margin driven by a 7% decrease in PJM cleared auction capacity volumes primarily from unit
deactivations, coupled with increased purchased capacity, partially offset by a 4% increase in PJM cleared
auction capacity prices
Changes in commercial optimization activities
Lower gross margin due to market adjustments for fuel oil inventory
Higher gross margin due to the EME acquisition in April 2014
Higher gross margin for gas facilities due to a decrease in natural gas prices, partially offset by a 6% decrease
in average realized energy prices, which reflect the impact of beneficial hedges
Higher gross margin due to new load contracts starting in June 2014 and lower supply cost
Higher gross margin primarily driven by a 9% increase in New York and New England hedged capacity prices
offset by purchased capacity
Other
Decrease in economic gross margin
Decrease in mark-to-market for economic hedging primarily due to net unrealized gains/losses on open
positions related to economic hedges
Increase in contract and emission credit amortization
Decrease in gross margin
West Region
Lower capacity gross margin due to a 17% decrease in price as a result of higher reserve margins driven by
more competition in certain areas and the expiration of certain tolling arrangements, which were replaced
with lower price agreements
Lower gross margin due to the retirement of Coolwater
Higher energy gross margin due to a 15% increase in volume driven by more available generation resulting
from the expiration of certain tolling arrangements and a 39% decrease in gas prices, partially offset by a
27% decrease in energy prices
Higher gross margin due to the EME acquisition
Other
Decrease in economic gross margin
Increase in mark-to-market for economic hedging primarily due to net unrealized gains/losses on open
positions related to economic hedges
Decrease in contract and emission credit amortization
Decrease in gross margin
(In millions)
$
(324)
(60)
(34)
(8)
121
55
50
29
9
(162)
(319)
11
(470)
$
$
(In millions)
$
$
$
(43)
(21)
11
8
3
(42)
2
(10)
(50)
Other
Other gross margin decreased $94 million and economic gross margin decreased $92 million for the year ended December 31,
2016, compared to the same period in 2015, due to BETM over the counter and congestion losses.
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Retail gross margin and economic gross margin
The following is a discussion of gross margin and economic gross margin for Retail.
(In millions except otherwise noted)
Retail revenue
Supply management revenue
Capacity revenues
Customer mark-to-market
Contract amortization
Other
Operating revenue (a)
Cost of sales (b)
Mark-to-market for economic hedging activities
Contract amortization
Gross margin
Less: Mark-to-market for economic hedging activities, net
Less: Contract and emission credit amortization
Economic gross margin
Business Metrics
Electricity sales volume (GWh) - Gulf Coast
Electricity sales volume (GWh) - All other regions
Natural gas sales volumes (MDth)
Average Retail Mass customer count (in thousands)
Ending Retail Mass customer count (in thousands)
$
$
$
Years ended December 31,
2015
2014
$
$
$
6,613
165
116
4
—
16
6,914
(5,244)
(4)
(6)
1,660
—
(6)
1,666
51,815
10,217
1,901
2,775
2,755
6,985
387
1
—
1
19
7,393
(5,957)
(508)
(6)
922
(508)
(5)
1,435
51,039
12,331
2,363
2,718
2,844
(a)
(b)
Includes intercompany sales of $6 million and $7 million in 2015 and 2014, respectively, representing sales from Retail to the Gulf Coast region.
Includes intercompany purchases of $1,054 million and $1,846 million in 2015 and 2014, respectively.
Retail gross margin increased $738 million and economic gross margin increased $231 million for the year ended
December 31, 2015, compared to the same period in 2014, due to:
Higher gross margin due to lower supply costs, partially offset by lower rates to customers driven by a decrease
in natural gas prices.
Higher gross margin due to lower supply costs on higher sales volumes resulting from weather in 2015.
Lower gross margin due to lower volumes driven by lower average customer usage and mix
Increase in economic gross margin
Increase in mark-to-market for economic hedging primarily due to net unrealized gains/losses on open
positions related to economic hedges
Decrease in contract and emission credit amortization
Increase in gross margin
(In millions)
$
$
$
189
50
(8)
231
508
(1)
738
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Renewables gross margin and economic gross margin
Renewables gross margin increased $43 million and economic gross margin increased $50 million for the year ended
December 31, 2015, compared to the same period in 2014, primarily driven by the EME acquisition in April 2014 and improved
performance at the Ivanpah solar plant, as it continued toward full production capabilities.
NRG Yield gross margin and economic gross margin
NRG Yield gross margin increased $143 million and economic gross margin increased $172 million for the year ended
December 31, 2015, compared to the same period in 2014, primarily related to the acquisition of the Alta Wind Assets in August
2014 as well as the acquisition of the January 2015 Drop Down Assets and the November 2015 Drop Down Assets from NRG,
the majority of which were acquired by NRG from EME in April 2014.
Mark-to-market for Economic Hedging Activities
Mark-to-market for economic hedging activities includes asset-backed hedges that have not been designated as cash flow
hedges and ineffectiveness on cash flow hedges. Total net mark-to-market results decreased by $385 million in the year ended
December 31, 2015, compared to the same period in 2014.
The breakdown of gains and losses included in operating revenues and operating costs and expenses by region are as follows:
Year Ended December 31, 2015
Generation
Gulf Coast
East
West
Retail
Renewables
NRG Yield
Elimination(a)
Total
(In millions)
Mark-to-market results in
operating revenues
Reversal of previously
recognized unrealized (gains)/
losses on settled positions
related to economic hedges
Reversal of acquired gain
positions related to economic
hedges
Net unrealized gains on open
positions related to economic
hedges
Total mark-to-market (losses)/
gains in operating revenues
$
Mark-to-market results in
operating costs and expenses
$
(408) $
(288) $
6
$
(1) $
(3) $
(2) $
(46) $ (742)
—
(84)
342
174
—
4
(66) $
(198) $
10
$
—
5
4
—
—
—
—
—
57
(84)
582
$
(3) $
(2) $
11
$ (244)
Reversal of previously
recognized unrealized losses/
(gains) on settled positions
related to economic hedges
Reversal of acquired gain
positions related to economic
hedges
Net unrealized (losses)/gains on
open positions related to
economic hedges
Total mark-to-market gains/
(losses) in operating costs
and expenses
$
34
$
15
$
(1) $
373
$
— $
— $
46
$
467
—
—
(18)
(4)
(51)
(93)
1
(373)
—
—
—
—
—
(22)
(57)
(573)
$
(17) $
(78) $
(18) $
(4) $
— $
— $
(11) $ (128)
(a) Represents the elimination of the intercompany activity between Retail and Generation.
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Generation
Year Ended December 31, 2014
Gulf Coast
East
West
Retail
Renewables
NRG Yield
Elimination(a)
Total
(In millions)
$
(6) $
10
$
(5) $
— $
1
$
— $
(1) $
(1)
Mark-to-market results in
operating revenues
Reversal of previously
recognized unrealized (gains)/
losses on settled positions
related to economic hedges
Reversal of acquired (gain)/loss
positions related to economic
hedges
Net unrealized gains/(losses) on
open positions related to
economic hedges
Total mark-to-market gains/
(losses) in operating revenues $
504
$
42
$
(11) $
— $
—
(325)
510
357
1
(7)
—
—
—
3
4
$
—
2
2
— (324)
(39)
826
$
(40) $ 501
Mark-to-market results in
operating costs and expenses
Reversal of previously
recognized unrealized (gains)/
losses on settled positions
related to economic hedges
Reversal of acquired (gain)/loss
positions related to economic
hedges
Net unrealized (losses)/gains on
open positions related to
economic hedges
Total mark-to-market (losses)/
gains in operating costs and
expenses
$
2
$
10
$
— $
(27) $
— $
— $
1
$ (14)
—
11
—
(20)
(25)
(20)
1
(461)
—
—
—
—
—
(9)
40
(465)
$
(23) $
1
$
1
$
(508) $
— $
— $
41
$ (488)
(a) Represents the elimination of the intercompany activity between Retail and Generation.
Mark-to-market results consist of unrealized gains and losses on contracts that are not yet settled. The settlement of these
transactions is reflected in the same revenue or cost caption as the items being hedged.
The reversals of acquired gain or loss positions were valued based upon the forward prices on the acquisition date.
For the year ended December 31, 2015, the $244 million loss in operating revenues from economic hedge positions was
driven primarily by the reversal of previously recognized unrealized gains on contracts that settled during the period and the
reversal of acquired contracts largely offset by an increase in value of open positions as a result of decreases in ERCOT and PJM
electricity prices. The $128 million loss in operating costs and expenses from economic hedge positions was driven primarily by
a decrease in the value of open positions as a result of decreases in ERCOT electricity and coal prices and the reversal of acquired
contracts, largely offset by the reversal of previously recognized unrealized losses on contracts that settled during the period.
In accordance with ASC 815, the following table represents the results of the Company's financial and physical trading of
energy commodities for the years ended December 31, 2015 and 2014. The realized and unrealized financial and physical trading
results are included in operating revenues. The Company's trading activities are subject to limits within the Company's Risk
Management Policy.
Trading gains/(losses)
Realized
Unrealized
Total trading (losses)/gains
91
Year Ended December 31,
2015
2014
(In millions)
$
$
$
57
(76)
(19) $
136
14
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In addition, trading activities reflect a decrease in gross margin of $69 million, reflected in the Generation segment, for
the year ended December 31, 2015, as compared to the same period in 2014.
Operations and Maintenance Expense
Generation
Gulf
Coast
East West Other
Elimin
ations
Retail Renewables
(In millions)
NRG
Yield
Corporate Eliminations
Total
Year Ended December 31, 2015 $ 656
$1,006
$ 143
Year Ended December 31, 2014 $ 636
$1,014
$ 159
$
$
1
1
$
$
(14) $ 253
(11) $ 235
$
$
94
128
$
$
178
140
$
$
22
3
$
$
(5) $2,334
(61) $2,244
Operations and maintenance expenses increased by $90 million for the year ended December 31, 2015, compared to
the same period in 2014, due to the following:
Increase due to the acquisition of EME in April 2014 and the Alta Wind Assets in August 2014
Increase in operations and maintenance expense related to planned outages at Cottonwood and Big Cajun
Increase in Retail operations and maintenance expense related to retail acquisitions and product expansion in
the core retail business.
Increase in operations and maintenance expense related to Ivanpah solar plant reaching commercial operations
in early 2014
Increase in operations and maintenance expense related to El Segundo Energy Center's forced outage in 2015
Increase due to the acquisition of Dominion in March 2014
Decrease in East operations and maintenance expense related to the timing end expense for prior year outages
at various plants
Decrease in operations and maintenance expense due to the retirement of Coolwater
Decrease in operations and maintenance expense related to Texas coal facilities due to timing of outages
Other
(In millions)
116
$
42
18
8
6
4
(64)
(30)
(14)
4
90
$
Other cost of operations
Generation
Gulf
Coast
East
West
Other
Retail
Renewables
NRG
Yield
Corporate
Total
(In millions)
Year Ended December 31, 2015
Year Ended December 31, 2014
$
$
103
110
$
$
131
122
$
$
25
22
$
$
— $
— $
113
109
$
$
21
16
$
$
72
48
$
$
— $
(5) $
465
422
Other cost of operations, comprised of asset retirement expense, insurance expense and property tax expense, increased
by $43 million for the year ended December 31, 2015, compared to the same period in 2014, primarily due to an increase in
property tax expense related to the acquisition of EME in April 2014 and the Alta Wind Assets in August 2014.
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Depreciation and Amortization
Generation
Gulf
Coast
East
West
Other
Retail
Renewables
NRG
Yield
Corporate
Total
Year Ended December 31, 2015
$ 546
$ 299
Year Ended December 31, 2014
$ 590
$ 294
$ — $
(In millions)
134
$
$ — $
134
$
$
$
51
70
180
164
$
$
297
233
$
$
59
38
$ 1,566
$ 1,523
Depreciation and amortization expense increased by $43 million for the year ended December 31, 2015, compared to the
same period in 2014, primarily due to increases of $19 million and $40 million due to the acquisitions of EME in April 2014 and
the Alta Wind Assets in August 2014, respectively, partially offset by a decrease in expense for facilities impaired during 2015.
Impairment Losses
In 2015, the Company recorded impairment losses of $5,030 million related to various facilities, as well as goodwill for its
Texas and Home Solar reporting units, as further described in Item 15 - Note 10, Asset Impairments and Note 11, Goodwill and
Other Intangibles, to the Consolidated Financial Statements.
In 2014, the Company recorded an impairment loss of $97 million related primarily to the Osceola and Coolwater facilities,
as further described in Item 15 — Note 10, Asset Impairments, to the Consolidated Financial Statements.
Selling, Marketing, General and Administrative Expenses
Year Ended December 31, 2015
Year Ended December 31, 2014
$
$
393
398
$
$
494
455
$
$
(In millions)
53
36
$
$
12
8
$
$
247
119
$
$
1,199
1,016
Generation
Retail
Renewables
NRG Yield
Corporate
Total
Selling, marketing, general and administrative expenses increased by $183 million for the year ended December 31, 2015
compared to the same period in 2014, due primarily to the expansion of the residential solar business and an increase in retail
acquisitions as well as channel and product expansions in the core retail business.
Acquisition-related Transaction and Integration Costs
NRG incurred transaction and integration costs of $10 million for the year ended December 31, 2015, compared to $84
million for the same period in 2014. The reduction in transaction and integration costs is due primarily to the substantial completion
of integration activities for the acquisition of Alta Wind, Dominion and EME in 2014.
Development Costs
NRG incurred development costs of $146 million for the year ended December 31, 2015, compared to $88 million for the
same period in 2014. This increase in development costs is due to increased development activities, primarily for Renewables and
NRG EVgo.
Impairment Losses on Investments
In 2015, the Company recorded other-than-temporary impairment losses on certain of its cost and equity method investments
of $56 million, as further described in Item 15 — Note 10, Asset Impairments, to the Consolidated Financial Statements.
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(Loss)/Gain on Sale of Equity Method Investment
In the fourth quarter of 2015, the Company sold its 32% interest in Altenex, as described in Item 15 — Note 3, Business
Acquisitions and Dispositions, to the Consolidated Financial Statements. In connection with the sale, the Company received cash
proceeds of $26 million and recorded a loss on sale of $14 million.
In the fourth quarter of 2014, the Company sold its investment in Sabine, as described in Item 15 — Note 3, Business
Acquisitions and Dispositions, to the Consolidated Financial Statements. In connection with the sale, the Company received cash
proceeds of $35 million and recorded a gain on sale of $18 million.
Gain/(Loss) on Debt Extinguishment
A gain on debt extinguishment of $75 million was recorded for the year ended December 31, 2015, primarily driven by the
repurchase of NRG senior notes due 2023 and 2024, GenOn senior notes due 2020 and GenOn Americas Generation senior notes
due 2021 and 2031 at a price below par value, combined with the write-off of unamortized premium.
In the fourth quarter of 2014, a loss of $95 million was recorded primarily due to the redemption premiums from the redemption
of the 2019 Senior Notes. These gains/losses also included the write-off of previously deferred financing costs.
Interest Expense
NRG's interest expense increased by $9 million for the year ended December 31, 2015, compared to the same period in 2014,
due to the following:
Increase due to the acquisition of EME in April 2014 and Alta Wind in August 2014
Increase for the 2022 Senior Notes issued in January 2014 and the 2024 Senior Notes issued in April 2014
Increase due to issuance of the NRG Yield Operating LLC 2024 Senior Notes issued in 2014
Decrease in derivative interest expense primarily from changes in fair value of interest rate swaps
Decrease due to the redemption of 7.625% and 8.5% Senior Notes due 2019
Other
(In millions)
51
24
17
(40)
(38)
(5)
9
$
$
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Income Tax Expense
For the year ended December 31, 2015, NRG recorded an income tax expense of $1,342 million on a pre-tax loss of $5,094
million. For the same period in 2014, NRG recorded an income tax expense of $3 million on pre-tax income of $135 million.
The effective tax rate was (26.3)% and 2.2% for the years ended December 31, 2015 and 2014, respectively.
For the year ended December 31, 2015, NRG's overall effective tax rate was different than the statutory rate of 35% primarily
due to recording of a valuation allowance on the federal and certain state net deferred tax assets that may not be realizable under
a “more likely than not” measurement. In addition, a portion of the book goodwill impairment is classified as a permanent reversal
impacting the effective tax rate.
(Loss)/income before income taxes
Tax at 35%
State taxes
Foreign operations
Federal and state tax credits, excluding PTCs
Valuation allowance
Book goodwill impairment
Impact of non-taxable entity earnings
Net interest accrued on uncertain tax positions
Production tax credits
Recognition of uncertain tax benefits
Tax expense attributable to consolidated partnerships
Impact of change in effective state tax rate
Other
Income tax expense
Effective income tax rate
Year Ended December 31,
2015
2014
(In millions
except as otherwise stated)
$
$
(5,094)
(1,783)
(218)
1
(5)
3,039
340
(10)
(3)
(33)
(15)
12
19
(2)
1,342
(26.3)%
$
$
135
47
9
1
(1)
6
—
(11)
(2)
(48)
(30)
4
22
6
3
2.2%
The effective income tax rate may vary from period to period depending on, among other factors, the geographic and business
mix of earnings and losses and changes in valuation allowances in accordance with ASC 740. These factors and others, including
the Company's history of pre-tax earnings and losses, are taken into account in assessing the ability to realize deferred tax assets.
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests was $54 million for the year ended
December 31, 2015, compared to $2 million for the year ended December 31, 2014. For the years ended December 31, 2015
and 2014, the net losses attributable to noncontrolling interests primarily reflect losses allocated to tax equity investors using the
hypothetical liquidation at book value, or HLBV, method, offset in part by NRG Yield, Inc.'s share of net income for the period.
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Liquidity and Capital Resources
Liquidity Position
As of December 31, 2016 and 2015, NRG's liquidity, excluding collateral funds deposited by counterparties, was
approximately $3.6 billion and $3.3 billion, respectively, comprised of the following:
Cash and cash equivalents:
NRG excluding NRG Yield and GenOn(b)
NRG Yield and subsidiaries
GenOn and subsidiaries(b)(c)
Restricted cash - operating
Restricted cash - reserves (a)
Total
Total credit facility availability
Total liquidity, excluding collateral funds deposited by counterparties
As of December 31,
2016
2015
(In millions)
$
$
622
317
1,034
56
390
2,419
1,217
3,636
$
$
742
111
665
127
287
1,932
1,373
3,305
Includes reserves primarily for debt service, performance obligations, and capital expenditures
(a)
(b) GenOn has the ability to draw on letters of credit associated with their intercompany revolving credit agreement with NRG. As of December 31, 2016, $272 million of letters of
credit were outstanding under this agreement for GenOn. Of this amount, $199 million were issued on behalf of GenOn Americas Generation, which includes $128 million issued
on behalf of GenOn Mid-Atlantic.
See Restricted Payments Tests, described below.
(c)
For the year ended December 31, 2016, total liquidity, excluding collateral funds deposited by counterparties, increased by
$331 million. Changes in cash and cash equivalent balances are further discussed hereinafter under the heading Cash Flow
Discussion. Cash and cash equivalents at December 31, 2016 were predominantly held in money market funds invested in treasury
securities, treasury repurchase agreements or government agency debt.
Management believes that the Company's liquidity position and cash flows from operations will be adequate to finance
operating and maintenance capital expenditures, to fund dividends to NRG's common stockholders, and other liquidity
commitments with exception of commitments related to GenOn as further described below. Management continues to regularly
monitor the Company's ability to finance the needs of its operating, financing and investing activity within the dictates of prudent
balance sheet management.
Restricted Payments Tests
Of the $2.0 billion of cash and cash equivalents of the Company as of December 31, 2016, $471 million and $100 million
were held by GenOn Mid-Atlantic and REMA, respectively. The ability of certain of GenOn’s and GenOn Americas Generation’s
subsidiaries to pay dividends and make distributions is restricted under the terms of certain agreements, including the GenOn Mid-
Atlantic and REMA operating leases. Under their respective operating leases, GenOn Mid-Atlantic and REMA are not permitted
to make any distributions and other restricted payments unless: (a) they satisfy the fixed charge coverage ratio for the most recently
ended period of four fiscal quarters; (b) they are projected to satisfy the fixed charge coverage ratio for each of the two following
periods of four fiscal quarters, commencing with the fiscal quarter in which such payment is proposed to be made; and (c) no
significant lease default or event of default has occurred and is continuing. In addition, prior to making a dividend or other restricted
payment, GenOn Mid-Atlantic and REMA must be in compliance with the requirement to provide credit support to the owner
lessors securing their obligations to pay scheduled rent under their respective leases. Based on GenOn Mid-Atlantic’s and REMA’s
most recent calculations of these tests, GenOn Mid-Atlantic and REMA did not satisfy the restricted payments tests. As a result,
as of December 31, 2016, GenOn Mid-Atlantic and REMA could not make distributions of cash and certain other restricted
payments. Each of GenOn Mid-Atlantic and REMA may recalculate its fixed charge coverage ratios from time to time and, subject
to compliance with the restricted payments test described above, make dividends or other restricted payments.
To the extent GenOn Mid-Atlantic or REMA are able to pay dividends to GenOn, the GenOn Senior Notes due 2018 and
2020 and the related indentures restrict the ability of GenOn to incur additional liens and make certain restricted payments, including
dividends. In the event of a default or if restricted payment tests are not satisfied, GenOn would not be able to distribute cash to
its parent, NRG. At December 31, 2016, GenOn did not meet the consolidated debt ratio component of the restricted payments
test.
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GenOn Liquidity
As disclosed in Item 15 - Note 1, Nature of Business, and Note 12, Debt and Capital Leases, to the Consolidated Financial
Statements, $691 million of GenOn's Senior Notes, excluding $8 million of associated premiums, are current within the GenOn
consolidated balance sheet as of December 31, 2016 and are due on June 15, 2017. GenOn's future profitability continues to be
adversely affected by (i) a sustained decline in natural gas prices and its resulting effect on wholesale power prices and capacity
prices, and (ii) the inability of GenOn Mid-Atlantic and REMA to make distributions of cash and certain other restricted payments
to GenOn. Based on current projections, GenOn is not expected to have sufficient liquidity to repay the Senior Notes due in June
2017. As a result of these factors, there is substantial doubt about GenOn's ability to continue as a going concern. As a result of
the substantial doubt about GenOn’s ability to continue as a going concern, along with additional factors, there is substantial doubt
about certain of GenOn’s subsidiaries’ ability to continue as a going concern.
The Company, GenOn's parent company, has no obligation to provide any financial support to GenOn other than under the
secured intercompany revolving credit agreement between the Company and GenOn and NRG Americas. As of December 31,
2016, $228 million was available to be used by GenOn under the $500 million revolving credit agreement. As controlled group
members, ERISA requires that NRG and GenOn are jointly and severally liable for the NRG Pension Plan for Bargained Employees
and the NRG Pension Plan, including the pension liabilities associated with GenOn employees.
GenOn is currently considering all options available to it, including negotiations with creditors, refinancing the GenOn
Senior Notes, potential sales of certain generating assets as well as the possibility for a need to file for protection under Chapter
11 of the U.S. Bankruptcy Code. During 2016, GenOn appointed two independent directors, retained advisors and established a
separate audit committee as part of this process. Any resolution may have a material impact on the Company's statement of
operations, cash flows and financial position.
As of December 31, 2016, GenOn represents 15.6% of the Company's consolidated total assets, 16.9% of the Company's
consolidated total liabilities and contributed $94 million to the Company's consolidated cash from operations in 2016.
Credit Ratings
On March 3, 2016 and March 21, 2016, respectively, S&P and Moody's reaffirmed the corporate credit ratings on NRG
Energy, Inc.
On October 7, 2016, GenOn's corporate credit rating was lowered by Moody's from Caa2 to Caa3 and its probability of
default rating was lowered from Caa2-PD to Caa3-PD. In addition, Moody's also lowered the ratings of REMA and GenOn Mid-
Atlantic's pass through certificates to Caa1 from B2. This is an update from March 21, 2016, at which time GenOn's corporate
credit rating was lowered from B3 to Caa2. At that time, Moody's also lowered the issue level ratings on the GenOn senior notes
from B3 to Caa2 and the GenOn America's Generation senior notes from Caa1 to Caa2.
On August 15, 2016, S&P lowered its corporate credit ratings on NRG Yield, Inc. and the NRG Yield Operating 2024 Senior
Notes to BB from BB+. The ratings outlook is stable.
On January 10, 2017, GenOn's corporate credit rating was further lowered by S&P to CCC- from CCC. The ratings outlook
for GenOn, GenOn Americas Generation, GenOn Mid-Atlantic and REMA is negative. In addition, S&P also lowered the issue-
level ratings on the GenOn Senior Notes to CCC from CCC+, the GenOn Americas Generation Senior Notes to CCC- from CCC,
and the pass-through certificates at REMA and GenOn Mid-Atlantic to CCC+ from B-.
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The following table summarizes the Company's current credit ratings:
NRG Energy, Inc.
7.625% Senior Notes, due 2018
8.25% Senior Notes, due 2020
7.875% Senior Notes, due 2021
6.25% Senior Notes, due 2022
6.625% Senior Notes, due 2023
6.25% Senior Notes, due 2024
7.25% Senior Notes, due 2026
6.625% Senior Notes, due 2027
Term Loan Facility, due 2023
GenOn 7.875% Senior Notes, due 2017
GenOn 9.500% Senior Notes, due 2018
GenOn 9.875% Senior Notes, due 2020
GenOn Americas Generation 8.500% Senior Notes, due 2021
GenOn Americas Generation 9.125% Senior Notes, due 2031
NRG Yield, Inc.
5.375% NRG Yield Operating LLC Senior Notes, due 2024
5.00% NRG Yield Operating LLC Senior Notes, due 2026
S&P
BB- Stable
BB-
BB-
BB-
BB-
BB-
BB-
BB-
BB-
BB+
CCC
CCC
CCC
CCC-
CCC-
BB
BB
BB
Moody's
Ba3 Stable
B1
B1
B1
B1
B1
B1
B1
B1
Baa3
Caa3
Caa3
Caa3
Caa3
Caa3
Ba2
Ba2
Ba2
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Sources of Liquidity
The principal sources of liquidity for NRG's future operating and capital expenditures are expected to be derived from new
and existing financing arrangements, existing cash on hand, cash flows from operations and cash proceeds from future sales of
assets, including sales to NRG Yield, Inc. As described in Item 15 — Note 12, Debt and Capital Leases, to the Consolidated
Financial Statements, the Company's financing arrangements consist mainly of the 2016 Senior Credit Facility, the Senior Notes,
the GenOn Senior Notes, the GenOn Americas Generation Senior Notes, the NRG Yield 2019 Convertible Notes, the NRG Yield
2020 Convertible Notes, the Yield Operating 2020 senior unsecured notes, the NRG Yield, Inc. revolving credit facility, and
project-related financings.
Offer and Drop Down of Assets to NRG Yield, Inc.
In December 2016, NRG offered NRG Yield, Inc. the opportunity to purchase the following assets: (i) the Minnesota Portfolio,
a 40 MW portfolio of wind project; (ii) the 30 MW Community wind projects; (iii) the 50 MW Jeffers wind projects; and (iv) a
16% interest in the 290 MW Agua Caliente solar project, pursuant to the ROFO Agreement. In addition to these ROFO Agreement
assets, NRG also offered NRG Yield, Inc. the opportunity to purchase NRG's 50% interests in seven utility-scale solar projects
located in Utah, representing 265 net MW of capacity.
On February 24, 2017, the Company and NRG Yield, Inc. entered into a definitive agreement regarding the sale of the
following projects to NRG Yield, Inc.: (i) a 16% interest (approximately 31% of NRG's 51% interest) in the Agua Caliente solar
project, one of the ROFO Agreement assets, representing ownership of approximately 46 net MW of capacity; and (ii) NRG's
50% interests in seven utility-scale solar projects located in Utah representing 265 net MW of capacity. NRG expects total cash
consideration for the transaction to be $130 million, plus assumed non-recourse project debt of approximately $464 million,
excluding working capital and other adjustments.
NRG Yield, Inc. elected not to pursue the acquisition of the Minnesota, Community, and Jeffers wind projects at this time,
but may continue its evaluation of the projects. NRG Yield, Inc. has retained the right with NRG, pursuant to the ROFO Agreement,
to participate in any third party process to the extent NRG elected to pursue a third party sale of these assets.
ROFO Agreement Expansion
On February 24, 2017, the Company amended and restated the ROFO Agreement to expand the ROFO assets pipeline with
the addition of 234 net MW of utility-scale solar projects. These assets include Buckthorn Solar, a 154 net MW facility located
in Texas, and the Hawaii Solar projects, which have a combined capacity of 80 net MW.
Sale of CVSR to NRG Yield, Inc. and CVSR Financing Arrangement
On July 15, 2016, CVSR Holdco LLC issued $200 million of senior secured notes that bear interest at 4.68% and mature
on March 31, 2037. The $199 million of net proceeds from the notes were distributed to a subsidiary of NRG and to NRG Yield
Operating LLC, the owners of CVSR Holdco LLC, based on their pro-rata ownership. NRG Yield Operating LLC utilized its net
proceeds of $97.5 million to reduce the outstanding balance of its revolving credit facility. NRG expects to utilize its net proceeds
in connection with the 2016 Capital Allocation Program. On September 1, 2016, the Company sold its remaining 51.05% interest
in CVSR Holdco LLC, which indirectly owns the CVSR solar facility, to NRG Yield, Inc. for total cash consideration of $78.5
million plus an immaterial working capital adjustment. NRG Yield, Inc. also assumed $496 million of non-recourse debt as of the
closing date.
Thermal Financing
On October 31, 2016, NRG Energy Center Minneapolis LLC, a subsidiary of NRG Yield, Inc., received proceeds of
$125 million from the issuance of 3.55% Series D notes due October 31, 2031, or the Series D Notes, and entered into a shelf
facility for the anticipated issuance of an additional $70 million of notes. In the first quarter of 2017, NRG Energy Center
Minneapolis LLC, anticipates amending the shelf facility to allow for the issuance of an additional $10 million of notes, increasing
the total principal amount of notes available for issuance under the shelf facility to $80 million. The Series D Notes are, and the
additional notes, if issued, will be secured by substantially all of the assets of NRG Energy Center Minneapolis LLC. NRG Thermal
LLC has guaranteed the indebtedness and its guarantee is secured by a pledge of the equity interests in all of NRG Thermal LLC’s
subsidiaries. NRG Energy Center Minneapolis LLC distributed the proceeds of the Series D Notes to NRG Thermal LLC, who
in turn distributed the proceeds to NRG Yield Operating LLC to be utilized for general corporate purposes, including potential
acquisitions.
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Issuance of 2027 Senior Notes
On August 2, 2016, NRG issued $1.25 billion in aggregate principal amount at par of 6.625% senior notes due 2027, or the
2027 Senior Notes. The 2027 Senior Notes are senior unsecured obligations of NRG and are guaranteed by certain of its subsidiaries.
Interest is paid semi-annually beginning on January 15, 2017, until the maturity date of January 15, 2027. The proceeds from the
issuance of the 2027 Senior Notes were utilized to retire the Company's 8.250% senior notes due 2020 and to reduce the balance
of the Company's 7.875% senior notes due 2021.
2023 Term Loan Facility
On January 24, 2017, NRG repriced the 2023 Term Loan Facility, reducing the interest rate margin by 50 basis points to
LIBOR plus 2.25%, the LIBOR floor remains 0.75%. As a result of the repricing the Company expects interest savings of
approximately $9 million in 2017 and approximately $60 million in interest savings over the life of the loan.
Capistrano Refinancing
In July 2016, Cedro Hill, Broken Bow and Crofton Bluffs, subsidiaries of Capistrano Wind Partners, each amended their
respective credit facilities to increase borrowings to a total of $312 million and to lower their respective interest rates. The net
proceeds of $87 million were distributed to Capistrano Wind Partners and subsequently distributed to the holders of the Class B
preferred equity interests of Capistrano Wind Partners.
EVgo
On June 17, 2016, the Company completed the sale of a majority interest in its EVgo business to Vision Ridge Partners for
total consideration of approximately $39 million, including $17 million in cash received net of $2.5 million in working capital
adjustments, $15 million contributed as capital to the EVgo business and $7 million of future contributions by Vision Ridge
Partners, all of which were determined based on forecasted cash requirements to operate the business in future periods. In addition,
the Company has future earnout potential of up to $70 million based on future profitability targets. NRG will retain its original
financial obligation of $102.5 million under its agreement with the CPUC, whereby EVgo will build at least 200 public fast
charging Freedom Station sites and perform the associated work to prepare 10,000 commercial and multi-family parking spaces
for electric vehicle charging in California. As a result of the sale, the Company recorded the accrual of NRG's remaining obligation
under its agreement with the CPUC of $56 million, of which $47 million remains as of December 31, 2016.
Issuance of 2026 Senior Notes
On May 23, 2016, NRG issued $1.0 billion in aggregate principal amount at par of 7.25% senior notes due 2026, or the 2026
Senior Notes. The 2026 Senior Notes are senior unsecured obligations of NRG and are guaranteed by certain of its subsidiaries.
Interest is paid semi-annually beginning on November 15, 2016, until the maturity date of May 15, 2026. The proceeds from the
issuance of the 2026 Senior Notes were utilized to redeem a portion of the Senior Notes as discussed in Uses of Liquidity.
Midwest Generation
On April 7, 2016, Midwest Generation, LLC, or MWG, entered into an agreement to sell certain quantities of unforced
capacity that has cleared various PJM Reliability Pricing Model auctions to a trading counterparty for net proceeds of $253 million.
MWG will continue to operate the applicable generation facilities and remains responsible for performance penalties and is eligible
for performance bonus payments, if any. Accordingly, MWG will continue to account for all revenues and costs as before; however,
the proceeds will be recorded as a financing obligation while capacity payments by PJM to the counterparty will be reflected as
debt amortization and interest expense through the end of the 2018/19 delivery year. MWG will amortize the upfront discount to
interest expense, at an effective interest rate of 4.39%, over the term of the arrangement, through June 2019.
Asset Dispositions
During the year ended December 31, 2016, the Company received proceeds of $118 million related to the sale of GenOn's
Seward and Shelby generating stations, proceeds of $56 million related to the sale of its Rockford generating stations, proceeds
of $369 million related to the sale of GenOn's Aurora generating station and proceeds of $74 million related to the sale of the
Potrero real property.
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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. NRG uses the first lien structure 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 gas used as a proxy for power. To the extent that the underlying hedge positions for a counterparty
are out-of-the-money to NRG, the counterparty would have claim under the first lien program. The first lien program limits the
volume that can be hedged, not the value of underlying out-of-the-money positions. The first lien program does not require NRG
to post collateral above any threshold amount of exposure. Within the first lien structure, the Company can hedge up to 80% of
its coal and nuclear capacity, excluding GenOn coal capacity, and 10% of its other assets, excluding GenOn's other assets, with
these counterparties for the first 60 months and then declining thereafter. Net exposure to a counterparty on all trades must be
positively correlated to the price of the relevant commodity for the first lien to be available to that counterparty. The first lien
structure is not subject to unwind or termination upon a ratings downgrade of a counterparty and has no stated maturity date.
The Company's first lien counterparties may have a claim on its assets to the extent market prices exceed the hedged prices.
As of December 31, 2016, all hedges under the first liens were out-of-the-money on a counterparty aggregate basis.
The following table summarizes the amount of MW hedged against the Company's coal and nuclear assets and as a percentage
relative to the Company's coal and nuclear capacity under the first lien structure as of December 31, 2016:
Equivalent Net Sales Secured by First Lien Structure (a)
In MW (b)
As a percentage of total net coal and nuclear capacity (c)
(a) Equivalent Net Sales include natural gas swaps converted using a weighted average heat rate by region.
(b) Net coal and nuclear capacity represents 80% of the Company's total coal and nuclear assets eligible under the first lien, which excludes coal assets
acquired in the GenOn and EME (including Midwest Generation) acquisitions, assets in NRG Yield, Inc. and NRG's assets that have project-level
financing.
2018
1,187
2017
2,637
—
—%
47%
22%
2019
2020
—
—%
Uses of Liquidity
The Company's requirements for liquidity and capital resources, other than for operating its facilities, can generally be categorized
by the following: (i) commercial operations activities; (ii) debt service obligations, as described more fully in Item 15 — Note 12, Debt
and Capital Leases, to the Consolidated Financial Statements; (iii) capital expenditures, including repowering and renewable
development, and environmental; and (iv) allocations in connection with acquisition opportunities, debt repayments, return of capital
and dividend payments to stockholders, as described in Item 15 — Note 15, Capital Structure, to the Consolidated Financial Statements.
Commercial Operations
The Company's commercial operations activities require a significant amount of liquidity and capital resources. These liquidity
requirements are primarily driven by: (i) margin and collateral posted with counterparties; (ii) margin and collateral required to
participate in physical markets and commodity exchanges; (iii) timing of disbursements and receipts (i.e. buying fuel before receiving
energy revenues); (iv) initial collateral for large structured transactions; and (v) collateral for project development. As of December 31,
2016, commercial operations had total cash collateral outstanding of $203 million and $882 million outstanding in letters of credit to
third parties primarily to support its commercial activities for both wholesale and retail transactions. As of December 31, 2016, total
collateral held from counterparties was $2 million in cash and $15 million of letters of credit.
Future liquidity requirements may change based on the Company's hedging activities and structures, fuel purchases, and future
market conditions, including forward prices for energy and fuel and market volatility. In addition, liquidity requirements are dependent
on the Company's credit ratings and general perception of its creditworthiness.
101
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3/4/17 3:01 AM
Debt Service Obligations
Principal payments on debt and capital leases as of December 31, 2016 are due in the following periods:
2017
2018
2019
2020
(In millions)
2021
Thereafter
Total
$
— $
398
$
— $
— $ — $
— $
Description
NRG Recourse Debt:
Senior notes, due 2018
Senior notes, due 2021
Senior notes, due 2022
Senior notes, due 2023
Senior notes, due 2024
Senior notes, due 2026
Senior notes, due 2027
Term loan facility, due 2023
Tax-exempt bonds
Subtotal NRG Recourse Debt
NRG Non-Recourse Debt:
GenOn senior notes
GenOn Americas Generation senior notes
GenOn Other
Subtotal GenOn debt (non-recourse to NRG)
Yield Operating LLC Senior Notes, due 2024
Yield Operating LLC Senior Notes, due 2026
Yield Inc. Convertible Senior Notes, due 2019
Yield Inc. Convertible Senior Notes, due 2020
El Segundo Energy Center, due 2023
Marsh Landing, due 2017 and 2023
Alta Wind I-V lease financing arrangements, due 2034 and
2035
Walnut Creek, term loans due 2023
Tapestry, due 2021
Alpine, due 2022
CVSR, due 2037
CVSR Holdco, due 2037
Energy Center Minneapolis, due 2017, 2025 and 2031
Viento, due 2023
NRG Yield Other
Subtotal NRG Yield debt (non-recourse to NRG)
Ivanpah, due 2033 and 2038
Agua Caliente, due 2037
Dandan, due 2033
Cedro Hill, due 2025
Midwest Gen - PJM Capacity
Utah Portfolio, due 2022
NRG Other
Subtotal other NRG non-recourse debt
Subtotal all non-recourse debt
Subtotal long-term debt
Capital Leases:
Capital leases
Other
—
—
—
—
—
—
19
—
19
691
—
4
695
—
—
—
—
43
52
39
43
10
9
25
5
13
14
29
282
40
31
3
12
79
9
50
224
1,201
1,220
2
—
—
—
—
—
—
—
19
—
417
649
—
5
654
—
—
—
—
48
55
40
45
11
8
26
6
7
16
30
292
40
32
4
12
103
12
82
285
1,231
1,648
2
—
—
—
—
—
—
—
19
—
19
—
—
5
5
—
—
345
—
49
57
42
47
11
8
24
6
11
18
33
—
—
—
—
—
—
19
—
19
490
—
5
495
—
—
—
288
53
60
43
49
11
8
21
7
11
15
75
206
—
—
—
—
—
19
—
225
—
366
5
371
—
—
—
—
57
62
45
53
129
8
23
6
11
16
29
—
992
869
733
1,000
1,250
1,796
455
7,095
—
329
72
401
500
350
—
—
193
84
756
73
—
104
652
169
168
99
344
651
641
439
3,492
44
34
4
12
—
13
9
116
1,252
1,271
1
1
45
35
4
12
—
13
12
121
931
1,156
—
1
902
684
58
103
—
226
231
2,204
6,097
13,192
—
—
42
33
3
12
49
14
10
163
819
838
1
—
1
839
398
206
992
869
733
1,000
1,250
1,891
455
7,794
1,830
695
96
2,621
500
350
345
288
443
370
965
310
172
145
771
199
221
178
540
5,797
1,113
849
76
163
231
287
394
3,113
11,531
19,325
6
2
Subtotal NRG Capital Leases
Total Debt and Capital Leases
2
1,222
$
2
1,650
$
$
2
$ 1,273
1
$ 1,157
$
—
13,192
8
19,333
In addition to the debt and capital leases shown in the above table, NRG had issued $1.3 billion of letters of credit under the
Company's $2.5 billion Revolving Credit Facility as of December 31, 2016.
102
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3/4/17 3:01 AM
Capital Expenditures
The following table and descriptions summarize the Company's capital expenditures for maintenance, environmental, and
growth investments, for the year ended December 31, 2016 and the estimated capital expenditure and growth investments forecast
for 2017.
Generation
Gulf Coast
East
West
Retail
Renewables
NRG Yield
Corporate
Total cash capital expenditures for the year ended
December 31, 2016
Other investments(a)
Funding from debt financing, net of fees
Funding from third party equity partners and cash grants
Total capital expenditures and investments, net of financings
Estimated capital expenditures for 2017
Other investments(a)
Funding from debt financing, net of fees
NRG estimated capital expenditures for 2017, net of financings
Maintenance
Environmental
Growth
Investments
Total
(In millions)
$
$
$
$
157
138
3
27
14
16
12
367
—
—
—
367
318
—
—
318
$
$
$
$
7
278
—
—
—
—
—
285
—
—
—
285
25
—
—
25
$
$
$
$
8
107
88
4
308
4
73
592
392
(141)
(171)
672
796
59
(662)
193
$
$
$
$
172
523
91
31
322
20
85
1,244
392
(141)
(171)
1,324
1,139
59
(662)
536
(a) Other investments include restricted cash activity and $191 million of cash related to acquisitions .
• Environmental capital expenditures — For the year ended December 31, 2016, the Company's environmental capital
expenditures included DSI/ESP upgrades at the Powerton facility and the Joliet gas conversion to satisfy CPS as well as
controls to satisfy MATS at the Avon Lake Facility.
• Growth Investments capital expenditures — For the year ended December 31, 2016, the Company's growth investment
capital expenditures included $315 million for solar projects, $32 million for wind projects, $107 million for fuel
conversions, $96 million for repowering projects, $4 million for thermal projects and $38 million for the Company's
other growth projects.
Environmental Capital Expenditures Estimate
NRG estimates that environmental capital expenditures from 2017 through 2021 required to comply with environmental
laws will be approximately $134 million, which includes $61 million for GenOn and $42 million for Midwest Generation. These
costs are primarily associated with the cost of complying with anticipated ELG requirements.
103
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 103
3/4/17 3:01 AM
The table below summarizes the status of NRG's coal fleet with respect to air quality controls. Planned investments are
either in construction or budgeted in the existing capital expenditures budget. Changes to regulations could result in changes to
planned installation dates. NRG uses an integrated approach to fuels, controls and emissions markets to meet environmental
standards.
Units (a)
State
Control
Equipment
Install
Date
Control
Equipment
Install
Date
Control
Equipment
Install
Date
Control
Equipment
Install Date
SO2
NOx
Mercury
Particulate
Avon 9
Big Cajun II 1
Big Cajun II 2
Big Cajun II 3
Chalk Point 1
Chalk Point 2
Cheswick 1
Conemaugh 1-2
Dickerson 1-3
Indian River 4
Joliet 6
Joliet 7, 8
Keystone 1-2
Limestone 1-2
Morgantown 1-2
New Castle 3, 4, 5
Powerton 5
Powerton 6
Shawville 1-2
Shawville 3-4
W.A. Parish 5, 6, 7
W.A. Parish 8(b)
Waukegan 7
Waukegan 8
Will County 4
OH
LA
LA
LA
MD
MD
PA
PA
MD
DE
IL
IL
PA
TX
MD
PA
IL
IL
PA
PA
TX
TX
IL
IL
IL
DSI
DSI
Gas
Conversion
PAL
FGD
FGD
FGD
FGD
FGD
CDS
Gas
Conversion
Gas
Conversion
FGD
FGD
FGD
Gas
Addition
DSI
DSI
Gas
Addition
Gas
Addition
FF co-
benefit
FGD
DSI
DSI
DSI
2016
2015
2015
2013
2009
2009
2010
1994, 95
2009
2011
2016
2016
2009
LNBOFA
LNBOFA/
SNCR
LNBOFA/
SNCR
LNBOFA/
SNCR
SCR
SACR
SCR
SCR
SNCR
LNBOFA/
SCR
Gas
Conversion/
FGR
Gas
Conversion
SCR
2004
ACI/ESP
2005/2014
ACI
2004/2014
Gas
Conversion
2002/2014
ACI
2008
2006
2003
2014
2009
FGD/ESP
FGD/ESP
FGD/ESP
FGD/ESP/
SCR
FGD/FF
1999/2011
ACI
2016
2016
2003
Gas
Conversion
Gas
Conversion
FGD/ESP/
SCR
1985-86
2009
LNBOFA/
SNCR
2002/2022,
2023
ACI
SCR
2007-2008
FGD/ESP
2016
Gas Addition
2003/2012
OFA/SNCR
2002/2012
ACI
ACI
2016
2015
2015
2015
2009
2009
2010
1994,95/
2014
2009
2008
2016
2016
2003
2015
2009
2016
2009
2009
ESP/upgrade
1970/2016
ESP/upgrade
1981/2015
Gas
Conversion
2015
ESP/upgrade
1983/2015
ESP/upgrade
1964/1980
ESP/upgrade
1964/1980
ESP
ESP
ESP/FF
1970
1970, 1971
1959,1960,
1962/2003
ESP/FF
1980/2011
Gas
Conversion
Gas
Conversion
ESP
ESP
ESP
2016
2016
1967, 1968
1985-1986
1970, 1971
Gas Addition
2016
ESP/upgrade
1973/2016
ESP/upgrade
1976/2014
2016
Gas Addition
2016
Gas Addition
2016
Gas Addition
2016
Gas Addition
2004
2004
2002
ACI
ACI
ACI
ACI
ACI
2015
2015
FF
FF
2008
ESP/upgrade
2008
ESP/upgrade
2009
ESP/upgrade
2016
2016
1988
1988
1958/2002,
2014
1962/1999,
2015
1963,72/
2000
2014
LNBOFA
2015
LNBOFA
1999
2017
LNBOFA/
SNCR
1999,2001/
2012
Gas
Addition/
FGR
OFA/SNCR
Gas
Addition/
FGR
Gas
Addition
SCR
SCR
2016
2016
2014
2016
2016
1988
1982
(a) NRG added natural gas capabilities at its New Castle, Shawville, and Joliet facilities in 2016. Joliet cannot switch back to coal.
(b) Unit expected to be converted into a cogeneration facility to provide power and steam to the Petra Nova CCF.
ACI - Activated Carbon Injection
CDS - Circulating Dry Scrubber
DSI - Dry Sorbent Injection with Trona
ESP - Electrostatic Precipitator
FGD - Flue Gas Desulfurization (wet)
FF- Fabric Filter
FBL - Fluidized Bed Limestone Injection
LNBOFA - Low NOx Burner with Overfire Air
PAL - Plantwide Applicability Limit
SCR - Selective Catalytic Reduction
SACR - Selective Auto-Catalytic Reduction
SNCR - Selective Non-Catalytic Reduction
104
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 104
3/4/17 3:01 AM
The following table summarizes the estimated environmental capital expenditures for the referenced periods by region:
2017
2018
2019
2020
2021
Total
Gulf Coast -
Legacy NRG
Gulf Coast -
GenOn
East -
Legacy NRG
East -
GenOn
East - MWG
Total
$
$
1
—
2
11
13
27
$
$
3
—
—
—
—
3
$
$
(In millions)
— $
1
—
1
2
4
$
10
2
8
11
27
58
$
$
11
—
—
3
28
42
$
$
25
3
10
26
70
134
NRG's current contracts with the Company's rural electrical customers in the Gulf Coast region allow for recovery of a
portion of the regions' capital costs once in operation, along with a capital return incurred by complying with any change in law,
including interest over the asset life of the required expenditures. The actual recoveries will depend, among other things, on the
timing of the completion of the capital projects and the remaining duration of the contracts.
Debt Reduction
The following table lists the repurchases of senior notes in 2016.
Amount in millions, except rates
7.625% senior notes due 2018
8.250% senior notes due 2020
7.875% senior notes due 2021
6.250% senior notes due 2022
6.625% senior notes due 2023
6.250% senior notes due 2024
Total at December 31, 2016
(a) Includes payment for accrued interest.
Principal
Repurchased
Cash Paid (a)
Average Early
Redemption
Percentage
$
$
$
641
1,058
922
108
67
171
2,967
$
706
1,129
978
105
64
163
3,145
107.89%
103.12%
104.00%
94.73%
94.13%
94.52%
In 2017, the Company reserved $200 million of additional capital allocated to discretionary debt reduction, which brings
the total expected discretionary debt reduction allocation in 2017 to $600 million.
Preferred Stock
On May 24, 2016, the Company entered an agreement with Credit Suisse Group to repurchase 100% of the outstanding
shares of its $344.5 million 2.822% preferred stock. On June 13, 2016, the Company completed the repurchase from Credit Suisse
of 100% of the outstanding shares at a price of $226 million. The Company anticipates the transaction to generate approximately
$10 million in annual dividend savings.
Common Stock Dividends
The following table lists the dividends paid during 2016:
Dividends per Common Share
$
0.030
$
0.030
$
0.030
$
0.145
Fourth Quarter
2016
Third Quarter
2016
Second Quarter
2016
First Quarter
2016
On January 18, 2017, NRG declared a quarterly dividend on the Company's common stock of $0.03 per share, or $0.12 per
share on an annualized basis, payable on February 15, 2017, to stockholders of record as of February 1, 2017. The Company's
common stock dividends are subject to available capital, market conditions, and compliance with associated laws and regulations.
The Company expects that, based on current circumstances, comparable cash dividends will continue to be paid in the foreseeable
future.
105
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 105
3/4/17 3:01 AM
UPMC Thermal Project
On October 31, 2016, NRG Business Services LLC, a subsidiary of the Company, and NRG Energy Center Pittsburgh LLC,
or NECP, a subsidiary of NRG Yield, Inc., entered into a EPC agreement for the construction of a 73 MWt district energy system
for NECP to provide 150 kpph of steam, 6,750 tons of chilled water and 7.5 MW of emergency backup power service to UPMC.
The initial term of the energy services agreement with UPMC Mercy will be for a period of twenty years from the service
commencement date. Pursuant to the terms of the EPC agreement, NECP shall pay NRG Business Services LLC $79 million,
subject to adjustment based upon certain conditions in the EPC agreement, upon substantial completion of the project. The project
is expected to reach COD in the first quarter of 2018. On January 5, 2017, the parties amended the EPC agreement, based on a
customer change order, to increase the capacity of the district energy system from 73 MWt to 80 MWt, which also increased the
payment from $79 million to $87 million.
2016 Utility-Scale Solar and Wind Acquisition
On November 2, 2016, the Company acquired equity interests in a tax equity portfolio from SunEdison, located in Utah,
comprised of 530 MW of mechanically-complete solar assets, of which NRG’s net interest based on cash to be distributed is 265
MW, for upfront cash consideration of $111 million. In connection with the acquisition, the Company assumed non-recourse debt
of $222 million. The Company also borrowed additional amounts of $65 million during the fourth quarter of 2016, as described
in Note 12, Debt and Capital Leases, which effectively reduced the Company's use of liquidity related to the acquisition. The
Company does not have a controlling interest in the tax equity portfolio and, accordingly, its interest is recorded as an equity
method investment. The purchase price was preliminarily allocated to the equity method investment balance of approximately
$328 million, current assets of $5 million and the assumed non-recourse debt of $222 million. The assets reached commercial
operations during the fourth quarter of 2016 and have 20-year PPAs with PacificCorp.
The Company acquired a 110 MW portfolio of construction-ready and 71 MW of development solar assets in Hawaii from
SunEdison for upfront cash consideration of $2 million on October 3, 2016 and a 154 MW construction-ready solar project in
Texas for upfront cash consideration of $11 million on November 9, 2016.
In addition to the total $124 million in upfront cash consideration paid for the above three acquisitions, the Company expects
to make an estimated $59 million in additional payments contingent upon future development milestones.
2016 Solar Distributed Generation Acquisition
On October 3, 2016, the Company acquired a 29 MW portfolio of mechanically-complete and construction-ready distributed
generation solar assets from SunEdison for cash consideration of approximately $67 million excluding post-closing adjustments
which reduced the purchase price by $5 million. Subsequent to the acquisition, the Company sold the majority of these assets
into a tax-equity financed portfolio within the DGPV Holdco partnership between NRG and NRG Yield, Inc., and expects to sell
the remaining assets into a similar portfolio in 2017. The purchase price was preliminarily allocated to $47 million in construction
in progress and $15 million in intangibles.
GenOn Mid-Atlantic Prepaid Letter of Credit
On January 27, 2017, GenOn Mid-Atlantic entered into an agreement with Natixis under which Natixis will procure payment
and credit support for the payment of certain lease payments owed pursuant to the GenOn Mid-Atlantic operating leases for
Morgantown and Dickerson. GenOn Mid-Atlantic made a payment of $130 million plus fees of $1 million as consideration for
Natixis applying for the issuance of, and obtaining, letters of credit from Natixis, New York Branch, the LC Provider, to support
the lease payments. Natixis is solely responsible for (i) obtaining letters of credit from the LC Provider, (ii) causing the letters of
credit to be issued to the lessors to support the lease payments on behalf of GenOn Mid-Atlantic, (iii) making lease payments and
(iv) satisfying any reimbursement obligations payable to the LC Provider.
106
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 106
3/4/17 3:01 AM
On February 24, 2017, GenOn Mid-Atlantic received a series of notices from the owner lessors under its operating leases of
the Morgantown coal generation unit alleging default, or Notices. The Notices allege the existence of lease events of default as a
result of, among other items, the purported failure by GenOn Mid-Atlantic to comply with a covenant requiring the maintenance
of qualifying credit support. The Notices instructed the relevant trustees to draw on letters of credit under the secured intercompany
revolving credit agreement between NRG and GenOn, supporting the GenOn Mid-Atlantic operating leases that were set to expire
on February 28, 2017. On February 28, 2017, the trustees drew on the letters of credit under the 2016 Revolving Credit Facility,
which resulted in borrowings of $125 million. The Company will provide written notification to GenOn with respect to the draw
and GenOn will become obligated under the secured intercompany revolving credit agreement between NRG and GenOn. The
Company is unaware of whether any further action will be taken by the owner lessors or any other person in connection with the
Notices. GenOn Mid-Atlantic disagrees with the owner lessors as to the existence of any lease events of default and/or any breaches
by GenOn Mid-Atlantic of any terms and conditions of the operating leases and believes that the declaration of a lease event of
default, the instruction to draw on the letters of credit under the secured intercompany revolving credit agreement between NRG
and GenOn and any actual draw thereon constitutes a violation by the owner lessors and the relevant trustees of the terms and
conditions of the GenOn Mid-Atlantic operating leases. GenOn Mid-Atlantic intends to vigorously pursue its rights and remedies
in connection with these actions.
Fuel Repowerings
The table below lists the Company's currently projected repowering projects. With respect to facilities that are currently
operating, the timing of the projects listed below could adversely impact the Company's operating revenues, gross margin and
other operating costs during the period prior to the targeted COD. For further information on the status of certain of the Company's
repowering projects, refer to Item 1 - Business, Regulatory Matters.
Facility
Repowerings
Carlsbad Peakers (formerly Encina) Units 1, 2, 3,
4, 5 and GT
Puente (formerly Mandalay) Units 1 and 2(a)
Bacliff (formerly Cielo Lindo/P.H. Robinson)
Peakers 1-6
Total Fuel Repowerings
Net Generation
Capacity (MW)
Project Type
Fuel Type
Targeted COD
527
262
360
1,149
Growth
Growth
Growth
Natural Gas
Natural Gas
Q4 2018
Q2 2020
Natural Gas
Q2 2017
(a) Projects are subject to applicable regulatory approvals and permits.
107
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 107
3/4/17 3:01 AM
Cash Flow Discussion
2016 compared to 2015
The following table reflects the changes in cash flows for the comparative years:
(In millions)
Net cash provided by operating activities
Net cash used by investing activities
Net cash used by financing activities
Net Cash Provided By Operating Activities
Changes to net cash provided by operating activities were driven by:
Year ended December 31,
2016
2015
Change
$
$
2,072
(824)
(794)
$
1,309
(1,485)
(432)
763
661
(362)
Change in cash collateral in support of risk management activities
Decrease in accounts payable primarily related to lower operations and maintenance expense in 2016
Decrease in inventory primarily related to plant fuel conversions at Shawville, Joliet, New Castle and Unit 2 at
the Big Cajun II facility and deactivations of the Huntley and Dunkirk facilities
Increase in accounts receivable due to timing of receipts
Decrease in operating income adjusted for non-cash items
Increase in prepaid expense primarily related to timing of property tax and insurance payments that occurred in
the first half of the year, and state tax receivables
Other changes in working capital driven by various timing differences
Decrease in accrued interest primarily driven by redemption of Senior Notes in late 2015 and 2016
Net Cash Used By Investing Activities
Changes to net cash used by investing activities were driven by:
(In millions)
746
$
191
160
(171)
(52)
(47)
(37)
(27)
763
$
(In millions)
Proceeds from the sale of assets related to the majority interest sale of EVgo, the sale of real property at the
Potrero generating station and the sale of the Aurora, Seward and Shelby generating stations in 2016
$
Decrease in investments in unconsolidated affiliates in 2016 compared to 2015, primarily related to the 25%
investment in Desert Sunlight of $285 million, as well as, Petra Nova and Altenex in 2015
Decrease in capital expenditures, primarily related to environmental projects at the Powerton and Joliet
facilities
Insurance proceeds primarily related to the Cottonwood generation station outage in 2016
Increase in cash paid for acquisitions in 2016 compared to 2015
Decrease in restricted cash primarily related to the Agua Caliente and CVSR projects
Decrease in cash grants received as the final Ivanpah cash grant amount was received in 2015 after resolution of
all open inquiries
Net decrease in nuclear decommissioning trust fund activity due to increase in purchases of securities in Q4,
2016
Net decrease in emission allowances activity
Other
$
635
361
39
29
(178)
(75)
(46)
(43)
(42)
(19)
661
108
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 108
3/4/17 3:01 AM
Net Cash Used By Financing Activities
Changes in net cash used by financing activities were driven by:
Repurchases of treasury stock in 2015
Net decrease in borrowings, offset by debt payments, which includes debt repurchases in 2016
Decrease in payment of dividends which reflects the reduction to the annualized dividend rate in 2016 from
$0.58/share to $0.12/share
Other
Decrease in cash contributions from noncontrolling interest in 2016, primarily related to the NRG Yield, Inc.
public offering in 2015 which had proceeds of $599 million
Repurchase of preferred stock in 2016
Increase in debt issuance costs primarily due to the refinancing of the senior credit facility and the issuance of
the 2026 and 2027 Senior Notes
Decrease in settlement of financing element related to acquired derivatives
(In millions)
$
$
437
209
125
9
(803)
(226)
(68)
(45)
(362)
109
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 109
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Year ended December 31,
2015
2014
Change
$
$
1,309
(1,485)
(432)
$
1,510
(2,903)
1,265
(201)
1,418
(1,697)
2015 compared to 2014
The following table reflects the changes in cash flows for the comparative years:
(In millions)
Net cash provided by operating activities
Net cash used by investing activities
Net cash used by financing activities
Net Cash Provided By Operating Activities
Changes to net cash provided by operating activities were driven by:
Increase in operating income adjusted for non-cash items
Change in cash paid in support of risk management activities
Other changes in working capital
Net Cash Used By Investing Activities
Changes to net cash used by investing activities were driven by:
Increase in cash paid for acquisitions, due primarily related to the EME and Alta Wind acquisitions in 2014
Decrease in cash grants, primarily reflecting the 2014 receipt of the CVSR cash grant
Increase in capital expenditures related to maintenance and environmental projects
Increase in equity investments, primarily related to 25% investment in Desert sunlight in 2015
Decrease in proceeds from sale of assets, due to the sales of Kendall, Bayou Cove and 50% of the company's
interest in Petra Nova
Decrease in restricted cash
Cash proceeds to fund cash grant bridge loan payment in 2014
Other
Net Cash Used By Financing Activities
Changes in net cash used by financing activities were driven by:
Net decrease in borrowings, offset by debt payments which primarily reflect the issuance of the 2021 and 2024
Senior Notes in 2014
Increase in repurchase of treasury stock
Decrease in cash contributions from noncontrolling interests
Decrease in proceeds from issuance of common stock
Increase in payments of dividends
Increase in contingent consideration payments
Increase in financing element of acquired derivatives
Decrease in cash paid for deferred financing cost
110
(In millions)
365
$
(39)
(527)
(201)
$
(In millions)
2,905
$
(834)
(374)
(301)
(167)
192
(57)
54
$
1,418
(In millions)
$
(1,331)
(398)
(172)
(20)
(5)
(4)
187
46
(1,697)
$
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 110
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NOLs, Deferred Tax Assets and Uncertain Tax Position Implications, under ASC 740
As of December 31, 2016, the Company had domestic pre-tax book loss of $886 million and foreign pre-tax book income
of $11 million. For the year ended December 31, 2016, the Company utilized carryforward NOLs of $507 million to fully offset
current year taxable income. As of December 31, 2016, the Company has cumulative domestic federal NOL carryforwards of
$3.4 billion which will begin expiring in 2026 and cumulative state NOL carryforwards of $4.9 billion for financial statement
purposes. In addition, NRG has cumulative foreign NOL carryforwards of $196 million, which do not have an expiration date.
As a result of the Company's tax position, and based on current forecasts, the Company anticipates income tax payments, primarily
due to state and local jurisdictions, of up to $35 million in 2017.
In addition to these amounts, the Company has $34 million of tax effected uncertain tax benefits for which the Company
has recorded a non-current tax liability of $37 million until such final resolution with the related taxing authority. The $37 million
non-current tax liability for uncertain tax benefits is from positions taken on various state returns, including accrued interest.
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.
Off-Balance Sheet Arrangements
Obligations under Certain Guarantee Contracts
NRG and certain of its subsidiaries enter into guarantee arrangements in the normal course of business to facilitate commercial
transactions with third parties. These arrangements include financial and performance guarantees, stand-by letters of credit, debt
guarantees, surety bonds and indemnifications. See also Item 15 — Note 26, Guarantees, to the Consolidated Financial Statements
for additional discussion.
Retained or Contingent Interests
NRG does not have any material retained or contingent interests in assets transferred to an unconsolidated entity.
Obligations Arising Out of a Variable Interest in an Unconsolidated Entity
Variable interest in Equity investments — As of December 31, 2016, NRG has several investments with an ownership interest
percentage of 50% or less in energy and energy-related entities that are accounted for under the equity method of accounting.
Several of these investments are variable interest entities for which NRG is not the primary beneficiary.
NRG's pro-rata share of non-recourse debt held by unconsolidated affiliates was approximately $633 million as of
December 31, 2016. This indebtedness may restrict the ability of these subsidiaries to issue dividends or distributions to NRG.
See also Item 15 — Note 16, Investments Accounted for by the Equity Method and Variable Interest Entities, to the Consolidated
Financial Statements for additional discussion.
111
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Contractual Obligations and Commercial Commitments
NRG has a variety of contractual obligations and other commercial commitments that represent prospective cash requirements
in addition to the Company's capital expenditure programs. The following tables summarize NRG's contractual obligations and
contingent obligations for guarantees. See also Item 15 — Note 12, Debt and Capital Leases, Note 22, Commitments and
Contingencies, and Note 26, Guarantees, to the Consolidated Financial Statements for additional discussion.
Contractual Cash Obligations
Long-term debt (including estimated interest)
Capital lease obligations (including estimated
interest)
Operating leases
Fuel purchase and transportation obligations
Fixed purchased power commitments
Pension minimum funding requirement (b)
Other postretirement benefits minimum funding
requirement (c)
Other liabilities (d)
Total
By Remaining Maturity at December 31,
2016
Under
1 Year
1-3 Years
3-5 Years
Over
5 Years
Total (a)
2015 Total
(In millions)
$
2,304
$
4,421
$
4,091
$ 16,670
$ 27,486
$ 27,038
3
292
638
25
34
8
288
4
509
425
30
107
17
187
2
376
249
32
62
17
173
—
1,308
415
—
172
38
697
9
2,485
1,727
87
375
80
1,345
17
2,712
2,335
70
452
102
991
$
3,592
$
5,700
$
5,002
$ 19,300
$ 33,594
$ 33,717
(a) Excludes $34 million non-current payable relating to NRG's uncertain tax benefits under ASC 740 as the period of payment cannot be reasonably
estimated. Also excludes $940 million of asset retirement obligations which are discussed in Item 15 — Note 13, Asset Retirement Obligations, to the
Consolidated Financial Statements.
(b) These amounts represent the Company's estimated minimum pension contributions required under the Pension Protection Act of 2006. These amounts
represent estimates that are based on assumptions that are subject to change.
(c) These amounts represent estimates that are based on assumptions that are subject to change. The minimum required contribution for years after 2020 are
currently not available.
Includes water right agreements, service and maintenance agreements, stadium naming rights, LTSA commitments and other contractual obligations.
(d)
Guarantees
Letters of credit and surety bonds
Asset sales guarantee obligations
Other guarantees
Total guarantees
By Remaining Maturity at December 31,
2016
Under
1 Year
1-3 Years
3-5 Years
Over
5 Years
Total
2015 Total
$
$
2,122
—
—
2,122
$
$
80
420
—
500
$
$
(In millions)
— $
257
5
262
$
15
—
731
746
$
$
2,217
677
736
3,630
$
$
1,899
257
722
2,878
112
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Fair Value of Derivative Instruments
NRG may enter into power purchase and sales contracts, fuel purchase contracts and other energy-related financial
instruments to mitigate variability in earnings due to fluctuations in spot market prices and to hedge fuel requirements at generation
facilities or retail load obligations. In addition, in order to mitigate interest rate risk associated with the issuance of the Company's
variable rate and fixed rate debt, NRG enters into interest rate swap agreements.
NRG's trading activities are subject to limits in accordance with the Company's Risk Management Policy. These contracts
are recognized on the balance sheet at fair value and changes in the fair value of these derivative financial instruments are recognized
in earnings.
The tables below disclose the activities that include both exchange and non-exchange traded contracts accounted for at fair
value in accordance with ASC 820, Fair Value Measurements and Disclosures, or ASC 820. Specifically, these tables disaggregate
realized and unrealized changes in fair value; disaggregate estimated fair values at December 31, 2016, based on their level within
the fair value hierarchy defined in ASC 820; and indicate the maturities of contracts at December 31, 2016. For a full discussion
of the Company's valuation methodology of its contracts, see Derivative Fair Value Measurements in Item 15 — Note 4, Fair
Value of Financial Instruments, to the Consolidated Financial Statements.
Derivative Activity Gains/(Losses)
Fair value of contracts as of December 31, 2015
Contracts realized or otherwise settled during the period
Changes in fair value
Fair value of contracts as of December 31, 2016
(In millions)
6
$
(206)
73
(127)
$
Fair Value of Contracts as of December 31, 2016
Maturity
Fair value hierarchy Gains/(Losses)
1 Year or Less
Greater Than 1
Year to 3 Years
Greater Than 3
Years to 5
Years
(In millions)
Greater Than
5 Years
Total Fair
Value
Level 1
Level 2
Level 3
Total
$
$
$
110
(95)
(37)
(22) $
(34) $
(34)
(20)
(88) $
(11) $
5
(3)
(9) $
— $
1
(9)
(8) $
65
(123)
(69)
(127)
The Company has elected to disclose derivative assets and liabilities on a trade-by-trade basis and does not offset amounts
at the counterparty master agreement level. Also, collateral received or posted on the Company's derivative assets or liabilities are
recorded on a separate line item on the balance sheet. Consequently, the magnitude of the changes in individual current and non-
current derivative assets or liabilities is higher than the underlying credit and market risk of the Company's portfolio. As discussed
in Item 7A — Quantitative and Qualitative Disclosures About Market Risk, Commodity Price Risk, NRG measures the sensitivity
of the Company's portfolio to potential changes in market prices using VaR, a statistical model which attempts to predict risk of
loss based on market price and volatility. NRG's risk management policy places a limit on one-day holding period VaR, which
limits the Company's net open position. As the Company's trade-by-trade derivative accounting results in a gross-up of the
Company's derivative assets and liabilities, the net derivative assets and liability position is a better indicator of NRG's hedging
activity. As of December 31, 2016, NRG's net derivative liability was $127 million, a decrease to total fair value of $133 million
as compared to December 31, 2015. This decrease was primarily driven by the roll-off of trades that settled during the period
partially offset by gains in fair value.
Based on a sensitivity analysis using simplified assumptions, the impact of a $0.50 per MMBtu increase in natural gas prices
across the term of the derivative contracts would result in a decrease of approximately $30 million in the net value of derivatives
as of December 31, 2016.
The impact of a $0.50 per MMBtu decrease in natural gas prices across the term of the derivative contracts would result
in an increase of approximately $15 million in the net value of derivatives as of December 31, 2016.
113
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Critical Accounting Policies and Estimates
NRG's discussion and analysis of the financial condition and results of operations are based upon the Consolidated Financial
Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements and related
disclosures in compliance with GAAP requires the application of appropriate technical accounting rules and guidance as well as
the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related
disclosures of contingent assets and liabilities. The application of these policies involves judgments regarding future events,
including the likelihood of success of particular projects, legal and regulatory challenges, and the fair value of certain assets and
liabilities. These judgments, in and of themselves, could materially affect the financial statements and disclosures based on varying
assumptions, which may be appropriate to use. In addition, the financial and operating environment may also have a significant
effect, not only on the operation of the business, but on the results reported through the application of accounting measures used
in preparing the financial statements and related disclosures, even if the nature of the accounting policies have not changed.
On an ongoing basis, NRG evaluates these estimates, utilizing historic experience, consultation with experts and other
methods the Company considers reasonable. In any event, actual results may differ substantially from the Company's estimates.
Any effects on the Company's business, financial position or results of operations resulting from revisions to these estimates are
recorded in the period in which the information that gives rise to the revision becomes known.
NRG's significant accounting policies are summarized in Item 15 — Note 2, Summary of Significant Accounting Policies,
to the consolidated financial statements. The Company identifies its most critical accounting policies as those that are the most
pervasive and important to the portrayal of the Company's financial position and results of operations, and that require the most
difficult, subjective and/or complex judgments by management regarding estimates about matters that are inherently uncertain.
Accounting Policy
Derivative Instruments
Income Taxes and Valuation Allowance for Deferred Tax Assets
Impairment of Long-Lived Assets and Investments
Goodwill and Other Intangible Assets
Contingencies
Judgments/Uncertainties Affecting Application
Assumptions used in valuation techniques
Assumptions used in forecasting generation
Assumptions used in forecasting borrowings
Market maturity and economic conditions
Contract interpretation
Market conditions in the energy industry, especially the
effects of price volatility on contractual commitments
Ability to be sustained upon audit examination of taxing
authorities
Interpret existing tax statute and regulations upon
application to transactions
Ability to utilize tax benefits through carry backs to prior
periods and carry forwards to future periods
Recoverability of investment through future operations
Regulatory and political environments and requirements
Estimated useful lives of assets
Environmental obligations and operational limitations
Estimates of future cash flows
Estimates of fair value
Judgment about impairment triggering events
Estimated useful lives for finite-lived intangible assets
Judgment about impairment triggering events
Estimates of reporting unit's fair value
Fair value estimate of intangible assets acquired in
business combinations
Estimated financial impact of event(s)
Judgment about likelihood of event(s) occurring
Regulatory and political environments and requirements
114
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Derivative Instruments
The Company follows the guidance of ASC 815 to account for derivative instruments. ASC 815 requires the Company to
mark-to-market all derivative instruments on the balance sheet and recognize changes in the fair value of non-hedge derivative
instruments immediately in earnings. In certain cases, NRG may apply hedge accounting to the Company's derivative instruments.
The criteria used to determine if hedge accounting treatment is appropriate are: (i) the designation of the hedge to an underlying
exposure; (ii) whether the overall risk is being reduced; and (iii) if there is a correlation between the changes in fair value of the
derivative instrument and the underlying hedged item. Changes in the fair value of derivatives instruments accounted for as hedges
are either recognized in earnings as an offset to the changes in the fair value of the related hedged item, or deferred and recorded
as a component of OCI and subsequently recognized in earnings when the hedged transactions occur.
For purposes of measuring the fair value of derivative instruments, NRG uses quoted exchange prices and broker quotes.
When external prices are not available, NRG uses internal models to determine the fair value. These internal models include
assumptions of the future prices of energy commodities based on the specific market in which the energy commodity is being
purchased or sold, using externally available forward market pricing curves for all periods possible under the pricing model. In
order to qualify the derivative instruments for hedged transactions, NRG estimates the forecasted generation and forecasted
borrowings for interest rate swaps occurring within a specified time period. Judgments related to the probability of forecasted
generation occurring are based on available baseload capacity, internal forecasts of sales and generation, and historical physical
delivery on similar contracts. Judgments related to the probability of forecasted borrowings are based on the estimated timing of
project construction, which can vary based on various factors. The probability that hedged forecasted generation and forecasted
borrowings will occur by the end of a specified time period could change the results of operations by requiring amounts currently
classified in OCI to be reclassified into earnings, creating increased variability in the Company's earnings. These estimations are
considered to be critical accounting estimates.
Certain derivative instruments that meet the criteria for derivative accounting treatment also qualify for a scope exception
to derivative accounting, as they are considered to be NPNS. The availability of this exception is based upon the assumption that
NRG has the ability and it is probable to deliver or take delivery of the underlying item. These assumptions are based on available
baseload capacity, internal forecasts of sales and generation and historical physical delivery on contracts. Derivatives that are
considered to be NPNS are exempt from derivative accounting treatment and are accounted for under accrual accounting. If it is
determined that a transaction designated as NPNS no longer meets the scope exception due to changes in estimates, the related
contract would be recorded on the balance sheet at fair value combined with the immediate recognition through earnings.
Income Taxes and Valuation Allowance for Deferred Tax Assets
As of December 31, 2016, NRG had a valuation allowance of $3.9 billion. This amount is comprised of domestic federal
net deferred tax assets of approximately $3.4 billion, domestic state net deferred tax assets of $534 million, foreign net operating
loss carryforwards of $63 million, and foreign capital loss carryforwards of approximately $1 million. The Company believes it
is more likely than not that the results of future operations will not generate sufficient taxable income which includes the future
reversal of existing taxable temporary differences to realize deferred tax assets, requiring a valuation allowance to be recorded.
NRG continues to be under audit for multiple years by taxing authorities in other jurisdictions. Considerable judgment is
required to determine the tax treatment of a particular item that involves interpretations of complex tax laws. 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. With few exceptions,
state and local income tax examinations are no longer open for years before 2010.
115
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Evaluation of Assets for Impairment and Other-Than-Temporary Decline in Value
In accordance with ASC 360, Property, Plant, and Equipment, or ASC 360, NRG evaluates property, plant and equipment
and certain intangible assets for impairment whenever indicators of impairment exist. Examples of such indicators or events are:
•
•
Significant decrease in the market price of a long-lived asset;
Significant adverse change in the manner an asset is being used or its physical condition;
• Adverse business climate;
• Accumulation of costs significantly in excess of the amount originally expected for the construction or acquisition of an
asset;
• Current period loss combined with a history of losses or the projection of future losses; and
• Change in the Company's intent about an asset from an intent to hold to a greater than 50% likelihood that an asset will
be sold or disposed of before the end of its previously estimated useful life.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future
net cash flows expected to be generated by the asset, through considering project specific assumptions for long-term power pool
prices, escalated future project operating costs and expected plant operations. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the
assets by factoring in the probability weighting of different courses of action available to the Company. Generally, fair value will
be determined using valuation techniques such as the present value of expected future cash flows. NRG uses its best estimates in
making these evaluations and considers various factors, including forward price curves for energy, fuel costs and operating costs.
However, actual future market prices and project costs could vary from the assumptions used in the Company's estimates, and the
impact of such variations could be material.
For assets to be held and used, if the Company determines that the undiscounted cash flows from the asset are less than the
carrying amount of the asset, NRG must estimate fair value to determine the amount of any impairment loss. Assets held-for-sale
are reported at the lower of the carrying amount or fair value less the cost to sell. The estimation of fair value under ASC 360,
whether in conjunction with an asset to be held and used or with an asset held-for-sale, and the evaluation of asset impairment
are, by their nature, subjective. NRG considers quoted market prices in active markets to the extent they are available. In the
absence of such information, the Company may consider prices of similar assets, consult with brokers, or employ other valuation
techniques. NRG will also discount the estimated future cash flows associated with the asset using a single interest rate representative
of the risk involved with such an investment or employ an expected present value method that probability-weights a range of
possible outcomes. The use of these methods involves the same inherent uncertainty of future cash flows as previously discussed
with respect to undiscounted cash flows. Actual future market prices and project costs could vary from those used in the Company's
estimates, and the impact of such variations could be material. Annually, during the fourth quarter, the Company revises its views
of power and fuel prices including the Company's fundamental view for long term prices, forecasted generation and operating and
capital expenditures, in connection with the preparation of its annual budget. Changes to the Company’s views of long term power
and fuel prices impacted the Company’s projections of profitability, based on management's estimate of supply and demand within
the sub-markets for each plant and the physical and economic characteristics of each plant.
The following long-lived asset impairments were recorded during 2016, as further described in Item 15 —Note 10, Asset
Impairments, to the consolidated financial statements:
• During the second quarter of 2016, the Company identified triggering events for the Mandalay and Ormond
Beach facilities and performed impairment tests. Based on the results of the impairment tests, the Company determined
that the carrying amount of these assets was higher than the estimated future net cash flows expected to be generated by
the respective assets and that the Mandalay and Ormond Beach assets were impaired. The fair value of the Mandalay
and Ormond Beach operating units was determined using the income approach which utilizes estimates of discounted
future cash flows, and include key inputs such as forecasted contract prices, forecasted operating expenses and discount
rates. The Company recorded an impairment loss of $16 million and $43 million for Mandalay and Ormond Beach,
respectively.
•
During the second quarter of 2016, the Company also recorded impairment losses of $17 million to record the
Rockford generating station at its sale price.
116
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• During the fourth quarter of 2016, the Company identified triggering events for the following facilities:
Wind Facilities - In connection with the preparation of the annual budget, it was noted that the cash
flows for the Elbow Creek and Goat Wind projects, located in Texas, and the Forward project, located in
Pennsylvania, were below the carrying value of the related assets, primarily driven by declining merchant power
prices in post-contract periods, and the assets were considered impaired. The fair value of the facilities was
determined using an income approach by applying a discounted cash flow methodology to the long-term budgets
for each respective plant. The income approach utilized estimates of discounted future cash flows and includes
key inputs such as forecasted power prices, operations and maintenance expense, and discount rates. The
Company recorded impairment losses of $117 million, $60 million and $6 million for Elbow Creek, Goat Wind
and Forward, respectively.
Long Beach - The Company determined that it would retire its Long Beach generation station by the
end of 2017, as it was not awarded a PPA in the recent SCE capacity auction and the current PPA will expire on
July 31, 2017. The fair value was determined using an income approach and the Company recorded an impairment
loss of $36 million to reduce the carrying amount of the facility to the value of the underlying land.
Ormond Beach - In connection with the preparation of the annual budget, the Company concluded that
the declining prices for resource adequacy contracts in the area in which Ormond Beach operates further reduced
expected cash flows for the facility and considered this to be an indicator of impairment. The cash flows
associated with Ormond Beach were less than the carrying amount and the Company determined the facility
was impaired. The fair value was determined using an income approach, which utilizes estimates of discounted
future cash flows and include key inputs such as forecasted contract prices, forecasted operating expenses and
discount rates. The Company recorded an impairment loss of $28 million to reduce the carrying amount to fair
value.
Keystone and Conemaugh Leased Interests - In connection with the preparation of the annual budget,
the Company noted that the cash flows for the leased interests in Keystone and Conemaugh were below the
carrying amount of the assets, primarily driven by a reduction in long-term energy and capacity prices in PJM
and maintenance costs , and the assets were impaired. The fair value of the interests in Keystone and Conemaugh
were determined using the income approach, which utilizes estimates of future discounted cash flows and include
key inputs such as forecasted power, capacity and fuel prices, forecasted operating expenses, contractual lease
payments, and discount rates. The Company recorded impairment losses of $97 million and $10 million for
Conemaugh and Keystone, respectively.
Pittsburg - The Company determined that it would need to retire the Pittsburg facility earlier than
anticipated as it did not receive a resource adequacy contract for 2017. The Company considered this to be a
triggering event, and tested the asset for impairment. The fair value of the facility was determined using an
income approach and the Company recorded an impairment loss of $20 million to reduce the carrying amount
to the value of the underlying land.
Other Impairments - During 2016, the Company recorded other impairment losses of $131 million, which included $23
million in excess SO2 allowances, $23 million for intangible assets, $19 million in previously purchased solar panels, $18 million
in deferred marketing expenses, and $48 million of other impairment losses.
117
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NRG is also required to evaluate its equity method and cost method investments to determine whether or not they are impaired
in accordance with ASC 323, Investments - Equity Method and Joint Ventures, or ASC 323. The standard for determining whether
an impairment must be recorded under ASC 323 is whether a decline in the value is considered an other-than-temporary decline
in value. The evaluation and measurement of impairments under ASC 323 involves the same uncertainties as described for long-
lived assets that the Company owns directly and accounts for in accordance with ASC 360. Similarly, the estimates that NRG
makes with respect to its equity and cost-method investments are subjective, and the impact of variations in these estimates could
be material. Additionally, if the projects in which the Company holds these investments recognize an impairment under the
provisions of ASC 360, NRG would record its proportionate share of that impairment loss and would evaluate its investment for
an other-than-temporary decline in value under ASC 323. During the year ended December 31, 2016, the Company recorded
impairment losses on its equity method and cost method investments of $268 million due to other-than-temporary declines in
value, including the following:
• During the first quarter of 2016, management changed its plans with respect to its future capital commitments
driven in part by the continued decline in oil prices. As a result, the Company reviewed its 50% interest in Petra Nova
Parish Holdings for impairment utilizing the other-than-temporary impairment model. In determining fair value, the
Company utilized an income approach and considered project specific assumptions for the future project cash flows. The
carrying amount of the Company's equity method investment exceeded the fair value of the investment and the Company
concluded that the decline is considered to be other-than-temporary. As a result, the Company measured the impairment
loss as the difference between the carrying amount and the fair value of the investment and recorded an impairment loss
of $140 million.
• During the fourth quarter of 2016, the Company offered several projects to NRG Yield Operating LLC including
its interest in Community Wind North. The offer price was below its current carrying amount and this decline in fair
value was determined to be other-than-temporary. Accordingly, the Company recorded an impairment loss of $36 million
to reduce its carrying amount to fair value. In addition, in connection with the preparation of the annual budget, the
Company noted that it could not budget for its interest in the Sherbino wind facility beyond 2018 due to its debt maturity
date and the anticipated difficulty in refinancing the debt that would mature in 2018. Accordingly, the Company determined
that an other-than-temporary impairment existed and recorded an impairment loss on its investment in Sherbino of $70
million.
• During 2016, the Company recorded $22 million of impairment losses for other investments.
Goodwill and Other Intangible Assets
At December 31, 2016, NRG reported goodwill of $662 million, consisting of $276 million associated with the acquisition
of EME, $341 million for retail business acquisitions, and $45 million associated with other business acquisitions. The Company
also recorded intangible assets, measured primarily based on significant inputs that are not observable in the market and thus
represent a Level 3 measurement as defined in ASC 820. See Item 15 — Note 3, Business Acquisitions and Dispositions, and
Note 11, Goodwill and Other Intangibles, to the consolidated financial statements for further discussion.
The Company applies ASC 805, Business Combinations, or ASC 805, and ASC 350, to account for its goodwill and intangible
assets. Under these standards, the Company amortizes all finite-lived intangible assets over their respective estimated weighted-
average useful lives, while goodwill has an indefinite life and is not amortized. Goodwill and all intangible assets not subject to
amortization are tested for impairments at least annually, or more frequently whenever an event or change in circumstances occurs
that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company tests goodwill
for impairment at the reporting unit level, which is identified by assessing whether the components of the Company's operating
segments constitute businesses for which discrete financial information is available and whether segment management regularly
reviews the operating results of those components. The Company performs the annual goodwill impairment assessment as of
December 31 or when events or changes in circumstances indicate that the carrying value may not be recoverable. NRG first
evaluates qualitative factors to determine if it is more likely than not that impairment has occurred. In the absence of sufficient
qualitative factors, goodwill impairment is determined utilizing a two-step process. If it is determined that the fair value of a
reporting unit is below its carrying amount, where necessary, the Company's goodwill and/or intangible asset with indefinite lives
will be impaired at that time.
The Company performed step zero of the goodwill impairment test, performing its qualitative assessment of macroeconomic,
industry and market events and circumstances, and the overall financial performance of the NRG Business Solutions (NRG
Curtailment Solutions) and Retail Mass reporting unit. The Company determined it was not more likely than not that the fair
value of the goodwill attributed to these reporting units were less than their carrying amount and accordingly, no impairment
existed for the year ended December 31, 2016.
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The Company performed step one of the two-step impairment test for the reporting units in the following table. The Company
determined the fair value of these reporting units using primarily an income approach. Under the income approach, the Company
estimated the fair value of the reporting units' invested capital exceeds its carrying value and, as such, the Company concluded
that goodwill associated with the reporting units in the following table is not impaired as of December 31, 2016:
Reporting Unit (Segment)
BETM (Generation, formerly Corporate)
Midwest Generation (Generation)
Texas Non-Commodity (excluding Goal Zero) (Retail, formerly Retail Mass)
Solar Power Partners (Renewables)
Goal Zero (Retail, formerly Retail Mass)
% Fair Value Over
Carrying Value
169%
105
286
132
123
The Company also performed step one of the two-step impairment test for its Texas reporting unit. The Company determined
the fair value of the Texas reporting unit primarily using an income approach. The fair value of the reporting unit was determined
to be less than its carrying amount and, accordingly, the Company performed step two of the two-step impairment test. The results
of this impairment test are detailed below and in Item 15 - Note 10, Asset Impairments, to the consolidated financial statements.
The Company believes the methodology and assumptions used in the valuation are consistent with the views of market
participants. Significant inputs to the determination of fair value were as follows:
• The Company applied a discounted cash flow methodology to the long-term budgets for all of the plants in the region.
The significant assumptions used to derive the long-term budgets used in the income approach are affected by the following
key inputs:
The Company's views of power and fuel prices consider market prices for the first five-year period and the
Company's fundamental view for the longer term, which reflect the Company's long-term view of the price of
natural gas. The Company's fundamental view for the longer term reflects the implied power price and heat rate
that would support new build of a combined cycle gas plant in the Texas region. The price of natural gas plays
an important role in setting the price of electricity in many of the regions where NRG operates power plants.
Hedging is included to the extent of contracts already in place;
The Company's estimate of generation, fuel costs, capital expenditure requirements and the existing and
anticipated impact of environmental regulations;
The Company's fundamental view for the longer term, cash flows for the plants in the region were included in
the fair value calculation through the end of each plants' estimated useful life; and
Projected generation and resulting energy gross margin in the long-term budgets is based on an hourly dispatch
that simulates dispatch of each unit into the power market. The dispatch simulation is based on power prices,
fuel prices, and the physical and economic characteristics of each plant.
• The additional significant assumptions used in overall valuation of the Texas reporting unit were as follows:
The discount rate applied to internally developed cash flow projections for the Texas reporting unit represents
the weighted average cost of capital consistent with the risk inherent in future cash flows and based upon an
assumed capital structure, cost of long-term debt and cost of equity consistent with comparable companies in
the integrated utility industry.
The intangible value to Texas for synergies it provides to NRG’s retail businesses. The estimates of annual
collateral cost savings resulting from utilizing the Company's wholesale generation assets to provide supply to
retail represent the cost of collateral that would otherwise need to be held in reserve to support potential postings
to third parties in the case of a significant price move. This is calculated from a combination of the volume the
Company would otherwise need to buy from these third parties, based on historical volumes, and historical price
movements calibrated to an appropriate probability. The estimates of annual supply cost savings are based on
historical volumes of retail purchases from Texas, an average bid-ask spread based on broker quotes and the
assumption that Texas will realize half of the benefits associated with this savings.
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Under step one, if the fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is not considered
impaired. Under the income approach described above, the Company estimated that the fair value of Texas' invested capital was
43% below its carrying value as of December 31, 2016 and concluded that step two was required. Step two requires an allocation
of fair value to the individual asset and liabilities using a hypothetical purchase price allocation in order to determine the implied
fair value of goodwill. If the implied fair value of goodwill is less than the carrying amount, an impairment loss is recorded. Under
the step two analysis it was determined that the carrying amount of the goodwill exceeded its fair value by the remaining $337
million and an impairment loss of this amount was recorded.
The Company’s Midwest Generation reporting unit receives a significant portion of its revenues from the capacity markets
in PJM and the results of each annual auction can have a significant impact on Midwest Generation’s future performance.
Accordingly, if Midwest Generation’s future revenues are significantly reduced as a result of the 2017 annual auction, the Company
may consider that to be a triggering event and may be required to evaluate the Midwest Generation goodwill of $165 million for
impairment. The Company may also be required to evaluate the property, plant and equipment for the Midwest Generation facilities
for impairment. Depending on the results, it is possible that one of both of the assets could be impaired.
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors.
As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill impairment
test will prove to be accurate predictions of the future.
Contingencies
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. Gain contingencies are not recorded until management
determines it is certain that the future event will become or does become a reality. Such determinations are subject to interpretations
of current facts and circumstances, forecasts of future events, and estimates of the financial impacts of such events. NRG describes
in detail its contingencies in Item 15 — Note 22, Commitments and Contingencies, to the consolidated financial statements.
Recent Accounting Developments
See Item 15 — Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements for a discussion
of recent accounting developments.
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Item 7A — Quantitative and Qualitative Disclosures About Market Risk
NRG is exposed to several market risks in the Company's normal business activities. Market risk is the potential loss that
may result from market changes associated with the Company's merchant power generation or with an existing or forecasted
financial or commodity transaction. The types of market risks the Company is exposed to are commodity price risk, interest rate
risk, liquidity risk, credit risk and currency exchange risk. In order to manage, these risks the Company uses various fixed-price
forward purchase and sales contracts, futures and option contracts traded on NYMEX, and swaps and options traded in the over-
the-counter financial markets to:
• Manage and hedge fixed-price purchase and sales commitments;
• Manage and hedge exposure to variable rate debt obligations;
• Reduce exposure to the volatility of cash market prices, and
• Hedge fuel requirements for the Company's generating facilities.
Commodity Price Risk
Commodity price risks result from exposures to changes in spot prices, forward prices, volatilities, and correlations between
various commodities, such as natural gas, electricity, coal, oil, and emissions credits. NRG manages the commodity price risk of
the Company's merchant generation operations and load serving obligations by entering into various derivative or non-derivative
instruments to hedge the variability in future cash flows from forecasted sales and purchases of electricity and fuel. These
instruments include forwards, futures, swaps, and option contracts traded on various exchanges, such as NYMEX and ICE, as
well as over-the-counter markets. The portion of forecasted transactions hedged may vary based upon management's assessment
of market, weather, operation and other factors.
While some of the contracts the Company uses to manage risk represent commodities or instruments for which prices are
available from external sources, other commodities and certain contracts are not actively traded and are valued using other pricing
sources and modeling techniques to determine expected future market prices, contract quantities, or both. NRG uses the Company's
best estimates to determine the fair value of those derivative contracts. However, it is likely that future market prices could vary
from those used in recording mark-to-market derivative instrument valuation and such variations could be material.
NRG measures the risk of the Company's portfolio using several analytical methods, including sensitivity tests, scenario
tests, stress tests, position reports, and VaR. NRG uses a Monte Carlo simulation based VaR model to estimate the potential loss
in the fair value of the Company's energy assets and liabilities, which includes generation assets, load obligations, and bilateral
physical and financial transactions. The key assumptions for the Company's VaR model include: (i) lognormal distribution of
prices; (ii) one-day holding period; (iii) 95% confidence interval; (iv) rolling 36-month forward looking period; and (v) market
implied volatilities and historical price correlations.
As of December 31, 2016, the VaR for NRG's commodity portfolio, including generation assets, load obligations and bilateral
physical and financial transactions calculated using the VaR model was $41 million.
The following table summarizes average, maximum and minimum VaR for NRG for the years ended December 31, 2016
and 2015:
(In millions)
VaR as of December 31,
For the year ended December 31,
Average
Maximum
Minimum
$
$
2016
2015
$
$
41
53
72
32
54
42
55
30
Due to the inherent limitations of statistical measures such as VaR, the evolving nature of the competitive markets for
electricity and related derivatives, and the seasonality of changes in market prices, the VaR calculation may not capture the full
extent of commodity price exposure. As a result, actual changes in the fair value of mark-to-market energy assets and liabilities
could differ from the calculated VaR, and such changes could have a material impact on the Company's financial results.
In order to provide additional information, the Company also uses VaR to estimate the potential loss of derivative financial
instruments that are subject to mark-to-market accounting. These derivative instruments include transactions that were entered
into for both asset management and trading purposes. The VaR for the derivative financial instruments calculated using the
diversified VaR model for the entire term of these instruments entered into for both asset management and trading was $65 million
as of December 31, 2016, primarily driven by asset-backed transactions.
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Interest Rate Risk
NRG is exposed to fluctuations in interest rates through the Company's issuance of fixed rate and variable rate debt. Exposures
to interest rate fluctuations may be mitigated by entering into derivative instruments known as interest rate swaps, caps, collars
and put or call options. These contracts reduce exposure to interest rate volatility and result in primarily fixed rate debt obligations
when taking into account the combination of the variable rate debt and the interest rate derivative instrument. NRG's risk
management policies allow the Company to reduce interest rate exposure from variable rate debt obligations.
In addition to those discussed above, the Company's project subsidiaries enter into interest rate swaps, intended to hedge
the risks associated with interest rates on non-recourse project level debt. See Item 15 — Note 12, Debt and Capital Leases, to
the Consolidated Financial Statements, for more information about interest rate swaps of the Company's project subsidiaries.
If all of the above swaps had been discontinued on December 31, 2016, the Company would have owed the counterparties
$46 million. Based on the investment grade rating of the counterparties, NRG believes its exposure to credit risk due to
nonperformance by counterparties to its hedge contracts to be insignificant.
NRG has both long and short-term debt instruments that subject the Company to the risk of loss associated with movements
in market interest rates. As of December 31, 2016, a 1% change in interest rates would result in a $13 million change in interest
expense on a rolling twelve month basis.
As of December 31, 2016, the Company's debt fair value was $18.6 billion and carrying value was $19.4 billion. NRG
estimates that a 1% decrease in market interest rates would have increased the fair value of the Company's long-term debt by $1.5
billion.
Liquidity Risk
Liquidity risk arises from the general funding needs of the Company's activities and in the management of the Company's
assets and liabilities. The Company is currently exposed to additional collateral posting if natural gas prices decline primarily
due to the long natural gas equivalent position at various exchanges used to hedge NRG's retail supply load obligations.
Based on a sensitivity analysis for power and gas positions under marginable contracts, a $0.50 per MMBtu change in natural
gas prices across the term of the marginable contracts would cause a change in margin collateral posted of approximately $192
million as of December 31, 2016, and a 1.00 MMBtu/MWh change in heat rates for heat rate positions would result in a change
in margin collateral posted of approximately $243 million as of December 31, 2016. This analysis uses simplified assumptions
and is calculated based on portfolio composition and margin-related contract provisions as of December 31, 2016.
Counterparty Credit Risk
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. The Company monitors and manages credit risk through credit policies that include: (i) an
established credit approval process; (ii) a daily monitoring of counterparties' credit limits; (iii) the use of credit mitigation measures
such as margin, collateral, prepayment arrangements, or volumetric limits; (iv) the use of payment netting agreements; and (v) the
use of master netting agreements that allow for the netting of positive and negative exposures of various contracts associated with
a single counterparty. Risks surrounding counterparty performance and credit could ultimately impact the amount and timing of
expected cash flows. The Company seeks to mitigate counterparty risk by having a diversified portfolio of counterparties. The
Company also has credit protection within various agreements to call on additional collateral support if and when necessary. Cash
margin is collected and held at the Company to cover the credit risk of the counterparty until positions settle.
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As of December 31, 2016, aggregate counterparty credit exposure to a significant portion of the Company's counterparties
totaled $231 million, of which the Company held collateral (cash and letters of credit) against those positions of $2 million resulting
in a net exposure of $229 million. Approximately 95% of the Company's exposure before collateral is expected to roll off by the
end of 2018. The following table highlights the 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, NPNS, and non-derivative transactions.
As of December 31, 2016, the aggregate credit exposure is shown net of collateral held, and includes amounts net of receivables
or payables.
Category
Utilities, energy merchants, marketers and other
Total
Category
Investment grade
Non-Investment grade/Non-Rated
Total
Net Exposure (a) (b)
(% of Total)
100%
100%
Net Exposure (a) (b)
(% of Total)
67%
33
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.
The Company has credit exposure to certain wholesale counterparties, each of which represent more than 10% of the total
net exposure discussed above and the aggregate credit exposure to such counterparties was $80 million as of December 31, 2016.
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, the Company does not anticipate a material impact on its financial position
or results of operations from nonperformance by any counterparty.
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 include 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 applicable
share of the 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.
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Long Term Contracts
Counterparty credit exposure described above excludes credit risk exposure under certain long term contracts, 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 values 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 December 31, 2016, aggregate credit risk exposure managed
by NRG to these counterparties was approximately $4.1 billion, of which $2.6 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, which NRG is unable to predict.
Retail Customer Credit Risk
NRG is exposed to retail credit risk through its 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 could be incurred from nonpayment
of customer accounts receivable and any in-the-money forward value. NRG 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 December 31, 2016, 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. The Company is also subject to risk with respect to its
residential solar customers. The Company's bad debt expense resulting from credit risk was $48 million, $64 million, and $64
million for the years ending December 31, 2016, 2015 and 2014, respectively. Current economic conditions may affect the
Company's customers' ability to pay bills in a timely manner, which could increase customer delinquencies and may lead to an
increase in bad debt expense.
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 that have adequate assurance clauses that are in a net liability position as of December 31,
2016 was $36 million. The collateral required for contracts with credit rating contingent features that are in a net liability position
as of December 31, 2016 was $56 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 is approximately $14 million as of December 31,
2016.
Currency Exchange Risk
NRG's foreign earnings and investments may be subject to foreign currency exchange risk, which NRG generally does not
hedge. As these earnings and investments are not material to NRG's consolidated results, the Company's foreign currency exposure
is limited.
Item 8 — Financial Statements and Supplementary Data
The financial statements and schedules are listed in Part IV, Item 15 of this Form 10-K.
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Item 9 — Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A — Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures and Internal Control Over Financial
Reporting
Under the supervision and with the participation of NRG's management, including its principal executive officer, principal
financial officer and principal accounting officer, NRG conducted an evaluation of the effectiveness of the design and operation
of its disclosure controls and procedures, as such term is defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act. Based on
this evaluation, the Company's principal executive officer, principal financial officer and principal accounting officer concluded
that the disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-
K. Management's report on the Company's internal control over financial reporting and the report of the Company's independent
registered public accounting firm are incorporated under the caption "Management's Report on Internal Control over Financial
Reporting" and under the caption "Report of Independent Registered Public Accounting Firm" in this Annual Report on Form 10-
K for the fiscal year ended December 31, 2016.
Changes in Internal Control over Financial Reporting
There were no changes in NRG’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under
the Exchange Act) that occurred in the fourth quarter of 2016 that materially affected, or are reasonably likely to materially affect,
NRG’s internal control over financial reporting.
Inherent Limitations over Internal Controls
NRG's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP. The
Company's internal control over financial reporting includes those policies and procedures that:
1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the Company's assets;
2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial
statements in accordance with GAAP, and that the Company's receipts and expenditures are being made only in accordance
with authorizations of its management and directors; and
3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
the Company's assets that could have a material effect on the consolidated financial statements.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because
of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls.
Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management's Report on Internal Control over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of the Company's
management, including its principal executive officer, principal financial officer and principal accounting officer, the Company
conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal
Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on the Company's evaluation under the framework in Internal Control — Integrated Framework (2013), the Company's
management concluded that its internal control over financial reporting was effective as of December 31, 2016.
The effectiveness of the Company's internal control over financial reporting as of December 31, 2016 has been audited by
KPMG LLP, the Company's independent registered public accounting firm, as stated in its report which is included in this Annual
Report on
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
NRG Energy, Inc.:
We have audited NRG Energy, Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established
in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). NRG Energy, Inc.’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, NRG Energy, Inc. maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2016, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of NRG Energy, Inc. and subsidiaries as of December 31, 2016 and 2015, and the related consolidated
statements of operations, comprehensive (loss)/income, cash flows, and stockholders’ equity for each of the years in the three-
year period ended December 31, 2016, and our report dated February 28, 2017 expressed an unqualified opinion on those
consolidated financial statements.
(signed) KPMG LLP
Philadelphia, PA
February 28, 2017
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Item 9B — Other Information
None.
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Item 10 — Directors, Executive Officers and Corporate Governance
PART III
Directors
E. Spencer Abraham has been a director of NRG since December 2012. Previously, he served as a director of GenOn Energy,
Inc. from January 2012 to December 2012. He is Chairman and Chief Executive Officer of The Abraham Group, an international
strategic consulting firm based in Washington, D.C which he founded in 2005. Prior to that, Secretary Abraham served as Secretary
of Energy under President George W. Bush from 2001 through January 2005 and was a U.S. Senator for the State of Michigan
from 1995 to 2001. Secretary Abraham serves on the boards of the following public companies: Occidental Petroleum Corporation,
PBF Energy, Two Harbors Investment Corp. and Uranium Energy Corp. He also serves on the board of C3 IOT, a private company.
Secretary Abraham also serves as chairman of the advisory committee of Lynx Global Realty Asset Fund. Secretary Abraham
previously served as the non-executive chairman of AREVA, Inc., the U.S. subsidiary of the French-owned nuclear company, and
as a director of Deepwater Wind LLC, International Battery, Green Rock Energy, ICx Technologies, PetroTiger and Sindicatum
Sustainable Resources. He also previously served on the advisory board or committees of Midas Medici (Utilipoint), Millennium
Private Equity, Sunovia and Wetherly Capital.
Kirbyjon H. Caldwell has been a director of NRG since March 2009. He was a director of Reliant Energy, Inc. from August
2003 to March 2009. Since 1982, he has served as Senior Pastor at the 16,000-member Windsor Village United Methodist Church
in Houston, Texas. Pastor Caldwell was also a director of United Continental Holdings, Inc. (formerly Continental Airlines, Inc.)
from 1999 to September 2011. Pastor Caldwell is also on the Board of Trustees of Baylor College of Medicine.
Lawrence S. Coben has served as Chairman of the Board of NRG since February 2017 and has been a director of NRG since
December 2003. He is currently Chairman and Chief Executive Officer of Tremisis Energy Corporation LLC. Dr. Coben was
Chairman and Chief Executive Officer of Tremisis Energy Acquisition Corporation II, a publicly held company, from July 2007
through March 2009 and of Tremisis Energy Acquisition Corporation from February 2004 to May 2006. From January 2001 to
January 2004, he was a Senior Principal of Sunrise Capital Partners L.P., a private equity firm. From 1997 to January 2001, Dr.
Coben was an independent consultant. From 1994 to 1996, Dr. Coben was Chief Executive Officer of Bolivian Power Company.
Dr. Coben serves on the board of Freshpet, Inc. and served on the advisory board of Morgan Stanley Infrastructure II, L.P. from
September 2014 through December 2016. Dr. Coben is also Executive Director of the Sustainable Preservation Initiative and a
Consulting Scholar at the University of Pennsylvania Museum of Archaeology and Anthropology.
Terry G. Dallas has been a director of NRG since December 2012. Previously, he served as a director of GenOn from
December 2010 to December 2012. Mr. Dallas served as a director of Mirant Corporation from 2006 until December 2010. Mr.
Dallas was also the former Executive Vice President and Chief Financial Officer of Unocal Corporation, an oil and gas exploration
and production company prior to its merger with Chevron Corporation, from 2000 to 2005. Prior to that, Mr. Dallas held various
executive finance positions in his 21-year career with Atlantic Richfield Corporation, an oil and gas company with major operations
in the United States, Latin America, Asia, Europe and the Middle East.
Mauricio Gutierrez has served as President and Chief Executive Officer of NRG since December 2015 and as a director
of NRG since January 2016. Prior to December 2015, Mr. Gutierrez was the Executive Vice President and Chief Operating Officer
of NRG from July 2010 to December 2015. Mr. Gutierrez also served as the Interim President and Chief Executive Officer of
NRG Yield, Inc. from December 2015 to May 2016 and Executive Vice President and Chief Operating Officer of NRG Yield, Inc.
from December 2012 to December 2015. Mr. Gutierrez has also served on the board of NRG Yield, Inc. since its formation in
December 2012. Mr. Gutierrez has been with NRG since August 2004 and served in multiple executive positions within NRG
including Executive Vice President - Commercial Operations from January 2009 to July 2010 and Senior Vice President -
Commercial Operations from March 2008 to January 2009. Prior to joining NRG in August 2004, Mr. Gutierrez held various
commercial positions within Dynegy, Inc.
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William E. Hantke has been a director of NRG since March 2006. Mr. Hantke served as Executive Vice President and Chief
Financial Officer of Premcor, Inc., a refining company, from February 2002 until December 2005. Mr. Hantke was Corporate Vice
President of Development of Tosco Corporation, a refining and marketing company, from September 1999 until September 2001,
and he also served as Corporate Controller from December 1993 until September 1999. Prior to that position, he was employed
by Coopers & Lybrand as Senior Manager, Mergers and Acquisitions from 1989 until 1990. He also held various positions from
1975 until 1988 with AMAX, Inc., including Corporate Vice President, Operations Analysis and Senior Vice President, Finance
and Administration, Metals and Mining. He was employed by Arthur Young from 1970 to 1975 as Staff/Senior Accountant. Mr.
Hantke was Non-Executive Chairman of Process Energy Solutions, a private alternative energy company until March 31, 2008
and served as director and Vice-Chairman of NTR Acquisition Co., an oil refining start-up, until January 2009. Mr. Hantke has
served on the board of PBF Energy Inc. since February 2016.
Paul W. Hobby has been a director of NRG since March 2006. Mr. Hobby is the Managing Partner of Genesis Park, L.P., a
Houston-based private equity business specializing in technology and communications investments which he founded in 1999.
Mr. Hobby routinely provides management and governance services to Genesis Park portfolio companies, and is currently serving
as Chairman of Texas Monthly. He previously served as the Chief Executive Officer of Alpheus Communications, Inc., a Texas
wholesale telecommunications provider from 2004 to 2011, and as former Chairman of CapRock Services Corp., the largest
provider of satellite services to the global energy business from 2002 to 2006. From November 1992 until January 2001, he served
as Chairman and Chief Executive Officer of Hobby Media Services and was Chairman of Columbine JDS Systems, Inc. from
1995 until 1997. Mr. Hobby is former Chairman of the Houston Branch of the Federal Reserve Bank of Dallas and the Greater
Houston Partnership and is former Chairman of the Texas Ethics Commission. He was an Assistant U.S. Attorney for the Southern
District of Texas from 1989 to 1992, Chief of Staff to the Lieutenant Governor of Texas, Bob Bullock and an Associate at Fulbright &
Jaworski from 1986 to 1989.
Anne C. Schaumburg has been a director of NRG since April 2005. From 1984 until her retirement in January 2002, she
was Managing Director of Credit Suisse First Boston and a Senior Banker in the Global Energy Group. From 1979 to 1984, she
was in the Utilities Group at Dean Witter Financial Services Group, where she last served as Managing Director. From 1971 to
1978, she was at The First Boston Corporation in the Public Utilities Group. Ms. Schaumburg is also a director of Brookfield
Infrastructure Partners L.P.
Evan J. Silverstein has been a director of NRG since December 2012. Previously, he served as a director of GenOn from
August 2006 to December 2012. He served as General Partner and Portfolio Manager of SILCAP LLC, a market-neutral hedge
fund that principally invests in utilities and energy companies, from January 1993 until his retirement in December 2005. Previously,
he served as portfolio manager specializing in utilities and energy companies and as senior equity utility analyst. Mr. Silverstein
has given numerous speeches and has testified before Congress on a variety of energy-related issues. He is an audit committee
financial expert.
Barry T. Smitherman has been a director of NRG since February 2017. Mr. Smitherman is currently an energy industry
consultant and senior advisor, as well as an adjunct professor of Energy Law at The University of Texas School of Law. From
April 2015 to January 2017, Mr. Smitherman was a partner with the law firm Vinson & Elkins LLP. Mr. Smitherman served on
the Railroad Commission of Texas from July 2011 through January 2015 where he acted as chairman from February 2012 to
August 2014. From April 2004 through July 2011, Mr. Smitherman served on the Public Utility Commission of Texas where he
acted as chairman from November 2007 through July 2011.
Thomas H. Weidemeyer has been a director of NRG since December 2003. Until his retirement in December 2003, Mr.
Weidemeyer served as Director, Senior Vice President and Chief Operating Officer of United Parcel Service, Inc., the world's
largest transportation company and President of UPS Airlines. Mr. Weidemeyer became Manager of the Americas International
Operation in 1989, and in that capacity directed the development of the UPS delivery network throughout Central and South
America. In 1990, Mr. Weidemeyer became Vice President and Airline Manager of UPS Airlines and, in 1994, was elected its
President and Chief Operating Officer. Mr. Weidemeyer became Senior Vice President and a member of the Management Committee
of United Parcel Service, Inc. that same year, and he became Chief Operating Officer of United Parcel Service, Inc. in January
2001. Mr. Weidemeyer also serves as a director of The Goodyear Tire & Rubber Co., Waste Management, Inc. and Amsted Industries
Incorporated.
C. John Wilder has been a director of NRG since February 2017. Mr. Wilder has served as the Executive Chairman and a
member of Investment Committees of three investment vehicles: (i) Bluescape Resources Company; (ii) Parallel Resource Partners;
(iii) and Bluescape Energy Partners since 2007. Since September 2015, Mr. Wilder has served as Executive Chairman and director
of Exco Resources, Inc. Mr. Wilder is on the advisory boards of the McCombs School of Business at the University of Texas at
Austin and the A.B. Freeman School of Business at Tulane University. Mr. Wilder is a Trustee of Texas Health Resources and is
a past member of the National Petroleum Council, a Secretary of Energy Appointment.
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Walter R. Young has been a director of NRG since December 2003. From May 1990 to June 2003, Mr. Young was Chairman,
Chief Executive Officer and President of Champion Enterprises, Inc., an assembler and manufacturer of manufactured homes.
Mr. Young has held senior management positions with The Henley Group, The Budd Company and BFGoodrich.
Cooperation Agreements with Elliott and Bluescape
On February 13, 2017, the Company entered into a letter agreement, or the Elliott Cooperation Agreement, with Elliott
Associates, L.P., Elliott International, L.P. and Elliott International Capital Advisors Inc. (collectively, Elliott), and a letter
agreement, or the Bluescape Cooperation Agreement, with Bluescape Energy Partners LLC and BEP Special Situations 2 LLC
(together, Bluescape). Under the Elliott Cooperation Agreement and the Bluescape Cooperation Agreement, the Company agreed
to appoint Messrs. Smitherman and Wilder to the Company’s board of directors and to nominate each of them for election as
directors of the Company at the 2017 Annual Meeting of Stockholders. In addition, Elliott and Bluescape agreed to vote all shares
beneficially owned by them or their affiliates, which they are entitled to vote on the record date, in favor of the election of directors
nominated by the Board and otherwise in accordance with the Board’s recommendation.
Under the terms of the Elliott Cooperation Agreement, Elliott agreed to customary standstill restrictions that, subject to
earlier termination under certain circumstances, expire upon the earlier of (x) December 31, 2017, and (y) thirty (30) days prior
to the first day of the time period established pursuant to the Company’s by-laws for stockholders to deliver notice to the Company
of director nominations to be brought before the 2018 Annual Meeting of Stockholders. Under the terms of the Bluescape
Cooperation Agreement, Bluescape agreed to customary standstill restrictions that, subject to earlier termination or automatic
extension under certain circumstances, expire upon the earlier of (x) December 31, 2018, and (y) thirty (30) days prior to the first
day of the time period established pursuant to the Company’s by-laws for stockholders to deliver notice to the Company of director
nominations to be brought before the 2019 Annual Meeting of Stockholders.
Executive Officers
Mauricio Gutierrez has served as President and Chief Executive Officer of NRG since December 2015 and as a director of
NRG since January 2016. For additional biographical information for Mr. Gutierrez, see above under "Directors."
Kirkland Andrews has served as Executive Vice President and Chief Financial Officer of NRG Energy since September 2011.
Mr. Andrews is a director of NRG Yield, Inc. and also served as Executive Vice President, Chief Financial Officer of NRG Yield,
Inc. from December 2012 to November 2016. Prior to joining NRG, he served as Managing Director and Co-Head Investment
Banking, Power and Utilities - Americas at Deutsche Bank Securities from June 2009 to September 2011. Prior to this, he served
in several capacities at Citigroup Global Markets Inc., including Managing Director, Group Head, North American Power from
November 2007 to June 2009, and Head of Power M&A, Mergers and Acquisitions from July 2005 to November 2007. In his
banking career, Mr. Andrews led multiple large and innovative strategic, debt, equity and commodities transactions.
David Callen has served as Senior Vice President and Chief Accounting Officer since February 2016 and Vice President and
Chief Accounting Officer from March 2015 to February 2016. In this capacity, Mr. Callen is responsible for directing NRG's
financial accounting and reporting activities. Mr. Callen also has served as Vice President and Chief Accounting Officer of NRG
Yield, Inc. since March 2015. Prior to this, Mr. Callen served as the Company's Vice President, Financial Planning & Analysis
from November 2010 to March 2015. He previously served as Director, Finance from October 2007 through October 2010, Director,
Financial Reporting from February 2006 through October 2007, and Manager, Accounting Research from September 2004 through
February 2006. Prior to NRG, Mr. Callen was an auditor for KPMG LLP in both New York City and Tel Aviv Israel from October
1996 through April 2001.
John Chillemi has served as Executive Vice President, National Business Development of NRG since December 2015. In
this role, Mr. Chillemi is responsible for all wholesale generation development activities for NRG across the nation. Prior to
December 2015, Mr. Chillemi was Senior Vice President and Regional President, West since the acquisition of GenOn in December
2012. Mr. Chillemi served as the Regional President in California and the West for GenOn from December 2010 to December
2012, and as President and Vice President of the West at Mirant Corporation from 2007 to December 2010. Mr. Chillemi has also
served as a director of NRG Yield, Inc. since May 2016. Mr. Chillemi has 30 years of power industry experience, beginning with
Georgia Power in 1986.
David R. Hill has served as Executive Vice President and General Counsel since September 2012. Mr. Hill also has served
as the Executive Vice President and General Counsel of NRG Yield, Inc. since December 2012. Prior to joining NRG, Mr. Hill
was a partner and co-head of Sidley Austin LLP's global energy practice group from February 2009 to August 2012. Prior to this,
Mr. Hill served as General Counsel of the U.S. Department of Energy from August 2005 to January 2009 and, for the three years
prior to that, as Deputy General Counsel for Energy Policy of the U.S. Department of Energy. Before his federal government
service, Mr. Hill was a partner in major law firms in Washington, D.C. and Kansas City, Missouri, and handled a variety of
regulatory, litigation and corporate matters.
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Elizabeth Killinger has served as Executive Vice President and President, NRG Retail and Reliant of NRG since February
2016. Ms. Killinger was Senior Vice President and President, NRG Retail from June 2015 to February 2016 and Senior Vice
President and President, NRG Texas Retail from January 2013 to June 2015. Ms. Killinger has also served as President of Reliant,
a subsidiary of NRG, since October 2012. Prior to that, Ms. Killinger was Senior Vice President of Retail Operations and Reliant
Residential from January 2011 to October 2012. Ms. Killinger has been with the Company and its predecessors since 2002 and
has held various operational and business leadership positions within the retail organization. Prior to joining the Company, Ms.
Killinger spent a decade providing strategy, management and systems consulting to energy, oilfield services and retail distribution
companies across the U.S. and in Europe.
Code of Ethics
NRG has adopted a code of ethics entitled "NRG Code of Conduct" that applies to directors, officers and employees, including
the chief executive officer and senior financial officers of NRG. It may be accessed through the "Governance" section of the
Company's website at www.nrg.com. NRG also elects to disclose the information required by Form 8-K, Item 5.05, "Amendments
to the Registrant's Code of Ethics, or Waiver of a Provision of the Code of Ethics," through the Company's website, and such
information will remain available on this website for at least a 12-month period. A copy of the "NRG Energy, Inc. Code of Conduct"
is available in print to any stockholder who requests it.
Other information required by this Item will be incorporated by reference to the similarly named section of NRG's Definitive
Proxy Statement for its 2017 Annual Meeting of Stockholders.
Item 11 — Executive Compensation
Information required by this Item will be incorporated by reference to the similarly named section of NRG's Definitive
Proxy Statement for its 2017 Annual Meeting of Stockholders.
Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Securities Authorized for Issuance under Equity Compensation Plans
Plan Category
Equity compensation plans approved by security
holders
Equity compensation plans not approved by
security holders
Total
(a)
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
(b)
Weighted-Average
Exercise
Price of Outstanding
Options, Warrants and
Rights
(c)
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities Reflected
in Column (a))
5,065,060 (1) $
1,216,253 (2)
6,281,313
$
21.39
24.64
22.83
8,154,877
960,904
9,115,781 (3)
(1) Consists of shares issuable under the NRG LTIP and the ESPP. The NRG LTIP became effective upon the Company's emergence from bankruptcy. On
July 28, 2010, the NRG LTIP was amended to increase the number of shares available for issuance to 22,000,000. The ESPP was approved by the Company's
stockholders on May 8, 2014. As of December 31, 2016, there were 667,819 shares reserved from the Company's treasury shares for the ESPP.
(2) Consists of shares issuable under the NRG GenOn LTIP. On December 14, 2012, in connection with the Merger, NRG assumed the GenOn Energy, Inc.
2010 Omnibus Incentive Plan and changed the name to the NRG 2010 Stock Plan for GenOn Employees, or the NRG GenOn LTIP. While the GenOn
Energy, Inc. 2010 Omnibus Incentive Plan was previously approved by stockholders of RRI Energy, Inc. before it became GenOn, the plan is listed as “not
approved” because the NRG GenOn LTIP was not subject to separate line item approval by NRG's stockholders when the Merger (which included the
assumption of this plan) was approved. NRG intends to make subsequent grants under the NRG GenOn LTIP. As part of the Merger, NRG also assumed
the GenOn Energy, Inc. 2002 Long-Term Incentive Plan, the GenOn Energy, Inc. 2002 Stock Plan, and the Mirant Corporation 2005 Omnibus Incentive
Compensation Plan. NRG has no intention of making any grants or awards of its own equity securities under these plans. The number of securities to be
issued upon the exercise of outstanding awards under these plans is 240,596 at a weighted-average exercise price of $36.72. See Item 15 — Note 20, Stock-
Based Compensation, to Consolidated Financial Statements for a discussion of the NRG GenOn LTIP.
(3) Consists of 7,487,058 shares of common stock under NRG's LTIP, 960,904 shares of common stock under the NRG GenOn LTIP, and 667,819 shares of
treasury stock reserved for issuance under the ESPP. In the first quarter of 2017, 282,530 shares were issued to employees' accounts from the treasury stock
reserve for the ESPP.
131
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Both the NRG LTIP and the NRG GenOn LTIP provide for grants of stock options, restricted stock, market stock units,
performance stock units, deferred stock units and dividend equivalent rights. NRG's directors, officers and employees, as well as
other individuals performing services for, or to whom an offer of employment has been extended by the Company, are eligible to
receive grants under the NRG LTIP and the NRG GenOn LTIP. However, participants eligible for the NRG LTIP at the time of
the Merger are not eligible to receive grants under the NRG GenOn LTIP. The purpose of the NRG LTIP and the NRG GenOn
LTIP is to promote the Company's long-term growth and profitability by providing these individuals with incentives to maximize
stockholder value and otherwise contribute to the Company's success and to enable the Company to attract, retain and reward the
best available persons for positions of responsibility. The Compensation Committee of the Board of Directors administers the
NRG LTIP and the NRG GenOn LTIP.
Other information required by this Item will be incorporated by reference to the similarly named section of NRG's Definitive
Proxy Statement for its 2017 Annual Meeting of Stockholders.
Item 13 — Certain Relationships and Related Transactions, and Director Independence
Information required by this Item will be incorporated by reference to the similarly named section of NRG's Definitive
Proxy Statement for its 2017 Annual Meeting of Stockholders.
Item 14 — Principal Accounting Fees and Services
Information required by this Item will be incorporated by reference to the similarly named section of NRG's Definitive
Proxy Statement for its 2017 Annual Meeting of Stockholders.
132
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Item 15 — Exhibits, Financial Statement Schedules
(a)(1) Financial Statements
PART IV
The following consolidated financial statements of NRG Energy, Inc. and related notes thereto, together with the reports
thereon of KPMG LLP, are included herein:
Consolidated Statements of Operations — Years ended December 31, 2016, 2015, and 2014
Consolidated Statements of Comprehensive (Loss)/Income — Years ended December 31, 2016, 2015, and 2014
Consolidated Balance Sheets — As of December 31, 2016 and 2015
Consolidated Statements of Cash Flows — Years ended December 31, 2016, 2015, and 2014
Consolidated Statement of Stockholders' Equity — Years ended December 31, 2016, 2015, and 2014
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedule
The following Consolidated Financial Statement Schedule of NRG Energy, Inc. is filed as part of Item 15 of this report
and should be read in conjunction with the Consolidated Financial Statements.
Schedule II — Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions or are inapplicable, and therefore, have been omitted.
(a)(3) Exhibits: See Exhibit Index submitted as a separate section of this report.
(b) Exhibits
See Exhibit Index submitted as a separate section of this report.
(c) Not applicable
133
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
NRG Energy, Inc.:
We have audited the accompanying consolidated balance sheets of NRG Energy, Inc. and subsidiaries as of December 31, 2016
and 2015, and the related consolidated statements of operations, comprehensive (loss)/income, cash flows, and stockholders’ equity
for each of the years in the
period ended December 31, 2016. In connection with our audits of the consolidated financial
statements, we also have audited financial statement schedule “Schedule II. Valuation and Qualifying Accounts.” These
consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of NRG Energy, Inc. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows
period ended December 31, 2016, in conformity with U.S. generally accepted accounting
for each of the years in the
principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), NRG
Energy, Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control
- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and
our report dated February 28, 2017 expressed an unqualified opinion on the effectiveness of the Company’s internal control over
financial reporting.
As disclosed in Note 12, Debt and Capital Leases, to the consolidated financial statements, as of December 31, 2016, $691 million
of senior notes issued by GenOn Energy, Inc. (GenOn), a consolidated subsidiary, are classified as current within the consolidated
balance sheet and are due on June 15, 2017. GenOn’s future profitability continues to be adversely affected by (i) a sustained
decline in natural gas prices and its resulting effect on wholesale power prices and capacity prices, and (ii) the inability of certain
of its subsidiaries to make distributions of cash and certain other restricted payments to GenOn. Based on current projections,
GenOn is not expected to have sufficient liquidity exclusive of cash subject to the restrictions under certain of its subsidiaries’
operating leases to satisfy the senior notes due in June 2017. As a result of these factors, there is no assurance GenOn will continue
as a going concern. GenOn and its consolidated subsidiaries represents total assets constituting 16 percent and 17 percent in 2016
and 2015 and total revenues constituting 15 percent, 16 percent and 19 percent in 2016, 2015 and 2014, respectively, of the related
consolidated totals.
Philadelphia, Pennsylvania
February 28, 2017
(signed) KPMG LLP
134
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NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31,
2016
2015
2014
$
12,351
$
14,674
$
15,868
(In millions, except per share amounts)
Operating Revenues
Total operating revenues
Operating Costs and Expenses
Cost of operations
Depreciation and amortization
Impairment losses
Selling, general and administrative
Acquisition-related transaction and integration costs
Development costs
Total operating costs and expenses
Gain on sale of assets
Gain on postretirement benefits curtailment
Operating Income/(Loss)
Other Income/(Expense)
Equity in earnings of unconsolidated affiliates
Impairment losses on investments
Other income, net
(Loss)/gain on sale of equity method investment
Net (loss)/gain on debt extinguishment
Interest expense
Total other expense
(Loss)/Income Before Income Taxes
Income tax expense
Net (Loss)/Income
Less: Net loss attributable to noncontrolling interests and redeemable
noncontrolling interests
Net (Loss)/Income Attributable to NRG Energy, Inc.
Dividends for preferred shares
Gain on redemption of preferred shares
(Loss)/Income Available for Common Stockholders
(Loss)/Earnings Per Share Attributable to NRG Energy, Inc. Common
Stockholders
Weighted average number of common shares outstanding — basic
Net (Loss)/Income per Weighted Average Common Share — Basic
Weighted average number of common shares outstanding — diluted
Net (Loss)/Income per Weighted Average Common Share — Diluted
Dividends Per Common Share
(117)
(774)
5
(78)
(701) $
(54)
(6,382)
20
—
(6,402) $
316
(2.22) $
316
(2.22) $
$
0.24
329
(19.46) $
329
(19.46) $
$
0.58
$
$
$
$
See notes to Consolidated Financial Statements.
8,555
1,367
918
1,101
8
90
12,039
215
—
527
27
(268)
42
—
(142)
(1,061)
(1,402)
(875)
16
(891)
10,784
1,566
5,030
1,199
10
146
18,735
—
21
(4,040)
36
(56)
33
(14)
75
(1,128)
(1,054)
(5,094)
1,342
(6,436)
11,808
1,523
97
1,016
84
88
14,616
19
—
1,271
38
—
22
18
(95)
(1,119)
(1,136)
135
3
132
(2)
134
56
—
78
334
0.23
339
0.23
0.54
135
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NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME
Net (Loss)/Income
Other Comprehensive Income/(Loss), net of tax
Unrealized gain/(loss) on derivatives, net of income tax expense/(benefit) of $1,
$19, and $(21)
Foreign currency translation adjustments, net of income tax benefit of $0, $0, and
$5
Available-for-sale securities, net of income tax benefit of $0, $3, and $2
Defined benefit plan, net of income tax expense/(benefit) of $0, $69, and $(88)
Other comprehensive income/(loss)
Comprehensive Loss
Less: Comprehensive (loss)/income attributable to noncontrolling interests and
redeemable noncontrolling interests
Comprehensive Loss Attributable to NRG Energy, Inc.
Dividends for preferred shares
Gain on redemption of preferred shares
For the Year Ended December 31,
2016
2015
2014
(In millions)
$
(891) $
(6,436) $
132
35
(1)
1
3
38
(15)
(11)
17
10
1
(853)
(6,435)
(117)
(736)
5
(78)
(73)
(6,362)
20
—
(45)
(8)
(7)
(129)
(189)
(57)
8
(65)
56
—
Comprehensive Loss Available for Common Stockholders
$
(663) $
(6,382) $
(121)
See notes to Consolidated Financial Statements.
136
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NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Current Assets
ASSETS
Cash and cash equivalents
Funds deposited by counterparties
Restricted cash
Accounts receivable — trade
Inventory
Derivative instruments
Cash collateral posted in support of energy risk management activities
Current assets held-for-sale
Prepayments and other current assets
Total current assets
Property, plant and equipment, net
Other Assets
Equity investments in affiliates
Notes receivable, less current portion
Goodwill
Intangible assets, net
Nuclear decommissioning trust fund
Derivative instruments
Deferred income taxes
Non-current assets held-for-sale
Other non-current assets
Total other assets
Total Assets
See notes to Consolidated Financial Statements.
As of December 31,
2016
2015
(In millions)
$
$
1,973
2
446
1,166
1,111
1,062
203
9
423
6,395
17,912
1,120
17
662
2,036
610
189
225
10
1,179
6,048
30,355
$
$
1,518
106
414
1,157
1,252
1,915
568
6
455
7,391
18,732
1,045
53
999
2,310
561
305
167
105
1,214
6,759
32,882
137
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NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt and capital leases
Accounts payable
Derivative instruments
Cash collateral received in support of energy risk management activities
Accrued interest expense
Other accrued expenses
Current liabilities held-for-sale
Other current liabilities
Total current liabilities
Other Liabilities
Long-term debt and capital leases
Nuclear decommissioning reserve
Nuclear decommissioning trust liability
Postretirement and other benefit obligations
Deferred income taxes
Derivative instruments
Out-of-market contracts, net
Non-current liabilities held-for-sale
Other non-current liabilities
Total non-current liabilities
Total Liabilities
2.822% convertible perpetual preferred stock; $0.01 par value; 250,000 shares issued
and outstanding at December 31, 2015
Redeemable noncontrolling interest in subsidiaries
Commitments and Contingencies
Stockholders' Equity
Common stock; $0.01 par value; 500,000,000 shares authorized; 417,583,825 and
416,939,950 shares issued; and 315,443,011 and 314,190,042 shares outstanding at
December 31, 2016 and 2015
Additional paid-in capital
Accumulated deficit
Treasury stock, at cost; 102,140,814 and 102,749,908 shares at December 31, 2016
and 2015
Accumulated other comprehensive loss
Noncontrolling interest
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity
See notes to Consolidated Financial Statements.
As of December 31,
2016
2015
(In millions, except share data)
$
1,220
895
1,084
2
220
543
—
418
4,382
18,006
287
339
553
20
294
1,040
12
930
21,481
25,863
—
46
4
8,358
(3,787)
(2,399)
(135)
2,405
4,446
30,355
$
481
869
1,721
106
242
568
2
386
4,375
18,983
326
283
588
19
493
1,146
4
900
22,742
27,117
302
29
4
8,296
(3,007)
(2,413)
(173)
2,727
5,434
32,882
$
$
138
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 138
3/4/17 3:01 AM
NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended December 31,
2015
2016
2014
Cash Flows from Operating Activities
Net (loss)/income
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
(In millions)
$
(891) $ (6,436) $
132
Equity in earnings and distribution of unconsolidated affiliates
Depreciation and amortization
Provision for bad debts
Amortization of nuclear fuel
Amortization of financing costs and debt discount/premiums
Adjustment to loss/(gain) on debt extinguishment
Amortization of intangibles and out-of-market contracts
Amortization of unearned equity compensation
Net (gain)/loss on sale of assets and equity method investments
Gain on post retirement benefits curtailment
Impairment losses
Changes in derivative instruments
Changes in deferred income taxes and liability for uncertain tax benefits
Changes in collateral deposits in support of risk management activities
Proceeds from sale of emission allowances
Changes in nuclear decommissioning trust liability
Cash provided/(used) by changes in other working capital, net of acquisition and disposition effects:
Accounts receivable - trade
Inventory
Prepayments and other current assets
Accounts payable
Accrued expenses and other current liabilities
Other assets and liabilities
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities
Acquisition of businesses, net of cash acquired
Capital expenditures
(Increase)/decrease in restricted cash, net
(Increase)/decrease in restricted cash to support equity requirements for U.S. DOE funded projects
Net cash proceeds from notes receivable
Proceeds from renewable energy grants
Purchases of emission allowances, net of proceeds
Investments in nuclear decommissioning trust fund securities
Proceeds from sales of nuclear decommissioning trust fund securities
Proceeds from sale of assets, net
Investments in unconsolidated affiliates
Other
Net Cash Used by Investing Activities
Cash Flows from Financing Activities
Payments of dividends to preferred and common stockholders
Net receipts from settlement of acquired derivatives that include financing elements
Payments for treasury stock
Payments for preferred shares
Distributions from, net of contributions to, noncontrolling interests in subsidiaries
Proceeds from sale of noncontrolling interests in subsidiaries
Proceeds from issuance of common stock
Proceeds from issuance of long-term debt
Payments of debt issuance and hedging costs
Payments for short and long-term debt
Other
Net Cash (Used)/Provided by Financing Activities
Effect of exchange rate changes on cash and cash equivalents
Net Increase/(Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period
See notes to Consolidated Financial Statements.
139
54
1,367
48
49
3
21
91
10
(224)
—
1,186
23
(43)
365
47
41
(12)
134
(39)
(27)
(39)
(92)
2,072
(209)
(1,244)
(29)
(3)
17
36
(1)
(551)
510
636
(34)
48
(824)
(76)
151
—
(226)
(156)
—
1
5,527
(89)
(5,913)
(13)
(794)
1
455
1,518
1,973
$
37
1,566
64
45
(11)
(75)
81
41
14
(21)
5,086
233
1,326
(381)
—
(2)
136
(26)
8
(218)
(9)
(149)
1,309
(31)
(1,283)
8
35
18
82
41
(629)
631
27
(395)
11
(1,485)
(201)
196
(437)
—
47
600
1
1,004
(21)
(1,599)
(22)
(432)
10
(598)
2,116
1,518
$
49
1,523
64
46
(12)
25
64
42
(4)
—
97
(61)
(154)
146
—
19
(2)
(245)
36
(12)
(26)
(217)
1,510
(2,936)
(909)
57
(206)
25
916
(16)
(619)
600
203
(103)
85
(2,903)
(196)
9
(39)
—
189
630
21
4,563
(67)
(3,827)
(18)
1,265
(10)
(138)
2,254
2,116
$
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 139
3/4/17 3:01 AM
NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings/
(Accumu-
lated
Deficit)
Accumulated
Other
Comprehensive
Income/(Loss)
Noncon-
trolling
Interest
Total
Stock-
holders'
Equity
Treasury
Stock
(In millions)
Balances at December 31, 2013
$
4
$
7,840
$
3,695
$ (1,942) $
5
$
Net income
Other comprehensive loss
Issuance of shares for acquisition of EME
Acquisition of EME noncontrolling interests
Distributions to noncontrolling interests
Equity-based compensation
Purchase of treasury stock
Preferred stock dividends
Common stock dividends
ESPP share purchases
Sale of assets to NRG Yield, Inc.
Dividend for refinancing of preferred stock
Equity component of NRG Yield, Inc. convertible notes
Impact of NRG Yield, Inc. public offering
Sales proceeds and other contributions from noncontrolling
interests
(179)
401
45
41
134
(9)
(181)
(4)
(47)
(44)
3
865
17
352
(57)
(41)
23
630
125
10,467
151
(179)
401
352
(57)
45
(44)
(9)
(181)
(1)
—
(47)
23
630
125
Balances at December 31, 2014
$
4
$
8,327
$
3,588
$ (1,983) $
(174) $
1,914
$ 11,676
Net loss
Other comprehensive income/(loss)
Sale of assets to NRG Yield, Inc.
ESPP share purchases
Equity-based compensation
Purchase of treasury stock
Common stock dividends
Preferred stock dividends
Distributions to noncontrolling interests
Contributions from noncontrolling interests
Acquisition of noncontrolling interests by NRG Yield, Inc.
Impact of NRG Yield, Inc. public offering
Equity component of NRG Yield, Inc. convertible notes
(56)
(1)
26
(6,382)
(2)
(191)
(20)
7
(437)
1
(37)
(4)
83
(159)
234
74
599
23
(6,419)
(3)
27
6
24
(437)
(191)
(20)
(159)
234
74
599
23
Balances at December 31, 2015
$
4
$
8,296
$
(3,007) $ (2,413) $
(173) $
2,727
$
5,434
Net loss
Other comprehensive income
Sale of assets to NRG Yield, Inc.
ESPP share purchases
Equity-based compensation
Common stock dividends
Dividend for preferred shares
Gain on redemption of preferred shares
Distributions to noncontrolling interests
Dividends paid to NRG Yield, Inc.
Contributions from noncontrolling interests
Redemption of noncontrolling interests
59
(2)
5
(774)
(6)
1
(74)
(5)
78
(79)
(853)
38
(16)
14
(158)
(92)
30
(7)
38
43
6
6
(74)
(5)
78
(158)
(92)
30
(7)
Balances at December 31, 2016
$
4
$
8,358
$
(3,787) $ (2,399) $
(135) $
2,405
$
4,446
See notes to Consolidated Financial Statements.
140
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 140
3/4/17 3:01 AM
NRG ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Nature of Business
General
NRG Energy, Inc., or NRG or the Company, is a leading integrated power company built on the strength of the nation's
largest and most diverse competitive electric generation portfolio and leading retail electricity platform. NRG aims to create a
sustainable energy future by producing, selling and delivering electricity and related products and services in major competitive
power markets in the U.S. in a manner that delivers value to all of NRG's stakeholders. The Company owns and operates
approximately 47,000 MW of generation; engages in the trading of wholesale energy, capacity and related products; transacts in
and trades fuel and transportation services; and directly sells energy, services, and innovative, sustainable products and services
to retail customers under the names “NRG”, "Reliant" and other retail brand names owned by NRG.
Generation consists of the Company’s wholesale operations, commercial operations, EPC operations, energy services and
other critical related functions. NRG has traditionally referred to this business as its wholesale power generation business. In
addition to the traditional functions from NRG’s wholesale power generation business, Generation also includes NRG’s business
solutions, which include demand response, commodity sales, energy efficiency and energy management services, and NRG’s
conventional distributed generation business, consisting of reliability, combined heat and power, thermal and district heating and
cooling and large-scale distributed generation.
Retail is a consumer facing business that includes the Company’s residential retail and C&I business. Products and services
range from retail energy, portable solar and battery products home services, and a variety of bundled products which combine
energy with protection products, energy efficiency and renewable energy solutions as well as other distributed and reliability
products.
Renewables operates the Company’s existing renewables business, including operation of the NRG Yield renewable assets.
Renewables is also one of the largest solar and wind power developers and owner-operators in the U.S., having developed,
constructed and financed a full range of solutions for utilities, schools, municipalities and commercial market segments.
GenOn Liquidity and Ability to Continue as a Going Concern
As disclosed in Note 12, Debt and Capital Leases, $691 million of GenOn's Senior Notes excluding $8 million of associated
premiums, are current within the GenOn consolidated balance sheet as of December 31, 2016 and are due on June 15, 2017.
GenOn's future profitability continues to be adversely affected by (i) a sustained decline in natural gas prices and its resulting
effect on wholesale power prices and capacity prices, and (ii) the inability of GenOn Mid-Atlantic and REMA to make distributions
of cash and certain other restricted payments to GenOn. Based on current projections, GenOn is not expected to have sufficient
liquidity to repay the GenOn Senior Notes due in June 2017. As a result of these factors, there is substantial doubt about GenOn's
ability to continue as a going concern. As a result of the substantial doubt about GenOn’s ability to continue as a going concern,
along with additional factors, there is substantial doubt about certain of GenOn’s subsidiaries’ ability to continue as a going concern.
As of December 31, 2016, GenOn has cash and cash equivalents of $1.0 billion, of which $471 million and $100 million is
held by GenOn Mid-Atlantic and REMA, respectively. Under their respective operating leases, GenOn Mid-Atlantic and REMA
are not permitted to make any distributions and other restricted payments unless: (a) they satisfy the fixed charge coverage ratio
for the most recently ended period for four fiscal quarters; (b) they are projected to satisfy the fixed charge coverage ratio for each
of the two following periods of four fiscal quarters, commencing with the fiscal quarter in which such payment is proposed to be
made; and (c) no significant lease default or event of default has occurred and is continuing. Additionally, GenOn Mid-Atlantic
and REMA must be in compliance with the requirement to provide credit support to the owner lessors securing their obligations
to pay scheduled rent under their respective leases. As a result, GenOn Mid-Atlantic has not been able to make distributions of
cash and certain other restricted payments since the quarter ended March 31, 2014 which was the last quarterly period for which
GenOn Mid-Atlantic satisfied the conditions under its operating agreement. REMA has not satisfied the conditions under its
operating agreement to make distributions of cash and certain other restricted payments since 2009.
NRG, GenOn's parent company, has no obligation to provide any financial support to GenOn other than under the secured
intercompany revolving credit agreement between NRG and GenOn and NRG Americas. As of December 31, 2016, $228 million
was available to be used by GenOn under the $500 million revolving credit agreement. As controlled group members, ERISA
requires that NRG and GenOn are jointly and severally liable for the NRG Pension Plan for Bargained Employees and the NRG
Pension Plan, including the pension liabilities associated with GenOn employees.
141
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GenOn is currently considering all options available to it, including negotiations with creditors, refinancing the GenOn
Senior Notes, potential sales of certain generating assets as well as the possibility for a need to file for protection under Chapter
11 of the U.S. Bankruptcy Code. During 2016, GenOn appointed two independent directors, retained advisors and established a
separate audit committee as part of this process. Any resolution may have a material impact on the Company's statement of
operations, cash flows and financial position.
As of December 31, 2016, GenOn represents 15.6% of the Company's consolidated total assets, 16.9% of the Company's
consolidated total liabilities and contributed $94 million to the Company's consolidated cash from operations in 2016.
NRG Yield, Inc. Ownership
In 2013, the Company formed NRG Yield, Inc. to own and operate a portfolio of contracted generation assets and thermal
infrastructure assets that have historically been owned and/or operated by NRG and its subsidiaries. In 2013 and 2014, NRG
Yield, Inc. issued Class A common stock to its public shareholders and utilized the proceeds to acquire a controlling interest in
NRG Yield LLC, through its ownership of Class A units. At that time, the Company owned the Class B common stock of NRG
Yield, Inc. and the Class B units of NRG Yield LLC. On May 14, 2015, NRG Yield, Inc. completed a stock split in connection
with which each outstanding share of Class A common stock was split into one share of Class A common stock and one share of
Class C common stock, and each outstanding share of Class B common stock was split into one share of Class B common stock
and one share of Class D common stock. A similar split was effected at NRG Yield LLC with respect to its member units. The
Company consolidates NRG Yield, Inc. for financial reporting purposes as it maintains a controlling voting interest, and presents
the public ownership of the Class A and Class C common stock as noncontrolling interest. The Company receives distributions
from NRG Yield LLC, through its ownership of Class B and Class D units.
The following table represents the structure of NRG Yield, Inc. as of December 31, 2016:
142
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Note 2 — Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The Company's consolidated financial statements have been prepared in accordance with GAAP. The ASC, established by
the FASB, is the source of authoritative GAAP to be applied by nongovernmental entities. In addition, the rules and interpretative
releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.
The consolidated financial statements include NRG's accounts and operations and those of its subsidiaries in which the
Company has a controlling interest. All significant intercompany transactions and balances have been eliminated in consolidation.
The usual condition for a controlling financial interest is ownership of a majority of the voting interests of an entity. However, a
controlling financial interest may also exist through arrangements that do not involve controlling voting interests. As such, NRG
applies the guidance of ASC 810, Consolidations, or ASC 810, to determine when an entity that is insufficiently capitalized or
not controlled through its voting interests, referred to as a VIE, should be consolidated.
Segment Reporting
The Company's businesses are segregated as follows: Generation (previously named Generation/Business), which includes
generation, international and BETM (previously part of Corporate); Retail which includes Mass customers (previously Retail
Mass), and Business Solutions, which includes C&I customers and other distributed and reliability products (previously in the
Generation segment); Renewables (previously named NRG Renew), which includes solar and wind assets, excluding those in
NRG Yield; NRG Yield; and corporate activities. The Company's corporate segment include residential solar (previously part of
NRG Home) and electric vehicle services. During 2016, the Company began reporting the results of its residential solar business
in its corporate segment and its international business in its Generation segment. The Company's segment structure and its allocation
of corporate expenses were updated to reflect how management makes financial decisions and allocates resources. The Company
has recast data from prior periods to reflect this change in reportable segments to conform to the current year presentation.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with an original maturity of three months or less at the time of
purchase.
Funds Deposited by Counterparties
Funds deposited by counterparties consist of cash held by the Company as a result of collateral posting obligations from its
counterparties. Some amounts are segregated into separate accounts that are not contractually restricted but, based on the Company's
intention, are not available for the payment of general corporate obligations. Depending on market fluctuations and the settlement
of the underlying contracts, the Company will refund this collateral to the hedge counterparties pursuant to the terms and conditions
of the underlying trades. Since collateral requirements fluctuate daily and the Company cannot predict if any collateral will be
held for more than twelve months, the funds deposited by counterparties are classified as a current asset on the Company's balance
sheet, with an offsetting liability for this cash collateral received within current liabilities. Changes in funds deposited by
counterparties are closely associated with the Company's operating activities and are classified as an operating activity in the
Company's consolidated statements of cash flows.
Restricted Cash
Restricted cash consists primarily of funds held to satisfy the requirements of certain debt agreements and funds held within
the Company's projects that are restricted in their use. Of these funds, as of December 31, 2016, approximately $53 million is
designated for current debt service payments, $51 million is designated to fund operating expenses, and $58 million is designated
to fund distributions, with the remaining $284 million restricted for reserves including debt service, performance obligations and
other reserves, as well as capital expenditures.
143
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 143
3/4/17 3:01 AM
Trade Receivables and Allowance for Doubtful Accounts
Trade receivables are reported in the balance sheet at outstanding principal adjusted for any write-offs and the allowance
for doubtful accounts. For its retail business, the Company accrues an allowance for doubtful accounts based on estimates of
uncollectible revenues by analyzing counterparty credit ratings (for commercial and industrial customers), historical collections,
accounts receivable aging and other factors. The retail business writes-off accounts receivable balances against the allowance for
doubtful accounts when it determines a receivable is uncollectible. In addition, the Company considers a reserve for doubtful
accounts based on the credit worthiness of the customers and continually reviews and adjusts for current economic trends that
might impact the level of future credit losses. The reserve represents management's best estimate of uncollectible amounts. As of
December 31, 2016 and 2015, the allowance for doubtful accounts was $30 million and $21 million, respectively.
Inventory
Inventory is valued at the lower of weighted average cost or market, and consists principally of fuel oil, coal and raw materials
used to generate electricity or steam. The Company removes these inventories as they are used in the production of electricity or
steam. Spare parts inventory is valued at weighted average cost. The Company removes these inventories when they are used
for repairs, maintenance or capital projects. The Company expects to recover the fuel oil, coal, raw materials, and spare parts
costs in the ordinary course of business. Finished goods inventory is valued at the lower of cost or net realizable value with cost
being determined on a first-in first-out basis. The Company removes these inventories as they are sold to customers. Sales of
inventory are classified as an operating activity in the consolidated statements of cash flows.
Property, Plant and Equipment
Property, plant and equipment are stated at cost or, in the case of business acquisitions, fair value; however, impairment
adjustments are recorded whenever events or changes in circumstances indicate that their carrying values may not be recoverable.
See Note 3, Business Acquisitions and Dispositions, for more information on acquired property, plant and equipment. NRG also
classifies nuclear fuel related to the Company's 44% ownership interest in STP as part of the Company's property, plant, and
equipment. Significant additions or improvements extending asset lives are capitalized as incurred, while repairs and maintenance
that do not improve or extend the life of the respective asset are charged to expense as incurred. Depreciation, other than nuclear
fuel, is computed using the straight-line method, while nuclear fuel is amortized based on units of production over the estimated
useful lives. Certain assets and their related accumulated depreciation amounts are adjusted for asset retirements and disposals
with the resulting gain or loss included in cost of operations in the consolidated statements of operations.
Asset Impairments
Long-lived assets that are held and used are reviewed for impairment whenever events or changes in circumstances indicate
carrying values may not be recoverable. Such reviews are performed in accordance with ASC 360. An impairment loss is indicated
if the total future estimated undiscounted cash flows expected from an asset are less than its carrying value. An impairment charge
is measured by the difference between an asset's carrying amount and fair value with the difference recorded in operating costs
and expenses in the consolidated statements of operations. Fair values are determined by a variety of valuation methods, including
third-party appraisals, sales prices of similar assets, and present value techniques.
Investments accounted for by the equity method are reviewed for impairment in accordance with ASC 323, Investments-
Equity Method and Joint Ventures, or ASC 323, which requires that a loss in value of an investment that is an other-than-temporary
decline should be recognized. The Company identifies and measures losses in the value of equity method investments based upon
a comparison of fair value to carrying value.
For further discussion of these matters, refer to Note 10, Asset Impairments.
Development Costs and Capitalized Interest
Development costs include project development costs, which are expensed in the preliminary stages of a project and
capitalized when the project is deemed to be commercially viable. Commercial viability is determined by one or a series of actions
including, among others, Board of Director approval pursuant to a formal project plan that subjects the Company to significant
future obligations that can only be discharged by the use of a Company asset. When a project is available for operations, capitalized
interest, and capitalized project development costs are reclassified to property, plant and equipment and depreciated on a straight-
line basis over the estimated useful life of the project's related assets. Capitalized costs are charged to expense if a project is
abandoned or management otherwise determines the costs to be unrecoverable.
Interest incurred on funds borrowed to finance capital projects is capitalized until the project under construction is ready for
its intended use. The amount of interest capitalized for the years ended December 31, 2016, 2015, and 2014, was $43 million,
$30 million, and $29 million, respectively.
144
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Debt Issuance Costs
Debt issuance costs are capitalized and amortized as interest expense on a basis which approximates the effective interest
method over the term of the related debt. Debt issuance costs are presented as a direct deduction from the carrying amount of the
related debt.
Intangible Assets
Intangible assets represent contractual rights held by the Company. The Company recognizes specifically identifiable
intangible assets including customer contracts, customer relationships, energy supply contracts, marketing partnerships, power
purchase agreements, trade names, emission allowances, and fuel contracts when specific rights and contracts are acquired. In
addition, the Company also established values for emission allowances and power contracts upon adoption of Fresh Start reporting.
These intangible assets are amortized based on expected volumes, expected delivery, expected discounted future net cash flows,
straight line or units of production basis. As of December 31, 2016 and 2015, the Company had accumulated amortization related
to its intangible assets of $1.8 billion and $1.5 billion, respectively.
Intangible assets determined to have indefinite lives are not amortized, but rather are tested for impairment at least annually
or more frequently if events or changes in circumstances indicate that such acquired intangible assets have been determined to
have finite lives and should now be amortized over their useful lives. NRG had no intangible assets with indefinite lives recorded
as of December 31, 2016.
Emission allowances held-for-sale, which are included in other non-current assets on the Company's consolidated balance
sheet, are not amortized; they are carried at the lower of cost or fair value and reviewed for impairment in accordance with ASC
360.
Goodwill
In accordance with ASC 350, the Company recognizes goodwill for the excess cost of an acquired entity over the net value
assigned to assets acquired and liabilities assumed. NRG performs goodwill impairment tests annually, during the fourth quarter,
and when events or changes in circumstances indicate that the carrying value may not be recoverable.
The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting
unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment
test. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent.
In the absence of sufficient qualitative factors, goodwill impairment is determined using a two-step process:
Step one — Identify potential impairment by comparing the fair value of a reporting unit to the book value, including
goodwill. If the fair value exceeds book value, goodwill of the reporting unit is not considered impaired.
If the book value exceeds fair value, proceed to step two.
Step two — Compare the implied fair value of the reporting unit's goodwill to the book value of the reporting unit
goodwill. If the book value of goodwill exceeds the implied fair value, an impairment charge is recognized
for the excess.
For further discussion of goodwill and goodwill impairment losses recognized during 2016 and 2015, refer to Note 11,
Goodwill and Other Intangibles.
Income Taxes
The Company accounts for income taxes using the liability method in accordance with ASC 740, which requires that the
Company use the asset and liability method of accounting for deferred income taxes and provide deferred income taxes for all
significant temporary differences.
The Company has two categories of income tax expense or benefit — current and deferred, as follows:
• Current income tax expense or benefit consists solely of current taxes payable less applicable tax credits, and
• Deferred income tax expense or benefit is the change in the net deferred income tax asset or liability, excluding amounts
charged or credited to accumulated other comprehensive income.
145
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The Company reports some of its revenues and expenses differently for financial statement purposes than for income tax
return purposes, resulting in temporary and permanent differences between the Company's financial statements and income tax
returns. The tax effects of such temporary differences are recorded as either deferred income tax assets or deferred income tax
liabilities in the Company's consolidated balance sheets. The Company measures its deferred income tax assets and deferred
income tax liabilities using income tax rates that are currently in effect. The Company believes it is more likely than not that the
results of future operations will generate sufficient taxable income which includes the future reversal of existing taxable temporary
differences to realize deferred tax assets, net of valuation allowances. In arriving at this conclusion to utilize projections of future
profit before tax in its estimate of future taxable income, the Company considered the profit before tax generated in recent years.
A valuation allowance is recorded to reduce the Company's net deferred tax assets to an amount that is more-likely-than-not to be
realized.
The Company reduces its current income tax expense in the consolidated statement of operations for any investment tax
credits, or ITCs, that are not convertible into cash grants, as well as other tax credits, in the period the tax credit is generated. ITCs
that are convertible into cash grants, as well as the deferred income tax benefit generated by the difference in the financial statement
and tax basis of the related assets, are recorded as a reduction to the carrying value of the underlying property and subsequently
amortized to earnings on a straight-line basis over the useful life of each underlying property.
The Company accounts for uncertain tax positions in accordance with ASC 740, which applies to all tax positions related
to income taxes. Under ASC 740, tax benefits are recognized when it is more-likely-than-not that a tax position will be sustained
upon examination by the authorities. The benefit recognized from a position that has surpassed the more-likely-than-not threshold
is the largest amount of benefit that is more than 50% likely to be realized upon settlement. The Company recognizes interest and
penalties accrued related to uncertain tax benefits as a component of income tax expense.
In accordance with ASC 805 and as discussed further in Note 19, Income Taxes, changes to existing net deferred tax assets
or valuation allowances or changes to uncertain tax benefits, are recorded to income tax expense.
Revenue Recognition
Energy — Both physical and financial transactions are entered into to optimize the financial performance of the Company's
generating facilities. Electric energy revenue is recognized upon transmission to the customer. Physical transactions, or the sale
of generated electricity to meet supply and demand, are recorded on a gross basis in the Company's consolidated statements of
operations. Financial transactions, or the buying and selling of energy for trading purposes, are recorded net within operating
revenues in the consolidated statements of operations in accordance with ASC 815.
Capacity — Capacity revenues are recognized when contractually earned, and consist of revenues billed to a third party at
either the market or a negotiated contract price for making installed generation capacity available in order to satisfy system integrity
and reliability requirements.
Sale of Emission Allowances — The Company records its bank of emission allowances as part of intangible assets. From
time to time, management may authorize the transfer of emission allowances in excess of usage from the Company's emission
bank to intangible assets held-for-sale for trading purposes. The Company records the sale of emission allowances on a net basis
within operating revenue in the Company's consolidated statements of operations.
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.
Retail revenues — Gross revenues for energy sales and services to retail customers are recognized upon delivery under the
accrual method. Energy sales and services that have been delivered but not billed by period end are estimated. Gross revenues
also includes energy revenues from resales of purchased power, which were $154 million, $165 million and $387 million for the
years ended December 31, 2016, 2015, and 2014, respectively. These revenues represent the sale of excess supply to third parties
in the market.
Accrued unbilled revenues are based on estimates of customer usage since the date of the last meter reading provided by the
independent system operators or electric distribution companies. Volume estimates are based on daily forecasted volumes and
estimated customer usage by class. Unbilled revenues are calculated by multiplying these volume estimates by the applicable rate
by customer class. Estimated amounts are adjusted when actual usage is known and billed. The Company recorded receivables
for unbilled revenues of $321 million, $309 million and $341 million as of December 31, 2016, 2015, and 2014, respectively, for
retail energy sales and services.
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Consumer product revenues are recognized when title and risk of loss pass to the retailer, distributor, or end-customer and
when all of the following have occurred: a firm sales agreement is in place, delivery has occurred, pricing is fixed and determinable,
and collection is reasonably assured. Revenue is recognized as the net amount expected to be received after deducting estimated
amounts for product returns, discounts, and allowances based on historical return rates and reasonable judgment.
Lessor Accounting
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. Contingent rental
income recognized in the years ended December 31, 2016, 2015, and 2014 was $936 million, $777 million, and $544 million,
respectively.
Gross Receipts and Sales Taxes
In connection with its retail business, the Company records gross receipts taxes on a gross basis in revenues and cost of
operations in its consolidated statements of operations. During the years ended December 31, 2016, 2015, and 2014, the Company's
revenues and cost of operations included gross receipts taxes of $102 million, $110 million, and $108 million, respectively.
Additionally, the retail business records sales taxes collected from its taxable customers and remitted to the various governmental
entities on a net basis; thus, there is no impact on the Company's consolidated statement of operations.
Cost of Energy for Retail Operations
The cost of energy for electricity sales and services to retail customers is included in cost of operations and is based on
estimated supply volumes for the applicable reporting period. A portion of the cost of energy ($90 million, $85 million and $86
million as of December 31, 2016, 2015, and 2014, respectively) was accrued and consisted of estimated transmission and
distribution charges not yet billed by the transmission and distribution utilities. In estimating supply volumes, the Company
considers the effects of historical customer volumes, weather factors and usage by customer class. Transmission and distribution
delivery fees are estimated using the same method used for electricity sales and services to retail customers. In addition, ISO fees
are estimated based on historical trends, estimated supply volumes and initial ERCOT ISO settlements. Volume estimates are then
multiplied by the supply rate and recorded as cost of operations in the applicable reporting period.
Derivative Financial Instruments
The Company accounts for derivative financial instruments under ASC 815, which requires the Company to record all
derivatives on the balance sheet at fair value unless they qualify for a NPNS exception. Changes in the fair value of non-hedge
derivatives are immediately recognized in earnings. Changes in the fair value of derivatives accounted for as hedges, if elected
for hedge accounting, are either:
• Recognized in earnings as an offset to the changes in the fair value of the related hedged assets, liabilities and firm
commitments; or
• Deferred and recorded as a component of accumulated OCI until the hedged transactions occur and are recognized in
earnings.
The Company's primary derivative instruments are power purchase or sales contracts, fuels purchase contracts, other energy
related commodities, and interest rate instruments used to mitigate variability in earnings due to fluctuations in market prices and
interest rates. On an ongoing basis, the Company assesses the effectiveness of all derivatives that are designated as hedges for
accounting purposes in order to determine that each derivative continues to be highly effective in offsetting changes in fair values
or cash flows of hedged items. Internal analyses that measure the statistical correlation between the derivative and the associated
hedged item determine the effectiveness of such a contract designated as a hedge. If it is determined that the derivative instrument
is not highly effective as a hedge, hedge accounting will be discontinued prospectively. In this case, the gain or loss previously
deferred in accumulated OCI would be frozen until the underlying hedged instrument is delivered unless the transactions being
hedged are no longer probable of occurring in which case the amount in OCI would be immediately reclassified into earnings. If
the derivative instrument is terminated, the effective portion of this derivative deferred in accumulated OCI will be frozen until
the underlying hedged item is delivered.
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Revenues and expenses on contracts that qualify for the NPNS exception are recognized when the underlying physical
transaction is delivered. While these contracts are considered derivative financial instruments under ASC 815, they are not recorded
at fair value, but on an accrual basis of accounting. If it is determined that a transaction designated as NPNS no longer meets the
scope exception, the fair value of the related contract is recorded on the balance sheet and immediately recognized through earnings.
NRG's trading activities are subject to limits in accordance with the Company's Risk Management Policy. These contracts
are recognized on the balance sheet at fair value and changes in the fair value of these derivative financial instruments are recognized
in earnings.
Foreign Currency Translation and Transaction Gains and Losses
The local currencies are generally the functional currency of NRG's foreign operations. Foreign currency denominated assets
and liabilities are translated at end-of-period rates of exchange. Revenues, expenses, and cash flows are translated at the weighted-
average rates of exchange for the period. The resulting currency translation adjustments are not included in the Company's
consolidated statements of operations for the period, but are accumulated and reported as a separate component of stockholders'
equity until sale or complete or substantially complete liquidation of the net investment in the foreign entity takes place. Foreign
currency transaction gains or losses are reported within other income/(expense) in the Company's consolidated statements of
operations. For the years ended December 31, 2016, 2015, and 2014, amounts recognized as foreign currency transaction gains
(losses) were immaterial. The Company's cumulative translation adjustment balances as of December 31, 2016, 2015, and 2014
were $(11) million, $(10) million and $1 million, respectively.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of trust funds,
accounts receivable, notes receivable, derivatives, and investments in debt securities. Trust funds are held in accounts managed
by experienced investment advisors. Certain accounts receivable, notes receivable, and derivative instruments are concentrated
within entities engaged in the energy industry. These industry concentrations may impact the Company's overall exposure to credit
risk, either positively or negatively, in that the customers may be similarly affected by changes in economic, industry or other
conditions. Receivables and other contractual arrangements are subject to collateral requirements under the terms of enabling
agreements. However, the Company believes that the credit risk posed by industry concentration is offset by the diversification
and creditworthiness of its customer base. See Note 4, Fair Value of Financial Instruments, for a further discussion of derivative
concentrations.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, funds deposited by counterparties, receivables, accounts payable, and
accrued liabilities approximate fair value because of the short-term maturity of these instruments. See Note 4, Fair Value of
Financial Instruments, for a further discussion of fair value of financial instruments.
Asset Retirement Obligations
The Company accounts for AROs in accordance with ASC 410-20, Asset Retirement Obligations, or ASC 410-20. Retirement
obligations associated with long-lived assets included within the scope of ASC 410-20 are those for which a legal obligation exists
under enacted laws, statutes, and written or oral contracts, including obligations arising under the doctrine of promissory estoppel,
and for which the timing and/or method of settlement may be conditional on a future event. ASC 410-20 requires an entity to
recognize the fair value of a liability for an ARO in the period in which it is incurred and a reasonable estimate of fair value can
be made.
Upon initial recognition of a liability for an ARO, the Company capitalizes the asset retirement cost by increasing the carrying
amount of the related long-lived asset by the same amount. Over time, the liability is accreted to its future value, while the
capitalized cost is depreciated over the useful life of the related asset. See Note 13, Asset Retirement Obligations, for a further
discussion of AROs.
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Pensions and Other Postretirement Benefits
The Company offers pension benefits through a defined benefit pension plan. In addition, the Company provides
postretirement health and welfare benefits for certain groups of employees. The Company accounts for pension and other
postretirement benefits in accordance with ASC 715, Compensation — Retirement Benefits. The Company recognizes the funded
status of the Company's defined benefit plans in the statement of financial position and records an offset for gains and losses as
well as all prior service costs that have not been included as part of the Company's net periodic benefit cost to other comprehensive
income. The determination of the Company's obligation and expenses for pension benefits is dependent on the selection of certain
assumptions. These assumptions determined by management include the discount rate, the expected rate of return on plan assets
and the rate of future compensation increases. The Company's actuarial consultants determine assumptions for such items as
retirement age. The assumptions used may differ materially from actual results, which may result in a significant impact to the
amount of pension obligation or expense recorded by the Company.
The Company measures the fair value of its pension assets in accordance with ASC 820, Fair Value Measurements and
Disclosures, or ASC 820.
Stock-Based Compensation
The Company accounts for its stock-based compensation in accordance with ASC 718, Compensation — Stock
Compensation, or ASC 718. The fair value of the Company's non-qualified stock options and market stock units are estimated
on the date of grant using the Black-Scholes option-pricing model and the Monte Carlo valuation model, respectively. NRG uses
the Company's common stock price on the date of grant as the fair value of the Company's restricted stock units and deferred stock
units. Forfeiture rates are estimated based on an analysis of the Company's historical forfeitures, employment turnover, and
expected future behavior. The Company recognizes compensation expense for both graded and cliff vesting awards on a straight-
line basis over the requisite service period for the entire award.
Investments Accounted for by the Equity Method
The Company has investments in various domestic energy projects, as well as one Australian project. The equity method
of accounting is applied to such investments in affiliates, which include joint ventures and partnerships, because the ownership
structure prevents the Company from exercising a controlling influence over the operating and financial policies of the projects.
Under this method, equity in pre-tax income or losses of domestic partnerships and, generally, in the net income or losses of its
Australian project, are reflected as equity in earnings of unconsolidated affiliates. For certain investments that relate to tax equity
arrangements, equity earnings are allocated using the hypothetical liquidation at book value, or HLBV, method which is described
below. Distributions from equity method investments that represent earnings on the Company's investment are included within
cash flows from operating activities and distributions from equity method investments that represent a return of the Company's
investment are included within cash flows from investing activities.
Tax Equity Arrangements
The Company’s redeemable noncontrolling interest in subsidiaries and noncontrolling interest, included in stockholders'
equity, represents third-party interests in the net assets under certain tax equity arrangements, which are consolidated by the
Company, that have been entered into to finance the cost of solar energy systems under operating leases and wind facilities eligible
for certain tax credits. The Company has determined that the provisions in the contractual agreements of these structures represent
substantive profit sharing arrangements. Further, the Company has determined that the appropriate methodology for calculating
the noncontrolling interest and redeemable noncontrolling interest that reflects the substantive profit sharing arrangements is a
balance sheet approach utilizing the HLBV method. Under the HLBV method, the amounts reported as noncontrolling interest
and redeemable noncontrolling interests represent the amounts the investors that are party to the tax equity arrangements would
hypothetically receive at each balance sheet date under the liquidation provisions of the contractual agreements, assuming the net
assets of the funding structures were liquidated at their recorded amounts determined in accordance with GAAP. The investors’
interests in the results of operations of the funding structures are determined as the difference in noncontrolling interest and
redeemable noncontrolling interests at the start and end of each reporting period, after taking into account any capital transactions
between the structures and the funds’ investors. The calculations utilized to apply the HLBV method include estimated calculations
of taxable income or losses for each reporting period.
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Redeemable Noncontrolling Interest
To the extent that the third-party has the right to redeem their interests for cash or other assets, the Company has included
the noncontrolling interest attributable to the third party as a component of temporary equity in the mezzanine section of the
consolidated balance sheet. The following table reflects the changes in the Company's redeemable noncontrolling interest balance
for the years ended December 31, 2016, 2015, and 2014.
Balance as of December 31, 2013
Cash contributions from redeemable noncontrolling interest
Comprehensive loss attributable to redeemable noncontrolling interest
Balance as of December 31, 2014
Cash contributions from redeemable noncontrolling interest
Comprehensive loss attributable to redeemable noncontrolling interest
Balance as of December 31, 2015
Distributions to redeemable noncontrolling interest
Contributions from redeemable noncontrolling interest
Comprehensive loss attributable to redeemable noncontrolling interest
Balance as of December 31, 2016
Sale-Leaseback Arrangements
(In millions)
$
$
2
36
(19)
19
27
(17)
29
(1)
56
(38)
46
NRG is party to sale-leaseback arrangements that provide for the sale of certain assets to a third party and simultaneous
leaseback to the Company. In accordance with ASC 840-40, Sale-Leaseback Transactions, if the seller-lessee retains, through the
leaseback, substantially all of the benefits and risks incident to the ownership of the property sold, the sale-leaseback transaction
is accounted for as a financing arrangement. An example of this type of continuing involvement would include an option to
repurchase the assets or the buyer-lessor having the option to sell the assets back to the Company. This provision is included in
most of the Company’s sale-leaseback arrangements. As such, the Company accounts for these arrangements as financings.
Under the financing method, the Company does not recognize as income any of the sale proceeds received from the lessor
that contractually constitutes payment to acquire the assets subject to these arrangements. Instead, the sale proceeds received are
accounted for as financing obligations and leaseback payments made by the Company are allocated between interest expense and
as a reduction to the financing obligation. Interest on the financing obligation is calculated using the Company’s incremental
borrowing rate at the inception of the arrangement on the outstanding financing obligation. Judgment is required to determine
the appropriate borrowing rate for the arrangement and in determining any gain or loss on the transaction that would be recorded
either at the end of or over the lease term.
Marketing and Advertising Costs
The Company expenses its marketing and advertising costs as incurred and which are included within selling, general and
administrative expenses. Marketing and advertising expenses for the years ended December 31, 2016, 2015, and 2014 were $247
million, $307 million, and $208 million, respectively. The costs of tangible assets used in advertising campaigns are recorded as
fixed assets or deferred advertising costs and amortized as advertising costs over the shorter of the useful life of the asset or the
advertising campaign. The Company has several long-term sponsorship arrangements. Payments related to these arrangements
are deferred and expensed over the term of the arrangement. Advertising expenses for the years ended December 31, 2016, 2015
and 2014 were $53 million, $135 million, and $87 million, respectively.
Business Combinations
The Company accounts for its business combinations in accordance with ASC 805, Business Combinations, or ASC 805.
ASC 805 requires an acquirer to recognize and measure in its financial statements the identifiable assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree at fair value at the acquisition date. It also recognizes and measures the
goodwill acquired or a gain from a bargain purchase in the business combination and determines what information to disclose to
enable users of an entity's financial statements to evaluate the nature and financial effects of the business combination. In addition,
transaction costs are expensed as incurred.
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Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of
the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
In recording transactions and balances resulting from business operations, the Company uses estimates based on the best
information available. Estimates are used for such items as plant depreciable lives, tax provisions, uncollectible accounts, actuarially
determined benefit costs, the valuation of energy commodity contracts, environmental liabilities, legal costs incurred in connection
with recorded loss contingencies, and assets acquired and liabilities assumed in business combinations, among others. In addition,
estimates are used to test long-lived assets and goodwill for impairment and to determine the fair value of impaired assets. As
better information becomes available or actual amounts are determinable, the recorded estimates are revised. Consequently,
operating results can be affected by revisions to prior accounting estimates.
Reclassifications
Certain prior-year amounts have been reclassified for comparative purposes. The reclassifications did not affect results from
operations, net assets or cash flows.
Recent Accounting Developments
ASU 2017-04 - In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350),
Simplifying the Test for Goodwill Impairment, or ASU No. 2017-04. The amendments of ASU No. 2017-04 aim at simplifying
the subsequent measurement of goodwill. As a result, ASU No. 2017-04 eliminates Step 2 from the goodwill impairment test
which previously required an entity to determine the fair value at the impairment testing date of the assets and liabilities following
the procedures which would be required in determining the fair value of assets acquired and liabilities assumed under a business
combination. Under ASU No. 2017-04, an entity shall perform its goodwill impairment test by comparing the fair value of the
reporting unit with its carrying amount and recognize an impairment charge for the amount the carrying amount exceeds the
reporting unit’s fair value. The amendments of ASU No. 2017-04 are effective for annual reporting periods beginning after
December 15, 2019, and interim periods within those annual periods. Early adoption is permitted for interim or annual goodwill
impairment tests performed on testing dates after January 1, 2017 and the adoption should be applied prospectively.
ASU 2016-18 — In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230), Restricted
Cash, or ASU No. 2016-18. The amendments of ASU No. 2016-18 were issued to address the diversity in classification and
presentation of changes in restricted cash and restricted cash equivalents on the statement of cash flows which is currently not
addressed under Topic 230. The amendments of ASU No. 2016-18 would require an entity to include amounts generally described
as restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning of period and end
of period total amounts on the statement of cash flows. The amendments of ASU No. 2016-18 are effective for annual reporting
periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted and the
adoption of ASU No. 2016-18 should be applied retrospectively. The Company is currently evaluating the impact of the standard
on the Company’s statement of cash flows.
ASU 2016-16 — In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740), Intra-Entity Transfers of
Assets Other Than Inventory, or ASU No. 2016-16. The amendments of ASU No. 2016-16 were issued to improve the accounting
for the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition
of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party which has
resulted in diversity in practice and increased complexity within financial reporting. The amendments of ASU No. 2016-16 would
require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the
transfer occurs and do not require new disclosure requirements. The amendments of ASU No. 2016-16 are effective for annual
reporting periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted
and the adoption of ASU No. 2016-16 should be applied on a modified retrospective basis through a cumulative-effect adjustment
directly to retained earnings as of the beginning of the period of adoption. The Company is currently evaluating the impact of the
standard on the Company’s results of operations, cash flows and financial position.
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ASU 2016-15 — In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230), Classification
of Certain Cash Receipts and Cash Payments, or ASU No. 2016-15. The amendments of ASU No. 2016-15 were issued to address
eight specific cash flow issues for which stakeholders have indicated to the FASB that a diversity in practice existed in how entities
were presenting and classifying these items in the statement of cash flows. The issues addressed by ASU No. 2016-15 include
but are not limited to the classification of debt prepayment and debt extinguishment costs, payments made for contingent
consideration for a business combination, proceeds from the settlement of insurance proceeds, distributions received from equity
method investees and separately identifiable cash flows and the application of the predominance principle. The amendments of
ASU No. 2016-15 are effective for public entities for fiscal years beginning after December 15, 2017 and interim periods in those
fiscal years. Early adoption is permitted, including adoption in an interim fiscal period with all amendments adopted in the same
period. The adoption of ASU No. 2016-15 is required to be applied retrospectively. The Company is currently evaluating the
impact of the standard on the Company's statement of cash flows.
ASU 2016-09 — In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718), or
ASU No. 2016-09. The amendments of ASU No. 2016-09 were issued as part of the FASB's Simplification Initiative focused on
improving areas of GAAP for which cost and complexity may be reduced while maintaining or improving the usefulness of
information disclosed within the financial statements. The amendments focused on simplification specifically with regard to
share-based payment transactions, including income tax consequences, classification of awards as equity or liabilities and
classification on the statement of cash flows. The guidance in ASU No. 2016-09 is effective for fiscal years beginning after
December 15, 2016, and interim periods within those annual periods. The Company adopted this standard effective January 1,
2017. The adoption of this standard will not have a material impact on the Company's results of operations, cash flows and financial
position.
ASU 2016-07 — In March 2016, the FASB issued ASU No. 2016-07, Investments - Equity Method and Joint Ventures (Topic
323), or ASU No. 2016-07. The amendments of ASU No. 2016-07 eliminate the requirement that when an investment qualifies
for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must
adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had
been in effect during all previous periods that the investment had been held. The amendments require that the equity method
investor add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held interest
and adopt the equity method of accounting with no retroactive adjustment to the investment. In addition, ASU No. 2016-07
requires that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting
recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the
investment becomes qualified for use of the equity method. The guidance in ASU No. 2016-07 is effective for fiscal years beginning
after December 15, 2016, and interim periods within those annual periods. The Company adopted this standard effective January
1, 2017. The adoption of ASU No. 2016-07 is required to be applied prospectively. The adoption of this standard will not have a
material impact on the Company's results of operations, cash flows and financial position.
ASU 2016-02 — In 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 expects to adopt the standard effective January 1, 2019 utilizing the required modified
retrospective approach for the earliest period presented. The Company 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. As this review is still in process, it is currently not practicable to quantify the impact of
adopting the ASU at this time.
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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) to 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 to 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 is currently evaluating the impact of the standard on the
Company's results of operations, cash flows and financial position.
ASU 2015-16 — In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying
the Accounting for Measurement-Period Adjustments, or ASU No. 2015-16. The amendments of ASU No. 2015-16 require that
an acquirer recognize measurement period adjustments to the provisional amounts recognized in a business combination in the
reporting period during which the adjustments are determined. Additionally, the amendments of ASU No. 2015-16 require the
acquirer to record in the same period's financial statements the effect on earnings of changes in depreciation, amortization or other
income effects, if any, as a result of the measurement period adjustment, calculated as if the accounting had been completed at the
acquisition date as well as disclosing either on the face of the income statement or in the notes the portion of the amount recorded
in current period earnings that would have been recorded in previous reporting periods. The guidance in ASU No. 2015-16 is
effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal
years. The amendments should be applied prospectively. The Company adopted ASU No. 2015-16 for the year ended December
31, 2016, and the adoption did not have a material impact on the Company's results of operations, cash flows and financial position.
ASU 2014-15 — In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern
(Subtopic 205-40): Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern, which requires
management to evaluate whether there are conditions and events that raise substantial doubt about an entity's ability to continue
as a going concern within one year after the financial statements are available to be issued. The Company adopted this ASU
effective January 1, 2016.
ASU 2014-09 — In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606),
or ASU No. 2014-09, which was further amended through various updates issued by the FASB thereafter. The amendments of
ASU No. 2014-09 completed the joint effort between the FASB and the IASB, to develop a common revenue standard for GAAP
and IFRS, and to improve financial reporting. The guidance under Topic 606 provides that an entity should recognize revenue to
depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be
entitled to in exchange for the goods or services provided and establishes a five step model to be applied by an entity in evaluating
its contracts with customers. The Company expects to adopt the standard effective January 1, 2018 and apply the guidance
retrospectively to contracts at the date of adoption. The Company will recognize the cumulative effect of applying Topic 606 at
the date of initial application, as prescribed under the modified retrospective transition method. The Company also expects to elect
the practical expedient available under Topic 606 for measuring progress toward complete satisfaction of a performance obligation
and for disclosure requirements of remaining performance obligations. The practical expedient allows an entity to recognize
revenue in the amount to which the entity has the right to invoice such that the entity has a right to the consideration in an amount
that corresponds directly with the value to the customer for performance completed to date by the entity. In 2016, the Company
continued to assess the new standard with a focus on identifying the performance obligations included within its revenue
arrangements with customers and evaluating the Company’s methods of estimating the amount and timing of variable consideration.
Based on the assessment to date, the Company is currently evaluating the impact of the new standard on the Company’s results
of operations, financial position or cash flows.
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Note 3 — Business Acquisitions and Dispositions
The Company has completed the following business acquisitions and dispositions that are material to the Company's financial
statements:
Acquisitions
2016 Utility-Scale Solar and Wind Acquisition
On November 2, 2016, the Company acquired equity interests in a tax equity portfolio from SunEdison, located in Utah,
comprised of 530 MW of mechanically-complete solar assets, of which NRG’s net interest based on cash to be distributed is 265 MW,
for upfront cash consideration of $111 million. In connection with the acquisition, the Company assumed non-recourse debt of $222
million. The Company also borrowed additional amounts of $65 million during the fourth quarter of 2016, as described in Note 12,
Debt and Capital Leases, which effectively reduced the Company's use of liquidity related to the acquisition. The Company does not
have a controlling interest in the tax equity portfolio and, accordingly, its interest is recorded as an equity method investment. The
purchase price was preliminarily allocated to the equity method investment balance of approximately $328 million, current assets of
$5 million and the assumed non-recourse debt of $222 million. The assets reached commercial operations during the fourth quarter
of 2016 and have 20-year PPAs with PacificCorp.
The Company acquired a 110 MW portfolio of construction-ready and 71 MW of development solar assets in Hawaii from
SunEdison for upfront cash consideration of $2 million on October 3, 2016 and a 154 MW construction-ready solar project in Texas
for upfront cash consideration of $11 million on November 9, 2016.
In addition to the total $124 million in upfront cash consideration paid for the above acquisitions, the Company expects to make
an estimated $59 million in additional payments contingent upon future development milestones.
2016 Solar Distributed Generation Acquisition
On October 3, 2016, the Company acquired a 29 MW portfolio of mechanically-complete and construction-ready distributed
generation solar assets from SunEdison for cash consideration of approximately $67 million excluding post-closing adjustments which
reduced the purchase price by $5 million. Subsequent to the acquisition, the Company sold the majority of these assets into a tax-
equity financed portfolio within the DGPV Holdco partnership between NRG and NRG Yield, Inc., and expects to sell the remaining
assets into a similar portfolio in 2017. The purchase price was preliminarily allocated to $47 million in construction in progress and
$15 million in intangible assets.
2015 Acquisition of Desert Sunlight
On June 29, 2015, NRG Yield, Inc., through its subsidiary NRG Yield Operating LLC, acquired 25% of the membership interest
in Desert Sunlight Investment Holdings, LLC, which owns two solar photovoltaic facilities that total 550 MW located in Desert
Center, California from EFS Desert Sun, LLC, an affiliate of GE Energy Financial Services, for a purchase price of $285 million.
The Company accounts for its 25% investment as an equity method investment.
2014 Acquisition of Alta Wind
On August 12, 2014, NRG Yield, Inc., through its subsidiary NRG Yield Operating LLC, or Yield Operating, completed the
acquisition of 100% of the membership interests of Alta Wind Asset Management Holdings, LLC, Alta Wind Company, LLC, Alta
Wind X Holding Company, LLC, and Alta Wind XI Holding Company, LLC, which collectively own seven wind facilities that total
947 MW located in Tehachapi, California and a portfolio of land leases, or the Alta Wind Assets. Power generated by the Alta Wind
facility is sold to Southern California Edison under long-term power purchase agreements with 21 years of remaining contract life
for Alta I-V. The Alta X and XI power purchase agreements began in January 2016 with terms of 22 years and sold energy and
renewable energy credits on a merchant basis during the years ended December 31, 2015 and 2014.
The purchase price of the Alta Wind Assets was $923 million, which was comprised of a purchase price of $870 million and
$53 million paid for working capital balances. In order to fund the purchase price of the acquisition, NRG Yield, Inc. issued 12,075,000
shares of its Class A common stock on July 29, 2014 for net proceeds of $630 million. In addition, on August 5, 2014, Yield Operating
issued $500 million in aggregate principal amount at par of 5.375% senior notes due August 2024. Interest on the notes is payable
semi-annually on February 15 and August 15 of each year, and commenced on February 15, 2015. The notes are senior unsecured
obligations of Yield Operating and are guaranteed by NRG Yield LLC, Yield Operating’s parent company, and by certain of Yield
Operating’s wholly owned subsidiaries.
154
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The acquisition was recorded as a business combination under ASC 805, with identifiable assets acquired and liabilities assumed
provisionally recorded at their estimated fair values on the acquisition date. The accounting for the business combination was completed
as of August 11, 2015, at which point the fair values became final. The following table summarizes the provisional amounts recognized
for assets acquired and liabilities assumed as of December 31, 2014, as well as adjustments made through August 11, 2015, when the
allocation became final. The purchase price of $923 million was allocated as follows:
Assets
Cash
Current and non-current assets
Property, plant and equipment
Intangible assets
Total assets acquired
Liabilities
Debt
Current and non-current liabilities
Total liabilities assumed
Net assets acquired
Acquisition Date
Fair Value at
December 31, 2014
Measurement
period
adjustments
Revised
Acquisition Date
(In millions)
$
$
22
49
1,304
1,177
2,552
1,591
38
1,629
923
$
— $
(2)
6
(6)
(2)
—
(2)
(2)
— $
22
47
1,310
1,171
2,550
1,591
36
1,627
923
2014 Acquisition of Dominion's Competitive Electric Retail Business
On March 31, 2014, the Company acquired the competitive retail electricity business of Dominion Resources, Inc., or Dominion.
The acquisition of Dominion's competitive retail electricity business increased NRG’s retail portfolio by approximately 540,000
customers in the aggregate by the end of 2014. The acquisition supports NRG's ongoing efforts to expand the Company's retail
footprint in the Northeast and to grow its retail position in Texas. The Company paid approximately $192 million as cash consideration
for the acquisition, including $165 million of purchase price and $27 million paid for working capital balances, which was funded
by cash on hand. The purchase price was allocated to the following: $40 million to accounts receivable-trade, $64 million to customer
relationships, $9 million to trade names, $14 million to current assets, $21 million to derivative assets, $47 million to current and
non-current liabilities, and goodwill of $91 million of which $8 million is deductible for U.S. income tax purposes in future periods.
The consideration and assets include amounts paid for customer relationships in the Northeast that were accounted for as an asset
acquisition. The factors that resulted in goodwill arising from the acquisition include the revenues associated with new customers in
new regions and through the synergies associated with combining a new retail business with the Company's existing retail and
generation assets. The accounting for the Dominion acquisition was completed as of March 30, 2015, at which point the provisional
fair values became final with no material changes.
2014 Acquisition of EME
On April 1, 2014, the Company acquired substantially all of the assets of EME. EME, through its subsidiaries and affiliates,
owned or leased and operated a portfolio of approximately 8,000 MW consisting of wind energy facilities and coal- and gas-fired
generating facilities. The Company paid an aggregate purchase price of $3.5 billion, which was funded through the issuance of
12,671,977 shares of NRG common stock on April 1, 2014, the issuance of $700 million in newly-issued corporate debt, as described
in Note 12, Debt and Capital Leases, and cash on hand. The Company also assumed non-recourse debt of approximately $1.2 billion.
In connection with the transaction, NRG agreed to certain conditions with the parties to the Powerton and Joliet, or POJO, sale-
leaseback transaction subject to which an NRG subsidiary assumed the POJO leveraged leases and NRG guaranteed the remaining
payments under each lease, which total $405 million through 2034.
On April 30, 2014, subsequent to the acquisition, the Company acquired the remaining 50% ownership of Mission Del Sol LLC,
which owns the Sunrise facility, a 586 MW natural gas facility in Fellows, California, from Chevron Power Holdings Inc. increasing
the Company's ownership interest to 100% in exchange for the Company's 50% interest in six cogeneration facilities, previously co-
owned with Chevron Power Holdings Inc.
155
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The acquisition was recorded as a business combination under ASC 805, with identifiable assets acquired and liabilities assumed
provisionally recorded at their estimated fair values on the acquisition date. The accounting for the EME acquisition was completed
as of March 31, 2015, at which point the fair values became final. The following table summarizes the provisional amounts recognized
for assets acquired and liabilities assumed as of December 31, 2014, as well as adjustments made through March 31, 2015, when the
allocation became final. Measurement period adjustments primarily reflect the tax impact of the acquisition date fair values and final
estimates for asset retirement obligations. The purchase price of $3.5 billion was allocated as follows:
Assets
Cash
Current assets
Property, plant and equipment
Intangible assets
Goodwill
Non-current assets
Total assets acquired
Liabilities
Current and non-current liabilities
Out-of-market contracts and leases
Long-term debt
Total liabilities assumed
Less: noncontrolling interest
Net assets acquired
Dispositions
2016 Potrero Disposition
Acquisition Date
Fair Value at
December 31,
2014
Measurement period
adjustments
Revised
Acquisition Date
(In millions)
$
$
1,422
724
2,438
172
334
773
5,863
629
159
1,249
2,037
352
3,474
$
$
— $
72
(3)
—
(56)
—
13
13
—
—
13
—
— $
1,422
796
2,435
172
278
773
5,876
642
159
1,249
2,050
352
3,474
On September 26, 2016, NRG Potrero LLC, or Potrero, an indirect wholly owned subsidiary of GenOn Americas Generation,
completed the sale of real property at the Potrero generating station located in San Francisco, CA to California Barrel Company, LLC
for total consideration of $86 million, consisting of $74 million of cash received, which is net of $8 million of closing costs and $4
million to be held in escrow in order to cover post-closing obligations. This transaction resulted in a gain on sale of $74 million.
2016 Disposition of Majority Interest in EVgo
On June 17, 2016, the Company completed the sale of a majority interest in its EVgo business to Vision Ridge Partners for total
consideration of approximately $39 million, including $17 million in cash received, which is net of $2.5 million in working capital
adjustments, $15 million contributed as capital to the EVgo business and $7 million of future contributions by Vision Ridge Partners,
all of which were determined based on forecasted cash requirements to operate the business in future periods. In addition, the Company
has future earnout potential of up to $70 million based on future profitability targets. NRG retained its original financial obligation
of $102.5 million under its agreement with the CPUC whereby EVgo will build at least 200 public fast charging Freedom Station
sites and perform the associated work to prepare 10,000 commercial and multi-family parking spaces for electric vehicle charging in
California. NRG has contracted with EVgo to continue to build the remaining required Freedom Stations and commercial and multi-
family parking spaces for electric vehicle charging required under this obligation and EVgo will be directly reimbursed by NRG for
the costs. As a result of the sale, the Company recorded a loss on sale of $78 million during the second quarter of 2016, which reflects
the loss on the sale of the equity interest of $27 million and the accrual of NRG's remaining obligation under its agreement with the
CPUC of $56 million, of which $47 million remains as of December 31, 2016. At December 31, 2016, the Company's remaining
35% interest in EVgo of $5 million was accounted for as an equity method investment.
156
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 156
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2016 Rockford Disposition
On May 12, 2016, the Company entered into an agreement with RA Generation, LLC to sell 100% of its interests in the Rockford
I and Rockford II generating stations, or Rockford, for cash consideration of $55 million, subject to adjustments for working capital
and the results of the PJM 2019/2020 base residual auction. Rockford is a 450 MW natural gas facility located in Rockford, Illinois.
The transaction triggered an indicator of impairment as the sales price was less than the carrying amount of the assets and as a result,
the assets were considered to be impaired. The Company measured the impairment loss as the difference between the carrying amount
of the assets and the agreed-upon sales price. The Company recorded an impairment loss of $17 million during the quarter ended
June 30, 2016 to reduce the carrying amount of the assets held for sale to the fair market value. On July 12, 2016, the Company
completed the sale of Rockford for cash proceeds of $56 million, including $1 million in adjustments for the PJM base residual auction
results. For further discussion on this impairment, refer to Note 10, Asset Impairments.
2016 Aurora Disposition
On May 12, 2016, GenOn entered into an agreement with RA Generation, LLC to sell the Aurora Generating Station, or Aurora,
for cash consideration of $365 million, subject to adjustments for working capital and the results of the PJM 2019/2020 base residual
auction. Aurora is an 878 MW natural gas facility located in Aurora, Illinois. On July 12, 2016, GenOn completed the sale of Aurora
for cash proceeds of $369 million, including $4 million in adjustments for the PJM base residual auction results and estimated working
capital, which is subject to further adjustment. The Company recorded a gain of approximately $188 million recognized within the
Company's consolidated results of operations during the quarter ended September 30, 2016.
2016 Seward Disposition
On November 24, 2015, GenOn entered into an agreement with Seward Generation, LLC and an affiliate of Robindale Energy
Services, Inc. to sell the Seward Generating Station, a 525 MW coal-fired facility in Pennsylvania, for cash consideration of $75
million. At December 31, 2015, GenOn had classified on its balance sheet the assets and liabilities of Seward as held for sale. On
February 2, 2016, GenOn completed the sale of Seward and received gross cash proceeds of $75 million, excluding $3 million cash
on hand transferred to the buyer. GenOn will also receive $5 million in deferred cash consideration in five $1 million annual installments
and up to $2.5 million in payments contingent upon certain environmental requirements being imposed by August 2017. In addition,
Robindale committed to future inventory purchases from GenOn of $13 million through 2019.
2016 Shelby Disposition
On November 9, 2015, GenOn entered into an agreement with an affiliate of Rockland Power Partners II, LP to sell the Shelby
Generating Station, a 352 MW natural gas-fired facility located in Illinois for cash consideration of $46 million. At December 31,
2015, GenOn had classified on its balance sheet the assets and liabilities of Shelby as held for sale. On March 1, 2016, GenOn
completed the sale of Shelby for cash proceeds of $46 million, which resulted in a gain of $29 million recognized during the first
quarter of 2016. In addition, GenOn retained $10 million related to future revenue rights retained as part of the agreement of which
$8 million had been received as of December 31, 2016.
2015 Disposition of Altenex
On December 31, 2015, the Company completed the sale of its 32% interest in Altenex, LLC to Edison Energy, LLC and Edison
Energy NewCo 2, LLC for cash consideration of $26 million. The Company had accounted for its investment in Altenex as an equity
method investment and recognized a loss of $14 million as a result of the transactions within the Company's consolidated statements
of operations.
2014 Sale of Sabine
On December 2, 2014, the Company, through its subsidiaries GenOn Sabine (Delaware), Inc. and GenOn Sabine (Texas), Inc.,
completed the sale of its 50% interest in Sabine Cogen, L.P., or Sabine, to Bayou Power, LLC, an affiliate of Rockland Capital, LLC.
Sabine owns a 105 MW natural gas-fired cogeneration facility located in Texas. The Company received cash consideration of $35
million at closing. A gain of $18 million was recognized as a result of the transaction and recorded as a gain on sale of equity method
investments within the Company's consolidated statements of operations.
157
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2014 Disposition of 50% Interest in Petra Nova Parish Holdings LLC
On July 3, 2014, the Company, through its wholly owned subsidiary Petra Nova Holdings LLC, sold 50% of its interest in Petra
Nova Parish Holdings LLC to JX Nippon Oil Exploration (EOR) Limited, or JX Nippon, a wholly owned subsidiary of JX Nippon
Oil & Gas Exploration Corporation. As a result of the sale, the Company no longer has a controlling interest in and has deconsolidated
Petra Nova Parish Holdings LLC as of the date of the sale. On July 7, 2014, the Company made its initial capital contribution into
the partnership of $35 million, which was funded with a portion of the sale proceeds of $76 million. On March 3, 2014, Petra Nova
CCS I LLC, a wholly owned subsidiary of Petra Nova Parish Holdings LLC, entered into a fixed-price agreement to build and operate
a CCF at the W.A. Parish facility with a consortium of Mitsubishi Heavy Industries America, Inc. and TIC - The Industrial Company.
Notice to proceed for the construction on the CCF was issued on July 15, 2014, and commercial operation began in late 2016.
Petra Nova Parish Holdings LLC also owns a 75 MW peaking unit at W.A. Parish, which achieved commercial operations on
June 26, 2013. The peaking unit will be converted into a cogeneration facility to provide power and steam to the CCF. The CCF is
being financed by: (i) up to $167 million from a U.S. DOE CCPI grant of which $7 million has already been received from the grant
in the initial design and engineering phase and $106 million has already been received from the grant under the construction phase,
(ii) $250 million in loans provided by the Japan Bank for International Cooperation and Mizuho Bank, Ltd., and (iii) approximately
$300 million in equity contributions from each of the Company and JX Nippon. The Company’s contribution will include investments
already made during the development of the project. In February 2016, Petra Nova Parish Holdings LLC received notice of an
additional $23 million in U.S. DOE funding.
On July 14, 2014, Petra Nova Parish Holdings LLC entered into two credit facilities, or the Petra Nova Parish Credit Agreements,
to fund the cost of construction of the CCF at the W.A. Parish facility. The Petra Nova Parish Credit Agreements are comprised of a
$75 million Nippon Export and Investment Insurance, or NEXI, covered loan and a $175 million Japan Bank for International
Cooperation, or JBIC, facility. The NEXI covered loan has an interest rate of LIBOR plus an applicable margin of 1.75% and the
JBIC facility has an interest rate of LIBOR plus an applicable margin of 0.50% during the construction phase which escalates to an
applicable margin of 1.50% upon completion of the CCF. Both credit facilities mature in April 2026. NRG has guaranteed its 50%
share of the obligations under the Petra Nova Parish Credit Agreements through mechanical completion as defined by the credit
agreements.
Transfer of Assets under Common Control
On September 1, 2016, the Company completed the sale of its remaining 51.05% interest in the CVSR project to NRG Yield,
Inc. for total cash consideration of $78.5 million, plus an immaterial working capital adjustment. In addition, NRG Yield, Inc. assumed
non-recourse project level debt of $496 million.
On November 3, 2015, the Company sold 75% of the Class B interests of NRG Wind TE Holdco, which owns a portfolio of 12
wind facilities totaling 814 net MW, to NRG Yield, Inc. NRG Yield, Inc. paid total cash consideration of $209 million, subject to
working capital adjustments. NRG Yield, Inc. is responsible for its pro-rata share of non-recourse project debt of $193 million and
noncontrolling interest associated with a tax equity structure of $159 million (as of the acquisition date). In February 2016, the
Company made a final working capital payment of $2 million to NRG Yield, Inc. reducing total cash consideration to $207 million.
On January 2, 2015, the Company sold the following facilities to NRG Yield, Inc.: Walnut Creek, the Tapestry projects (Buffalo
Bear, Pinnacle and Taloga) and Laredo Ridge. NRG Yield, Inc. paid total cash consideration of $489 million, including $9 million
of working capital adjustments, plus assumed project level debt of $737 million.
On June 30, 2014, the Company sold the following facilities to NRG Yield, Inc.: High Desert, Kansas South, and El Segundo
Energy Center. NRG Yield, Inc. paid total cash consideration of $357 million, which represents a base purchase price of $349 million
and $8 million of working capital adjustments, plus assumed project level debt of approximately $612 million.
The above sales were recorded as transfers of entities under common control and the related assets were transferred at their
carrying value.
158
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Note 4 — Fair Value of Financial Instruments
For cash and cash equivalents, funds deposited by counterparties, accounts and other receivables, accounts payable, restricted
cash, and cash collateral posted 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 values and fair values of the Company's recorded financial instruments not carried at fair market
value are as follows:
Assets
Notes receivable (a)
Liabilities
Long-term debt, including current portion (b)
As of December 31,
2016
2015
Carrying Amount
Fair Value
Carrying Amount
Fair Value
(In millions)
$
$
34
19,406
$
$
34
18,566
$
$
73
19,620
$
$
73
18,263
(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 December 31, 2016 and 2015:
Long-term debt, including current portion
$
11,055
$
(In millions)
$
7,511
11,028
$
7,235
As of December 31, 2016
As of December 31, 2015
Level 2
Level 3
Level 2
Level 3
Fair Value Accounting under ASC 820
ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into
three levels as follows:
• Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability
to access as of the measurement date. NRG's financial assets and liabilities utilizing Level 1 inputs include active exchange-
traded securities, energy derivatives, and trust fund investments.
• Level 2 — inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability
or indirectly observable through corroboration with observable market data. NRG's financial assets and liabilities utilizing
Level 2 inputs include fixed income securities, exchange-based derivatives, and over the counter derivatives such as
swaps, options and forward contracts.
• Level 3 — unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset
or liability at the measurement date. NRG's financial assets and liabilities utilizing Level 3 inputs include infrequently-
traded, non-exchange-based derivatives and commingled investment funds, and are measured using present value pricing
models.
In accordance with ASC 820, the Company determines the level in the fair value hierarchy within which each fair value
measurement in its entirety falls, based on the lowest level input that is significant to the fair value measurement in its entirety.
159
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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 consolidated balance
sheets on a recurring basis and their level within the fair value hierarchy:
Investments in securities (classified within other non-current assets):
Debt securities
Available-for-sale securities
Other (a)
Nuclear trust fund investments:
Cash and cash equivalents
U.S. government and federal agency obligations
Federal agency mortgage-backed securities
Commercial mortgage-backed securities
Corporate debt securities
Equity securities
Foreign government fixed income securities
Other trust fund investments:
U.S. government and federal agency obligations
Derivative assets:
Commodity contracts
Interest rate contracts
Total assets
Derivative liabilities:
Commodity contracts
Interest rate contracts
Total liabilities
As of December 31, 2016
Fair Value
Level 1
Level 2
Level 3
Total
(In millions)
$
— $
10
10
— $
—
—
25
72
—
—
—
292
—
1
559
—
969
494
—
494
$
$
$
—
1
62
17
84
—
3
—
551
49
767
635
88
723
$
$
$
$
$
$
17
—
—
—
—
—
—
—
54
—
—
92
—
163
161
—
161
$
$
$
$
17
10
10
25
73
62
17
84
346
3
1
1,202
49
1,899
1,290
88
1,378
(a) Consists primarily of mutual funds held in a rabbi trust for non-qualified deferred compensation plans for certain key and highly compensated employees
and a total return swap that does not meet the definition of a derivative.
160
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Investments in securities (classified within other non-current assets):
Debt securities
Available-for-sale securities
Other (a)
Nuclear trust fund investments:
Cash and cash equivalents
U.S. government and federal agency obligations
Federal agency mortgage-backed securities
Commercial mortgage-backed securities
Corporate debt securities
Equity securities
Foreign government fixed income securities
Other trust fund investments:
U.S. government and federal agency obligations
Derivative assets:
Commodity contracts
Total assets
Derivative liabilities:
Commodity contracts
Interest rate contracts
Total liabilities
As of December 31, 2015
Fair Value
Level 1
Level 2
Level 3
Total
(In millions)
— $
—
—
—
1
59
25
81
—
1
—
$
17
—
—
—
—
—
—
—
54
—
—
17
9
14
6
55
59
25
81
334
1
1
1,449
1,616
1,036
128
1,164
$
$
$
$
$
$
149
220
182
—
182
$
$
$
2,220
2,822
2,086
128
2,214
$
— $
9
14
6
54
—
—
—
280
—
1
622
986
868
—
868
$
$
$
(a) Primarily consists of mutual funds held in a rabbi trusts for non-qualified deferred compensation plans for certain former employees and a total return
swap that does not meet the definition of a derivative.
There have been no transfers during the year ended December 31, 2016 between Levels 1 and 2. The following tables
reconcile, for the years ended December 31, 2016 and 2015, the beginning and ending balances for financial instruments that are
recognized at fair value in the consolidated financial statements at least annually using significant unobservable inputs:
For the Year Ended December 31, 2016
Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
Debt
Securities
Trust Fund
Investments
Derivatives (a)
Total
Beginning balance as of January 1, 2016
$
17
$
Total gains/(losses) realized/unrealized:
Included in earnings
Included in nuclear decommissioning obligations
Purchases
Transfers into Level 3 (b)
Transfers out of Level 3 (b)
Ending balance as of December 31, 2016
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 December 31, 2016
$
$
(a) Consists of derivatives assets and liabilities, net.
(In millions)
$
54
—
(1)
1
—
—
54
$
(33) $
12
—
(29)
(18)
(1)
(69) $
38
12
(1)
(28)
(18)
(1)
2
—
—
—
—
—
17
$
— $
— $
(14) $
(14)
(b) Transfers in/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.
161
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 161
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For the Year Ended December 31, 2015
Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
Debt
Securities
Other
Trust Fund
Investments
Derivatives (a)
Total
Beginning balance as of January 1, 2015
$
18
$
11
(In millions)
52
$
$
80
$
161
Total losses realized/unrealized:
Included in earnings
Included in nuclear decommissioning obligations
Purchases
Transfers into Level 3 (b)
Transfer out of Level 3 (b)
Ending balance as of December 31, 2015
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 December 31, 2015
$
$
(1)
—
—
—
—
17
(11)
—
—
—
—
$
— $
—
(2)
4
—
—
54
(100)
—
(19)
3
3
(33) $
$
(112)
(2)
(15)
3
3
38
— $
— $
— $
(30) $
(30)
(a) Consists of derivatives assets and liabilities, net.
(b) Transfers in/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.
Realized and unrealized gains and losses included in earnings that are related to the energy derivatives are recorded in
operating revenues and cost of operations.
Non-derivative fair value measurements
NRG's investments in debt securities are classified as Level 3 and consist of non-traded debt instruments that are valued
based on third-party market value assessments.
The trust fund investments are held primarily to satisfy NRG's nuclear decommissioning obligations. These trust fund
investments hold debt and equity securities directly and equity securities indirectly through commingled funds. The fair values
of equity securities held directly by the trust funds are based on quoted prices in active markets and are categorized in Level 1.
In addition, U.S. government and federal agency obligations are categorized as Level 1 because they trade in a highly liquid and
transparent market. The fair values of corporate debt securities are based on evaluated prices that reflect observable market
information, such as actual trade information of similar securities, adjusted for observable differences and are categorized in
Level 2. Certain equity securities, classified as commingled funds, are analogous to mutual funds, are maintained by investment
companies, and hold certain investments in accordance with a stated set of fund objectives. The fair value of the equity securities
classified as commingled funds are based on net asset values per fund share (the unit of account), derived from the quoted prices
in active markets of the underlying equity securities. However, because the shares in the commingled funds are not publicly
quoted, not traded in an active market and are subject to certain restrictions regarding their purchase and sale, the commingled
funds are categorized in Level 3. See also Note 6, Nuclear Decommissioning Trust Fund.
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Derivative fair value measurements
A portion of the Company'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. For the majority of NRG markets, the Company receives
quotes from multiple sources. To the extent that NRG receives multiple quotes, the Company's prices reflect the average of the
bid-ask mid-point prices obtained from all sources that NRG believes provide the most liquid market for the commodity. If the
Company receives one quote, then the mid-point of the bid-ask spread for that quote is used. The terms for which such price
information is available vary by commodity, region and product. A significant portion of the fair value of the Company's derivative
portfolio is based on price quotes from brokers in active markets who regularly facilitate those transactions and the Company
believes such price quotes are executable. The Company does not use third party sources that derive price based on proprietary
models or market surveys. The remainder of the assets and liabilities represents contracts for which external sources or observable
market quotes are not available. These contracts are valued based on various valuation 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. Contracts valued with prices provided by models and other valuation techniques make up 7% of derivative assets
and 12% of derivative liabilities. 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 for interest rate swaps is calculated utilizing the bilateral method
based on published default probabilities. For commodities, to the extent that NRG's net exposure under a specific master agreement
is an asset, the Company uses the counterparty's default swap rate. If the exposure under a specific master agreement is a liability,
the Company uses NRG's default swap rate. For interest rate swaps and commodities, the credit reserve is added to the discounted
fair value to reflect the exit price that a market participant would be willing to receive to assume NRG's liabilities or that a market
participant would be willing to pay for NRG's assets. As of December 31, 2016, the credit reserve resulted in an $11 million
decrease in fair value in operating revenue and cost of operations. As of December 31, 2015 the credit reserve resulted in a $5
million increase in fair value which is composed of a $2 million gain in OCI and a $3 million gain in operating revenue and cost
of operations.
The fair values in each category reflect the level of forward prices and volatility factors as of December 31, 2016, and may
change as a result of changes in these factors. Management uses its best estimates to determine the fair value of commodity and
derivative contracts NRG holds and sells. These estimates consider various factors including closing exchange and over-the-
counter price quotations, time value, volatility factors and credit exposure. It is possible, however, that future market prices could
vary from those used in recording assets and liabilities from energy marketing and trading activities and such variations could be
material.
NRG's significant positions classified as Level 3 include physical and financial power and physical coal executed in illiquid
markets as well as financial transmission rights, or FTRs. The significant unobservable inputs used in developing fair value include
illiquid power and coal 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 December 31, 2016 and 2015:
Significant Unobservable Inputs
December 31, 2016
Fair Value
Input/Range
Assets
Liabilities
(In millions)
Power Contracts
$
40
$
107
Coal Contracts
FTRs
—
52
92
$
1
53
161
$
Valuation
Technique
Significant
Unobservable
Input
Low
High
Weighted
Average
Discounted
Cash Flow
Discounted
Cash Flow
Discounted
Cash Flow
Forward Market
Price (per MWh)
Forward Market
Price (per ton)
Auction Prices (per
MWh)
$
11
$
104
$
42
(22)
51
17
31
45
—
163
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Significant Unobservable Inputs
December 31, 2015
Fair Value
Input/Range
Assets
Liabilities
(In millions)
Valuation
Technique
Significant
Unobservable
Input
Low
High
Weighted
Average
Power Contracts
$
86
$
Coal Contracts
FTRs
—
63
$
149
$
Discounted
Cash Flow
Discounted
Cash Flow
Discounted
Cash Flow
100
12
70
182
Forward Market
Price (per MWh)
Forward Market
Price (per ton)
Auction Prices (per
MWh)
$
10
$
92
$
28
(98)
45
87
27
35
—
The following table provides sensitivity of fair value measurements to increases/(decreases) in significant unobservable
inputs as of December 31, 2016 and 2015:
Significant Unobservable Input
Forward Market Price Power/Coal
Forward Market Price Power/Coal
FTR Prices
FTR Prices
Position
Buy
Sell
Buy
Sell
Change In Input
Increase/(Decrease)
Increase/(Decrease)
Increase/(Decrease)
Increase/(Decrease)
Impact on Fair Value
Measurement
Higher/(Lower)
Lower/(Higher)
Higher/(Lower)
Lower/(Higher)
Under the guidance of ASC 815, entities may choose to offset cash collateral posted or received against the fair value of
derivative positions executed with the same counterparties under the same master netting agreements. The Company has chosen
not to offset positions as defined in ASC 815. As of December 31, 2016, the Company recorded $203 million of cash collateral
posted and $2 million of cash collateral received on its balance sheet.
Concentration of Credit Risk
In addition to the credit risk discussion as disclosed in Note 2, Summary of Significant Accounting Policies, the following
item is a discussion of the concentration of credit risk for the Company's financial instruments. 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. The
Company monitors and manages credit risk through credit policies that include: (i) an established credit approval process; (ii) a
daily monitoring of counterparties' credit limits; (iii) the use of credit mitigation measures such as margin, collateral, prepayment
arrangements, or volumetric limits; (iv) the use of payment netting agreements; and (v) the use of master netting agreements that
allow for the netting of positive and negative exposures of various contracts associated with a single counterparty. Risks surrounding
counterparty performance and credit could ultimately impact the amount and timing of expected cash flows. The Company seeks
to mitigate counterparty risk by having a diversified portfolio of counterparties. The Company also has credit protection within
various agreements to call on additional collateral support if and when necessary. Cash margin is collected and held at the Company
to cover the credit risk of the counterparty until positions settle.
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Counterparty Credit Risk
As of December 31, 2016, counterparty credit exposure, excluding credit exposure from RTOs, ISOs, and registered
commodity exchanges and certain long-term agreements, was $231 million and NRG held collateral (cash and letters of credit)
against those positions of $2 million, resulting in a net exposure of $229 million. Approximately 95% of the Company's exposure
before collateral is expected to roll off by the end of 2018. 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.
Category
Utilities, energy merchants, marketers and other
Total
Category
Investment grade
Non-Investment grade/Non-Rated
Total
Net Exposure (a) (b)
(% of Total)
100
100%
Net Exposure (a) (b)
(% of Total)
67%
33
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 $80 million as of December 31, 2016. 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, wind and solar PPAs. As external sources or observable market quotes
are not available to estimate such exposure, the Company values 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 December 31, 2016, aggregate credit risk exposure managed by NRG
to these counterparties was approximately $4.1 billion, including $2.6 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, which NRG is unable to predict.
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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 December 31, 2016, 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. The Company is also subject to risk with respect to its
residential solar customers. The Company's bad debt expense was $48 million, $64 million, and $64 million for the years ending
December 31, 2016, 2015, and 2014, respectively. Current economic conditions may affect the Company's customers' ability to
pay bills in a timely manner, which could increase customer delinquencies and may lead to an increase in bad debt expense.
Note 5 — Accounting for Derivative Instruments and Hedging Activities
ASC 815 requires the Company to recognize all derivative instruments on the balance sheet as either assets or liabilities and
to measure them at fair value each reporting period unless they qualify for a NPNS exception. The Company may elect to designate
certain derivatives as cash flow hedges, if certain conditions are met, and defer the effective portion of the change in fair value of
the derivatives to accumulated OCI, until the hedged transactions occur and are recognized in earnings. The ineffective portion
of a cash flow hedge is immediately recognized in earnings.
For derivatives designated as hedges of the fair value of assets or liabilities, the changes in fair value of both the derivative
and the hedged transaction are recorded in current earnings.
For derivatives that are not designated as cash flow hedges or do not qualify for hedge accounting treatment, the changes
in the fair value will be immediately recognized in earnings. Certain derivative instruments may qualify for the NPNS exception
and are therefore exempt from fair value accounting treatment. ASC 815 applies to NRG's energy related commodity contracts,
interest rate swaps, and equity contracts.
As the Company engages principally in the trading and marketing of its generation assets and retail businesses, some of
NRG's commercial activities qualify for hedge accounting. In order for the generation assets to qualify, the physical generation
and sale of electricity should be highly probable at inception of the trade and throughout the period it is held, as is the case with
the Company's baseload plants. For this reason, many trades in support of NRG's baseload units normally qualify for NPNS or
cash flow hedge accounting treatment, and trades in support of NRG's peaking units' asset optimization will generally not qualify
for hedge accounting treatment, with any changes in fair value likely to be reflected on a mark-to-market basis in the statement
of operations. Most of the retail load contracts either qualify for the NPNS exception or fail to meet the criteria for a derivative
and the majority of the retail supply and fuels supply contracts are recorded under mark-to-market accounting. All of NRG's
hedging and trading activities are subject to limits within the Company's Risk Management Policy.
Energy-Related Commodities
To manage the commodity price risk associated with the Company's competitive supply activities and the price risk associated
with wholesale power sales from the Company's electric generation facilities and retail power sales from NRG's retail businesses,
NRG enters into a variety of derivative and non-derivative hedging instruments, utilizing the following:
•
•
•
Forward contracts, which commit NRG to purchase or sell energy commodities or purchase fuels in the future;
Futures contracts, which are exchange-traded standardized commitments to purchase or sell a commodity or financial
instrument;
Swap agreements, which require payments to or from counterparties based upon the differential between two prices for
a predetermined contractual, or notional, quantity;
• Option contracts, which convey to the option holder the right but not the obligation to purchase or sell a commodity;
• Extendable swaps, which include a combination of swaps and options executed simultaneously for different periods. This
combination of instruments allows NRG to sell out-year volatility through call options in exchange for natural gas swaps
with fixed prices in excess of the market price for natural gas at that time. The above-market swap combined with its
later-year call option are priced in aggregate at market at the trade's inception; and
• Weather and hurricane derivative products used to mitigate a portion of retail's lost revenue due to weather.
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The objectives for entering into derivative contracts designated as hedges include:
•
•
•
Fixing the price for a portion of anticipated future electricity sales that provides an acceptable return on the Company's
electric generation operations;
Fixing the price of a portion of anticipated fuel purchases for the operation of the Company's power plants; and
Fixing the price of a portion of anticipated power purchases for the Company's retail sales.
NRG's trading and hedging activities are subject to limits within the Company's Risk Management Policy. These contracts
are recognized on the balance sheet at fair value and changes in the fair value of these derivative financial instruments are recognized
in earnings.
As of December 31, 2016, NRG's derivative assets and liabilities consisted primarily of the following:
•
•
Forward and financial contracts for the purchase/sale of electricity and related products economically hedging NRG's
generation assets' forecasted output or NRG's retail load obligations through 2031;
Forward and financial contracts for the purchase of fuel commodities relating to the forecasted usage of NRG's generation
assets through 2018; and
• Other energy derivatives instruments extending through 2024.
Also, as of December 31, 2016, NRG had other energy-related contracts that did not meet the definition of a derivative
instrument or qualified for the NPNS exception and were therefore exempt from fair value accounting treatment as follows:
• Load-following forward electric sale contracts extending through 2026;
•
Power tolling contracts through 2039;
• Coal purchase contracts through 2021;
•
Power transmission contracts through 2025;
• Natural gas transportation contracts and storage agreements through 2030; and
• Coal transportation contracts through 2029.
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 December 31, 2016, NRG had interest rate
derivative instruments on recourse debt extending through 2021 and non-recourse debt extending through 2036, the majority 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
commodity, excluding those derivatives that qualified for the NPNS exception as of December 31, 2016 and 2015. 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.
Commodity
Units
Short Ton
Short Ton
Emissions
Coal
Natural Gas MMBtu
Oil
Power
Capacity
Interest
Equity
Barrel
MWh
MW/Day
Dollars
Shares
Total Volume
December 31,
2016
December 31,
2015
(In millions)
—
41
85
1
(28)
(1)
3,429
1
$
1
35
293
1
(74)
(1)
2,326
1
$
The decrease in the natural gas position was primarily the result of the settlement of generation hedge positions and retail
hedge positions. The increase in the interest rate position was primarily the result of entering into new interest rate swaps to
hedge the Term Loan Facility, as described in Note 12, Debt and Capital Leases.
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Fair Value of Derivative Instruments
The following table summarizes the fair value within the derivative instrument valuation on the balance sheet:
(In millions)
Derivatives Designated as Cash Flow or Fair Value
Hedges:
Fair Value
Derivative Assets
Derivative Liabilities
December 31,
2016
December 31,
2015
December 31,
2016
December 31,
2015
Interest rate contracts current
$
— $
— $
Interest rate contracts long-term
Total Derivatives Designated as Cash Flow or Fair
Value Hedges
Derivatives Not Designated as Cash Flow or Fair
Value Hedges:
Interest rate contracts current
Interest rate contracts long-term
Commodity contracts current
Commodity contracts long-term
Total Derivatives Not Designated as Cash Flow or Fair
Value Hedges
Total Derivatives
12
12
—
37
1,062
140
1,239
—
—
—
—
1,915
305
2,220
$
1,251
$
2,220
$
1,378
$
$
28
41
69
7
12
1,049
241
1,309
42
68
110
5
13
1,674
412
2,104
2,214
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 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 December 31, 2016
Commodity contracts:
Derivative assets
$
1,202
$
Derivative liabilities
Total commodity contracts
Interest rate contracts:
Derivative assets
Derivative liabilities
Total interest rate contracts
(1,290)
(88)
49
(88)
(39)
(In millions)
(1,005) $
1,005
—
(4)
4
—
Total derivative instruments
$
(127) $
— $
(1) $
14
13
—
—
—
13
$
196
(271)
(75)
45
(84)
(39)
(114)
168
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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, 2015
Commodity contracts:
Derivative assets
Derivative liabilities
Total commodity contracts
Interest rate contracts:
Derivative liabilities
Total derivative instruments
$
$
2,220
$
(2,086)
134
(128)
6
$
Accumulated Other Comprehensive Income
(In millions)
(1,616) $
1,616
—
—
(113) $
271
158
—
— $
158
$
491
(199)
292
(128)
164
The following tables summarize the effects on NRG's accumulated OCI balance attributable to cash flow hedge derivatives,
net of tax:
Accumulated OCI balance at December 31, 2015
Reclassified from accumulated OCI to income:
Due to realization of previously deferred amounts
Mark-to-market of cash flow hedge accounting contracts
Accumulated OCI balance at December 31, 2016, net of $16 tax
Losses expected to be realized from other comprehensive loss during the next 12 months, net
of $4 tax
Year Ended December 31, 2016
Interest
Rate
Total
(In millions)
(101) $
21
14
(66) $
(16) $
(101)
21
14
(66)
(16)
$
$
$
There were no gains or losses recognized in income from the ineffective portion of cash flow hedges for the year ended
December 31, 2016.
Accumulated OCI balance at December 31, 2014
Reclassified from accumulated OCI to income:
Due to realization of previously deferred amounts
Mark-to-market of cash flow hedge accounting contracts
Accumulated OCI balance at December 31, 2015, net of $16 tax
$
$
Year Ended December 31, 2015
Energy
Commodities
Interest
Rate
(In millions)
Total
(1) $
(67) $
1
—
— $
14
(48)
(101) $
(68)
15
(48)
(101)
There were no gains or losses recognized in income from the ineffective portion of cash flow hedges for the year ended
December 31, 2015.
Accumulated OCI balance at December 31, 2013
Reclassified from accumulated OCI to income:
Due to realization of previously deferred amounts
Mark-to-market of cash flow hedge accounting contracts
Accumulated OCI balance at December 31, 2014, net of $35 tax
$
$
169
Year Ended December 31, 2014
Energy
Commodities
Interest
Rate
(In millions)
Total
(1) $
(22) $
—
—
(1) $
13
(58)
(67) $
(23)
13
(58)
(68)
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 169
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There were no gains or losses recognized in income from the ineffective portion of cash flow hedges for the year ended
December 31, 2014.
Amounts reclassified from accumulated OCI into income and amounts recognized in income from the ineffective portion
of cash flow hedges are recorded to operating revenue for commodity contracts and interest expense for interest rate contracts.
Accounting guidelines require a high degree of correlation between the derivative and the hedged item throughout the
period in order to qualify as a cash flow hedge. As of December 31, 2016, the Company's regression analysis for Viento
Funding II interest rate swaps, while positively correlated, did not meet the required threshold for cash flow hedge accounting.
As a result, the Company de-designated the Viento Funding II cash flow hedges as of December 31, 2016, and will
prospectively mark these derivatives to market through the income statement.
Impact of Derivative Instruments on the Statement of Operations
Unrealized gains and losses associated with changes in the fair value of derivative instruments not accounted for as cash
flow hedges and ineffectiveness of hedge derivatives are reflected in current period earnings.
The following table summarizes the pre-tax effects of economic hedges that have not been designated as cash flow hedges,
ineffectiveness on cash flow hedges, and trading activity on the Company's statement of operations. The effect of commodity
hedges is included within operating revenues and cost of operations and the effect of interest rate hedges is included in interest
expense.
Unrealized mark-to-market results
Reversal of previously recognized unrealized gains on settled positions
related to economic hedges
Reversal of acquired gain positions related to economic hedges
Net unrealized gains on open positions related to economic hedges
Total unrealized mark-to-market (losses)/gains for economic hedging
activities
Reversal of previously recognized unrealized losses/(gains) on settled
positions related to trading activity
Reversal of acquired gain positions related to trading activity
Net unrealized gains/(losses) on open positions related to trading activity
Total unrealized mark-to-market gains/(losses) for trading activity
Total unrealized (losses)/gains
Unrealized (losses)/gains included in operating revenues
Unrealized gains/(losses) included in cost of operations
Total impact to statement of operations — energy commodities
Total impact to statement of operations — interest rate contracts
Year Ended December 31,
2016
2015
(In millions)
2014
$
$
$
$
$
(245) $
(60)
20
(275) $
(106)
9
(285)
(372)
10
—
18
28
(257) $
(46)
(14)
(16)
(76)
(448) $
Year Ended December 31,
2016
2015
(In millions)
2014
(837) $
580
(257) $
$
36
(320) $
(128)
(448) $
$
17
(15)
(333)
361
13
1
(32)
45
14
27
515
(488)
27
(31)
The reversal of gain or loss positions acquired as part of acquisitions were valued based upon the forward prices on the
acquisition dates. The roll-off amounts were offset by realized gains or losses at the settled prices and are reflected in revenue or
cost of operations during the same period.
For the year ended December 31, 2016, the $20 million gain from economic hedge positions was primarily the result of an
increase in the value of forward purchases of natural gas due to an increase in natural gas prices.
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During 2016, the Company closed out and financially settled certain open positions with counterparties. The closure and
financial settlements with these counterparties were necessary to manage the increase in collateral posting requirements following
rating agency downgrades for GenOn and to reduce expected collateral costs associated with exchange cleared hedge transactions.
GenOn realized approximately $38 million due to the closure and financial settlement of all open positions with one of GenOn's
counterparties during the second quarter of 2016, for which $18 million, $19 million and $1 million would have been realized
during the remainder of 2016, 2017 and 2018, respectively. During the third quarter of 2016, GenOn realized $98 million due to
the closure and financial settlement of certain positions with an additional counterparty for which $82 million, $13 million and
$3 million would have otherwise been realized in 2017, 2018, and 2019, respectively. GenOn has entered into additional transactions
with NRG Power Marketing LLC and an external counterparty in order to re-hedge the positions settled with certain counterparties.
For the year ended December 31, 2015, the $9 million gain from economic hedge positions was primarily the result of an
increase in the value of forward sales of electricity due to a decrease in power prices.
For the year ended December 31, 2014, the $361 million gain from economic hedge positions was primarily the result of an
increase in the value of forward sales of natural gas due to a decrease in natural gas prices.
During 2014, NRG had interest rate swaps designated as cash flow hedges on the Dandan solar project. The notional amount
on the swaps exceeded the actual debt draws on the project. As such, the Company discontinued cash flow hedge accounting for
these contracts and $6 million of losses previously deferred in OCI was recognized in the statement of operations for the year
ended December 31, 2014.
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 that have adequate assurance clauses that are in net liability positions as of December 31,
2016 was $36 million. The collateral required for contracts with credit rating contingent features that are in a net liability position
as of December 31, 2016 was $56 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 $14 million as of
December 31, 2016.
See Note 4, Fair Value of Financial Instruments, for discussion regarding concentration of credit risk.
Note 6 — Nuclear Decommissioning Trust Fund
NRG's Nuclear Decommissioning Trust Fund assets, which are for the decommissioning of STP, are comprised of securities
classified as available-for-sale and recorded at fair value based on actively quoted market prices. Although NRG is responsible
for managing the decommissioning of its 44% interest in STP, the predecessor utilities that owned STP are authorized by the PUCT
to collect decommissioning funds from their ratepayers to cover decommissioning costs on behalf of NRG. NRC requirements
determine the decommissioning cost estimate which is the minimum required level of funding. In the event that funds from the
ratepayers that accumulate in the nuclear decommissioning trust are ultimately determined to be inadequate to decommission the
STP facilities, the utilities will be required to collect through rates charged to rate payers all additional amounts, with no obligation
from NRG, provided that NRG has complied with PUCT rules and regulations regarding decommissioning trusts. Following
completion of the decommissioning, if surplus funds remain in the decommissioning trusts, any excess will be refunded to the
respective ratepayers of the utilities.
NRG accounts for the Nuclear Decommissioning Trust Fund in accordance with ASC 980, Regulated Operations, or ASC
980, 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 other comprehensive income, consistent with
regulatory treatment.
171
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3/4/17 3:01 AM
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 December 31, 2016
As of December 31, 2015
(In millions, except otherwise noted)
Fair
Value
Unrealized
Gains
Unrealized
Losses
Cash and cash equivalents
$
25
$
— $
U.S. government and federal agency
obligations
Federal agency mortgage-backed
securities
Commercial mortgage-backed securities
Corporate debt securities
Equity securities
Foreign government fixed income
securities
Total
73
62
17
84
346
3
1
1
—
1
214
—
$
610
$
217
$
—
—
1
1
2
—
—
4
Weighted-
average
maturities
(in years)
Fair
Value
Unrealized
Gains
Unrealized
Losses
Weighted-
average
maturities
(in years)
— $
6
$
— $
11
25
26
11
—
9
55
59
25
81
334
1
1
1
—
1
199
—
$
561
$
202
$
—
—
—
2
1
—
—
3
—
11
25
28
10
—
9
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 using the specific identification method.
Realized gains
Realized losses
Proceeds from sale of securities
Note 7 — Inventory
Inventory consisted of:
Fuel oil
Coal/Lignite
Natural gas
Spare parts
Other
Total Inventory
Year Ended December 31,
2016
2015
(In millions)
2014
$
$
26
11
510
$
21
14
631
29
8
600
As of December 31,
2016
2015
$
$
$
(In millions)
289
334
28
413
47
1,111
$
312
471
12
437
20
1,252
During the year ended December 31, 2015, the Company recorded a lower of weighted average cost or market adjustment
related to fuel oil of $19 million.
172
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 172
3/4/17 3:01 AM
Note 8 — Notes Receivable
Notes receivable consist of fixed and variable rate notes related primarily to amounts owed to the Company from transmission
owners for certain projects for the financing of network upgrades. The Company's notes receivable were as follows:
Notes receivable
Less current maturities(a)
Total notes receivable — non-current
As of December 31,
2016
2015
(In millions)
$
$
34
17
17
$
$
73
20
53
(a) The current portion of notes receivable is recorded in prepayments and other current assets on the consolidated balance sheets.
Note 9 — Property, Plant and Equipment
The Company's major classes of property, plant, and equipment were as follows:
Facilities and equipment
Land and improvements
Nuclear fuel
Office furnishings and equipment
Construction in progress
Total property, plant, and equipment
Accumulated depreciation
Net property, plant, and equipment
Depreciable
Lives
1-40 Years
5 Years
2-10 Years
As of December 31,
2016
2015
(In millions)
21,445
1,026
601
457
697
24,226
(6,314)
17,912
$
$
21,633
1,226
545
462
627
24,493
(5,761)
18,732
$
$
The Company decreased accumulated depreciation and facilities and equipment within total property, plant and
equipment by approximately $1 billion, respectively, to adjust amounts previously presented as of December 31, 2015. This
adjustment had no impact on net assets at December 31, 2015. Accordingly, the Company does not consider the adjustment to
be material to the consolidated balance sheet. Consolidated operating income and net income for the year ended December 31,
2016 were not impacted by the adjustment.
The Company recorded long-lived asset impairments during the years ended December 31, 2016 and 2015, as further
described in Note 10, Asset Impairments.
Note 10 — Asset Impairments
2016 Impairment Losses
Rockford — As described in Note 3, Business Acquisitions and Dispositions, on May 12, 2016, the Company entered into
an agreement with RA Generation, LLC to sell 100% of its interests in the Rockford generating stations for cash consideration of
$55 million. The transaction triggered an indicator of impairment as the sale price was less than the carrying amount of the assets,
and, as a result, the assets were considered to be impaired. The Company measured the impairment loss as the difference between
the carrying amount of the assets and the agreed-upon sale price. The Company recorded an impairment loss of $17 million during
the year ended December 31, 2016, to reduce the carrying amount of the assets held for sale to the fair market value.
173
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3/4/17 3:01 AM
Mandalay and Ormond Beach — On May 26, 2016, the CPUC rejected a multi-year resource adequacy contract between
Mandalay and SCE. Also during the second quarter of 2016, the Statewide Advisory Committee on Cooling Water Intake Structures,
or SACCWIS, issued a draft April 2016 Report noting that CAISO plans to continue to assume in its transmission studies that
Ormond Beach will not operate after December 31, 2020, the deadline for Ormond Beach compliance with California regulations
to mitigate once-through cooling (OTC) impacts. The Company does not anticipate that contracts of sufficient value can be secured
to support the significant investment required to design, permit, construct and operate measures required for OTC compliance.
As a result, on May 6, 2016, the Company notified SACCWIS that it does not expect to continue to operate Ormond Beach beyond
2020. Additionally, during the second quarter of 2016, CAISO issued its Local Capacity Requirements report for 2017 indicating
unfavorable changes within the local reliability areas in which both Mandalay and Ormond Beach are located. The culmination
of these events were considered to be indicators of impairment and as a result, the Company performed impairment tests for the
Mandalay and Ormond Beach assets. Based on the results of the impairment tests, the Company determined that the carrying
amount of these assets was higher than the estimated future net cash flows expected to be generated by the respective assets and
that the Mandalay and Ormond Beach assets were impaired. The fair value of the Mandalay and Ormond Beach operating units
was determined using the income approach which utilizes estimates of discounted future cash flows, which were Level 3 fair value
measurements and include key inputs such as forecasted contract prices, forecasted operating expenses and discount rates. The
Company measured the impairment losses as the difference between the carrying amount of the Mandalay and Ormond Beach
operating units and the present value of the estimated future net cash flows for each respective operating unit. The Company
recorded an impairment loss of $16 million and $43 million for Mandalay and Ormond Beach, respectively, during the second
quarter of 2016.
In addition, during the fourth quarter of 2016 the declining prices for resource adequacy contracts available in the reliability
sub-area which Ormond Beach operates in further reduced anticipated cash flows to be generated from Ormond Beach through
its anticipated retirement in 2020. This was considered to be an indicator of impairment and as a result, the Company performed
an impairment test for the Ormond Beach assets. The Company determined that the carrying amount of these assets was higher
than the estimated future net cash flows expected to be generated by the assets and that the Ormond Beach assets were impaired.
The fair value of the Ormond Beach operating unit was determined using the income approach which utilizes estimates of discounted
future cash flows, which were Level 3 fair value measurements and include key inputs such as forecasted contract prices, forecasted
operating expenses and discount rates. During the fourth quarter of 2016, the Company recorded an additional impairment loss
of $28 million for Ormond Beach.
Wind Facilities — During the fourth quarter of 2016, as the Company updated its estimated future cash flows in connection
with the preparation of its annual budget, the Company determined that the cash flows for the Elbow Creek and Goat Wind projects,
located in Texas and the Forward project, located in Pennsylvania were below the carrying value of the related assets, primarily
driven by the declining merchant power prices in post-contract periods, and the assets were considered impaired. The fair values
of the facilities were determined using an income approach by applying a discounted cash flow methodology to the long-term
budgets for each respective plant. The income approach utilized estimates of discounted future cash flows, which were Level 3
fair value measurements and include key inputs, such as forecasted power prices, operations and maintenance expense and discount
rates. The Company measured the impairment loss as the difference between the carrying amount and the fair value of the assets
and recorded impairment losses of $117 million, $60 million and $6 million for Elbow Creek, Goat Wind and Forward, respectively.
Long Beach — During the fourth quarter of 2016, the Company determined that by the end of 2017 it would retire its Long
Beach generation station located in Long Beach, California. The generating station was not awarded a PPA, in the SCE's capacity
auction during the fourth quarter of 2016 and the current PPA will expire on July 31, 2017. The Company considered this to be
an indicator of impairment and performed an impairment test. The Company measured the impairment loss as the difference
between the carrying amount and the fair value of the assets and recorded an impairment loss of $36 million.
Keystone and Conemaugh Leased Interests — During the fourth quarter of 2016, the Company revised its estimated future
cash flows in connection with the preparation of its annual budget. The Company noted the cash flows for the leased interests in
Keystone and Conemaugh were below the carrying value of the related assets, primarily driven by a reduction in long-term energy
and capacity prices in PJM, and the assets were impaired. The fair value of the interests in Keystone and Conemaugh were
determined using the income approach which utilizes estimates of discounted future cash flows, which were Level 3 fair value
measurements and include key inputs such as forecasted power, capacity and fuel prices, forecasted operating expenses, contractual
lease payments and discount rates. The Company recorded impairment losses of $97 million and $10 million for Conemaugh and
Keystone respectively, for the year ended December 31, 2016.
Pittsburg — During the fourth quarter of 2016, the Company determined that it would need to retire the Pittsburg facility
earlier than anticipated as it did not receive a resource adequacy contract for 2017. The Company considered this to be a triggering
event and tested the assets for impairment. The fair value of the facility was determined using an income approach and the
Company recorded an impairment loss of $20 million to reduce the carrying amount to the value of the underlying land.
174
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 174
3/4/17 3:01 AM
Other Impairments — During 2016, the Company recorded other impairment losses of $153 million, which included $23
million in excess SO2 allowances, $23 million for other intangible assets, $19 million in previously purchased solar panels, $18
million in deferred marketing expenses, $22 million in other investments and $48 million of other impairment losses.
Petra Nova Parish Holdings — During the first quarter of 2016, management changed its plans with respect to its future
capital commitments driven in part by the continued decline in oil prices. As a result, the Company reviewed its 50% interest in
Petra Nova Parish Holdings for impairment utilizing the other-than-temporary impairment model. In determining fair value, the
Company utilized an income approach and considered project specific assumptions for the future project cash flows. The carrying
amount of the Company's equity method investment exceeded the fair value of the investment and the Company concluded that
the decline is considered to be other-than-temporary. As a result, the Company measured the impairment loss as the difference
between the carrying amount and the fair value of the investment and recorded an impairment loss of $140 million.
Community Wind North and Sherbino — During the fourth quarter of 2016, the Company offered several projects to NRG
Yield including its interest in Community Wind North. The offer price was below its current carrying amount and this decline in
fair value was determined to be other-than-temporary. Accordingly, the Company recorded an impairment loss of $36 million to
reduce its carrying amount to fair value. In addition, in connection with the preparation of the annual budget, the Company noted
that due to the anticipated difficulty in refinancing Sherbino’s debt that will mature in 2018, the project’s fair value had decreased
significantly below its carrying amount and this decline was determined to be other-than-temporary. Accordingly, the Company
determined that an other-than-temporary impairment existed and recorded an impairment loss on its investment in Sherbino of
$70 million.
2015 Impairment Losses
Seward — As described in Note 3, Business Acquisitions and Dispositions, on November 24, 2015, the Company entered
into an agreement with Robindale Energy Services, Inc. to sell Seward for cash consideration of $75 million. The transaction
triggered an impairment indicator as the sale price was less than the carrying amount of the assets, and, as a result, the assets were
considered to be impaired. The Company measured the impairment loss as the difference between the carrying amount of the
assets and the agreed-upon sale price. The Company recorded an impairment loss of $134 million for the year ended December
31, 2015, to reduce the carrying amount of the assets held for sale to the fair market value.
Limestone and W.A. Parish — During the fourth quarter of 2015, as the Company updated its estimates of future cash flows
in connection with the preparation of its annual budget, it was noted that the cash flows for the Limestone and W.A. Parish coal-
fired facilities located in Texas were lower than the carrying amount, primarily driven by declining power prices as the cost of
commodities continues to decline and the assets were impaired. The fair value of the Limestone and W.A. Parish plants was
determined using an income approach by applying a discounted cash flow methodology to the long-term budgets for each respective
plant. The income approach utilized estimates of discounted future cash flows, which were Level 3 fair value measurements, and
include key inputs such as forecasted power prices, fuel costs and emissions credit expense, forecasted operating and capital
expenditures and discount rates. The Company measured the impairment loss as the difference between the carrying amount and
the fair value of the assets and recognized impairment losses of $1,514 million and $1,295 million related to Limestone and W.A.
Parish, respectively.
Huntley — On August 25, 2015, the Company filed a notice with the NYSPSC of its intent to retire Huntley's operating units
on March 1, 2016. The Company considered this to be an indicator of impairment and performed an impairment test for these
assets under ASC 360, Property, Plant and Equipment. On October 14, 2015, the Company filed a cost-of-service filing at FERC
in anticipation that the Huntley operating units would be needed for reliability purposes, proposing a reliability must run service
agreement for a four-year period beginning on March 1, 2016. On October 30, 2015, NYISO released the results of its reliability
study, indicating that the Huntley operating units are not needed for bulk system reliability. The Company considered the impact
of the reliability study conducted and evaluated the estimated cash flows associated with the facility. Accordingly, the Company
determined that the carrying amount of the assets was higher than the estimated future net cash flows expected to be generated
by the assets and that the assets were impaired. The fair value of the Huntley operating units was determined using the income
approach. The income approach utilized estimates of discounted future cash flows, which were Level 3 fair value measurements,
and include key inputs such as forecasted contract prices, forecasted operating expenses and discount rates. The Company recorded
an impairment loss of $132 million during the year ended December 31, 2015.
175
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 175
3/4/17 3:01 AM
Dunkirk — The Company signed a ten-year agreement in November 2014 with National Grid to add natural gas-burning
capabilities at the Dunkirk facility. On August 25, 2015, NRG announced that Dunkirk Unit 2 would be mothballed on January
1, 2016 at the expiration of its reliability support services agreement. The project to add natural gas-burning capabilities has been
suspended, pending the outcome of litigation with respect to the gas addition contract and its validity. On October 30, 2015,
NYISO released the results of its reliability study, indicating that the Dunkirk facility is not needed for system reliability. In
connection with the planned mothball of the facility, the pending litigation and the latest reliability assessment completed by
NYISO, the Company evaluated whether the related fixed assets were impaired. The Company determined that the carrying amount
of the assets was higher than the estimated future net cash flows expected to be generated by the assets and that the assets were
impaired. The fair value of the Dunkirk facility was determined using the income approach. The income approach utilized estimates
of discounted future cash flows, which were Level 3 fair value measurements, and include key inputs such as forecasted contract
prices, forecasted operating and capital expenditures and discount rates. The Company recorded an impairment loss of $160 million
during the year ended December 31, 2015.
Gregory — During the fourth quarter of 2015, the Company determined that the carrying amount of the assets was higher
than the estimated future net cash flows expected to be generated by the assets and that the assets were impaired. The fair value
of the Gregory facility was determined using the income approach, which utilized estimates of discounted future cash flows, which
were Level 3 fair value measurements, and include key inputs such as forecasted prices, operating and capital expenditures and
discount rates. The Company recorded an impairment loss of $176 million during the year ended December 31, 2015.
Solar Panels — During the fourth quarter of 2015, the Company recorded an impairment loss of $29 million to reduce the
carrying value of certain solar panels to their approximate fair value.
Investments — During the fourth quarter of 2015, the Company reviewed certain of its cost method and equity method
investments and concluded that losses incurred by these investments were other-than-temporary. These losses were primarily
driven by the sustained decline in stock price of a publicly traded investment as well as change in financing structures of certain
non-publicly traded investments. As a result, the Company recorded losses related to these investments of $56 million.
2014 Impairment Losses
Coolwater — During the fourth quarter of 2014, the Company determined that it would retire the 636 MW natural-gas fired
Coolwater facility in Dagget, California. The facility faced critical repairs on the cooling towers for units 3 and 4 and, during the
fourth quarter of 2014, did not receive any awards in a near-term capacity auction and no interest in a bilateral capacity deal. The
Company considered this to be an indicator of impairment and performed an impairment test for these assets under ASC 360,
Property, Plant and Equipment. The carrying amount of the assets was higher than the future net cash flows expected to be
generated by the assets and as a result, the assets are considered to be impaired. The Company measured the impairment loss as
the difference between the carrying amount and the fair value of the assets. The Company retired the Coolwater facility effective
January 1, 2015. All remaining fixed assets of the station were written off resulting in an impairment loss of $22 million recorded
during the fourth quarter of 2014.
Osceola — During the third quarter of 2014, the Company determined that it would mothball the 463 MW natural gas-fired
Osceola facility, in Saint Cloud, Florida. The Company considered this to be an indicator of impairment and performed an
impairment test for these assets under ASC 360, Property, Plant and Equipment. The carrying amount of the assets was higher
than the future net cash flows expected to be generated by the assets and as a result, the assets were considered to be impaired.
The Company measured the impairment loss as the difference between the carrying amount and the fair value of the assets. Due
to the location of the facility, it was determined that the best indicator of fair value is the market value of the combustion turbines.
The Company recorded an impairment loss of approximately $60 million during the third quarter of 2014, which represents the
excess of the carrying value over the fair market value.
Solar Panels — During the third quarter of 2014, the Company recorded an impairment loss of $10 million to reduce the
carrying value of certain solar panels to their approximate fair value.
176
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3/4/17 3:01 AM
Note 11 — Goodwill and Other Intangibles
Goodwill
NRG's goodwill balance was $662 million and $999 million as of December 31, 2016 and 2015, respectively. As of
December 31, 2016, and 2015, NRG had approximately $547 million and $620 million, respectively, of goodwill that is deductible
for U.S. income tax purposes in future periods. As of December 31, 2016, goodwill consisted of $276 million associated with the
acquisition of EME, $341 million for Retail business acquisitions, and $45 million associated with other business acquisitions.
2016 Impairments of Goodwill
During the year ended December 31, 2016, the Company recorded a goodwill impairment charge of $337 million related
to its Texas reporting unit, reducing the goodwill balance for Texas to zero.
In connection with the annual impairment assessment, the Company performed step one of the two-step impairment test
for the Texas reporting unit, for which $1.7 billion of goodwill was recognized as part of the Texas Genco acquisition in 2006 and
$1.4 billion was written off in 2015. The Company determined the fair value of the Texas reporting unit primarily using an income
approach through which the Company applied a discounted cash flow methodology to the long-term budgets for all plants in the
regions. Significant inputs impacting the income approach include the Company's views of power and fuel prices for the first five-
year period and the Company's view for the longer term, which were finalized in connection with the preparation of the fourth quarter
financial statements, projected generation based on an hourly dispatch meant to simulate the dispatch of each unit into the power
market which is impacted by power prices, fuel prices, and the physical and economic characteristics of each plant, intangible value
to Texas for synergies it provides to NRG's retail businesses, and the discount rate applied to cash flow projections. Under step one,
the estimated fair value of the Texas invested capital was 43% below its carrying value as of December 31, 2016, and the Company
concluded step two was required. Based on the results of step two of the impairment test, the Company determined the carrying
amount of the reporting unit was higher than the fair value, and accordingly, the Company recognized an impairment loss of $337
million as of December 31, 2016.
2015 Impairments of Goodwill
During the year ended December 31, 2015, the Company recorded goodwill impairment charges of $1.5 billion which are
comprised of the following:
Texas — In connection with the annual impairment assessment, the Company performed step one of the two-step impairment
test for the Texas reporting unit, for which $1.7 billion of goodwill was recognized as part of the Texas Genco acquisition in 2006.
The Company determined the fair value of the Texas reporting unit primarily using an income approach through which the Company
applied a discounted cash flow methodology to the long-term budgets for all plants in the regions. Significant inputs impacting the
income approach include the Company's views of power and fuel prices for the first five-year period and the Company's view for
the longer term, which were finalized in connection with the preparation of the fourth quarter financial statements, projected generation
based on an hourly dispatch meant to simulate the dispatch of each unit into the power market which is impacted by power prices,
fuel prices, and the physical and economic characteristics of each plant, intangible value to Texas for synergies it provides to NRG's
retail businesses, and the discount rate applied to cash flow projections. Under step one, the estimated fair value of the Texas invested
capital was 76% below its carrying value as of December 31, 2015, and the Company concluded step two was required. Based on
the results of step two of the impairment test, the Company determined the carrying amount of the reporting unit was higher than
the fair value, and accordingly, the Company recognized an impairment loss of $1.4 billion as of December 31, 2015.
NRG Home Solar — The Company performed the two-step impairment test as part of its annual impairment testing for the
NRG Home Solar reporting unit utilizing an income approach developed through applying a discounted cash flow methodology to
the long-term budget for the reporting unit. As a result, the Company determined that the carrying value of the reporting unit was
higher than the fair value, and accordingly, the Company recognized an impairment loss of $125 million during the year ended
December 31, 2015 to reduce the carrying value of the goodwill that was recognized in connection with acquisitions made by NRG
Home Solar.
Goal Zero — During the third quarter of 2015, the Company agreed to relieve the Goal Zero seller of all known and unknown
claims in return for the seller's agreement to forego all contingent consideration. Concurrently, the Company determined that there
was an indication of goodwill impairment and performed an impairment test. The carrying amount of the reporting unit was higher
than the fair value, and accordingly, the Company recognized an impairment loss of $36 million during the third quarter of 2015 to
reduce the carrying value of the goodwill that was recognized in connection with the acquisition.
177
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3/4/17 3:01 AM
Intangible Assets
The Company's intangible assets as of December 31, 2016, primarily reflect intangible assets established with the acquisitions
of various companies and are comprised of the following:
• Emission Allowances — These intangibles primarily consist of SO2 and NOx emission allowances established with the 2012
GenOn acquisition and 2006 Texas Genco acquisition and also include RGGI emission credits which NRG began purchasing
in 2009. These emission allowances are held-for-use and are amortized to cost of operations, with NOx allowances amortized
on a straight-line basis and SO2 allowances and RGGI credits amortized based on units of production. During the year ended
December 31, 2016, the Company recorded an impairment loss of $23 million to reduce the value of excess SO2 allowances
to zero.
• Energy supply contracts — Established with the acquisitions of Reliant Energy and Green Mountain Energy, these represent
the fair value at the acquisition date of in-market contracts for the purchase of energy to serve retail electric customers. The
contracts are amortized to cost of operations based on the expected delivery under the respective contracts.
•
In-market fuel (gas and nuclear) contracts — These intangibles were established with the Texas Genco acquisition in 2006
and are amortized to cost of operations over expected volumes over the life of each contract.
• Customer contracts — Established with the acquisitions of Reliant Energy, Green Mountain Energy, and Northwind Phoenix,
these intangibles represent the fair value at the acquisition date of contracts that primarily provide electricity to Reliant
Energy's and Green Mountain Energy's C&I customers. These contracts are amortized to revenues based on expected
volumes to be delivered for the portfolio.
• Customer relationships — These intangibles represent the fair value at the acquisition date of acquired businesses' customer
base, primarily for Dominion, Energy Alternatives, Energy Plus, Reliant Energy, Green Mountain Energy, Energy Systems
and Energy Curtailment Specialists. The customer relationships are amortized to depreciation and amortization expense
based on the expected discounted future net cash flows by year. During the year ended December 31, 2016, the Company
recorded an impairment loss of $8 million for certain customer relationships.
• Marketing partnerships — Established with the acquisition of Energy Plus, these intangibles represent the fair value at the
acquisition date of existing agreements with loyalty and affinity partners. The marketing partnerships are amortized to
depreciation and amortization expense based on the expected discounted future net cash flows by year.
•
Trade names — Established with the Reliant Energy, Green Mountain, Energy Plus and Dominion acquisitions, these
intangibles are amortized to depreciation and amortization expense, on a straight-line basis.
• Power purchase agreements — Established predominantly with the EME and Alta Wind acquisitions, these represent the
fair value of PPAs acquired. These will be amortized to revenues, generally on a straight-line basis, over the terms of the
PPAs.
• Other — Consists of renewable energy credits, wind leasehold rights, costs to extend the operating license for STP Units
1 and 2, and the intangible asset related to a purchased ground lease. During the year ended December 31, 2016, the
Company recorded an impairment loss of $15 million of other intangible assets.
The following tables summarize the components of NRG's intangible assets subject to amortization:
178
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 178
3/4/17 3:01 AM
Year Ended December 31,
2016
Emission
Allowances
Energy
Supply
Fuel
Customer
Customer
Relationships
Marketing
Partnerships
Trade
Names
PPA
Other
Total
Contracts
$
$
920
50
54
$ 72
— —
$
—
(1)
(10)
(23)
(7)
929
— —
— —
— —
— —
— —
72
54
$
16
—
—
—
—
—
—
16
(In millions)
$
834
—
—
—
—
(18)
—
816
88
—
—
—
—
—
—
88
$
342
—
$ 1,264
—
$245
34
$ 3,835
84
—
—
—
—
—
342
—
18
— (44)
18
(45)
—
—
— (23)
—
—
230
1,264
(10)
(64)
(7)
3,811
Net carrying amount
$
324
$ — $ 5
$
8
$
(605)
(54)
(67)
(8)
(663)
153
$
(49)
39
$
(159)
183
(138)
$ 1,126
(32)
$198
(1,775)
$ 2,036
(a) Adjusted for write-off of fully amortized emission allowances of $10 million.
(b) The impairment of customer relationships and other intangibles included a write-off of accumulated amortization of $10 million and $8 million respectively.
Year Ended December 31,
2015
Emission
Allowances
Energy
Supply
Fuel Customer
Customer
Relationships
Marketing
Partnerships
Trade
Names
PPA
Other
Total
Contracts
January 1, 2015
$
1,018
$
54
$72
$
77
(33)
(154)
—
12
920
— —
— —
— —
— —
— —
54
72
(In millions)
831
$
$
3
—
—
—
—
834
16
—
—
—
—
—
16
88
—
—
—
—
—
88
$
353
$ 1,270
$267
$ 3,969
—
—
—
(6)
(5)
342
—
57
— (62)
137
(95)
—
—
(6)
1,264
—
(5)
(12)
245
(154)
(11)
(11)
3,835
January 1, 2016
Purchases
Acquisition of
businesses
Usage
Write-off of fully
amortized balances(a)
Impairment(b)
Other
December 31, 2016
Less accumulated
amortization
Purchases
Usage
Write-off of fully
amortized balances
Impairment
Other
December 31, 2015
Less accumulated
amortization(a)
Net carrying amount
(502)
(47)
(65)
(6)
$
418
$
7
$ 7
$
10
$
(624)
210
$
(41)
47
$
(137)
205
(75)
$ 1,189
(28)
$217
(1,525)
$ 2,310
(a) Adjusted for write-off of fully amortized emission allowances of $154 million.
The following table presents NRG's amortization of intangible assets for each of the past three years:
Amortization
Emission allowances
Energy supply contracts
Fuel contracts
Customer contracts
Customer relationships
Marketing partnerships
Trade names
Power purchase agreements
Other
Total amortization
Years Ended December 31,
2016
2015
(In millions)
2014
$
113
$
99
$
124
7
2
2
49
8
22
63
12
5
2
2
67
14
23
50
15
6
2
—
70
15
21
24
6
$
278
$
277
$
268
179
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 179
3/4/17 3:01 AM
The following table presents estimated amortization of NRG's intangible assets for each of the next five years:
Year Ended December 31,
Emission
Allowances
Fuel
Customer
Customer
Relationships
Marketing
Partnerships
Trade
Names
PPA
Other
Total
Contracts
2017
2018
2019
2020
2021
$
82
$ 1
$
33 —
31 —
16 —
16 —
1
1
1
1
1
(In millions)
$
26
$
14
10
8
6
$
$
5
5
4
4
4
23
23
23
23
23
$
57
57
57
57
57
3
3
3
3
3
$ 198
136
129
112
110
Intangible assets held for sale — From time to time, management may authorize the transfer from the Company's emission
bank of emission allowances held-for-use to intangible assets held-for-sale. Emission allowances held-for-sale are included in other
non-current assets on the Company's consolidated balance sheet and are not amortized, but rather expensed as sold. As of December 31,
2016, the value of emission allowances held-for-sale is $39 million and is managed within the Corporate segment. Once transferred
to held-for-sale, these emission allowances are prohibited from moving back to held-for-use.
Out-of-market contracts — Due primarily to business acquisitions, NRG acquired certain out-of-market contracts, which are
classified as non-current liabilities on NRG's consolidated balance sheet. These include out-of-market lease contracts of $159 million
and $790 million acquired in the acquisitions of EME and GenOn, respectively, and out-of-market gas transportation and storage
contracts of $327 million acquired in the acquisition of GenOn. These out-of-market contracts are amortized to cost of operations.
As of December 31, 2016 and 2015, the Company had accumulated amortization for out-of-market contracts of $765 million and
$664 million.
The following table summarizes the estimated amortization related to NRG's out-of-market contracts:
Year Ended December 31,
Power
Contracts
Leases
Gas
Transportation
Total
2017
2018
2019
2020
2021
$
16
16
17
17
10
(In millions)
$
47
47
47
47
47
37
32
29
29
26
$
100
95
93
93
83
180
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 180
3/4/17 3:01 AM
Note 12 — Debt and Capital Leases
Long-term debt and capital leases consisted of the following:
NRG Recourse Debt:
Senior notes, due 2018
Senior notes, due 2020
Senior notes, due 2021
Senior notes, due 2022
Senior notes, due 2023
Senior notes, due 2024
Senior notes, due 2026
Senior notes, due 2027
Term loan facility, due 2018
Term loan facility, due 2023
Tax-exempt Bonds
Subtotal NRG Recourse Debt
NRG Non-Recourse Debt:
GenOn senior notes
GenOn Americas Generation senior notes
GenOn Other
$
Subtotal GenOn debt (non-recourse to NRG)
NRG Yield Operating LLC Senior Notes, due 2024
NRG Yield Operating LLC Senior Notes, due 2026
NRG Yield LLC and Yield Operating LLC Revolving Credit Facility, due 2019
NRG Yield Inc. Convertible Senior Notes, due 2019
NRG Yield Inc. Convertible Senior Notes, due 2020
El Segundo Energy Center, due 2023
Marsh Landing, due 2017 and 2023
Alta Wind I-V lease financing arrangements, due 2034 and 2035
Walnut Creek, term loans due 2023
Tapestry, due 2021
CVSR, due 2037
CVSR HoldCo, due 2037
Alpine, due 2022
Energy Center Minneapolis, due 2017 and 2025
Energy Center Minneapolis, due 2031
Viento, due 2023
NRG Yield - other
Subtotal NRG Yield debt (non-recourse to NRG)
Ivanpah, due 2033 and 2038
Agua Caliente, due 2037
Dandan, due 2033
Peaker bonds, due 2019
Cedro Hill, due 2025
Utah Portfolio, due 2022
Midwest Generation, due 2019
NRG Other
Subtotal other NRG non-recourse debt
Subtotal all non-recourse debt
Subtotal long-term debt (including current maturities)
Capital leases:
Subtotal long-term debt and capital leases (including current maturities)
Less current maturities
Less debt issuance costs
Total long-term debt and capital leases
$
181
As of December 31,
2016
2015
December 31, 2016
Interest Rate % (a)
(In millions except rates)
7.625
8.250
7.875
6.250
6.625
6.250
7.250
6.625
L+2.00
L+2.75
4.125 - 6.00
7.875 - 9.875
8.500 - 9.125
5.375
5.000
L+2.75
3.500
3.250
L+1.625 - L+2.25
L+1.75 - L+1.875
5.696 - 7.015
L+1.625
L+1.625
2.339 - 3.775
4.680
L+1.750
5.95 - 7.25
3.55
L+2.75
various
2.285 - 4.256
2.395 - 3.633
L+2.25
L+1.07
L+1.75
L+2.65
4.390
various
various
398
—
207
992
869
733
1,000
1,250
—
1,882
455
7,786
1,911
745
96
2,752
500
350
—
335
271
443
370
965
310
172
771
199
145
96
125
178
540
5,770
1,113
849
76
—
163
287
218
392
3,098
11,620
19,406
8
19,414
1,220
188
18,006
$
$
1,039
1,058
1,128
1,100
936
904
—
—
1,964
—
455
8,584
1,956
752
56
2,764
500
—
306
330
266
485
418
1,002
351
181
793
—
154
108
—
189
573
5,656
1,149
879
98
72
103
—
—
315
2,616
11,036
19,620
16
19,636
481
172
18,983
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 181
3/4/17 3:01 AM
(a) As of December 31, 2016, L+ equals 3 month LIBOR plus x%, with the exception of the Viento term loan, which is 6 month LIBOR plus x% and the
Alpine term loan, the NRG Marsh Landing term loan, the Walnut Creek loan, and 2023 Term Loan Facility, which are 1 month LIBOR plus x%.
Long-term debt includes the following premiums/(discounts):
Term loan facility, due 2018 (a)
Term loan facility, due 2023 (a)
Peaker bonds, due 2019 (b)
Yield, Inc. Convertible notes, due 2019
Yield, Inc. Convertible notes, due 2020
Midwest Generation, due 2019
GenOn senior notes, due 2017 (c)
GenOn senior notes, due 2018 (c)
GenOn senior notes, due 2020 (c)
GenOn Americas Generation senior notes, due 2021 (c)
GenOn Americas Generation senior notes, due 2031 (c)
Total premium
As of December 31,
2016
2015
(In millions)
— $
(9)
—
(10)
(17)
(13)
8
38
35
26
24
82
$
(3)
—
(4)
(15)
(21)
—
23
59
44
32
25
140
$
$
(a) Term loan facility, due 2018 replaced with the Term loan facility due 2023. Discount of $1 million was related to current maturities in 2016.
(b) Repaid in 2016.
(c) Premiums for long-term debt acquired in the GenOn acquisition represent adjustments to record the debt at fair value in connection with the acquisition.
Consolidated Annual Maturities
Annual payments based on the maturities of NRG's debt and capital leases for the years ending after December 31, 2016
are as follows:
2017
2018
2019
2020
2021
Thereafter
Total
(In millions)
1,222
1,650
839
1,273
1,157
13,192
19,333
$
$
182
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 182
3/4/17 3:01 AM
NRG Recourse Debt
Senior Notes
Issuance of 2026 Senior Notes
On May 23, 2016, NRG issued $1.0 billion in aggregate principal amount at par of 7.25% senior notes due 2026, or the 2026
Senior Notes. The 2026 Senior Notes are senior unsecured obligations of NRG and are guaranteed by certain of its subsidiaries.
Interest is paid semi-annually beginning on November 15, 2016, until the maturity date of May 15, 2026. The proceeds from the
issuance of the 2026 Senior Notes were utilized to repurchase a portion of the Senior Notes discussed below under 2016 Senior
Note Repurchases.
Issuance of 2027 Senior Notes
On August 2, 2016, NRG issued $1.25 billion in aggregate principal amount at par of 6.625% senior notes due 2027, or the
2027 Senior Notes. The 2027 Senior Notes are senior unsecured obligations of NRG and are guaranteed by certain of its subsidiaries.
Interest is paid semi-annually beginning on January 15, 2017, until the maturity date of January 15, 2027. The proceeds from the
issuance of the 2027 Senior Notes were utilized to retire the Company's 8.250% senior notes due 2020 and reduce the balance of
the Company's 7.875% senior notes due 2021.
2016 Senior Notes Repurchases
During the year ended December 31, 2016, the Company repurchased $3.0 billion in aggregate principal of its Senior Notes
for $3.1 billion, which included accrued interest of $77 million. In connection with the repurchases, a $117 million loss on debt
extinguishment was recorded, which included the write-off of previously deferred financing costs of $16 million.
Amount in millions, except rates
7.625% senior notes due 2018 (b)
8.250% senior notes due 2020
7.875% senior notes due 2021 (c)
6.250% senior notes due 2022
6.625% senior notes due 2023
6.250% senior notes due 2024
Total
(a) Includes payment for accrued interest.
(b) $186 million of the redemptions financed by cash on hand.
(c) $193 million of the redemptions financed by cash on hand.
2015 Senior Notes Repurchases
Principal
Repurchased
Cash Paid (a)
Average Early
Redemption
Percentage
$
$
$
641
1,058
922
108
67
171
2,967
$
706
1,129
978
105
64
163
3,145
107.89%
103.12%
104.00%
94.73%
94.13%
94.52%
During the year ended December 31, 2015, the Company repurchased $246 million in aggregate principal of its Senior Notes
for $231 million, which included accrued interest of $5 million. In connection with the repurchases, a $19 million gain on debt
extinguishment was recorded, which included the write-off of previously deferred financing costs of $2 million.
Amount in millions, except rates
7.625% senior notes due 2018
8.250% senior notes due 2020
6.625% senior notes due 2023
6.250% senior notes due 2024
Total
(a) Includes payment for accrued interest.
Principal
Repurchased
Cash Paid (a)
Average Early
Redemption
Percentage
$
$
$
92
5
54
95
246
$
97
5
47
82
231
102.23%
96.50%
85.97%
84.73%
183
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 183
3/4/17 3:01 AM
Senior Notes Outstanding
As of December 31, 2016, NRG had seven outstanding issuances of senior notes, or Senior Notes:
i.
ii.
iii.
iv.
v.
vi.
7.875% senior notes, issued May 24, 2011 and due May 15, 2021, or the 2021 Senior Notes;
6.625% senior notes, issued September 24, 2012 and due March 15, 2023, or the 2023 Senior Notes;
6.250% senior notes, issued January 27, 2014 and due July 15, 2022, or the 2022 Senior Notes;
6.250% senior notes, issued April 21, 2014 and due November 1, 2024, or the 2024 Senior Notes;
7.250% senior notes, issued May 23, 2016 and due May 15, 2026, or the 2026 Senior Notes; and
6.625% senior notes, issued August 2, 2016 and due January 15, 2027, or the 2027 Senior Notes.
vii.
7.625% senior notes, issued January 26, 2011 and due January 15, 2018, or the 2018 Senior Notes.
The Company periodically enters into supplemental indentures for the purpose of adding entities under the Senior Notes
as guarantors.
The indentures and the forms of notes provide, among other things, that the Senior Notes will be senior unsecured obligations
of NRG. The indentures also provide for customary events of default, which include, among others: nonpayment of principal or
interest; breach of other agreements in the indentures; defaults in failure to pay certain other indebtedness; the rendering of
judgments to pay certain amounts of money against NRG and its subsidiaries; the failure of certain guarantees to be enforceable;
and certain events of bankruptcy or insolvency. Generally, if an event of default occurs, the Trustee or the Holders of at least 25%
in principal amount of the then outstanding series of Senior Notes may declare all of the Senior Notes of such series to be due and
payable immediately. The terms of the indentures, among other things, limit NRG's ability and certain of its subsidiaries' ability
to return capital to stockholders, grant liens on assets to lenders and incur additional debt. Interest is payable semi-annually on
the Senior Notes until their maturity dates.
2021 Senior Notes
On or after May 15, 2016, NRG may redeem some or all of the notes at redemption prices expressed as percentages of
principal amount as set forth in the following table, plus accrued and unpaid interest on the notes redeemed to the first applicable
redemption date:
Redemption Period
May 15, 2016 to May 14, 2017
May 15, 2017 to May 14, 2018
May 15, 2018 to May 14, 2019
May 15, 2019 and thereafter
2022 Senior Notes
Redemption
Percentage
103.938%
102.625%
101.313%
100.000%
At any time prior to July 15, 2017, NRG may redeem up to 35% of the aggregate principal amount of the 2022 Senior Notes,
at a redemption price equal to 106.25% of the principal amount of the notes redeemed, plus accrued and unpaid interest, with an
amount equal to the net cash proceeds of certain equity offerings. At any time prior to July 15, 2018, NRG may redeem all or a
part of the 2022 Senior Notes, at a redemption price equal to 100% of the principal amount, accrued and unpaid interest to the
redemption date, plus a premium. The premium is the greater of: (i) 1% of the principal amount of the notes; or (ii) the excess of
the principal amount of the note over the following: the present value of 103.125% of the note, plus interest payments due on the
note from the date of redemption through July 15, 2018, computed using a discount rate equal to the Treasury Rate as of such
redemption date plus 0.50%. In addition, on or after July 15, 2018, NRG may redeem some or all of the notes at redemption prices
expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the notes
redeemed to the first applicable redemption date:
Redemption Period
July 15, 2018 to July 14, 2019
July 15, 2019 to July 14, 2020
July 15, 2020 and thereafter
Redemption
Percentage
103.125%
101.563%
100.000%
184
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 184
3/4/17 3:01 AM
2023 Senior Notes
Prior to September 15, 2017, NRG may redeem all or a portion of the 2023 Senior Notes at a price equal to 100% of the
principal amount plus a premium and accrued and unpaid interest. The premium is the greater of: (i) 1% of the principal amount
of the notes; or (ii) the excess of the principal amount of the note over the following: the present value of 103.313% of the note,
plus interest payments due on the note from the date of redemption through September 15, 2017, discounted at a Treasury rate
plus 0.50%. In addition, on or after September 15, 2017, NRG may redeem some or all of the 2023 Senior Notes at redemption
prices expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the
notes redeemed to the first applicable redemption date:
Redemption Period
September 15, 2017 to September 14, 2018
September 15, 2018 to September 14, 2019
September 15, 2019 to September 14, 2020
September 15, 2020 and thereafter
2024 Senior Notes
Redemption
Percentage
103.313%
102.208%
101.104%
100.000%
At any time prior to May 1, 2017, NRG may redeem up to 35% of the aggregate principal amount of the 2024 Senior Notes,
at a redemption price equal to 106.25% of the principal amount of the notes redeemed, plus accrued and unpaid interest, with an
amount equal to the net cash proceeds of certain equity offerings. At any time prior to May 1, 2019, NRG may redeem all or a
part of the 2024 Senior Notes, at a redemption price equal to 100% of the principal amount, accrued and unpaid interest to the
redemption date, plus a premium. The premium is the greater of: (i) 1% of the principal amount of the notes; or (ii) the excess of
the principal amount of the note over the following: the present value of 103.125% of the note, plus interest payments due on the
note from the date of redemption through May 1, 2019 computed using a discount rate equal to the Treasury Rate as of such
redemption date plus 0.50%. In addition, on or after May 1, 2019, NRG may redeem some or all of the notes at redemption prices
expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the notes
redeemed to the first applicable redemption date:
Redemption Period
May 1, 2019 to April 30, 2020
May 1, 2020 to April 30, 2021
May 1, 2021 to April 30, 2022
May 1, 2022 and thereafter
2026 Senior Notes
Redemption
Percentage
103.125%
102.083%
101.042%
100.000%
At any time prior to May 15, 2019, NRG may redeem up to 35% of the aggregate principal amount of the 2026 Senior Notes,
at a redemption price equal to 107.25% of the principal amount of the notes redeemed, plus accrued and unpaid interest, with an
amount equal to the net cash proceeds of certain equity offerings. At any time prior to May 15, 2021, NRG may redeem all or a
part of the 2026 Senior Notes, at a redemption price equal to 100% of the principal amount, accrued and unpaid interest to the
redemption date, plus a premium. The premium is the greater of: (i) 1% of the principal amount of the notes; or (ii) the excess of
the principal amount of the note over the following: the present value of 103.625% of the note, plus interest payments due on the
note from the date of redemption through May 15, 2021 computed using a discount rate equal to the Treasury Rate as of such
redemption date plus 0.50%. In addition, on or after May 15, 2021, NRG may redeem some or all of the notes at redemption
prices expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the
notes redeemed to the first applicable redemption date:
Redemption Period
May 15, 2021 to May 14, 2022
May 15, 2022 to May 14, 2023
May 15, 2023 to May 14, 2024
May 15, 2024 and thereafter
Redemption
Percentage
103.625%
102.417%
101.208%
100.000%
185
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 185
3/4/17 3:01 AM
2027 Senior Notes
At any time prior to July 15, 2019, NRG may redeem up to 35% of the aggregate principal amount of the 2027 Senior Notes,
at a redemption price equal to 106.625% of the principal amount of the notes redeemed, plus accrued and unpaid interest, with an
amount equal to the net cash proceeds of certain equity offerings. At any time prior to July 15, 2021 NRG may redeem all or a
part of the 2027 Senior Notes, at a redemption price equal to 100% of the principal amount, accrued and unpaid interest to the
redemption date, plus a premium. The premium is the greater of: (i) 1% of the principal amount of the notes; or (ii) the excess of
the principal amount of the note over the following: the present value of 103.313% of the note, plus interest payments due on the
note from the date of redemption through July 15, 2021 computed using a discount rate equal to the Treasury Rate as of such
redemption date plus 0.50%. In addition, on or after July 15, 2021, NRG may redeem some or all of the notes at redemption prices
expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the notes
redeemed to the first applicable redemption date:
Redemption Period
July 15, 2021 to July14, 2022
July 15, 2022 to July 14, 2023
July 15, 2023 to July 14, 2024
July 15, 2024 and thereafter
Senior Credit Facility
Redemption
Percentage
103.313%
102.208%
101.104%
100.000%
On June 30, 2016, NRG replaced its Senior Credit Facility, consisting of its Term Loan Facility and Revolving Credit Facility
with a new senior secured facility, or the 2016 Senior Credit Facility, which includes the following:
• A $1.9 billion term loan facility, or the 2023 Term Loan Facility, with a maturity date of June 30, 2023, which will pay
interest at a rate of LIBOR plus 2.75%, with a LIBOR floor of 0.75%. The debt was issued at 99.50% of face value; the
discount will be amortized to interest expense over the life of the loan. Repayments under the 2023 Term Loan Facility
will consist of 0.25% of principal per quarter, with the remainder due at maturity. The proceeds of the new term loan
facility as well as cash on hand were used to repay the 2018 Term Loan Facility balance outstanding. A $21 million loss
on extinguishment of the Term Loan Facility was recorded during the second quarter of 2016, which consisted of the
write-off of previously deferred financing costs. On January 24, 2017, NRG repriced the 2023 Term Loan Facility, reducing
the interest rate margin by 50 basis points to LIBOR plus 2.25%, the LIBOR floor remains 0.75%.
• A $289 million revolving senior credit facility, or the Tranche A Revolving Facility, with a maturity date of July 1, 2018
and a $2.2 billion revolving senior credit facility, or the Tranche B Revolving Facility, with a maturity date of June 30,
2021, which will pay interest at a rate of LIBOR plus 2.25%.
The 2016 Senior Credit Facility is guaranteed by substantially all of NRG's existing and future direct and indirect subsidiaries,
with certain customary or agreed-upon exceptions for unrestricted foreign subsidiaries, and certain other subsidiaries, including
GenOn, NRG Yield, Inc. and their respective subsidiaries. The capital stock of these guarantor subsidiaries has been pledged for
the benefit of the 2016 Senior Credit Facility's lenders.
The 2016 Senior Credit Facility is also secured by first-priority perfected security interests in substantially all of the property
and assets owned or acquired by NRG and its subsidiaries, other than certain limited exceptions. These exceptions include assets
of certain unrestricted subsidiaries, equity interests in certain of NRG's affiliates that have non-recourse debt financing, including
GenOn, NRG Yield, Inc. and their respective subsidiaries, and voting equity interests in excess of 66% of the total outstanding
voting equity interest of certain of NRG's foreign subsidiaries.
186
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 186
3/4/17 3:01 AM
Tax Exempt Bonds
Amount in millions, except rates
Indian River Power tax exempt bonds, due 2040
Indian River Power LLC, tax exempt bonds, due 2045
Dunkirk Power LLC, tax exempt bonds, due 2042
City of Texas City, tax exempt bonds, due 2045
Fort Bend County, tax exempt bonds, due 2038
Fort Bend County, tax exempt bonds, due 2042
Total
NRG Non-Recourse Debt
As of December 31,
2016
2015
Interest Rate %
$
$
$
57
190
59
22
54
73
455
$
57
190
59
22
54
73
455
6.000
5.375
5.875
4.125
4.750
4.750
The following are descriptions of certain indebtedness of NRG's subsidiaries that are outstanding as of December 31, 2016.
All of NRG's non-recourse debt is secured by the assets in the respective GenOn subsidiaries and project subsidiaries as further
described below. The net assets in the GenOn and project subsidiaries are subject to restrictions, including the ability to transfer
assets out of the subsidiaries. As of December 31, 2016, NRG had net assets of $4.9 billion that were deemed restricted for
purposes of Rule 4-08(e)(3)(ii) of Regulation S-X.
The indebtedness described below is non-recourse to NRG, unless otherwise noted.
GenOn Senior Notes
Amount in millions, except rates
Senior unsecured notes, due 2017
Senior unsecured notes, due 2018
Senior unsecured notes, due 2020
Total
As of December 31,
2016
2015
Interest Rate %
$
$
$
699
687
525
714
708
534
1,911
$
1,956
7.875
9.500
9.875
Under the GenOn Senior Notes and the related indentures, the GenOn Senior Notes are the sole obligation of GenOn and
are not guaranteed by any subsidiary or affiliate of GenOn. The GenOn Senior Notes are senior unsecured obligations of GenOn
having no recourse to any subsidiary or affiliate of GenOn. The GenOn Senior Notes restrict the ability of GenOn and its subsidiaries
to encumber their assets. The GenOn Senior Notes are subject to acceleration of GenOn's obligations thereunder upon the occurrence
of certain events of default, including: (a) default in interest payment for 30 days, (b) default in the payment of principal or premium,
if any, (c) failure after 90 days of specified notice to comply with any other agreements in the indenture, (d) certain cross-
acceleration events, (e) failure by GenOn or its significant subsidiaries to pay certain final and non-appealable judgments after 90
days and (f) certain events of bankruptcy and insolvency.
2015 Repurchase of GenOn Senior Notes
During the fourth quarter of 2015, the Company repurchased $119 million in aggregate principal of the following outstanding
Senior Notes for $108 million, including accrued interest.
Amount in millions, except rates
Senior unsecured notes, due 2017
Senior unsecured notes, due 2018
Senior unsecured notes, due 2020
Total
Principal
Repurchased
Average Early
Redemption Percentage
Gain on Debt
Extinguishment
33
25
61
119
95.172% $
90.950%
83.847%
$
3
5
15
23
$
$
187
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 187
3/4/17 3:01 AM
2018 and 2020 GenOn Senior Notes
The GenOn Senior Notes due 2018 and 2020 and the related indentures restrict the ability of GenOn to incur additional liens
and make certain restricted payments, including dividends and purchases of capital stock. In the event of a default or if restricted
payment tests are not satisfied, GenOn would not be able to distribute cash to its parent, NRG. At December 31, 2016, GenOn
failed the consolidated debt ratio component of the restricted payments test. Under the related indentures, the ability of GenOn to
make restricted payments, including dividends, loans and advances to NRG, is limited to specified exclusions, including up to
$250 million of such restricted payments. As of December 31, 2016, GenOn net assets of $368 million were deemed restricted
for purposes of Rule 4-08(e)(3)(ii) of Regulation S-X.
Prior to maturity, GenOn may redeem the senior notes due 2018, in whole or in part, at a redemption price equal to 100%
of the principal amount plus a premium and accrued and unpaid interest. The premium is the greater of: (i) 1% of the principal
amount of the notes; or (ii) the excess of the following: the present value of 100% of the note, plus interest payments due on the
note through maturity, discounted at a Treasury rate plus 0.50% over the principal amount of the note.
GenOn may redeem some or all of the Senior Notes due 2020 at redemption prices expressed as percentages of principal
amount as set forth in the following table, plus accrued and unpaid interest on the notes redeemed to the first applicable redemption
rate:
Redemption Period
October 15, 2016 to October 14, 2017
October 15, 2017 to October 14, 2018
October 15, 2018 and thereafter
2017 GenOn Senior Notes
Redemption
Percentage
103.292%
101.646%
100.000%
Prior to maturity, GenOn may redeem all or a part of the GenOn Senior Notes due 2017 at a redemption price equal to 100%
of the notes plus a premium and accrued and unpaid interest. The premium is the greater of: (i) 1% of the principal amount of
the notes; or (ii) the excess of the following: the present value of 100% of the note, plus interest payments due on the note through
maturity, discounted at a Treasury rate plus 0.50% over the principal amount of the note.
GenOn Americas Generation Senior Notes
Amount in millions, except rates
Senior unsecured notes, due 2021
Senior unsecured notes, due 2031
Total
As of December 31,
2016
2015
Interest Rate %
$
$
392
353
745
$
$
398
354
752
8.500
9.125
The GenOn Americas Generation Senior Notes due 2021 and 2031 are senior unsecured obligations of GenOn Americas
Generation, a wholly owned subsidiary of NRG, having no recourse to any subsidiary or affiliate of GenOn Americas Generation.
2015 Repurchase of GenOn Americas Generation Senior Notes
During the fourth quarter of 2015, the Company repurchased $155 million in aggregate principal of the following outstanding
Senior Notes for $128 million, including accrued interest.
Principal Repurchased
Average Early
Redemption Percentage
Gain on Debt
Extinguishment
Amount in millions, except rates
Senior unsecured notes, due 2021
Senior unsecured notes, due 2031
Total
84
71
155
84.910% $
77.018%
$
20
22
42
$
$
188
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 188
3/4/17 3:01 AM
2021 and 2031 GenOn Americas Senior Notes
Prior to maturity, GenOn Americas Generation may redeem all or a part of the senior notes due 2021 and 2031 at a redemption
price equal to 100% of the notes plus a premium and accrued and unpaid interest. The premium is the greater of: (i) the discounted
present value of the then-remaining scheduled payments of principal and interest on the outstanding notes, discounted at a Treasury
rate plus 0.375%, less the unpaid principal amount; and (ii) zero.
Yield Operating LLC Senior Notes
2024 Yield Operating Senior Notes
On August 5, 2014, Yield Operating issued $500 million of senior unsecured notes and utilized the proceeds to fund the
acquisition of the Alta Wind Assets. The Yield Operating senior notes bear interest at 5.375% and mature in August 2024. Interest
on the notes is payable semi-annually on February 15 and August 15 of each year, and commenced on February 15, 2015. The
notes are senior unsecured obligations of Yield Operating and are guaranteed by NRG Yield LLC, Yield Operating’s parent company,
and by certain of Yield Operating’s wholly owned current and future subsidiaries.
Yield LLC and Yield Operating LLC Revolving Credit Facility
NRG Yield LLC and its direct wholly owned subsidiary, NRG Yield Operating LLC, entered into a senior secured revolving
credit facility, which can be used for cash and for the issuance of letters of credit. At December 31, 2016, there was $60 million
of letters of credit issued under the revolving credit facility and no borrowing outstanding on the revolver.
Yield, Inc. Convertible Notes
2020 Yield Inc. Convertible Notes
On June 29, 2015, NRG Yield, Inc. closed on its offering of $287.5 million aggregate principal amount of 3.25% Convertible
Senior Notes due 2020, or the 2020 Convertible Notes. The 2020 Convertible Notes are convertible, under certain circumstances,
into NRG Yield, Inc. Class C common stock, cash or a combination thereof at an initial conversion price of $27.50 per Class C
common share, which is equivalent to an initial conversion rate of approximately 36.3636 shares of Class C common stock per
$1,000 principal amount of notes. Interest on the 2020 Convertible Notes is payable semi-annually in arrears on June 1 and
December 1 of each year, commencing on December 1, 2015. The 2020 Convertible Notes mature on June 1, 2020, unless earlier
repurchased or converted in accordance with their terms. Prior to the close of business on the business day immediately preceding
December 1, 2019, the 2020 Convertible Notes will be convertible only upon the occurrence of certain events and during certain
periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the
maturity date. The 2020 Convertible Notes are accounted for in accordance with ASC 470-20, under which issuers of convertible
debt instruments that may be settled in cash upon conversion, including partial cash settlement, are required to separately account
for the liability (debt) and equity (conversion option) components. The equity component, the $23 million conversion option
value, was recorded to NRG's noncontrolling interest for NRG Yield, Inc. with the offset to debt discount. The debt discount is
being amortized to interest expense over the term of the notes.
189
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 189
3/4/17 3:01 AM
2019 Yield Inc. Convertible Notes
In the first quarter of 2014, NRG Yield, Inc. closed on its offering of $345 million aggregate principal amount of 3.50%
Convertible Senior Notes due 2019, or the 2019 Convertible Notes. The 2019 Convertible Notes were convertible, under certain
circumstances, into NRG Yield, Inc. Class A common stock, cash or a combination thereof at an initial conversion price of $46.55
per Class A common share, which is equivalent to an initial conversion rate of approximately 21.4822 shares of Class A common
stock per $1,000 principal amount of 2019 Convertible Notes. Effective May 15, 2015, the conversion rate was adjusted to 42.9644
shares of Class A common stock per $1,000 principal amount of 2019 Convertible Notes in accordance with the terms of the related
indenture. Interest on the 2019 Convertible Notes is payable semi-annually in arrears on February 1 and August 1 of each year,
commencing on August 1, 2014. The 2019 Convertible Notes mature on February 1, 2019, unless earlier repurchased or converted
in accordance with their terms. Prior to the close of business on the business day immediately preceding August 1, 2018, the 2019
Convertible Notes will be convertible only upon the occurrence of certain events and during certain periods, and thereafter, at any
time until the close of business on the second scheduled trading day immediately preceding the maturity date. The 2019 Convertible
Notes are accounted for in accordance with ASC 470-20. The equity component, the $23 million conversion option value, was
recorded to NRG's noncontrolling interest for NRG Yield, Inc. with the offset to debt discount. The debt discount is being amortized
to interest expense over the term of the notes. The 2019 Convertible Notes are guaranteed by NRG Yield Operating LLC and
NRG Yield LLC.
NRG Yield Operating 2026 Senior Notes
On August 18, 2016, NRG Yield Operating LLC issued $350 million of senior unsecured notes, or the NRG Yield Operating
2026 Senior Notes. The NRG Yield Operating 2026 Senior Notes bear interest of 5.00% and mature on September 15, 2026.
Interest on the notes is payable semi-annually on March 15 and September 15 of each year, and will commence on March 15,
2017. The Yield Operating 2026 Senior Notes are senior unsecured obligations of NRG Yield Operating LLC and are guaranteed
by NRG Yield LLC, and by certain of NRG Yield Operating LLC’s wholly owned current and future subsidiaries. A portion of
the proceeds from the 2026 Senior Notes was used to repay NRG Yield Operating LLC's revolving credit facility.
Project Financings
The following are descriptions of certain indebtedness of NRG's project subsidiaries that are outstanding as of December 31,
2016.
Aqua Caliente Holdco Financing Agreement
On February 17, 2017, Agua Caliente Borrower I LLC and Agua Caliente Borrower II LLC, Agua Caliente Holdco, the
indirect owners 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. Net
proceeds were distributed to the Company.
Utah Portfolio
As part of the 2016 utility-scale solar and wind acquisition on November 2, 2016, as discussed in Note 3, Business Acquisitions
and Dispositions, NRG recorded $222 million of non-recourse project level debt. As of term conversion for the three associated
debt facilities, the Company borrowed an additional $65 million of non-recourse debt. Each facility bears interest of LIBOR plus
2.625% and matures on December 16, 2022.
Thermal Financing
On October 31, 2016, NRG Energy Center Minneapolis LLC, a subsidiary of NRG Yield, Inc., received proceeds of $125
million from the issuance of 3.55% Series D notes due October 31, 2031, or the Series D Notes, and entered into a shelf facility
for the anticipated issuance of an additional $70 million of notes. The Series D Notes are secured by substantially all of the assets
of NRG Energy Center Minneapolis LLC. NRG Thermal LLC has guaranteed the indebtedness and its guarantee is secured by a
pledge of the equity interests in all of NRG Thermal LLC’s subsidiaries. NRG Energy Center Minneapolis LLC distributed the
proceeds of the Series D Notes to NRG Thermal LLC, who in turn distributed the proceeds to NRG Yield Operating LLC to be
utilized for general corporate purposes, including potential acquisitions.
190
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 190
3/4/17 3:01 AM
Alta Wind X and Alta Wind XI due 2021
On June 30, 2015, the Company entered into a tax equity financing arrangement through which Yield Operating, a subsidiary
of NRG Yield, Inc., received $119 million in net proceeds. These proceeds, as well as proceeds obtained from the June 29, 2015,
NRG Yield, Inc. common stock issuance and the 2020 Convertible Notes issuance, were utilized to repay all of the outstanding
project indebtedness associated with Alta Wind X and Alta Wind XI facilities. The Company also settled interest rate swaps
associated with the project level debt for Alta Wind X and Alta Wind XI and incurred a fee of $17 million.
Alta Wind lease financing arrangements
Alta Wind Holdings (Alta Wind II - V) and Alta I have finance lease obligations issued under lease transactions whereby
the respective operating entities sold and leased back undivided interests in specific assets of the projects. All of the assets of Alta
I-V are pledged as collateral under these arrangements. The sale and related lease transactions are accounted for as financing
arrangements as the operating entities have continued involvement with the property.
Amount in millions,
except rates
Non-Recourse Debt
Alta Wind I
Alta Wind II
Alta Wind III
Alta Wind IV
Alta Wind V
Total
Lease Financing Arrangement
Letter of Credit Facility
Amount Outstanding as of
December 31, 2016
$
$
242
191
198
128
206
965
Interest Rate Maturity Date
12/30/2034
7.015%
5.696%
6.067%
5.938%
6.071%
12/30/2034
12/30/2034
12/30/2034
6/30/2035
Amount Outstanding as of
December 31, 2016
Interest Rate Maturity Date
$
$
3.250%
2.750%
2.750%
2.750%
2.750%
1/5/2021
6/30/2017&
12/31/2017
various
various
various
16
27
27
19
30
119
High Lonesome Mesa Facility
Prior to the Company's acquisition of EME, an intercompany tax credit agreement related to the High Lonesome Mesa facility
was terminated. The termination resulted in an event of default under the project financing arrangement. The Company received
additional default notices for various items. The facility is secured by the assets of High Lonesome Mesa and is non-recourse to
NRG.
On November 3, 2015, the lender sent a notice of acceleration and indicated that it would accept the Company's interest in
the assets in lieu of repayment. On January 27, 2016, High Lonesome Mesa, LLC, or HLM, filed at FERC for approval to transfer
100% of the ownership interests in HLM to subsidiaries of the lien holders, Macquarie Bank Limited and Hannon Armstrong
Capital, LLC. On March 2, 2016 HLM received FERC approval and on March 31, 2016 the Company transferred 100% of its
interest in HLM to the lien holders and deconsolidated HLM.
Dandan Financing
In December 2013, NRG, through its wholly-owned subsidiary, NRG Solar Dandan LLC, or Dandan, entered into a credit
agreement with a bank, or the Dandan Financing Agreement, for a $81 million construction loan and a $23 million cash grant
loan. On January 29, 2016, the construction loan converted to a $79 million term loan with $23 million outstanding under the cash
grant loan. In addition, a $4 million debt service letter of credit was issued replacing the $5 million construction letter of credit
that was outstanding at year end. In November 2016, Dandan repaid the $23 million outstanding under the cash grant loan,
including accrued interest and breakage fees, with the proceeds received from the U.S. Treasury Department. As of December 31,
2016, $76 million was outstanding under the term loan and $4 million in letters of credit in support of the project were issued.
El Segundo Energy Center Credit Agreement
On May 29, 2015, NRG West Holdings LLC amended its financing agreement to increase borrowings under the Tranche A
facility by $5 million and to reduce the related interest rate to LIBOR plus an applicable margin of 1.625% from May 29, 2015,
to August 31, 2017, LIBOR plus an applicable margin of 1.75% from September 1, 2017, to August 31, 2020, and LIBOR plus
1.875% from September 1, 2020, through the maturity date; and to reduce Tranche B loan interest rate to LIBOR plus an applicable
margin of 2.25% from May 29, 2015, to August 31, 2017, LIBOR plus 2.375% from September 1, 2017, to August 31, 2020, and
LIBOR plus an applicable margin of 2.50% from September 1, 2020, through the maturity date and to reduce the working capital
facility by $9 million. The proceeds of the increased borrowing were used to pay costs associated with the refinancing. Further,
the amendment resulted in a $7 million loss on debt extinguishment.
191
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 191
3/4/17 3:01 AM
As of December 31, 2016, under the West Holdings Credit Agreement, West Holdings had outstanding $385 million under
the Tranche A Facility, $58 million under the Tranche B Facility, issued a $33 million letter of credit in support of the PPA, issued
a $1 million letter of credit under the working capital facility, and issued a $48 million letter of credit under the facility in support
of its debt service requirements.
Peakers
On June 30, 2016, in contemplation of the sale of Rockford as further discussed in Note 3, Business Acquisitions and
Dispositions, NRG Peaker Finance Company LLC elected to redeem all of the outstanding bonds at a redemption price equal to
the principal amount plus a redemption premium, accrued and unpaid interest, swap breakage, and other fees, totaling approximately
$85 million in connection with the removal of NRG Rockford LLC, and NRG Rockford II, LLC from the peaker financing collateral
package. The Company recognized a $3 million loss on extinguishment of the debt related to the write-off of unamortized discount
during the second quarter of 2016. On July 12, 2016, NRG completed the sale of the Rockford generating stations.
Midwest Generation
On April 7, 2016, Midwest Generation, LLC, or MWG, entered into an agreement to sell certain quantities of unforced
capacity that has cleared various PJM Reliability Pricing Model auctions to a trading counterparty for net proceeds of $253 million.
MWG will continue to operate the applicable generation facilities and remains responsible for performance penalties and eligible
for performance bonus payments, if any. Accordingly, MWG will continue to account for all revenues and costs as before; however,
the proceeds will be recorded as a financing obligation while capacity payments by PJM to the counterparty will be reflected as
debt amortization and interest expense through the end of the 2018/19 delivery year. MWG will amortize the upfront discount to
interest expense, at an effective interest rate of 4.39%, over the term of the arrangement, through June 2019. As of December 31,
2016, $218 million was outstanding.
CVSR
On July 15, 2016, CVSR Holdco LLC, the indirect owner of the CVSR project, issued $200 million of senior secured notes.
The $199 million of net proceeds from the notes were distributed to a subsidiary of NRG and NRG Yield Operating LLC, the
owners of CVSR Holdco LLC, based on their pro-rata ownership. The notes were issued at par and bear an interest rate at 4.68%.
Interest is payable semi-annually beginning on September 30, 2016, until the maturity date of March 31, 2037.
Capistrano Refinancing
On July 13, 2016, Cedro Hill, Broken Bow and Crofton Bluffs, subsidiaries of Capistrano Wind Partners, each amended
their respective credit facilities to increase borrowings to a total of $312 million and to lower their respective interest rates. The
net proceeds of $87 million, were distributed to Capistrano Wind Partners and subsequently distributed to the holders of the Class
B preferred equity interests of Capistrano Wind Partners.
192
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 192
3/4/17 3:01 AM
Interest Rate Swaps — Project Financings
Many of NRG's project subsidiaries entered into interest rate swaps, intended to hedge the risks associated with interest rates
on non-recourse project level debt. These swaps amortize in proportion to their respective loans and are floating for fixed where
the project subsidiary pays its counterparty the equivalent of a fixed interest payment on a predetermined notional value and will
receive quarterly the equivalent of a floating interest payment based on the same notional value. All interest rate swap payments
by the project subsidiary and its counterparty are made quarterly, and the LIBOR is determined in advance of each interest period.
The following table summarizes the swaps, some of which are forward starting as indicated, related to NRG's project level debt
as of December 31, 2016.
Recourse Debt
NRG Energy
Non-Recourse Debt
El Segundo Energy Center
South Trent Wind LLC
South Trent Wind LLC
NRG Solar Roadrunner LLC
NRG Solar Alpine LLC
NRG Solar Alpine LLC
NRG Solar Avra Valley LLC
NRG Marsh Landing
Iron Springs
Four Brothers
Granite Mountain
DGPV 4
Other
EME Project Financings
Broken Bow
Cedro Hill
Crofton Bluffs
Laredo Ridge
Tapestry
Tapestry
Viento Funding II
Viento Funding II
Walnut Creek Energy
WCEP Holdings
Alta Wind Project Financings
AWAM
Total
% of
Principal
Fixed
Interest
Rate
Floating Interest Rate
Notional Amount at
December 31, 2016
(In millions)
Effective Date
Maturity Date
85% various
1-mo. LIBOR
$
1,000
June 30, 2016
June 30, 2021
75%
75%
75%
75%
85%
85%
85%
75%
80%
80%
80%
2.417% 3-mo. LIBOR
3.265% 3-mo. LIBOR
4.95% 3-mo. LIBOR
4.313% 3-mo. LIBOR
2.744% 3-mo. LIBOR
2.421% 3-mo. LIBOR
2.333% 3-mo. LIBOR
3.244% 3-mo. LIBOR
2.555% 1-mo. LIBOR
2.567% 1-mo. LIBOR
2.557% 1-mo. LIBOR
85% various
3-mo. LIBOR
75% various
various
75% various
3-mo. LIBOR
90% various
3-mo. LIBOR
75% various
3-mo. LIBOR
75%
75%
50%
2.310% 3-mo. LIBOR
2.210% 3-mo. LIBOR
3.570% 3-mo. LIBOR
90% various
6-mo. LIBOR
90%
4.985% 6-mo. LIBOR
75% various
3-mo. LIBOR
90%
4.003% 3-mo. LIBOR
100%
2.470% 3-mo. LIBOR
$
330 November 30, 2011
August 31, 2023
43
21
28
115
8
June 15, 2010
June 30, 2020
June 14, 2020
June 14, 2028
September 30, 2011
December 31, 2029
various
December 31, 2029
June 24, 2014
June 30, 2025
49 November 30, 2012
November 30, 2030
June 28, 2013
342
34 December 15, 2016
June 30, 2023
September 30, 2036
141 December 15, 2016
September 30, 2036
56 December 15, 2016
September 30, 2036
19
142
58
147
38
79
various
various
various
various
various
various
various
various
various
various
March 31, 2011
March 31, 2026
155 December 30, 2011
December 21, 2021
60 December 21, 2021
December 21, 2029
160
65
276
46
18
3,430
various
July 11, 2023
June 28, 2013
June 28, 2013
various
June 30, 2028
May 31, 2023
May 21, 2023
May 22, 2013
May 15, 2031
193
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 193
3/4/17 3:01 AM
Note 13 — Asset Retirement Obligations
The Company's AROs are primarily related to the future dismantlement of equipment on leased property and environmental
obligations related to nuclear decommissioning, ash disposal, site closures, and fuel storage facilities. In addition, the Company
has also identified conditional AROs for asbestos removal and disposal, which are specific to certain power generation operations.
See Note 6, Nuclear Decommissioning Trust Fund, for a further discussion of the Company's nuclear decommissioning
obligations. Accretion for the nuclear decommissioning ARO and amortization of the related ARO asset are recorded to the Nuclear
Decommissioning Trust Liability to the ratepayers and are not included in net income, consistent with regulatory treatment.
The following table represents the balance of ARO obligations as of December 31, 2016 and 2015, along with the additions,
reductions and accretion related to the Company's ARO obligations for the year ended December 31, 2016:
Balance as of December 31, 2015
Revisions in estimates for current obligations
Additions
Spending for current obligations
Accretion — Expense
Accretion — Nuclear decommissioning
Balance as of December 31, 2016
(In millions)
945
(103)
49
(8)
42
15
940
$
$
Note 14 — Benefit Plans and Other Postretirement Benefits
NRG sponsors and operates defined benefit pension and other postretirement plans. As part of the GenOn acquisition in
2012, NRG assumed GenOn's defined benefit pension plans and other postretirement benefit plans, and GenOn's benefit plan
obligations were recorded at fair value at the time of the acquisition. NRG expects to contribute $36 million to the Company's
pension plans in 2017.
NRG pension benefits are available to eligible non-union and union employees through various defined benefit pension
plans. These benefits are based on pay, service history and age at retirement. Most pension benefits are provided through tax-
qualified plans. Certain executive pension benefits that cannot be provided by the tax-qualified plans are provided through unfunded
non-tax-qualified plans. NRG also provides postretirement health and welfare benefits for certain groups of employees. Cost
sharing provisions vary by the terms of any applicable collective bargaining agreements.
As part of the change in control associated with the GenOn acquisition, NRG decided to terminate/settle the nonqualified
legacy GenOn Benefit Restoration Plan and Supplemental Executive Retirement Plan. Final settlement payments totaling $12
million were paid to remaining participants during 2014. On December 31, 2014, NRG merged eight qualified pension plans into
two separate qualified pension plans, the NRG Pension Plan for Bargained Employees and the NRG Pension Plan. The NRG
Pension Plan for Bargained Employees, GenOn Mirant Bargaining Unit Pension Plan, GenOn First Energy Pension Plan, GenOn
Duquesne Pension Plan, and GenOn REMA Pension Plan were merged into the NRG Pension Plan for Bargained Employees. The
NRG Texas Retirement Plan, and GenOn Mirant Pension Plan were merged into the NRG Pension Plan for Non-Bargained
Employees and renamed the NRG Pension Plan. These actions were conducted to simplify internal administration of the plans,
reduce regulatory filings, and lower fees paid to outside vendors. The benefits provided to current participants in the Plans were
not impacted. As controlled group members, ERISA requires that NRG and GenOn are jointly and severally liable for the NRG
Pension Plan for Bargained Employees and the NRG Pension Plan, including pension liabilities associated with GenOn employees.
194
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 194
3/4/17 3:01 AM
NRG Defined Benefit Plans
The annual net periodic benefit cost/(credit) related to NRG's pension and other postretirement benefit plans include the
following components:
Service cost benefits earned
Interest cost on benefit obligation
Expected return on plan assets
Amortization of unrecognized net loss/(gain)
Net periodic benefit cost
Service cost benefits earned
Interest cost on benefit obligation
Amortization of unrecognized prior service credit
Amortization of unrecognized net loss
Curtailment gain
Net periodic benefit cost/(credit)
2016
Year Ended December 31,
Pension Benefits
2015
(In millions)
2014
30
43
(60)
2
15
$
$
32
53
(62)
2
25
$
$
Year Ended December 31,
Other Postretirement Benefits
2016
2015
(In millions)
2014
2
6
(5)
—
—
3
$
$
$
3
9
(5)
1
(14)
(6) $
30
53
(62)
(6)
15
3
9
(17)
—
—
(5)
$
$
$
$
A comparison of the pension benefit obligation, other postretirement benefit obligations and related plan assets for NRG's
plans on a combined basis is as follows:
Benefit obligation at January 1
Service cost
Interest cost
Plan amendments
Actuarial loss/(gain)
Employee and retiree contributions
Benefit payments
Curtailment
Benefit obligation at December 31
Fair value of plan assets at January 1
Actual return on plan assets
Employee and retiree contributions
Employer contributions
Benefit payments
Fair value of plan assets at December 31
Funded status at December 31 — excess of obligation
over assets
As of December 31,
Pension Benefits
Other Postretirement
Benefits
2016
2015
2016
2015
(In millions)
$
$
1,196
30
43
—
40
—
(68)
—
1,241
916
72
—
33
(68)
953
$
1,305
32
53
—
(120)
—
(74)
—
1,196
988
(26)
—
28
(74)
916
$
178
2
6
(42)
(2)
3
(17)
—
128
—
—
3
14
(17)
—
238
3
9
(6)
(31)
2
(12)
(25)
178
—
—
2
10
(12)
—
$
(288) $
(280) $
(128) $
(178)
195
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Amounts recognized in NRG's balance sheets were as follows:
Current liabilities
Non-current liabilities
As of December 31,
Pension Benefits
Other Postretirement
Benefits
2016
2015
2016
2015
$
— $
288
(In millions)
— $
280
$
8
120
12
166
Amounts recognized in NRG's accumulated OCI that have not yet been recognized as components of net periodic benefit
cost were as follows:
Net loss/(gain)
Prior service cost/(credit)
As of December 31,
Pension Benefits
Other Postretirement
Benefits
2016
2015
2016
2015
$
$
94
3
(In millions)
$
68
3
(11) $
(45)
(9)
(9)
Other changes in plan assets and benefit obligations recognized in OCI were as follows:
Year Ended December 31,
Pension
Benefits
Other Postretirement
Benefits
2016
2015
2016
2015
Net actuarial loss/(gain)
Amortization of net actuarial (gain)/loss
Prior service credit
Amortization of prior service cost
Curtailment
Total recognized in other comprehensive loss/(income)
Total recognized in net periodic pension cost/(credit) and
other comprehensive loss/(income)
$
$
$
28
(2)
—
—
—
26
41
$
$
$
(In millions)
(31) $
(2)
(1)
—
—
(34) $
(2) $
—
(41)
5
—
(38) $
(8) $
36
$
(31)
(1)
(7)
5
(11)
(45)
(37)
The Company's estimated unrecognized loss and unrecognized prior service cost for NRG's pension plan that will be
amortized from accumulated OCI to net periodic cost over the next fiscal year is approximately $4 million. The Company's
estimated unrecognized gain and unrecognized prior service credit for NRG's postretirement plan that will be amortized from
accumulated OCI to net periodic cost over the next fiscal year is $1 million and $8 million, respectively.
The following table presents the balances of significant components of NRG's pension plan:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
As of December 31,
Pension Benefits
2016
2015
$
(In millions)
$
1,241
1,174
953
1,196
1,115
916
196
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NRG's market-related value of its plan assets is the fair value of the assets. The fair values of the Company's pension plan
assets by asset category and their level within the fair value hierarchy are as follows:
Common/collective trust investment — U.S. equity
Common/collective trust investment — non-U.S. equity
Common/collective trust investment — global equity
Common/collective trust investment — fixed income
Partnerships/joint ventures
Short-term investment fund
Total
Common/collective trust investment — U.S. equity
Common/collective trust investment — non-U.S. equity
Common/collective trust investment — global equity
Common/collective trust investment — fixed income
Partnerships/joint ventures
Short-term investment fund
Total
Fair Value Measurements as of December 31, 2016
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Observable Inputs
(Level 2)
(In millions)
Total
$
$
— $
—
—
—
—
3
3
$
283
149
104
383
31
—
950
$
$
Fair Value Measurements as of December 31, 2015
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Observable Inputs
(Level 2)
(In millions)
Total
$
$
— $
—
—
—
—
6
6
$
255
147
90
400
18
—
910
$
$
283
149
104
383
31
3
953
255
147
90
400
18
6
916
In accordance with ASC 820, the Company determines the level in the fair value hierarchy within which each fair value
measurement in its entirety falls, based on the lowest level input that is significant to the fair value measurement in its entirety.
The fair value of the common/collective trusts is valued at fair value which is equal to the sum of the market value of all of the
fund's underlying investments, and is categorized as Level 2. Partnerships/joint ventures Level 2 investments consist primarily
of a partnership which invests in emerging market equity securities. There are no investments categorized as Level 3.
The following table presents the significant assumptions used to calculate NRG's benefit obligations:
Weighted-Average Assumptions
Discount rate
Rate of compensation increase
Health care trend rate
As of December 31,
Pension Benefits
Other Postretirement Benefits
2016
2015
2016
2015
4.26%
3.00%
—
4.52%
3.00%
—
4.29%
N/A
7.0% grading to
5.0% in 2025
4.55%
N/A
7.25% grading to
5.0% in 2025
197
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 197
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The following table presents the significant assumptions used to calculate NRG's benefit expense:
Pension Benefits
Other Postretirement Benefits
As of December 31,
Weighted-Average
Assumptions
Discount rate
Expected return on plan
assets
Rate of compensation
increase
2016
2015
2014
2016
2015
2014
4.52%
4.16%
4.99%
4.55%
4.20%
5.06%
6.65%
6.36%
6.81%
3.00%
3.45%
3.65%
—
—
—
—
—
—
Health care trend rate
—
—
7.25% grading
to 5.0% in 2025
8.6% grading to
5.0% in 2023
8.5% grading to
5.5% in 2019
—
NRG uses December 31 of each respective year as the measurement date for the Company's pension and other postretirement
benefit plans. The Company sets the discount rate assumptions on an annual basis for each of NRG's defined benefit retirement
plans as of December 31. The discount rate assumptions represent the current rate at which the associated liabilities could be
effectively settled at December 31. The Company utilizes the Aon Hewitt AA Above Median, or AA-AM, yield curve to select
the appropriate discount rate assumption for each retirement plan. The AA-AM yield curve is a hypothetical AA yield curve
represented by a series of annualized individual spot discount rates from 6 months to 99 years. Each bond issue used to build this
yield curve must be non-callable, and have an average rating of AA when averaging available Moody's Investor Services, Standard
& Poor's and Fitch ratings.
NRG employs a total return investment approach, whereby a mix of equities and fixed income investments are used to
maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration
of plan liabilities, plan funded status, and corporate financial condition. The Investment Committee reviews the asset mix
periodically and as the plan assets increase in future years, the Investment Committee may examine other asset classes such as
real estate or private equity. NRG employs a building block approach to determining the long-term rate of return assumption for
plan assets, with proper consideration given to diversification and rebalancing. Historical markets are studied and long-term
historical relationships between equities and fixed income are preserved, consistent with the widely accepted capital market
principle that assets with higher volatility generate a greater return over the long run. Current factors such as inflation and interest
rates are evaluated before long-term capital market assumptions are determined. Peer data and historical returns are reviewed to
check for reasonableness and appropriateness.
In 2016, NRG changed the approach utilized to estimate the service cost and interest cost components of net periodic benefit
cost for pension and postretirement benefit plans. Historically, the Company estimated these components by using a single weighted
average discount rate derived from the yield curve used to measure the benefit obligation. The Company has elected to use a spot
rate approach in the estimation of the components of benefit cost by applying specific spot rates along the yield curve to the
relevant projected cash flows, as this provides a better estimate of service and interest costs. This election is considered a change
in estimate and, accordingly, has been accounted for starting in 2016. This change does not affect the measurement of NRG's total
benefit obligation.
The target allocations of NRG's pension plan assets were as follows for the year ended December 31, 2016:
U.S. equity
Non-U.S. equity
Global equity
Emerging market equity
U.S. fixed income
27%
15%
10%
3%
45%
Plan assets are currently invested in a diversified blend of equity and fixed-income investments. Furthermore, equity
investments are diversified across U.S., non-U.S., global, and emerging market equities, as well as among growth, value, small
and large capitalization stocks.
198
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Investment risk and performance are monitored on an ongoing basis through quarterly portfolio reviews of each asset fund
class to a related performance benchmark, if applicable, and annual pension liability measurements. Performance benchmarks
are composed of the following indices:
Asset Class
Index
U.S. equities
Non-U.S. equities
Global equities
Emerging market equities
Fixed income securities
Dow Jones U.S. Total Stock Market Index
MSCI All Country World Ex-U.S. IMI Index
MSCI World Index
MSCI Emerging Markets Index
Barclays Capital Long Term Government/Credit Index &
Barclays Strips 20+ Index
NRG's expected future benefit payments for each of the next five years, and in the aggregate for the five years thereafter,
are as follows:
2017
2018
2019
2020
2021
2022-2026
Other Postretirement Benefit
Pension
Benefit Payments
Benefit Payments
(In millions)
Medicare Prescription
Drug Reimbursements
$
$
66
69
72
76
79
417
$
8
8
8
9
9
38
—
—
—
—
—
1
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-
percentage-point change in assumed health care cost trend rates would have the following effect:
Effect on total service and interest cost components
Effect on postretirement benefit obligation
STP Defined Benefit Plans
1-Percentage-
Point Increase
1-Percentage-
Point Decrease
$
(In millions)
$
1
9
—
(8)
NRG has a 44% undivided ownership interest in STP, as discussed further in Note 27, Jointly Owned Plants. STPNOC,
which operates and maintains STP, provides its employees a defined benefit pension plan as well as postretirement health and
welfare benefits. Although NRG does not sponsor the STP plan, it reimburses STPNOC for 44% of the contributions made towards
its retirement plan obligations. For the year ended December 31, 2016, NRG reimbursed STPNOC $7 million towards its defined
benefit plans. For the year ended December 31, 2015, NRG reimbursed STPNOC $9 million towards its defined benefit plans. In
2017, NRG expects to reimburse STPNOC $12 million for its contribution towards the plans.
The Company has recognized the following in its statement of financial position, statement of operations and accumulated
OCI related to its 44% interest in STP:
As of December 31,
Pension Benefits
Other Postretirement Benefits
2016
2015
2016
2015
Funded status — STPNOC benefit plans
Net periodic benefit cost/(credit)
Other changes in plan assets and benefit obligations
recognized in other comprehensive income/(loss)
$
(74) $
7
11
(In millions)
(63) $
10
(8)
(23) $
(2)
(1)
(26)
(8)
6
199
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Defined Contribution Plans
NRG's employees are also eligible to participate in defined contribution 401(k) plans. Upon completion of the GenOn
acquisition, NRG assumed GenOn's defined contribution 401(k) plans and amended the plan covering the majority of employees
with NRG 401(k) plan features, effective January 1, 2013. On July 5, 2013, the GenOn defined contribution 401(k) plans were
merged into the NRG 401(k) plan.
The Company's contributions to these plans were as follows:
Year Ended December 31,
2016
2015
(In millions)
2014
Company contributions to defined contribution plans
$
55
$
53
$
47
Note 15 — Capital Structure
For the period from December 31, 2013 to December 31, 2016, the Company had 10,000,000 shares of preferred stock
authorized, and 500,000,000 shares of common stock authorized. The following table reflects the changes in NRG's common
shares issued and outstanding for each period presented:
Balance as of December 31, 2013
Shares issued under ESPP
Shares issued under LTIPs
Shares issued in connection with the EME acquisition
Share repurchases
Balance as of December 31, 2014
Shares issued under ESPP
Shares issued under LTIPs
Share repurchases
Balance as of December 31, 2015
Shares issued under ESPP
Shares issued under LTIPs
Balance as of December 31, 2016
Common Stock
Issued
401,126,780
—
1,707,419
12,671,977
—
415,506,176
—
1,433,774
—
416,939,950
—
643,875
417,583,825
Common
Treasury
(77,347,528)
128,336
—
—
(1,624,360)
(78,843,552)
283,139
—
(24,189,495)
(102,749,908)
609,094
—
(102,140,814)
Outstanding
323,779,252
128,336
1,707,419
12,671,977
(1,624,360)
336,662,624
283,139
1,433,774
(24,189,495)
314,190,042
609,094
643,875
315,443,011
The following table summarizes NRG's common stock reserved for the maximum number of shares potentially issuable
based on the conversion and redemption features of the long-term incentive plans as of December 31, 2016:
Equity Instrument
Long-term incentive plans
Common Stock
Reserve Balance
17,336,092
Common stock dividends — In 2014, NRG paid quarterly dividends on the Company's common stock of $0.14 per share, or
$0.56 per share on an annualized basis. In 2015, the Company increased its annual common stock dividend by 4% to $0.58 per
share and in 2016, as part of the 2016 Capital Allocation Program, the Company decreased its annual common stock dividend by
79% to $0.12 per share. The following table lists the dividends paid per common share during 2016, 2015 and 2014:
2016
2015
2014
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
$
$
$
0.030
0.145
0.140
$
$
$
0.030
0.145
0.140
$
$
$
0.030
0.145
0.140
$
$
$
0.145
0.145
0.120
On January 18, 2017, NRG declared a quarterly dividend on the Company's common stock of $0.03 per share, or $0.12 per
share on an annualized basis, payable on February 15, 2017, to stockholders of record as of February 1, 2017.
200
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Employee Stock Purchase Plan — Under the ESPP, eligible employees may elect to withhold up to 10% of their eligible
compensation to purchase shares of NRG common stock at the lesser of 85% of its fair market value on the offering date or 85%
of the fair market value on the exercise date. An offering date occurs each January 1 and July 1. An exercise date occurs each
June 30 and December 31. As of December 31, 2016, there remained 667,819 shares of treasury stock reserved for issuance under
the ESPP, and in the first quarter of 2017, 282,530 shares of common stock were issued to employee accounts from treasury stock.
Share Repurchases — During 2015 and 2014, the Company's board of directors authorized share repurchases of $481 million
of its common stock, which were made as follows:
Board Authorized Share Repurchases
Fourth Quarter 2014
First Quarter 2015
Second Quarter 2015
Third Quarter 2015
Fourth Quarter 2015
Total Board Authorized Share Repurchases
Total number of
shares purchased
Average
price paid
per share (a)
Amounts paid for
shares purchased
(in millions) (a)
1,624,360
$
26.95
$
3,146,484
4,379,907
11,104,184
5,558,920
25,813,855
25.15
24.53
15.06
15.03
$
44
79
107
167
84
481
(a) The average price paid per share and amounts paid for shares purchased exclude the commissions of $0.015 per share paid in connection with the share
repurchase.
Preferred Stock
2.822% Redeemable Preferred Stock
Preferred Stock
On December 23, 2014, NRG and the Credit Suisse Group amended and restated its 250,000 shares of 3.625% Convertible
Perpetual Preferred Stock, or 3.625% Preferred Stock, which is treated as redeemable preferred stock, initially issued on August
11, 2005, to the Credit Suisse Group in a private placement. The amendment resulted in a reduction of the rate from 3.625% to
2.822% and is hereby referred to as the 2.822% Preferred Stock. The transaction was accounted for as an extinguishment of the
3.625% Preferred Stock and the issuance of new 2.822% Preferred Stock. The loss on extinguishment of the 3.625% Preferred
Stock of $42 million represents the increase in redeemable preferred stock as the Company recorded the 2.822% Preferred Stock
at a fair value of $291 million in connection with the amendment. The loss on extinguishment of $42 million as well as $5 million
in consent fees paid to Credit Suisse, were recorded as a dividend on the preferred shares. This amount reduced net income to
arrive at net income/(loss) available to NRG common stockholders in the calculation of earnings per share for the year ended
December 31, 2014.
On May 24, 2016, NRG entered an agreement with Credit Suisse Group to repurchase 100% of the outstanding shares of its
$344.5 million 2.822% preferred stock. On June 13, 2016, the Company completed the repurchase from Credit Suisse of 100%
of the outstanding shares at a price of $226 million. The transaction resulted in a gain on redemption of $78 million, measured as
the difference between the fair value of the cash consideration paid upon redemption of $226 million and the carrying value of
the preferred stock at the time of the redemption of $304 million. This amount is reflected in net income/(loss) available to NRG
common stockholders in the calculation of earnings per share.
201
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The following table reflects the changes in the Company's redeemable preferred stock balance for the years ended
December 31, 2016, 2015, and 2014:
Balance as of December 31, 2013
Loss recorded in connection with extinguishment of 3.625% preferred stock and issuance of 2.822%
preferred stock
Balance as of December 31, 2014
Accretion to redemption value
Balance as of December 31, 2015
Accretion to redemption value
Repurchase of 2.822% redeemable preferred stock
Gain on redemption of 2.822% redeemable preferred stock
Balance as of December 31, 2016
(In millions)
$
$
249
42
291
11
302
2
(226)
(78)
—
Note 16 — Investments Accounted for by the Equity Method and Variable Interest Entities
Entities that are not Consolidated
NRG accounts for the Company's significant investments using the equity method of accounting. NRG's carrying value of
equity investments can be impacted by impairments, unrealized gains and losses on derivatives and movements in foreign currency
exchange rates, as well as other adjustments.
The following table summarizes NRG's equity method investments as of December 31, 2016:
Name
Avenal Solar Holdings LLC (a)
Community Wind North, LLC
Desert Sunlight Investment Holdings, LLC (a)
Elkhorn Ridge Wind, LLC (a)
GenConn Energy LLC (a)
Four Brothers Holdings (c)
Granite Mountain Renewables (c)
Iron Springs Renewables (c)
Midway-Sunset Cogeneration Company
Petra Nova Parish Holdings LLC
Saguaro Power Company
San Juan Mesa Wind Project, LLC (a)
Sherbino I Wind Farm LLC
Watson Cogeneration Company
Gladstone Power Station (b)
Other
Total equity investments in affiliates
(a) Equity method investments owned by NRG Yield
(b) Gladstone Power Station is located in Australia
(c) Economic interest based on cash to be distributed
Undistributed earnings from equity investments
202
Economic
Interest
Investment
Balance
(In millions)
50.0% $
99.0%
25.0%
47.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
75.0%
50.0%
49.0%
37.5%
Various
$
(7)
21
282
85
106
208
90
48
22
34
(14)
74
—
26
132
13
1,120
As of December 31,
2016
2015
$
(In millions)
101
$
55
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 202
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Utility-Scale Solar Portfolio — As described in Note 3, Business Acquisitions and Dispositions, on November 2, 2016, the
Company acquired equity interests in a tax equity portfolio, located in Utah, comprised of 530 MW of mechanically-complete solar
assets. These equity interests in Four Brothers Holdings, Granite Mountain Renewables, and Iron Springs Renewables are accounted
for as equity method investments.
Variable Interest Entities
NRG accounts for its interests in certain entities that are considered VIEs under ASC 810, for which NRG is not the primary
beneficiary, under the equity method.
GenConn — NRG owns a 50% interest in GenConn, a limited liability company formed to construct, own and operate two
190 MW peaking generation facilities in Connecticut at NRG's Devon and Middletown sites.
GenConn has a $237 million note with an interest rate of 4.73% and a maturity date of July 2041 and a 5-year, $35 million
working capital facility which can be used to issue letters of credit at an interest rate of 1.875%. As of December 31, 2016, $212
million was outstanding under the note and $14 million was drawn on the working capital facility. The note is secured by all of the
GenConn assets. NRG's maximum exposure to loss is limited to its equity investment, which was $106 million as of December 31,
2016.
Sherbino — NRG owns a 50% interest in Sherbino, a joint venture with BP Wind Energy North America Inc. Sherbino is a
150 MW wind farm, which commenced commercial operations in October 2008. In December 2008, Sherbino entered into a 15-
year term loan facility which is non-recourse to NRG. As of December 31, 2016, the outstanding principal balance of the term
loan facility was $72 million, and is secured by substantially all of Sherbino's assets and membership interests. During the fourth
quarter of 2016, the Company recorded an other-than-temporary impairment loss equal to the full value of its investment in Sherbino
of $70 million as further described in Note 10, Asset Impairments.
Other Equity Investments
Gladstone — Through a joint venture, NRG owns a 37.5% interest in Gladstone, a 1,613 MW coal-fueled power generation
facility in Queensland, Australia. The power generation facility is managed by the joint venture participants and the facility is
operated by NRG. Operating expenses incurred in connection with the operation of the facility are funded by each of the participants
in proportion to their ownership interests. Coal is sourced from local mines in Queensland. NRG and the joint venture participants
receive their respective share of revenues directly from the off takers in proportion to the ownership interests in the joint venture.
Power generated by the facility is primarily sold to an adjacent aluminum smelter, with excess power sold to the Queensland
Government owned utility under long term supply contracts. NRG's investment in Gladstone was $132 million as of December 31,
2016.
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. For one of the tax equity arrangements, the Company has a deficit restoration obligation equal
to $88 million as of December 31, 2016, 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)
Current assets
Net property, plant and equipment
Other long-term assets
Total assets
Current liabilities
Long-term debt
Other long-term liabilities
Total liabilities
Noncontrolling interests
December 31, 2016
87
$
December 31, 2015
84
$
1,534
954
2,575
59
442
183
684
529
1,807
863
2,754
56
366
179
601
493
Net assets less noncontrolling interests
$
1,362
$
1,660
203
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 203
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Note 17 — 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 earnings/(loss) per share while giving effect to all potentially dilutive common shares that were
outstanding during the period.
Dilutive effect for equity compensation and other equity instruments — The outstanding non-qualified stock options, non-
vested restricted stock units, and market stock units are not considered outstanding for purposes of computing basic earnings/
(loss) per share. However, these instruments are included in the denominator for purposes of computing diluted earnings/(loss)
per share under the treasury stock method. The if-converted method was used to determine the dilutive effect of embedded
derivatives in the Company's 2.822% Preferred Stock for the years ended December 31, 2015 and 2014. During 2016, the Company
repurchased 100% of the outstanding shares of its 2.822% preferred stock.
The reconciliation of NRG's basic earnings/(loss) per share to diluted earnings/(loss) per share is shown in the following
table:
Basic (loss)/earnings per share attributable to NRG common stockholders
Net (loss)/income attributable to NRG Energy, Inc.
Dividends for preferred shares
Dividends for refinancing of preferred shares
Gain on redemption of 2.822% redeemable perpetual preferred shares
(Loss)/Income Available to Common Stockholders
Weighted average number of common shares outstanding
(Loss)/Earnings per weighted average common share — basic
Diluted (loss)/earnings per share attributable to NRG common stockholders
Weighted average number of common shares outstanding
Incremental shares attributable to the issuance of equity compensation (treasury stock
$
$
$
method)
Total dilutive shares
Year Ended December 31,
2016
2015
2014
(In millions, except per share amounts)
(774) $
(6,382) $
134
5
—
(78)
20
—
—
(701) $
(6,402) $
316
329
(2.22) $
(19.46) $
316
—
316
329
—
329
9
47
—
78
334
0.23
334
5
339
0.23
(Loss)/Earnings per weighted average common share — diluted
$
(2.22) $
(19.46) $
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 earnings/(loss) per share:
Equity compensation
Embedded derivative of 2.822% redeemable perpetual preferred stock
Total
Year Ended December 31,
2016
2015
2014
(In millions of shares)
5
—
5
6
16
22
1
16
17
204
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 204
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Note 18 — Segment Reporting
The Company's segment structure reflects how management currently makes financial decisions and allocates resources.
During January 2017, the Company's businesses are segregated as follows: Generation, which includes generation, international
and BETM (previously part of Corporate); Retail which includes Mass customers (previously Retail Mass), and Business Solutions,
which includes C&I customers and other distributed and reliability products (previously in the Generation segment); Renewables,
which includes solar and wind assets, excluding those in NRG Yield; NRG Yield; and corporate activities. The Company's corporate
segment includes residential solar and electric vehicle services. Intersegment sales are accounted for at market. The financial
information for years ended December 31, 2016, 2015, and 2014 have been recast to reflect these changes.
NRG Yield includes certain of the Company's contracted generation assets. On September 1, 2016 NRG Yield acquired the
remaining 51.05% interest in CVSR Holdco LLC, which indirectly owns the CVSR solar facility, from the Company. This
acquisition was accounted for as transfers of entities under common control and accordingly, all historical periods have been recast
to reflect this change.
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) and net income/(loss) attributable to NRG Energy, Inc.
During the years ended December 31, 2016, 2015 and 2014, the Company had one customer in the East region within
Generation which comprised more than 10% of the Company's consolidated revenues.
For the Year Ended December 31, 2016
Operating revenues(a)
Operating expenses
Depreciation and amortization
Impairment losses
Acquisition-related transaction and integration costs
Development costs
Generation(a) Retail (a) Renewables(a)
$
5,679
4,922
702
645
—
22
$ 6,336
$
5,169
115
1
—
4
417
215
190
56
—
40
Total operating cost and expenses
6,291
5,289
NRG
Yield(a)
(In millions)
$ 1,021
Corporate(a)
Eliminations
Total
$
77
$
(1,179) $
12,351
322
297
183
1
—
803
—
218
37
—
3
—
(274)
(16)
501
—
(84)
(30)
(105)
1
—
(108)
(326)
212
63
33
7
24
339
(78)
(340)
7
(21)
62
(142)
(658)
(1,092)
37
(1,129) $
(1,184)
—
—
—
—
9,656
1,367
918
8
90
(1,184)
12,039
—
5
18
—
(61)
—
59
21
—
21
$
215
527
27
(268)
42
(142)
(1,061)
(875)
16
(891)
294
(318)
(5)
(142)
36
—
(79)
(508)
(1)
1,046
—
—
1
—
(1)
1,046
(1)
1
(507) $ 1,045
$
(20)
(306) $
(1)
(15) $
—
—
(13)
(54)
16
(66)
(117)
(507) $ 1,045
$
(293) $
39
$
(1,145) $
87
$
(774)
204
767
199
$
— $
12
340
372
330
12
$
710
$
91
$
(257) $
23
110
111
—
1,120
1,242
662
13,256
$ 1,977
$
5,280
$ 8,383
$
15,590
$
(14,131) $
30,355
955
$
4
$
23
$
8
$
189
$
— $
1,179
205
Gain/(loss) on sale of assets
Operating (loss)/income
Equity in (losses)/earnings of unconsolidated
affiliates
Impairment losses on investments
Other income, net
Loss on debt extinguishment
Interest expense
(Loss)/income before income taxes
Income tax (benefit)/expense
Net (loss)/income
Less: Net (loss)/income attributable to
noncontrolling interests and redeemable
noncontrolling interests
Net (loss)/income attributable to NRG Energy,
Inc.
Balance sheet
Equity investments in affiliates
Capital expenditures (b)
Goodwill
Total assets
(a) Inter-segment sales and net derivative gains and
losses included in operating revenues
(b) Includes accruals.
$
$
$
$
$
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 205
3/4/17 3:01 AM
For the Year Ended December 31, 2015
Generation(a) Retail (a) Renewables(a)
Corporate(a)
Eliminations
Total
39
$
(1,170) $
392
185
181
13
—
52
431
—
(39)
9
—
3
—
—
(83)
(110)
(18)
(92)
NRG
Yield(a)
(In millions)
$
953
$
333
297
—
3
—
633
—
320
26
—
3
(9)
—
(263)
77
12
65
19
291
59
132
6
63
551
—
(512)
—
(42)
78
84
(14)
(779)
(1,185)
1,347
(2,532)
(37)
(1,149)
—
22
—
—
14,674
11,983
1,566
5,030
10
146
(1,127)
18,735
—
(43)
(9)
—
(98)
—
—
95
(55)
—
(55)
(42)
21
(4,040)
36
(56)
33
75
(14)
(1,128)
(5,094)
1,342
(6,436)
(54)
—
—
6
(4,446) $
624
$
(98) $
46
$
(2,495) $
(13) $
(6,382)
334
792
536
$
— $
36
340
134
163
12
$
697
$
30
—
127
246
111
$
(247) $
—
—
1,045
1,267
999
17,625
$
2,017
$
5,142
$
8,689
$
19,720
$
(20,311) $
32,882
898
$
6
$
25
$
29
$
212
$
— $
1,170
Operating revenues(a)
Operating expenses
Depreciation and amortization
Impairment losses
Acquisition-related transaction and integration
costs
Development costs
$
7,546
$
6,914
$
6,210
896
4,827
—
27
6,113
133
36
1
4
Total operating cost and expenses
11,960
6,287
21
(4,393)
10
(14)
48
—
—
(97)
(4,446)
—
(4,446)
—
627
—
—
(1)
—
—
(1)
625
1
624
Gain on postretirement benefits curtailment
Operating (loss)/income
Equity in earnings/(losses) of unconsolidated
affiliates
Impairment losses on investments
Other income, net
(Loss)/gain on debt extinguishment
Loss on sale of equity method investment
Interest expense
(Loss)/income before income taxes
Income tax expense/(benefit)
Net (loss)/income
Less: Net income/(loss) attributable to
noncontrolling interests and redeemable
noncontrolling interests
Net (loss)/income attributable to
NRG Energy, Inc.
Balance sheet
Equity investments in affiliates
Capital expenditures(b)
Goodwill
Total assets
$
$
$
(a) Inter-segment sales and net derivative gains
and losses included in operating revenues
$
(b) Includes accruals.
206
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 206
3/4/17 3:01 AM
Operating revenues(a)
Operating expenses
Depreciation and amortization
Impairment losses
Acquisition-related transaction and integration
costs
Development costs
Total operating costs and expenses
Gain on sale of assets
Operating income/(loss)
Equity in earnings/(losses)of unconsolidated
affiliates
Other income, net
Gain on sale of equity method investment
Loss on debt extinguishment
Interest expense
Income/(loss) before income taxes
Income tax expense/(benefit)
Net income/(loss)
Less: Net (loss)/income attributable to
noncontrolling interests and redeemable
noncontrolling interests
Net income/(loss) attributable to NRG Energy,
Inc.
(a) Inter-segment sales and net derivative gains
and losses included in operating revenues
$
$
$
Generation(a)
Retail(a)
$
9,288
$
7,393
6,985
7,270
957
87
1
12
8,042
19
1,265
23
39
18
—
(94)
1,251
3
1,248
134
—
3
1
7,408
—
(15)
—
—
—
—
(2)
(17)
1
(18)
For the Year Ended December 31, 2014
Renewables(a) NRG Yield(a) Corporate(a)
(In millions)
$
344
828
19
$
$
191
164
32
—
40
427
—
(83)
(4)
1
—
(1)
(97)
(184)
—
(184)
285
233
—
4
—
522
—
306
17
6
—
(1)
(216)
112
4
108
151
35
(22)
76
35
275
—
(256)
—
75
—
(93)
(806)
(1,080)
(5)
(1,075)
Eliminations
Total
$
(2,004) $ 15,868
(2,058)
—
—
—
—
12,824
1,523
97
84
88
(2,058)
14,616
—
54
2
(99)
—
—
96
53
—
53
19
1,271
38
22
18
(95)
(1,119)
135
3
132
(1)
—
2
16
5
(24)
(2)
1,249
$
(18) $
(186) $
92
$
(1,080) $
77
$
134
1,873
$
7
$
25
$
12
$
85
$
— $
2,002
207
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 207
3/4/17 3:01 AM
As of December 31, 2016, the Company's businesses were segregated as follows: Generation (previously named Generation/
Business), which includes generation, international and business solutions; Retail Mass (previously NRG Home Retail);
Renewables (previously named NRG Renew), which includes solar and wind assets, excluding those in NRG Yield; NRG Yield;
and corporate activities. The Company's corporate segment included BETM, residential solar (previously part of NRG Home) and
electric vehicle services. During 2016, the Company began reporting the results of its residential solar business in its corporate
segment and its international business in its Generation segment. The financial information for years ended December 31, 2016,
2015, and 2014 have been recast to reflect these changes.
NRG Yield includes certain of the Company's contracted generation assets. On September 1, 2016 NRG Yield acquired the
remaining 51.05% interest in CVSR Holdco LLC, which indirectly owns the CVSR solar facility, from the Company. This
acquisition was accounted for as transfers of entities under common control and accordingly, all historical periods have been recast
to reflect this change.
For the Year Ended December 31, 2016
Operating revenues(a)
Operating expenses
Depreciation and amortization
Impairment losses
Acquisition-related transaction and integration costs
Development costs
Generation(a)
Retail
Mass(a)
Renewables(a)
$
6,927
6,020
$ 4,966
3,987
$
712
646
—
26
104
—
—
—
417
215
190
56
—
40
Total operating cost and expenses
7,404
4,091
NRG
Yield(a)
(In millions)
$ 1,021
322
Corporate(a)
Eliminations
Total
$
137
235
64
33
7
24
363
(78)
(304)
7
(21)
62
(142)
(658)
(1,056)
37
297
183
1
—
803
—
218
37
—
3
—
(274)
(16)
(1)
$
(1,117) $
(1,123)
—
—
—
—
12,351
9,656
1,367
918
8
90
(1,123)
12,039
—
6
18
—
(61)
—
59
22
—
22
$
215
527
27
(268)
42
(142)
(1,061)
(875)
16
(891)
293
(184)
(5)
(142)
37
—
(80)
(374)
—
—
875
—
—
—
—
—
875
—
501
—
(84)
(30)
(105)
1
—
(108)
(326)
(20)
(374) $
875
$
(306) $
(15) $
(1,093) $
—
—
(13)
(54)
16
(66)
(117)
(374) $
875
$
(293) $
39
$
(1,109) $
88
$
(774)
204
779
199
$ — $
59
340
372
330
12
$
710
$
23
—
91
51
111
$
(257) $
—
—
1,120
1,242
662
13,234
$ 1,589
$
5,280
$ 8,383
$
15,734
$
(13,865) $
30,355
893
$
2
$
23
$
8
$
191
$
— $
1,117
Gain/(loss) on sale of assets
Operating (loss)/income
Equity in (losses)/earnings of unconsolidated
affiliates
Impairment losses on investments
Other income, net
Loss on debt extinguishment
Interest expense
(Loss)/income before income taxes
Income tax (benefit)/expense
Net (loss)/income
Less: Net (loss)/income attributable to
noncontrolling interests and redeemable
noncontrolling interests
Net (loss)/income attributable to NRG Energy,
Inc.
Balance sheet
Equity investments in affiliates
Capital expenditures (b)
Goodwill
Total assets
(a) Inter-segment sales and net derivative gains and
losses included in operating revenues
(b) Includes accruals.
$
$
$
$
$
208
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 208
3/4/17 3:01 AM
Generation(a)
Retail
Mass (a) Renewables(a)
Corporate(a)
Eliminations
Total
For the Year Ended December 31, 2015
14
$
(1,171) $
392
184
180
13
—
52
429
—
(37)
9
—
3
—
—
(83)
(108)
(18)
(90)
NRG
Yield(a)
(In millions)
$
$
953
333
297
—
3
—
633
—
320
26
—
3
(9)
—
(263)
77
12
65
19
310
59
132
6
63
570
—
(556)
(3)
(42)
77
84
(14)
(779)
(1,233)
1,347
(2,580)
(37)
(1,149)
—
22
—
—
14,674
11,983
1,566
5,030
10
146
(1,127)
18,735
—
(44)
(6)
—
(98)
—
—
95
(53)
—
(53)
(42)
21
(4,040)
36
(56)
33
75
(14)
(1,128)
(5,094)
1,342
(6,436)
(54)
—
—
6
(4,446) $
668
$
(96) $
46
$
(2,543) $
(11) $
(6,382)
334
798
536
$ — $
30
340
134
163
12
$
697
$
30
—
127
246
111
$
(247) $
—
—
1,045
1,267
999
17,324
$ 1,876
$
5,142
$
8,689
$
19,926
$
(20,075) $
32,882
898
$
6
$
25
$
29
$
213
$
— $
1,171
Operating revenues(a)
Operating expenses
Depreciation and amortization
Impairment losses
Acquisition-related transaction and integration
costs
Development costs
$
9,097
$ 5,389
$
7,744
907
4,827
—
31
4,561
123
36
1
—
Total operating cost and expenses
13,509
4,721
21
(4,391)
10
(14)
48
—
—
(98)
(4,445)
1
(4,446)
—
668
—
—
—
—
—
—
668
—
668
Gain on postretirement benefits curtailment
Operating (loss)/income
Equity in earnings/(losses) of unconsolidated
affiliates
Impairment losses on investments
Other income, net
(Loss)/gain on debt extinguishment
Loss on sale of equity method investment
Interest expense
(Loss)/income before income taxes
Income tax expense/(benefit)
Net (loss)/income
Less: Net income/(loss) attributable to
noncontrolling interests and redeemable
noncontrolling interests
Net (loss)/income attributable to
NRG Energy, Inc.
Balance sheet
Equity investments in affiliates
Capital expenditures(b)
Goodwill
Total assets
$
$
$
(a) Inter-segment sales and net derivative gains
and losses included in operating revenues
$
(b) Includes accruals.
209
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 209
3/4/17 3:01 AM
Operating revenues(a)
Operating expenses
Depreciation and amortization
Impairment losses
Acquisition-related transaction and integration
costs
Development costs
Total operating costs and expenses
Gain on sale of assets
Operating income/(loss)
Equity in earnings/(losses)of unconsolidated
affiliates
Other income, net
Gain on sale of equity method investment
Loss on debt extinguishment
Interest expense
Income/(loss) before income taxes
Income tax expense/(benefit)
Net income/(loss)
Less: Net (loss)/income attributable to
noncontrolling interests and redeemable
noncontrolling interests
Net income/(loss) attributable to NRG Energy,
Inc.
(a) Inter-segment sales and net derivative gains
and losses included in operating revenues
$
$
Generation(a)
Retail
Mass (a)
$
11,113
$
5,503
8,993
5,236
966
87
1
13
10,060
19
1,072
23
39
18
—
(95)
1,057
4
1,053
122
—
3
—
5,361
—
142
—
—
—
—
(1)
141
—
141
For the Year Ended December 31, 2014
Renewables(a) NRG Yield(a) Corporate(a)
(In millions)
$
828
344
82
$
$
191
164
32
—
40
427
—
(83)
(4)
1
—
(1)
(97)
(184)
—
(184)
285
233
—
4
—
522
—
306
17
6
—
(1)
(216)
112
4
108
171
38
(22)
76
35
298
—
(216)
—
75
—
(93)
(806)
(1,040)
(5)
(1,035)
Eliminations
Total
$
(2,002) $ 15,868
(2,052)
—
—
—
—
12,824
1,523
97
84
88
(2,052)
14,616
—
50
2
(99)
—
—
96
49
—
49
19
1,271
38
22
18
(95)
(1,119)
135
3
132
(1)
—
2
16
5
(24)
(2)
1,054
$
141
$
(186) $
92
$
(1,040) $
73
$
134
1,873
$
7
$
25
$
12
$
85
$
— $
2,002
210
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 210
3/4/17 3:01 AM
Note 19 — Income Taxes
The income tax provision from continuing operations consisted of the following amounts:
Current
State
Total — current
Deferred
U.S. Federal
State
Foreign
Total — deferred
Total income tax expense
Effective tax rate
Year Ended December 31,
2016
2015
2014
(In millions, except percentages)
$
$
$
$
17
17
3
(6)
2
(1)
16
(1.8)%
$
$
6
6
1,020
315
1
1,336
1,342
(26.3)%
8
8
(50)
41
4
(5)
3
2.2%
The following represents the domestic and foreign components of income/(loss) before income tax expense/(benefit):
U.S.
Foreign
Total
Year Ended December 31,
2016
2015
(In millions)
2014
$
$
(886) $
11
(875) $
(5,105) $
11
(5,094) $
126
9
135
A reconciliation of the U.S. federal statutory rate of 35% to NRG's effective rate is as follows:
(Loss)/income before income taxes
Tax at 35%
State taxes
Foreign operations
Federal and state tax credits, excluding PTCs
Valuation allowance
Impact of non-taxable equity earnings
Book goodwill impairment
Net interest accrued on uncertain tax positions
Production tax credit
Recognition of uncertain tax benefits
Tax expense attributable to consolidated partnerships
Impact of change in effective state tax rate
Other
Income tax expense
Effective income tax rate
Year Ended December 31,
2016
2015
2014
(In millions, except percentages)
$
$
$
$
(875)
(306)
11
10
—
306
22
—
1
(26)
2
(1)
1
(4)
16
(1.8)%
(5,094)
(1,783)
(218)
1
(5)
3,039
(10)
340
(3)
(33)
(15)
12
19
(2)
1,342
(26.3)%
$
$
135
47
9
1
(1)
6
(11)
—
(2)
(48)
(30)
4
22
6
3
2.2%
For the year ended December 31, 2016, NRG's overall effective tax rate was different than the statutory rate of 35% primarily
due to the change in valuation allowance, the impact of non-taxable equity earnings and current state tax expense, partially offset
by the generation of PTCs from various wind facilities.
For the year ended December 31, 2015, NRG's overall effective tax rate was different than the statutory rate of 35% primarily
due to recording of a valuation allowance on the federal and certain state net deferred tax assets that may not be realizable under
a “more likely than not” measurement. In addition, a portion of the book goodwill impairment is classified as a permanent reversal
impacting the effective tax rate.
211
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 211
3/4/17 3:01 AM
For the year ended December 31, 2014, NRG's overall effective tax rate was different than the statutory rate of 35% primarily
due to the generation of PTCs generated from various wind facilities including assets acquired in the EME transaction, and a
benefit resulting from the recognition of uncertain tax benefits, partially offset by state and local income taxes including a change
in the effective state rate.
The temporary differences, which gave rise to the Company's deferred tax assets and liabilities consisted of the following:
Deferred tax liabilities:
Emissions allowances
Derivatives, net
Cumulative translation adjustments
Investment in projects
Total deferred tax liabilities
Deferred tax assets:
Deferred compensation, accrued vacation and other reserves
Discount/premium on notes
Difference between book and tax basis of property
Goodwill
Differences between book and tax basis of contracts
Pension and other postretirement benefits
Equity compensation
Bad debt reserve
U.S. capital loss carryforwards
U.S. Federal net operating loss carryforwards
Foreign net operating loss carryforwards
State net operating loss carryforwards
Foreign capital loss carryforwards
Deferred financing costs
Federal and state tax credit carryforwards
Federal benefit on state uncertain tax positions
Intangibles amortization (excluding goodwill)
Derivatives, net
Inventory obsolescence
Other
Total deferred tax assets
Valuation allowance
Total deferred tax assets, net of valuation allowance
Net deferred tax asset
The following table summarizes NRG's net deferred tax position:
Net deferred tax asset — noncurrent
Net deferred tax liability — noncurrent
Net deferred tax asset
Deferred tax assets and valuation allowance
$
$
$
$
As of December 31,
2016
2015
(In millions)
$
30
—
11
374
415
318
45
1,511
83
301
183
11
12
1
1,171
63
223
1
4
446
12
211
101
31
8
4,736
(4,116)
620
205
$
31
22
2
838
893
255
68
1,210
39
516
218
50
6
1
1,373
59
230
1
6
439
17
90
—
27
11
4,616
(3,575)
1,041
148
As of December 31,
2016
2015
$
(In millions)
225
(20)
205
$
167
(19)
148
Net deferred tax balance — As of December 31, 2016 and 2015, NRG recorded a net deferred tax asset of $4.3 billion and
$3.7 billion, respectively. The Company believes the federal and certain state net deferred tax assets may not be realizable under
a “more likely than not” measurement and as such, a valuation allowance has been recorded to reduce the asset accordingly. The
Company assesses cumulative and forecasted pretax book earnings and the future reversal of existing taxable temporary differences.
212
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Based on the Company's assessment of positive and negative evidence, including available tax planning strategies, NRG
believes that it is more likely than not that a benefit will not be realized on $4.1 billion and $3.6 billion of tax assets as of
December 31, 2016, and 2015, respectively, thus a valuation allowance has been recorded. The net deferred tax asset of $205
million is predominantly due to the inclusion of NRG Yield Inc.'s net deferred tax asset consisting primarily of net operating losses.
NOL carryforwards — At December 31, 2016, the Company had tax effected cumulative domestic NOLs consisting of
carryforwards for federal income tax purposes of $1.2 billion and state of $223 million. The Company estimates it will need to
generate future taxable income to fully realize the net federal deferred tax asset before expiration commencing in 2026. In addition,
NRG has cumulative foreign NOL carryforwards of $63 million with no expiration date.
Valuation allowance — As of December 31, 2016, the Company's tax effected valuation allowance was $4.1 billion, consisting
of domestic federal net deferred tax assets of approximately $3.6 billion, domestic state net deferred tax assets of $504 million,
foreign net operating loss carryforwards of $63 million and foreign capital loss carryforwards of approximately $1 million. Based
upon the assessment of cumulative and forecasted pretax book earnings, and the future reversal of existing taxable temporary
differences, it was determined that a valuation allowance was required to be recorded during the year.
Taxes Receivable and Payable
As of December 31, 2016, NRG recorded a current tax payable of $8 million that represents a tax liability due for state
income taxes. NRG has a tax receivable of $29 million, comprised of, $10 million due from the New York State Empire Zone
program, and $11 million of refunds due from state income tax estimated payments and return filings for 2016 and 2015, respectively.
The remaining balance of $8 million relates to federal cash grants applied for eligible solar energy projects, net of sequestration.
Uncertain tax benefits
NRG has identified uncertain tax benefits whose after-tax value is $34 million for which, as of December 31, 2016, and
2015, NRG has recorded a non-current tax liability of $37 million and $35 million, respectively. The Company recognizes interest
and penalties related to uncertain tax benefits in income tax expense. During the year ended December 31, 2016, the Company
recognized an expense of $1 million in interest. As of December 31, 2016 and 2015, NRG had cumulative interest and penalties
related to these uncertain tax benefits of $4 million and $3 million, respectively.
Tax jurisdictions — 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. With few exceptions,
state and local income tax examinations are no longer open for years before 2010.
The following table reconciles the total amounts of uncertain tax benefits:
Balance as of January 1
Increase due to current year positions
Decrease due to prior year positions
Decrease due to settlements and payments
Uncertain tax benefits as of December 31
Note 20 — Stock-Based Compensation
NRG Energy, Inc. Long-Term Incentive Plan
As of December 31,
2016
2015
(In millions)
$
$
32
8
—
(6)
34
$
$
71
4
(25)
(18)
32
As of December 31, 2016 and 2015, a total of 22,000,000 shares of NRG common stock were authorized for issuance under
the NRG LTIP, and 5,558,390 shares of NRG common stock were authorized for issuance under the NRG GenOn LTIP. The NRG
LTIP and the NRG GenOn LTIP are subject to adjustments in the event of reorganization, recapitalization, stock split, reverse
stock split, stock dividend, and a combination of shares, merger or similar change in NRG's structure or outstanding shares of
common stock. There were 7,487,058 and 6,240,648 shares of common stock remaining available for grants under the NRG LTIP
as of December 31, 2016 and 2015, respectively. There were 960,904 and 1,671,633 shares of common stock remaining available
for grants under the NRG GenOn LTIP as of December 31, 2016 and 2015, respectively.
213
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 213
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Non-Qualified Stock Options
NQSOs granted under the NRG LTIP and the NRG GenOn LTIP typically have three-year graded vesting schedules beginning
on the grant date and become exercisable at the end of the requisite service period. NRG recognizes compensation costs for
NQSOs over the requisite service period for the entire award. The maximum contractual term is 10 years for NRG's outstanding
NQSOs. No NQSOs were granted in 2016, 2015 or 2014.
The following table summarizes the Company's NQSO activity and changes during the year:
Outstanding at December 31, 2015
Forfeited
Outstanding at December 31, 2016
Exercisable at December 31, 2016
Shares
Weighted Average
Exercise Price
$
2,071,913
(548,994)
1,522,919
1,522,919
32.27
52.34
25.03
25.03
Weighted Average
Remaining Contractual
Term
(In years)
Aggregate
Intrinsic Value
(In millions)
$
3
3
3
—
—
—
The following table summarizes the total intrinsic value of options exercised and the cash received from the exercises of
options:
Total intrinsic value of options exercised
Cash received from options exercised
2016
Year Ended December 31,
2015
(In millions)
2014
$
— $
—
$
2
9
7
21
There were no options that exercised during the year ended December 31, 2016.
Restricted Stock Units
As of December 31, 2016, RSUs granted under the Company's LTIPs typically have three-year graded vesting schedules
beginning on the grant date. Fair value of the RSUs is based on the closing price of NRG common stock on the date of grant. The
following table summarizes the Company's non-vested RSU awards and changes during the year:
Non-vested at December 31, 2015
Granted
Forfeited
Vested
Non-vested at December 31, 2016
Units
2,261,996
1,226,957
(592,163)
(916,649)
1,980,141
Weighted Average Grant-
Date Fair Value per Unit
27.59
$
11.54
22.91
26.07
19.29
The total fair value of RSUs vested during the years ended December 31, 2016, 2015, and 2014, was $11 million, $10 million
and $26 million, respectively. The weighted average grant date fair value of RSUs granted during the years ended December 31,
2016, 2015, and 2014 was $11.54, $27.31, and $29.90, respectively.
Deferred Stock Units
DSUs represent the right of a participant to be paid one share of NRG common stock at the end of a deferral period established
under the terms of the award. DSUs granted under the Company's LTIPs are fully vested at the date of issuance. Fair value of the
DSUs, which is based on the closing price of NRG common stock on the date of grant, is recorded as compensation expense in
the period of grant.
214
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The following table summarizes the Company's outstanding DSU awards and changes during the year:
Outstanding at December 31, 2015
Granted
Converted to Common Stock
Outstanding at December 31, 2016
Units
427,578
102,147
(76,051)
453,674
Weighted Average Grant-
Date Fair Value per Unit
21.88
$
16.85
18.37
21.54
The aggregate intrinsic values for DSUs outstanding as of December 31, 2016, 2015, and 2014 were approximately $6
million, $5 million, and $10 million respectively. The aggregate intrinsic values for DSUs converted to common stock for the
years ended December 31, 2016, 2015, and 2014 were $1 million, less than a million, and $1 million, respectively. The weighted
average grant date fair value of DSUs granted during the years ended December 31, 2016, 2015, and 2014 was $16.85, $25.14
and $35.63, respectively.
Market Stock Units
MSUs are restricted grants where the quantity of shares increases and decreases alongside the Company's Total Shareholder
Return, or TSR. Each MSU represents the potential to receive NRG common stock after the completion of the performance period,
typically three years of service from the date of grant. The number of shares of NRG common stock to be paid (if any) as of the
vesting date for each MSU will depend on the TSR. The number of shares of common stock to be paid as of the vesting date for
each MSU is equal to: (i) three quarters of one share of common stock if the TSR has decreased by no more than 25% over the
performance period; (ii) one share of common stock, if there is no change in TSR over the performance period; and (iii) two shares
of common stock if the TSR increases 100% or more over the performance period. If there is more than a 25% reduction in TSR
over the performance period, no common stock will be paid. If the TSR is between 75% and 100% over the performance period,
shares awarded are interpolated. The value of the common stock on the date of grant is based on the closing price of NRG common
stock on the date of grant.
The following table summarizes the Company's non-vested MSU awards and changes during the year:
Non-vested at December 31, 2015
Granted
Forfeited
Vested
Non-vested at December 31, 2016
Units
1,980,157
806,409
(1,499,963)
(4,015)
1,282,588
Weighted Average Grant-
Date Fair Value per Unit
29.54
$
14.73
27.76
33.81
21.47
The weighted average grant date fair value of MSUs granted during the years ended December 31, 2016, 2015 and 2014,
was $14.73, $26.68 and $31.90, respectively.
The fair value of MSUs is estimated on the date of grant using a Monte Carlo simulation model and expensed over the
service period, which equals the vesting period. Significant assumptions used in the fair value model with respect to the Company's
MSUs are summarized below:
Expected volatility
Expected term (in years)
Risk free rate
2016
2015
34.33% 24.08%-25.20%
1-3
0.25%-1.07%
3
1.31%
For the years ended December 31, 2016 and 2015, expected volatility is calculated based on NRG's historical stock price
volatility data over the period commensurate with the expected term of the MSU, which equals the vesting period.
215
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 215
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Supplemental Information
The following table summarizes NRG's total compensation expense recognized for the years presented as well as total non-
vested compensation costs not yet recognized and the period over which this expense is expected to be recognized as of
December 31, 2016 for each of the types of awards issued under the LTIPs. Minimum tax withholdings of $5 million, $21 million,
and $16 million for the years ended December 31, 2016, 2015, and 2014, respectively, are reflected as a reduction to additional
paid-in capital on the Company's consolidated balance sheet and are reflected as operating activities on the Company's consolidated
statement of cash flows.
Award
Compensation Expense
Non-vested Compensation Cost
Unrecognized
Total Cost
Weighted Average
Recognition Period
Remaining (In years)
Year Ended December 31
2015
2014
2016
As of December 31
2016
2016
(In millions, except weighted average data)
$
NQSOs(a)
RSUs
DSUs
MSUs
PRSUs(b)
$
Total
$
Tax detriment recognized
(a) All NQSOs granted under the Company's LTIP were fully vested as of December 31, 2016 and 2015.
(b) Phantom Restricted Stock Units, PRSUs, are liability-classified time-based awards that typically vest ratably over a three-year period. The amount to be
paid upon vesting is based on NRG's closing stock price for the period.
— $
23
2
16
—
41
$
(12) $
— $
14
2
3
5
24
$
(4) $
1
20
2
19
—
42
(8)
—
12
—
7
8
27
—
1.46
—
1.54
1.30
$
$
Note 21 — Related Party Transactions
The following table summarizes NRG's material related party transactions with third party affiliates that are included in the
Company's operating revenues, operating costs and other income and expense:
Revenues from Related Parties Included in Operating Revenues
Gladstone
GenConn
Total
Year Ended December 31,
2016
2015
(In millions)
2014
$
$
2
5
7
$
$
4
4
8
$
$
6
6
12
Gladstone — NRG provides services to Gladstone, an equity method investment, under an operations and maintenance
agreement. Fees for services under this contract primarily include recovery of NRG's costs of operating the plant as approved in
the annual budget, as well as a base monthly fee.
GenConn — NRG provides services to GenConn under operations and maintenance agreements with GenConn Devon and
GenConn Middletown that began in June 2011.
Keystone and Conemaugh facilities — The Company operates the Keystone and Conemaugh facilities under five-year
agreements that initially expired in December 2015 and were renewed through December 2020 that, subject to certain provisions
and notifications, could be terminated annually with one year's notice. The Company is reimbursed by the other owners for the
cost of direct services provided to the Conemaugh and Keystone facilities. Additionally, the Company received fees of $11 million
in 2016, $11 million in 2015, and $10 million in 2014.
216
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Note 22 — Commitments and Contingencies
Operating Lease Commitments
Powerton and Joliet Leases
The Company leases 100% interests in the Powerton facility and Unit 7 and Unit 8 of the Joliet facility through 2034 and
2030, respectively, through its indirect subsidiary, Midwest Generation, LLC. The Company accounts for these leases as operating
leases and records lease expense on a straight-line basis over the lease term. As further described in Note 3, Business Acquisitions
and Dispositions, in connection with the acquisition of EME, the Company recorded the out-of-market value as a liability in out-
of-market contracts of $159 million. The liability will be amortized through rent expense on a straight-line basis over the term of
the lease. The Company expects to record lease expense, net of amortization of the out-of-market liability, of approximately $14
million per year through the term of the lease.
Future minimum lease commitments under the Powerton and Joliet operating leases for the years ending after December 31,
2016, are as follows:
Period
2017
2018
2019
2020
2021
Thereafter
Total
GenOn Mid-Atlantic Leases
(In millions)
1
1
1
1
3
234
241
$
$
The Company leases 100% interests in the Dickerson and Morgantown coal generation units and associated property through
2029 and 2034, respectively, through its indirect subsidiary, GenOn MidAtlantic, LLC. The Company accounts for these leases as
operating leases and records lease expense on a straight-line basis over the lease term. In connection with the acquisition of GenOn,
the Company recorded the out-of-market value as a liability in out-of-market contracts of $604 million. The liability is being
amortized through rent expense on a straight-line basis over the term of the lease. The Company expects to record lease expense,
net of amortization of the out-of-market liability, of approximately $43 million per year through the term of the lease.
Future minimum lease commitments under the GenOn Mid-Atlantic operating leases for the years ending after December 31,
2016 are as follows:
Period
2017
2018
2019
2020
2021
Thereafter
Total
(In millions)
144
105
139
105
42
400
935
$
$
217
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 217
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REMA Leases
The Company, through its indirect subsidiary, NRG REMA, LLC, leases a 100% interest in the Shawville coal generation
facility through 2026 and leases 16.5% and 16.7% interests in the Conemaugh and Keystone coal generation facilities through
2034, and expects to make payments under the leases through 2029 in accordance with the terms of the leases. The Company
accounts for these leases as operating leases and records lease expense on a straight-line basis over the lease term. In connection
with the acquisition of GenOn, the Company recorded the out-of-market value as a liability in out-of-market contracts of $186
million. The liability is being amortized through rent expense on a straight-line basis over the term of the lease. The Company
expects to record lease expense, net of amortization of the out-of-market liability, of approximately $29 million per year through
the term of the lease.
Future minimum lease commitments under the REMA operating leases for the years ending after December 31, 2016 are as
follows:
Period
2017
2018
2019
2020
2021
Thereafter
Total
(In millions)
63
55
65
56
47
231
517
$
$
Other Operating Leases
NRG leases certain Company facilities and equipment under operating leases, some of which include escalation clauses,
expiring on various dates through 2050. NRG also has certain tolling arrangements to purchase power, which qualify as operating
leases. Certain operating lease agreements include provisions such as scheduled rent increases, leasehold incentives, and rent
concessions over their lease term. The Company recognizes the effects of these scheduled rent increases, leasehold incentives, and
rent concessions on a straight-line basis over the lease term unless another systematic and rational allocation basis is more
representative of the time pattern in which the leased property is physically employed. Lease expense under operating leases was
$102 million, $100 million, and $106 million for the years ended December 31, 2016, 2015, and 2014, respectively.
Future minimum lease commitments under operating leases for the years ending after December 31, 2016 are as follows:
Period
2017
2018
2019
2020
2021
Thereafter
Total (a)
(In millions)
84
76
67
61
52
443
783
$
$
(a) Amounts in the table exclude future sublease income of $14 million associated with long-term leases for office locations.
Coal, Gas and Transportation Commitments
NRG has entered into long-term contractual arrangements to procure fuel and transportation services for the Company's
generation assets and for the years ended December 31, 2016, 2015, and 2014, the Company purchased $1.8 billion, $2.6 billion,
and $3.5 billion, respectively, under such arrangements.
As of December 31, 2016, the Company's commitments under such outstanding agreements are as follows:
Period
2017
2018
2019
2020
2021
Thereafter
Total
(In millions)
638
251
174
140
109
415
1,727
$
$
218
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 218
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Purchased Power Commitments
NRG has purchased power contracts of various quantities and durations that are not classified as derivative assets and liabilities
and do not qualify as operating leases. These contracts are not included in the consolidated balance sheet as of December 31, 2016.
Minimum purchase commitment obligations are as follows as of December 31, 2016:
Period
2017
2018
2019
2020
2021
Thereafter
Total (a)
(a) As of December 31, 2016, the maximum remaining term under any individual purchased power contract is five years.
(In millions)
25
17
13
11
21
—
87
$
$
Lignite Contract with Texas Westmoreland Coal Co.
The Company's Limestone facility utilizes a blend of coal including lignite obtained from the Jewett mine, a surface mine
adjacent to the Limestone facility, under a long-term contract with Texas Westmoreland Coal Co., or TWCC. The contract is a
cost-plus arrangement with certain performance incentives and penalties. On August 18, 2016, NRG gave notice to TWCC
terminating the active mining of lignite under the contract, effective on December 31, 2016.
Under the contract, TWCC continues to be responsible for reclamation activities. NRG is responsible for reclamation costs
and has recorded an adequate ARO liability. The Railroad Commission of Texas has imposed a bond obligation of $95.5 million
on TWCC for the reclamation of the mine. Pursuant to the contract with TWCC, NRG supports this obligation through surety
bonds. Additionally, NRG is obligated to provide additional performance assurance if required by the Railroad Commission of
Texas.
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
December 31, 2016, hedges under the first lien were out-of-the-money for NRG on a counterparty aggregate basis.
Nuclear Insurance
STP maintains required insurance coverage for liability claims arising from nuclear incidents pursuant to the Price-Anderson
Act. Effective January 1, 2017, the current liability limit per incident is $13.44 billion, subject to change to account for the effects
of inflation and the number of licensed reactors. An inflation adjustment must be made at least once every five years with the next
due no later than September 10, 2018. Under the Price-Anderson Act, owners of nuclear power plants in the U.S. are required to
purchase primary insurance limits of $450 million for each operating site. In addition, the Price-Anderson Act requires an additional
layer of protection through mandatory participation in a retrospective rating plan for power reactors resulting in an additional $13
billion in funds available for public liability claims. The current maximum assessment per incident, per reactor, is approximately
$127 million, taking into account a 5% adjustment for administrative fees, payable at approximately $19 million per year, per
reactor. NRG would be responsible for 44% of the maximum assessment, or $8 million per year, per reactor, and a maximum of
$112 million per incident. In addition, the U.S. Congress retains the ability to impose additional financial requirements on the
nuclear industry to pay liability claims that exceed $13 billion for a single incident. The liabilities of the co-owners of STP with
respect to the retrospective premium assessments for nuclear liability insurance are joint and several.
219
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STP purchases insurance for property damage and site decontamination cleanup costs from Nuclear Electric Insurance Limited,
or NEIL, an industry mutual insurance company, of which STP is a member. STP has purchased $2.75 billion in limits for nuclear
events and $1.5 billion in limits for non-nuclear events, the maximum available from NEIL. The upper $1.25 billion in limits
(excess of the first $1.5 billion in limits) is a single limit blanket policy shared with two Diablo Canyon nuclear reactors, which
have no affiliation with the Company. This shared limit is not subject to automatic reinstatement in the event of a loss. The NEIL
policy covers both nuclear and non-nuclear property damage events, and a NEIL companion policy provides Accidental Outage
coverage for the co-owners of STP's lost revenue following a property damage event, at a weekly indemnity limit of $2.52 million
per unit up to a maximum of $274.4 million nuclear and $183.5 million non-nuclear, and is subject to an eight-week waiting period.
NRG also purchases an Accidental Outage policy from NEIL, which provides protection for lost revenue due to an insurable event.
This coverage allows for reimbursement up to $1.98 million per week per unit up to a maximum of $215.6 million nuclear and
$144 million non-nuclear, and is subject to an eight-week waiting period. Under the terms of the NEIL policies, member companies
may be assessed up to ten times their annual premium if the NEIL Board of Directors determines their surplus has been depleted
due to the payment of property losses at any of the licensed reactors in a single policy year. NEIL requires that its members maintain
an investment grade credit rating or insure their annual retrospective obligation by providing a financial guarantee, letter of credit,
deposit premium, or an insurance policy. NRG has purchased an insurance policy from NEIL to guarantee the Company's obligation;
however this insurance will only respond to retrospective premium adjustments assessed within twenty-four months after the policy
term, whereas NEIL's Board of Directors can make such an adjustment up to 6 years after the policy expires.
Ivanpah Energy Production Guarantee
The Company's PPAs with PG&E with respect to the Ivanpah plant contain provisions for contract quantity and guaranteed
energy production, which require that Ivanpah units 1 and 3 deliver to PG&E no less than the guaranteed energy production amount
specified in the PPAs in any period of twenty-four consecutive months, or performance measurement period, during the term of
the PPAs. In January 2017, the Company and PG&E executed amendments to the PPAs that provide, among other things, the ability
to cure any failure to meet the guaranteed energy production amounts through performance and liquidated damage provisions. On
February 2, 2017, PG&E filed a request with the CPUC to approve the amendments. Pending final and nonappealable CPUC
approval, PG&E agreed to refrain from declaring any event of default with respect to any failure to deliver the guaranteed energy
production amounts.
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.
220
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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. The appeal has been fully briefed by the
parties and was argued before the Fifth Circuit on February 8, 2017.
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 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 Court of Appeals' decision and the Supreme Court granted the petition. On April 21, 2015, the
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 Supreme Court left open whether the claims were
preempted on the basis of conflict preemption. The 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.
Defendants filed their briefs in opposition to class plaintiffs' motions for class certification on June 24, 2016. On January 26, 2017,
the court heard oral argument on several motions, including plaintiffs' motion on class certification. In May 2016, the U.S. District
Court for the District of Nevada granted the defendants' motion for summary judgment in one of the Kansas cases. Subsequently
in December 2016, the plaintiffs filed a notice of appeal with the Ninth Circuit. 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 Supreme Court denied the
petition for a writ of certiorari, thereby ending one of the five lawsuits.
Energy Plus Holdings — On August 7, 2012, Energy Plus Holdings received a subpoena from the NYAG which generally
sought information and business records related to Energy Plus Holdings' sales, marketing and business practices. Energy Plus
Holdings provided documents and information to the NYAG. On June 22, 2015, the NYAG issued another subpoena seeking
additional information. Energy Plus Holdings provided responsive documents to this second subpoena. The Company does not
expect the resolution of this matter to have a material impact on the Company’s consolidated financial position, results of operation,
or cash flows.
Maryland Department of the Environment v. GenOn Chalk Point and GenOn Mid-Atlantic — On January 25, 2013, Food &
Water Watch, the Patuxent Riverkeeper and the Potomac Riverkeeper (together, the Citizens Group) sent GenOn Mid-Atlantic a
letter alleging that the Chalk Point, Dickerson and Morgantown generating facilities were violating the terms of the three National
Pollution Discharge Elimination System permits by discharging nitrogen and phosphorous in excess of the limits in each permit.
On March 21, 2013, the MDE sent GenOn Mid-Atlantic a similar letter with respect to the Chalk Point and Dickerson generating
facilities, threatening to sue within 60 days if the generating facilities were not brought into compliance. On June 11, 2013, the
Maryland Attorney General on behalf of the MDE filed a complaint in the U.S. District Court for the District of Maryland alleging
violations of the CWA and Maryland environmental laws related to water.
In August 2016, the court approved a consent decree to settle the matter. The consent decree requires: (1) improving the
wastewater treatment systems at the Chalk Point and Dickerson facilities which was completed in October 2016; (2) completing
supplemental environmental projects worth $1 million; and (3) paying a civil penalty of $1 million. The Company has improved
the wastewater treatment systems at the Chalk Point and Dickerson facilities and paid the civil penalty of $1 million.
221
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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. In addition to seeking penalties of up to $37,500 per violation, per day,
the complaint seeks an injunction ordering Midwest Generation to install controls sufficient to meet BACT emission rates at the
units subject to the complaint and other remedies, which could go well beyond the requirements of the CPS. 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. The Company does not expect the resolution of this matter to have
a material impact on the Company’s consolidated financial position, results of operations or cash flows.
Potomac River Environmental Investigation — In March 2013, NRG Potomac River LLC 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 is currently reviewing the information provided by DOEE.
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 July 8, 2016, NRG filed a Rule 11 Motion seeking dismissal of NRG from the California case. The Rule
11 Motion was denied on August 16, 2016. Class certification hearings are scheduled on June 5, 2017 and June 19, 2017 in the
New Jersey and California cases respectively.
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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 have 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 demurrers in response to the plaintiffs' complaint. The demurrers
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 demurrers to the amended complaints. On November 18, 2016, the court sustained the demurrers and allowed
plaintiffs another opportunity to file a second amended lawsuit which they did on January 13, 2017.
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. On August 3, 2016, the court approved a stipulation entered into by the parties. The
stipulation provided that the plaintiffs would file an amended complaint by August 19, 2016, which they did on August 18, 2016.
The Defendants filed demurrers and a motion challenging jurisdiction on October 18, 2016. On February 24, 2017, the court
approved the parties' stipulation which provides the plaintiffs' opposition is due on June 15, 2017 and defendants' reply is due on
August 14, 2017.
Ahmed v. NRG Energy, Inc. and the NRG Yield Board of Directors — On September 15, 2016, plaintiffs filed a putative class
action lawsuit against NRG Energy, Inc., the directors of NRG Yield, Inc., and other parties in the Delaware Chancery Court. The
complaint alleges that the defendants breached their respective fiduciary duties with regard to the recapitalization of NRG Yield,
Inc. common stock in 2015. The plaintiffs generally seek economic damages, attorney’s fees and injunctive relief. The defendants
filed a motion to dismiss the lawsuit on December 21, 2016. Plaintiffs filed their objection to the motion to dismiss on February
15, 2017. Oral argument is scheduled for June 20, 2017.
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, or collectively, the
GenOn Notes, 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 a services agreement between NRG and GenOn. Plaintiffs generally seek recovery
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. This agreement may be extended by mutual agreement of the parties.
Note 23 — Regulatory Matters
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.
223
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National
Zero-Emission Credits for Nuclear Plants — Pursuant to legislation in Illinois, the Illinois Power Agency, or IPA, is to
procure contracts for ZECs. The IPA is to procure ZECs through a process that would take into account environmental benefits,
including the preservation of zero emission facilities. 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. Other states located in organized markets may also be considering
the implementation of ZECs. These ZECs are out-of-market subsidies that threaten to artificially suppress market prices and
interferer with the wholesale power market.
Current Administration and Changeover at FERC — FERC is currently without a quorum and cannot issue orders in contested
proceedings until a new Commissioner is appointed. FERC’s day-to-day work can continue through authority that has been
delegated to FERC Staff. With a new administration and three vacant positions at FERC, NRG’s business may be affected because
its generation fleet is subject to changes in FERC regulatory policy.
East Region
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.
Retail
MISO SECA — Green Mountain Energy previously provided competitive retail energy supply in the MISO region during
the period of January 1, 2002, to December 31, 2005. By order dated November 18, 2004, FERC eliminated certain regional
through-and-out transmission rates charged by transmission owners in MISO and PJM. In order to temporarily compensate the
transmission owners for lost revenues, FERC ordered MISO, PJM and their respective transmission owners to eliminate seams
charges and in the meantime, as a temporary measure, allowed them to recover transition charges known as SECA charges. The
tariff amendments filed by MISO and the MISO transmission owners allocated certain SECA charges to various zones and sub-
zones within MISO, including a sub-zone called the Green Mountain Energy Company Sub-zone. During several years of extensive
litigation before FERC, several transmission owners sought to recover SECA charges from Green Mountain Energy. Green
Mountain Energy denied responsibility for any SECA charges and did not pay any asserted SECA charges.
On May 21, 2010, FERC issued two orders, including its Order on Initial Decision, in which FERC determined that
approximately $22 million plus interest of SECA charges were owed not by Green Mountain Energy but rather by BP Energy —
one of Green Mountain Energy's suppliers during the period at issue. On August 19, 2010, the transmission owners and MISO
made compliance filings in accordance with FERC's Orders allocating SECA charges to a BP Energy Sub-zone, and making no
allocation to a Green Mountain Energy Sub-zone. On September 16, 2015, FERC issued an order conditionally accepting those
compliance filings, and setting for hearing and settlement proceedings issues related to service to certain Michigan customers
during 2002 and 2003.
On September 30, 2011, FERC issued orders denying all requests for rehearing and again determined that SECA charges
were not owed by Green Mountain Energy. Numerous parties, including BP Energy, sought judicial review of FERC's orders,
and Green Mountain Energy was granted intervenor status in the consolidated appeals. Most appellants subsequently settled with
the transmission owners and withdrew their appeals, including BP Energy, which agreed to pay approximately $24 million to the
three transmission owners signing the agreement, with another $1 million offered to the remaining PJM transmission owners,
should they choose to join the settlement; all chose to do so. FERC approved the settlement, and BP Energy moved to dismiss its
appeals; its motions to dismiss were granted by the Court. Subsequently, all remaining appeals either settled or were rejected by
the Court.
West Region
Carlsbad Energy Center — On May 21, 2015, the CPUC approved the Carlsbad Energy Center PPTA for a nominally rated
500 MW five unit natural gas peaking plant. On December 7, 2015, three parties filed two petitions for a writ of review with the
California Court of Appeal appealing the CPUC's decision. On November 30, 2016, the California Court of Appeals issued a
decision affirming the CPUC's approval of the PPTA. The period in which to seek review of that decision in the California Supreme
Court has passed, and the CPUC’s decision is now final.
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California Station Power — As the result of unfavorable final and non-appealable litigation, the Company has accrued a
liability associated with its power plants’ consumption of station power in California, after August 30, 2010. The majority of the
liability is associated with the Company's Encina, El Segundo, and Long Beach facilities. The Company has established an
appropriate reserve and is awaiting final billing decisions from SCE.
Note 24 — Environmental Matters
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 is facing new requirements regarding GHGs, combustion byproducts,
water discharge and use, and threatened and endangered species have been put in place in recent years. 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 change in the near term with respect to federal laws under the new 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) SO2 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. 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.
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. 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 December 31, 2016.
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East Region
New Source Review — The EPA and various states are 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 the litigation described in Item 15 — Note 22,
Commitments and Contingencies. In January 2009, GenOn received an NOV from the EPA alleging that past work at Keystone,
Portland and Shawville generating stations violated regulations regarding NSR. In June 2011, GenOn received an NOV from the
EPA alleging that past work at Avon Lake and Niles generating stations violated NSR. In December 2007, the NJDEP filed suit
alleging that NSR violations occurred at the Portland generating station, which suit was resolved pursuant to a July 2013 consent
decree. 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 generation
stations violated regulations regarding NSR.
Burton Island Old Ash Landfill — In January 2006, NRG's Indian River Power LLC was notified that it may be a potentially
responsible party with respect to Burton Island Old Ash Landfill, a historic captive landfill located at the Indian River facility. On
October 1, 2007, NRG signed an agreement with DNREC to investigate the site through the Voluntary Clean-up Program, or the
VCP. On February 4, 2008, DNREC issued findings that no further action was required in relation to surface water and that a
previously planned shoreline stabilization project would satisfactorily address shoreline erosion. The landfill itself required a
Remedial Investigation and Feasibility Study to determine the type and scope of any additional required work. DNREC approved
the Feasibility Study in December 2012. In January 2013, DNREC proposed a remediation plan based on the Feasibility Study.
The remediation plan was approved in October 2013. In December 2015, DNREC approved the Company's remediation design
and the Company's Long Term Stewardship Plan. The cost of completing the work required by the approved remediation plan is
consistent with amounts budgeted in early 2016 and on track for completion in 2017. The estimated cost to comply with the Long-
Term Stewardship Plan was added to the liability in December 2016.
In addition to the VCP, on May 29, 2008, DNREC requested that NRG's Indian River Power LLC participate in the
development and performance of a Natural Resource Damage Assessment at the Burton Island Old Ash Landfill. NRG is currently
working with DNREC and other trustees to close out the assessment process.
For further discussion of these matters, refer to Note 22, Commitments and Contingencies.
Note 25 — Cash Flow Information
Detail of supplemental disclosures of cash flow and non-cash investing and financing information was:
Interest paid, net of amount capitalized
Income taxes (refunded)/paid (a)
Consent fee paid, preferred stock
Non-cash investing and financing activities:
(Decrease)/additions to fixed assets for accrued capital expenditures
Decrease to fixed assets for accrued grants and related tax impact
Issuance of shares for EME acquisition
Year Ended December 31,
2016
2015
2014
(In millions)
$
1,106
$
1,172
$
27
—
(33)
—
—
16
—
(24)
—
—
1,067
(6)
5
87
(711)
(401)
(a) In 2016, the net income taxes paid reflect $29 million in income taxes paid and $2 million in income tax refunds. In 2015, the net income taxes refunded
are net of $17 million income taxes paid and $1 million income tax refunds. In 2014, the net income taxes refunded are net of $15 million income taxes paid
and $21 million income tax refunds.
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Note 26 — Guarantees
NRG and its subsidiaries enter into various contracts that include indemnification and guarantee provisions as a routine part
of the Company's business activities. Examples of these contracts include asset purchases and sale agreements, commodity sale
and purchase agreements, retail contracts, joint venture agreements, EPC agreements, operation and maintenance agreements,
service agreements, settlement agreements, and other types of contractual agreements with vendors and other third parties, as well
as affiliates. These contracts generally indemnify the counterparty for tax, environmental liability, litigation and other matters, as
well as breaches of representations, warranties and covenants set forth in these agreements. The Company is obligated with respect
to customer deposits associated with the Company's retail businesses. NRG has also assumed guarantees for some non-qualified
benefits of existing retirees resulting from the acquisition of GenOn. In some cases, NRG's maximum potential liability cannot
be estimated, since the underlying agreements contain no limits on potential liability.
In accordance with ASC 460, Guarantees, or ASC 460, NRG has estimated that the current fair value for issuing these
guarantees was $2.2 million as of December 31, 2016 and the liability in this amount is included in the Company's non-current
liabilities.
The following table summarizes the maximum potential exposures that can be estimated for NRG's guarantees, indemnities,
and other contingent liabilities by maturity:
Guarantees
Letters of credit and surety bonds
Asset sales guarantee obligations
Other guarantees
Total guarantees
By Remaining Maturity at December 31,
2016
Under
1 Year
1-3 Years
3-5 Years
Over
5 Years
Total
2015 Total
$
$
2,122
—
—
2,122
$
$
80
420
—
500
$
$
(In millions)
— $
—
5
5
$
15
257
731
1,003
$
$
2,217
677
736
3,630
$
$
1,899
257
722
2,878
Letters of credit and surety bonds — As of December 31, 2016, NRG and its consolidated subsidiaries were contingently
obligated for a total of $2.2 billion under letters of credit and surety bonds. Most of these letters of credit and surety bonds are
issued in support of the Company's obligations to perform under commodity agreements and obligations associated with future
closure and maintenance of ash sites, as well as for financing or other arrangements. A majority of these letters of credit and surety
bonds expire within one year of issuance, and it is typical for the Company to renew them on similar terms.
The material indemnities, within the scope of ASC 460, are as follows:
Asset sales — The purchase and sale agreements which govern NRG's asset or share investments and divestitures customarily
contain guarantees and indemnifications of the transaction to third parties. The contracts indemnify the parties for liabilities
incurred as a result of a breach of a representation or warranty by the indemnifying party, or as a result of a change in tax laws.
These obligations generally have a discrete term and are intended to protect the parties against risks that are difficult to predict or
estimate at the time of the transaction. In several cases, the contract limits the liability of the indemnifier. NRG has no reason to
believe that the Company currently has any material liability relating to such routine indemnification obligations.
Other guarantees — NRG has issued other guarantees of obligations including payments under certain agreements with
respect to certain of its unconsolidated subsidiaries, payment or performance by fuel providers and payment or reimbursement of
credit support and deposits. The Company does not believe that it will be required to perform under these guarantees.
Other indemnities — Other indemnifications NRG has provided cover operational, tax, litigation and breaches of
representations, warranties and covenants. NRG has also indemnified, on a routine basis in the ordinary course of business,
consultants or other vendors who have provided services to the Company. NRG's maximum potential exposure under these
indemnifications can range from a specified dollar amount to an indeterminate amount, depending on the nature of the transaction.
Total maximum potential exposure under these indemnifications is not estimable due to uncertainty as to whether claims will be
made or how they will be resolved. NRG does not have any reason to believe that the Company will be required to make any
material payments under these indemnity provisions.
Because many of the guarantees and indemnities NRG issues to third parties and affiliates do not limit the amount or duration
of its obligations to perform under them, there exists a risk that the Company may have obligations in excess of the amounts
described above. For those guarantees and indemnities that do not limit the Company's liability exposure, it may not be able to
estimate what the Company's liability would be, until a claim is made for payment or performance, due to the contingent nature
of these contracts.
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Note 27 — Jointly Owned Plants
Certain NRG subsidiaries own undivided interests in jointly-owned plants, as described below. These plants are maintained
and operated pursuant to their joint ownership participation and operating agreements. NRG is responsible for its subsidiaries'
share of operating costs and direct expenses and includes its proportionate share of the facilities and related revenues and direct
expenses in these jointly-owned plants in the corresponding balance sheet and income statement captions of the Company's
consolidated financial statements.
The following table summarizes NRG's proportionate ownership interest in the Company's jointly-owned facilities:
As of December 31, 2016
Ownership
Interest
Property, Plant &
Equipment
Accumulated
Depreciation
Construction in
Progress
(In millions unless otherwise stated)
South Texas Project Units 1 and 2, Bay City, TX
44.00% $
3,275
$
Big Cajun II Unit 3, New Roads, LA
Cedar Bayou Unit 4, Baytown, TX
Keystone, Shelocta, PA
Conemaugh, New Florence, PA
58.00%
50.00%
3.70%
3.72%
204
216
97
103
(1,734) $
123
(67)
(48)
(51)
39
—
5
—
1
228
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 228
3/4/17 3:01 AM
Note 28 — Unaudited Quarterly Financial Data
Refer to Note 3, Business Acquisitions and Dispositions, and Note 10, Asset Impairments, for a description of the effect of
unusual or infrequently occurring events during the quarterly periods. Summarized unaudited quarterly financial data is as follows:
Quarter Ended
2016
December 31
September 30
June 30
March 31
Operating revenues
Operating (loss)/income
Net (loss)/income
Less: Net loss attributable to noncontrolling interests and
redeemable noncontrolling interests
Net (loss)/income attributable to NRG Energy, Inc.
(Loss)/income available to Common Stockholders
Weighted average number of common shares
outstanding — basic
Net (loss)/income per weighted average common
share — basic
Weighted average number of common shares
outstanding — diluted
Net (loss)/income per weighted average common
share — diluted
Operating revenues
Operating (loss)/income
Net (loss)/income
Less: Net (loss)/income attributable to noncontrolling
interests and redeemable noncontrolling interests
Net (loss)/income attributable to NRG Energy, Inc.
(Loss)/income available to Common Stockholders
Weighted average number of common shares
outstanding — basic
Net (loss)/income per weighted average common
share — basic
Weighted average number of common shares
outstanding — diluted
Net (loss)/income per weighted average common
share — diluted
$
$
$
$
$
$
$
$
2,532
(791)
(1,055)
(68)
(987)
(In millions, except per share data)
2,638
$
87
(276)
3,952
755
393
$
$
(9)
402
(5)
(271)
(987) $
402
$
(193) $
316
316
315
(3.13) $
1.27
$
(0.61) $
316
317
315
(3.13) $
1.27
$
(0.61) $
3,229
476
47
(35)
82
77
315
0.24
315
0.24
Quarter Ended
2015
December 31
September 30
June 30
March 31
3,011
(4,727)
(6,358)
(44)
(6,314)
(In millions, except per share data)
3,400
$
232
(9)
4,434
379
67
$
$
1
66
5
(14)
(6,319) $
61
$
(19) $
315
331
333
(20.08) $
0.18
$
(0.06) $
315
332
333
3,829
76
(136)
(16)
(120)
(125)
336
0.37
336
(20.08) $
0.18
$
(0.06) $
(0.37)
229
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 229
3/4/17 3:01 AM
Note 29 — Condensed Consolidating Financial Information
As of December 31, 2016, the Company had outstanding $5.4 billion of Senior Notes due 2018 - 2027, as shown in Note
12, 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, including GenOn and its 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 December 31, 2016:
NRG Operating Services, Inc.
NRG Oswego Harbor Power Operations Inc.
NRG PacGen Inc.
NRG Portable Power LLC
NRG Power Marketing LLC
NRG Reliability Solutions LLC
NRG Renter's Protection LLC
NRG Retail LLC
NRG Retail Northeast LLC
NRG Rockford Acquisition LLC
NRG Saguaro Operations Inc.
NRG Security LLC
NEO Freehold-Gen LLC
NEO Power Services Inc.
New Genco GP, LLC
Norwalk Power LLC
NRG Affiliate Services Inc.
NRG Artesian Energy LLC
NRG Arthur Kill Operations Inc.
NRG Astoria Gas Turbine Operations Inc.
NRG Bayou Cove LLC
NRG Business Solutions LLC
NRG Cabrillo Power Operations Inc.
NRG California Peaker Operations LLC
NRG Cedar Bayou Development Company, LLC NRG Services Corporation
NRG Connected Home LLC
NRG Connecticut Affiliate Services Inc.
NRG Construction LLC
NRG Curtailment Solutions LLC
NRG Development Company Inc.
Ace Energy, Inc.
Allied Warranty LLC
Arthur Kill Power LLC
Astoria Gas Turbine Power LLC
Bayou Cove Peaking Power LLC
BidURenergy, Inc.
Cabrillo Power I LLC
Cabrillo Power II LLC
Carbon Management Solutions LLC
Cirro Group, Inc.
Cirro Energy Services, Inc.
Clean Edge Energy LLC
Conemaugh Power LLC
Connecticut Jet Power LLC
Cottonwood Development LLC
Cottonwood Energy Company LP
Cottonwood Generating Partners I LLC
Cottonwood Generating Partners II LLC
Cottonwood Generating Partners III LLC NRG Devon Operations Inc.
NRG Dispatch Services LLC
Cottonwood Technology Partners LP
NRG Distributed Generation PR LLC
Devon Power LLC
NRG Dunkirk Operations Inc.
Dunkirk Power LLC
NRG El Segundo Operations Inc.
Eastern Sierra Energy Company LLC
NRG Energy Efficiency-L LLC
El Segundo Power, LLC
NRG Energy Efficiency-P LLC
El Segundo Power II LLC
NRG Energy Labor Services LLC
Energy Alternatives Wholesale, LLC
NRG ECOKAP Holdings, LLC
Energy Choice Solutions, LLC
NRG Energy Services Group LLC
NRG Curtailment Solutions, Inc.
NRG Energy Services International Inc.
Energy Plus Holdings LLC
NRG Energy Services LLC
Energy Plus Natural Gas LLC
NRG Generation Holdings, Inc.
Energy Protection Insurance Company
NRG Home & Business Solutions LLC
Everything Energy LLC
NRG Home Solutions LLC
Forward Home Security, LLC
NRG Home Solutions Product LLC
GCP Funding Company, LLC
NRG Homer City Services LLC
Green Mountain Energy Company
NRG Huntley Operations Inc.
Gregory Partners, LLC
NRG HQ DG LLC
Gregory Power Partners LLC
NRG Identity Protect LLC
Huntley Power LLC
NRG Ilion Limited Partnership
Independence Energy Alliance LLC
NRG Ilion LP LLC
Independence Energy Group LLC
NRG International LLC
Independence Energy Natural Gas LLC
NRG Maintenance Services LLC
Indian River Operations Inc.
NRG Mextrans Inc.
Indian River Power LLC
NRG MidAtlantic Affiliate Services Inc.
Keystone Power LLC
NRG Middletown Operations Inc.
Langford Wind Power LLC
NRG Montville Operations Inc.
NRG Home Services LLC
NRG New Roads Holdings LLC
Louisiana Generating LLC
NRG North Central Operations Inc.
Meriden Gas Turbines LLC
NRG Northeast Affiliate Services Inc.
Middletown Power LLC
NRG Norwalk Harbor Operations Inc.
Montville Power LLC
NRG GreenCo, LLC
NEO Corporation
NRG GreenCo Holdings, LLC
NRG Business Services LLC
NRG SimplySmart Solutions LLC
NRG South Central Affiliate Services Inc.
NRG South Central Generating LLC
NRG South Central Operations Inc.
NRG South Texas LP
NRG Texas C&I Supply LLC
NRG Texas Gregory LLC
NRG Texas Holding Inc.
NRG Texas LLC
NRG Texas Power LLC
NRG Warranty Services LLC
NRG West Coast LLC
NRG Western Affiliate Services Inc.
O'Brien Cogeneration, Inc. II
ONSITE Energy, Inc.
Oswego Harbor Power LLC
RE Retail Receivables, LLC
Reliant Energy Northeast LLC
Reliant Energy Power Supply, LLC
Reliant Energy Retail Holdings, LLC
Reliant Energy Retail Services, LLC
RERH Holdings LLC
Saguaro Power LLC
Somerset Operations Inc.
Somerset Power LLC
Texas Genco Financing Corp.
Texas Genco GP, LLC
Texas Genco Holdings, Inc.
Texas Genco LP, LLC
Texas Genco Operating Services, LLC
Texas Genco Services, LP
US Retailers LLC
Vienna Operations Inc.
Vienna Power LLC
WCP (Generation) Holdings LLC
West Coast Power LLC
230
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 230
3/4/17 3:01 AM
The non-guarantor subsidiaries include all of NRG's foreign subsidiaries and certain domestic subsidiaries, including GenOn
and its subsidiaries. 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. Except for NRG Bayou Cove, LLC,
which is subject to certain restrictions under the Company's Peaker financing agreements, there are no restrictions on the ability
of any of the guarantor subsidiaries to transfer funds to NRG. In addition, 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 Securities and Exchange
Commission's 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.
In addition, the condensed parent company financial statements are provided in accordance with Rule 12-04, Schedule I of
Regulation S-X, as the restricted net assets of NRG Energy, Inc.’s subsidiaries exceed 25 percent of the consolidated net assets of
NRG Energy, Inc. These statements should be read in conjunction with the consolidated statements and notes thereto of NRG
Energy, Inc. For a discussion of NRG Energy, Inc.'s long-term debt, see Note 12, Debt and Capital Leases to the consolidated
financial statements. For a discussion of NRG Energy, Inc.'s contingencies, see Note 22, Commitments and Contingencies to the
consolidated financial statements. For a discussion of NRG Energy, Inc.'s guarantees, see Note 26, Guarantees to the consolidated
financial statements.
231
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 231
3/4/17 3:01 AM
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2016
Operating Revenues
Total operating revenues
Operating Costs and Expenses
Cost of operations
Depreciation and amortization
Impairment losses
Selling, general and administrative
Acquisition-related transaction and integration
costs
Development costs
Total operating costs and expenses
Gain/(loss) on sale of assets
Operating Income/(Loss)
Other Income/(Expense)
Equity in (losses)/earnings of consolidated
subsidiaries
Equity in earnings/(losses) of unconsolidated
affiliates
Impairment losses on investments
Other income/(loss), net
Net loss on debt extinguishment
Interest expense
Total other expense
Income/(Loss) Before Income Taxes
Income tax expense/(benefit)
Net Income/(Loss)
Less: Net (loss)/income attributable to
noncontrolling interests and redeemable
noncontrolling interests
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
NRG Energy, Inc.
(Note Issuer)
Eliminations (a)
Consolidated
Balance
(In millions)
$
7,509
$
5,082
$
— $
(240) $
12,351
5,402
3,355
565
378
415
—
—
6,760
—
749
(148)
5
—
4
—
(15)
(154)
595
(1)
596
776
540
397
1
60
5,129
294
247
(58)
37
(268)
46
(4)
(574)
(821)
(574)
18
(592)
42
26
—
289
7
30
394
(79)
(473)
313
(5)
—
(6)
(138)
(472)
(308)
(781)
(63)
(718)
(244)
—
—
—
—
—
(244)
—
4
(107)
(10)
—
(2)
—
—
(119)
(115)
62
(177)
8,555
1,367
918
1,101
8
90
12,039
215
527
—
27
(268)
42
(142)
(1,061)
(1,402)
(875)
16
(891)
—
(103)
56
(70)
(117)
Net Income/(Loss) Attributable to NRG Energy,
Inc.
$
596
$
(489) $
(774) $
(107) $
(774)
(a) All significant intercompany transactions have been eliminated in consolidation.
232
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 232
3/4/17 3:01 AM
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
For the Year Ended December 31, 2016
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiaries
NRG Energy,
Inc.
(Note Issuer)
(In millions)
Eliminations(a)
Consolidated
Balance
Net Income/(Loss)
Other Comprehensive Income/(Loss), net of tax
$
Unrealized gain on derivatives, net
Foreign currency translation adjustments, net
Available-for-sale securities, net
Defined benefit plan, net
Other comprehensive income
Comprehensive Income/(Loss)
Less: Comprehensive (loss)/income attributable to
noncontrolling interests and redeemable
noncontrolling interests
Comprehensive Income/(Loss) Attributable to
NRG Energy, Inc.
Dividends for preferred shares
Gain on redemption of preferred shares
Comprehensive Income/(Loss) Available for
Common Stockholders
596
$
(592) $
(718) $
(177) $
(891)
—
(1)
—
36
35
631
—
631
—
—
32
(1)
—
(23)
8
(584)
(103)
(481)
—
—
89
(1)
1
(51)
38
(680)
56
(736)
5
(78)
(86)
2
—
41
(43)
(220)
(70)
(150)
—
—
35
(1)
1
3
38
(853)
(117)
(736)
5
(78)
$
631
$
(481) $
(663) $
(150) $
(663)
(a) All significant intercompany transactions have been eliminated in consolidation.
233
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 233
3/4/17 3:01 AM
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2016
ASSETS
Current Assets
Cash and cash equivalents
Funds deposited by counterparties
Restricted cash
Accounts receivable - trade, net
Accounts receivable - Affiliate
Inventory
Derivative instruments
Cash collateral posted in support of energy risk management
activities
Current assets held-for-sale
Prepayments and other current assets
Total current assets
Net Property, Plant and Equipment
Other Assets
Investment in subsidiaries
Equity investments in affiliates
Notes receivable, less current portion
Goodwill
Intangible assets, net
Nuclear decommissioning trust fund
Deferred income taxes
Derivative instruments
Non-current assets held for sale
Other non-current assets
Total other assets
Total Assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt and capital leases
Accounts payable
Accounts payable - affiliate
Derivative instruments
Cash collateral received in support of energy risk management
activities
Accrued interest expense
Other accrued expenses
Other current liabilities
Total current liabilities
Other Liabilities
Long-term debt and capital leases
Nuclear decommissioning reserve
Nuclear decommissioning trust liability
Postretirement and other benefit obligations
Deferred income taxes
Derivative instruments
Out-of-market contracts
Non-current liabilities held-for-sale
Other non-current liabilities
Total non-current liabilities
Total Liabilities
2.822% Preferred Stock
Redeemable noncontrolling interest in subsidiaries
Stockholders' Equity
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
NRG Energy, Inc. Eliminations (a) Consolidated
Balance
(In millions)
$
— $
2
11
734
309
482
962
37
—
76
2,613
4,216
837
(14)
—
359
592
610
3
143
—
67
2,597
$
1,650
—
435
429
(241)
629
305
166
9
279
3,661
13,472
1,973
1,129
17
303
1,447
—
868
60
10
784
6,591
$
323
—
—
3
200
—
—
—
—
62
588
251
10,128
5
(76)
—
—
—
(646)
36
—
328
9,775
— $
—
—
—
(262)
—
(205)
—
—
—
(467)
(27)
(12,938)
—
76
—
(3)
—
—
(50)
—
—
(12,915)
1,973
2
446
1,166
6
1,111
1,062
203
9
417
6,395
17,912
—
1,120
17
662
2,036
610
225
189
10
1,179
6,048
$
$
9,426
$
23,724
$
10,614
$
(13,409) $
30,355
— $
499
655
947
2
3
110
204
2,420
244
287
339
114
186
157
80
—
283
1,690
4,110
—
—
5,316
$
1,202
362
1,834
342
—
94
140
166
4,140
10,302
—
—
189
(1,094)
187
960
12
573
11,129
15,269
—
46
8,409
(58) $
34
(2,227)
—
—
123
293
48
(1,787)
7,460
—
—
250
928
—
—
—
74
8,712
6,925
—
—
3,689
$
76
—
(262)
(205)
—
—
—
—
(391)
—
—
—
—
—
(50)
—
—
—
(50)
(441)
—
—
(12,968)
1,220
895
—
1,084
2
220
543
418
4,382
18,006
287
339
553
20
294
1,040
12
930
21,481
25,863
—
46
4,446
Total Liabilities and Stockholders' Equity
$
9,426
$
23,724
$
10,614
$
(13,409) $
30,355
(a) All significant intercompany transactions have been eliminated in consolidation.
234
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 234
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NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2016
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
NRG Energy, Inc.
(Note Issuer)
(In millions)
Eliminations(a)
Consolidated
Balance
$
596
$
(592) $
(718) $
(177) $
(891)
Cash Flows from Operating Activities
Net income/(loss)
Adjustments to reconcile net income/(loss) to net cash provided by
operating activities:
Distributions from unconsolidated affiliates
Equity in earnings of unconsolidated affiliates
Depreciation and amortization
Provision for bad debts
Amortization of nuclear fuel
Amortization of financing costs and debt discount/premiums
Adjustment to loss on debt extinguishment
Amortization of intangibles and out-of-market contracts
Amortization of unearned equity compensation
Gain on sale of assets and equity method investments, net
Impairment losses
Changes in derivative instruments
Changes in deferred income taxes and liability for uncertain tax
benefits
Changes in collateral deposits supporting energy risk
management activities
Proceeds from sale of emission allowances
Changes in nuclear decommissioning trust liability
Cash (used)/provided by changes in other working capital
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities
Dividends from NRG Yield, Inc.
Acquisition of September 2016 Drop Down Assets, net of cash
acquired
Intercompany dividends
Acquisition of businesses, net of cash acquired
Capital expenditures
Increase in restricted cash, net
Increase in restricted cash - U.S. DOE projects
Decrease in notes receivable
Proceeds from renewable energy grants
Purchases of emission allowances, net of proceeds
Investments in nuclear decommissioning trust securities
Proceeds from sales of nuclear decommissioning trust fund
securities
Proceeds from sale of assets, net
Investments in unconsolidated affiliates
Other
Net Cash (Used)/Provided by Investing Activities
Cash Flows from Financing Activities
Dividends from NRG Yield, Inc.
Payments (for)/from intercompany loans
Acquisition of September 2016 Drop Down Assets, net of cash
acquired
Intercompany dividends
Payment of dividends to preferred and common stockholders
Net receipts from settlement of acquired derivatives that include
financing elements
Payments for preferred shares
Distributions from, net of contributions to noncontrolling
interests in subsidiaries
Proceeds from issuance of common stock
Proceeds from issuance of long-term debt
Payments for short and long-term debt
Payment of debt issuance costs and hedging costs
Other
Net Cash (Used)/Provided by Financing Activities
Effect of exchange rate changes on cash and cash equivalents
Net Increase/(Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period
$
(a) All significant intercompany transactions have been eliminated in consolidation.
89
(37)
776
7
—
(18)
4
52
—
(294)
808
136
18
(72)
—
—
364
1,241
—
(77)
—
(209)
(1,016)
(25)
(3)
17
36
—
—
—
619
(37)
13
(682)
(81)
(49)
—
40
—
151
—
(156)
—
1,387
(988)
(29)
(10)
265
1
825
825
1,650
—
(5)
565
41
49
—
—
39
—
—
378
(77)
(1)
437
47
41
(1,806)
304
—
—
—
—
(180)
(4)
—
—
—
(1)
(551)
510
—
3
27
(196)
—
(52)
—
(52)
—
—
—
—
—
—
(1)
—
(3)
(108)
—
—
—
— $
235
—
5
26
—
—
21
17
—
10
70
—
(36)
(60)
—
—
—
1,192
527
81
—
12
—
(48)
—
—
—
—
—
—
—
17
—
8
70
—
101
77
—
(76)
—
(226)
—
1
4,140
(4,924)
(60)
—
(967)
—
(370)
693
323
$
$
(8)
10
—
—
—
—
—
—
—
—
—
—
—
—
—
—
175
—
(81)
77
(12)
—
—
—
—
—
—
—
—
—
—
—
—
(16)
81
—
(77)
12
—
—
—
—
—
—
—
—
—
16
—
—
—
— $
81
(27)
1,367
48
49
3
21
91
10
(224)
1,186
23
(43)
365
47
41
(75)
2,072
—
—
—
(209)
(1,244)
(29)
(3)
17
36
(1)
(551)
510
636
(34)
48
(824)
—
—
—
—
(76)
151
(226)
(156)
1
5,527
(5,913)
(89)
(13)
(794)
1
455
1,518
1,973
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 235
3/4/17 3:01 AM
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2015
Operating Revenues
Total operating revenues
Operating Costs and Expenses
Cost of operations
Depreciation and amortization
Impairment losses
Selling, general and administrative
Acquisition-related transactions and integration
costs
Development costs
Total operating costs and expenses
Gain on postretirement benefits curtailment
Operating (Loss)/Income
Other Income/(Expense)
Equity in losses of consolidated subsidiaries
Equity in earnings of unconsolidated affiliates
Impairment losses on investments
Other income, net
Loss on sale of equity method investment
Net gain on debt extinguishment
Interest expense
Total other expense
Loss Before Income Taxes
Income tax (benefit)/expense
Net Loss
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
NRG
Energy, Inc.
(Note Issuer)
(In millions)
Eliminations (a)
Consolidated
Balance
$ 10,024
$
4,768
$
— $
(118) $
14,674
7,712
787
4,655
467
1
—
13,622
—
(3,598)
(86)
8
—
4
—
—
(18)
(92)
(3,690)
(1,104)
(2,586)
3,176
759
375
382
(5)
53
4,740
21
49
(29)
37
(25)
29
—
56
(564)
(496)
(447)
(96)
(351)
14
20
—
350
14
93
491
—
(491)
(2,799)
—
(31)
—
(14)
19
(546)
(3,371)
(3,862)
2,489
(6,351)
(118)
—
—
—
—
—
(118)
—
—
2,914
(9)
—
—
—
—
—
2,905
2,905
53
2,852
10,784
1,566
5,030
1,199
10
146
18,735
21
(4,040)
—
36
(56)
33
(14)
75
(1,128)
(1,054)
(5,094)
1,342
(6,436)
Less: Net (loss)/income attributable to
noncontrolling interests and redeemable
noncontrolling interests
Net Loss Attributable to NRG Energy, Inc.
$
—
(2,586) $
(23)
(328) $
31
(6,382) $
(62)
2,914
$
(54)
(6,382)
(a) All significant intercompany transactions have been eliminated in consolidation.
236
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 236
3/4/17 3:01 AM
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
For the Year Ended December 31, 2015
Net Loss
Other Comprehensive (Loss)/Income, net of
tax
Unrealized (loss)/gain on derivatives, net
Foreign currency translation adjustments, net
Available-for-sale securities, net
Defined benefit plan, net
Other comprehensive (loss)/income
Comprehensive Loss
Less: Comprehensive (loss)/income
attributable to noncontrolling interests and
redeemable noncontrolling interests
Comprehensive Loss Attributable to NRG
Energy, Inc.
Dividends for preferred shares
Comprehensive Loss Available for Common
Stockholders
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
NRG Energy, Inc.
(Note Issuer)
Eliminations(a)
Consolidated
Balance
$
(2,586) $
(351) $
(6,351) $
2,852
$
(6,436)
(In millions)
(9)
—
—
(22)
(31)
(2,617)
—
(2,617)
—
(13)
(7)
(1)
(15)
(36)
(387)
(42)
(345)
—
48
(4)
18
(42)
20
(6,331)
(41)
—
—
89
48
2,900
(15)
(11)
17
10
1
(6,435)
31
(62)
(73)
(6,362)
20
2,962
—
(6,362)
20
$
(2,617) $
(345) $
(6,382) $
2,962
$
(6,382)
(a) All significant intercompany transactions have been eliminated in consolidation.
237
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 237
3/4/17 3:01 AM
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2015
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
NRG Energy, Inc.
Eliminations (a)
Consolidated
Balance
(In millions)
ASSETS
Current Assets
Cash and cash equivalents
Funds deposited by counterparties
Restricted cash
Accounts receivable - trade, net
Inventory
Derivative instruments
Cash collateral posted in support of energy risk management
activities
Accounts receivable - affiliate
Current assets held-for-sale
Prepayments and other current assets
Total current assets
Net Property, Plant and Equipment
Other Assets
Investment in subsidiaries
Equity investments in affiliates
Notes receivable, less current portion
Goodwill
Intangible assets, net
Nuclear decommissioning trust fund
Derivative instruments
Deferred income taxes
Non-current assets held for sale
Other non-current assets
Total other assets
Total Assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt and capital leases
Accounts payable
Accounts payable - affiliate
Derivative instruments
Cash collateral received in support of energy risk management
activities
Accrued interest expense
Other accrued expenses
Current liabilities held-for-sale
Other current liabilities
Total current liabilities
Other Liabilities
Long-term debt and capital leases
Nuclear decommissioning reserve
Nuclear decommissioning trust liability
Postretirement and other benefit obligations
Deferred income taxes
Derivative instruments
Out-of-market contracts
Non-current liabilities held-for-sale
Other non-current liabilities
Total non-current liabilities
Total Liabilities
2.822% Preferred Stock
Redeemable noncontrolling interest in subsidiaries
Stockholders' Equity
Total Liabilities and Stockholders' Equity
$
$
$
$
— $
55
5
851
570
1,202
474
395
—
93
3,645
4,767
842
(14)
—
697
763
561
153
(6)
—
80
3,076
11,488
2
553
151
1,130
55
5
122
—
192
2,210
302
326
283
236
179
301
95
—
318
2,040
4,250
—
—
7,238
11,488
$
$
$
(a) All significant intercompany transactions have been eliminated in consolidation.
825
51
409
304
682
871
94
260
6
287
3,789
13,773
2,244
1,160
46
302
1,551
—
184
815
105
749
7,156
24,718
460
277
2,000
749
51
91
151
2
187
3,968
10,496
—
—
200
(1,088)
224
1,051
4
535
11,422
15,390
—
29
9,299
24,718
$
$
$
$
238
693
—
—
2
—
—
—
571
—
71
1,337
219
11,039
1
7
—
2
—
—
(642)
—
385
10,792
12,348
19
39
(929)
—
—
147
295
—
7
(422)
8,185
—
—
152
928
—
—
—
47
9,312
8,890
302
—
3,156
12,348
$
$
$
$
— $
—
—
—
—
(158)
—
(1,222)
—
—
(1,380)
(27)
(14,125)
(102)
—
—
(6)
—
(32)
—
—
—
(14,265)
(15,672) $
— $
—
(1,222)
(158)
—
(1)
—
—
—
(1,381)
—
—
—
—
—
(32)
—
—
—
(32)
(1,413)
—
—
(14,259)
(15,672) $
1,518
106
414
1,157
1,252
1,915
568
4
6
451
7,391
18,732
—
1,045
53
999
2,310
561
305
167
105
1,214
6,759
32,882
481
869
—
1,721
106
242
568
2
386
4,375
18,983
326
283
588
19
493
1,146
4
900
22,742
27,117
302
29
5,434
32,882
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 238
3/4/17 3:01 AM
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2015
Cash Flows from Operating Activities
Net loss
Adjustments to reconcile net loss to net cash provided by operating
activities:
Distributions from unconsolidated affiliates
Equity in earnings of unconsolidated affiliates
Depreciation and amortization
Provision for bad debts
Amortization of nuclear fuel
Amortization of financing costs and debt discount/premiums
Adjustment to gain on debt extinguishment
Amortization of intangibles and out-of-market contracts
Amortization of unearned equity compensation
Gain on postretirement benefits curtailment
Loss on sale of assets
Impairment losses
Changes in derivative instruments
Changes in deferred income taxes and liability for uncertain tax
benefits
Changes in nuclear decommissioning trust liability
Changes in collateral deposits supporting energy risk management
activities
Cash (used)/provided by changes in other working capital
Net Cash (Used)/Provided by Operating Activities
Cash Flows from Investing Activities
Dividends from NRG Yield, Inc.
Intercompany dividends
Acquisition of 2015 Drop Down Assets, net of cash acquired
Acquisition of businesses, net of cash acquired
Capital expenditures
(Increase)/decrease in restricted cash, net
Decrease in restricted cash - U.S. DOE projects
Decrease in notes receivable
Proceeds from renewable energy grants
Purchases of emission allowances, net of proceeds
Investments in nuclear decommissioning trust fund securities
Proceeds from sales of nuclear decommissioning trust fund
securities
Proceeds from sale of assets, net
Investments in unconsolidated affiliates
Other
Net Cash (Used)/Provided by Investing Activities
Cash Flows from Financing Activities
Dividends from NRG Yield, Inc.
Intercompany dividends
Payments from/(for) intercompany loans
Acquisition of 2015 Drop Down Assets, net of cash acquired
Payment of dividends to preferred stockholders
Net receipts from acquired derivatives that include financing
elements
Payment for treasury stock
Distributions from, net of contributions to, noncontrolling interests
in subsidiaries
Proceeds from sale of noncontrolling interests in subsidiaries
Proceeds from issuance of common stock
Proceeds from issuance of long-term debt
Payments of short and long-term debt
Payment of debt issuance and hedging costs
Other
Net Cash Provided/(Used) by Financing Activities
Effect of exchange rate changes on cash and cash equivalents
Net (Decrease)/Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
NRG
Energy, Inc.
(In millions)
Eliminations (a)
Consolidated
Balance
$
(2,586) $
(351) $
(6,351) $
2,852
$
(6,436)
3
(8)
787
58
45
—
—
52
—
—
—
4,655
264
(1,092)
(2)
(360)
(8,744)
(6,928)
—
—
—
—
(316)
(1)
—
—
—
41
(629)
631
—
1
—
(273)
—
—
7,183
—
—
—
—
—
—
—
—
—
—
—
7,183
—
(18)
18
— $
$
91
(37)
759
3
—
(37)
(56)
29
—
(21)
—
400
(31)
(237)
—
(21)
(847)
(356)
—
—
(698)
(31)
(908)
9
34
18
82
—
—
—
1
(357)
11
(1,839)
(70)
(33)
1,258
—
—
196
—
47
600
—
953
(1,353)
(21)
(22)
1,555
10
(630)
1,455
825
$
—
—
20
3
—
26
(19)
—
41
—
14
31
—
2,655
—
—
12,173
8,593
70
33
—
—
(59)
—
1
—
—
—
—
—
26
(39)
—
32
—
—
(8,441)
698
(201)
—
(437)
—
—
1
51
(246)
—
—
(8,575)
—
50
643
693
(21)
9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(2,840)
—
(70)
(33)
698
—
—
—
—
—
—
—
—
—
—
—
—
595
70
33
—
(698)
—
—
—
—
—
—
—
—
—
—
(595)
—
—
—
— $
$
73
(36)
1,566
64
45
(11)
(75)
81
41
(21)
14
5,086
233
1,326
(2)
(381)
(258)
1,309
—
—
—
(31)
(1,283)
8
35
18
82
41
(629)
631
27
(395)
11
(1,485)
—
—
—
—
(201)
196
(437)
47
600
1
1,004
(1,599)
(21)
(22)
(432)
10
(598)
2,116
1,518
(a) All significant intercompany transactions have been eliminated in consolidation.
239
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 239
3/4/17 3:01 AM
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2014
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
NRG Energy, Inc. Eliminations (a)
Consolidated
Balance
(In millions)
$
9,974
$
6,287
$
— $
(393) $
15,868
Operating Revenues
Total operating revenues
Operating Costs and Expenses
Cost of operations
Depreciation and amortization
Impairment losses
Selling, general and administrative
Acquisition-related transaction and integration
costs
Development costs
Total operating costs and expenses
Gain on sale of assets
Operating Income/(Loss)
Other Income/(Expense)
Equity in earnings of consolidated subsidiaries
Equity in earnings of unconsolidated affiliates
Other income, net
Gain on sale of equity method investment
Loss on debt extinguishment
Interest expense
Total other income/(expense)
Income/(Loss) Before Income Taxes
Income tax expense/(benefit)
Net Income
Less: Net income attributable to noncontrolling
interests and redeemable noncontrolling interests
7,909
4,220
801
—
333
3
—
9,046
—
928
317
13
7
—
—
(19)
318
1,246
322
924
—
706
119
379
15
32
5,471
19
835
219
33
14
18
(9)
(525)
(250)
585
159
426
57
Net Income Attributable to NRG Energy, Inc
$
924
$
369
$
(a) All significant intercompany transactions have been eliminated in consolidation.
4
16
—
304
66
56
446
—
(446)
775
—
3
—
(86)
(575)
117
(329)
(478)
149
(325)
—
(22)
—
—
—
(347)
—
(46)
(1,311)
(8)
(2)
—
—
—
(1,321)
(1,367)
—
(1,367)
15
134
$
(74)
(1,293) $
11,808
1,523
97
1,016
84
88
14,616
19
1,271
—
38
22
18
(95)
(1,119)
(1,136)
135
3
132
(2)
134
240
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 240
3/4/17 3:01 AM
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME
For the Year Ended December 31, 2014
Net Income
Other Comprehensive (Loss)/Income, net of
tax
Unrealized loss on derivatives, net
Foreign currency translation adjustments, net
Available-for-sale securities, net
Defined benefit plan, net
Other comprehensive loss
Comprehensive Income/(Loss)
Less: Comprehensive income attributable to
noncontrolling interest
Comprehensive Income/(Loss) Attributable to
NRG Energy, Inc.
Dividends for preferred shares
Comprehensive Income/(Loss) Available for
Common Stockholders
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
NRG Energy, Inc.
(Note Issuer)
Eliminations(a)
Consolidated
Balance
$
924
$
426
$
149
$
(1,367) $
132
(In millions)
(49)
—
—
5
(44)
880
—
880
—
(89)
(12)
1
(104)
(204)
222
67
155
—
(215)
4
(8)
20
(199)
(50)
15
(65)
56
308
—
—
(50)
258
(1,109)
(74)
(1,035)
—
(45)
(8)
(7)
(129)
(189)
(57)
8
(65)
56
$
880
$
155
$
(121) $
(1,035) $
(121)
(a) All significant intercompany transactions have been eliminated in consolidation.
241
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 241
3/4/17 3:01 AM
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2014
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
NRG
Energy, Inc. Eliminations(a)
(In millions)
Consolidated
Balance
$
924
$
426
$
149
$
(1,367)
$
132
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Distributions from unconsolidated affiliates
Equity in earnings of unconsolidated affiliates
Depreciation and amortization
Provision for bad debts
Amortization of nuclear fuel
Amortization of financing costs and debt discount/premiums
Adjustment to loss on debt extinguishment
Amortization of intangibles and out-of-market contracts
Amortization of unearned equity compensation
Gain on sale of assets
Impairment losses
Changes in derivative instruments
Changes in deferred income taxes and liability for uncertain tax
benefits
Changes in nuclear decommissioning trust liability
Changes in collateral deposits supporting energy risk management
activities
Cash provided/(used) by changes in other working capital
Net Cash Provided/(Used) by Operating Activities
Cash Flows from Investing Activities
Dividends from NRG Yield, Inc.
Acquisition of business, net of cash acquired
Capital expenditures
Decrease in restricted cash
(Increase)/decrease in restricted cash - U.S. DOE projects
Decrease in notes receivable
Proceeds from renewable energy grants
Purchases of emission allowances, net of proceeds
Investments in nuclear decommissioning trust fund securities
Proceeds from sales of nuclear decommissioning trust fund securities
Proceeds from sale of assets, net
Investments in unconsolidated affiliates, net
Other
Net Cash (Used)/Provided by Investing Activities
Cash Flows from Financing Activities
Dividends from NRG Yield, Inc.
Payments (for)/from intercompany loans
Payment for dividends to preferred stockholders
Net receipts from acquired derivatives that include financing elements
Payment for treasury stock
Distributions from, net of contributions to, noncontrolling interests in
subsidiaries
Proceeds from sale of noncontrolling interests in subsidiaries
Proceeds from issuance of common stock
Proceeds from issuance of long-term debt
Payments of short and long-term debt
Payment of debt issuance and hedging costs
Other
Net Cash (Used)/Provided by Financing Activities
Effect of exchange rate changes on cash and cash equivalents
Net (Decrease)/Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period
$
—
(13)
801
64
46
—
—
65
—
—
—
(149)
242
19
101
686
2,786
—
—
(252)
—
—
—
—
(16)
(619)
600
—
—
—
(287)
—
(2,523)
—
—
—
—
—
—
—
—
—
(14)
(2,537)
—
(38)
56
18
87
(33)
706
—
—
(40)
8
(1)
—
(4)
119
88
—
—
16
—
—
28
17
—
42
—
—
—
(115)
(281)
—
45
(958)
328
—
(25)
(619)
57
(209)
25
916
—
—
—
—
(25)
85
205
(60)
(685)
—
9
—
189
630
—
1,182
(1,160)
(39)
(4)
62
(10)
585
870
1,455
$
$
—
—
(1,575)
(1,604)
60
(2,911)
(38)
—
3
—
—
—
—
—
203
(78)
—
(2,761)
—
3,208
(196)
—
(39)
—
—
21
3,381
(2,667)
(28)
—
3,680
—
(685)
1,328
643
$
—
8
—
—
—
—
—
—
—
—
(22)
—
—
—
—
1,381
—
(60)
—
—
—
—
—
—
—
—
—
—
—
—
(60)
60
—
—
—
—
—
—
—
—
—
—
60
—
—
—
— $
87
(38)
1,523
64
46
(12)
25
64
42
(4)
97
(61)
(154)
19
146
(466)
1,510
—
(2,936)
(909)
57
(206)
25
916
(16)
(619)
600
203
(103)
85
(2,903)
—
—
(196)
9
(39)
189
630
21
4,563
(3,827)
(67)
(18)
1,265
(10)
(138)
2,254
2,116
(a) All significant intercompany transactions have been eliminated in consolidation.
242
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 242
3/4/17 3:01 AM
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2016, 2015, and 2014
Allowance for doubtful accounts, deducted from
accounts receivable
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
Income tax valuation allowance, deducted from
deferred tax assets
Year Ended December 31, 2016
Year Ended December 31, 2015
Year Ended December 31, 2014
(a) Represents principally net amounts charged as uncollectible.
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Charged to
Other Accounts
(In millions)
Deductions
Balance at
End of Period
$
$
21
23
40
48
62
64
$
— $
—
—
(39) (a) $
(64) (a)
(81) (a)
$
3,575
$
306
$
235
$
—
$
265
291
3,039
—
271
(10)
—
(16)
30
21
23
4,116
3,575
265
243
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 243
3/4/17 3:01 AM
Number
Description
Method of Filing
EXHIBIT INDEX
2.1
2.2
2.3
2.4
2.5
2.6
2.7
3.1
3.2
3.3
3.4
3.5
3.6
3.7
4.1
4.2
4.3
Third Amended Joint Plan of Reorganization of NRG Energy, Inc.,
NRG Power Marketing, Inc., NRG Capital LLC, NRG Finance
Company I LLC, and NRGenerating Holdings (No. 23) B.V.
Incorporated herein by reference to Exhibit 99.1 to the
Registrant's current report on Form 8-K filed on
November 19, 2003.
First Amended Joint Plan of Reorganization of NRG Northeast
Generating LLC (and certain of its subsidiaries), NRG South Central
Generating (and certain of its subsidiaries) and Berrians I Gas Turbine
Power LLC.
Incorporated herein by reference to Exhibit 99.2 to the
Registrant's current report on Form 8-K filed on
November 19, 2003.
Acquisition Agreement, dated as of September 30, 2005, by and
among NRG Energy, Inc., Texas Genco LLC and the Direct and
Indirect Owners of Texas Genco LLC.
Incorporated herein by reference to Exhibit 2.1 to the
Registrant's current report on Form 8-K filed on October
3, 2005.
Purchase and Sale Agreement by and between Denali Merger Sub Inc.
and NRG Energy, Inc. dated as of August 13, 2010.
Incorporated herein by reference to Exhibit 99.2 to the
Registrant's current report on Form 8-K filed on
August 13, 2010.
Agreement and Plan of Merger, dated as of July 20, 2012, by and
among NRG Energy, Inc., Plus Merger Corporation and GenOn
Energy, Inc.
Incorporated herein by reference to Exhibit 2.1 to the
Registrant's current report on Form 8-K filed on July 23,
2012.
Plan Sponsor Agreement, dated October 18, 2013, by and among NRG
Energy, Inc., NRG Energy Holdings, Inc., Edison Mission Energy,
certain of Edison Mission Energy’s debtor subsidiaries, the Official
Committee of Unsecured Creditors of Edison Mission Energy and its
affiliated debtors, the PoJo Parties (as defined therein) and the
proponent noteholders thereto.
Incorporated herein by reference to Exhibit 2.1 to
Amendment No. 1 to the Registrant’s current report on
Form 8-K filed on October 21, 2013.
Asset Purchase Agreement, dated October 18, 2013, by and among
NRG Energy, Inc., Edison Mission Energy and NRG Energy Holdings
Inc.
Incorporated herein by reference to Exhibit 2.2 to
Amendment No. 1 to the Registrant’s current report on
Form 8-K filed on October 21, 2013.
Amended and Restated Certificate of Incorporation.
Certificate of Amendment to Amended and Restated Certificate of
Incorporation.
Fourth Amended and Restated By-Laws.
Certificate of Designations relating to the Series 1 Exchangeable
Limited Liability Company Preferred Interests of NRG Common
Stock Finance I LLC, as filed with the Secretary of State of Delaware
on August 4, 2006.
Certificate of Amendment to Certificate of Designations relating to
the Series 1 Exchangeable Limited Liability Company Preferred
Interests of NRG Common Stock Finance I LLC, as filed with the
Secretary of State of Delaware on February 27, 2008.
Second Certificate of Amendment to Certificate of Designations
relating to the Series 1 Exchangeable Limited Liability Company
Preferred Interests of NRG Common Stock Finance I LLC, as filed
with the Secretary of State of Delaware on August 8, 2008.
Incorporated herein by reference to Exhibit 3.1 to the
Registrant's quarterly report on Form 10-Q filed on May
3, 2012.
Incorporated herein by reference to Exhibit 3.1 to the
Registrant's current report on Form 8-K filed on
December 14, 2012.
Incorporated herein by reference to Exhibit 3.1 to the
Registrant's current report on Form 8-K filed on
February 13, 2017.
Incorporated herein by reference to Exhibit 10.7 to the
Registrant's current report on Form 8-K filed on August
10, 2006.
Incorporated herein by reference to Exhibit 3.1 to the
Registrant's quarterly report on Form 10-Q filed on May
1, 2008.
Incorporated herein by reference to Exhibit 3.1 to the
Registrant's quarterly report on Form 10-Q filed on
October 30, 2008.
Certificate of Designations of 2.822% Convertible Perpetual
Preferred Stock, as filed with the Secretary of State of the State of
Delaware on December 30, 2014.
Incorporated herein by reference to Exhibit 3.1 to the
Registrant's current report on Form 8-K filed on
December 30, 2014.
Supplemental Indenture, dated as of December 30, 2005, among NRG
Energy, Inc., the subsidiary guarantors named on Schedule A thereto
and Law Debenture Trust Company of New York, as trustee.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's current report on Form 8-K filed on January
4, 2006.
Amended and Restated Common Agreement among XL Capital
Assurance Inc., Goldman Sachs Mitsui Marine Derivative Products,
L.P., Law Debenture Trust Company of New York, as Trustee, The
Bank of New York, as Collateral Agent, NRG Peaker Finance
Company LLC and each Project Company Party thereto, dated as of
January 6, 2004, together with Annex A to the Common Agreement.
Amended and Restated Security Deposit Agreement among NRG
Peaker Finance Company, LLC and each Project Company party
thereto, and the Bank of New York, as Collateral Agent and Depositary
Agent, dated as of January 6, 2004.
Incorporated herein by reference to Exhibit 4.9 to the
Registrant's annual report on Form 10-K filed on
March 16, 2004.
Incorporated herein by reference to Exhibit 4.10 to the
Registrant's annual report on Form 10-K filed on
March 16, 2004.
244
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4.4
4.5
4.6
4.7
4.8
NRG Parent Agreement by NRG Energy, Inc. in favor of the Bank of
New York, as Collateral Agent, dated as of January 6, 2004.
Indenture dated June 18, 2002, between NRG Peaker Finance
Company LLC, as Issuer, Bayou Cove Peaking Power LLC, Big Cajun
I Peaking Power LLC, NRG Rockford LLC, NRG Rockford II LLC
and Sterlington Power LLC, as Guarantors, XL Capital Assurance Inc.,
as Insurer, and Law Debenture Trust Company, as Successor Trustee
to the Bank of New York.
Specimen of Certificate representing common stock of NRG Energy,
Inc.
Indenture, dated February 2, 2006, among NRG Energy, Inc. and Law
Debenture Trust Company of New York.
Thirty-Sixth Supplemental Indenture, dated August 20, 2010, among
NRG Energy, Inc., the guarantors named therein and Law Debenture
Trust Company of New York as Trustee, re: NRG Energy, Inc.'s 8.25%
Senior Notes due 2020.
4.9
Form of 8.25% Senior Note due 2020.
4.10
4.11
4.12
Registration Rights Agreement, dated August 20, 2010, among NRG
Energy, Inc., the guarantors named therein and Citigroup Global
Markets Inc., Banc of America Securities LLC and Deutsche Bank
Securities Inc., as representatives of the several initial purchasers.
Forty-First Supplemental Indenture, dated as of December 15, 2010,
among NRG Energy, Inc., the existing guarantors named therein, the
guaranteeing subsidiaries named therein and Law Debenture Trust
Company of New York as Trustee, re: NRG Energy, Inc.'s 8.25%
Senior Notes due 2020.
Forty-Second Supplemental Indenture, dated January 26, 2011,
among NRG Energy, Inc., the existing guarantors named therein, the
guaranteeing subsidiaries named therein and Law Debenture Trust
Company of New York as Trustee, re: NRG Energy, Inc.’s 7.625%
Senior Notes due 2018.
4.13
Form of 7.625% Senior Note due 2018.
Incorporated herein by reference to Exhibit 4.11 to the
Registrant's annual report on Form 10-K filed on
March 16, 2004.
Incorporated herein by reference to Exhibit 4.23 to the
Registrant's annual report on Form 10-K filed on
March 31, 2003.
Incorporated herein by reference to Exhibit 4.3 to the
Registrant's quarterly report on Form 10-Q filed on
August 4, 2006.
Incorporated herein by reference to Exhibit 4.1 to the
Registrant's current report on Form 8-K filed on
February 6, 2006.
Incorporated herein by reference to Exhibit 4.1 to the
Registrant's current report on Form 8-K filed on
August 20, 2010.
Incorporated herein by reference to Exhibit 4.2 to the
Registrant's current report on Form 8-K filed on
August 20, 2010.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's current report on Form 8-K filed on
August 20, 2010.
Incorporated herein by reference to Exhibit 4.5 to the
Registrant's current report on Form 8-K filed on
December 16, 2010.
Incorporated herein by reference to Exhibit 4.1 to the
Registrant's current report on Form 8-K filed on January
28, 2011.
Incorporated herein by reference to Exhibit 4.2 to the
Registrant's current report on Form 8-K filed on January
28, 2011.
Registration Rights Agreement, dated January 26, 2011, among NRG
Energy, Inc., the guarantors named therein and J.P. Morgan
Securities LLC, as initial purchaser.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's current report on Form 8-K filed on January
28, 2011.
4.14
4.15
4.16
4.17
Forty-Eighth Supplemental Indenture, dated May 20, 2011, among
NRG Energy, Inc., the existing guarantors named therein, the
guaranteeing subsidiaries named therein and Law Debenture Trust
Company of New York as Trustee, re: NRG Energy, Inc.’s 8.25%
Senior Notes due 2020.
Forty-Ninth Supplemental Indenture, dated May 20, 2011, among
NRG Energy, Inc., the existing guarantors named therein, the
guaranteeing subsidiaries named therein and Law Debenture Trust
Company of New York as Trustee, re: NRG Energy, Inc.’s 7.625%
Senior Notes due 2018.
Fifty-First Supplemental Indenture, dated May 24, 2011, among NRG
Energy, Inc., the existing guarantors named therein, the guaranteeing
subsidiaries named therein and Law Debenture Trust Company of New
York as Trustee, re: NRG Energy, Inc.’s 7.875% Senior Notes due
2021.
4.18
Form of 7.875% Senior Note due 2021.
4.19
Registration Rights Agreement, dated May 24, 2011, among NRG
Energy, Inc., the guarantors named therein and Morgan Stanley & Co.
Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Barclays Capital Inc., Citigroup Global Markets Inc., Credit Suisse
Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman,
Sachs & Co., J.P. Morgan Securities LLC and RBS Securities Inc., as
representatives of the initial purchasers.
245
Incorporated herein by reference to Exhibit 4.4 to the
Registrant's current report on Form 8-K filed on
May 25, 2011.
Incorporated herein by reference to Exhibit 4.5 to the
Registrant's current report on Form 8-K filed on
May 25, 2011.
Incorporated herein by reference to Exhibit 4.3 to the
Registrant's current report on Form 8-K filed on
May 25, 2011.
Incorporated herein by reference to Exhibit 4.4 to the
Registrant's current report on Form 8-K filed on
May 25, 2011.
Incorporated herein by reference to Exhibit 4.5 to the
Registrant's current report on Form 8-K filed on
May 25, 2011.
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4.20
4.21
4.22
4.23
4.24
4.25
4.26
4.27
4.28
4.29
Fifty-Fourth Supplemental Indenture, dated November 8, 2011,
among NRG Energy, Inc., the existing guarantors named therein, the
guaranteeing subsidiaries named therein and Law Debenture Trust
Company of New York as Trustee, re: NRG Energy, Inc.’s 8.25%
Senior Notes due 2020.
Fifty-Fifth Supplemental Indenture, dated November 8, 2011, among
NRG Energy, Inc., the existing guarantors named therein, the
guaranteeing subsidiaries named therein and Law Debenture Trust
Company of New York as Trustee, re: NRG Energy, Inc.’s 7.625%
Senior Notes due 2018.
Fifty-Seventh Supplemental Indenture, dated November 8, 2011,
among NRG Energy, Inc., the existing guarantors named therein, the
guaranteeing subsidiaries named therein and Law Debenture Trust
Company of New York as Trustee, re: NRG Energy, Inc.’s 7.875%
Senior Notes due 2021.
Sixtieth Supplemental Indenture, dated April 5, 2012, among NRG
Energy, Inc., the existing guarantors named therein, the guaranteeing
subsidiaries named therein and Law Debenture Trust Company of New
York as Trustee, re: NRG Energy, Inc.’s 8.25% Senior Notes due 2020.
Sixty-First Supplemental Indenture, dated April 5, 2012, among NRG
Energy, Inc., the existing guarantors named therein, the guaranteeing
subsidiaries named therein and Law Debenture Trust Company of New
York as Trustee, re: NRG Energy, Inc.’s 7.625% Senior Notes due
2018.
Sixty-Third Supplemental Indenture, dated April 5, 2012, among NRG
Energy, Inc., the existing guarantors named therein, the guaranteeing
subsidiaries named therein and Law Debenture Trust Company of New
York as Trustee, re: NRG Energy, Inc.’s 7.875% Senior Notes due
2021.
Sixty-Sixth Supplemental Indenture, dated May 9, 2012, among NRG
Energy, Inc., the existing guarantors named therein, the guaranteeing
subsidiaries named therein and Law Debenture Trust Company of New
York as Trustee, re: NRG Energy, Inc.’s 8.25% Senior Notes due 2020.
Sixty-Seventh Supplemental Indenture, dated May 9, 2012, among
NRG Energy, Inc., the existing guarantors named therein, the
guaranteeing subsidiaries named therein and Law Debenture Trust
Company of New York as Trustee, re: NRG Energy, Inc.’s 7.625%
Senior Notes due 2018.
Sixty-Ninth Supplemental Indenture, dated May 9, 2012, among NRG
Energy, Inc., the existing guarantors named therein, the guaranteeing
subsidiaries named therein and Law Debenture Trust Company of New
York as Trustee, re: NRG Energy, Inc.’s 7.875% Senior Notes due
2021.
Seventieth Supplemental Indenture, dated September 24, 2012, among
NRG Energy, Inc., the existing guarantors named therein, the
guaranteeing subsidiaries named therein and Law Debenture Trust
Company of New York as Trustee, re: NRG Energy, Inc.’s 6.625%
Senior Notes due 2023.
4.30
Form of 6.625% Senior Note due 2023.
4.31
4.32
4.33
Seventy-Second Supplemental Indenture, dated October 9, 2012,
among NRG Energy, Inc., the existing guarantors named therein, the
guaranteeing subsidiaries named therein and Law Debenture Trust
Company of New York as Trustee, re: NRG Energy, Inc.’s 8.25%
Senior Notes due 2020.
Seventy-Third Supplemental Indenture, dated October 9, 2012, among
NRG Energy, Inc., the existing guarantors named therein, the
guaranteeing subsidiaries named therein and Law Debenture Trust
Company of New York as Trustee, re: NRG Energy, Inc.’s 7.625%
Senior Notes due 2018.
Seventy-Fifth Supplemental Indenture, dated October 9, 2012, among
NRG Energy, Inc., the existing guarantors named therein, the
guaranteeing subsidiaries named therein and Law Debenture Trust
Company of New York as Trustee, re: NRG Energy, Inc.’s 7.875%
Senior Notes due 2021.
Incorporated herein by reference to Exhibit 4.3 to the
Registrant's current report on Form 8-K filed on
November 8, 2011.
Incorporated herein by reference to Exhibit 4.4 to the
Registrant's current report on Form 8-K filed on
November 8, 2011.
Incorporated herein by reference to Exhibit 4.6 to the
Registrant's current report on Form 8-K filed on
November 8, 2011.
Incorporated herein by reference to Exhibit 4.3 to the
Registrant's current report on Form 8-K filed on April
6, 2012.
Incorporated herein by reference to Exhibit 4.4 to the
Registrant's current report on Form 8-K filed on April
6, 2012.
Incorporated herein by reference to Exhibit 4.6 to the
Registrant's current report on Form 8-K filed on April
6, 2012.
Incorporated herein by reference to Exhibit 4.3 to the
Registrant's current report on Form 8-K filed on May
11, 2012.
Incorporated herein by reference to Exhibit 4.4 to the
Registrant's current report on Form 8-K filed on May
11, 2012.
Incorporated herein by reference to Exhibit 4.6 to the
Registrant's current report on Form 8-K filed on May
11, 2012.
Incorporated herein by reference to Exhibit 4.1 to the
Registrant's current report on Form 8-K filed on
September 24, 2012.
Incorporated herein by reference to Exhibit 4.2 to the
Registrant's current report on Form 8-K filed on
September 24, 2012.
Incorporated herein by reference to Exhibit 4.2 to the
Registrant's current report on Form 8-K filed on October
12, 2012.
Incorporated herein by reference to Exhibit 4.3 to the
Registrant's current report on Form 8-K filed on October
12, 2012.
Incorporated herein by reference to Exhibit 4.5 to the
Registrant's current report on Form 8-K filed on October
12, 2012.
246
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4.34
4.35
4.36
4.37
4.38
4.39
4.40
4.41
4.42
4.43
4.44
4.45
4.46
4.47
4.48
4.49
4.50
4.51
Seventy-Sixth Supplemental Indenture, dated October 9, 2012, among
NRG Energy, Inc., the existing guarantors named therein, the
guaranteeing subsidiaries named therein and Law Debenture Trust
Company of New York as Trustee, re: NRG Energy, Inc.’s 6.625%
Senior Notes due 2023.
Senior Indenture, dated December 22, 2004, between Reliant Energy,
Inc. and Wilmington Trust Company.
Fourth Supplemental Indenture, dated June 13, 2007, among Reliant
Energy, Inc., the Guarantors listed therein and Wilmington Trust
Company as Trustee, re: GenOn Energy, Inc.’s 7.625% Senior Notes
due 2014.
Fifth Supplemental Indenture, dated June 13, 2007, among Reliant
Energy, Inc., the Guarantors listed therein and Wilmington Trust
Company as Trustee, re: GenOn Energy, Inc.’s 7.875% Senior Notes
due 2017.
Indenture, dated May 1, 2001, between Mirant Americas Generation,
Inc. and Bankers Trust Company as Trustee.
Incorporated herein by reference to Exhibit 4.6 to the
Registrant's current report on Form 8-K filed on October
12, 2012.
Incorporated herein by reference to Exhibit 4.1 to
GenOn Energy, Inc.’s current report on Form 8-K filed
on December 27, 2004.
Incorporated herein by reference to Exhibit 4.1 to
GenOn Energy Inc.'s current report on Form 8-K filed
on June 15, 2007.
Incorporated herein by reference to Exhibit 4.2 to
GenOn Energy Inc.'s current report on Form 8-K filed
June 15, 2007.
Incorporated herein by reference to Exhibit 4.1 to Mirant
Americas Generation, Inc.'s Registration Statement on
Form S-4 filed on June 18, 2001.
Third Supplemental Indenture, dated May 1, 2001, between Mirant
Americas Generation, Inc. and Bankers Trust Company as Trustee, re:
GenOn Americas Generation, LLC’s 9.125% Senior Notes due 2031.
Incorporated herein by reference to Exhibit 4.4 to Mirant
Americas Generation, Inc.'s Registration Statement on
Form S-4 filed on June 18, 2001.
Fifth Supplemental Indenture, dated October 9, 2001, between Mirant
Americas Generation, Inc. and Bankers Trust Company as Trustee, re:
GenOn Americas Generation, LLC’s 8.5% Senior Notes due 2021.
Incorporated herein by reference to Exhibit 4.6 to Mirant
Americas Generation, Inc.'s Registration Statement on
Form S-4/A filed on May 7, 2002.
Sixth Supplemental Indenture, dated November 1, 2001, between
Mirant Americas Generation LLC and Bankers Trust Company, re:
Indenture, dated May 1, 2001.
Incorporated herein by reference to Exhibit 4.6 to Mirant
Corporation's annual report on Form 10-K filed on
February 27, 2009.
Seventh Supplemental Indenture, dated January 3, 2006, between
Mirant Americas Generation LLC and Wells Fargo Bank National
Association (as successor to Bankers Trust Company), re: Indenture,
dated May 1, 2001.
Incorporated herein by reference to Exhibit 4.1 to Mirant
Americas Generation, LLC's quarterly report on Form
10-Q filed on May 14, 2007.
Senior Notes Indenture, dated October 4, 2010, by GenOn Escrow
Corp. and Wilmington Trust Company as trustee, re: GenOn Energy,
Inc.’s 9.5% Senior Notes due 2018 and 9.875% Senior Notes due 2020.
Incorporated by reference to Exhibit 4.4 to Mirant
Corporation's quarterly report on Form 10-Q filed on
November 5, 2010.
Supplemental Indenture, dated December 3, 2010, by and among
GenOn Energy, Inc., GenOn Escrow Corp. and Wilmington Trust
Company as trustee, re: GenOn Energy, Inc.’s 9.5% Senior Notes due
2018 and 9.875% Senior Notes due 2020.
Seventy-Eighth Supplemental Indenture, dated as of January 3, 2013,
among NRG Energy, Inc., the guarantors named therein and Law
Debenture Trust Company of New York as trustee, re: NRG Energy,
Inc.’s 8.25% Senior Notes due 2020.
Seventy-Ninth Supplemental Indenture, dated as of January 3, 2013,
among NRG Energy, Inc., the guarantors named therein and Law
Debenture Trust Company of New York as trustee, re: NRG Energy,
Inc.’s 7.625% Senior Notes due 2018.
Eighty-First Supplemental Indenture, dated as of January 3, 2013,
among NRG Energy, Inc., the guarantors named therein and Law
Debenture Trust Company of New York as trustee, re: NRG Energy,
Inc.’s 7.875% Senior Notes due 2021.
Eighty-Second Supplemental Indenture, dated as of January 3, 2013,
among NRG Energy, Inc., the guarantors named therein and Law
Debenture Trust Company of New York as trustee, re: NRG Energy,
Inc.’s 6.625% Senior Notes due 2023.
Eighty-Fourth Supplemental Indenture, dated as of March 13, 2013,
among NRG Energy, Inc., the guarantors named therein and Law
Debenture Trust Company of New York as trustee, re: NRG Energy,
Inc.’s 8.25% Senior Notes due 2020.
Eighty-Fifth Supplemental Indenture, dated as of March 13, 2013,
among NRG Energy, Inc., the guarantors named therein and Law
Debenture Trust Company of New York as trustee, re: NRG Energy,
Inc.’s 7.625% Senior Notes due 2018.
Eighty-Seventh Supplemental Indenture, dated as of March 13, 2013,
among NRG Energy, Inc., the guarantors named therein and Law
Debenture Trust Company of New York as trustee, re: NRG Energy,
Inc.’s 7.875% Senior Notes due 2021.
Incorporated by reference to Exhibit 4.2 to GenOn
Energy Inc.'s current report on Form 8-K filed on
December 7, 2010.
Incorporated herein by reference to Exhibit 4.2 to the
Registrant’s current report on Form 8-K filed on January
9, 2013.
Incorporated herein by reference to Exhibit 4.3 to the
Registrant’s current report on Form 8-K filed on January
9, 2013.
Incorporated herein by reference to Exhibit 4.5 to the
Registrant’s current report on Form 8-K filed on January
9, 2013.
Incorporated herein by reference to Exhibit 4.6 to the
Registrant’s current report on Form 8-K filed on January
9, 2013.
Incorporated herein by reference to Exhibit 4.2 to the
Registrant’s current report on Form 8-K filed on March
13, 2013.
Incorporated herein by reference to Exhibit 4.3 to the
Registrant’s current report on Form 8-K filed on March
13, 2013.
Incorporated herein by reference to Exhibit 4.5 to the
Registrant’s current report on Form 8-K filed on March
13, 2013.
247
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4.52
4.53
4.54
4.55
4.56
4.57
4.58
4.59
4.60
4.61
4.62
4.63
4.64
4.65
4.66
4.67
Eighty-Eighth Supplemental Indenture, dated as of March 13, 2013,
among NRG Energy, Inc., the guarantors named therein and Law
Debenture Trust Company of New York as trustee, re: NRG Energy,
Inc.’s 6.625% Senior Notes due 2023.
Incorporated herein by reference to Exhibit 4.6 to the
Registrant’s current report on Form 8-K filed on March
13, 2013.
Eighty-Ninth Supplemental Indenture, dated as of March 13, 2013,
among NRG Energy, Inc., the guarantors named therein and Law
Debenture Trust Company of New York.
Incorporated herein by reference to Exhibit 4.7 to the
Registrant’s current report on Form 8-K filed on March
13, 2013.
Ninety-First Supplemental Indenture, dated as of May 2, 2013, among
NRG Energy, Inc., the guarantors named therein and Law Debenture
Trust Company of New York as trustee, re: NRG Energy, Inc.’s 8.25%
Senior Notes due 2020.
Ninety-Second Supplemental Indenture, dated as of May 2, 2013,
among NRG Energy, Inc., the guarantors named therein and Law
Debenture Trust Company of New York as trustee, re: NRG Energy,
Inc.’s 7.625% Senior Notes due 2018.
Ninety-Fourth Supplemental Indenture, dated as of May 2, 2013,
among NRG Energy, Inc., the guarantors named therein and Law
Debenture Trust Company of New York as trustee, re: NRG Energy,
Inc.’s 7.875% Senior Notes due 2021.
Ninety-Fifth Supplemental Indenture, dated as of May 2, 2013, among
NRG Energy, Inc., the guarantors named therein and Law Debenture
Trust Company of New York as trustee, re: NRG Energy, Inc.’s 6.625%
Senior Notes due 2023.
Ninety-Seventh Supplemental Indenture, dated as of September 4,
2013, among NRG Energy, Inc., the guarantors named therein and
Law Debenture Trust Company of New York as trustee, re: NRG
Energy, Inc.’s 8.25% Senior Notes due 2020.
Ninety-Eighth Supplemental Indenture, dated as of September 4, 2013,
among NRG Energy, Inc., the guarantors named therein and Law
Debenture Trust Company of New York as trustee, re: NRG Energy,
Inc.’s 7.625% Senior Notes due 2018
One Hundredth Supplemental Indenture, dated as of September 4,
2013, among NRG Energy, Inc., the guarantors named therein and
Law Debenture Trust Company of New York as trustee, re: NRG
Energy, Inc.’s 7.875% Senior Notes due 2021.
One Hundred-First Supplemental Indenture, dated as of September 4,
2013, among NRG Energy, Inc., the guarantors named therein and
Law Debenture Trust Company of New York as trustee, re: NRG
Energy, Inc.’s 6.625% Senior Notes due 2023.
One Hundred-Third Supplemental Indenture, dated as of October 7,
2013, among NRG Energy, Inc., the guarantors named therein and
Law Debenture Trust Company of New York as trustee, re: NRG
Energy, Inc.’s 8.25% Senior Notes due 2020.
One Hundred-Fourth Supplemental Indenture, dated as of October 7,
2013, among NRG Energy, Inc., the guarantors named therein and
Law Debenture Trust Company of New York as trustee, re: NRG
Energy, Inc.’s 7.625% Senior Notes due 2018.
One Hundred-Sixth Supplemental Indenture, dated as of October 7,
2013, among NRG Energy, Inc., the guarantors named therein and
Law Debenture Trust Company of New York as trustee, re: NRG
Energy, Inc.’s 7.875% Senior Notes due 2021.
One Hundred-Seventh Supplemental Indenture, dated as of October
7, 2013, among NRG Energy, Inc., the guarantors named therein and
Law Debenture Trust Company of New York as trustee, re: NRG
Energy, Inc.’s 6.625% Senior Notes due 2023.
One Hundred-Eighth Supplemental
Indenture, dated as of
November 13, 2013, among NRG Energy, Inc., the guarantors named
therein and Law Debenture Trust Company of New York as trustee,
re: NRG Energy, Inc.’s 8.5% Senior Notes due 2019, 8.25% Senior
Notes due 2020, 7.625% Senior Notes due 2018, 7.625% Senior Notes
due 2019, 7.875% Senior Notes due 2021 and 6.625% Senior Notes
due 2023.
One Hundred-Ninth Supplemental Indenture, dated as of January 27,
2014, among NRG Energy, Inc., the guarantors named therein and
Law Debenture Trust Company of New York as Trustee, re: NRG
Energy's 6.25% Senior Notes due 2022.
Incorporated herein by reference to Exhibit 4.2 to the
Registrant’s current report on Form 8-K filed on May 3,
2013.
Incorporated herein by reference to Exhibit 4.3 to the
Registrant’s current report on Form 8-K filed on May 3,
2013.
Incorporated herein by reference to Exhibit 4.5 to the
Registrant’s current report on Form 8-K filed on May 3,
2013.
Incorporated herein by reference to Exhibit 4.6 to the
Registrant’s current report on Form 8-K filed on May 3,
2013.
Incorporated herein by reference to Exhibit 4.2 to the
Registrant’s current report on Form 8-K filed on
September 6, 2013.
Incorporated herein by reference to Exhibit 4.3 to the
Registrant’s current report on Form 8-K filed on
September 6, 2013.
Incorporated herein by reference to Exhibit 4.5 to the
Registrant’s current report on Form 8-K filed on
September 6, 2013.
Incorporated herein by reference to Exhibit 4.6 to the
Registrant’s current report on Form 8-K filed on
September 6, 2013.
Incorporated herein by reference to Exhibit 4.2 to the
Registrant’s current report on Form 8-K filed on October
8, 2013.
Incorporated herein by reference to Exhibit 4.3 to the
Registrant’s current report on Form 8-K filed on October
8, 2013.
Incorporated herein by reference to Exhibit 4.5 to the
Registrant’s current report on Form 8-K filed on October
8, 2013.
Incorporated herein by reference to Exhibit 4.6 to the
Registrant’s current report on Form 8-K filed on October
8, 2013.
Incorporated herein by reference to Exhibit 4.1 to the
Registrant’s current report on Form 8-K filed on
November 13, 2013.
Incorporated herein by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K filed on
January 27, 2014.
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4.69
4.70
4.71
4.73
4.74
4.75
4.76
4.77
4.78
4.79
4.80
4.81
4.82
4.68
Form of 6.25% Senior Note due 2022.
Registration Rights Agreement, dated January 27, 2014, among NRG
Energy, Inc., the guarantors named therein and Barclays Capital Inc.,
Deutsche Bank Securities Inc., Goldman, Sachs & Co., Morgan
Stanley & Co. LLC, Credit Agricole Securities (USA) Inc., Natixis
Securities Americas LLC and RBC Capital Markets, LLC, as initial
purchasers.
One Hundred-Tenth Supplemental Indenture, dated as of March 24,
2014, among NRG Energy, Inc., the guarantors named therein and
Law Debenture Trust Company of New York as trustee, re: NRG
Energy, Inc.'s 8.5% Senior Notes due 2019, 8.25% Senior Notes due
2020, 7.625% Senior Notes due 2018, 7.625% Senior Notes due 2019,
7.875% Senior Notes due 2021, 6.625% Senior Notes due 2023 and
6.25% Senior Notes due 2022.
Incorporated herein by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K filed on
January 27, 2014.
Incorporated herein by reference to Exhibit 4.3 to the
Company's Current Report on Form 8-K filed on
January 27, 2014.
Incorporated herein by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K filed on March
28, 2014.
Indenture, dated as of April 21, 2014, among NRG Energy, Inc., the
guarantors named therein and Law Debenture Trust Company of New
York as Trustee, re: NRG Energy, Inc.'s 6.25% Senior Notes due 2024.
Incorporated herein by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K filed on April
21, 2014.
4.72
Form of 6.25% Senior Note due 2024.
Registration Rights Agreement, dated April 21, 2014, among NRG
Energy, Inc., the guarantors named therein and Citigroup Global
Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Credit Suisse Securities (USA), Inc., J.P. Morgan Securities LLC,
Mitsubishi UFJ Securities (USA), Inc., SMBC Nikko Securities
America, Inc. and RBS Securities Inc.
One Hundred-Eleventh Supplemental Indenture, dated as of April 28,
2014, among NRG Energy, Inc., the guarantors named therein and
Law Debenture Trust Company of New York as trustee, re: NRG
Energy, Inc.'s 8.5% Senior Notes due 2019, 8.25% Senior Notes due
2020, 7.625% Senior Notes due 2018, 7.625% Senior Notes due 2019,
7.875% Senior Notes due 2021, 6.625% Senior Notes due 2023 and
6.25% Senior Notes due 2022.
First Supplemental Indenture, dated as of May 2, 2014, among NRG
Energy, Inc., the guarantors named therein and Law Debenture Trust
Company of New York as trustee, re: NRG Energy, Inc.'s 6.25% Senior
Notes due 2024.
Incorporated herein by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K filed on April
21, 2014.
Incorporated herein by reference to Exhibit 4.3 to the
Company's Current Report on Form 8-K filed on April
21, 2014.
Incorporated herein by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K filed on May
2, 2014.
Incorporated herein by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K filed on May
2, 2014.
One Hundred-Twelfth Supplemental Indenture, dated as of October 3,
2014, among NRG Energy, Inc., the guarantors named therein and
Law Debenture Trust Company of New York.
Incorporated herein by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K filed on
October 3, 2014.
Second Supplemental Indenture, dated as of October 3, 2014, among
NRG Energy, Inc., the guarantors named therein and Law Debenture
Trust Company of New York as trustee, re: NRG Energy, Inc.'s 6.25%
Senior Notes due 2024.
One Hundred-Thirteenth Supplemental Indenture, dated as of
November 12, 2014, among NRG Energy, Inc., the guarantors named
therein and Law Debenture Trust Company of New York as trustee,
re: NRG Energy, Inc.'s 8.25% Senior Notes due 2020, 7.625% Senior
Notes due 2018, 7.875% Senior Notes due 2021, 6.625% Senior Notes
due 2023 and 6.25% Senior Notes due 2022.
Incorporated herein by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K filed on
October 3, 2014.
Incorporated herein by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K filed on
November 14, 2014.
Third Supplemental Indenture, dated as of November 12, 2014, among
NRG Energy, Inc., the guarantors named therein and Law Debenture
Trust Company of New York.
Incorporated herein by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K filed on
November 14, 2014.
One Hundred-Fourteenth Supplemental Indenture, dated as of
November 24, 2014, among NRG Energy, Inc., the guarantors named
therein and Law Debenture Trust Company of New York, as trustee,
re: NRG Energy, Inc.'s 8.25% Senior Notes due 2020, 7.625% Senior
Notes due 2018, 7.875% Senior Notes due 2021, 6.625% Senior Notes
due 2023 and 6.25% Senior Notes due 2022.
Fourth Supplemental Indenture, dated as of November 24, 2014,
among NRG Energy, Inc., the guarantors named therein and Law
Debenture Trust Company of New York, as trustee, re: NRG
Energy, Inc.'s 6.25% Senior Notes due 2024.
Incorporated herein by reference to Exhibit 4.1 to the
Registrant's current report on Form 8-K filed on
November 25, 2014.
Incorporated herein by reference to Exhibit 4.2 to the
Registrant's current report on Form 8-K filed on
November 25, 2014.
One Hundred-Fifteenth Supplemental Indenture, dated as of April 8,
2015, among NRG Energy, Inc., the guarantors named therein and
Law Debenture Trust Company of New York.
Incorporated herein by reference to Exhibit 4.1 to the
Company's current report on Form 8-K filed on April 9,
2015.
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4.83
4.84
4.85
4.86
4.87
4.88
4.89
4.90
4.91
Fifth Supplemental Indenture, dated as of April 8, 2015, among NRG
Energy, Inc., the guarantors named therein and Law Debenture Trust
Company of New York.
Incorporated herein by reference to Exhibit 4.2 to the
Company's current report on Form 8-K filed on April 9,
2015.
One Hundred-Sixteenth Supplemental Indenture, dated as of April 29,
2015, among NRG Energy, Inc., the guarantors named therein and
Law Debenture Trust Company of New York.
Incorporated herein by reference to Exhibit 4.1 to the
Company's current report on Form 8-K filed on April
30, 2015.
Sixth Supplemental Indenture, dated as of April 29, 2015, among NRG
Energy, Inc., the guarantors named therein and Law Debenture Trust
Company of New York.
Incorporated herein by reference to Exhibit 4.2 to the
Company's current report on Form 8-K filed on April
30, 2015.
One Hundred-Seventeenth Supplemental Indenture, dated as of May
22, 2015, among NRG Energy, Inc., the guarantors named therein and
Law Debenture Trust Company of New York.
Incorporated herein by reference to Exhibit 4.1 to the
Company's current report on Form 8-K filed on May 22,
2015.
Seventh Supplemental Indenture, dated as of May 22, 2015, among
NRG Energy, Inc., the guarantors named therein and Law Debenture
Trust Company of New York.
Incorporated herein by reference to Exhibit 4.2 to the
Company's current report on Form 8-K filed on May 22,
2015.
One Hundred-Eighteenth Supplemental Indenture, dated as of October
28, 2015, among NRG Energy, Inc., the guarantors named therein and
Law Debenture Trust Company of New York.
Incorporated herein by reference to Exhibit 4.1 to the
Company's current report on Form 8-K filed on
November 2, 2015.
Eighth Supplemental Indenture, dated as of October 28, 2015, among
NRG Energy, Inc., the guarantors named therein and Law Debenture
Trust Company of New York.
Incorporated herein by reference to Exhibit 4.2 to the
Company's current report on Form 8-K filed on
November 2, 2015.
Indenture, dated May 23, 2016, between NRG Energy, Inc. and Law
Debenture Trust Company of New York.
Incorporated herein by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K, filed on May
23, 2016.
Supplemental Indenture, dated May 23, 2016, among NRG Energy,
Inc., the guarantors named therein and Law Debenture Trust Company
of New York.
Incorporated herein by reference to Exhibit 4.2 to the
Registrant's Current Report on Form 8-K, filed on May
23, 2016.
4.92
Form of 7.250% Senior Note due 2026.
Registration Rights Agreement, dated May 23, 2016, among NRG
Energy, Inc., the guarantors named therein and Deutsche Bank
Securities Inc., as representative to the initial purchasers listed in
Schedule I thereto.
Incorporated herein by reference to Exhibit 4.3 to the
Registrant's Current Report on Form 8-K, filed on May
23, 2016.
Incorporated herein by reference to Exhibit 4.4 to the
Registrant's Current Report on Form 8-K, filed on May
23, 2016.
One Hundred-Nineteenth Supplemental Indenture, dated as of July 19,
2016, among NRG Energy, Inc., the guarantors named therein and
Law Debenture Trust Company of New York.
Incorporated herein by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K, filed on July
25, 2016.
Ninth Supplemental Indenture, dated as of July 19, 2016, among NRG
Energy, Inc., the guarantors named therein and Law Debenture Trust
Company of New York.
Incorporated herein by reference to Exhibit 4.2 to the
Registrant's Current Report on Form 8-K, filed on July
25, 2016.
Second Supplemental Indenture, dated as of July 19, 2016, among
NRG Energy, Inc., the guarantors named therein and Law Debenture
Trust Company of New York.
Incorporated herein by reference to Exhibit 4.3 to the
Registrant's Current Report on Form 8-K, filed on July
25, 2016.
Third Supplemental Indenture, dated August 2, 2016, among NRG
Energy, Inc., the guarantors named therein and Law Debenture Trust
Company of New York.
Incorporated herein by reference to Exhibit 4.2 to the
Registrant's Current Report on Form 8-K, filed on
August 3, 2016.
4.93
4.94
4.95
4.96
4.97
4.98
Form of 6.625% Senior Note due 2027.
4.99
10.1
Registration Rights Agreement, dated August 2, 2016, among NRG
Energy, Inc., the guarantors named therein and Morgan Stanley & Co.
LLC, as representative to the initial purchasers listed in Schedule I
thereto.
Note Agreement, dated August 20, 1993, between NRG Energy, Inc.,
Energy Center, Inc. and each of the purchasers named therein.
Incorporated herein by reference to Exhibit 4.3 to the
Registrant's Current Report on Form 8-K, filed on
August 3, 2016.
Incorporated herein by reference to Exhibit 4.4 to the
Registrant's Current Report on Form 8-K, filed on
August 3, 2016.
Incorporated herein by reference to Exhibit 10.5 to the
Registrant's Registration Statement on Form S-1, as
amended, Registration No. 333-33397.
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10.2
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9
10.10
10.11
10.12
10.13
10.14
10.15†
10.16*
10.17*
10.18*
10.19
10.20
10.21
10.22
Master Shelf and Revolving Credit Agreement, dated August 20, 1993,
between NRG Energy, Inc., Energy Center, Inc., The Prudential
Insurance Registrants of America and each Prudential Affiliate, which
becomes party thereto.
Form of NRG Energy Inc. Long-Term Incentive Plan Deferred Stock
Unit Agreement for Officers and Key Management.
Form of NRG Energy, Inc. Long-Term Incentive Plan Deferred Stock
Unit Agreement for Directors.
Form of NRG Energy, Inc. Long-Term Incentive Plan Non-Qualified
Stock Option Agreement.
Form of NRG Energy, Inc. Long-Term Incentive Plan Restricted Stock
Unit Agreement.
Form of NRG Energy, Inc. Long-Term Incentive Plan Performance
Stock Unit Agreement.
Second Amended and Restated Annual Incentive Plan for Designated
Corporate Officers.
Incorporated herein by reference to Exhibit 10.4 to the
Registrant's Registration Statement on Form S-1, as
amended, Registration No. 333-33397.
Incorporated herein by reference to Exhibit 10.14 to the
Registrant's annual report on Form 10-K filed on March
30, 2005.
Incorporated herein by reference to Exhibit 10.15 to the
Registrant's annual report on Form 10-K filed on March
30, 2005.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's quarterly report on Form 10-Q filed on
November 9, 2004.
Incorporated herein by reference to Exhibit 10.2 to the
Registrant's quarterly report on Form 10-Q filed on
November 9, 2004.
Incorporated herein by reference to Exhibit 10.7 to the
Registrant's annual report on Form 10-K filed on
February 23, 2010.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's current report on Form 8-K filed on May 7,
2015.
Railroad Car Full Service Master Leasing Agreement, dated as of
February 18, 2005, between General Electric Railcar Services
Corporation and NRG Power Marketing Inc.
Incorporated herein by reference to Exhibit 10.28 to the
Registrant's annual report on Form 10-K filed on
March 30, 2005.
Purchase Agreement (West Coast Power) dated as of December 27,
2005, by and among NRG Energy, Inc., NRG West Coast LLC (Buyer),
DPC II Inc. (Seller) and Dynegy, Inc.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's current report on Form 8-K filed on
December 28, 2005.
Purchase Agreement (Rocky Road Power), dated as of December 27,
2005, by and among Termo Santander Holding, L.L.C.(Buyer),
Dynegy, Inc., NRG Rocky Road LLC (Seller) and NRG Energy, Inc.
Incorporated herein by reference to Exhibit 10.2 to the
Registrant's current report on Form 8-K filed on
December 28, 2005.
Stock Purchase Agreement, dated as of August 10, 2005, by and
between NRG Energy, Inc. and Credit Suisse First Boston Capital
LLC.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's current report on Form 8-K filed on August
11, 2005.
Agreement with respect to the Stock Purchase Agreement, dated
December 19, 2008, by and between NRG Energy, Inc. and Credit
Suisse First Boston Capital LLC.
Incorporated herein by reference to Exhibit 10.13 to the
Registrant's annual report on Form 10-K filed on
February 12, 2009.
Investor Rights Agreement, dated as of February 2, 2006, by and
among NRG Energy, Inc. and Certain Stockholders of NRG Energy,
Inc. set forth therein.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's current report on Form 8-K filed on
February 8, 2006.
Terms and Conditions of Sale, dated as of October 5, 2005, between
Texas Genco II LP and Freight Car America, Inc., (including the
Proposal Letter and Amendment thereto).
Incorporated herein by reference to Exhibit 10.32 to the
Registrant's annual report on Form 10-K filed on March
7, 2006.
Amended and Restated Employment Agreement, dated December 4,
2008, between NRG Energy, Inc. and David Crane.
Incorporated herein by reference to Exhibit 10.16 to the
Registrant's annual report on Form 10-K filed on
February 12, 2009.
Amendment 2014-1 to the Amended and Restated Employment
Agreement between NRG Energy, Inc. and David Crane, dated
December 4, 2014.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's current report on Form 8-K filed on
December 10, 2014.
General Release, dated January 4, 2016, between NRG Energy, Inc.
and David Crane.
Limited Liability Company Agreement of NRG Common Stock
Finance I LLC.
Incorporated herein by reference to Exhibit 10.2 to the
Registrant's current report on Form 8-K/A filed on
January 8, 2016.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's current report on Form 8-K filed on August
10, 2006.
Note Purchase Agreement, dated August 4, 2006, between NRG
Common Stock Finance I LLC, Credit Suisse International and Credit
Suisse Securities (USA) LLC.
Incorporated herein by reference to Exhibit 10.3 to the
Registrant's current report on Form 8-K filed on August
10, 2006.
Amendment Agreement, dated February 27, 2008, to the Note
Purchase Agreement by and among NRG Common Stock Finance I
LLC, Credit Suisse International, and Credit Suisse Securities (USA)
LLC.
Amendment Agreement, dated December 19, 2008, to the Note
Purchase Agreement by and among NRG Common Stock Finance I
LLC, Credit Suisse International, and Credit Suisse Securities (USA)
LLC.
Incorporated herein by reference to Exhibit 10.5 to the
Registrant's quarterly report on Form 10-Q filed on May
1, 2008.
Incorporated herein by reference to Exhibit 10.23 to the
Registrant's annual report on Form 10-K filed on
February 12, 2009.
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10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32*
10.33†
10.34†
10.35†
10.36†
10.37†
10.38
10.39†
10.40*
Amendment Agreement, dated December 19, 2008, to the Note
Purchase Agreement by and among NRG Common Stock Finance II
LLC, Credit Suisse International, and Credit Suisse Securities (USA)
LLC.
Agreement with respect to Note Purchase Agreement, dated
December 19, 2008, by and among NRG Common Stock Finance I
LLC, NRG Energy, Inc., Credit Suisse International, and Credit Suisse
Securities (USA) LLC.
Agreement with respect to Note Purchase Agreement, dated
December 19, 2008, by and among NRG Common Stock Finance II
LLC, NRG Energy, Inc., Credit Suisse International, and Credit Suisse
Securities (USA) LLC.
Incorporated herein by reference to Exhibit 10.26 to the
Registrant's annual report on Form 10-K filed on
February 12, 2009.
Incorporated herein by reference to Exhibit 10.24 to the
Registrant's annual report on Form 10-K filed on
February 12, 2009.
Incorporated herein by reference to Exhibit 10.27 to the
Registrant's annual report on Form 10-K filed on
February 12, 2009.
Preferred Interest Purchase Agreement, dated August 4, 2006,
between NRG Common Stock Finance I LLC, Credit Suisse Capital
LLC and Credit Suisse Securities (USA) LLC, as agent.
Incorporated herein by reference to Exhibit 10.5 to the
Registrant's current report on Form 8-K filed on August
10, 2006.
Preferred Interest Amendment Agreement, dated February 27, 2008,
by and among NRG Common Stock Finance I LLC, Credit Suisse
Capital LLC, and Credit Suisse Securities (USA) LLC.
Incorporated herein by reference to Exhibit 10.6 to the
Registrant's quarterly report on Form 10-Q filed on May
1, 2008.
Preferred Interest Amendment Agreement, dated December 19, 2008,
by and among NRG Common Stock Finance I LLC, Credit Suisse
International, and Credit Suisse Securities (USA) LLC.
Incorporated herein by reference to Exhibit 10.31 to the
Registrant's annual report on Form 10-K filed on
February 12, 2009.
Preferred Interest Amendment Agreement, dated December 19, 2008,
by and among NRG Common Stock Finance II LLC, Credit Suisse
Capital LLC, and Credit Suisse Securities (USA) LLC.
Incorporated herein by reference to Exhibit 10.34 to the
Registrant's annual report on Form 10-K filed on
February 12, 2009.
Agreement with respect to Preferred Interest Purchase Agreement,
dated December 19, 2008, by and among NRG Common Stock
Finance I LLC, NRG Energy, Inc., Credit Suisse Capital LLC, and
Credit Suisse Securities (USA) LLC.
Agreement with respect to Preferred Interest Purchase Agreement,
dated December 19, 2008, by and among NRG Common Stock
Finance II LLC, NRG Energy, Inc., Credit Suisse Capital LLC, and
Credit Suisse Securities (USA) LLC.
NRG Energy, Inc. Executive Change-in-Control and General
Severance Agreement, dated December 9, 2008.
Amended and Restated Contribution Agreement (NRG), dated
March 25, 2008, by and among Texas Genco Holdings, Inc., NRG
South Texas LP and NRG Nuclear Development Company LLC and
Certain Subsidiaries Thereof.
Incorporated herein by reference to Exhibit 10.32 to the
Registrant's annual report on Form 10-K filed on
February 12, 2009.
Incorporated herein by reference to Exhibit 10.35 to the
Registrant's annual report on Form 10-K filed on
February 12, 2009.
Incorporated herein by reference to Exhibit 10.40 to the
Registrant's annual report on Form 10-K filed on
February 12, 2009.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's quarterly report on Form 10-Q filed on May
1, 2008.
Contribution Agreement (Toshiba), dated February 29, 2008, by and
between Toshiba Corporation and NRG Nuclear Development
Company LLC.
Incorporated herein by reference to Exhibit 10.2 to the
Registrant's quarterly report on Form 10-Q filed on May
1, 2008.
Multi-Unit Agreement, dated February 29, 2008, by and among
Toshiba Corporation, NRG Nuclear Development Company LLC and
NRG Energy, Inc.
Incorporated herein by reference to Exhibit 10.3 to the
Registrant's quarterly report on Form 10-Q filed on May
1, 2008.
Amended and Restated Operating Agreement of Nuclear Innovation
North America LLC, dated May 1, 2008.
LLC Membership Interest Purchase Agreement between Reliant
Energy, Inc. and NRG Retail LLC, dated as of February 28, 2009.
Project Agreement, Settlement Agreement and Mutual Release, dated
March 1, 2010, by and among by and among Nuclear Innovation North
America LLC, the City of San Antonio acting by and through the City
Public Service Board of San Antonio, a Texas municipal utility, NINA
Texas 3 LLC and NINA Texas 4 LLC, and solely for purposes of certain
sections of the Settlement Agreement, by NRG Energy, Inc and NRG
South Texas LP.
Incorporated herein by reference to Exhibit 10.4 to the
Registrant's quarterly report on Form 10-Q filed on May
1, 2008.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's quarterly report on Form 10-Q filed on
April 30, 2009.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's current report on Form 8-K filed on
March 2, 2010.
STP 3 & 4 Owners Agreement, dated March 1, 2010, by and among
Nuclear Innovation North America LLC, the City of San Antonio,
NINA Texas 3 LLC and NINA Texas 4 LLC.
Incorporated herein by reference to Exhibit 10.2 to the
Registrant's current report on Form 8-K filed on
March 2, 2010.
Amended and Restated 2009 Executive Change-in-Control and
General Severance Plan.
Incorporated herein by reference to Exhibit 10.3 to the
Registrant's quarterly report on Form 10-Q filed on
August 9, 2016.
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10.41†
10.42†
10.43(a)
10.43(b)
10.44*
10.45
Investment and Option Agreement by and among NINA Investments
Holdings LLC, Nuclear Innovation North America LLC and TEPCO
Nuclear Energy America LLC, dated as of May 10, 2010.
Incorporated herein by reference to Exhibit 10.3 to the
Registrant's quarterly report on Form 10-Q filed on
August 2, 2010.
Parent Company Agreement by and among NRG Energy, Inc., Nuclear
Innovation North America LLC, The Tokyo Electric Power Company
and TEPCO Nuclear Energy America LLC, dated as of May 10, 2010.
Incorporated herein by reference to Exhibit 10.4 to the
Registrant's quarterly report on Form 10-Q filed on
August 2, 2010.
Letter of Credit and Reimbursement Agreement, dated as of June 30,
2010, by and among NRG LC Facility Company LLC, NRG Energy,
Inc. and Citibank, N.A.
Incorporated herein by reference to Exhibit 10.2(a) the
Registrant's current report on Form 8-K filed on July 1,
2010.
Letter of Credit and Reimbursement Agreement, dated as of June 30,
2010, by and among NRG LC Facility Company LLC, NRG Energy,
Inc. and Deutsche Bank AG, New York Bank.
Incorporated herein by reference to Exhibit 10.2(b) to
the Registrant's current report on Form 8-K filed on July
1, 2010.
The NRG Energy, Inc. Amended and Restated Long-Term Incentive
Plan.
Amended and Restated Credit Agreement, dated July 1, 2011, by and
among NRG Energy, Inc., the lenders party thereto, the joint lead
bookrunners and joint lead arrangers party thereto, Citicorp North
America, Inc., Morgan Stanley Senior Funding, Inc. and the
documentation agents party thereto.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's current report on Form 8-K filed on
August 3, 2010.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's current report on Form 8-K filed on July 5,
2011.
10.46*
Form of Market Stock Unit Grant Agreement.
10.47
Registration Rights Agreement, dated September 24, 2012, among
NRG Energy, Inc., the guarantors named therein and Deutsche Bank
Securities Inc., Merrill, Lynch, Pierce, Fenner & Smith Incorporated,
Barclays Capital Inc., Citigroup Global Markets Inc., Credit Suisse
Securities (USA) LLC, Goldman, Sachs & Co., J.P. Morgan Securities
LLC, Morgan Stanley & Co. LLC and RBS Securities Inc., as initial
purchasers.
10.48*
NRG 2010 Stock Plan for GenOn Employees.
Revolving Credit Agreement among GenOn Energy, Inc., as Borrower,
GenOn Americas, Inc., as Borrower, the several lenders from time to
time parties thereto, and NRG Energy, Inc., as Administrative Agent,
dated as of December 14, 2012.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's current report on Form 8-K/A filed on
September 12, 2011.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's current report on Form 8-K filed on
September 24, 2012.
Incorporated herein by reference to Exhibit 10.49 to the
Registrant’s annual report on Form 10-K filed on
February 27, 2013.
Incorporated herein by reference to Exhibit 10.50 to the
Registrant’s annual report on Form 10-K filed on
February 27, 2013.
First Amendment Agreement, dated as of February 6, 2013, to the
Amended and Restated Credit Agreement and the Second Amended
and Restated Collateral Trust Agreement.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant’s quarterly report on Form 10-Q filed on May
7, 2013.
Second Amendment Agreement, dated as of June 4, 2013, to the
Amended and Restated Credit Agreement, the Second Amended and
Restated Collateral Trust Agreement and the Amended and Restated
Guarantee and Collateral Agreement.
NRG Energy, Inc. Long-Term Incentive Plan Market Stock Unit
Agreement.
NRG Energy, Inc. 2010 Stock Plan For GenOn Employees Market
Stock Unit Agreement
10.54*
Amended and Restated Employee Stock Purchase Plan.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant’s current report on Form 8-K filed on June
10, 2013.
Incorporated herein by reference to Exhibit 10.53 to the
Registrant's annual report on Form 10-K filed on
February 28, 2014.
Incorporated herein by reference to Exhibit 10.54 to the
Registrant's annual report on Form 10-K filed on
February 28, 2014.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's quarterly report on Form 10-Q filed on
August 7, 2014.
10.49
10.50
10.51
10.52*
10.53*
10.55
10.56
10.57
Amendment Agreement, dated as of December 23, 2014, by and
between NRG Energy, Inc. and Credit Suisse First Boston Capital
LLC.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's current report on Form 8-K filed on
December 30, 2014.
Employment Agreement, dated December 21, 2015, by and between
NRG Energy, Inc. and Mauricio Gutierrez.
Amendment and Restatement Agreement, dated as of June 30, 2016,
to the Amended and Restated Credit Agreement, the Second Amended
and Restated Collateral Trust Agreement and the Amended and
Restated Guarantee and Collateral Agreement.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's current report on Form 8-K filed on
December 24, 2015.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's quarterly report on Form 10-Q filed on
August 9, 2016.
253
NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 253
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10.58
10.59
10.60
10.61
12.1
12.2
21.1
23.1
31.1
31.2
31.3
32
99.1
Second Amended and Restated Credit Agreement, dated as of June 30,
2016, by and among NRG Energy, Inc., the lenders party thereto, the
joint lead arrangers and joint lead bookrunners party thereto, Citicorp
North America, Inc., Commerzbank AG, New York Branch, Keybank
Capital Markets Inc. and CIT Bank, N.A.
First Amendment Agreement, dated as of January 24, 2017, dated as
of January 24, 2017, by and among NRG Energy, Inc., the lenders
from time to time parties thereto and Citicorp North America, Inc., as
administrative agent and collateral agent.
Incorporated herein by reference to Exhibit 10.2 to the
Registrant's quarterly report on Form 10-Q filed on
August 9, 2016.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's Current Report on Form 8-K filed on
January 24, 2017.
Cooperation Agreement, dated as of February 13, 2017, by and among
NRG Energy, Inc., Elliott Associates, L.P., Elliott International, L.P.
and Elliott International Capital Advisors Inc.
Incorporated herein by reference to Exhibit 10.1 to the
Registrant's Current Report on Form 8-K filed on
February 13, 2017.
Cooperation Agreement, dated as of February 13, 2017, by and among
NRG Energy, Inc., Bluescape Energy Partners LLC and BEP Special
Situations 2 LLC.
Incorporated herein by reference to Exhibit 10.2 to the
Registrant's Current Report on Form 8-K filed on
February 13, 2017.
NRG Energy, Inc. Computation of Ratio of Earnings to Fixed Charges.
Filed herewith.
NRG Energy, Inc. Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements.
Filed herewith.
Subsidiaries of NRG Energy, Inc.
Consent of KPMG LLP.
Rule 13a-14(a)/15d-14(a) certification of Mauricio Gutierrez
Rule 13a-14(a)/15d-14(a) certification of Kirkland B. Andrews.
Rule 13a-14(a)/15d-14(a) certification of David Callen.
Filed herewith.
Filed herewith.
Filed herewith.
Filed herewith.
Filed herewith.
Section 1350 Certification.
Furnished herewith.
Services Agreement between NRG Energy, Inc. and GenOn Energy,
Inc., dated December 20, 2012.
Incorporated herein by reference to Exhibit 99.1 to the
Registrant's current report on Form 8-K filed on
December 13, 2016.
101 INS
XBRL Instance Document.
101 SCH
XBRL Taxonomy Extension Schema.
101 CAL
XBRL Taxonomy Extension Calculation Linkbase.
101 DEF
XBRL Taxonomy Extension Definition Linkbase.
101 LAB
XBRL Taxonomy Extension Label Linkbase.
101 PRE
XBRL Taxonomy Extension Presentation Linkbase.
Filed herewith.
Filed herewith.
Filed herewith.
Filed herewith.
Filed herewith.
Filed herewith.
*
†
Exhibit relates to compensation arrangements.
Portions of this exhibit have been redacted and are subject to a confidential treatment request filed with the Secretary of the Securities
and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
Item 16. Form 10-K Summary
None.
254
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
SIGNATURES
NRG ENERGY, INC.
(Registrant)
By:
/s/ MAURICIO GUTIERREZ
Mauricio Gutierrez
Chief Executive Officer
Date: February 28, 2017
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NRG 12.31.16 Form 10-K Final as filed 2.28.17.pdf 255
3/4/17 3:01 AM
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints David R. Hill and Brian E. Curci, each or any of them,
such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for such person and in
such person's name, place and stead, in any and all capacities, to sign any and all amendments to this report on Form 10-K, and
to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each
and every act and thing necessary or desirable to be done in and about the premises, as fully to all intents and purposes as such
person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the Exchange Act, this report has been signed by the following persons on behalf of the registrant in the
capacities indicated on February 28, 2017.
Signature
/s/ MAURICIO GUTIERREZ
Mauricio Gutierrez
/s/ KIRKLAND B. ANDREWS
Kirkland B. Andrews
/s/ DAVID CALLEN
David Callen
/s/ LAWRENCE S. COBEN
Lawrence S. Coben
/s/ E. SPENCER ABRAHAM
E. Spencer Abraham
/s/ KIRBYJON H. CALDWELL
Kirbyjon H. Caldwell
/s/ TERRY G. DALLAS
Terry G. Dallas
/s/ WILLIAM E. HANTKE
William E. Hantke
/s/ PAUL W. HOBBY
Paul W. Hobby
/s/ ANNE C. SCHAUMBURG
Anne C. Schaumburg
/s/ EVAN J. SILVERSTEIN
Evan J. Silverstein
/s/ BARRY T. SMITHERMAN
Barry T. Smitherman
/s/ THOMAS H. WEIDEMEYER
Thomas H. Weidemeyer
/s/ C. JOHN WILDER
C. John Wilder
/s/ WALTER R. YOUNG
Walter R. Young
Title
President, Chief Executive Officer and
Director (Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
Date
February 28, 2017
February 28, 2017
February 28, 2017
Chairman of the Board
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
February 28, 2017
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
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NRG Energy
804 Carnegie Center
Princeton, NJ
08540-6213
t: 609.524.4500
f: 609.524.4501
nrg.com
1201 Fannin Street
Houston, TX
77002-6929
t: 713.537.3000