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Goodwill and Other Intangibles

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangibles

Goodwill and Other Intangibles

Goodwill

NRG's goodwill balance was $539 million and $662 million as of December 31, 2017 and 2016, respectively. As of December 31, 2017, and 2016, NRG had approximately $460 million and $547 million, respectively, of goodwill that is deductible for U.S. income tax purposes in future periods. As of December 31, 2017, goodwill consisted of $165 million associated with the acquisition of EME, $341 million for Retail business acquisitions, and $33 million associated with other business acquisitions.

2017 Impairments of Goodwill

BETM — During the fourth quarter of 2017, the Company concluded that BETM was held for sale in connection with board approval and advanced negotiations to sell the business. Accordingly, the Company recorded the assets and liabilities at fair market value as of December 31, 2017, which resulted in an impairment loss of $90 million to record BETM’s goodwill at fair market value. The remaining goodwill balance for BETM of $21 million is included within non-current assets held-for-sale as of December 31, 2017.

SPP — During the fourth quarter of 2017, NRG sold its interests in certain SPP projects to NRG Yield. The goodwill recorded during the SPP acquisition was related primarily to its development pipeline, which was not sold to NRG Yield. As the Company does not expect to separately develop these projects and accordingly, has no cash flow stream associated with the goodwill, an impairment loss of $12 million was recorded to reduce the value to zero as of December 31, 2017.

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.

Intangible Assets 

The Company's intangible assets as of December 31, 2017, 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 NO_x emission allowances established with the 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 NO_x 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, 2017, the Company recorded an impairment loss of $20 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, Energy Curtailment Specialists, and Source Power & Gas. The customer relationships are amortized to depreciation and amortization expense based on the expected discounted future net cash flows by year.

• 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. During the year ended December 31, 2017, the Company recorded an impairment loss of $6 million related to 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 assets related to purchased ground leases.

The following tables summarize the components of NRG's intangible assets subject to amortization:

					Contracts
Year Ended December 31, 2017	Emission Allowances				Energy Supply				Fuel				Customer				Customer Relationships				Marketing Partnerships				Trade Names				PPA				Other				Total
	(In millions)
January 1, 2017	$	789			$	54			$	72			$	16			$	816			$	88			$	342			$	1,286			$	198			$	3,661
Purchases	31				—				—				—				—				—				—				—				32				63
Acquisition of businesses	—				—				—				—				18				—				—				—				—				18
Usage	(10		)		—				—				—				—				—				—				—				(28		)		(38		)
Write-off of fully amortized balances(a)	—				(54		)		(23		)		—				—				—				—				—				—				(77		)
Impairment	(20		)		—				—				—				—				—				—				(6		)		—				(26		)
Other	(23		)		—				—				—				—				—				—				5				(19		)		(37		)
December 31, 2017	767				—				49				16				834				88				342				1,285				183				3,564
Less accumulated amortization	(591		)		—				(45		)		(9		)		(698		)		(54		)		(182		)		(205		)		(34		)		(1,818		)
Net carrying amount	$	176			$	—			$	4			$	7			$	136			$	34			$	160			$	1,080			$	149			$	1,746

(a) Adjusted for write-off of fully amortized energy supply contracts of $54 million and fuel contracts of $23 million.

					Contracts
Year Ended December 31, 2016	Emission Allowances				Energy Supply				Fuel				Customer				Customer Relationships				Marketing Partnerships				Trade Names				PPA				Other				Total
	(In millions)
January 1, 2016	$	816			$	54			$	72			$	16			$	834			$	88			$	342			$	1,286			$	213			$	3,721
Purchases	13				—				—				—				—				—				—				—				34				47
Acquisition of businesses	—				—				—				—				—				—				—								18				18
Usage	(1		)		—				—				—				—				—				—				—				(44		)		(45		)
Write-off of fully amortized balances(a)	(10		)		—				—				—				—				—				—				—				—				(10		)
Impairment(b)	(23		)		—				—				—				(18		)		—				—				—				(23		)		(64		)
Other	(6		)		—				—				—				—				—				—				—				—				(6		)
December 31, 2016	789				54				72				16				816				88				342				1,286				198				3,661
Less accumulated amortization	(518		)		(54		)		(67		)		(8		)		(663		)		(49		)		(159		)		(143		)		(27		)		(1,688		)
Net carrying amount	$	271			$	—			$	5			$	8			$	153			$	39			$	183			$	1,143			$	171			$	1,973

(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.

The following table presents NRG's amortization of intangible assets for each of the past three years:

	Years Ended December 31,
Amortization	2017				2016				2015
	(In millions)
Emission allowances	$	73			$	66			$	60
Energy supply contracts	—				7				5
Fuel contracts	1				2				2
Customer contracts	1				2				2
Customer relationships	35				49				67
Marketing partnerships	5				8				14
Trade names	23				22				23
Power purchase agreements	62				64				51
Other	7				11				14
Total amortization	$	207			$	231			$	238

The following table presents estimated amortization of NRG's intangible assets for each of the next five years:

					Contracts
Year Ended December 31,	Emission Allowances				Fuel				Customer				Customer Relationships				Marketing Partnerships				Trade Names				PPA				Other				Total
	(In millions)
2018	$	33			$	1			$	1			$	25			$	5			$	22			$	64			$	8			$	159
2019	30				—				1				21				4				22				64				8				150
2020	16				—				1				17				4				22				64				8				132
2021	16				—				1				13				4				22				64				8				128
2022	15				—				1				7				3				22				64				8				120

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, 2017, the value of emission allowances held-for-sale is $9 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 acquired in the acquisition of EME. These out-of-market contracts are amortized to cost of operations. As of December 31, 2017 and 2016, the Company had accumulated amortization for out-of-market contracts of $358 million and $457 million, respectively.

The following table summarizes the estimated amortization related to NRG's out-of-market contracts:

Year Ended December 31,	Power Contracts				Leases				Total
	(In millions
2018	$	16			$	9			$	25
2019	16				9				25
2020	17				9				26
2021	14				9				23
2022	1				9				10

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- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
-URI http://asc.fasb.org/topic&trid=2144416

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