Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2018

Estimated carrying amounts and fair values of NRG's recorded financial instruments not carried at fair market value

The following table presents the level within the fair value hierarchy for long-term debt, including current portion as of March 31, 2018 and December 31, 2017:



	As of March 31, 2018				As of December 31, 2017
	Level 2		Level 3		Level 2		Level 3
	(In millions)
Long-term debt, including current portion	$	8,772	$	7,915	$	8,934	$	7,960

The estimated carrying amounts and fair values of NRG's recorded financial instruments not carried at fair market value are as follows:



	As of March 31, 2018				As of December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
Assets:
Notes receivable^(a)	$	15	$	14	$	16	$	15
Liabilities:
Long-term debt, including current portion^(b)	16,559		16,687		16,603		16,894

(a) Includes the current portion of notes receivable which is recorded in prepayments and other current assets on the Company's consolidated balance sheets.

(b) Excludes deferred financing costs, which are recorded as a reduction to long-term debt on the Company's consolidated balance sheets.

Assets and liabilities measured and recorded at fair value on the consolidated balance sheets on a recurring basis

The following tables present assets and liabilities measured and recorded at fair value on the Company's condensed consolidated balance sheets on a recurring basis and their level within the fair value hierarchy:



	As of March 31, 2018
	Fair Value
(In millions)	Total		Level 1		Level 2		Level 3
Investments in securities (classified within other non-current assets)	$	22	$	3	$	—	$	19
Nuclear trust fund investments:
Cash and cash equivalents	16		16		—		—
U.S. government and federal agency obligations	56		55		1		—
Federal agency mortgage-backed securities	92		—		92		—
Commercial mortgage-backed securities	16		—		16		—
Corporate debt securities	100		—		100		—
Equity securities	333		333		—		—
Foreign government fixed income securities	5		—		5		—
Other trust fund investments:
U.S. government and federal agency obligations	1		1		—		—
Derivative assets:
Commodity contracts	1,277		168		1,060		49
Interest rate contracts	92		—		92		—
Measured using net asset value practical expedient:
Equity securities — nuclear trust fund investments	62
Total assets	$	2,072	$	576	$	1,366	$	68
Derivative liabilities:
Commodity contracts	1,024		224		729		71
Interest rate contracts	30		—		30		—
Total liabilities	$	1,054	$	224	$	759	$	71



	As of December 31, 2017
	Fair Value
(In millions)	Total		Level 1		Level 2		Level 3
Investments in securities (classified within other non-current assets)	$	22	$	3	$	—	$	19
Nuclear trust fund investments:
Cash and cash equivalents	47		45		2		—
U.S. government and federal agency obligations	43		42		1		—
Federal agency mortgage-backed securities	82		—		82		—
Commercial mortgage-backed securities	14		—		14		—
Corporate debt securities	99		—		99		—
Equity securities	334		334		—		—
Foreign government fixed income securities	5		—		5		—
Other trust fund investments:
U.S. government and federal agency obligations	1		1		—		—
Derivative assets:
Commodity contracts	745		191		509		45
Interest rate contracts	53		—		53		—
Measured using net asset value practical expedient:
Equity securities — nuclear trust fund investments	68
Total assets	$	1,513	$	616	$	765	$	64
Derivative liabilities:
Commodity contracts	693		257		359		77
Interest rate contracts	59		—		59		—
Total liabilities	$	752	$	257	$	418	$	77

Reconciliation of 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

The following tables reconcile, for the three months ended March 31, 2018 and 2017, the beginning and ending balances for financial instruments that are recognized at fair value in the condensed consolidated financial statements, at least annually, using significant unobservable inputs:



	Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
	Three months ended March 31, 2018
(In millions)	Debt Securities		Derivatives^(a)			Total
Beginning balance	$	19	$	(32	)	$	(13	)
Total gains — realized/unrealized:
Included in earnings	—		2			2
Purchases	—		1			1
Transfers into Level 3 ^(b)	—		4			4
Transfers out of Level 3 ^(b)	—		3			3
Ending balance as of March 31, 2018	$	19	$	(22	)	$	(3	)
Gains for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held as of March 31, 2018	$	—	$	3		$	3


(a)	Consists of derivative assets and liabilities, net.


(b)	Transfers into/out of Level 3 are related to the availability of external broker quotes and are valued as of the end of the reporting period. All transfers in/out are with Level 2.



	Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
	Three months ended March 31, 2017
(In millions)	Debt Securities		Trust Fund Investments		Derivatives^(a)			Total
Beginning balance	$	17	$	54	$	(68	)	$	3
Total gains — realized/unrealized:
Included in earnings	1		—		6			7
Included in nuclear decommissioning obligation	—		4		—			4
Purchases	—		—		4			4
Transfers into Level 3 ^(b)	—		—		(8		)	(8		)
Transfers out of Level 3 ^(b)	—		—		10			10
Ending balance as of March 31, 2017	$	18	$	58	$	(56	)	$	20
Losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held as of March 31, 2017	$	—	$	—	$	(15	)	$	(15	)


(a)	Consists of derivative assets and liabilities, net.


(b)	Transfers into/out of Level 3 are related to the availability of external broker quotes and are valued as of the end of the reporting period. All transfers in/out are with Level 2.

Significant unobservable inputs used developing fair valueets, Quantitative Information

The following tables quantify the significant unobservable inputs used in developing the fair value of the Company's Level 3 positions as of March 31, 2018 and December 31, 2017:



	Significant Unobservable Inputs
	March 31, 2018
	Fair Value						Input/Range
	Assets		Liabilities		Valuation Technique	Significant Unobservable Input	Low			High		Weighted Average
	(In millions)
Power Contracts	$	38	$	63	Discounted Cash Flow	Forward Market Price (per MWh)	$	9		$	319	$	40
FTRs	11		8		Discounted Cash Flow	Auction Prices (per MWh)	(28		)	46		—
	$	49	$	71



	Significant Unobservable Inputs
	December 31, 2017
	Fair Value						Input/Range
	Assets		Liabilities		Valuation Technique	Significant Unobservable Input	Low			High		Weighted Average
	(In millions)
Power Contracts	$	34	$	65	Discounted Cash Flow	Forward Market Price (per MWh)	$	10		$	142	$	33
FTRs	11		12		Discounted Cash Flow	Auction Prices (per MWh)	(28		)	46		—
	$	45	$	77

Fair value inputs, sensitivity analysis

The following table provides sensitivity of fair value measurements to increases/(decreases) in significant unobservable inputs as of March 31, 2018 and December 31, 2017:



Significant Unobservable Input	Position	Change In Input	Impact on Fair Value Measurement
Forward Market Price Power	Buy	Increase/(Decrease)	Higher/(Lower)
Forward Market Price Power	Sell	Increase/(Decrease)	Lower/(Higher)
FTR Prices	Buy	Increase/(Decrease)	Higher/(Lower)
FTR Prices	Sell	Increase/(Decrease)	Lower/(Higher)

Net counterparty credit exposure by industry sector and by counterparty credit quality

The following tables highlight net counterparty credit exposure by industry sector and by counterparty credit quality. Net counterparty credit exposure is defined as the aggregate net asset position for NRG with counterparties where netting is permitted under the enabling agreement and includes all cash flow, mark-to-market and NPNS, and non-derivative transactions. The exposure is shown net of collateral held, and includes amounts net of receivables or payables.



	Net Exposure ^{(a) (b)}
Category by Industry Sector	(% of Total)
Utilities, energy merchants, marketers and other	78	%
Financial institutions	22
Total as of March 31, 2018	100	%



	Net Exposure ^{(a) (b)}
Category by Counterparty Credit Quality	(% of Total)
Investment grade	78	%
Non-Investment grade/Non-Rated	22
Total as of March 31, 2018	100	%


(a)	Counterparty credit exposure excludes uranium and coal transportation contracts because of the unavailability of market prices.


(b)	The figures in the tables above exclude potential counterparty credit exposure related to RTOs, ISOs, registered commodity exchanges and certain long term contracts.