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Acquisitions, Discontinued Operations and Dispositions | 12 Months Ended
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Dec. 31, 2021
Discontinued Operations and Disposal Groups [Abstract] |
Acquisitions, Discontinued Operations and Dispositions | Acquisitions, Discontinued Operations and Dispositions Acquisitions Direct Energy Acquisition On January 5, 2021 (the "Acquisition Closing Date"), the Company acquired all of the issued and outstanding common shares of Direct Energy, which had been a North American subsidiary of Centrica plc. Direct Energy is a leading retail provider of electricity, natural gas, and home and business energy related products and services in North America, with operations in all 50 U.S. states and 8 Canadian provinces. The acquisition increased NRG's retail portfolio by over 3 million customers and strengthens its integrated model. It also broadens the Company's presence in the Northeast and into states and locales where it did not previously operate, supporting NRG's objective to diversify its business. The Company paid an aggregate purchase price of $3.625 billion in cash, subject to a purchase price adjustment of $77 million. The Company funded the purchase price using a combination of $715 million of cash on hand, $166 million from a draw on its Revolving Credit Facility (of which $107 million was used to fund acquisition costs and financing fees that are not included in the aggregate purchase price above) as well as approximately $2.9 billion in secured and unsecured corporate debt issued in December 2020. The final purchase price adjustment resulted in additional payment of $22 million, which was paid in December 2021. The Company also increased its collective collateral facilities by $3.4 billion as of the Acquisition Closing Date to meet the additional liquidity requirements related to the acquisition, as detailed in the following table:
| (In millions)
Available on Acquisition Closing Date |
Revolving Credit Facility commitment increase | $ | 802 |
Revolving Credit Facility new tranche | 273
Facility agreement in connection with the sale of pre-capitalized trust securities | 874
Available as of December 31, 2020 |
Credit default swap facility | 150
Revolving accounts receivable financing facility | 750
Repurchase facility | 75
Bilateral letter of credit facilities | 475
Total Increases to Liquidity and Collateral Facilities | $ | 3,399 |
For further discussion see Note 13, Long-term Debt and Finance Leases. Acquisition costs of $25 million and $17 million for the years ended December 31, 2021 and 2020, respectively, are included in acquisition-related transaction and integration costs in the Company's consolidated statement of operations. The acquisition has been recorded as a business combination under ASC 805 with identifiable assets acquired and liabilities assumed recorded at their estimated fair values on the acquisition date. The purchase price is allocated as follows:
| (In millions)
Current Assets |
Cash and cash equivalents | $ | 152 |
Funds deposited by counterparties | 21 |
Restricted cash | 9 |
Accounts receivable, net | 1,802 |
Inventory | 106 |
Derivative instruments | 1,014 |
Cash collateral paid in support of energy risk management activities | 233 |
Prepayments and other current assets | 173 |
Total current assets | 3,510 |
Property, plant and equipment, net | 151 |
Other Assets |
Goodwill(a) | 1,250 |
Intangible assets, net: |
Customer relationships(b) | 1,277 |
Customer and supply contracts(b) | 610 |
Trade names(b) | 310 |
Renewable energy credits | 124 |
Total intangible assets, net | 2,321 |
Derivative instruments | 531 |
Other non-current assets | 31 |
Total other assets | 4,133 |
Total Assets | $ | 7,794 |
| (In millions)
Current Liabilities |
Accounts payable | $ | 1,116 |
Derivative instruments | 1,266 |
Cash collateral received in support of energy risk management activities | 21 |
Accrued expenses and other current liabilities | 670 |
Total current liabilities | 3,073 |
Other Liabilities |
Derivative instruments | 562 |
Deferred income taxes | 320 |
Other non-current liabilities | 115 |
Total other liabilities | 997 |
Total Liabilities | $ | 4,070 |
Direct Energy Purchase Price | $ | 3,724 |
(a)Goodwill arising from the acquisition is attributed to the value of the platform acquired and the synergies expected from combining the operations of Direct Energy with NRG's existing businesses. Goodwill was allocated to the Texas, East, and West/Services/Other segments of $427 million, $648 million , and $175 million, respectively. Goodwill expected to be deductible for tax purposes is $322 million (b)The weighted average amortization period for total amortizable intangible assets is 12 years Measurement Period Adjustments The following measurement period adjustments were recognized during the quarter ended December 31, 2021:
| (In millions)
Assets |
Prepayments and other current assets | $ | (10) |
Goodwill | (7) |
Total decrease in assets | $ | (17) |
Liabilities |
Accounts payable | $ | (4) |
Accrued expenses and other current liabilities | (20) |
Deferred income taxes | (18) |
Total decrease in liabilities | $ | (42) |
Net measurement period adjustments | $ | 25 |
The measurement period adjustments are attributable primarily to refinement of the underlying assumptions used to estimate the fair value of assets acquired and liabilities assumed as more information was obtained about facts and circumstances that existed as of the Acquisition Closing Date. Fair Value Measurement of Intangible Assets The fair values of intangible assets as of the Acquisition Closing Date were measured primarily based on significant inputs that are observable and unobservable in the market and thus represent Level 2 and Level 3 measurements, respectively. Significant inputs were as follows: Customer relationships — Customer relationships, reflective of Direct Energy’s customer base, were valued using an excess earning method of the income approach. Under this approach, the Company estimated the present value of expected future cash flows resulting from existing customer relationships, considering attrition and charges for contributory assets (such as net working capital, fixed assets, workforce and trade names) utilized in the business, discounted at an independent power producer peer group’s weighted average cost of capital. The customer relationships are amortized to depreciation and amortization, ratably based on discounted future cash flows. The weighted average amortization period is 12 years. Customer and supply contracts — The fair value of in-market and out-of-market customer and supply contracts were estimated based on contractual terms compared to market prices as of the Acquisition Closing Date. The majority of the contracts were valued using prices provided by external sources, primarily price quotations available through broker or over-the-counter and online exchanges. For contracts for which external sources or observable market quotes were not available, these values were based on valuation techniques including, but not limited to, internal models based on fundamental analysis of the market and extrapolation of the observable market data with similar characteristics. In addition, the Company applied a credit reserve to reflect credit risk, which is calculated based on published default probabilities. The customer and supply contracts are amortized to revenue and cost of operations, respectively, based upon the fair market value, as of the acquisition date, for each delivery month. The weighted average amortization period is 14 years. Trade names — Trade names were valued using a "relief from royalty" method of the income approach. Under this approach, the fair value is estimated to be the present value of royalties saved because NRG owns the intangible asset and therefore does not have to pay a royalty for its use. The trade names are amortized to depreciation and amortization, on a straight line basis, over a weighted average amortization period of 15 years. Renewable energy credits — Renewable energy credits were valued based on the market prices as of the Acquisition Closing Date. Renewable energy credits are retired, as required, for the applicable compliance period. They are expensed to cost of operations based on customer usage. Fair Value Measurement of Derivative Assets and Liabilities The fair values of derivatives assets and liabilities as of the Acquisition Closing Date were as follows:
| Fair Value
(In millions) | Total |  | Level 1 |  | Level 2 |  | Level 3
Derivatives assets | $ | 1,545 |  |  | $ | 155 |  |  | $ | 1,272 |  |  | $ | 118 |
Derivatives liabilities | 1,828 |  |  | 207 |  |  | 1,489 |  |  | 132 |
Refer to Note 5, Fair Value of Financial Instruments for discussion on derivative fair value measurements. Supplemental Information For the Year Ended December 31, 2021 Direct Energy contributed revenue and income before income taxes of $15.6 billion and $2.4 billion, respectively. Supplemental Unaudited Pro Forma Financial Information The following table provides unaudited pro forma combined financial information of NRG and Direct Energy, after giving effect to the Direct Energy acquisition and related financing transactions as if they had occurred on January 1, 2019. The pro forma financial information has been prepared for illustrative and informational purposes only, and is not intended to project future operating results or indicative of what our financial performance would have been had the transactions occurred on the date assumed. No effect has been given to operating synergies.
| For the Year Ended December 31,
(In millions) | 2021 |  | 2020 |  | 2019
Total operating revenues | $ | 26,987 |  |  | $ | 21,326 |  |  | $ | 23,673 |
Income from continuing operations | 2,225 |  |  | 471 |  |  | 3,623 |
Amounts above reflect certain pro forma adjustments that were directly attributable to the Direct Energy acquisition. These adjustments include the following: (i) Income statement effects of fair value adjustments based on the purchase price allocation including amortization of intangible assets, depreciation of property, plant and equipment and lease expense. (ii) Interest expense assumes the financing transactions directly attributable to the Direct Energy acquisition occurred on January 1, 2019. (iii) Removal of Direct Energy historical interest expense associated with related party notes receivable/payable between Direct Energy and Centrica and its subsidiaries, as those notes are assumed to be repaid as of January 1, 2019. (iv) Elimination of transactions between NRG and Direct Energy. (v) Adjustments to reflect all acquisition costs occurring during the year ended December 31, 2019. (vi) Tax effects of pro forma adjustments on all periods presented and shifting the recognition of one time tax benefits resulting from the acquisition from the year ended December 31, 2021 to the year ended December 31, 2019. Midwest Generation Lease Purchase — On September 29, 2020, Midwest Generation acquired all of the ownership interests in the Powerton facility and Units 7 and 8 of the Joliet facility, which were being leased through 2034 and 2030, respectively, for approximately $260 million. The purchase was funded with cash-on-hand. Upon closing, lease expense related to these facilities, which totaled approximately $14 million in 2019, and the operating lease liability of $148 million were eliminated. Stream Energy Acquisition — On August 1, 2019, the Company completed the acquisition of Stream Energy's retail electricity and natural gas business operating in 9 states and Washington, D.C. for $329 million, including working capital and other adjustments of approximately $29 million. The acquisition increased NRG's retail portfolio by approximately 600,000 RCEs or 450,000 customers. The purchase price was allocated as follows:
| (In millions)
Account receivable | $ | 98 |
Accounts payable | (73) |
Other net current and non-current working capital | 5 |
Marketing partnership | 154 |
Customer relationships | 85 |
Trade name | 28 |
Other intangible assets | 26 |
Goodwill (a) | 6 |
Stream Purchase Price | $ | 329 |
(a)Goodwill arising from the acquisition is attributed to the value of the platform acquired and the synergies expected from combining the operations of Stream Energy with NRG's existing businesses. Goodwill of $5 million and $1 million was assigned to the Texas and East segments, respectively, and is not deductible for tax purposes Dispositions Sale of 4,850 MW of Fossil generating assets On December 1, 2021, the Company closed the previously announced sale of approximately 4,850 MWs of fossil generating assets from its East and West regions to Generation Bridge, an affiliate of ArcLight Capital Partners. Proceeds of $760 million were reduced by working capital and other adjustments of $137 million, resulting in net proceeds of $623 million. The Company recorded a gain of $210 million from the sale, which includes the $39 million indemnification liability recorded as discussed below. As part of the transaction, NRG entered into a tolling agreement for the 866 MW Arthur Kill plant in New York City through April 2025. As part of the agreement to sell the fossil generating assets, NRG has agreed to indemnify Generation Bridge for certain future environmental compliance costs up to $39 million. The indemnity term will expire on December 1, 2028. The Company has recorded the liability within accrued expenses and other current liabilities and other non-current liabilities. Sale of Agua Caliente On February 3, 2021, the Company closed on the sale of its 35% ownership in the Agua Caliente solar project to Clearway Energy, Inc. for $202 million. NRG recognized a gain on the sale of $17 million, including cash disposed of $7 million. Sale of Home Solar In the third quarter of 2020, the Company concluded its Home Solar business was held for sale and recorded an impairment loss of $29 million, as further discussed in Note 11, Asset Impairments. On November 13, 2020, the Company completed the sale of the Home Solar business for cash proceeds of $66 million, resulting in a $2 million loss on the sale. In connection with the sale, the Company extinguished debt of $27 million and recognized a $5 million loss on the extinguishment. Company completed other asset sales for cash proceeds of $12 million and $15 million during the years ended December 31, 2021 and 2020, respectively. Discontinued Operations Sale of South Central Portfolio On February 4, 2019, the Company completed the sale of its South Central Portfolio to Cleco for cash consideration of $1 billion excluding working capital and other adjustments. The Company concluded that the divested business met the criteria for discontinued operations, as the disposition represented a strategic shift in the business in which NRG operates. In connection with the transaction, NRG also entered into a transition services agreement to provide certain corporate services to the divested business, which have been substantially completed in 2020. The South Central Portfolio includes the 1,177 MW Cottonwood natural gas generating facility. Upon the closing of the sale of the South Central Portfolio, NRG entered into a lease agreement with Cleco to leaseback the Cottonwood facility through 2025. Due to its continuing involvement with the Cottonwood facility, NRG did not use held-for-sale or discontinued operations treatment in accounting for the Cottonwood facility. Summarized results of South Central discontinued operations for the year ended December 31, 2019 were as follows:
|  | (In millions)
Operating revenues |  | $ | 31 |
Operating costs and expenses |  | (23) |
Gain from operations of discontinued components |  | 8 |
Gain on disposal of discontinued operations, net of tax |  | 20 |
Gain from discontinued operations, including disposal, net of tax |  | $ | 28 |
Sale of Ownership in NRG Yield, Inc. and its Renewables Platform On August 31, 2018, the Company completed the sale of its ownership interests in NRG Yield, Inc. and its Renewables Platform to GIP for total cash consideration of $1.348 billion. The Company concluded that the divested businesses met the criteria for discontinued operations, as the dispositions represented a strategic shift in the business in which NRG operates. In connection with the transaction, NRG entered into a transition services agreement to provide certain corporate services to the divested businesses in 2018, which concluded in 2020. During the year ended December 31, 2019, the Company recorded an adjustment to reduce the purchase price by $15 million in connection with the completion of the Patriot Wind project. During the year ended December 31, 2019, the Company reduced the liability related to the indemnification of NRG Yield for any increase in property taxes for certain solar properties by $22 million due to updated estimates. Carlsbad On February 6, 2018, NRG entered into an agreement with NRG Yield and GIP to sell 100% of its membership interests in Carlsbad Energy Holdings LLC, which owns the Carlsbad project, for $385 million of cash consideration, excluding working capital adjustments. The primary condition to close the Carlsbad transaction was the completion of the sale of NRG Yield and the Renewables Platform. At the time of the sale of NRG Yield and the Renewables Platform in August 2018, the Company concluded that the Carlsbad project met the criteria for discontinued operations and accordingly, all current and prior period results for Carlsbad were reclassified as discontinued operations. The transaction closed on February 27, 2019. Carlsbad will continue to have a ground lease and easement agreement with NRG with an initial term ending in 2039 and two ten-year extensions. As a result of the transaction, additional commitments related to the project totaled $23 million as of December 31, 2021 and December 31, 2020. Summarized results of NRG Yield, Inc. and Renewables Platform and Carlsbad discontinued operations for the year ended December 31, 2019 were as follows:
|  | (In millions)
Operating revenues |  | $ | 19 |
Operating costs and expenses |  | (9) |
Other expenses |  | (5) |
Gain/(loss) from discontinued operations, net of tax |  | 5 |
Gain/(loss) on disposal of discontinued operations, net of tax |  | 265 |
Income/(expense) from California property tax indemnification |  | 22 |
Income/(expense) from other commitments, indemnification and fees |  | 4 |
Income/(loss) on disposal of discontinued operations, net of tax |  | 291 |
Income/(loss) from discontinued operations, net of tax |  | $ | 296 |
GenOn On June 14, 2017, the GenOn Entities filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Texas Bankruptcy Court. As a result of the bankruptcy filings, NRG concluded that it no longer controlled GenOn as it was subject to the control of the Texas Bankruptcy Court; and accordingly, NRG deconsolidated GenOn and its subsidiaries for financial reporting purposes as of such date. For the Year Ended December 31, 2019 NRG recorded $3 million loss from discontinued operations, net of tax for GenOn results of operations.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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