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Acquisitions and Dispositions | 12 Months Ended
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Dec. 31, 2023
Discontinued Operations and Disposal Groups [Abstract] |
Acquisitions and Dispositions | Acquisitions and Dispositions Acquisitions 2023 Acquisitions Vivint Smart Home Acquisition On March 10, 2023 (the "Acquisition Closing Date"), the Company completed the acquisition of Vivint Smart Home, Inc., pursuant to the Agreement and Plan of Merger, dated as of December 6, 2022, by and among the Company, Vivint Smart Home, Inc. and Jetson Merger Sub, Inc., a wholly-owned subsidiary of the Company (“Merger Sub”) pursuant to which Merger Sub merged with and into Vivint Smart Home, Inc., with Vivint Smart Home, Inc. surviving the merger as a wholly-owned subsidiary of the Company. Dedicated to redefining the home experience with intelligent products and services, Vivint Smart Home brought approximately two million subscribers to NRG. Vivint Smart Home's single, expandable platform incorporates artificial intelligence and machine learning into its operating system and its vertically integrated business model includes hardware, software, sales, installation, customer service and technical support and professional monitoring, enabling superior subscriber experiences and a complete end-to-end smart home experience. The acquisition accelerated the realization of NRG's consumer-focused growth strategy and creates a leading essential home services platform fueled by market-leading brands, unparalleled insights, proprietary technologies and complementary sales channels. NRG paid $12 per share, or approximately $2.6 billion in cash. The Company funded the acquisition using: •proceeds of $724 million from newly issued $740 million 7.000% Senior Secured First Lien Notes due 2033, net of issuance costs and discount; •proceeds of $635 million from newly issued $650 million 10.25% Series A Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, net of issuance costs; •proceeds of approximately $900 million drawn from its Revolving Credit Facility and Receivables Securitization Facilities; and •cash on hand. In February 2023, the Company increased its Revolving Credit Facility by $600 million to meet the additional liquidity requirements related to the acquisition. For further discussion, see Note 13, Long-term Debt and Finance Leases. Acquisition costs of $38 million and $17 million for the years ended December 31, 2023 and 2022, 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 and liabilities acquired recorded at their estimated Acquisition Closing Date fair value. The total consideration of $2.623 billion includes:
|  | (In millions)
Vivint Smart Home, Inc. common shares outstanding as of March 10, 2023 of 216,901,639 at $12.00 per share |  | $ | 2,603 |
Other Vivint Smart Home, Inc. equity instruments (Cash out RSUs and PSUs, Stock Appreciation Rights, Private Placement Warrants) |  | 6 |
Total Cash Consideration |  | $ | 2,609 |
Fair value of acquired Vivint Smart Home, Inc. equity awards attributable to pre-combination service |  | 14 |
Total Consideration |  | $ | 2,623 |
The purchase price was allocated as follows as of December 31, 2023:
| (In millions)
Current Assets |
Cash and cash equivalents | $ | 120 |
Accounts receivable, net | 60 |
Inventory | 113 |
Prepayments and other current assets | 37 |
Total current assets | 330 |
Property, plant and equipment, net | 49 |
Other Assets |
Operating lease right-of-use assets, net | 35 |
Goodwill(a) | 3,494 |
Intangible assets, net(b): |
Customer relationships | 1,740 |
Technology | 860 |
Trade names | 160 |
Sales channel contract | 10 |
Intangible assets, net | 2,770 |
Deferred income taxes | 382 |
Other non-current assets | 14 |
Total other assets | 6,695 |
Total Assets | $ | 7,074 |
Current Liabilities |
Current portion of long-term debt and finance leases | $ | 14 |
Current portion of operating lease liabilities | 13 |
Accounts payable | 109 |
Derivative instruments | 80 |
Deferred revenue current | 518 |
Accrued expenses and other current liabilities | 207 |
Total current liabilities | 941 |
Other Liabilities |
Long-term debt and finance leases | 2,572 |
Non-current operating lease liabilities | 28 |
Derivative instruments | 32 |
Deferred income taxes | 18 |
Deferred revenue non-current | 837 |
Other non-current liabilities | 23 |
Total other liabilities | 3,510 |
Total Liabilities | $ | 4,451 |
Vivint Smart Home Purchase Price | $ | 2,623 |
(a)Goodwill arising from the acquisition is attributed to the value of the platform acquired, cross-selling opportunities, subscriber growth and the synergies expected from combining the operations of Vivint Smart Home with NRG's existing businesses. None of the goodwill recorded will be deductible for tax purposes (b)The weighted average amortization period for total amortizable intangible assets is approximately ten years 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 Vivint Smart Home’s subscriber base, were valued using an excess earning method of the income approach, and is classified as Level 3. Under this approach, the Company estimated the present value of expected future cash flows resulting from existing subscriber relationships, considering attrition and charges for contributory assets (such as net working capital, fixed assets, workforce, trade names and technology) utilized in the business, discounted based on the required rate of return on the acquired intangible asset. The subscriber relationships are amortized to depreciation and amortization, ratably based on discounted future cash flows. The weighted average amortization period is twelve years. Technology – Developed technology was valued using a "relief from royalty" method of the income approach, and is classified as Level 3. Under this approach, the fair value was estimated to be the present value of royalties saved which assumed the value of the asset based on discounted cash flows of the amount that would be paid by a hypothetical market participant had they not owned the asset and instead licensed the asset from another company. The estimated cash flows from the developed technology considered the obsolescence factor and was discounted based on the required rate of return on the acquired intangible asset. The developed technology is amortized to depreciation and amortization, ratably based on discounted future cash flows. The weighted average amortization period is five years. Trade names – Trade names were valued using a "relief from royalty" method of the income approach, and is classified as Level 3. Under this approach, the fair value is estimated to be the present value of royalties saved which assumed the value of the asset based on discounted cash flows of the amount that would be paid by a hypothetical market participant had they not owned the asset and instead licensed the asset from another company. The estimated cash flows from the trade names considered the expected probable use of the asset and was discounted based on the required rate of return on the acquired intangible asset. The trade names are amortized to depreciation and amortization, on a straight line basis, over an amortization period of ten years. Fair Value Measurement of Acquired Vivint Smart Home Debt The Company acquired $2.7 billion in aggregate principal of Vivint Smart Home’s 2027 Senior Secured Notes, 2029 Senior notes and 2028 Senior Secured Term Loan (together, the "Acquired Vivint Smart Home Debt") which were recorded at fair value as of the Acquisition Closing Date. The difference between the fair value at the Acquisition Closing Date and the principal outstanding of the Acquired Vivint Smart Home Debt, of $152 million, is being amortized through interest expense over the remaining term of the debt. The Acquired Vivint Smart Home Debt is classified as Level 2 and were measured at fair value using observable market inputs based on interest rates at the Acquisition Closing Date. For additional discussion, see Note 13, Long-term Debt and Finance Leases. Fair Value Measurement of Derivatives Liabilities The derivative liabilities are recorded in connection with the contractual future payment obligations with the financing providers under Vivint Smart Home’s Consumer Financing Program. The fair values of the derivatives liabilities as of the Acquisition Closing Date were valued using a discounted cash flow model, with inputs consisting of available market data, such as market yield discount rates, as well as unobservable internally derived assumptions, such as collateral prepayment rates, collateral default rates and credit loss rates. These derivatives are classified as Level 3 and changes to the fair value are recorded through other income, net in the consolidated statement of operations. For additional discussion, see Note 6, Accounting for Derivative Instruments and Hedging Activities. Supplemental Pro Forma Financial Information The following table provides unaudited pro forma combined financial information of NRG and Vivint Smart Home, after giving effect to the Vivint Smart Home acquisition and related financing transactions as if they had occurred on January 1, 2021. The pro forma financial information has been prepared for illustrative and informational purposes only, and is not intended to project future operating results or be indicative of what the Company's financial performance would have been had the transactions occurred on the date indicated. No effect has been given to prospective operating synergies.
| For the Year Ended December 31,
(In millions) | 2023 |  | 2022 |  | 2021
Total operating revenues | $ | 29,109 |  |  | $ | 33,225 |  |  | $ | 28,468 |
Net (loss)/income | (3) |  |  | 1,136 |  |  | 1,574 |
Amounts above reflect certain pro forma adjustments that were directly attributable to the Vivint Smart Home 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, reversal of historical Vivint Smart Home amortization of capitalized contract costs and reversal of historical Vivint Smart Home other income recorded for the change in fair value of warrant derivative liabilities, as the warrants are assumed to be cashed out upon the Acquisition Closing Date. (ii)One-time expenses directly related to the acquisition. (iii)Adjustments to reflect all acquisition and related transactions costs in the year ended December 31, 2021. (iv)Interest expense assumes the financing transactions directly attributable to the Vivint Smart Home acquisition occurred on January 1, 2021. (v)Adjustments related to recording Vivint Smart Home's historical debt at Acquisition Closing Date fair value. (vi)Adjustments to reflect the write-off of short-term deferred financing costs related to the bridge facility put in place for the acquisition prior to securing permanent financing during the year ended December 31, 2021 instead of the year ended December 31, 2023. (vii) Income tax effect of the acquisition accounting adjustments and financing adjustments (adjusted for permanent book/tax differences) based on combined blended federal/state tax rate for all periods presented. 2021 Acquisitions Direct Energy Acquisition On January 5, 2021, 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 strengthened its integrated model. It also broadened 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 and total purchase price adjustment of $99 million, resulting in an adjusted purchase price of $3.724 billion. Acquisition costs of $25 million for the year ended December 31, 2021 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 was allocated as follows as of December 31, 2021:
| (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 |
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 was 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 deductible for tax purposes was $322 million (b)As of January 5, 2021, the weighted average amortization period for total amortizable intangible assets was 12 years Dispositions 2023 Dispositions Sale of the 44% equity interest in STP On November 1, 2023, the Company closed on the sale of its 44% equity interest in STP to Constellation Energy Generation ("Constellation"). Proceeds of $1.75 billion were reduced by working capital and other adjustments of $96 million, resulting in net proceeds of $1.654 billion. The Company recorded a gain on the sale of $1.2 billion within the Texas region of operations. For discussion of the litigation matter related to the transaction, see Note 23, Commitments and Contingencies. The Company recorded income before income taxes from its 44% equity interest in STP as follows:
| For the Year Ended December 31,
(In millions) | 2023 |  | 2022 |  | 2021
Income before income taxes(a) | $ | 206 |  |  | $ | 362 |  |  | $ | 829 |
(a)Excludes the impact of the Company's hedges at the portfolio level Sale of Gregory On October 2, 2023, the Company closed on the sale of its 100% ownership in the Gregory natural gas generating facility in Texas for $102 million. The Company recorded a gain on the sale of $82 million. Sale of Astoria On January 6, 2023, the Company closed on the sale of land and related generation assets from the Astoria site, within the East region of operations, for proceeds of $212 million, subject to transaction fees of $3 million and certain indemnifications, resulting in a $199 million gain. As part of the transaction, NRG entered into an agreement to lease the land back for the purpose of operating the Astoria gas turbines. Decommissioning was completed in December 2023 and the lease agreement has been terminated. 2022 Dispositions Sale of Watson On June 1, 2022, the Company closed on the sale of its 49% ownership in the Watson natural gas generating facility for $59 million. The Company recorded a gain on the sale of $46 million. 2021 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 $140 million, resulting in net proceeds of $620 million. The Company recorded a gain of $207 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.

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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 -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent + Details
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