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Derivative Instruments

6 Months Ended

Jun. 30, 2020

Note 7—Derivative Instruments

The primary risk managed by the Company using derivative instruments is commodity price risk, which is accounted for in accordance with Accounting Standards Codification 815 — Derivatives and Hedging. Natural gas and electricity put and call options and swaps are entered into as hedges against unfavorable fluctuations in market prices of natural gas and electricity. The Company does not apply hedge accounting to these options or swaps, therefore the changes in fair value are recorded in earnings. By using derivative instruments to mitigate exposures to changes in commodity prices, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company minimizes the credit or repayment risk in derivative instruments by entering into transactions with high-quality counterparties. At June 30, 2020, GRE’s swaps and options were traded on the Intercontinental Exchange. GRE International's swaps and options were traded through counterparties.

The summarized volume of GRE’s outstanding contracts and options at June 30, 2020 was as follows (MWh – Megawatt hour and Dth – Decatherm):

Settlement Dates	Volume
	Electricity (in MWH)		Gas (in Dth)
Third quarter 2020		69,200		72,961
Fourth quarter 2020		134,859		122,651
First quarter 2021		—		133,750
Second quarter 2021		—		89,800
Third quarter 2021		—		67,850
Fourth quarter 2021		—		68,700
First quarter 2022		—		67,300
Second quarter 2022		—		40,000
Third quarter 2022		—		8,650
Fourth quarter 2022		—		9,000
First quarter 2023		—		8,450
Second quarter 2023		—		1,700

The fair value of outstanding derivative instruments recorded in the accompanying consolidated balance sheets were as follows:

Asset Derivatives	Balance Sheet Location	June 30, 2020		December 31, 2019
		(in thousands)
Derivatives not designated or not qualifying as hedging instruments:
Energy contracts and options¹	Other current assets	$	335	$	324
Energy contracts and options	Other assets		9		3
Total derivatives not designated or not qualifying as hedging instruments — Assets		$	344	$	327

Liability Derivatives

Derivatives not designated or not qualifying as hedging instruments:
Energy contracts and options¹	Other current liabilities	$	1,297		1,909
Energy contracts and options	Other liabilities		42		70
Total derivatives not designated or not qualifying as hedging instruments — Liabilities		$	1,339	$	1,979

(1) The Company classifies derivative assets and liabilities as current based on the cash flows expected to be incurred within the following 12 months.

The effects of derivative instruments on the consolidated statements of operations was as follows:

		Amount of Loss Recognized on Derivatives
Derivatives not designated or not qualifying as	Location of Loss Recognized	Three Months Ended June 30,					Six Months Ended June 30,
hedging instruments	on Derivatives		2020		2019		2020		2019
		(in thousands)					(in thousands)
Energy contracts and options	Cost of revenues	$	(6,200)	$	(7,921	)	$	(18,589)	$	(10,830	)