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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2019
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation Our Consolidated Financial Statements have been prepared in accordance with U.S. GAAP and include the accounts of all majority-owned subsidiaries that are not VIEs and all VIEs where we have determined we are the primary beneficiary. Intercompany transactions have been eliminated in consolidation. Equity Method Investments — We use the equity method of accounting to record our net interests in VIEs where we have determined that we are not the primary beneficiary, which include Greenfield LP, a 50% partnership interest and Calpine Receivables, a 100% membership interest. Our share of net income (loss) is calculated according to our equity ownership percentage or according to the terms of the applicable partnership agreement or limited liability company operating agreement. See Note 7 for further discussion of our VIEs and unconsolidated investments. Reclassifications — We have reclassified certain prior period amounts for comparative purposes. These reclassifications did not have a material effect on our financial condition, results of operations or cash flows. Jointly-Owned Plants — Certain of our subsidiaries own undivided interests in jointly-owned plants. These plants are maintained and operated pursuant to their joint ownership participation and operating agreements. We are responsible for our subsidiaries’ share of operating costs and direct expenses and include our proportionate share of the facilities and related revenues and direct expenses in these jointly-owned plants in the corresponding balance sheet and income statement captions of our Consolidated Financial Statements. The following table summarizes our proportionate ownership interest in jointly-owned power plants:
As of December 31, 2019 |  | Ownership Interest |  | Property, Plant & Equipment |  | Accumulated Depreciation |  | Construction in Progress
(in millions, except percentages)
Freestone Energy Center |  | 75.0 | % |  | $ | 379 |  |  | $ | (177 | ) |  | $ | — |
Hidalgo Energy Center |  | 78.5 | % |  | $ | 250 |  |  | $ | (113 | ) |  | $ | — |
Use of Estimates in Preparation of Financial Statements The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures included in our Consolidated Financial Statements. Actual results could differ from those estimates. Fair Value of Financial Instruments and Derivatives See Note 8 for disclosures regarding the fair value of our debt instruments and Note 9 for disclosures regarding the fair values of our derivative instruments and related margin deposits and certain of our cash balances. Concentrations of Credit Risk Financial instruments that potentially subject us to credit risk consist of cash and cash equivalents, restricted cash, accounts and notes receivable and derivative financial instruments. Certain of our cash and cash equivalents, as well as our restricted cash balances, are invested in money market accounts with investment banks that are not FDIC insured. We place our cash and cash equivalents and restricted cash in what we believe to be creditworthy financial institutions and certain of our money market accounts invest in U.S. Treasury securities or other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities. Additionally, we actively monitor the credit risk of our counterparties and customers, including our receivable, commodity and derivative transactions. Our accounts and notes receivable are concentrated within entities engaged in the energy industry, mainly within the U.S. We generally have not collected collateral for accounts receivable from utilities and end-user customers; however, we may require collateral in the future. For financial and commodity derivative counterparties and customers, we evaluate the net accounts receivable, accounts payable and fair value of commodity contracts and may require security deposits, cash margin or letters of credit to be posted if our exposure reaches a certain level or their credit rating declines. Our counterparties and customers primarily consist of four categories of entities who participate in the energy markets:
• | financial institutions and trading companies;
• | regulated utilities, municipalities, cooperatives, ISOs and other retail power suppliers;
• | oil, natural gas, chemical and other energy-related industrial companies; and
• | commercial, industrial and residential retail customers.
We have concentrations of credit risk with a few of our wholesale counterparties and retail customers relating to our sales of power and steam and our hedging, optimization and trading activities. For example, our wholesale business currently has contracts with investor owned California utilities which could be affected should they be found liable for recent wildfires in California and, accordingly, incur substantial costs associated with the wildfires. On January 29, 2019, PG&E and PG&E Corporation each filed voluntary petitions for relief under Chapter 11. We currently have several power plants that provide energy and energy-related products to PG&E under PPAs, many of which have PG&E collateral posting requirements. Since the bankruptcy filing, we have received all material payments under the PPAs, either directly or through the application of collateral. We also currently have numerous other agreements with PG&E related to the operation of our power plants in Northern California, under which PG&E has continued to provide service since its bankruptcy filing. We cannot predict the ultimate outcome of this matter and continue to monitor the bankruptcy proceedings. We have exposure to trends within the energy industry, including declines in the creditworthiness of our counterparties and customers for our commodity and derivative transactions. Currently, certain of our counterparties and customers within the energy industry have below investment grade credit ratings. Our risk control group manages counterparty and customer credit risk and monitors our net exposure with each counterparty or customer on a daily basis. The analysis is performed on a mark-to-market basis using forward curves. The net exposure is compared against a credit risk threshold which is determined based on each counterparties’ and customer’s credit rating and evaluation of their financial statements. We utilize these thresholds to determine the need for additional collateral or restriction of activity with the counterparty or customer. We believe that our credit policies and portfolio of transactions adequately monitor and diversify our credit risk. Currently, our wholesale counterparties and retail customers are performing and financially settling timely according to their respective agreements with the exception of certain retail customers where our credit exposure is not material. Cash and Cash Equivalents We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. We have cash and cash equivalents held in non-corporate accounts relating to certain project finance facilities and lease agreements that require us to establish and maintain segregated cash accounts. These accounts have been pledged as security in favor of the lenders under such project finance facilities, and the use of certain cash balances on deposit in such accounts is limited, at least temporarily, to the operations of the respective projects. Restricted Cash Certain of our debt agreements, lease agreements or other operating agreements require us to establish and maintain segregated cash accounts, the use of which is restricted, making these cash funds unavailable for general use. These amounts are held by depository banks in order to comply with the contractual provisions requiring reserves for payments such as for debt service, rent and major maintenance or with applicable regulatory requirements. Funds that can be used to satisfy obligations due during the next 12 months are classified as current restricted cash, with the remainder classified as non-current restricted cash. Restricted cash is generally invested in accounts earning market rates; therefore, the carrying value approximates fair value. Such cash is excluded from cash and cash equivalents on our Consolidated Balance Sheets. The table below represents the components of our restricted cash as of December 31, 2019 and 2018 (in millions):
| 2019 |  | 2018
| Current |  | Non-Current |  | Total |  | Current |  | Non-Current |  | Total
Debt service | $ | 58 |  |  | $ | 8 |  |  | $ | 66 |  |  | $ | 13 |  |  | $ | 8 |  |  | $ | 21 |
Construction/major maintenance | 28 |  |  | 6 |  |  | 34 |  |  | 23 |  |  | 24 |  |  | 47 |
Security/project/insurance | 209 |  |  | 31 |  |  | 240 |  |  | 120 |  |  | — |  |  | 120 |
Other | 4 |  |  | 1 |  |  | 5 |  |  | 11 |  |  | 2 |  |  | 13 |
Total | $ | 299 |  |  | $ | 46 |  |  | $ | 345 |  |  | $ | 167 |  |  | $ | 34 |  |  | $ | 201 |
Business Interruption Proceeds We record business interruption insurance proceeds when they are realizable and recorded approximately $11 million, $14 million and $27 million of business interruption proceeds in operating revenues for the years ended December 31, 2019, 2018, and 2017, respectively. Accounts Receivable and Payable Accounts receivable and payable represent amounts due from customers and owed to vendors, respectively. Accounts receivable are recorded at invoiced amounts, net of reserves and allowances, and do not bear interest. Receivable balances greater than 30 days past due are reviewed for collectability, depending upon the nature of the customer, and if deemed uncollectible, are charged off against the allowance account after all means of collection have been exhausted and the potential for recovery is considered remote. We use our best estimate to determine the required allowance for doubtful accounts based on a variety of factors, including the length of time receivables are past due, economic trends and conditions affecting our customer base, significant one-time events and historical write-off experience. Specific provisions are recorded for individual receivables when we become aware of a customer’s inability to meet its financial obligations. The accounts receivable and payable balances also include settled but unpaid amounts relating to our marketing, hedging and optimization activities. Some of these receivables and payables with individual counterparties are subject to master netting arrangements whereby we legally have a right of offset and settle the balances net. However, for balance sheet presentation purposes and to be consistent with the way we present the majority of amounts related to marketing, hedging and optimization activities on our Consolidated Statements of Operations, we present our receivables and payables on a gross basis. We do not have any significant off balance sheet credit exposure related to our customers. Inventory Inventory primarily consists of spare parts, stored natural gas and fuel oil, environmental products and natural gas exchange imbalances. Inventory, other than spare parts, is stated primarily at the lower of cost or net realizable value under the weighted average cost method. Spare parts inventory is valued at weighted average cost and is expensed to operating and maintenance expense or capitalized to property, plant and equipment as the parts are utilized and consumed. Collateral We use margin deposits, prepayments and letters of credit as credit support with and from our counterparties and customers for commodity procurement and risk management activities. In addition, we have granted additional first priority liens on the assets previously subject to first priority liens under our First Lien Notes, First Lien Term Loans and Corporate Revolving Facility as collateral under certain of our power and natural gas agreements. These agreements qualify as “eligible commodity hedge agreements” under our First Lien Notes, First Lien Term Loans and Corporate Revolving Facility. The first priority liens have been granted in order to reduce the cash collateral and letters of credit that we would otherwise be required to provide to our counterparties under such agreements. The counterparties under such agreements would share the benefits of the collateral subject to such first priority liens ratably with the lenders under our First Lien Notes, First Lien Term Loans and Corporate Revolving Facility. Certain of our interest rate hedging instruments relate to hedges of certain of our project financings collateralized by first priority liens on the underlying assets. See Note 11 for a further discussion on our amounts and use of collateral. Property, Plant and Equipment, Net Property, plant, and equipment items are recorded at cost. We capitalize costs incurred in connection with the construction of power plants, the development of geothermal properties and the refurbishment of major turbine generator equipment. When capital improvements to leased power plants meet our capitalization criteria, they are capitalized as leasehold improvements and amortized over the shorter of the term of the lease or the economic life of the capital improvement. We expense maintenance when the service is performed for work that does not meet our capitalization criteria. Our current capital expenditures at our Geysers Assets are those incurred for proven reserves and reservoir replenishment (primarily water injection), pipeline and power generation assets and drilling of “development wells” as all drilling activity has been performed within the known boundaries of the steam reservoir. We have capitalized costs incurred during ownership consisting of additions, certain replacements or repairs when the repairs appreciably extend the life, increase the capacity or improve the efficiency or safety of the property. Such costs are expensed when they do not meet the above criteria. We purchased our Geysers Assets as a proven steam reservoir and all well costs, except well workovers and routine repairs and maintenance, have been capitalized since our purchase date. We depreciate our assets under the straight-line method over the shorter of their estimated useful lives or lease term. For our natural gas-fired power plants, we assume an estimated salvage value which approximates 10% of the depreciable cost basis where we own the power plant or have a favorable option to purchase the power plant or take ownership of the power plant at conclusion of the lease term and a de minimis amount of the depreciable costs basis for componentized equipment. For our Geysers Assets, we typically assume no salvage values. We use the component depreciation method for our natural gas-fired power plant rotable parts, certain componentized balance of plant parts and our information technology equipment and the composite depreciation method for the other natural gas-fired power plant asset groups and Geysers Assets. Generally, upon normal retirement of assets under the composite depreciation method, the costs of such assets are retired against accumulated depreciation and no gain or loss is recorded. For the retirement of assets under the component depreciation method, generally, the costs and related accumulated depreciation of such assets are removed from our Consolidated Balance Sheets and any gain or loss is recorded as operating and maintenance expense. Goodwill and Intangible Assets Goodwill represents the excess of the purchase price over the fair value of the net assets acquired at the time of an acquisition. We assess the carrying amount of our goodwill annually for impairment during the third quarter and whenever the events or changes in circumstances indicate that the carrying value may not be recoverable. Our goodwill resulted from the acquisition of our retail business. As such, our goodwill balance of $242 million was allocated to our Retail segment. We did not record any changes in the carrying amount of our goodwill during the years ended December 31, 2019 and 2018. We record intangible assets, such as acquired contracts, customer relationships and trademark and trade name at their estimated fair values at acquisition. We use all information available to estimate fair values including quoted market prices, if available, and other widely accepted valuation techniques. Certain estimates and judgments are required in the application of the techniques used to measure fair value of our intangible assets, including estimates of future cash flows, selling prices, replacement costs, economic lives and the selection of a discount rate, which are not observable in the market and represent a level 3 measurement. All recognized intangible assets consist of rights and obligations with finite lives. As of December 31, 2019 and 2018, the components of our intangible assets were as follows (in millions):
| 2019 |  | 2018 |  | Lives
Acquired contracts | $ | 444 |  |  | $ | 458 |  |  | 0 – 9 Years
Customer relationships | 445 |  |  | 445 |  |  | 7 – 14 Years
Trademark and trade name | 40 |  |  | 40 |  |  | 15 Years
Other | 4 |  |  | 88 |  |  | 39 – 44 Years
| 933 |  |  | 1,031 |  |  |
Less: Accumulated amortization | 593 |  |  | 619 |  |  |
Intangible assets, net | $ | 340 |  |  | $ | 412 |  |  |
Amortization expense related to our intangible assets for the years ended December 31, 2019, 2018 and 2017 was $72 million, $100 million and $175 million, respectively. The estimated aggregate amortization expense of our intangible assets for the next five years is as follows (in millions):
2020 | $ | 44 |
2021 | $ | 39 |
2022 | $ | 36 |
2023 | $ | 28 |
2024 | $ | 28 |
Impairment Evaluation of Long-Lived Assets (Including Goodwill, Intangibles and Investments) We evaluate our long-lived assets, such as property, plant and equipment, equity method investments and definite-lived intangible assets for impairment, when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Equipment assigned to each power plant is not evaluated for impairment separately; instead, we evaluate our operating power plants and related equipment as a whole unit. When we believe an impairment condition may have occurred, we are required to estimate the undiscounted future cash flows associated with a long-lived asset or group of long-lived assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities for long-lived assets that are expected to be held and used. We use a fundamental long-term view of the power market which is based on long-term production volumes, price curves and operating costs together with the regulatory and environmental requirements within each individual market to prepare our multi-year forecast. Since we manage and market our power sales as a portfolio rather than at the individual power plant level or customer level within each designated market, pool or segment, we group our power plants based upon the corresponding market for valuation purposes. If we determine that the undiscounted cash flows from an asset or group of assets to be held and used are less than the associated carrying amount, or if we have classified an asset as held for sale, we must estimate fair value to determine the amount of any impairment loss. We test goodwill and all intangible assets not subject to amortization for impairments at least annually, or more frequently whenever an event or change in circumstances occurs that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We test goodwill for impairment at the reporting unit level, which is identified one level below the Company’s operating segments for which discrete financial information is available and management regularly reviews the operating results. We perform an annual impairment assessment in the third quarter of each year, or more frequently if indicators of potential impairment exist, to determine whether it is more likely than not that the fair value of a reporting unit in which goodwill resides is less than its carrying value. For reporting units in which this assessment concludes that it is more likely than not that the fair value is more than its carrying value, goodwill is not considered impaired and we are not required to perform the goodwill impairment test. Qualitative factors considered in this assessment include industry and market considerations, overall financial performance, and other relevant events and factors affecting the reporting unit. For reporting units in which the impairment assessment concludes that it is more likely than not that the fair value is less than its carrying value, we perform the goodwill impairment test, which compares the fair value of the reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not considered impaired and we are not required to perform additional analysis. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we record an impairment loss equal to the difference not to exceed the goodwill balance assigned to the reporting unit. We did not record an impairment of our goodwill during the years ended December 31, 2019, 2018 and 2017. All construction and development projects are reviewed for impairment whenever there is an indication of potential reduction in fair value. If it is determined that a construction or development project is no longer probable of completion and the capitalized costs will not be recovered through future operations, the carrying value of the project will be written down to its fair value. In order to estimate future cash flows, we consider historical cash flows, existing contracts, capacity prices and PPAs, changes in the market environment and other factors that may affect future cash flows. To the extent applicable, the assumptions we use are consistent with forecasts that we are otherwise required to make (for example, in preparing our earnings forecasts). The use of this method involves inherent uncertainty. We use our best estimates in making these evaluations and consider various factors, including forward price curves for power and fuel costs and forecasted operating costs. However, actual future market prices and project costs could vary from the assumptions used in our estimates, and the effect of such variations could be material. When we determine that our assets meet the assets held-for-sale criteria, they are reported at the lower of their carrying amount or fair value less the cost to sell. We are also required to evaluate our equity method investments to determine whether or not they are impaired when the value is considered an “other than a temporary” decline in value. Generally, fair value will be determined using valuation techniques such as the present value of expected future cash flows. We will also discount the estimated future cash flows associated with the asset using a single interest rate representative of the risk involved with such an investment including contract terms, tenor and credit risk of counterparties. We may also consider prices of similar assets, consult with brokers, or employ other valuation techniques. We use our best estimates in making these evaluations and consider various factors, including forward price curves for power and fuel costs and forecasted operating costs. However, actual future market prices and project costs could vary from the assumptions used in our estimates, and the effect of such variations could be material. On January 29, 2019, PG&E and PG&E Corporation each filed voluntary petitions for relief under Chapter 11. Our power plants that sell energy and energy-related products to PG&E through PPAs, include Russell City Energy Center and Los Esteros Critical Energy Facility. Since the bankruptcy filing, we have received all material payments under the PPAs, either directly or through application of collateral. As of December 31, 2019, our Consolidated Balance Sheet included net long-lived assets at Russell City Energy Center and Los Esteros Critical Energy Facility of approximately $647 million and $427 million, respectively, and non-recourse project finance debt at Russell City Energy Center and Los Esteros Critical Energy Facility of approximately $272 million and $135 million, respectively. We cannot predict whether the PPAs will be assumed through the bankruptcy proceeding, however, we believe that even if the contracts were not to be assumed, the undiscounted future cash flows of the power plants would exceed the carrying values of each of the facilities. We continue to monitor the bankruptcy proceedings for any changes in circumstances that would impact the carrying value of either power plant. We recorded impairment losses of $84 million during the year ended December 31, 2019 related to the sale of our Garrison and RockGen Energy Centers in our East segment, spare turbine equipment in our Texas segment and certain capitalized costs related to wind development projects in our Texas and East segments. We recorded impairment losses of $10 million during the year ended December 31, 2018 related to scrapped power plant equipment in our East segment. We recorded impairment losses of $41 million during the year ended December 31, 2017 related to our South Point Energy Center in our West segment and spare turbine equipment in our Texas segment. Asset Retirement Obligation We record all known asset retirement obligations for which the liability’s fair value can be reasonably estimated. Over time, the liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. At December 31, 2019 and 2018, our asset retirement obligation liabilities were $68 million and $63 million, respectively, primarily relating to land leases upon which our power plants are built and the requirement that the property meet specific conditions upon its return. Debt Issuance Costs Costs incurred related to the issuance of debt instruments are deferred and amortized over the term of the related debt using a method that approximates the effective interest rate method. However, when the timing of debt transactions involve contemporaneous exchanges of cash between us and the same creditor(s) in connection with the issuance of a new debt obligation and satisfaction of an existing debt obligation, debt issuance costs are accounted for depending on whether the transaction qualifies as an extinguishment or modification, which requires us to either write-off the original debt issuance costs and capitalize the new issuance costs, or continue to amortize the original debt issuance costs and immediately expense the new issuance costs. Our debt issuance costs related to a recognized debt liability are presented as a direct deduction from the carrying amount of the related debt liability, which is consistent with the presentation of debt discounts. Revenue Recognition Our operating revenues are comprised of the following:
• | power and steam revenue consisting of variable payments related to generation, retail power and gas sales activities, power revenues consisting of fixed and variable capacity payments not related to generation including capacity payments received from RTO and ISO capacity auctions, host steam, REC revenue from our Geysers Assets, other revenues such as RMR Contracts, resource adequacy and certain ancillary service revenues and realized settlements from our marketing, hedging, optimization and trading activities;
• | mark-to-market revenues from derivative instruments as a result of our marketing, hedging, optimization and trading activities; and
• | sales of natural gas and other service revenues.
See Note 3 for further information related to our accounting for revenue from contracts with customers. Realized Settlements of Commodity Derivative Instruments — The realized value of power commodity sales and purchase contracts that are net settled or settled as gross sales and purchases, but could have been net settled, are reflected on a net basis and are included in Commodity revenue on our Consolidated Statements of Operations. Mark-to-Market Gain (Loss) — The changes in the mark-to-market value of power-based commodity derivative instruments are reflected on a net basis as a separate component of operating revenues. Gross vs. Net Accounting — We determine whether the financial statement presentation of revenues should be on a gross or net basis. Where we act as principal, we record settlement of our physical commodity contracts on a gross or net basis dependent upon whether the contract results in physical delivery of the underlying product. With respect to our physical executory contracts, where we do not take title to the commodities but receive a variable payment to convert natural gas into power and steam in a tolling operation, we record revenues on a net basis. Accounting for Derivative Instruments We enter into a variety of derivative instruments including both exchange traded and OTC power and natural gas forwards, options as well as instruments that settle on the power price to natural gas price relationships (Heat Rate swaps and options) and interest rate hedging instruments. We recognize all derivative instruments that qualify for derivative accounting treatment as either assets or liabilities and measure those instruments at fair value unless they qualify for and are designated under the normal purchase normal sale exemption. Accounting for derivatives at fair value requires us to make estimates about future prices during periods for which price quotes may not be available from sources external to us, in which case we rely on internally developed price estimates. See Note 10 for further discussion on our accounting for derivatives. Fuel and Purchased Energy Expense Fuel and purchased energy expense is comprised of the cost of natural gas and fuel oil purchased from third parties for the purposes of consumption in our power plants as fuel, the cost of power purchased from third parties for sale to retail customers, the cost of power and natural gas purchased from third parties for our marketing, hedging and optimization activities and realized settlements and mark-to-market gains and losses resulting from general market price movements against certain derivative natural gas and power contracts including financial natural gas transactions economically hedging anticipated future power sales that either do not qualify as hedges under the hedge accounting guidelines or qualify under the hedge accounting guidelines and the hedge accounting designation has not been elected. Realized and Mark-to-Market Expenses from Commodity Derivative Instruments Realized Settlements of Commodity Derivative Instruments — The realized value of natural gas commodity purchase and sales contracts that are net settled are reflected on a net basis and included in Commodity expense on our Consolidated Statements of Operations. Power purchase commodity contracts that result in the physical delivery of power, and that also supplement our power generation, are reflected on a gross basis and are included in Commodity expense on our Consolidated Statements of Operations. Mark-to-Market (Gain) Loss — The changes in the mark-to-market value of natural gas-based and certain power-based commodity derivative instruments are reflected on a net basis as a separate component of fuel and purchased energy expense. Operating and Maintenance Expense Operating and maintenance expense primarily includes employee expenses, utilities, chemicals, repairs and maintenance (including equipment failure and major maintenance), insurance and property taxes. We recognize these expenses when the service is performed or in the period to which the expense relates. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying values of existing assets and liabilities and their respective tax basis and tax credit and NOL carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income in the period that includes the enactment date. We recognize the financial statement effects of a tax position when it is more-likely-than-not, based on the technical merits, that the position will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold is measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority. We reverse a previously recognized tax position in the first period in which it is no longer more-likely-than-not that the tax position would be sustained upon examination. See Note 12 for a further discussion on our income taxes. New Accounting Standards and Disclosure Requirements Leases — On January 1, 2019, we adopted Accounting Standards Update 2016-02, “Leases” (“Topic 842”). The comprehensive new lease standard superseded all existing lease guidance. The standard requires that a lessee should recognize a right-of-use asset and a lease liability for substantially all operating leases based on the present value of the minimum rental payments. For lessors, the accounting for leases under Topic 842 remained substantially unchanged. The standard also requires expanded disclosures surrounding leases. We adopted the standards under Topic 842 using the modified retrospective method and elected a number of the practical expedients in our implementation of Topic 842. The key change that affected us relates to our accounting for operating leases for which we are the lessee that were historically off-balance sheet. The impact of adopting the standards resulted in the recognition of a right-of-use asset and lease obligation liability of $191 million on our Consolidated Balance Sheet on January 1, 2019, exclusive of previously recognized lease balances. The implementation of Topic 842 did not have a material effect on our Consolidated Statement of Operations or Consolidated Statement of Cash Flows for the year ended December 31, 2019. See Note 4 for a discussion of the practical expedients we elected and additional disclosures required by Topic 842. Derivatives and Hedging — In August 2017, the FASB issued Accounting Standards Update 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” The standard better aligns an entity’s hedging activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in the financial statements. The standard will prospectively make hedge accounting easier to apply to hedging activities and also enhances disclosure requirements for how hedge transactions are reflected in the financial statements when hedge accounting is elected. We adopted Accounting Standards Update 2017-12 in the first quarter of 2019 which did not have a material effect on our financial condition, results of operations or cash flows. Fair Value Measurements — In August 2018, the FASB issued Accounting Standards Update 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” The standard removes, modifies and adds disclosures about fair value measurements and is effective for fiscal years beginning after December 15, 2019. The changes required by this standard to remove or modify disclosures may be early adopted with adoption of the additional disclosures required by this standard delayed until their effective date. We do not anticipate a material effect on our financial condition, results of operations or cash flows as a result of adopting this standard. Income Taxes — In December 2019, the FASB issued Accounting Standards Update 2019-12, “Simplifying the Accounting for Income Taxes.” The standard is intended to simplify the accounting for income taxes by removing certain exceptions and improve consistent application by clarifying guidance related to the accounting for income taxes. The standard is effective for fiscal years beginning after December 15, 2020. We do not anticipate a material effect on our financial condition, results of operations or cash flows as a result of adopting this standard.

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