Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2017

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

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



	As of June 30, 2017				As of December 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
Assets:
Notes receivable^(a)	$	25	$	24	$	34	$	34
Liabilities:
Long-term debt, including current portion^(b)	17,086		17,246		16,655		16,620

(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.

The following table presents the level within the fair value hierarchy for long-term debt, including current portion as of June 30, 2017 and December 31, 2016:



	As of June 30, 2017				As of December 31, 2016
	Level 2		Level 3		Level 2		Level 3
	(In millions)
Long-term debt, including current portion	$	9,398	$	7,848	$	9,205	$	7,415

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 June 30, 2017
	Fair Value
(In millions)	Level 1		Level 2		Level 3		Total
Investment in available-for-sale securities (classified within other non-current assets):
Debt securities	$	—	$	—	$	18	$	18
Available-for-sale securities	4		—		—		4
Nuclear trust fund investments:
Cash and cash equivalents	11		—		—		11
U.S. government and federal agency obligations	45		—		—		45
Federal agency mortgage-backed securities	—		71		—		71
Commercial mortgage-backed securities	—		17		—		17
Corporate debt securities	—		109		—		109
Equity securities	319		—		61		380
Foreign government fixed income securities	—		4		—		4
Other trust fund investments:
U.S. government and federal agency obligations	1		—		—		1
Derivative assets:
Commodity contracts	186		535		110		831
Interest rate contracts	—		39		—		39
Total assets	$	566	$	775	$	189	$	1,530
Derivative liabilities:
Commodity contracts	292		496		121		909
Interest rate contracts	—		95		—		95
Total liabilities	$	292	$	591	$	121	$	1,004



	As of December 31, 2016
	Fair Value
(In millions)	Level 1		Level 2		Level 3		Total
Investment in available-for-sale securities (classified within other non-current assets):
Debt securities	$	—	$	—	$	17	$	17
Available-for-sale securities	10		—		—		10
Nuclear trust fund investments:
Cash and cash equivalents	25		—		—		25
U.S. government and federal agency obligations	72		1		—		73
Federal agency mortgage-backed securities	—		62		—		62
Commercial mortgage-backed securities	—		17		—		17
Corporate debt securities	—		84		—		84
Equity securities	292		—		54		346
Foreign government fixed income securities	—		3		—		3
Other trust fund investments:
U.S. government and federal agency obligations	1		—		—		1
Derivative assets:
Commodity contracts	560		549		90		1,199
Interest rate contracts	—		49		—		49
Total assets	$	960	$	765	$	161	$	1,886
Derivative liabilities:
Commodity contracts	494		636		158		1,288
Interest rate contracts	—		88		—		88
Total liabilities	$	494	$	724	$	158	$	1,376

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 and six months ended June 30, 2017 and 2016, 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 June 30, 2017										Six months ended June 30, 2017
(In millions)	Debt Securities		Trust Fund Investments		Derivatives^(a)			Total			Debt Securities		Trust Fund Investments		Derivatives^(a)			Total
Beginning balance	$	18	$	58	$	(56	)	$	20		$	17	$	54	$	(68	)	$	3
Total gains — realized/unrealized:
Included in earnings	—		—		40			40			1		—		46			47
Included in nuclear decommissioning obligation	—		3		—			3			—		7		—			7
Purchases	—		—		5			5			—		—		9			9
Transfers into Level 3 ^(b)	—		—		3			3			—		—		(5		)	(5		)
Transfers out of Level 3 ^(b)	—		—		(3		)	(3		)	—		—		7			7
Ending balance as of June 30, 2017	$	18	$	61	$	(11	)	$	68		$	18	$	61	$	(11	)	$	68
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 June 30, 2017	$	—	$	—	$	22		$	22		$	—	$	—	$	7		$	7


(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 June 30, 2016												Six months ended June 30, 2016
(In millions)	Debt Securities			Trust Fund Investments			Derivatives^(a)			Total			Debt Securities			Trust Fund Investments			Derivatives^(a)			Total
Beginning balance	$	17		$	52		$	(2	)	$	67		$	17		$	54		$	(22	)	$	49
Total gains/(losses) — realized/unrealized:
Included in earnings	—			—			23			23			—			—			9			9
Included in OCI	(1		)	—			—			(1		)	(1		)	—			—			(1		)
Included in nuclear decommissioning obligations	—			(1		)	—			(1		)	—			(4		)	—			(4		)
Purchases	—			—			22			22			—			1			27			28
Transfers into Level 3 ^(b)	—			—			(20		)	(20		)	—			—			7			7
Transfers out of Level 3 ^(b)	—			—			(5		)	(5		)	—			—			(3		)	(3		)
Ending balance as of June 30, 2016	$	16		$	51		$	18		$	85		$	16		$	51		$	18		$	85
Gains/(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 June 30, 2016	$	—		$	—		$	11		$	11		$	—		$	—		$	(7	)	$	(7	)


(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 June 30, 2017 and December 31, 2016:



	Significant Unobservable Inputs
	June 30, 2017
	Fair Value						Input/Range
	Assets		Liabilities		Valuation Technique	Significant Unobservable Input	Low			High		Weighted Average
	(In millions)
Power Contracts	$	57	$	78	Discounted Cash Flow	Forward Market Price (per MWh)	$	10		$	115	$	30
FTRs	53		43		Discounted Cash Flow	Auction Prices (per MWh)	(29		)	27		—
	$	110	$	121



	Significant Unobservable Inputs
	December 31, 2016
	Fair Value						Input/Range
	Assets		Liabilities		Valuation Technique	Significant Unobservable Input	Low			High		Weighted Average
	(In millions)
Power Contracts	$	39	$	108	Discounted Cash Flow	Forward Market Price (per MWh)	$	11		$	104	$	31
FTRs	51		50		Discounted Cash Flow	Auction Prices (per MWh)	(22		)	17		—
	$	90	$	158

Fair Value Inputs, Sensitivity Analysis

The following table provides sensitivity of fair value measurements to increases/(decreases) in significant unobservable inputs as of June 30, 2017 and December 31, 2016:



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	89	%
Financial institutions	11
Total as of June 30, 2017	100	%



	Net Exposure ^{(a) (b)}
Category by Counterparty Credit Quality	(% of Total)
Investment grade	78	%
Non-Investment grade/Non-Rated	22
Total as of June 30, 2017	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.