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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2024

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

The estimated carrying value and fair value of the Company's long-term debt, including current portion, is as follows:


	September 30, 2024				December 31, 2023
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value




Convertible Senior Notes	$	232	$	515	$	575	$	739

Other long-term debt, including current portion	10,497		10,412		10,219		9,835
Total long-term debt, including current portion(a)	$	10,729	$	10,927	$	10,794	$	10,574

(a)Excludes deferred financing costs, which are recorded as a reduction to long-term debt in the Company's consolidated balance sheets

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:


	September 30, 2024
	Fair Value
(In millions)	Total		Level 1		Level 2		Level 3
Investments in securities (classified within other current and non-current assets)	$	26	$	—	$	26	$	—



Derivative assets:
Interest rate contracts	2		—		2		—
Foreign exchange contracts	5		—		5		—
Commodity contracts	4,196		626		3,384		186


Equity securities measured using net asset value practical expedient (classified within other non-current assets)	6
Total assets	$	4,235	$	626	$	3,417	$	186
Derivative liabilities:
Interest rate contracts	$	30	$	—	$	30	$	—
Foreign exchange contracts	2		—		2		—
Commodity contracts	3,588		654		2,722		212
Consumer Financing Program	200		—		—		200
Total liabilities	$	3,820	$	654	$	2,754	$	412


	December 31, 2023
	Fair Value
(In millions)	Total		Level 1		Level 2		Level 3
Investments in securities (classified within other current and non-current assets)	$	21	$	—	$	21	$	—


Derivative assets:
Interest rate contracts	12		—		12		—
Foreign exchange contracts	5		—		5		—
Commodity contracts	6,138		1,334		4,470		334



Equity securities measured using net asset value practical expedient (classified within other non-current assets)	6
Total assets	$	6,182	$	1,334	$	4,508	$	334
Derivative liabilities:
Interest rate contracts	$	8	$	—	$	8	$	—
Foreign exchange contracts	9		—		9		—
Commodity contracts	5,356		1,413		3,728		215
Consumer Financing Program	134		—		—		134
Total liabilities	$	5,507	$	1,413	$	3,745	$	349

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 table reconciles, for the three and nine months ended September 30, 2024 and 2023, the beginning and ending balances for financial instruments that are recognized at fair value in the condensed consolidated financial statements, using significant unobservable inputs, for commodity derivatives:


	Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
	Commodity Derivatives(a)
(In millions)	Three months ended September 30, 2024		Three months ended September 30, 2023		Nine months ended September 30, 2024		Nine months ended September 30, 2023
Beginning balance	$	121	$	905	$	119	$	505

Total (losses)/gains realized/unrealized included in earnings	(83)		5		(120)		(172)
Purchases	(38)		(115)		(7)		25
Transfers into Level 3(b)	(19)		(374)		(2)		64
Transfers out of Level 3(b)	(7)		—		(16)		(1)
Ending balance	$	(26)	$	421	$	(26)	$	421
(Losses)/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 period end	$	(41)	$	75	$	(70)	$	(56)

(a)Consists of derivative assets and liabilities, net, excluding derivatives liabilities from the Consumer Financing Program, which are presented in a separate table below

(b)Transfers into/out of Level 3 within the fair value hierarchy are related to the availability of consensus pricing and external broker quotes and are valued as of the end of the reporting period. All transfers in/out of Level 3 are from/to Level 2

Reconciliation of contractual obligations of Consumer Financing Program recognized at fair value

The following table reconciles, for the three and nine months ended September 30, 2024 and 2023, the beginning and ending balances of the contractual obligations from the Consumer Financing Program that are recognized at fair value in the condensed consolidated financial statements, using significant unobservable inputs:


	Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
	Consumer Financing Program
(In millions)	Three months ended September 30, 2024		Three months ended September 30, 2023		Nine months ended September 30, 2024		Nine months ended September 30, 2023
Beginning balance	$	(151)	$	(115)	$	(134)	$	—
Contractual obligations added from the acquisition of Vivint Smart Home	—		—		—		(112)
New contractual obligations	(63)		(33)		(121)		(55)
Settlements	21		21		64		43
Total losses included in earnings	(7)		(1)		(9)		(4)
Ending balance	$	(200)	$	(128)	$	(200)	$	(128)

Significant unobservable inputs used developing fair values, 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 September 30, 2024 and December 31, 2023:



	September 30, 2024
	Fair Value						Input/Range
(In millions, except as noted)	Assets		Liabilities		Valuation Technique	Significant Unobservable Input	Low			High			Weighted Average
Natural Gas Contracts	$	38	$	27	Discounted Cash Flow	Forward Market Price ($ per MMBtu)	$	1		$	13		$	4
Power Contracts	75		138		Discounted Cash Flow	Forward Market Price ($ per MWh)	0			131			41
Capacity Contracts	27		12		Discounted Cash Flow	Forward Market Price ($ per MW/Day)	20			649			207
RECs	31		9		Discounted Cash Flow	Forward Market Price ($ per Certificate)	2			245			16
FTRs	15		26		Discounted Cash Flow	Auction Prices ($ per MWh)	(38)			8,434			0
Consumer Financing Program	—		200		Discounted Cash Flow	Collateral Default Rates	0.25		%	100.00		%	10.90		%
					Discounted Cash Flow	Collateral Prepayment Rates	2.00		%	3.00		%	2.86		%
					Discounted Cash Flow	Credit Loss Rates	4.70		%	60.00		%	13.88		%
	$	186	$	412



	December 31, 2023
	Fair Value						Input/Range
(In millions, except as noted)	Assets		Liabilities		Valuation Technique	Significant Unobservable Input	Low			High			Weighted Average
Natural Gas Contracts	$	39	$	65	Discounted Cash Flow	Forward Market Price ($ per MMBtu)	$	1		$	15		$	3
Power Contracts	197		66		Discounted Cash Flow	Forward Market Price ($ per MWh)	1			210			47
Capacity Contracts	21		33		Discounted Cash Flow	Forward Market Price ($ per MW/Day)	49			658			285
RECs	58		14		Discounted Cash Flow	Forward Market Price ($ per Certificate)	2			320			15
FTRs	19		37		Discounted Cash Flow	Auction Prices ($ per MWh)	(58)			252			0
Consumer Financing Program	—		134		Discounted Cash Flow	Collateral Default Rates	0.43		%	93.30		%	8.12		%
					Discounted Cash Flow	Collateral Prepayment Rates	2.00		%	3.00		%	2.95		%
					Discounted Cash Flow	Credit Loss Rates	6.00		%	60.00		%	12.57		%
	$	334	$	349

Fair value inputs, sensitivity analysis

The following table provides sensitivity of fair value measurements to increases/(decreases) in significant, unobservable inputs as of September 30, 2024 and December 31, 2023:

Significant Unobservable Input

Position

Change In Input

Impact on Fair Value Measurement

Forward Market Price Natural Gas/Power/Capacity/RECs

Buy

Increase/(Decrease)

Higher/(Lower)

Forward Market Price Natural Gas/Power/Capacity/RECs

Sell

Increase/(Decrease)

Lower/(Higher)

FTR Prices

Buy

Increase/(Decrease)

Higher/(Lower)

FTR Prices

Sell

Increase/(Decrease)

Lower/(Higher)

Collateral Default Rates

n/a

Increase/(Decrease)

Higher/(Lower)

Collateral Prepayment Rates

n/a

Increase/(Decrease)

Lower/(Higher)

Credit Loss Rates

n/a

Increase/(Decrease)

Higher/(Lower)

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	75	%
Financial institutions	25

Total as of September 30, 2024	100	%


	Net Exposure (a)(b)
Category by Counterparty Credit Quality	(% of Total)
Investment grade	59	%
Non-investment grade/Non-Rated	41
Total as of September 30, 2024	100	%

(a)Counterparty credit exposure excludes 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

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References + Details