Derivative Instruments and Hedging Activity

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activity

Derivative Instruments and Hedging Activity

NEP uses derivative instruments (primarily interest rate swaps) to manage the interest rate cash flow risk associated with outstanding and expected future debt issuances and borrowings. NEP records all derivative instruments that are required to be marked to market as either assets or liabilities on its condensed consolidated balance sheets and measures them at fair value each reporting period. NEP does not utilize hedge accounting for its derivative instruments. All changes in the derivatives' fair value are recognized in interest expense in the condensed consolidated statements of income (loss). At September 30, 2020 and December 31, 2019, the net notional amounts of the interest rate contracts were approximately $7,082 million and $6,859 million, respectively.

During the nine months ended September 30, 2019, NEP reclassified approximately $6 million from AOCI to interest expense primarily because the related future transactions being hedged were no longer going to occur. At September 30, 2020, NEP's AOCI does not include any amounts related to cash flow hedges. Cash flows from the interest rate contracts are reported in cash flows from operating activities in the condensed consolidated statements of cash flows.

Fair Value of Derivative Instruments - The tables below present NEP's gross derivative positions, based on the total fair value of each derivative instrument, at September 30, 2020 and December 31, 2019, as required by disclosure rules, as well as the location of the net derivative positions, based on the expected timing of future payments, on the condensed consolidated balance sheets.

	September 30, 2020
	Gross Basis				Net Basis
	Assets		Liabilities		Assets		Liabilities
	(millions)
Interest rate contracts	$	53	$	1,073	$	—	$	1,020
Net fair value by balance sheet line item:
Other current assets					$	—
Other non-current assets					—
Derivatives - current							$	19
Derivatives - non-current							1,001
Total derivatives					$	—	$	1,020

	December 31, 2019
	Gross Basis				Net Basis
	Assets		Liabilities		Assets		Liabilities
	(millions)
Interest rate contracts	$	9	$	427	$	—	$	418
Net fair value by balance sheet line item:
Other current assets					$	—
Other non-current assets					—
Derivatives - current							$	1
Derivatives - non-current							417
Total derivatives					$	—	$	418

Financial Statement Impact of Derivative Instruments - Gains (losses) related to NEP's interest rate contracts are recorded in the condensed consolidated financial statements as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(millions)
Interest rate contracts:
Gains reclassified from AOCI to interest expense	$	—	$	—	$	—	$	5
Gains (losses) recognized in interest expense	$	131	$	(311)	$	(609)	$	(589)

Credit-Risk-Related Contingent Features - Certain of NEP's derivative instruments contain credit-related cross-default and material adverse change triggers, none of which contain requirements to maintain certain credit ratings or financial ratios. At September 30, 2020 and December 31, 2019, the aggregate fair value of NEP's derivative instruments with contingent risk features that were in a liability position was approximately $971 million and $420 million, respectively.