Goodwill and Other Intangibles |
Goodwill and Other Intangibles Goodwill — NRG's goodwill balance was $2.6 billion as of December 31, 2014, and $2.0 billion as of December 31, 2013. The Company recorded approximately $1.7 billion of goodwill in connection with the acquisition of Texas Genco in 2006. The Company recorded $144 million of goodwill in connection with the 2010 acquisition of Green Mountain Energy, and $29 million in connection with the 2011 acquisition of Energy Plus. The Company recorded $334 million of goodwill in connection with the 2014 acquisition of EME. Additionally, in 2014, 2013 and 2012, the Company recorded goodwill for several business acquisitions. The EME acquisition is discussed further in Note 3, Business Acquisitions and Dispositions. As of December 31, 2014, there was no impairment to goodwill. As of December 31, 2014 and 2013, NRG had approximately $831 million and $573 million, respectively, of goodwill that is deductible for U.S. income tax purposes in future periods. Intangible Assets — The Company's intangible assets as of December 31, 2014, primarily reflect intangible assets established with the acquisitions of various companies in 2014, 2013, 2012, 2011, 2010, 2009, and 2006, and are comprised of the following: | | • | Emission Allowances — These intangibles primarily consist of SO2 and NOx emission allowances established with the 2012 GenOn acquisition and 2006 Texas Genco acquisition and also include RGGI emission credits which NRG began purchasing in 2009. These emission allowances are held-for-use and are amortized to cost of operations, with NOx allowances amortized on a straight-line basis and SO2 allowances and RGGI credits amortized based on units of production. |
| | • | Energy supply contracts — Established with the acquisitions of Reliant Energy and Green Mountain Energy, these represent the fair value at the acquisition date of in-market contracts for the purchase of energy to serve retail electric customers. The contracts are amortized to cost of operations based on the expected delivery under the respective contracts. |
| | • | In-market fuel (gas and nuclear) contracts — These intangibles were established with the Texas Genco acquisition in 2006 and are amortized to cost of operations over expected volumes over the life of each contract. |
| | • | Customer contracts — Established with the acquisitions of Reliant Energy, Green Mountain Energy, and Northwind Phoenix, these intangibles represent the fair value at the acquisition date of contracts that primarily provide electricity to Reliant Energy's and Green Mountain Energy's C&I customers. These contracts are amortized to revenues based on expected volumes to be delivered for the portfolio. |
| | • | Customer relationships — These intangibles represent the fair value at the acquisition date of acquired businesses' customer base, primarily for Dominion, Energy Alternatives, Energy Plus, Reliant Energy, Green Mountain Energy, Energy Systems and Energy Curtailment Specialists. The customer relationships are amortized to depreciation and amortization expense based on the expected discounted future net cash flows by year. |
| | • | Marketing partnerships — Established with the acquisition of Energy Plus, these intangibles represent the fair value at the acquisition date of existing agreements with loyalty and affinity partners. The marketing partnerships are amortized to depreciation and amortization expense based on the expected discounted future net cash flows by year. |
| | • | Trade names — Established with the Reliant Energy, Green Mountain, Energy Plus and Dominion acquisitions, these intangibles are amortized to depreciation and amortization expense, on a straight-line basis. |
| | • | Power purchase agreements — Established predominantly with the EME and Alta Wind acquisitions, these represent the fair value of PPAs acquired. These will be amortized, generally on a straight-line basis, over the term of the PPA. |
| | • | Other — Consists of renewable energy credits, wind leasehold rights, costs to extend the operating license for STP Units 1 and 2, and the intangible asset related to a purchased ground lease. |
The following tables summarize the components of NRG's intangible assets subject to amortization: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contracts | | | | | | | | | | | | | Year Ended December 31, 2014 | Emission Allowances | | Energy Supply | | Fuel | | Customer | | Customer Relationships | | Marketing Partnerships | | Trade Names | | PPA | | Other | | Total | | (In millions) | January 1, 2014 | $ | 871 |
| | $ | 54 |
| | $ | 72 |
| | $ | 859 |
| | $ | 743 |
| | $ | 88 |
| | $ | 318 |
| | $ | 14 |
| | $ | 98 |
| | $ | 3,117 |
| Purchases | 141 |
| | — |
| | — |
| | — |
| | 8 |
| | — |
| | — |
| | — |
| | 33 |
| | 182 |
| Acquisition of businesses | 12 |
| | — |
| | — |
| | — |
| | 80 |
| | — |
| | 35 |
| | 1,252 |
| | 162 |
| | 1,541 |
| Usage | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (34 | ) | | (34 | ) | Write-off of fully amortized balances | — |
| | — |
| | — |
| | (843 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (843 | ) | Other | (6 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 3 |
| | 9 |
| | 6 |
| December 31, 2014 | 1,018 |
| | 54 |
| | 72 |
| | 16 |
| | 831 |
| | 88 |
| | 353 |
| | 1,269 |
| | 268 |
| | 3,969 |
| Less accumulated amortization(a) | (557 | ) | | (42 | ) | | (63 | ) | | (4 | ) | | (557 | ) | | (27 | ) | | (114 | ) | | (25 | ) | | (13 | ) | | (1,402 | ) | Net carrying amount | $ | 461 |
| | $ | 12 |
| | $ | 9 |
| | $ | 12 |
| | $ | 274 |
| | $ | 61 |
| | $ | 239 |
| | $ | 1,244 |
| | $ | 255 |
| | $ | 2,567 |
|
(a) Adjusted for write-off of fully amortized customer contracts of $843 million. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contracts | | | | | | | | | | | | | Year Ended December 31, 2013 | Emission Allowances | | Energy Supply | | Fuel | | Customer | | Customer Relationships | | Marketing Partnerships | | Trade Names | | PPA | | Other | | Total | | (In millions) | January 1, 2013 | $ | 793 |
| | $ | 54 |
| | $ | 72 |
| | $ | 859 |
| | $ | 640 |
| | $ | 88 |
| | $ | 318 |
| | $ | 4 |
| | $ | 88 |
| | $ | 2,916 |
| Purchases | 76 |
| | — |
| | — |
| | — |
| | 14 |
| | — |
| | — |
| | — |
| | 28 |
| | 118 |
| Acquisition of businesses | — |
| | — |
| | — |
| | — |
| | 89 |
| | — |
| | — |
| | 10 |
| | — |
| | 99 |
| Usage | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (14 | ) | | (14 | ) | Other | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (4 | ) | | (2 | ) | December 31, 2013 | 871 |
| | 54 |
| | 72 |
| | 859 |
| | 743 |
| | 88 |
| | 318 |
| | 14 |
| | 98 |
| | 3,117 |
| Less accumulated amortization | (433 | ) | | (36 | ) | | (61 | ) | | (847 | ) | | (487 | ) | | (12 | ) | | (93 | ) | | (1 | ) | | (7 | ) | | (1,977 | ) | Net carrying amount | $ | 438 |
| | $ | 18 |
| | $ | 11 |
| | $ | 12 |
| | $ | 256 |
|
| $ | 76 |
|
| $ | 225 |
| | $ | 13 |
| | $ | 91 |
|
| $ | 1,140 |
|
The following table presents NRG's amortization of intangible assets for each of the past three years: | | | | | | | | | | | | | | Years Ended December 31, | Amortization | 2014 | | 2013 | | 2012 | | (In millions) | Emission allowances | $ | 124 |
| | $ | 104 |
| | $ | 50 |
| Energy supply contracts | 6 |
| | 6 |
| | 5 |
| Fuel contracts | 2 |
| | 2 |
| | 2 |
| Customer contracts | — |
| | 53 |
| | 119 |
| Customer relationships | 70 |
| | 72 |
| | 98 |
| Marketing partnerships | 15 |
| | 8 |
| | 4 |
| Trade names | 21 |
| | 29 |
| | 30 |
| Power purchase agreements | 24 |
| | 1 |
| | — |
| Other | 6 |
| | 4 |
| | 2 |
| Total amortization | $ | 268 |
| | $ | 279 |
| | $ | 310 |
|
The following table presents estimated amortization of NRG's intangible assets for each of the next five years: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contracts | | | | | | | | | | | | | Year Ended December 31, | Emission Allowances | | Energy Supply | | Fuel | | Customer | | Customer Relationships | | Marketing Partnerships | | Trade Names | | PPA | | Other | | Total | | | 2015 | $ | 91 |
| | $ | 6 |
| | $ | 2 |
| | $ | 1 |
| | $ | 62 |
| | $ | 14 |
| | $ | 23 |
| | $ | 50 |
| | $ | 8 |
| | $ | 257 |
| 2016 | 94 |
| | 6 |
| | 2 |
| | 1 |
| | 48 |
| | 9 |
| | 23 |
| | 63 |
| | 8 |
| | 254 |
| 2017 | 93 |
| | — |
| | 1 |
| | 1 |
| | 32 |
| | 5 |
| | 23 |
| | 63 |
| | 8 |
| | 226 |
| 2018 | 90 |
| | — |
| | — |
| | 1 |
| | 20 |
| | 5 |
| | 23 |
| | 63 |
| | 8 |
| | 210 |
| 2019 | 88 |
| | — |
| | — |
| | 1 |
| | 16 |
| | 4 |
| | 23 |
| | 63 |
| | 8 |
| | 203 |
|
The following table presents the weighted average remaining amortization period related to NRG's intangible assets purchased in 2014 business acquisitions: | | | | | | | | | | As of December 31, 2014 | | Trade Names | | PPA | | Customer Relationships | | Other | | | (In years) | Weighted average remaining amortization period | | 15 | | 21 | | 10 | | 19 |
Intangible assets held for sale — From time to time, management may authorize the transfer from the Company's emission bank of emission allowances held-for-use to intangible assets held-for-sale. Emission allowances held-for-sale are included in other non current assets on the Company's consolidated balance sheet and are not amortized, but rather expensed as sold. As of December 31, 2014, the value of emission allowances held-for-sale is $53 million and is managed within the Corporate segment. Once transferred to held-for-sale, these emission allowances are prohibited from moving back to held-for-use. Out-of-market contracts — Due primarily to business acquisitions, NRG acquired certain out-of-market contracts, which are classified as non-current liabilities on NRG's consolidated balance sheet. These include out-of-market lease contracts of $159 million and $790 million acquired in the acquisitions of EME and GenOn, respectively, and out-of-market gas transportation and storage contracts of $327 million acquired in the acquisition of GenOn. These out-of-market contracts are amortized to cost of operations. In addition, the power contracts are amortized to revenues. The following table summarizes the estimated amortization related to NRG's out-of-market contracts: | | | | | | | | | | | | | | | | Year Ended December 31, | Power Contracts | | Leases | | Gas Transportation | | Total | | (In millions) | 2015 | $ | 16 |
| | 47 |
| | $ | 37 |
| | $ | 100 |
| 2016 | 16 |
| | 47 |
| | 42 |
| | 105 |
| 2017 | 17 |
| | 47 |
| | 37 |
| | 101 |
| 2018 | 17 |
| | 47 |
| | 32 |
| | 96 |
| 2019 | 18 |
| | 47 |
| | 29 |
| | 94 |
|
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