On January 5, 2021 (the "Acquisition Closing Date"), the Company acquired all of the issued and outstanding common shares of Direct Energy, a North American subsidiary of Centrica. Direct Energy is a leading retail provider of electricity, natural gas, and home and business energy related products and services in North America, with operations in all 50 U.S. states and 8 Canadian provinces. The acquisition increased NRG's retail portfolio by over 3 million customers and strengthens its integrated model. It also broadens the Company's presence in the Northeast and into states and locales where it did not previously operate, supporting NRG's objective to diversify its business.

The Company paid an aggregate purchase price of $3.625 billion in cash and an initial purchase price adjustment of $77 million. The Company funded the purchase price using a combination of $715 million of cash on hand, $166 million from a draw on its Revolving Credit Facility (of which $107 million was used to fund acquisition costs and financing fees that are not included in the aggregate purchase price above), as well as approximately $2.9 billion in secured and unsecured corporate debt issued in December 2020. The purchase price adjustment resulted in a reduction of $3 million, which is in negotiation with Centrica. The Company expects to receive this payment from Centrica in 2021. The Company also increased its collective liquidity and collateral facilities by $3.4 billion as of the Acquisition Closing Date to meet the additional liquidity requirements related to the acquisition, as detailed in the following table:


	(In millions)
Available on Acquisition Closing Date
Revolving Credit Facility commitment increase	$	802
Revolving Credit Facility new tranche	273
Facility agreement in connection with the sale of pre-capitalized trust securities	874
Available as of December 31, 2020
Credit default swap facility	150
Revolving accounts receivable financing facility	750
Repurchase facility	75
Bilateral letter of credit facilities	475
Total Increases to Liquidity and Collateral Facilities	$	3,399

Acquisition costs were $1 million and $23 million for the three and six months ended June 30, 2021, respectively, and are included in acquisition-related transaction and integration costs in the Company's consolidated statement of operations.

The acquisition has been recorded as a business combination under ASC 805 with identifiable assets acquired and liabilities assumed provisionally recorded at their estimated fair values on the acquisition date. The initial accounting for the business combination is not complete because the evaluation necessary to assess the fair value of certain net assets acquired and the amount of goodwill to be recognized is still in process. The provisional amounts are subject to revision until the evaluations are completed to the extent that additional information is obtained about the facts and circumstances that existed as of the Acquisition Closing Date.

The purchase price is provisionally allocated as follows:


	(In millions)
Current Assets
Cash and cash equivalents	$	152
Funds deposited by counterparties	21
Restricted cash	9
Accounts receivable, net	1,802
Inventory	106
Derivative instruments	1,014
Cash collateral paid in support of energy risk management activities	233
Prepayments and other current assets	183
Total current assets	3,520
Property, plant and equipment, net	151
Other Assets
Goodwill(a)	1,246
Intangible assets, net:
Customer relationships	1,296
Customer and supply contracts	610
Trade names	323
Renewable energy credits	124
Total intangible assets, net	2,353
Derivative instruments	531
Other non-current assets	31
Total other assets	4,161
Total Assets	$	7,832

Current Liabilities
Accounts payable	$	1,390
Derivative instruments	1,266
Cash collateral received in support of energy risk management activities	21
Accrued expenses and other current liabilities	442
Total current liabilities	3,119
Other Liabilities
Derivative instruments	562
Deferred income taxes	339
Other non-current liabilities	113
Total other liabilities	1,014
Total Liabilities	$	4,133

Direct Energy Purchase Price	$	3,699

(a) Goodwill arising from the acquisition is attributed to the value of the platform acquired and the synergies expected from combining the operations of Direct Energy with NRG's existing businesses. The allocation of goodwill to the Company's reportable segments is anticipated to be completed by the end of 2021. Goodwill expected to be deductible for tax purposes is $337 million


(In millions)	Increase/(Decrease)
Assets
Prepayments and other current assets	$	2
Property, plant and equipment, net	(27)
Goodwill	256
Intangible assets, net	(206)
Total increase in assets	25
Liabilities
Accrued expenses and other current liabilities	2
Deferred income taxes	(94)
Other non-current liabilities	82
Total decrease in liabilities	(10)
Increase in net assets acquired	$	35

The measurement period adjustments to the provisional amounts are attributable primarily to refinement of the underlying assumptions used to estimate the fair value of assets acquired and liabilities assumed as more information is obtained about facts and circumstances that existed as of the Acquisition Closing Date.

The provisional fair values of intangible assets as of the Acquisition Closing Date were measured primarily based on significant inputs that are not observable in the market and thus represent a Level 2 and Level 3 measurements. Significant inputs were as follows:

Customer relationships — Customer relationships, reflective of Direct Energy’s customer base, were valued using an excess earning method of the income approach. Under this approach, the Company estimated the present value of expected future cash flows resulting from existing customer relationships, considering attrition and charges for contributory assets (such as net working capital, fixed assets, workforce and trade names) utilized in the business, discounted at an independent power producer peer group’s weighted average cost of capital. The customer relationships are amortized to depreciation and amortization.

Customer and supply contracts — The fair value of in-market and out-of-market customer and supply contracts were estimated based on contractual terms compared to market prices as of the Acquisition Closing Date. The majority of the contracts were valued using prices provided by external sources, primarily price quotations available through broker or over-the-counter and online exchanges. For contracts for which external sources or observable market quotes were not available, these values were based on valuation techniques including, but not limited to, internal models based on fundamental analysis of the market and extrapolation of the observable market data with similar characteristics. In addition, the Company applied a credit reserve to reflect credit risk, which is calculated based on published default probabilities. The customer and supply contracts are amortized to revenue and cost of operations, respectively.

Trade names — Trade names were valued using a "relief from royalty" method of the income approach. Under this approach, the fair value is estimated to be the present value of royalties saved because NRG owns the intangible asset and therefore does not have to pay a royalty for its use. The trade names are amortized to depreciation and amortization.

Renewable energy credits — Renewable energy credits were valued based on the market prices as of the Acquisition Closing Date. Renewable energy credits are retired, as required, for the applicable compliance period. They are expensed to cost of operations based on customer usage.

Pro forma comparative financial information for the Direct Energy acquisition has not been included for the three and six months ended June 30, 2021 and 2020, as the computation of such information is impracticable due to pre-acquisition financial statements for the reporting periods not being prepared in accordance with GAAP.

On February 28, 2021, the Company entered into a definitive purchase agreement with Generation Bridge, an affiliate of ArcLight Capital Partners, to sell approximately 4,850 MW of fossil generating assets from its East and West regions of operations for total proceeds of $760 million, subject to standard purchase price adjustments and certain other indemnifications. The purchase price adjustments will include a working capital deduction for cash flows generated of approximately $11 million per month from the beginning of the year until the closing of the transaction, in lieu of cash flows generated during the year. As part of the transaction, NRG is entering into a tolling agreement for its 866 MW Arthur Kill plant in New York City through April 2025. The transaction is expected to close by the end of 2021 and is subject to various closing conditions, approvals and consents, including FERC and NYPSC. The transaction received approval under the Hart-Scott-Rodino Act.


	(In millions)(a)
Current assets(b)	$	50
Property, plant and equipment, net	390
Other non-current assets	3
Total non-current assets(c)	393
Total assets held for sale	$	443

Current liabilities(d)	29
Non-current liabilities(e)	61
Total liabilities held for sale	$	90

On February 3, 2021, the Company closed on the sale of its 35% ownership in the Agua Caliente solar project to Clearway Energy, Inc. for $202 million. NRG recognized a gain on the sale of $17 million, including cash disposed of $7 million.