Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Note 5 – Fair Value of Financial Instruments

ASC 820, Fair Value Measurements, states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tiered fair value hierarchy, which prioritizes which inputs should be used in measuring fair value, is comprised of: (Level I) observable inputs such as quoted prices in active markets; (Level II) inputs other than quoted prices in active markets that are observable either directly or indirectly and (Level III) unobservable inputs for which there is little or no market data. The fair value hierarchy requires the use of observable market data when available in determining fair value. Our assets and liabilities that were measured at fair value on a recurring basis were as follows (in millions):

	December 31, 2020								December 31, 2019
	Fair Value		Level I		Level II		Level III		Fair Value			Level I		Level II			Level III
Money market funds (cash and    cash equivalents)	$	13,847	$	13,847	$	—	$	—	$	1,632		$	1,632	$	—		$	—
Interest rate swap assets		—		—		—		—		1			—		1			—
Interest rate swap liabilities		58		—		58		—		(27	)		—		(27	)		—
Total	$	13,905	$	13,847	$	58	$	—	$	1,606		$	1,632	$	(26	)	$	—

All of our money market funds were classified within Level I of the fair value hierarchy because they were valued using quoted prices in active markets. Our interest rate swaps were classified within Level II of the fair value hierarchy because they were valued using alternative pricing sources or models that utilized market observable inputs, including current and forward interest rates.

Interest Rate Swaps

We enter into fixed-for-floating interest rate swap agreements to swap variable interest payments on certain debt for fixed interest payments, as required by certain of our lenders. We do not designate our interest rate swaps as hedging instruments. Accordingly, our interest rate swaps are recorded at fair value on the consolidated balance sheets within other non-current assets or other long-term liabilities, with any changes in their fair values recognized as other (expense) income, net, in the consolidated statements of operations and with any cash flows recognized as operating activities in the consolidated statements of cash flows. Our interest rate swaps outstanding were as follows (in millions):

	December 31, 2020						December 31, 2019
	Aggregate Notional Amount		Gross Asset at Fair Value		Gross Liability at Fair Value		Aggregate Notional Amount		Gross Asset at Fair Value		Gross Liability at Fair Value
Interest rate swaps	$	554	$	—	$	58	$	821	$	1	$	27

Our interest rate swaps activity was as follows (in millions):

	Year Ended December 31,
	2020		2019		2018
Gross losses	$	42	$	51	$	12
Gross gains	$	6	$	11	$	22

Disclosure of Fair Values

Our financial instruments that are not re-measured at fair value include accounts receivable, MyPower customer notes receivable, accounts payable, accrued liabilities, customer deposits and debt. The carrying values of these financial instruments other than our 2021 Notes, 2022 Notes, 2024 Notes, our subsidiary’s Zero-Coupon Convertible Senior Notes due in 2020 and our subsidiary’s 5.50% Convertible Senior Notes due in 2022 (collectively referred to as “Convertible Senior Notes” below), 5.30% Senior Notes due in 2025 (“2025 Notes”), solar asset-backed notes and solar loan-backed notes approximate their fair values.

We estimate the fair value of the Convertible Senior Notes and the 2025 Notes using commonly accepted valuation methodologies and market-based risk measurements that are indirectly observable, such as credit risk (Level II). In addition, we estimate the fair values of our solar asset-backed notes and solar loan-backed notes based on rates currently offered for instruments with similar maturities and terms (Level III). The following table presents the estimated fair values and the carrying values (in millions):

	December 31, 2020				December 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
Convertible Senior Notes	$	1,971	$	24,596	$	3,729	$	6,110
2025 Notes	$	1,785	$	1,877	$	1,782	$	1,748
Solar asset-backed notes	$	1,115	$	1,137	$	1,155	$	1,211
Solar loan-backed notes	$	146	$	152	$	175	$	189