XML 109 R25.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Leases
12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Leases Leases
Adoption of Topic 842
The Company adopted ASU No. 2016-02, Leases (Topic 842), or Topic 842, on January 1, 2019 using the modified retrospective transition method and therefore, prior period financial information has not been adjusted and continues to be reflected in accordance with the Company’s historical accounting policy. Topic 842 requires the establishment of a lease liability and related right-of-use, or ROU, asset for all leases with a term longer than 12 months. The Company elected certain of the permitted practical expedients, including the expedient that permits the Company to retain its existing lease assessment and classification. The Company also elected to account for lease and non-lease components for specific asset classes as a single lease component.
The adoption of the standard resulted in the recording of operating lease liabilities of $165 million and related ROU assets of $159 million. There was no impact to the Company’s consolidated statement of operations or cash flows. The Company utilized its incremental borrowing rate at adoption date, ranging from 4.04% - 4.67%, to determine the amount of the lease liabilities.
Accounting for Leases
The Company evaluates each arrangement at inception to determine if it contains a lease. All of the Company’s leases are operating leases as of December 31, 2019.
Lessee
The Company records its operating lease liabilities at the present value at lease commencement date of the lease payments over the lease term. Lease payments include fixed payment amounts, as well as variable rate payments based on an index initially measured at lease commencement date. Variable payments, including payments based on future performance and based on index changes, are recorded as the expense is incurred. The Company determines the relevant lease term by evaluating whether renewal and termination options are reasonably certain to be exercised. The Company uses its incremental borrowing rate to calculate the present value of the lease payments, based on information available at the lease commencement date.
The Company’s leases consist of land leases for numerous operating asset locations, real estate leases and equipment leases. The terms and conditions for these leases vary by the type of underlying asset.
Lease expense for the year ended December 31, 2019 was comprised of the following:
(In millions)
 
 
Operating lease cost
 
$
13

Variable lease cost
 
8

Total lease cost
 
$
21


Lease expense under operating leases was $18 million and $17 million for the years ended December 31, 2018 and 2017, respectively.
Operating lease information as of December 31, 2019 was as follows:
(In millions, except term and rate)
 
 
ROU Assets - operating leases, net
 
$
223

 
 
 
Short-term lease liability - operating leases (a)
 
7

Long-term lease liability - operating leases
 
227

Total lease liability
 
$
234

 
 
 
Cash paid for operating leases
 
$
15

Weighted average remaining lease term
 
25

Weighted average discount rate
 
4.4%
 
(a) Short-term lease liability balances are included within the accrued expenses and other current liabilities line item of the consolidated balance sheets as of December 31, 2019.
Maturities of operating lease liabilities as of December 31, 2019 are as follows:
(In millions)
 
 
2020
 
$
16

2021
 
16

2022
 
16

2023
 
15

2024
 
16

Thereafter
 
303

Total lease payments
 
382

Less imputed interest
 
(148
)
Total lease liability - operating leases
 
$
234



Maturities of operating lease liabilities as of December 31, 2018 under the ASC 840 were as follows:
(In millions)
 
 
2019
 
13

2020
 
13

2021
 
13

2022
 
13

2023
 
12

Thereafter
 
207

Total lease payments
 
$
271


Oahu Solar Lease Agreements
The Oahu Solar projects are party to various land lease agreements with a wholly owned subsidiary of CEG. the projects are leasing the land for a period of 35 years, with the ability to renew the lease for two additional five year periods. the Company has a lease liability of $21 million and corresponding right-of-use asset of $19 million related to the leases as of December 31, 2019.
Lessor
The majority of the Company’s revenue is obtained through PPAs or other contractual agreements that are accounted for as leases. These leases are comprised of both fixed payments and variable payments contingent upon volumes or performance metrics. The terms of the leases are further described in Item 2 — Properties of this Form 10-K. Many of the leases have renewal options at the end of the lease term. Termination may be allowed under specific circumstances in the lease arrangements, such as under an event of default. All of the Company’s leases are operating leases. Certain of these leases have both lease and non-lease components, and the Company allocates the transaction price to the components based on standalone selling prices. The following amounts of energy and capacity revenue are related to the Company’s leases:
Period ended December 31, 2019
 
 
 
 
 
 
 
 
(In millions)
 
Conventional Generation
 
Renewables
 
Thermal
 
Total
Energy revenue
 
$
5

 
$
509

 
$
2

 
$
516

Capacity revenue
 
348

 

 

 
348

Operating revenue
 
$
353

 
$
509

 
$
2

 
$
864

Period ended December 31, 2018
 
 
 
 
 
 
 
 
(In millions)
 
Conventional Generation
 
Renewables
 
Thermal
 
Total
Energy revenue
 
$
5

 
$
534

 
$
2

 
$
541

Capacity revenue
 
337

 

 

 
337

Operating revenue
 
$
342

 
$
534

 
$
2

 
$
878


Minimum future rent payments for the remaining periods relate to the Conventional segment and were as follows as of December 31, 2019:
(In millions)
 
2020
439

2021
444

2022
450

2023
259

2024
106

Thereafter
1,605

Total lease payments
$
3,303

Property, plant and equipment, net related to the Company’s operating leases were as follows as of December 31, 2019:
(In millions)
 
Property, plant and equipment
$
6,942

Accumulated depreciation
(1,649
)
Net property, plant and equipment
$
5,293