DERIVATIVE INSTRUMENTS (Notes)

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Energy Price Risk

We have entered into a variety of contractual hedging arrangements, designated as cash flow hedges, in order to mitigate our exposure to energy market risk, and will continue to do so in the future. Our efforts in this regard involve only mitigation of price volatility for the energy we produce and do not involve taking positions (either long or short) on energy prices in excess of our physical generation. The amount of energy generation which we have hedged on a forward basis under agreements with various financial institutions as of September 30, 2020 is indicated in the following table (in millions):


Calendar Year						Hedged MWh
2020						0.9
2021						2.0
2022						0.2

Total						3.1

As of September 30, 2020, the fair value of the energy derivative asset was $2 million. The change in fair value was recorded as a component of AOCI.

During the nine months ended September 30, 2020, cash provided by and used in energy derivative settlements of $32 million and zero, respectively, was included in net cash provided by operating activities on our condensed consolidated statement of cash flows.

During the nine months ended September 30, 2019, cash provided by and used in energy derivative settlements of $16 million and $1 million, respectively, was included in net cash provided by operating activities on our condensed consolidated statement of cash flows.

Interest Rate Swaps

We may utilize derivative instruments to reduce our exposure to fluctuations in cash flows due to changes in variable interest rates paid on our direct borrowings under the senior secured revolving credit facility and the term loan of our subsidiary

Covanta Energy (collectively referred to as the "Credit Facilities"). To achieve that objective, we entered into pay-fixed, receive-variable swap agreements on $200 million notional amount of our variable rate debt under the Credit Facilities during 2019 and 2020. The interest rate swaps are designated specifically to the Credit Facilities as a cash flow hedge and are recorded at fair value with changes in fair value recorded as a component of AOCI. For further information on our Credit Facilities see Note 13. Consolidated Debt.

As of September 30, 2020, the fair value of the interest rate swap derivative liability was $10 million. The change in fair value was recorded as a component of AOCI.