DERIVATIVE INSTRUMENTS (Notes)

3 Months Ended

Mar. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

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 March 31, 2021 is indicated in the following table (in millions):

Calendar Year	Hedged MWh
2021	1.6
2022	0.7
2023	0.1
Total	2.4

As of March 31, 2021, the fair value of the energy derivative liability was $3 million. The change in fair value was recorded as a component of AOCI.

During the three months ended March 31, 2021, cash provided by and used in energy derivative settlements of $8 million and $2 million, respectively, was included in net cash provided by operating activities on our condensed consolidated statement of cash flows.

During the three months ended March 31, 2020, cash provided by and used in energy derivative settlements of $18 million and zero, 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 a senior secured credit facility consisting of a revolving credit facility ("Revolving Credit Facility") and a term loan (“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. 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 12. Consolidated Debt.

As of March 31, 2021, the fair value of the interest rate swap derivative liability of $7 million was recorded in short-term and long-term liabilities on our condensed consolidated balance sheets.