|NRG ENERGY, INC. filed this Form 10-K on 02/29/2016|
•During the third quarter of 2015, the Company announced that Dunkirk Unit 2 will be mothballed on January 1, 2016, at the expiration of its reliability support services agreement. The project to add natural gas-burning capabilities has been suspended, pending the outcome of litigation with respect to the gas addition contract and its validity. On October 30, 2015, NYISO released the results of its reliability study, indicating that the Dunkirk facility is not needed for system reliability. The Company determined that the carrying amount of the assets was higher than the estimated future net cash flows expected to be generated by the assets and that the assets were impaired. The fair value of the Dunkirk facility was determined using the income approach. The income approach utilized estimates of discounted future cash flows, which include key inputs such as forecasted contract prices, forecasted operating and capital expenditures and discount rates. The Company recorded an impairment loss of $160 million during the year ended December 31, 2015.
•During the fourth quarter of 2015, the Company recorded an impairment loss of $29 million to reduce the carrying value of certain solar panels to approximate fair value.
•During the fourth quarter of 2015, as the Company revised its fundamental view for long term prices in connection with the preparation of its annual budget, it was noted that the cash flows for the Limestone and W.A. Parish coal fired facilities and the Gregory combined cycle facility located in Texas were lower than the carrying amount, primarily driven by declining power prices as the cost of commodities continues to decline. As a result of these updates and in connection with the preparation of the year-end financial statements, the Company determined that the assets are impaired. The Company measured the impairment loss as the difference between the carrying amount and the fair value of the assets and recognized impairment losses of $1,514 million, $1,295 million and $176 million related to Limestone, W.A. Parish, and Gregory, respectively.
NRG is also required to evaluate its equity-method and cost-method investments to determine whether or not they are impaired in accordance with ASC 323, Investments - Equity Method and Joint Ventures, or ASC 323. The standard for determining whether an impairment must be recorded under ASC 323 is whether a decline in the value is considered an "other than temporary" decline in value. The evaluation and measurement of impairments under ASC 323 involves the same uncertainties as described for long-lived assets that the Company owns directly and accounts for in accordance with ASC 360. Similarly, the estimates that NRG makes with respect to its equity and cost-method investments are subjective, and the impact of variations in these estimates could be material. Additionally, if the projects in which the Company holds these investments recognize an impairment under the provisions of ASC 360, NRG would record its proportionate share of that impairment loss and would evaluate its investment for an other than temporary decline in value under ASC 323. During the year ended December 31, 2015, the Company recorded impairment losses on its equity-method and cost-method investments of $56 million due to "other than temporary" declines in value.
Goodwill and Other Intangible Assets
At December 31, 2015, NRG reported goodwill of $999 million, consisting of $337 million associated with the acquisition of Texas Genco in 2006, or NRG Texas, $341 million for its NRG Home businesses, $278 million related to the acquisition of EME and $43 million associated with other business acquisitions. The Company has also recorded intangible assets in connection with its business acquisitions, measured primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in ASC 820. See Item 15 — Note 3, Business Acquisitions and Dispositions, and Note 11, Goodwill and Other Intangibles, to the Consolidated Financial Statements for further discussion.
The Company applies ASC 805, Business Combinations, or ASC 805, and ASC 350, to account for its goodwill and intangible assets. Under these standards, the Company amortizes all finite-lived intangible assets over their respective estimated weighted-average useful lives, while goodwill has an indefinite life and is not amortized. However, goodwill and all intangible assets not subject to amortization are tested for impairments at least annually, or more frequently whenever an event or change in circumstances occurs that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company tests goodwill for impairment at the reporting unit level, which is identified by assessing whether the components of the Company's operating segments constitute businesses for which discrete financial information is available and whether segment management regularly reviews the operating results of those components. The Company performs the annual goodwill impairment assessment as of December 31 or when events or changes in circumstances indicate that the carrying value may not be recoverable. NRG first evaluates qualitative factors to determine if it is more likely than not that impairment has occurred. In the absence of sufficient qualitative factors, goodwill impairment is determined utilizing a two-step process. If it is determined that the fair value of a reporting unit is below its carrying amount, where necessary, the Company's goodwill and/or intangible asset with indefinite lives will be impaired at that time.