SEC Filings

10-K
NRG ENERGY, INC. filed this Form 10-K on 02/29/2016
Entire Document
 
                

Commercial Operations Overview
NRG seeks to maximize profitability and manage cash flow volatility through the marketing, trading and sale of energy, capacity and ancillary services into spot, intermediate and long-term markets and through the active management and trading of emissions allowances, fuel supplies and transportation-related services. The Company's principal objectives are the realization of the full market value of its asset base, including the capture of its extrinsic value, the management and mitigation of commodity market risk and the reduction of cash flow volatility over time.
NRG enters into power sales and hedging arrangements via a wide range of products and contracts, including PPAs, fuel supply contracts, capacity auctions, natural gas derivative instruments and other financial instruments. In addition, because changes in power prices in the markets where NRG operates are generally correlated to changes in natural gas prices, NRG uses hedging strategies that may include power and natural gas forward sales contracts to manage the commodity price risk primarily associated with the Company's coal and nuclear generation assets. The objective of these hedging strategies is to stabilize the cash flow generated by NRG's portfolio of assets.
NRG also trades electric power, natural gas and related commodity and financial products, including forwards, futures, options and swaps, through its ownership of BETM, which is also an energy management service provider for primarily third-party generating assets. Certain other NRG entities trade to a lesser extent, utilizing similar products as well as oil and weather products. The Company seeks to generate profits from volatility in the price of electricity, capacity, fuels and transmission congestion by buying and selling contracts in wholesale markets under guidelines approved by the Company's risk management committee.
Coal and Nuclear Operations
The following table summarizes NRG's U.S. coal and nuclear capacity and the corresponding revenues and average natural gas prices and positions resulting from coal and nuclear hedge agreements extending beyond December 31, 2015, and through 2019 for the Company's Gulf Coast region:
Gulf Coast
 
2016
 
2017
 
2018
 
2019
 
Annual
Average for
2016-2019
 
 
(Dollars in millions unless otherwise stated)
Net Coal and Nuclear Capacity (MW) (a)
 
6,290

 
6,290

 
6,290

 
6,290

 
6,290

Forecasted Coal and Nuclear Capacity (MW) (b)
 
4,843

 
4,850

 
4,692

 
4,881

 
4,817

Total Coal and Nuclear Sales (MW) (c)
 
5,108

 
2,017

 
1,171

 
1,018

 
2,329

Percentage Coal and Nuclear Capacity Sold Forward (d)
 
105
%
 
42
%
 
25
%
 
21
%
 
48
%
Total Forward Hedged Revenues (e)
 
$
1,876

 
$
716

 
$
470

 
$
446

 
 
Weighted Average Hedged Price ($ per MWh) (e)
 
$
41.80

 
$
40.54

 
$
45.84

 
$
50.05

 
 
Average Equivalent Natural Gas Price ($ per MMBtu) (e)
 
$
3.51

 
$
3.66

 
$
4.12

 
$
4.43

 
 
Gas Price Sensitivity Up $0.50/MMBtu on Coal and Nuclear Units
 
$
(37
)
 
$
139

 
$
172

 
$
190

 
 
Gas Price Sensitivity Down $0.50/MMBtu on Coal and Nuclear Units
 
$
24

 
$
(141
)
 
$
(157
)
 
$
(171
)
 
 
Heat Rate Sensitivity Up 1 MMBtu/MWh on Coal and Nuclear Units
 
$
15

 
$
86

 
$
83

 
$
97

 
 
Heat Rate Sensitivity Down 1 MMBtu/MWh on Coal and Nuclear Units
 
$
(2
)
 
$
(77
)
 
$
(74
)
 
$
(86
)
 
 
(a)
Net coal and nuclear capacity represents nominal summer net MW capacity of power generated as adjusted for the Company's ownership position excluding capacity from inactive/mothballed units, see Item 2 - Properties for units scheduled to be deactivated.
(b)
Forecasted generation dispatch output (MWh) based on forward price curves as of December 31, 2015, which is then divided by number of hours in a given year to arrive at MW capacity. The dispatch takes into account planned and unplanned outage assumptions.
(c)
Includes amounts under power sales contracts and natural gas hedges. The forward natural gas quantities are reflected in equivalent MWh based on forward market implied heat rate as of December 31, 2015, and then combined with power sales to arrive at equivalent MWh hedged which is then divided by number of hours in a given year to arrive at MW hedged. The coal and nuclear sales include swaps and delta of options sold which is subject to change. For detailed information on the Company's hedging methodology through use of derivative instruments, see discussion in Item 15 - Note 5, Accounting for Derivative Instruments and Hedging Activities, to the Consolidated Financial Statements. Includes inter-segment sales from the Company's wholesale power generation business to the retail business.
(d)
Percentage hedged is based on total coal and nuclear sales as described in (c) above divided by the forecasted coal and nuclear capacity.
(e)
Represents U.S. coal and nuclear sales, including energy revenue and demand charges.

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