SEC Filings

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


 
Significant Unobservable Inputs
 
December 31, 2014
 
Fair Value
 
 
 
Input/Range
 
Assets
 
Liabilities
 
Valuation Technique
 
Significant Unobservable Input
 
Low
 
High
 
Weighted Average
 
(In millions)
Power Contracts
$
195

 
$
154

 
Discounted Cash Flow
 
Forward Market Price (per MWh)
 
$
15

 
$
92

 
$
47

Coal Contracts
3

 
1

 
Discounted Cash Flow
 
Forward Market Price (per ton)
 
53

 
56

 
54

FTRs
111

 
75

 
Discounted Cash Flow
 
Auction Prices (per MWh)
 
(29
)
 
30

 

 
$
309

 
$
230

 
 
 
 
 
 
 
 
 
 
The following table provides sensitivity of fair value measurements to increases/(decreases) in significant unobservable inputs as of December 31, 2015, and December 31, 2014:
Significant Unobservable Input
 
Position
 
Change In Input
 
Impact on Fair Value Measurement
Forward Market Price Power/Coal
 
Buy
 
Increase/(Decrease)
 
Higher/(Lower)
Forward Market Price Power/Coal
 
Sell
 
Increase/(Decrease)
 
Lower/(Higher)
FTR Prices
 
Buy
 
Increase/(Decrease)
 
Higher/(Lower)
FTR Prices
 
Sell
 
Increase/(Decrease)
 
Lower/(Higher)
Under the guidance of ASC 815, entities may choose to offset cash collateral paid or received against the fair value of derivative positions executed with the same counterparties under the same master netting agreements. The Company has chosen not to offset positions as defined in ASC 815. As of December 31, 2015, the Company recorded $568 million of cash collateral paid and $106 million of cash collateral received on its balance sheet.
Concentration of Credit Risk
In addition to the credit risk discussion as disclosed in Note 2, Summary of Significant Accounting Policies, the following item is a discussion of the concentration of credit risk for the Company's financial instruments. Credit risk relates to the risk of loss resulting from non-performance or non-payment by counterparties pursuant to the terms of their contractual obligations. The Company monitors and manages credit risk through credit policies that include: (i) an established credit approval process; (ii) a daily monitoring of counterparties' credit limits; (iii) the use of credit mitigation measures such as margin, collateral, prepayment arrangements, or volumetric limits; (iv) the use of payment netting agreements; and (v) the use of master netting agreements that allow for the netting of positive and negative exposures of various contracts associated with a single counterparty. Risks surrounding counterparty performance and credit could ultimately impact the amount and timing of expected cash flows. The Company seeks to mitigate counterparty risk by having a diversified portfolio of counterparties. The Company also has credit protection within various agreements to call on additional collateral support if and when necessary. Cash margin is collected and held at NRG to cover the credit risk of the counterparty until positions settle.

152