|NRG ENERGY, INC. filed this Form 10-K on 02/29/2016|
The Company, through its indirect subsidiary, NRG REMA, LLC, leases a 100% interest in the Shawville coal generation facility through 2026 and leases 16.5% and 16.7% interests in the Keystone and Conemaugh coal generation facilities through 2034, and expects to make payments under the leases through 2029 in accordance with the terms of the leases. The Company accounts for these leases as operating leases and records lease expense on a straight-line basis over the lease term. In connection with the acquisition of GenOn, the Company recorded the out-of-market value as a liability in out-of-market contracts of $186 million. The liability is being amortized through rent expense on a straight-line basis over the term of the lease. The Company expects to record lease expense, net of amortization of the out-of-market liability, of approximately $29 million per year through the term of the lease.
In May 2015, NRG mothballed the coal-fired Units 1, 2, 3, and 4 at Shawville generating facility (597 MW) and plans to return those units to service no later than the summer of 2016 using natural gas. Under the lease agreement for Shawville, NRG's obligations generally are to pay the required rent and to maintain the leased assets in accordance with the lease documentation, including in compliance with prudent competitive electric generating industry practice and applicable laws.
Future minimum lease commitments under the REMA operating leases for the years ending after December 31, 2015, are as follows:
Other Operating Leases
NRG leases certain Company facilities and equipment under operating leases, some of which include escalation clauses, expiring on various dates through 2044. NRG also has certain tolling arrangements to purchase power, which qualify as operating leases. Certain operating lease agreements include provisions such as scheduled rent increases, leasehold incentives, and rent concessions over their lease term. The Company recognizes the effects of these scheduled rent increases, leasehold incentives, and rent concessions on a straight-line basis over the lease term unless another systematic and rational allocation basis is more representative of the time pattern in which the leased property is physically employed. Lease expense under operating leases was $100 million, $106 million, and $88 million for the years ended December 31, 2015, 2014, and 2013, respectively.
Future minimum lease commitments under operating leases for the years ending after December 31, 2015, are as follows:
(a) Amounts in the table exclude future sublease income of $17 million associated with long-term leases for office locations in Texas.
Coal, Gas and Transportation Commitments
NRG has entered into long-term contractual arrangements to procure fuel and transportation services for the Company's generation assets and for the years ended December 31, 2015, 2014, and 2013, the Company purchased $2.6 billion, $3.5 billion, and $2.8 billion, respectively, under such arrangements.