|NRG ENERGY, INC. filed this Form 10-K on 03/01/2018|
Note 10 — Asset Impairments
2017 Impairment Losses
During the fourth quarter of 2017, the Company completed its annual budget and revised its view of long-term power and fuel prices and the corresponding impact on estimated cash flows associated with its long-lived assets. The most significant impact was a decrease in the Company's long-term view of natural gas prices which resulted in a reduction to long-term power prices and had a negative impact on the Company's coal, nuclear and renewable facilities. Each of the facilities below had estimated cash flows that were lower than the carrying amount and the assets were considered impaired.
The fair values of the assets were determined using an income approach by applying a discounted cash flow methodology to the long-term budget for the facility. The income approach utilized estimates of discounted future cash flows, which were Level 3 fair value measurements, an include key inputs such as forecasted power prices, nuclear fuel costs, forecasted operating and maintenance costs, plant investment capital expenditures and discount rates.
South Texas Project, or STP — The Company recognized an impairment loss of $1,248 million related to its interest in STP as a result of the decrease in the Company's view of long-term power prices in ERCOT.
Indian River — The Company recognized an impairment loss of $36 million for Indian River as a result of the decrease in the Company's view of long-term power prices in PJM.
Keystone and Conemaugh — The Company recognized impairment losses of $35 million for Keystone and $35 million for Conemaugh as a result of the decrease in the Company's view of long-term power prices in PJM.
Wind Facilities — The Company recorded impairment losses of $110 million, $26 million and $4 million for Langford, Elbow Creek and Forward, respectively, as a result of the decrease in the Company's view of long-term merchant power prices in ERCOT and PJM. While Elbow Creek and Forward have contracts to sell power, the significant decrease in estimated power prices had an impact on cash flows in post-contract periods.
The Company also recorded the following impairments in 2017 based on specific triggering events that occurred:
Bacliff Project — On June 16, 2017, NRG Texas Power LLC provided notice to BTEC New Albany, LLC that it was exercising its right to terminate the Amended and Restated Membership Interest Purchase Agreement, or MIPA, due to the Bacliff Project, a new peaking facility at the former P.H. Robinson Electric Generating Station, not achieving commercial completion by the contractual expiration date of May 31, 2017. As a result of the MIPA termination, the Company recorded an impairment loss of $41 million to reduce the carrying amount of the related construction in progress to zero during the second quarter of 2017. On July 14, 2017, the Company gave notice to BTEC New Albany, LLC that it owes NRG Texas Power LLC approximately $48 million under the terminated MIPA, consisting of $38 million in purchaser incurred costs and $10 million in liquidated damages.
Other Long-Lived Asset Impairments — During the second, third and fourth quarters of 2017, the Company recorded impairment losses of approximately $22 million, $14 million and $15 million, respectively, in connection with the Company's Renewables business. These impairment losses were primarily to record the value of certain long-lived assets, including property, plant and equipment and intangible assets, at fair market value at acquisition date or in connection with an impairment indicator.
Petra Nova Parish Holdings — In connection with the preparation of the annual budget during the fourth quarter, management revised its view of oil production expectations with respect to Petra Nova Parish Holdings. As a result, the Company reviewed its 50% interest in Petra Nova Parish Holdings for impairment utilizing the other-than-temporary impairment model. In determining fair value, the Company utilized an income approach and considered project specific assumptions for the future project cash flows. The carrying amount of the Company's equity method investment exceeded the fair value of the investment and the Company concluded that the decline is considered to be other-than-temporary. As a result, the Company measured the impairment loss as the difference between the carrying amount and the fair value of the investment and recorded an impairment loss of $69 million.
The Company also recorded an additional $11 million in impairment losses for other investments during the fourth quarter of 2017.
2016 Impairment Losses