Policy

Goodwill and Other Intangibles

Goodwill — NRG's goodwill balance was $2.0 billion as of December 31, 2013 and 2012. The Company recorded approximately $1.7 billion of goodwill in connection with the acquisition of Texas Genco in 2006. The Company recorded $144 million of goodwill in connection with the 2010 acquisition of Green Mountain Energy, and $29 million in connection with the 2011 acquisition of Energy Plus. In 2013 and 2012, the Company recorded additional goodwill for several business acquisitions. The Energy Plus acquisition is discussed further in Note 3, Business Acquisitions and Dispositions. As of December 31, 2013, there was no impairment to goodwill. As of December 31, 2013, 2012, and 2011, NRG had approximately $573 million, $609 million, and $594 million, respectively, of goodwill that is deductible for U.S. income tax purposes in future periods.

Intangible Assets — The Company's intangible assets as of December 31, 2013, primarily reflect intangible assets established with the acquisitions of various companies in 2013, 2012, 2011, 2010, 2009, and 2006, and are comprised of the following:

•

Emission Allowances — These intangibles primarily consist of SO₂ and NOx emission allowances established with the 2012 GenOn acquisition and 2006 Texas Genco acquisition and also include RGGI emission credits which NRG began purchasing in 2009. These emission allowances are held-for-use and are amortized to cost of operations, with NOx allowances amortized on a straight-line basis and SO₂ allowances and RGGI credits amortized based on units of production. During the year ended December 31, 2011, the Company recorded an impairment charge of $160 million on the Company's Acid Rain Program SO₂emission allowances in order to comply with the Acid Rain Program as discussed in Note 24, Environmental Matters.


•	Development rights — Arising primarily from the acquisition of solar businesses in 2010 and 2011, these intangibles are amortizable to depreciation and amortization expense on a straight-line basis over the estimated life of the related project portfolio.


•	Energy supply contracts — Established with the acquisitions of Reliant Energy and Green Mountain Energy, these represent the fair value at the acquisition date of in-market contracts for the purchase of energy to serve retail electric customers. The contracts are amortized to cost of operations based on the expected delivery under the respective contracts.


•	In-market fuel (gas and nuclear) contracts — These intangibles were established with the Texas Genco acquisition in 2006 and are amortized to cost of operations over expected volumes over the life of each contract.

•

Customer contracts — Established with the acquisitions of Reliant Energy, Green Mountain Energy, and Northwind Phoenix, these intangibles represent the fair value at the acquisition date of contracts that primarily provide electricity to Reliant Energy's and Green Mountain Energy's C&I customers. These contracts are amortized to revenues based on expected volumes to be delivered for the portfolio.

•

Customer relationships — These intangibles represent the fair value at the acquisition date of acquired businesses' customer base, primarily for Energy Alternatives, Energy Plus, Reliant Energy, Green Mountain Energy, Energy Systems and Energy Curtailment Specialists. The customer relationships are amortized to depreciation and amortization expense based on the expected discounted future net cash flows by year.

•

Marketing partnerships — Established with the acquisition of Energy Plus, as further discussed in Note 3, Business Acquisitions and Dispositions, these intangibles represent the fair value at the acquisition date of existing agreements with loyalty and affinity partners. The marketing partnerships are amortized to depreciation and amortization expense based on the expected discounted future net cash flows by year.


•	Trade names — Established with the Reliant Energy, Green Mountain and Energy Plus acquisitions, these intangibles are amortized to depreciation and amortization expense, on a straight-line basis.


•	Other — Consists of renewable energy credits, wind intangible assets, costs to extend the operating license for STP Units 1 and 2, the intangible asset related to a purchased ground lease and the value of acquired power purchase agreements.

The following tables summarize the components of NRG's intangible assets subject to amortization:



							Contracts
Year Ended December 31, 2013	Emission Allowances			Development Rights			Energy Supply			Fuel			Customer			Customer Relationships			Marketing Partnerships			Trade Names			Other			Total
	(In millions)
January 1, 2013	$	793		$	24		$	54		$	72		$	859		$	640		$	88		$	318		$	68		$	2,916
Purchases	76			—			—			—			—			14			—			—			28			118
Acquisition of businesses	—			—			—			—			—			89			—			—			10			99
Usage	—			—			—			—			—			—			—			—			(14		)	(14		)
Other	2			(5		)	—			—			—			—			—			—			1			(2		)
December 31, 2013	871			19			54			72			859			743			88			318			93			3,117
Less accumulated amortization	(433		)	—			(36		)	(61		)	(847		)	(487		)	(12		)	(93		)	(8		)	(1,977		)
Net carrying amount	$	438		$	19		$	18		$	11		$	12		$	256		$	76		$	225		$	85		$	1,140



						Contracts
Year Ended December 31, 2012	Emission Allowances			Development Rights		Energy Supply			Fuel			Customer			Customer Relationships			Marketing Partnerships			Trade Names			Other			Total
	(In millions)
January 1, 2012	$	783		$	24	$	54		$	72		$	859		$	634		$	88		$	318		$	39		$	2,871
Purchases	18			—		—			—			—			—			—			—			18			36
Acquisition of businesses	53			—		—			—			—			6			—			—			10			69
Usage	—			—		—			—			—			—			—			—			(13		)	(13		)
Sales	(4		)	—		—			—			—			—			—			—			—			(4		)
Write-off of fully amortized balances	(56		)	—		—			—			—			—			—			—			—			(56		)
Other	(1		)	—		—			—			—			—			—			—			14			13
December 31, 2012	793			24		54			72			859			640			88			318			68			2,916
Less accumulated amortization^(a)	(329		)	—		(30		)	(59		)	(794		)	(415		)	(4		)	(72		)	(3		)	(1,706		)
Net carrying amount	$	464		$	24	$	24		$	13		$	65		$	225		$	84		$	246		$	65		$	1,210

(a) Adjusted for write-off of fully amortized emission allowances of $56 million

The following table presents NRG's amortization of intangible assets for each of the past three years:



	Years Ended December 31,
Amortization	2013		2012		2011
	(In millions)
Emission allowances	$	104	$	50	$	66
Energy supply contracts	6		5		4
Fuel contracts	2		2		2
Customer contracts	53		119		185
Customer relationships	72		98		109
Marketing partnerships	8		4		—
Trade names	29		30		22
Other	5		2		—
Total amortization	$	279	$	310	$	388

The following table presents estimated amortization of NRG's intangible assets for each of the next five years:



					Contracts
Year Ended December 31,	Emission Allowances		Development Rights		Energy Supply		Fuel		Customer		Customer Relationships		Marketing Partnerships		Trade Names		Total
	(In millions)
2014	$	77	$	1	$	6	$	2	$	1	$	61	$	15	$	21	$	184
2015	65		1		6		2		1		45		14		21		155
2016	64		1		6		2		1		31		9		21		135
2017	65		1		—		—		1		21		5		21		114
2018	68		1		—		—		1		10		5		21		106

The following table presents the weighted average remaining amortization period related to NRG's intangible assets purchased in 2013 business acquisitions:



As of December 31, 2013		Customer Relationships
		(In years)
Weighted average remaining amortization period		28

Intangible assets held for sale — From time to time, management may authorize the transfer from the Company's emission bank of emission allowances held-for-use to intangible assets held-for-sale. Emission allowances held-for-sale are included in other non current assets on the Company's consolidated balance sheet and are not amortized, but rather expensed as sold. As of December 31, 2013, the value of emission allowances held-for-sale is $24 million and is managed within the Corporate segment. Once transferred to held-for-sale, these emission allowances are prohibited from moving back to held-for-use.

Out-of-market contracts — Due primarily to business acquisitions, NRG acquired certain out-of-market contracts, which are classified as non-current liabilities on NRG's consolidated balance sheet. These include out-of-market lease contracts of $790 million and out-of-market gas transportation and storage contracts of $327 million acquired in the acquisition of GenOn. These out-of-market contracts are amortized to cost of operations. In addition, the power and customer contracts are amortized to revenues, while the energy supply contracts are amortized to cost of operations.

The following table summarizes the estimated amortization related to NRG's out-of-market contracts:



Year Ended December 31,		Power Contracts		Leases	Gas Transportation		Total
	(In millions)
2014		$	17	39	$	36	$	92
2015		17		39	37		93
2016		18		39	42		99
2017		18		39	37		94
2018		19		39	32		90

NRG ENERGY, INC. | 2013 | FY |

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