| Long-term Debt and Finance Leases | Long-term Debt and Finance Leases Long-term debt and finance leases consisted of the following: (In millions, except rates) December 31, 2022 December 31, 2021 Interest rate % Recourse debt: Senior Notes, due 2027 $ 375 $ 375 6.625 Senior Notes, due 2028 821 821 5.750 Senior Notes, due 2029 733 733 5.250 Senior Notes, due 2029 500 500 3.375 Senior Notes, due 2031 1,030 1,030 3.625 Senior Notes, due 2032 1,100 1,100 3.875 Convertible Senior Notes, due 2048 (a) 575 575 2.750 Senior Secured First Lien Notes, due 2024 600 600 3.750 Senior Secured First Lien Notes, due 2025 500 500 2.000 Senior Secured First Lien Notes, due 2027 900 900 2.450 Senior Secured First Lien Notes, due 2029 500 500 4.450 Tax-exempt bonds 466 466 1.250 - 4.750 Subtotal long-term debt (including current maturities) 8,100 8,100 Finance leases 11 13 various Subtotal long-term debt and finance leases (including current maturities) 8,111 8,113 Less current maturities (63) (4) Less debt issuance costs (70) (83) Discounts (2) (60) Total long-term debt and finance leases $ 7,976 $ 7,966 (a) As of the ex-dividend date of January 31, 2023, the Convertible Senior Notes were convertible at a price of $43.01, which is equivalent to a conversion rate of approximately 23.2527 shares of common stock per $1,000 principal amount. Debt includes the following discounts: As of December 31, (In millions) 2022 2021 Senior Secured First Lien Notes, due 2024, 2025, 2027 and 2029 $ (2) $ (2) Convertible Senior Notes, due 2048 — (58) Total discounts $ (2) $ (60) Consolidated Annual Maturities As of December 31, 2022, annual payments based on the maturities of NRG's debt and finance leases are expected to be as follows: (In millions) 2023 $ 63 2024 604 2025 749 2026 1 2027 1,275 Thereafter 5,419 Total $ 8,111 Revolving Credit Facility On February 14, 2023 (the “Revolving Credit Facility Amendment Effective Date”), the Company amended its Revolving Credit Facility to: (i) increase the existing revolving commitments thereunder by $600 million (the “Incremental Commitment”), (ii) extend the maturity date of a portion of the revolving commitments thereunder to February 14, 2028, (iii) transition the benchmark rate applicable to revolving loans from LIBOR to SOFR and (iv) make certain other amendments to the terms of the Revolving Credit Facility for purposes of, among other things, providing additional flexibility. After giving effect to the Incremental Commitment on the Revolving Credit Facility Amendment Effective Date, the Company will have a total of $4.275 billion of revolving commitments under the Revolving Credit Facility. The full amount of the Incremental Commitment was made available from and after the Revolving Credit Facility Amendment Effective Date but will be reduced by $500 million if the Vivint acquisition is not consummated. A portion of the non-extended revolving commitments will terminate on July 5, 2023, with the remaining portion terminating on May 28, 2024, in each case, unless otherwise extended. The Revolving Credit Facility is guaranteed by NRG’s existing and future direct and indirect subsidiaries, with customary and agreed-upon exceptions, for, among other exceptions, unrestricted subsidiaries, foreign subsidiaries, project subsidiaries, immaterial subsidiaries, captive insurance subsidiaries and securitization vehicles. The Revolving Credit Facility is also secured by a first priority perfected security interest in a substantial portion of the property and assets owned by NRG and its subsidiaries that are guarantors under the Revolving Credit Facility, subject to certain exceptions that include, among other things, the capital stock of certain specified subsidiaries, including unrestricted subsidiaries and certain excluded subsidiaries, equity interests in excess of 66% of the total outstanding voting equity interests of certain foreign subsidiaries, equity interests the pledge of which is prohibited by applicable agreements binding on such subsidiaries and other assets that may be designated by NRG as excluded from the collateral that, when taken together with all other assets so designated since the Revolving Credit Facility Amendment Effective Date, have an aggregate fair market value not exceeding $750 million. The Revolving Credit Facility is secured on a pari passu basis with certain interest rate, foreign currency and commodity hedging obligations of NRG, the Senior Secured Notes and certain other indebtedness. The Revolving Credit Facility contains customary covenants, which, among other things, require NRG to maintain a minimum interest coverage ratio and a maximum first lien leverage ratio on a consolidated basis and limit NRG’s ability to: • incur indebtedness and liens and enter into sale and lease-back transactions; • make investments, loans and advances; • return capital to shareholders; • repay subordinated indebtedness; • consummate mergers, consolidations and asset sales; • enter into affiliate transactions; and • change its fiscal year-end. As of December 31, 2022, there were no outstanding borrowings and there were $1.6 billion in letters of credit issued under the Revolving Credit Facility. Senior Notes Issuance of 2032 Senior Notes On August 23, 2021, the Company issued $1.1 billion of aggregate principal amount of 3.875% senior notes due 2032. The 2032 Senior Notes are senior unsecured obligations of NRG and are guaranteed by certain of its subsidiaries. Interest is paid semi-annually beginning on February 15, 2022 until the maturity date of February 15, 2032. The 2032 Senior Notes were issued under NRG's Sustainability-Linked Bond Framework, which sets out certain sustainability targets, including reducing greenhouse gas emissions. Failure to meet such sustainability targets will result in a 25 basis point increase to the interest rate payable on the 2032 Senior Notes from and including August 15, 2026. The proceeds of the 2032 Senior Notes, along with cash on hand, were used to fund the redemption of $1.0 billion aggregate principal amount of the 7.250% Senior Notes due 2026 and $355 million aggregate principal amounts of the 6.625% Senior Notes due 2027. Senior Note Redemptions During the year ended December 31, 2021, the Company redeemed approximately $1.9 billion in aggregate principal amount of its Senior Notes for $1.9 billion using the proceeds of the 2032 Senior Notes and cash on hand, as detailed in the table below. In connection with the redemptions, a $77 million loss on debt extinguishment was recorded, which included the write-off of previously deferred financing costs of $12 million. (In millions, except percentages) Principal Repurchased Cash Paid (a) Average Early Redemption Percentage 7.250% Senior Notes, due 2026 $ 1,000 $ 1,056 103.625 % 6.625% Senior Notes, due 2027 855 893 103.313 % Total $ 1,855 $ 1,949 (a) Includes accrued interest of $29 million for redemptions for the year ended December 31, 2021 2048 Convertible Senior Notes Accounting for Convertible Senior Notes — Upon issuance in 2018, the Convertible Senior Notes were separated into liability and equity components for accounting purposes. The carrying amount of the liability component was initially calculated by measuring the fair value of similar liabilities that do not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Convertible Senior Notes. This difference represented the debt discount that was amortized to interest expense over seven years, which was determined to be the expected life of the Convertible Senior Notes, using the effective interest rate method. The equity component was recorded in additional paid-in capital and was not remeasured as it continued to meet the conditions for equity classification. Following the adoption of ASU 2020-06 as of January 1, 2022, the Company no longer records the conversion feature of its convertible senior notes in equity. Instead, the Company combined the previously separated equity component with the liability component, which together is now classified as debt, thereby eliminating the subsequent amortization of the debt discount as interest expense. As a result of the provisions of the amended guidance, the Company recorded a $100 million decrease to additional paid-in capital, a $57 million decrease to debt discount, a $57 million increase to retained earnings, and a $14 million decrease to long-term deferred tax liabilities. For more information on the adoption of ASU 2020-06, refer to Note 2, Summary of Significant Accounting Policies. Modification to Convertible Senior Notes — On February 22, 2022, the Company irrevocably elected to eliminate the right to settle conversions only in shares of the Company's common stock, such that any conversion after such date, the Company will pay cash per $1,000 principal amount and will settle in cash or a combination of cash and the Company's common stock for the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount. Convertible Senior Notes Features — As of December 31, 2022, the Convertible Senior Notes were convertible, under certain circumstances, into cash or a combination of cash and the Company’s common stock at a price of $43.46 per common share, which is equivalent to a conversion rate of approximately 23.0116 shares of common stock per $1,000 principal amount of Convertible Senior Notes. As of December 31, 2021, the Convertible Senior Notes were convertible at a price of $44.89 per common share, which is equivalent to a conversion rate of approximately 22.2761 shares of common stock per $1,000 principal amount of Convertible Senior Notes. The net carrying amounts of the Convertible Senior Notes as of December 31, 2022 and December 31, 2021 were $570 million and $512 million, respectively. The Convertible Senior Notes mature on June 1, 2048, unless earlier repurchased, redeemed or converted in accordance with their terms. The Convertible Senior notes are convertible at the option of the holders under certain circumstances. Prior to the close of business on the business day immediately preceding December 1, 2024, the Convertible Senior Notes will be convertible only upon the occurrence of certain events and during certain periods, and thereafter during specified periods as follows: • from December 1, 2024 until the close of business on the second scheduled trading day immediately before June 1, 2025; and • from December 1, 2047 until the close of business on the second scheduled trading day immediately before the maturity date The following table details the interest expense recorded in connection with the Convertible Senior Notes, due 2048: For the years ended December 31, ($ In millions) 2022 2021 2020 Contractual interest expense $ 16 $ 16 $ 16 Amortization of discount and deferred finance costs (a) 1 15 14 Total $ 17 $ 31 $ 30 Effective Interest Rate 3.01 % 5.34 % 5.19 % (a) Upon adoption of ASU 2020-06 on January 1, 2022, which resulted in the removal of the debt discount, no further debt discount amortization is being recorded Senior Notes Early Redemption As of December 31, 2022, NRG had the following outstanding issuances of senior notes with an early redemption feature, or Senior Notes: i. 6.625% senior notes, issued August 2, 2016 and due January 15, 2027, or the 2027 Senior Notes; ii. 5.750% senior notes, issued December 7, 2017 and due January 15, 2028, or the 2028 Senior Notes; iii. 5.250% senior notes, issued May 24, 2019 and due June 15, 2029, or the 2029 Senior Notes; iv. 3.375% senior notes, issued December 2, 2020 and due February 15, 2029, or the 3.375% 2029 Senior Notes; v. 3.625% senior notes, issued December 2, 2020 and due February 15, 2031, or the 2031 Senior Notes; and vi. 3.875% senior notes, issued August 23, 2021 and due February 15, 2032, or the 2032 Senior Notes. The Company periodically enters into supplemental indentures for the purpose of adding entities under the Senior Notes as guarantors. The indentures and the forms of notes provide, among other things, that the Senior Notes will be senior unsecured obligations of NRG. The indentures also provide for customary events of default, which include, among others: nonpayment of principal or interest; breach of other agreements in the indentures; defaults in failure to pay certain other indebtedness; the rendering of judgments to pay certain amounts of money against NRG and its subsidiaries; the failure of certain guarantees to be enforceable; and certain events of bankruptcy or insolvency. Generally, if an event of default occurs, the Trustee or the Holders of at least 25% or 30% (depending on the series of Senior Notes) in principal amount of the then outstanding series of Senior Notes may declare all of the Senior Notes of such series to be due and payable immediately. The terms of the indentures, among other things, limit NRG's ability and certain of its subsidiaries' ability to return capital to stockholders, grant liens on assets to lenders and incur additional debt. Interest is payable semi-annually on the Senior Notes until their maturity dates. 2027 Senior Notes NRG may redeem some or all of the 2027 Senior Notes at redemption prices expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the notes redeemed to the first applicable redemption date: Redemption Period Redemption July 15, 2022 to July 14, 2023 102.208 % July 15, 2023 to July 14, 2024 101.104 % July 15, 2024 and thereafter 100.000 % 2028 Senior Notes NRG may redeem some or all of the 2028 Senior Notes at redemption prices expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the notes redeemed to the first applicable redemption date: Redemption Period Redemption January 15, 2023 to January 14, 2024 102.875 % January 15, 2024 to January 14, 2025 101.917 % January 15, 2025 to January 14, 2026 100.958 % January 15, 2026 and thereafter 100.000 % 5.250% 2029 Senior Notes At any time prior to June 15, 2024, NRG may redeem all or a part of the 2029 Senior Notes, at a redemption price equal to 100% of the principal amount of the notes redeemed, plus accrued and unpaid interest to the redemption date, plus a premium. The premium is the greater of: (i) 1% of the principal amount of the notes; or (ii) the excess of the principal amount of the note over the following: the present value of 102.625% of the note, plus interest payments due on the note through June 15, 2024 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 0.50%. In addition, on or after June 15, 2024, NRG may redeem some or all of the notes at redemption prices expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the notes redeemed to the first applicable redemption date: Redemption Period Redemption Percentage June 15, 2024 to June 14, 2025 102.625 % June 15, 2025 to June 14, 2026 101.750 % June 15, 2026 to June 14, 2027 100.875 % June 15, 2027 and thereafter 100.000 % 3.375% 2029 Senior Notes At any time prior to February 15, 2024, NRG may redeem up to 40% of the aggregate principal amount of the 2029 Senior Notes, at a redemption price equal to 103.375% of the principal amount of the notes redeemed, plus accrued and unpaid interest, with an amount equal to the net cash proceeds of certain equity offerings, provided that at least 50% of the aggregate principal amount remains outstanding immediately after the occurrence of such redemption. At any time prior to February 15, 2024, NRG may redeem all or a part of the 2029 Senior Notes, at a redemption price equal to 100% of the principal amount of the notes redeemed, plus accrued and unpaid interest to the redemption date, plus a premium. The premium is the greater of: (i) 1% of the principal amount of the notes; or (ii) the excess of the principal amount of the note over the following: the present value of 101.688% of the note, plus interest payments due on the note through February 15, 2024 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 0.50%. In addition, on or after February 15, 2024, NRG may redeem some or all of the notes at redemption prices expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the notes redeemed to the first applicable redemption date: Redemption Period Redemption Percentage February 15, 2024 to February 14, 2025 101.688 % February 15, 2025 to February 14, 2026 100.844 % February 15, 2026 and thereafter 100.000 % 2031 Senior Notes At any time prior to February 15, 2026, NRG may redeem up to 40% of the aggregate principal amount of the 2031 Senior Notes, at a redemption price equal to 103.625% of the principal amount of the notes redeemed, plus accrued and unpaid interest, with an amount equal to the net cash proceeds of certain equity offerings, provided that at least 50% of the aggregate principal amount remains outstanding immediately after the occurrence of such redemption. At any time prior to February 15, 2026, NRG may redeem all or a part of the 2031 Senior Notes, at a redemption price equal to 100% of the principal amount of the notes redeemed, plus accrued and unpaid interest to the redemption date, plus a premium. The premium is the greater of: (i) 1% of the principal amount of the notes; or (ii) the excess of the principal amount of the note over the following: the present value of 101.813% of the note, plus interest payments due on the note through February 15, 2026 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 0.50%. In addition, on or after February 15, 2026, NRG may redeem some or all of the notes at redemption prices expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the notes redeemed to the first applicable redemption date: Redemption Period Redemption Percentage February 15, 2026 to February 14, 2027 101.813 % February 15, 2027 to February 14, 2028 101.208 % February 15, 2028 to February 14, 2029 100.604 % February 15, 2029 and thereafter 100.000 % 2032 Senior Notes At any time prior to August 15, 2024, NRG may redeem up to 40% of the aggregate principal amount of the 2032 Senior Notes, at a redemption price equal to 103.875% of the principal amount of the notes redeemed, plus accrued and unpaid interest, with an amount equal to the net cash proceeds of certain equity offerings, provided that at least 50% of the aggregate principal amount remains outstanding immediately after the occurrence of such redemption. At any time prior to February 15, 2027, NRG may redeem all or a part of the 2032 Senior Notes, at a redemption price equal to 100% of the principal amount of the notes redeemed, plus accrued and unpaid interest to the redemption date, plus a premium. The premium is the greater of: (i) 1% of the principal amount of the notes; or (ii) the excess of (A) the present value of (1) the redemption price of the note at February 15, 2027 (such redemption price being set forth in the table appearing below in the column “Redemption Percentage (If Sustainability Performance Target has not been satisfied and/or confirmed by External Verifier)” unless the Sustainability Performance Target has been satisfied in respect of the year ended December 31, 2025 and the Company has provided confirmation thereof to the Trustee together with a related confirmation by the External Verifier by the date that is at least 15 days prior to August 15, 2026 in which case the redemption price shall be as set forth in the column “Redemption Percentage (If Sustainability Performance Target has been satisfied and confirmed by External Verifier)”) plus (2) interest payments due on the note through February 15, 2027 (excluding accrued but unpaid interest to the redemption date) computed using a discount rate equal to the Treasury Rate as of such redemption date plus 0.50%, over (B) the principal amount of the note. In addition, on or after February 15, 2027, NRG may redeem some or all of the notes at redemption prices expressed as percentages of principal amount as set forth in the following table during the twelve-month period beginning on February 15 of the years indicated below, plus accrued and unpaid interest on the notes redeemed to the first applicable redemption date: Year Redemption Percentage Redemption Percentage 2027 101.938 % 102.188 % 2028 101.292 % 101.458 % 2029 100.646 % 100.729 % 2030 and thereafter 100.000 % 100.000 % Receivables Facility In 2020, NRG Receivables LLC, a bankruptcy remote, special purpose, indirect wholly owned subsidiary, entered into the Receivables Facility for an amount up to $750 million, subject to adjustments on a seasonal basis, with issuers of asset-backed commercial paper and commercial banks (the "Lenders".) The assets of NRG Receivables LLC are first available to satisfy the claims of the Lenders before making payments on the subordinated note and equity issued by NRG Receivables LLC. The assets of NRG Receivables LLC are not available to the Company and its subsidiaries or creditors unless and until distributed by NRG Receivables LLC. Under the Receivables Facility, certain indirect subsidiaries of the Company sell their accounts receivables to NRG Receivables LLC, subject to certain terms and conditions. In turn, NRG Receivables LLC grants a security interest in the purchased receivables to the Lenders as collateral for cash borrowings and issuances of letters of credit. Pursuant to the Performance Guaranty, the Company has guaranteed, for the benefit of NRG Receivables and the Lenders, the payment and performance by each indirect subsidiary of its respective obligations under the Receivables Facility. The accounts receivables remain on the Company's consolidated balance sheet and any amounts funded by the Lenders to NRG Receivables LLC will be reflected as short-term borrowings. Cash flows from the Receivables Facility are reflected as financing activities in the Company's consolidated statements of cash flows. The Company will continue to service the accounts receivables sold in exchange for a servicing fee. On July 26, 2022, NRG Receivables LLC, a wholly-owned indirect subsidiary of the Company, entered into an amendment to its Receivables Facility dated September 22, 2020 with a group of conduit lenders and banks and Royal Bank of Canada, as Administrative Agent to, among other things, (i) extend the scheduled termination date by one year, (ii) increase the aggregate commitments from $800 million to $1.0 billion, (iii) increase the letter of credit sublimit to equal the aggregate commitments, (iv) replace LIBOR with Term SOFR as the benchmark for borrowings and (v) add new originators. Borrowings by NRG Receivables LLC under the Receivables Facility bear interest as defined under the Receivables Financing Agreement. The weighted average interest rate related to usage under the Receivables Facility as of December 31, 2022 was 0.844%. As of December 31, 2022, there were no outstanding borrowings and there were $721 million in letters of credit issued under the Receivables Facility. Repurchase Facility In 2020, the Company entered into the Repurchase Facility related to the Receivables Facility. Under the Repurchase Facility, the Company can borrow up to $75 million, collateralized by a subordinated note issued by NRG Receivables LLC to NRG Retail LLC in favor of the originating entities representing a portion of the balance of receivables sold to NRG Receivables LLC under the Receivables Facility. On February 9, 2022, the Company entered into amendments to its existing Repurchase Facility to, among other things, (i) increase the size of the facility from $75 million to $150 million and (ii) replace LIBOR with term SOFR as the benchmark for the pricing rate. On July 26, 2022, the Company renewed its existing Repurchase Facility to, among other things, extend the maturity date to July 26, 2023. The Repurchase Facility has no commitment fee and borrowings will be drawn at SOFR + 1.30%. As of December 31, 2022, there were no outstanding borrowings under the Repurchase Facility. Bilateral Letter of Credit Facilities On April 29, 2022, May 27, 2022 and October 13, 2022, the Company increased the size of the facilities by $100 million, $50 million and $50 million respectively, to provide additional liquidity, allowing for the issuance of up to $675 million of letters of credit. These facilities are uncommitted. As of December 31, 2022, $668 million was issued under these facilities. Tax Exempt Bonds As of December 31, (In millions, except rates) 2022 2021 Interest Rate % NRG Indian River Power 2020, tax exempt bonds, due 2040 $ 57 $ 57 1.250 NRG Indian River Power 2020, tax exempt bonds, due 2045 190 190 1.250 NRG Dunkirk 2020, tax exempt bonds, due 2042 59 59 1.300 City of Texas City, tax exempt bonds, due 2045 33 33 4.125 Fort Bend County, tax exempt bonds, due 2038 54 54 4.750 Fort Bend County, tax exempt bonds, due 2042 73 73 4.750 Total $ 466 $ 466 |
