Table of Contents
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One) | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2009 | ||
or | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
(Exact Name of Registrant as Specified in Its Charter)
Delaware (State or Other Jurisdiction of Incorporation or Organization) | 76-0655566 (I.R.S. Employer Identification No.) | |
1000 Main Street Houston, Texas 77002 (Address and Zip Code of Principal Executive Offices) | (832) 357-3000 (Registrant’s Telephone Number, Including Area Code) |
Title of Each Class | Name of Each Exchange on Which Registered | |
Common Stock, par value $.001 per share, and associated rights to purchase Series A Preferred Stock | New York Stock Exchange |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Table of Contents
iii | ||||||||
iv | ||||||||
PART I | ||||||||
1 | ||||||||
1 | ||||||||
1 | ||||||||
8 | ||||||||
8 | ||||||||
8 | ||||||||
11 | ||||||||
12 | ||||||||
13 | ||||||||
13 | ||||||||
13 | ||||||||
17 | ||||||||
17 | ||||||||
17 | ||||||||
17 | ||||||||
PART II | ||||||||
18 | ||||||||
19 | ||||||||
20 | ||||||||
24 | ||||||||
32 | ||||||||
35 | ||||||||
36 | ||||||||
38 | ||||||||
43 | ||||||||
43 | ||||||||
44 | ||||||||
46 | ||||||||
46 | ||||||||
46 | ||||||||
46 |
i
Table of Contents
ii
Table of Contents
• | Demand and market prices for electricity, capacity, fuel and emission allowances; | |
• | The timing and extent of changes in commodity prices; | |
• | Limitations on our ability to set rates at market prices; | |
• | Legislative, regulatoryand/or market developments; | |
• | Changes in environmental regulations that constrain our operations or increase our compliance costs; | |
• | Competition in the wholesale power markets; | |
• | Operating without long-term power sales agreements; | |
• | Ineffective hedging activities; | |
• | Our ability to obtain adequate fuel supplyand/or transmission services; | |
• | Interruption or breakdown of our plants; | |
• | Failure of third parties to perform contractual obligations; | |
• | Failure to meet our debt service obligations or restrictive covenants; | |
• | Changes in the wholesale power market or in our evaluation of our plants; | |
• | The outcome of pending or threatened lawsuits, regulatory proceedings, tax proceedings and investigations; | |
• | Weather-related events or other events beyond our control; and | |
• | Financial and economic market conditions and our access to capital. |
iii
Table of Contents
ancillary services | Services provided to support transmission grid operations. | |
BCFe | Billion cubic feet equivalent of natural gas. | |
Cal ISO | California Independent System Operator. | |
capacity | Energy that could have been generated at continuous full-power operation during the period. | |
capacity factor | The ratio of actual net electricity generated to capacity. | |
CenterPoint | CenterPoint Energy, Inc. and its subsidiaries, on and after August 31, 2002, and Reliant Energy, Incorporated and its subsidiaries, prior to August 31, 2002. | |
Channelview | RRI Energy Channelview LP, RRI Energy Channelview (Texas) LLC, RRI Energy Channelview (Delaware) LLC and RRI Energy Services Channelview LLC. | |
CO2 | Carbon dioxide. | |
commercial capacity factor | Generation divided by economic generation. | |
EBITDA | Earnings (loss) before interest expense, interest income, income taxes, depreciation and amortization expense. | |
economic generation | Estimated generation at 100% plant availability based on an hourly analysis of when it is economical to generate based on the price of power, fuel, emission allowances and variable operating costs. | |
EITF | Emerging Issues Task Force. | |
EPA | United States Environmental Protection Agency. | |
FASB | Financial Accounting Standards Board. | |
FERC | Federal Energy Regulatory Commission. | |
GAAP | Accounting principles generally accepted in the United States of America. | |
GWh | Gigawatt hour. | |
ISO | Independent system operator. | |
Kern | Kern River Gas Transmission Company. | |
LIBOR | London Inter Bank Offered Rate. | |
MISO | Midwest Independent Transmission System Operator, which is an RTO. | |
MW | Megawatt. | |
MWh | Megawatt hour. | |
net generating capacity | The average of a facility’s summer and winter generating capacities, net of auxiliary power. | |
NOx | Nitrogen oxides. | |
NYMEX | New York Mercantile Exchange. |
iv
Table of Contents
(Continued)
open energy gross margin | Calculated using the day-ahead and real-time market power sales prices received by the plants less market-based delivered fuel costs. | |
open gross margin | Segment profitability measure; consists of open energy gross margin and other margin; excludes the effects of hedges and other items and unrealized gains/losses on energy derivatives. | |
Orion Power | Orion Power Holdings, Inc. and its subsidiaries. | |
other margin | Represents power purchase agreements, capacity payments, ancillary services revenues and selective commercial strategies relating to optimizing our assets. | |
PEDFA | Pennsylvania Economic Development Financing Authority. | |
PJM | PJM Interconnection, LLC, which is an RTO. | |
PJM Market | The wholesale and retail electric market operated by PJM primarily in Delaware, the District of Columbia, Illinois, Maryland, New Jersey, Ohio, Pennsylvania, Virginia and West Virginia. | |
REMA | RRI Energy Mid-Atlantic Power Holdings, LLC and its subsidiaries. | |
RERH Holdings | RERH Holdings, LLC and its subsidiaries. | |
RPM | Model utilized by PJM to meet load serving entities’ forecasted capacity obligations via a forward-looking commitment of capacity resources. | |
RTO | Regional transmission organization. | |
SEC | United States Securities and Exchange Commission. | |
SO2 | Sulfur dioxide. |
v
Table of Contents
Item 1. | Business. |
1
Table of Contents
Net Generating | ||||||
Segment, Region, Plant(1) | Capacity (MW) | Fuel Type | ||||
East Coal | ||||||
PJM coal | ||||||
Cheswick | 560 | Coal | ||||
Conemaugh(2) | 281 | Coal | ||||
Elrama | 460 | Coal | ||||
Keystone(2) | 284 | Coal | ||||
Portland(1) | 401 | Coal | ||||
Seward | 525 | Coal | ||||
Shawville(1)(2) | 597 | Coal | ||||
Titus(1) | 243 | Coal | ||||
PJM coal total | 3,351 | |||||
MISO coal | ||||||
Avon Lake | 763 | Coal | ||||
New Castle | 333 | Coal | ||||
Niles | 244 | Coal | ||||
MISO coal total(3) | 1,340 | |||||
East Coal total | 4,691 | |||||
East Gas | ||||||
PJM gas | ||||||
Aurora | 878 | Gas | ||||
Blossburg | 19 | Gas | ||||
Brunot Island | 289 | Gas | ||||
Gilbert | 536 | Dual | ||||
Glen Gardner | 160 | Dual | ||||
Hamilton | 20 | Dual | ||||
Hunterstown | 60 | Dual | ||||
Hunterstown CCGT | 810 | Gas | ||||
Mountain | 40 | Dual | ||||
Orrtanna | 20 | Oil | ||||
Portland(1) | 169 | Dual | ||||
Sayreville | 224 | Dual | ||||
Shawnee | 20 | Oil | ||||
Shawville(1)(2) | 6 | Oil | ||||
Titus(1) | 31 | Dual | ||||
Tolna | 39 | Oil | ||||
Warren | 68 | Dual | ||||
Werner | 212 | Oil | ||||
PJM gas total | 3,601 | |||||
MISO gas | ||||||
Shelby | 356 | Gas | ||||
MISO gas total | 356 | |||||
East Gas total | 3,957 | |||||
2
Table of Contents
Net Generating | ||||||
Segment, Region, Plant(1) | Capacity (MW) | Fuel Type | ||||
West | ||||||
Coolwater | 622 | Gas | ||||
Ellwood | 54 | Gas | ||||
Etiwanda | 640 | Gas | ||||
Mandalay | 560 | Gas | ||||
Ormond Beach | 1,516 | Gas | ||||
West total | 3,392 | |||||
Other | ||||||
Choctaw | 800 | Gas | ||||
Indian River(4) | 587 | Dual | ||||
Osceola | 470 | Dual | ||||
Sabine(5) | 54 | Gas | ||||
Vandolah(6) | 630 | Dual | ||||
Other total | 2,541 | |||||
Total | 14,581 | |||||
(1) | We own, have an interest in, lease or contract for power from 37 plants, three of which have units included in both the East Coal and East Gas segments. The financial results are primarily included in the East Coal segment for these three plants. | |
(2) | We lease a 100%, 16.67% and 16.45% interest in three Pennsylvania facilities, Shawville, Keystone and Conemaugh, through facility lease agreements expiring in 2026, 2034 and 2034, respectively. The table includes our net share of the capacity of these facilities. | |
(3) | We expect these three plants to move into the PJM region in June 2011. | |
(4) | This plant was mothballed in January 2010. | |
(5) | We own a 50% interest in this facility located in Texas (non-ERCOT) having a net generating capacity of 108 MW. An unaffiliated party owns the other 50%. The table includes our net share of the capacity of this facility. | |
(6) | We are party to a tolling agreement entitling us to 100% of the capacity of this Florida facility having 630 MW of net generating capacity. This tolling agreement expires in 2012 and is treated as an operating lease for accounting purposes. |
3
Table of Contents
2009 | 2008 | 2007 | ||||||||||||||||||||||
GWh | % Economic(1) | GWh | % Economic(1) | GWh | % Economic(1) | |||||||||||||||||||
Economic Generation(2)(3) | ||||||||||||||||||||||||
East Coal | 24,078.7 | 61% | 27,136.7 | 67% | 31,884.5 | 79% | ||||||||||||||||||
East Gas | 2,054.7 | 6% | 1,362.5 | 4% | 1,584.2 | 5% | ||||||||||||||||||
West | 693.4 | 3% | 2,553.9 | 10% | 3,711.8 | 13% | ||||||||||||||||||
Other | 77.0 | 1% | 74.5 | 1% | 3,802.2 | 48% | ||||||||||||||||||
Total | 26,903.8 | 26% | 31,127.6 | 30% | 40,982.7 | 39% | ||||||||||||||||||
Commercial Capacity Factor(4) | ||||||||||||||||||||||||
East Coal | 82.4% | 86.3% | 79.0% | |||||||||||||||||||||
East Gas | 95.0% | 90.6% | 91.2% | |||||||||||||||||||||
West | 88.1% | 93.7% | 95.5% | |||||||||||||||||||||
Other | 99.1% | 82.7% | 91.9% | |||||||||||||||||||||
Total | 83.6% | 87.1% | 82.2% | |||||||||||||||||||||
Generation(3) | ||||||||||||||||||||||||
East Coal | 19,850.5 | 23,425.9 | 25,195.1 | |||||||||||||||||||||
East Gas | 1,951.1 | 1,234.9 | 1,444.0 | |||||||||||||||||||||
West | 611.0 | 2,393.2 | 3,543.9 | |||||||||||||||||||||
Other | 76.3 | 61.6 | 3,493.6 | |||||||||||||||||||||
�� | ||||||||||||||||||||||||
Total | 22,488.9 | 27,115.6 | 33,676.6 | |||||||||||||||||||||
Open Energy Unit Margin ($/MWh)(5) | ||||||||||||||||||||||||
East Coal | $ | 12.04 | $ | 30.69 | $ | 30.88 | ||||||||||||||||||
East Gas | 10.25 | 34.01 | 34.63 | |||||||||||||||||||||
West | 22.91 | NM | (6) | 5.64 | ||||||||||||||||||||
Other | — | 16.23 | 6.87 | |||||||||||||||||||||
Weighted average total | $ | 12.14 | $ | 28.07 | $ | 25.89 | ||||||||||||||||||
(1) | Generally represents economic generation (hours) divided by maximum generation hours (maximum plant capacity multiplied by 8,760 hours). | |
(2) | Estimated generation at 100% plant availability based on an hourly analysis of when it is economical to generate based on the price of power, fuel, emission allowances and variable operating costs. | |
(3) | Excludes generation related to power purchase agreements, including tolling agreements. | |
(4) | Generation divided by economic generation. | |
(5) | Represents open energy gross margin divided by generation. | |
(6) | NM is not meaningful. |
4
Table of Contents
Economic Generation (GWh) | Commercial Capacity Factor | Generation (GWh) | ||||||||||||||||||||||||||||||||||
Plant | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||||||||||
Cheswick | 3,565.6 | 2,602.6 | 3,537.9 | 77.5 | % | 94.0 | % | 82.2 | % | 2,764.4 | 2,446.1 | 2,906.7 | ||||||||||||||||||||||||
Conemaugh | 2,144.8 | 2,311.6 | 2,397.9 | 93.2 | 81.7 | 88.9 | 1,998.6 | 1,888.2 | 2,130.9 | |||||||||||||||||||||||||||
Elrama | 410.7 | 1,400.3 | 2,882.9 | 87.3 | 81.8 | 68.5 | 358.6 | 1,145.2 | 1,976.0 | |||||||||||||||||||||||||||
Keystone | 2,353.7 | 2,408.0 | 2,386.2 | 74.7 | 97.9 | 85.8 | 1,757.9 | 2,357.7 | 2,046.5 | |||||||||||||||||||||||||||
Portland | 2,726.6 | 2,708.6 | 2,713.7 | 83.7 | 79.6 | 82.8 | 2,282.0 | 2,156.1 | 2,247.8 | |||||||||||||||||||||||||||
Seward | 4,221.9 | 4,367.5 | 4,305.5 | 80.6 | 86.4 | 82.4 | 3,401.9 | 3,771.9 | 3,547.9 | |||||||||||||||||||||||||||
Shawville | 2,787.9 | 4,108.1 | 4,137.1 | 82.2 | 84.4 | 83.5 | 2,292.7 | 3,466.5 | 3,454.2 | |||||||||||||||||||||||||||
Titus | 1,099.8 | 1,381.6 | 1,525.0 | 86.7 | 87.3 | 89.6 | 953.6 | 1,206.1 | 1,367.1 | |||||||||||||||||||||||||||
Avon Lake | 3,523.5 | 3,296.2 | 4,701.0 | 88.9 | 86.3 | 62.1 | 3,131.6 | 2,844.3 | 2,919.3 | |||||||||||||||||||||||||||
New Castle | 732.1 | 1,394.3 | 1,856.4 | 84.6 | 90.5 | 77.4 | 619.5 | 1,262.1 | 1,437.2 | |||||||||||||||||||||||||||
Niles | 512.1 | 1,157.9 | 1,440.9 | 56.6 | 76.1 | 80.6 | 289.7 | 881.7 | 1,161.5 | |||||||||||||||||||||||||||
East Coal Total | 24,078.7 | 27,136.7 | 31,884.5 | 82.4 | % | 86.3 | % | 79.0 | % | 19,850.5 | 23,425.9 | 25,195.1 | ||||||||||||||||||||||||
Economic Generation (GWh) | Commercial Capacity Factor | Generation (GWh) | ||||||||||||||||||||||||||||||||||
Plant | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||||||||||
Hunterstown CCGT | 1,999.3 | 1,194.1 | 1,273.4 | 95.0 | % | 90.6 | % | 93.1 | % | 1,898.6 | 1,081.6 | 1,185.4 | ||||||||||||||||||||||||
Other plants | 55.4 | 168.4 | 310.8 | NM | (1) | NM | (1) | NM | (1) | 52.5 | 153.3 | 258.6 | ||||||||||||||||||||||||
East Gas Total | 2,054.7 | 1,362.5 | 1,584.2 | 95.0 | % | 90.6 | % | 91.2 | % | 1,951.1 | 1,234.9 | 1,444.0 | ||||||||||||||||||||||||
Economic Generation (GWh) | Commercial Capacity Factor | Generation (GWh) | ||||||||||||||||||||||||||||||||||
Plant | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||||||||||
Bighorn(2) | — | 582.8 | 1,437.0 | N/A | 94.8 | % | 99.9 | % | — | 552.7 | 1,435.8 | |||||||||||||||||||||||||
Coolwater | 130.6 | 592.2 | 698.1 | 50.5 | % | 92.9 | 96.5 | 65.9 | 550.1 | 673.7 | ||||||||||||||||||||||||||
Mandalay | 288.5 | 581.9 | 510.2 | 94.0 | 97.0 | 85.6 | 271.1 | 564.3 | 436.7 | |||||||||||||||||||||||||||
Ormond Beach | 274.3 | 797.0 | 1,066.5 | 99.9 | 91.1 | 93.5 | 274.0 | 726.1 | 997.7 | |||||||||||||||||||||||||||
West Total | 693.4 | 2,553.9 | 3,711.8 | 88.1 | % | 93.7 | % | 95.5 | % | 611.0 | 2,393.2 | 3,543.9 | ||||||||||||||||||||||||
Economic Generation (GWh) | Commercial Capacity Factor | Generation (GWh) | ||||||||||||||||||||||||||||||||||
Plant | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||||||||||
Channelview(3) | — | — | 3,520.1 | N/A | N/A | 93.2 | % | — | — | 3,282.3 | ||||||||||||||||||||||||||
Choctaw | 75.5 | 71.0 | 261.1 | 99.1 | % | 81.8 | % | 72.9 | 74.8 | 58.1 | 190.3 | |||||||||||||||||||||||||
Other plants | 1.5 | 3.5 | 21.0 | NM | (1) | NM | (1) | NM | (1) | 1.5 | 3.5 | 21.0 | ||||||||||||||||||||||||
Other Total | 77.0 | 74.5 | 3,802.2 | 99.1 | % | 82.7 | % | 91.9 | % | 76.3 | 61.6 | 3,493.6 | ||||||||||||||||||||||||
(1) | NM is not meaningful. | |
(2) | The Bighorn plant was sold in October 2008. | |
(3) | Channelview was deconsolidated in August 2007 and the plant was sold in July 2008. |
5
Table of Contents
2009(1) | 2008(1) | 2007(1) | ||||||||||
(in millions) | ||||||||||||
East Coal | ||||||||||||
Power generation revenues | $ | 756 | $ | 1,549 | $ | 1,368 | ||||||
Capacity revenues | 171 | 108 | 26 | |||||||||
Total East Coal | $ | 927 | (2) | $ | 1,657 | (2) | $ | 1,394 | (2) | |||
East Gas | ||||||||||||
Power generation revenues | $ | 89 | $ | 176 | $ | 181 | ||||||
Capacity revenues | 178 | 135 | 80 | |||||||||
Natural gas sales revenues | 242 | 365 | 267 | |||||||||
Total East Gas | $ | 509 | (2) | $ | 676 | (2) | $ | 528 | (2) | |||
West | ||||||||||||
Power generation revenues | $ | 44 | $ | 224 | $ | 227 | ||||||
Capacity revenues | 124 | 152 | 100 | |||||||||
Natural gas sales revenues | 139 | 330 | 600 | |||||||||
Total West | $ | 307 | $ | 706 | $ | 927 | ||||||
Other | ||||||||||||
Power generation revenues | $ | 33 | $ | 107 | $ | 300 | ||||||
Capacity revenues | 63 | 60 | 62 | |||||||||
Natural gas sales revenues | — | 253 | (3) | 127 | (3) | |||||||
Total Other | $ | 96 | $ | 420 | $ | 489 | ||||||
(1) | These amounts exclude $(14) million, $(65) million and $(135) million relating to unrealized gains/losses on energy derivatives, hedges and other items and other revenues not specifically identified to a particular plant or reportable segment for 2009, 2008 and 2007, respectively. | |
(2) | For 2009, 2008 and 2007, we recorded $920 million, $1.6 billion and $1.0 billion, respectively, in revenues from a single counterparty (PJM Interconnection, LLC), which represented 50%, 46% and 31%, respectively, of our consolidated revenues. This counterparty is included in our East Coal and East Gas segments. | |
(3) | We deconsolidated Channelview in August 2007. These amounts represent sales of fuel to Channelview prior to the assets being sold in July 2008. |
6
Table of Contents
2010 Estimated | 2011 Estimated | |||||||
(in millions) | ||||||||
East Coal(1)(2) | $ | 198 | $ | 164 | ||||
East Gas(1)(2) | 203 | 164 | ||||||
West | 114 | 95 | ||||||
Other | 40 | 51 | ||||||
Total | $ | 555 | $ | 474 | ||||
(1) | Includes $391 million and $318 million for 2010 and 2011, respectively, related to the PJM Market. | |
(2) | Includes $10 million for 2010 and 2011 related to the MISO Market. |
7
Table of Contents
8
Table of Contents
9
Table of Contents
10
Table of Contents
Plant operations | 1,807 | |||
Corporate | 432 | |||
Total | 2,239 | |||
11
Table of Contents
Name | Age(1) | Present Position | ||||
Mark M. Jacobs | 47 | President and Chief Executive Officer | ||||
David D. Brast | 41 | Senior Vice President, Commercial Operations and Origination | ||||
Rick J. Dobson | 51 | Executive Vice President and Chief Financial Officer | ||||
David S. Freysinger | 50 | Senior Vice President, Generation Operations | ||||
D. Rogers Herndon | 41 | Executive Vice President, Strategic Planning and Business Development | ||||
Michael L. Jines | 51 | Executive Vice President, General Counsel and Corporate Secretary and Chief Compliance Officer | ||||
Thomas C. Livengood | 54 | Senior Vice President and Controller | ||||
Albert H. Myres | 46 | Senior Vice President, Government and Public Affairs | ||||
Karen D. Taylor | 52 | Senior Vice President, Human Resources and Chief Diversity Officer |
(1) | Age is as of February 1, 2010. |
12
Table of Contents
• | Our corporate governance guidelines and standing board committee charters | |
• | Our annual reports onForm 10-K, quarterly reports onForm 10-Q, current reports onForm 8-K and amendments to these reports | |
• | Our business ethics policy |
Item 1A. | Risk Factors. |
13
Table of Contents
14
Table of Contents
15
Table of Contents
• | We must dedicate a portion of our cash flows to debt service, which reduces the amount of cash available for other business purposes; | |
• | The covenants in our debt agreements restrict our ability to, among other things, obtain additional financing, make investments or acquisitions, create additional liens on our assets and take other actions to react to changes or opportunities in our business; | |
• | Our revolving credit facilities require that we maintain a level of net secured debt not to exceed four times our adjusted EBITDA (as defined in the facilities); | |
• | If we do not comply with the payment and other material covenants under our debt agreements, we could be required to repay our debt immediately and, in the case of our revolving credit facilities, the commitment to lend us money could terminate; and | |
• | Our debt levels and credit ratings may affect the evaluation of our creditworthiness by suppliers or customers, which could put us at a competitive disadvantage to competitors with less debt or investment grade credit ratings. |
16
Table of Contents
Item 1B. | Unresolved Staff Comments. |
Item 2. | Properties. |
Item 3. | Legal Proceedings. |
Item 4. | Submission of Matters to a Vote of Security Holders. |
17
Table of Contents
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
Market Price | ||||||||
High | Low | |||||||
2009: | ||||||||
First Quarter | $ | 7.38 | $ | 2.03 | ||||
Second Quarter | $ | 6.23 | $ | 3.03 | ||||
Third Quarter | $ | 7.64 | $ | 4.44 | ||||
Fourth Quarter | $ | 7.21 | $ | 4.76 | ||||
2008: | ||||||||
First Quarter | $ | 26.74 | $ | 18.06 | ||||
Second Quarter | $ | 28.06 | $ | 20.47 | ||||
Third Quarter | $ | 24.15 | $ | 4.94 | ||||
Fourth Quarter | $ | 7.60 | $ | 2.77 |
18
Table of Contents
Item 6. | Selected Financial Data. |
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(1)(2)(3)(4) | (1)(2)(3)(5)(6) | (1)(2)(3)(7)(8) | (1)(2)(3)(9)(10) | (1)(2)(3)(11) | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Statements of Operations Data: | ||||||||||||||||||||
Revenues | $ | 1,825 | $ | 3,394 | $ | 3,203 | $ | 3,040 | $ | 3,068 | ||||||||||
Operating income (loss) | (413 | ) | 201 | (10 | ) | (207 | ) | (591 | ) | |||||||||||
Loss from continuing operations | (479 | ) | (110 | ) | (202 | ) | (374 | ) | (579 | ) | ||||||||||
Cumulative effect of accounting changes, net of tax | — | — | — | 1 | 1 | |||||||||||||||
Net income (loss) | 403 | (740 | ) | 365 | (328 | ) | (331 | ) | ||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(1)(2) | (1)(2)(3)(5)(6)(7) | (1)(2)(7)(8) | (1)(2)(9)(10) | (1)(2)(11) | ||||||||||||||||
Diluted Earnings (Loss) per Share: | ||||||||||||||||||||
Loss from continuing operations | $ | (1.36 | ) | $ | (0.32 | ) | $ | (0.59 | ) | $ | (1.22 | ) | $ | (1.91 | ) | |||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(1)(2)(12)(13) | (1)(2)(5)(6)(12)(13) | (1)(2)(7)(8)(10)(12)(13) | (1)(2)(9)(11)(12)(13) | (1)(2)(12)(13) | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Statements of Cash Flow Data: | ||||||||||||||||||||
Cash flows from operating activities | $ | 193 | $ | 183 | $ | 762 | $ | 1,276 | $ | (917 | ) | |||||||||
Cash flows from investing activities | 154 | 216 | (179 | ) | 1,057 | 306 | ||||||||||||||
Cash flows from financing activities | (509 | ) | (45 | ) | (292 | ) | (1,957 | ) | 594 | |||||||||||
December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(1)(2)(14) | (1)(2) | (1)(2) | (1)(2) | (1)(2)(15) | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Total assets | $ | 7,461 | $ | 10,722 | $ | 11,373 | $ | 11,827 | $ | 13,569 | ||||||||||
Current portion of long-term debt and short-term borrowings(16) | 405 | 13 | 52 | 355 | 339 | |||||||||||||||
Long-term debt(16) | 1,950 | 2,610 | 2,642 | 2,917 | 4,056 | |||||||||||||||
Stockholders’ equity | 4,238 | 3,778 | 4,477 | 3,950 | 3,864 |
19
Table of Contents
(1) | We sold or transferred the following operations, which have been classified as discontinued operations: Desert Basin, European energy, Orion Power’s hydropower plants, Liberty, Ceredo, Orion Power’s New York plants and our retail energy business. We sold the following operations, which are included in continuing operations: REMA hydropower plants in April 2005, landfill-gas fueled power plants in July 2005, our El Dorado investment in July 2005 and our Bighorn plant in October 2008. | |
(2) | We deconsolidated Channelview in August 2007 and sold its assets in July 2008. Channelview emerged from bankruptcy in October 2009 and we reconsolidated the entities at that time. | |
(3) | During 2009, 2008, 2007, 2006 and 2005, we had net gains on sales of assets and emission and exchange allowances of $22 million, $93 million, $26 million, $159 million and $168 million, respectively. | |
(4) | During 2009, we recorded non-cash long-lived assets impairments of $211 million related to our New Castle and Indian River plants. | |
(5) | During 2008, we recorded a non-cash goodwill impairment charge of $305 million related to our historical wholesale energy segment. | |
(6) | During 2008, we recorded $37 million in expenses and paid $34 million for Western states litigation and similar settlements relating to natural gas cases. | |
(7) | During 2007, we recorded and paid a $22 million charge related to resolution of a 2004 indictment for alleged violations of the Commodity Exchange Act, wire fraud and conspiracy charges. | |
(8) | During 2007, we recorded $73 million in debt extinguishments expenses and expensed $41 million of deferred financing costs related to accelerated amortization for refinancings and extinguishments. | |
(9) | During 2006, we recorded $37 million in debt conversion expense. | |
(10) | During 2006, we recorded a $35 million charge (paid in 2007) related to a settlement of certain class action natural gas cases relating to the Western states energy crisis. | |
(11) | During 2005, we recorded charges of $359 million relating to various settlements associated with the Western states energy crisis, which were paid during 2006. | |
(12) | During 2009, 2008, 2007, 2006 and 2005, we had net cash proceeds from sales of assets of $36 million, $527 million, $82 million, $1 million and $149 million, respectively. | |
(13) | During 2009, 2008, 2007, 2006 and 2005, we had net proceeds from sales of (purchases of) emission and exchange allowances of $(3) million, $(19) million, $(85) million, $183 million and $89 million, respectively. | |
(14) | See note 15 to our consolidated financial statements for discussion of our contingencies. | |
(15) | The balance sheet data for total assets as of December 31, 2005 has not been reclassified for the adoption of accounting guidance relating to the offsetting of amounts for contracts with a single counterparty as it was impracticable to reasonably retrieve and reconstruct the historical information due to migration of data driven by a system conversion. | |
(16) | Amounts exclude debt related to discontinued operations for December 31, 2008, 2007, 2006 and 2005. |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
• | Maintain a capital structure that positions us to manage through the cycles | |
• | Focus on operational excellence |
20
Table of Contents
• | Employ a flexible plant-specific operating model through the cycle | |
• | Utilize a disciplined capital investment approach | |
• | Create value from industry consolidation |
• | Selling the retail business | |
• | Focusing on operating efficiency and effectiveness | |
• | Implementing flexible plant-specific operating models | |
• | Implementing a modest hedging program to achieve a high probability of achieving free cash flow breakeven or better even if market conditions deteriorate further |
• | Supply and demand fundamentals | |
• | Plant fuel type and efficiency | |
• | Absolute and relative cost of fuels used in power generation |
• | Operations excellence—effectiveness | |
• | Maintenance practices | |
• | Planned and unplanned outages |
• | Supply and demand fundamentals | |
• | Commodity prices and spreads | |
• | Plant fuel type and efficiency |
21
Table of Contents
• | Supply and demand fundamentals | |
• | Power purchase agreements sold to others | |
• | Ancillary services | |
• | Equipment performance |
• | Operating efficiency | |
• | Maintenance practices | |
• | Generation asset fuel type | |
• | Planned and unplanned outages |
• | Hedging strategy | |
• | Volumes | |
• | Commodity prices | |
• | Effectiveness |
• | Long-term value—This part of our fleet, representing approximately 2,500 MW, is well positioned to generate revenue for the foreseeable future, and we would expect that little environmental investment will be needed in future years. We plan to invest and manage these plants for current and long-term profitability for both capacity and energy revenues. Our plants in this group are: Cheswick, Conemaugh, Keystone, Seward and Hunterstown and their combined open gross margin was $265 million, $474 million and $381 million during 2009, 2008 and 2007, respectively. | |
• | Long-term capacity resource—These plants, representing approximately 4,400 MW, are also well positioned to generate revenue for the foreseeable future, and we expect little future environmental investment. We plan to invest in this part of our fleet for long-term profitability from capacityand/or power purchase agreements. Our plants in this group are: Aurora, Blossburg, Brunot Island, Hamilton, Mountain, Orrtanna, Shawnee, Tolna, Warren, Shelby, Coolwater, Ellwood, Etiwanda, Choctaw and Osceola and their combined open gross margin was $158 million, $147 million and $146 million during 2009, 2008 and 2007, respectively. | |
• | Near-term profit/controls—These plants, representing approximately 5,400 MW, are well positioned to generate revenue in the current environment but may require further investment in environmental controls. We expect to maintain near-term profitability and preserve our options for supply/demand recoveryand/or improved gas-coal spreads in this group of plants. We may install environmental controls in the future depending on environmental regulations and market conditions. Our plants in this group are: Portland, Shawville, Titus, Avon Lake, Gilbert, Glen Gardner, Sayreville, Werner, Mandalay and Ormond Beach and their combined open gross margin was $328 million, $474 million and $482 million during 2009, 2008 and 2007, respectively. | |
• | Restore profit—This part of our fleet, representing approximately 1,600 MW, faces lower levels of profitability in the current environment. We will minimize spending, improve profitability and preserve our options for supply/demand recoveryand/or improved gas-coal spreads in these plants. Our plants in this group are: Elrama, New Castle, Niles and Indian River and their combined open gross margin was $77 million, $125 million and $164 million during 2009, 2008 and 2007, respectively. |
22
Table of Contents
NOx Controls | SO2 Controls | Combined | ||||||||||
(preliminary estimates, in millions of 2009 dollars) | ||||||||||||
Avon Lake | $ | 150 | $ | 280 | $ | 420 | ||||||
Portland | 135 | 295 | 415 | |||||||||
Shawville | 90 | 235 | 320 | |||||||||
Titus | 85 | 175 | 255 |
23
Table of Contents
• | eliminated the need for approximately $2.0 billion of credit support and removed capital requirements associated with contingent collateral requirements, which lowered our overall risk profile | |
• | enhanced our consolidated balance sheet and improved our liquidity position |
24
Table of Contents
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
East Coal open gross margin(1) | $ | 425 | $ | 858 | $ | 848 | $ | (433 | ) | $ | 10 | |||||||||
East Gas open gross margin(1) | 208 | 187 | 159 | 21 | 28 | |||||||||||||||
West open gross margin(1) | 133 | 166 | 161 | (33 | ) | 5 | ||||||||||||||
Other open gross margin(1) | 60 | 45 | 91 | 15 | (46 | ) | ||||||||||||||
Total(2) | 826 | 1,256 | 1,259 | (430 | ) | (3 | ) | |||||||||||||
Hedges and other items | (152 | ) | 233 | (104 | ) | (385 | ) | 337 | ||||||||||||
Unrealized gains (losses) on energy derivatives | 22 | (9 | ) | 7 | 31 | (16 | ) | |||||||||||||
Operation and maintenance | (550 | ) | (595 | ) | (643 | ) | 45 | 48 | ||||||||||||
General and administrative | (101 | ) | (122 | ) | (135 | ) | 21 | 13 | ||||||||||||
Western states litigation and similar settlements | — | (37 | ) | (22 | ) | 37 | (15 | ) | ||||||||||||
Gains on sales of assets and emission and exchange allowances, net | 22 | 93 | 26 | (71 | ) | 67 | ||||||||||||||
Goodwill and long-lived assets impairments | (211 | ) | (305 | ) | — | 94 | (305 | ) | ||||||||||||
Depreciation and amortization | (269 | ) | (313 | ) | (398 | ) | 44 | 85 | ||||||||||||
Income of equity investment, net | 1 | 1 | 5 | — | (4 | ) | ||||||||||||||
Debt extinguishments losses | (8 | ) | (2 | ) | (114 | ) | (6 | ) | 112 | |||||||||||
Other, net | — | 5 | — | (5 | ) | 5 | ||||||||||||||
Interest expense | (186 | ) | (200 | ) | (262 | ) | 14 | 62 | ||||||||||||
Interest income | 2 | 21 | 19 | (19 | ) | 2 | ||||||||||||||
Income tax (expense) benefit | 125 | (136 | ) | 160 | 261 | (296 | ) | |||||||||||||
Loss from continuing operations | (479 | ) | (110 | ) | (202 | ) | (369 | ) | 92 | |||||||||||
Income (loss) from discontinued operations | 882 | (630 | ) | 567 | 1,512 | (1,197 | ) | |||||||||||||
Net income (loss) | $ | 403 | $ | (740 | ) | $ | 365 | $ | 1,143 | $ | (1,105 | ) | ||||||||
(1) | Represents our segment profitability measure. | |
(2) | See “—Business Overview” for open gross margin by our plant-specific operating model groups. |
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
Diluted Earnings (Loss) per Share | ||||||||||||||||||||
Loss from continuing operations | $ | (1.36 | ) | $ | (0.32 | ) | $ | (0.59 | ) | $ | (1.04 | ) | $ | 0.27 | ||||||
Income (loss) from discontinued operations | 2.51 | (1.81 | ) | 1.66 | 4.32 | (3.47 | ) | |||||||||||||
Net income (loss) | $ | 1.15 | $ | (2.13 | ) | $ | 1.07 | $ | 3.28 | $ | (3.20 | ) | ||||||||
25
Table of Contents
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Third-party revenues | $ | 1,869 | $ | 3,142 | $ | 3,044 | $ | (1,273 | )(1) | $ | 98 | (2) | ||||||||
Revenues—affiliates | — | 253 | (3) | 127 | (3) | (253 | ) | 126 | ||||||||||||
Unrealized gains (losses) on energy derivatives | (44 | ) | (1 | ) | 32 | (43 | )(4) | (33 | )(5) | |||||||||||
Total revenues | $ | 1,825 | $ | 3,394 | $ | 3,203 | $ | (1,569 | ) | $ | 191 | |||||||||
(1) | Decrease primarily due to (a) lower power and natural gas sales prices and (b) lower power sales volumes. These decreases were partially offset by an increase in natural gas sales volumes. | |
(2) | Increase primarily due to (a) higher power and natural gas sales prices and (b) higher capacity payments. These increases were partially offset by (a) lower natural gas and power sales volumes and (b) lower steam sales due to the deconsolidation of Channelview. | |
(3) | We deconsolidated Channelview in August 2007. These revenues represent sales of fuel to Channelview prior to the assets being sold in July 2008. | |
(4) | See footnote 1 under “—Unrealized Gains (Losses) on Energy Derivatives.” | |
(5) | See footnote 2 under “—Unrealized Gains (Losses) on Energy Derivatives.” |
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Third-party costs | $ | 1,195 | $ | 1,834 | $ | 1,973 | $ | (639 | )(1) | $ | (139 | )(2) | ||||||||
Cost of sales—affiliates | — | 72 | (3) | 43 | (3) | (72 | ) | 29 | ||||||||||||
Unrealized (gains) losses on energy derivatives | (66 | ) | 8 | 25 | (74 | )(4) | (17 | )(5) | ||||||||||||
Total cost of sales | $ | 1,129 | $ | 1,914 | $ | 2,041 | $ | (785 | ) | $ | (127 | ) | ||||||||
(1) | Decrease primarily due to (a) lower prices paid for natural gas and (b) lower natural gas and coal volumes purchased. These decreases were partially offset by higher prices paid for coal. | |
(2) | Decrease primarily due to lower natural gas volumes purchased. This decrease was partially offset by higher prices paid for natural gas and coal. | |
(3) | We deconsolidated Channelview in August 2007. These cost of sales represent purchases of power from Channelview prior to the assets being sold in July 2008. | |
(4) | See footnote 1 under “—Unrealized Gains (Losses) on Energy Derivatives.” | |
(5) | See footnote 2 under “—Unrealized Gains (Losses) on Energy Derivatives.” |
26
Table of Contents
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
East Coal | ||||||||||||||||||||
Open energy gross margin | $ | 239 | $ | 719 | $ | 778 | $ | (480 | )(1) | $ | (59 | )(2) | ||||||||
Other margin | 186 | 139 | 70 | 47 | (3) | 69 | (4) | |||||||||||||
Open gross margin | $ | 425 | $ | 858 | $ | 848 | $ | (433 | ) | $ | 10 | |||||||||
East Gas | ||||||||||||||||||||
Open energy gross margin | $ | 20 | $ | 42 | $ | 50 | $ | (22 | )(5) | $ | (8 | ) | ||||||||
Other margin | 188 | 145 | 109 | 43 | (4) | 36 | (6) | |||||||||||||
Open gross margin | $ | 208 | $ | 187 | $ | 159 | $ | 21 | $ | 28 | ||||||||||
West | ||||||||||||||||||||
Open energy gross margin | $ | 14 | $ | (1 | ) | $ | 20 | $ | 15 | (7) | $ | (21 | )(8) | |||||||
Other margin | 119 | 167 | 141 | (48 | )(9) | 26 | (10) | |||||||||||||
Open gross margin | $ | 133 | $ | 166 | $ | 161 | $ | (33 | ) | $ | 5 | |||||||||
Other | ||||||||||||||||||||
Open energy gross margin | $ | — | $ | 1 | $ | 24 | $ | (1 | ) | $ | (23 | )(11) | ||||||||
Other margin | 60 | 44 | 67 | 16 | (12) | (23 | )(13) | |||||||||||||
Open gross margin | $ | 60 | $ | 45 | $ | 91 | $ | 15 | $ | (46 | ) | |||||||||
(1) | Decrease primarily due to (a) lower unit margins (lower power prices partially offset by lower fuel costs) and (b) lower economic generation. | |
(2) | Decrease primarily due to (a) lower economic generation and (b) lower unit margins (higher fuel costs partially offset by higher power prices). These decreases were partially offset by increased commercial capacity factor due to lower planned and unplanned outages in 2008. | |
(3) | Increase primarily due to higher RPM capacity payments. This increase was partially offset by lower ancillary payments. | |
(4) | Increase primarily due to higher RPM capacity payments. | |
(5) | Decrease primarily due to lower unit margins (lower power prices partially offset by lower fuel costs). This decrease was partially offset by higher economic generation. | |
(6) | Increase primarily due to higher RPM capacity payments. This increase was partially offset by lower revenue from purchase power agreements. | |
(7) | Increase primarily due to higher unit margins (lower fuel costs). This increase was partially offset by lower economic generation. | |
(8) | Decrease primarily due to (a) lower unit margins (higher fuel costs partially offset by higher power prices) and (b) lower economic generation. | |
(9) | Decrease primarily due to selective commercial strategies, which we did not engage in during 2009. | |
(10) | Increase primarily due to higher capacity payments. | |
(11) | Decrease primarily due to lower economic generation related to the deconsolidation of Channelview in August 2007. | |
(12) | Increase primarily due to (a) higher revenue from power purchase agreements and (b) selective commercial strategies, which we did not engage in during 2009. |
27
Table of Contents
(13) | Decrease primarily due to (a) the deconsolidation of Channelview in August 2007 and (b) selective commercial strategies, which we did not engage in during 2009. |
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
Hedges and other items income (loss) | $ | (152 | ) | $ | 233 | $ | (104 | ) | $ | (385 | )(1) | $ | 337 | (2) | ||||||
(1) | Net change primarily due to (a) $482 million decrease due to a decline in results of fuel hedges and sales of excess coal supplies in 2009 as compared to 2008 in our East Coal segment and (b) $60 million decrease due to a decline on gas transportation hedges. These decreases were partially offset by (a) $97 million gain on hedges of generation, (b) $29 million decrease in losses on closed power hedges and (c) $19 million lower market valuation adjustments to fuel inventory due to $19 million in losses in 2009 in our East Coal segment and $38 million in losses in 2008 in our East Gas and Other segments. | |
(2) | Net change primarily due to (a) $191 million increase in gains on fuel hedges and (b) $137 million decrease in losses on closed power hedges. |
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
Revenues—unrealized | $ | (44 | ) | $ | (1 | ) | $ | 32 | $ | (43 | ) | $ | (33 | ) | ||||||
Cost of sales—unrealized | 66 | (8 | ) | (25 | ) | 74 | 17 | |||||||||||||
Net unrealized gains (losses) on energy derivatives | $ | 22 | $ | (9 | ) | $ | 7 | $ | 31 | (1) | $ | (16 | )(2) | |||||||
(1) | Net change primarily due to $61 million in gains due to reversal of previously recognized unrealized losses on energy derivatives which settled during the period, partially offset by $30 million in losses from changes in prices on our energy derivatives marked to market. | |
(2) | Net change primarily due to $79 million in losses due to reversal of previously recognized unrealized gains on energy derivatives which settled during the period, partially offset by $63 million in gains from changes in prices on our energy derivatives marked to market. |
28
Table of Contents
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Plant operation and maintenance | $ | 395 | $ | 441 | $ | 476 | $ | (46 | )(1) | $ | (35 | )(2) | ||||||||
REMA leases | 60 | 60 | 60 | — | — | |||||||||||||||
Taxes other than income and insurance | 34 | 38 | 41 | (4 | ) | (3 | ) | |||||||||||||
Information Technology, Risk and other salaries and benefits | 25 | 22 | 21 | 3 | 1 | |||||||||||||||
Commercial Operations | 17 | 20 | 19 | (3 | ) | 1 | ||||||||||||||
Severance | 6 | — | — | 6 | — | |||||||||||||||
Bighorn (non-plant operations) | — | 7 | 8 | (7 | )(3) | (1 | )(3) | |||||||||||||
Channelview (non-plant operations) | — | — | 8 | — | (8 | )(4) | ||||||||||||||
Other, net | 13 | 7 | 10 | 6 | (3 | ) | ||||||||||||||
Operation and maintenance | $ | 550 | $ | 595 | $ | 643 | $ | (45 | ) | $ | (48 | ) | ||||||||
(1) | Decrease primarily due to (a) $22 million decrease in base O&M primarily due to decreased operations attributable to the use of our plant-specific operating model and cost reduction initiatives and (b) $13 million decrease in outages and projects spending. These decreases were primarily in our East Coal segment. | |
(2) | Decrease primarily due to (a) $15 million decrease in planned outages and projects largely driven by decreases in our East Coal segment, (b) the deconsolidation of Channelview (which was part of our Other segment) in August 2007 and (c) $6 million decrease in base O&M due to decreased routine maintenance largely driven by decreases in our East Coal segment partially offset by increases in our West segment. | |
(3) | The Bighorn plant was sold in October 2008. | |
(4) | We deconsolidated Channelview in August 2007 and sold the plant in July 2008. |
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Salaries and benefits | $ | 53 | $ | 59 | $ | 64 | $ | (6 | ) | $ | (5 | ) | ||||||||
Professional fees, contract services and information systems maintenance | 21 | 29 | 36 | (8 | ) | (7 | ) | |||||||||||||
Rent and utilities | 13 | 15 | 14 | (2 | ) | 1 | ||||||||||||||
Legal costs | 5 | 8 | 9 | (3 | ) | (1 | ) | |||||||||||||
Severance | 3 | — | 1 | 3 | (1 | ) | ||||||||||||||
Other, net | 6 | 11 | 11 | (5 | ) | — | ||||||||||||||
General and administrative | $ | 101 | $ | 122 | $ | 135 | $ | (21 | ) | $ | (13 | ) | ||||||||
29
Table of Contents
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
CO2 exchange allowances(1) | $ | 10 | $ | 38 | $ | — | $ | (28 | ) | $ | 38 | |||||||||
SO2 and NOx emission allowances | 7 | — | 1 | 7 | (1 | ) | ||||||||||||||
Bighorn plant(2) | 3 | 47 | — | (44 | ) | 47 | ||||||||||||||
Investment in and receivables from Channelview(3) | 2 | 6 | — | (4 | ) | 6 | ||||||||||||||
Equipment | — | — | 24 | — | (24 | ) | ||||||||||||||
Other, net | — | 2 | 1 | (2 | ) | 1 | ||||||||||||||
Gains on sales of assets and emission and exchange allowances, net | $ | 22 | $ | 93 | $ | 26 | $ | (71 | ) | $ | 67 | |||||||||
(1) | During 2007, we joined the Chicago Climate Exchange and sold some allowances in 2008 and 2009. | |
(2) | The Bighorn plant was in our West segment and sold in October 2008. | |
(3) | In July 2008, we sold the Channelview plant, which was in our Other segment. This amount represents our change in the estimate of the recovery of the net investment in and receivables from Channelview as it was deconsolidated in August 2007. |
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Depreciation on plants | $ | 226 | $ | 226 | $ | 269 | $ | — | $ | (43 | )(1) | |||||||||
Other, net—depreciation | 15 | 15 | 14 | — | 1 | |||||||||||||||
Depreciation | 241 | 241 | 283 | — | (42 | ) | ||||||||||||||
Amortization of emission allowances | 24 | 68 | 110 | (44 | )(2) | (42 | )(3) | |||||||||||||
Other, net—amortization | 4 | 4 | 5 | — | (1 | ) | ||||||||||||||
Amortization | 28 | 72 | 115 | (44 | ) | (43 | ) | |||||||||||||
Depreciation and amortization | $ | 269 | $ | 313 | $ | 398 | $ | (44 | ) | $ | (85 | ) | ||||||||
(1) | Decrease primarily due to (a) early retirements of plant components when replacement components are installed for upgrades (from $29 million, primarily in our East Coal and East Gas segments, in 2007 to $4 million in 2008), (b) classification of Bighorn assets (which were in our West segment) as held for sale in April 2008, which requires depreciation to cease and (c) the deconsolidation of Channelview in August 2007. | |
(2) | Decrease primarily due to (a) lower weighted average cost of SO2 allowances and (b) decrease in SO2 allowances used. The decrease was primarily in our East Coal segment. | |
(3) | Decrease primarily due to (a) lower weighted average cost of SO2 allowances and (b) decrease in SO2and NOxallowances used. The decrease was primarily in our East Coal segment. |
30
Table of Contents
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Sabine Cogen, LP | $ | 1 | $ | 1 | $ | 5 | $ | — | $ | (4 | ) | |||||||||
Income of equity investment, net | $ | 1 | $ | 1 | $ | 5 | $ | — | $ | (4 | ) | |||||||||
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Deferred financing costs—accelerated amortization due to extinguishments | $ | (5 | ) | $ | (1 | ) | $ | (41 | ) | $ | (4 | ) | $ | 40 | ||||||
Net premium/discount—debt extinguishments losses | (3 | ) | (1 | ) | (73 | )(1) | (2 | ) | 72 | |||||||||||
Debt extinguishments losses | $ | (8 | ) | $ | (2 | ) | $ | (114 | ) | $ | (6 | ) | $ | 112 | ||||||
(1) | Includes $21 million consent solicitation fee. |
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Impairment of investments | $ | — | $ | (2 | ) | $ | (3 | ) | $ | 2 | $ | 1 | ||||||||
Other, net | — | 7 | 3 | (7 | )(1) | 4 | ||||||||||||||
Other, net | $ | — | $ | 5 | $ | — | $ | (5 | ) | $ | 5 | |||||||||
(1) | Decrease primarily due to a recovery of a claim in 2008. |
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Fixed-rate debt | $ | 206 | $ | 212 | $ | 219 | $ | (6 | ) | $ | (7 | ) | ||||||||
Deferred financing costs | 7 | 7 | 9 | — | (2 | ) | ||||||||||||||
Financing fees expensed | 6 | 8 | 12 | (2 | ) | (4 | ) | |||||||||||||
Channelview | — | — | 16 | — | (16 | )(1) | ||||||||||||||
Variable-rate debt | — | — | 14 | — | (14 | ) | ||||||||||||||
Amortization of fair value adjustment of acquired debt | (12 | ) | (11 | ) | (11 | ) | (1 | ) | — | |||||||||||
Capitalized interest(2) | (23 | ) | (17 | ) | (4 | ) | (6 | ) | (13 | ) | ||||||||||
Other, net | 2 | 1 | 7 | 1 | (6 | ) | ||||||||||||||
Interest expense(3) | $ | 186 | $ | 200 | $ | 262 | $ | (14 | ) | $ | (62 | ) | ||||||||
(1) | Decrease due to the deconsolidation of Channelview in August 2007. | |
(2) | Relates primarily to environmental capital expenditures for SO2 emission reductions at our Cheswick and Keystone plants, which are included in our East Coal segment. |
31
Table of Contents
(3) | See notes 7 and 23 to our consolidated financial statements regarding certain debt and related interest expense classified in discontinued operations. |
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Interest on temporary cash investments | $ | 2 | $ | 15 | $ | 12 | $ | (13 | )(1) | $ | 3 | |||||||||
Net margin deposits | — | 2 | 6 | (2 | ) | (4 | ) | |||||||||||||
Other, net | — | 4 | 1 | (4 | ) | 3 | ||||||||||||||
Interest income | $ | 2 | $ | 21 | $ | 19 | $ | (19 | ) | $ | 2 | |||||||||
(1) | Decrease primarily due to significant reduction in money market interest rates. |
2009 | 2008 | 2007 | ||||||||||
Federal statutory rate | (35 | )% | 35 | % | (35 | )% | ||||||
Additions (reductions) resulting from: | ||||||||||||
Federal tax uncertainties | — | 2 | (2 | ) | ||||||||
Federal valuation allowance | 16 | 67 | (7 | ) | ||||||||
State income taxes, net of federal income taxes | (1 | )(1) | 180 | (2) | (4 | ) | ||||||
Goodwill impairment | — | 201 | — | |||||||||
Other, net | (1 | ) | 35 | (3) | 4 | |||||||
Effective rate | (21 | )% | 520 | % | (44 | )% | ||||||
(1) | Of this percentage, $32 million (5%) relates to an increase in our state valuation allowances. | |
(2) | Of this percentage, $36 million (142%) relates to an increase in our state valuation allowances. | |
(3) | Of this percentage, $6 million (23%) relates to write-off of book goodwill due to the sale of our Bighorn plant in October 2008. |
32
Table of Contents
Senior Secured | PEDFA | |||||||||||
6.75% Notes | Fixed-Rate Bonds | Total | ||||||||||
(in millions) | ||||||||||||
Net proceeds from sale of Texas retail | $ | 169 | $ | 92 | $ | 261 | (1) | |||||
Tender offer | 127 | 2 | 129 | (2) | ||||||||
Open market purchases | 92 | 35 | 127 | (3) | ||||||||
Total | $ | 388 | $ | 129 | $ | 517 | ||||||
(1) | Purchased at par and all activity is classified as discontinued operations. | |
(2) | Total consideration paid was $132 million. | |
(3) | Total consideration paid was $127 million. |
33
Table of Contents
2009 Actual | 2010 Estimated | 2011 Estimated | ||||||||||
(in millions) | ||||||||||||
Maintenance capital expenditures(1) | $ | 56 | $ | 48 | $ | 42 | ||||||
Environmental(2)(3) | 111 | 34 | 20 | |||||||||
Capitalized interest | 23 | (4) | 6 | — | ||||||||
Total capital expenditures | $ | 190 | $ | 88 | $ | 62 | ||||||
(1) | Excludes $8 million for 2010 through 2014 for pre-existing environmental conditions and remediation, which have been accrued for in our consolidated balance sheet as of December 31, 2009. | |
(2) | For a discussion of pending and contingent matters related to environmental regulations, see “—Business Overview—Pending Environmental Matters,” note 16(b) to our consolidated financial statements and “Business—Environmental Matters” in Item 1 of thisForm 10-K. | |
(3) | The environmental amounts for years beyond 2011 could significantly increase subject to finalization of rules and market conditions. | |
(4) | Relates primarily to environmental capital expenditures for SO2 emission reductions at our Cheswick and Keystone plants. |
Less than | One to | Three to | More than | |||||||||||||||||
Contractual Obligations | Total | One Year | Three Years | Five Years | Five Years | |||||||||||||||
(in millions) | ||||||||||||||||||||
Debt, including credit facilities(1) | $ | 3,770 | $ | 569 | $ | 290 | $ | 1,122 | $ | 1,789 | ||||||||||
Other commodity commitments(2) | 972 | 229 | 204 | 139 | 400 | |||||||||||||||
Derivative liabilities | 213 | 152 | 61 | — | — | |||||||||||||||
REMA operating lease payments | 934 | 52 | 119 | 128 | 635 | |||||||||||||||
Maintenance agreements obligations | 505 | 31 | 22 | 35 | 417 | |||||||||||||||
Other operating lease payments | 309 | 64 | 98 | 50 | 97 | |||||||||||||||
Plant and equipment commitments(3) | 53 | 31 | 7 | 15 | — | |||||||||||||||
Other(4) | 291 | 147 | 31 | 31 | 82 | |||||||||||||||
Total contractual cash obligations | $ | 7,047 | $ | 1,275 | $ | 832 | $ | 1,520 | $ | 3,420 | ||||||||||
34
Table of Contents
(1) | Includes interest payments. | |
(2) | See note 15(c) to our consolidated financial statements. | |
(3) | These amounts are included in the capital requirements table above under either maintenance capital expenditures or environmental. | |
(4) | Includes an estimated income tax cash payment of $65 million relating to Western states-related matters, estimated pension and post retirement benefit payments and other contractual obligations. |
2010 | $ | 555 | ||
2011 | 474 | |||
2012 | 440 | |||
2013 | 198 | |||
2014 | 100 | |||
Total(1) | $ | 1,767 | ||
(1) | See note 15(c) to our consolidated financial statements. |
35
Table of Contents
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Operating income (loss) | $ | (413 | ) | $ | 201 | $ | (10 | ) | $ | (614 | ) | $ | 211 | |||||||
Goodwill and long-lived assets impairments | 211 | 305 | — | (94 | ) | 305 | ||||||||||||||
Depreciation and amortization | 269 | 313 | 398 | (44 | ) | (85 | ) | |||||||||||||
Gains on sales of assets and emission and exchange allowances, net | (22 | ) | (93 | ) | (26 | ) | 71 | (67 | ) | |||||||||||
Net changes in energy derivatives | (21 | )(1) | 9 | (2) | (7 | )(3) | (30 | ) | 16 | |||||||||||
Western states litigation and similar settlements | — | 3 | (4) | — | (5) | (3 | ) | 3 | ||||||||||||
Western states litigation and similar settlements payments | (3 | ) | — | (4) | (35 | )(5)(6) | (3 | ) | 35 | |||||||||||
Margin deposits, net | (256 | ) | 199 | 286 | (455 | ) | (87 | ) | ||||||||||||
Option premiums purchased | (30 | ) | — | — | (30 | ) | — | |||||||||||||
Interest payments | (194 | ) | (206 | ) | (300 | ) | 12 | 94 | ||||||||||||
Change in accounts and notes receivable and accounts payable, net | 96 | (38 | ) | (60 | ) | 134 | 22 | |||||||||||||
Change in inventory | (15 | ) | (32 | ) | (22 | ) | 17 | (10 | ) | |||||||||||
Income tax payments, net of refunds | (2 | ) | (12 | ) | (3 | ) | 10 | (9 | ) | |||||||||||
Pension contributions | (20 | ) | (6 | ) | (13 | ) | (14 | ) | 7 | |||||||||||
Kern refund(7) | 3 | 30 | — | (27 | ) | 30 | ||||||||||||||
Other, net | 5 | 31 | (4 | ) | (26 | ) | 35 | |||||||||||||
Net cash provided by (used in) continuing operations from operating activities | (392 | ) | 704 | 204 | (1,096 | ) | 500 | |||||||||||||
Net cash provided by (used in) discontinued operations from operating activities | 585 | (521 | ) | 558 | 1,106 | (1,079 | ) | |||||||||||||
Net cash provided by operating activities | $ | 193 | $ | 183 | $ | 762 | $ | 10 | $ | (579 | ) | |||||||||
(1) | Includes unrealized gains on energy derivatives of $22 million. | |
(2) | Includes unrealized losses on energy derivatives of $9 million. | |
(3) | Includes unrealized gains on energy derivatives of $7 million. | |
(4) | We expensed $37 million and paid $34 million in 2008. | |
(5) | We expensed and paid $22 million in 2007. | |
(6) | We expensed $35 million in 2006 and paid it in 2007. | |
(7) | See note 16(c) to our consolidated financial statements. |
36
Table of Contents
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Capital expenditures(1) | $ | (190 | ) | $ | (279 | ) | $ | (175 | ) | $ | 89 | $ | (104 | ) | ||||||
Proceeds from sales of assets, net | 36 | 527 | 82 | (491 | ) | 445 | ||||||||||||||
Proceeds from sales of emission and exchange allowances | 19 | 42 | (2) | 7 | (23 | ) | 35 | |||||||||||||
Purchases of emission allowances | (22 | ) | (61 | )(3) | (92 | )(4) | 39 | 31 | ||||||||||||
Restricted cash | (5 | ) | 1 | (6 | ) | (6 | ) | 7 | ||||||||||||
Other, net | 4 | 6 | 6 | (2 | ) | — | ||||||||||||||
Net cash provided by (used in) continuing operations from investing activities | (158 | ) | 236 | (178 | ) | (394 | ) | 414 | ||||||||||||
Net cash provided by (used in) discontinued operations from investing activities | 312 | (20 | ) | (1 | ) | 332 | (19 | ) | ||||||||||||
Net cash provided by (used in) investing activities | $ | 154 | $ | 216 | $ | (179 | ) | $ | (62 | ) | $ | 395 | ||||||||
(1) | Relates primarily to environmental capital expenditures for SO2 emission reductions at our Cheswick and Keystone plants, which are included in our East Coal segment. The scrubber project for our Keystone plant was completed in 2009. The scrubber project for our Cheswick plant was halted in mid-2009 with plans to resume in 2010. | |
(2) | Includes $38 million from sales of CO2 exchange allowances. | |
(3) | Includes $48 million and $13 million for purchases of SO2 and NOx allowances, respectively. | |
(4) | Includes $89 million for purchases of SO2 allowances. |
Change | Change | |||||||||||||||||||
from 2008 | from 2007 | |||||||||||||||||||
2009 | 2008 | 2007 | to 2009 | to 2008 | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Proceeds from issuance of senior unsecured notes | $ | — | $ | — | $ | 1,300 | $ | — | $ | (1,300 | ) | |||||||||
Payments of senior secured notes and PEDFA fixed-rate bonds | (255 | ) | (58 | ) | (1,126 | ) | (197 | ) | 1,068 | |||||||||||
Net payments on senior secured term loans | — | — | (400 | ) | — | 400 | ||||||||||||||
Proceeds from issuances of stock | 12 | 14 | 41 | (2 | ) | (27 | ) | |||||||||||||
Payments of debt extinguishments expenses | (5 | ) | (1 | ) | (73 | ) | (4 | ) | 72 | |||||||||||
Payments of financing costs | — | — | (31 | ) | — | 31 | ||||||||||||||
Other, net | — | — | (3 | ) | — | 3 | ||||||||||||||
Net cash used in continuing operations from financing activities | (248 | ) | (45 | ) | (292 | ) | (203 | ) | 247 | |||||||||||
Net cash used in discontinued operations from financing activities | (261 | ) | — | — | (261 | ) | — | |||||||||||||
Net cash used in financing activities | $ | (509 | ) | $ | (45 | ) | $ | (292 | ) | $ | (464 | ) | $ | 247 | ||||||
37
Table of Contents
• | a significant decrease in the market price of a long-lived asset | |
• | a significant adverse change in the manner an asset is being used or its physical condition | |
• | an adverse action by a regulator or legislature or an adverse change in the business climate | |
• | an accumulation of costs significantly in excess of the amount originally expected for the construction or acquisition of an asset | |
• | a current-period loss combined with a history of losses or the projections of future losses | |
• | a change in our intent about an asset from an intent to hold to a greater than 50% likelihood that an asset will be sold or disposed of before the end of its previously estimated useful life |
38
Table of Contents
December 31, 2009 | ||
Undiscounted Cash Flow Scenarios Weightings: | ||
5-year market forecast with escalation(1)(2) | 50% | |
5-year market forecast with fundamental view(1) | 50% | |
Range of Assumptions in Fundamental View: | ||
Demand for power growth per year | 1%-2% | |
After-tax rate of return on new construction(3) | 6.5%-9.5% | |
Spread between natural gas and coal prices, $/MMBTU(4) | $3-$5 |
(1) | For each scenario, the first five years of cash flows are the same. | |
(2) | We assumed an annual 2.5% escalation percentage beyond year five. | |
(3) | The low to mid part of the range represents natural gas-fired plants’ required returns and the mid to high part of the range represents coal-fired and nuclear plants’ required returns. | |
(4) | Natural gas and coal prices are prior to transportation costs. |
39
Table of Contents
New Castle | Indian River | |||||||
Valuation approach weightings: | ||||||||
Income approach | 100 | % | 100 | % | ||||
Market-based approach | 0 | % | 0 | % | ||||
Risk-adjusted discount rate for the estimated cash flows | 15 | % | 15 | % |
December 31, | 2009 | |||||||||||||||
2009 | Impairment | |||||||||||||||
Level 1 | Level 2 | Level 3 | Charges | |||||||||||||
(in millions) | ||||||||||||||||
New Castle property, plant and equipment(1) | $ | — | $ | — | $ | 44 | $ | 120 | ||||||||
Indian River property, plant and equipment, water rights, permits and emission allowances(2) | — | — | 52 | 91 | ||||||||||||
Total | $ | — | $ | — | $ | 96 | $ | 211 | ||||||||
40
Table of Contents
(1) | New Castle is in our East Coal segment. | |
(2) | Indian River is in our Other segment. |
41
Table of Contents
• | estimated forward market price curves | |
• | valuation adjustments relating to time value | |
• | liquidity valuation adjustments | |
• | credit adjustments, based on the credit standing of the counterparties and our own non-performance risk |
42
Table of Contents
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
2015 and | Total Fair | |||||||||||||||||||||||||||
Sources of Fair Value | 2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | Value | |||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
Prices actively quoted (Level 1) | $ | 23 | $ | 41 | $ | — | $ | — | $ | — | $ | — | $ | 64 | ||||||||||||||
Prices provided by other external sources (Level 2) | (39 | ) | (36 | ) | (13 | ) | — | — | — | (88 | ) | |||||||||||||||||
Prices based on models and other valuation methods (Level 3) | (23 | ) | — | — | — | — | — | (23 | ) | |||||||||||||||||||
Totalmark-to-market non-trading derivatives | $ | (39 | ) | $ | 5 | $ | (13 | ) | $ | — | $ | — | $ | — | $ | (47 | ) | |||||||||||
43
Table of Contents
As of December 31, | Market Prices | Earnings Impact | Fair Value Impact | |||||||||
(in millions) | ||||||||||||
2009 | 10% increase | $ | (47 | ) | $ | (47 | ) | |||||
2008 | 10% decrease | (5 | ) | (5 | ) |
• | the derivatives are not closed out in advance of their expected term | |
• | the derivatives continue to function effectively as hedges of the underlying risk | |
• | as applicable, anticipated underlying transactions settle as expected |
2015 and | Total Fair | |||||||||||||||||||||||||||
Sources of Fair Value | 2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | Value | |||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
Prices actively quoted (Level 1) | $ | 24 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 24 | ||||||||||||||
Prices provided by other external sources (Level 2) | — | — | — | — | — | — | — | |||||||||||||||||||||
Prices based on models and other valuation methods (Level 3) | (5 | ) | — | — | — | — | — | (5 | ) | |||||||||||||||||||
Total | $ | 19 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 19 | ||||||||||||||
44
Table of Contents
2009 | 2008 | |||||||
(in millions) | ||||||||
Realized | $ | 31 | $ | 11 | ||||
Unrealized | (11 | ) | 14 | |||||
Total | $ | 20 | $ | 25 | ||||
2009 | 2008 | |||||||||||
(in millions) | ||||||||||||
Fair value of contracts outstanding, beginning of period | $ | 30 | $ | 19 | ||||||||
Contracts realized or settled | (32 | )(1) | (9 | )(2) | ||||||||
Changes in fair values attributable to market price and other market changes | 21 | 20 | ||||||||||
Fair value of contracts outstanding, end of period | $ | 19 | $ | 30 | ||||||||
(1) | Amount includes realized gain of $31 million and deferred settlements of $1 million. | |
(2) | Amount includes realized gain of $11 million partially offset by deferred settlements of $2 million. |
• | Confidence level—95% for natural gas and petroleum products and 99% for power products | |
• | Volatility—calculated daily from historical forward prices using the exponentially weighted moving average method | |
• | Correlation—calculated daily from daily volatilities and historical forward prices using the exponentially weighted moving average method | |
• | Holding period—natural gas and petroleum products generally have two day-holding periods. Power products have holding periods of five to 20 days based on the risk profile of the portfolio and the liquidation period |
45
Table of Contents
2009 | 2008 | |||||||
(in millions) | ||||||||
As of December 31 | $ | 1 | $ | 2 | ||||
Year Ended December 31: | ||||||||
Average | 2 | 4 | ||||||
High | 4 | 13 | ||||||
Low | — | — |
Item 8. | Financial Statements and Supplementary Data. |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
Item 9A. | Controls and Procedures. |
Item 9B. | Other Information. |
46
Table of Contents
Item 10. | Directors, Executive Officers and Corporate Governance. |
Item 11. | Executive Compensation. |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
(a) | (b) | (c) | ||||||||||
Number of Securities | ||||||||||||
Number of | Weighted-Average | Remaining Available for | ||||||||||
Securities to be Issued | Exercise Price of | Future Issuance Under | ||||||||||
Upon Exercise of | Outstanding | Equity Compensation Plans | ||||||||||
Outstanding Options, | Options, Warrants | (Excluding Securities Reflected | ||||||||||
Warrants and Rights | and Rights(1) | in column (a)) | ||||||||||
Equity compensation plans approved by security holders(2) | 6,487,502 | (3) | $ | 14.09 | 23,247,230 | (4) | ||||||
Equity compensation plans not approved by security holders(5) | 717,806 | (6) | $ | 8.42 | 3,618,389 | |||||||
Total | 7,205,308 | $ | 13.67 | 26,865,619 |
(1) | The weighted average exercise prices exclude shares issuable under outstanding time-based restricted stock units (which do not have an exercise price). | |
(2) | Plans approved by stockholders include the RRI Energy, Inc. Employee Stock Purchase Plan, the 2002 Long-Term Incentive Plan, the Long-Term Incentive Plan of RRI Energy, Inc. and the RRI Energy, Inc. Transition Stock Plan. | |
(3) | This amount includes 5,485,284 shares issuable upon the exercise of outstanding stock options and 1,002,218 shares issuable pursuant to outstanding restricted stock units granted under the 2002 Long-Term Incentive Plan. | |
(4) | Includes stockholder approved reserves of 8,262,101 shares as of December 31, 2009 that may be issued under the Employee Stock Purchase Plan and 14,985,129 shares that may be issued under the 2002 Long-Term Incentive Plan. Under the 2002 Long-Term Incentive Plan, no more than 25% of the shares available for future issuance are available for grant as awards of restricted stock and non-restricted awards of common stock or units denominated in common stock. No additional shares may be issued under the Long-Term Incentive Plan of RRI Energy, Inc. or the RRI Energy, Inc. Transition Stock Plan. No additional shares may be issued under the RRI Energy, Inc. Employee Stock Purchase Plan as it was terminated effective December 31, 2009, other than the 431,733 shares issued in January 2010 for the last offering period. | |
(5) | The RRI Energy Inc. 2002 Stock Plan permits grants of stock options, stock appreciation rights, performance based stock awards, time-based stock awards and cash awards to all employees other than the executive officers subject to the reporting requirements of Section 16(a) of the Exchange Act. The Board authorized 6,000,000 shares for grant upon adoption of the 2002 Stock Plan. To the extent these |
47
Table of Contents
6,000,000 shares were not granted in 2002, the excess shares were cancelled. In January 2003, an additional 6,000,000 shares were authorized for the plan, with no more than 25% of these shares available for grant as awards of restricted stock and non-restricted awards of common stock or units denominated in common stock. The total number of shares available for future issuance is adjusted for new grants, exercises, forfeitures, cancellations and terminations of outstanding awards. | ||
(6) | This amount includes 436,579 shares issuable upon the exercise of outstanding stock options and 281,227 shares issuable pursuant to outstanding restricted stock units. |
Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
Item 14. | Principal Accountant Fees and Services. |
48
Table of Contents
Item 15. | Exhibits and Financial Statement Schedules. |
(1) | Index to Consolidated Financial Statements of RRI Energy, Inc. and Subsidiaries. |
F-1 | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 |
(2) | Financial Statement Schedule. |
F-68 |
F-69 | ||||
F-70 | ||||
F-71 | ||||
F-72 | ||||
F-73 | ||||
F-74 |
F-99 | ||||
F-100 | ||||
F-101 | ||||
F-102 | ||||
F-103 | ||||
F-104 |
49
Table of Contents
(3) | Index to Exhibits. |
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
2 | .1 | Asset Purchase Agreement by and among Reliant Energy Channelview LP, Reliant Energy Services Channelview LLC and GIM Channelview Cogeneration, LLC entered into June 9, 2008 and dated as of April 3, 2008 (This filing excludes schedules and exhibits, which the registrant agrees to furnish supplementally to the Securities and Exchange Commission upon request) | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Quarterly Report on Form 10-Q for the period ended June 30, 2008 | 1-16455 | 2.1 | ||||||
2 | .2 | Asset Purchase Agreement for Bighorn power plant by and among Reliant Energy Wholesale Generation, LLC, Reliant Energy Asset Management, LLC and Nevada Power Company dated as of April 21, 2008 (This filing excludes schedules and exhibits, which the registrant agrees to furnish supplementally to the Securities and Exchange Commission upon request) | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Quarterly Report on Form 10-Q for the period ended March 31, 2008 | 1-16455 | 2.1 | ||||||
2 | .3 | Amendment No. 1 to Asset Purchase Agreement for Bighorn power plant by and among Reliant Energy Wholesale Generation, LLC, Reliant Energy Asset Management, LLC and Nevada Power Company, dated as of May 12, 2008 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Quarterly Report on Form 10-Q for the period ended June 30, 2008 | 1-16455 | 2.2 | ||||||
2 | .4 | LLC Membership Interest Purchase Agreement by and between Reliant Energy, Inc. and NRG Retail LLC, dated as of February 28, 2009 (Portions of this Exhibit have been omitted pursuant to a request for confidential treatment) | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Annual Report on Form 10-K for the year ended December 31, 2008 | 1-16455 | 2.4 |
50
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
2 | .5 | Letter Agreement dated March 24, 2009 re: Section 7.11 of the Membership Interest Purchase Agreement, dated as of February 28, 2009 by and between Reliant Energy, Inc. and NRG Retail LLC | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2009 | 1-16455 | 2.1 | ||||||
2 | .6 | Letter Agreement dated April 9, 2009 re: Section 7.9(iv) of the Membership Interest Purchase Agreement, dated as of February 28, 2009 by and between Reliant Energy, Inc. and NRG Retail LLC | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2009 | 1-16455 | 2.2 | ||||||
2 | .7 | Letter Agreement dated April 28, 2009 re: Sections 3.2(i), 7.12, 7.13(b) and 7.20 of the Membership Interest Purchase Agreement, dated as of February 28, 2009 by and between Reliant Energy, Inc. and NRG Retail LLC | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2009 | 1-16455 | 2.3 | ||||||
2 | .8 | Letter Agreement dated April 30, 2009 re: Effectiveness of the Closing of the Membership Interest Purchase Agreement, dated as of February 28, 2009 by and between Reliant Energy, Inc. and NRG Retail LLC | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2009 | 1-16455 | 2.4 | ||||||
3 | .1 | Third Restated Certificate of Incorporation | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Quarterly Report on Form 10-Q for the period ended June 30, 2007 | 1-16455 | 3.1 | ||||||
3 | .2 | Sixth Amended and Restated Bylaws | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2009 | 1-16455 | 3.2 | ||||||
3 | .3 | Certificate of Ownership and Merger merging a wholly-owned subsidiary into registrant pursuant to Section 253 of the General Corporation Law of the State of Delaware, effective as of May 2, 2009 | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2009 | 1-16455 | 3.3 | ||||||
4 | .1 | Specimen Stock Certificate | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Amendment No. 5 to Registration Statement on Form S-1, filed March 23, 2001 | 333-48038 | 4.1 |
51
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
4 | .2 | Rights Agreement between Reliant Resources, Inc. and The Chase Manhattan Bank, as Rights Agent, including a form of Rights Certificate, dated as of January 15, 2001 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Amendment No. 8 to Registration Statement on Form S-1, filed April 27, 2001 | 333-48038 | 4.2 | ||||||
4 | .3 | Senior Indenture among Reliant Energy, Inc. and Wilmington Trust Company, dated as of December 22, 2004 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K, filed December 27, 2004 | 1-16455 | 4.1 | ||||||
4 | .4 | First Supplemental Indenture relating to the 6.75% Senior Secured Notes due 2014, among Reliant Energy, Inc., the Guarantors listed therein and Wilmington Trust Company, dated as of December 22, 2004 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K, filed December 27, 2004 | 1-16455 | 4.2 | ||||||
4 | .5 | Second Supplemental Indenture relating to the 6.75% Senior Secured Notes due 2014, among Reliant Energy, Inc., the Guarantors listed therein and Wilmington Trust Company, dated as of September 21, 2006 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Annual Report on Form 10-K for the year ended December 31, 2006 | 1-16455 | 4.18 | ||||||
4 | .6 | Third Supplemental Indenture relating to the 6.75% Senior Secured Notes due 2014, among Reliant Energy, Inc., the Guarantors listed therein and Wilmington Trust Company, dated as of December 1, 2006 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K, filed December 7, 2006 | 1-16455 | 4.3 | ||||||
4 | .7 | Sixth Supplemental Indenture relating to the 6.75% Senior Secured Notes due 2014, among RRI Energy, Inc., The Guarantors listed therein and Wilmington Trust Company, dated as of June 1, 2009 | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, 2009 | 1-16455 | 10.1 | ||||||
4 | .8 | Seventh Supplemental Indenture relating to the 6.75% Senior Secured Notes due 2014, among RRI Energy, Inc., the Guarantors listed therein and Wilmington Trust Company, dated as of August 20, 2009 | RRI Energy’s Current Report on Form 8-K, filed August 24, 2009 | 1-16455 | 99.1 | ||||||
+4 | .9 | Eighth Supplemental Indenture relating to the 6.75% Senior Secured Notes due 2014, among RRI Energy, Inc., the Guarantors listed therein and Wilmington Trust Company, dated as of December 1, 2009 |
52
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
4 | .10 | Indenture between Orion Power Holdings, Inc. and Wilmington Trust Company, dated as of April 27, 2000 | Orion Power Holdings, Inc.’s Registration Statement on Form S-1, filed August 18, 2000 | 333-44118 | 4.1 | ||||||
4 | .11 | Fourth Supplemental Indenture relating to the 7.625% Senior Notes due 2014, among Reliant Energy, Inc., the Guarantors listed therein and Wilmington Trust Company, dated as of June 13, 2007 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K, filed June 15, 2007 | 1-16455 | 4.1 | ||||||
4 | .12 | Fifth Supplemental Indenture relating to the 7.875% Senior Notes due 2017, among Reliant Energy, Inc., the Guarantors listed therein and Wilmington Trust Company, dated as of June 13, 2007 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K, filed June 15, 2007 | 1-16455 | 4.2 | ||||||
10 | .1A | Master Separation Agreement between Reliant Resources, Inc. and Reliant Energy, Incorporated, dated as of December 31, 2000 | CenterPoint Energy Houston Electric, LLC’s (formerly known as Reliant Energy, Incorporated) Quarterly Report on Form 10-Q for the period ended March 31, 2001 | 1-3187 | 10.1 | ||||||
+10 | .1B | Schedules to Master Separation Agreement between Reliant Resources, Inc. and Reliant Energy, Incorporated, dated as of December 31, 2000 | |||||||||
10 | .2A | Tax Allocation Agreement between Reliant Resources, Inc. and Reliant Energy, Incorporated, dated as of December 31, 2000 | CenterPoint Energy Houston Electric, LLC’s (formerly known as Reliant Energy, Incorporated) Quarterly Report on Form 10-Q for the period ended March 31, 2001 | 1-3187 | 10.8 | ||||||
+10 | .2B | Exhibit to Tax Allocation Agreement between Reliant Resources, Inc. and Reliant Energy, Incorporated, dated as of December 31, 2000 | |||||||||
10 | .3 | Participating Preferred Stock Purchase Agreement by and between Reliant Energy, Inc. and FR Reliant Holdings LP dated as of October 10, 2008 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K, filed October 16, 2008 | 1-16455 | 10.1 |
53
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
10 | .4 | Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2001A, among Reliant Energy, Inc., the Subsidiary Guarantors defined therein and J.P. Morgan Trust Company, National Association, as trustee, dated as of December 22, 2004 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K, filed December 27, 2004 | 1-16455 | 10.2 | ||||||
10 | .5A | Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2002A, among Reliant Energy, Inc., the Subsidiary Guarantors defined therein and J.P. Morgan Trust Company, National Association, as trustee, dated as of December 22, 2004 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K, filed December 27, 2004 | 1-16455 | 10.3 | ||||||
+10 | .5B | Exhibit C to Exhibit B to Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2002A, among Reliant Energy, Inc., the Subsidiary Guarantors defined therein and J.P. Morgan Trust Company, National Association, as trustee, dated as of December 22, 2004 | |||||||||
10 | .6A | Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2002B, among Reliant Energy, Inc., the Subsidiary Guarantors defined therein and J.P. Morgan Trust Company, National Association, as trustee, dated as of December 22, 2004 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K, filed December 27, 2004 | 1-16455 | 10.4 |
54
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
+10 | .6B | Exhibit C to Exhibit B to Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2002B, among Reliant Energy, Inc., the Subsidiary Guarantors defined therein and J.P. Morgan Trust Company, National Association, as trustee, dated as of December 22, 2004 | |||||||||
10 | .7A | Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2003A, among Reliant Energy, Inc., the Subsidiary Guarantors defined therein and J.P. Morgan Trust Company, National Association, as trustee, dated as of December 22, 2004 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K filed December 27, 2004 | 1-16455 | 10.5 | ||||||
+10 | .7B | Exhibit C to Exhibit B to Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2003A, among Reliant Energy, Inc., the Subsidiary Guarantors defined therein and J.P. Morgan Trust Company, National Association, as trustee, dated as of December 22, 2004 | |||||||||
10 | .8A | Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2004A, among Reliant Energy, Inc., the Subsidiary Guarantors defined therein and J.P. Morgan Trust Company, National Association, as trustee, dated as of December 22, 2004 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K, filed December 27, 2004 | 1-16455 | 10.6 |
55
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
+10 | .8B | Exhibit C to Exhibit B to Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2004A, among Reliant Energy, Inc., the Subsidiary Guarantors defined therein and J.P. Morgan Trust Company, National Association, as trustee, dated as of December 22, 2004 | |||||||||
10 | .9 | Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2001A, among Reliant Energy Power Supply, LLC, Reliant Energy, Inc., the Subsidiary Guarantors as defined in the Guarantee Agreement and J.P. Morgan Trust Company, National Association, as trustee, dated as of September 21, 2006 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Annual Report on Form 10-K for the year ended December 31, 2006 | 1-16455 | 10.14 | ||||||
10 | .10 | Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2002A, among Reliant Energy Power Supply, LLC, Reliant Energy, Inc., the Subsidiary Guarantors as defined in the Guarantee Agreement and J.P. Morgan Trust Company, National Association, as trustee, dated as of September 21, 2006 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Annual Report on Form 10-K for the year ended December 31, 2006 | 1-16455 | 10.15 |
56
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
10 | .11 | Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2002B, among Reliant Energy Power Supply, LLC, Reliant Energy, Inc., the Subsidiary Guarantors as defined in the Guarantee Agreement and J.P. Morgan Trust Company, National Association, as trustee, dated as of September 21, 2006 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Annual Report on Form 10-K for the year ended December 31, 2006 | 1-16455 | 10.16 | ||||||
10 | .12 | Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2003A, among Reliant Energy Power Supply, LLC, Reliant Energy, Inc., the Subsidiary Guarantors as defined in the Guarantee Agreement and J.P. Morgan Trust Company, National Association, as trustee, dated as of September 21, 2006 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Annual Report on Form 10-K for the year ended December 31, 2006 | 1-16455 | 10.17 | ||||||
10 | .13 | Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2004A, among Reliant Energy Power Supply, LLC, Reliant Energy, Inc., the Subsidiary Guarantors as defined in the Guarantee Agreement and J.P. Morgan Trust Company, as trustee, dated as of September 21, 2006 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Annual Report on Form 10-K for the year ended December 31, 2006 | 1-16455 | 10.18 |
57
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
10 | .14 | Second Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2001A, among Reliant Energy, Inc., the Subsidiary Guarantors as defined in the Guarantee Agreement and The Bank of New York Trust Company, N.A., as trustee, dated as of December 1, 2006 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K, filed December 7, 2006 | 1-16455 | 10.1 | ||||||
10 | .15 | Second Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2002A, among Reliant Energy, Inc., the Subsidiary Guarantors as defined in the Guarantee Agreement and The Bank of New York Trust Company, N.A., as trustee, dated as of December 1, 2006 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K, filed December 7, 2006 | 1-16455 | 10.2 | ||||||
10 | .16 | Second Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2002B, among Reliant Energy, Inc., the Subsidiary Guarantors as defined in the Guarantee Agreement and The Bank of New York Trust Company, N.A., as trustee, dated as of December 1, 2006 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K, filed December 7, 2006 | 1-16455 | 10.3 |
58
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
10 | .17 | Second Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2003A, among Reliant Energy, Inc., the Subsidiary Guarantors as defined in the Guarantee Agreement and The Bank of New York Trust Company, N.A., as trustee, dated as of December 1, 2006 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K, filed December 7, 2006 | 1-16455 | 10.4 | ||||||
10 | .18 | Third Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2004A, among Reliant Energy, Inc., the Subsidiary Guarantors as defined in the Guarantee Agreement and The Bank of New York Trust Company, N.A., as trustee, dated as of December 1, 2006 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K, filed December 7, 2006 | 1-16455 | 10.5 | ||||||
10 | .19 | Third Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2001A, among RRI Energy, Inc., the Subsidiary Guarantors as defined in the Guarantee Agreement and The Bank of New York Trust Company, N.A., as trustee, dated as of June 1, 2009 | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, 2009 | 1-16455 | 10.2 | ||||||
10 | .20 | Third Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2002A, among RRI Energy, Inc., the Subsidiary Guarantors as defined in the Guarantee Agreement and The Bank of New York Trust Company, N.A., as trustee, dated as of June 1, 2009 | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, 2009 | 1-16455 | 10.3 |
59
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
10 | .21 | Third Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2002B, among RRI Energy, Inc., the Subsidiary Guarantors as defined in the Guarantee Agreement and The Bank of New York Trust Company, N.A., as trustee, dated as of June 1, 2009 | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, 2009 | 1-16455 | 10.4 | ||||||
10 | .22 | Third Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2003A, among RRI Energy, Inc., the Subsidiary Guarantors as defined in the Guarantee Agreement and The Bank of New York Trust Company, N.A., as trustee, dated as of June 1, 2009 | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, 2009 | 1-16455 | 10.5 | ||||||
10 | .23 | Fourth Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project), Series 2004A, among RRI Energy, Inc., the Subsidiary Guarantors as defined in the Guarantee Agreement and The Bank of New York Trust Company, N.A., as trustee, dated as of June 1, 2009 | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, 2009 | 1-16455 | 10.6 | ||||||
10 | .24 | Fourth Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s exempt facilities revenues bonds (Reliant Energy Seward, LLC Project), Series 2001A, among RRI Energy, Inc. the Subsidiary Guarantors as defined in the Guarantee Agreement and the Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of August 20, 2009 | RRI Energy, Inc.’s Current Report on Form 8-K, filed August 24, 2009 | 1-16455 | 99.2 |
60
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
10 | .25 | Fourth Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s exempt facilities revenues bonds (Reliant Energy Seward, LLC Project), Series 2002A, among RRI Energy, Inc. the Subsidiary Guarantors as defined in the Guarantee Agreement and the Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of August 20, 2009 | RRI Energy, Inc.’s Current Report on Form 8-K, filed August 24, 2009 | 1-16455 | 99.3 | ||||||
10 | .26 | Fourth Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s exempt facilities revenues bonds (Reliant Energy Seward, LLC Project), Series 2002B, among RRI Energy, Inc. the Subsidiary Guarantors as defined in the Guarantee Agreement and the Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of August 20, 2009 | RRI Energy, Inc.’s Current Report on Form 8-K, filed August 24, 2009 | 1-16455 | 99.4 | ||||||
10 | .27 | Fourth Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s exempt facilities revenues bonds (Reliant Energy Seward, LLC Project), Series 2003A, among RRI Energy, Inc. the Subsidiary Guarantors as defined in the Guarantee Agreement and the Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of August 20, 2009 | RRI Energy, Inc.’s Current Report on Form 8-K, filed August 24, 2009 | 1-16455 | 99.5 |
61
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
10 | .28 | Fifth Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s exempt facilities revenues bonds (Reliant Energy Seward, LLC Project), Series 2004A, among RRI Energy, Inc. the Subsidiary Guarantors as defined in the Guarantee Agreement and the Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of August 20, 2009 | RRI Energy, Inc.’s Current Report on Form 8-K, filed August 24, 2009 | 1-16455 | 99.6 | ||||||
+10 | .29 | Fifth Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s exempt facilities revenues bonds (Reliant Energy Seward, LLC Project), Series 2001A, among RRI Energy, Inc. the Subsidiary Guarantors as defined in the Guarantee Agreement and the Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of December 1, 2009 | |||||||||
+10 | .30 | Fifth Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s exempt facilities revenues bonds (Reliant Energy Seward, LLC Project), Series 2002A, among RRI Energy, Inc. the Subsidiary Guarantors as defined in the Guarantee Agreement and the Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of December 1, 2009 |
62
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
+10 | .31 | Fifth Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s exempt facilities revenues bonds (Reliant Energy Seward, LLC Project), Series 2002B, among RRI Energy, Inc. the Subsidiary Guarantors as defined in the Guarantee Agreement and the Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of December 1, 2009 | |||||||||
+10 | .32 | Fifth Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s exempt facilities revenues bonds (Reliant Energy Seward, LLC Project), Series 2003A, among RRI Energy, Inc. the Subsidiary Guarantors as defined in the Guarantee Agreement and the Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of December 1, 2009 | |||||||||
+10 | .33 | Sixth Supplemental Guarantee Agreement relating to Pennsylvania Economic Development Financing Authority’s exempt facilities revenues bonds (Reliant Energy Seward, LLC Project), Series 2004A, among RRI Energy, Inc. the Subsidiary Guarantors as defined in the Guarantee Agreement and the Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of December 1, 2009 |
63
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
10 | .34A | Credit and Guaranty Agreement among Reliant Energy, Inc., as Borrower, the Other Loan Parties referred to therein as guarantors, the lenders party thereto, Deutsche Bank AG New York Branch, as Administrative Agent and Collateral Agent, Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc., as Joint Lead Arrangers, Deutsche Bank Securities Inc., J.P. Morgan Securities Inc., Goldman Sachs Credit Partners L.P., Merrill Lynch Capital Corporation and ABN AMRO Bank N.V., as Joint Bookrunners with respect to the Revolving Credit Facility and Deutsche Bank Securities Inc., J.P. Morgan Securities Inc., Goldman Sachs Credit Partners L.P., Merrill Lynch Capital Corporation and Bear, Sterns & Co. Inc., as Joint Bookrunners with respect to the Pre-Funded L/C Facility, dated as of June 12, 2007 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.) Current Report on Form 8-K, filed June 15, 2007 | 1-16455 | 1.1 |
64
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
+10 | .34B | Exhibits and Schedules to Credit and Guaranty Agreement among Reliant Energy, Inc., as Borrower, the Other Loan Parties referred to therein as guarantors, the lenders party thereto, Deutsche Bank AG New York Branch, as Administrative Agent and Collateral Agent, Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc., as Joint Lead Arrangers, Deutsche Bank Securities Inc., J.P. Morgan Securities Inc., Goldman Sachs Credit Partners L.P., Merrill Lynch Capital Corporation and ABN AMRO Bank N.V., as Joint Bookrunners with respect to the Revolving Credit Facility and Deutsche Bank Securities Inc., J.P. Morgan Securities Inc., Goldman Sachs Credit Partners L.P., Merrill Lynch Capital Corporation and Bear, Sterns & Co. Inc., as Joint Bookrunners with respect to the Pre-Funded L/C Facility, dated as of June 12, 2007 (Portions of this Exhibit have been omitted pursuant to a request for confidential treatment) | |||||||||
10 | .35 | Facility Lease Agreement between Conemaugh Lessor Genco LLC and Reliant Energy Mid-Atlantic Power Holdings, LLC, dated as of August 24, 2000 | RRI Energy Mid-Atlantic Power Holdings, LLC’s (formerly Reliant Energy Mid-Atlantic Power Holdings, LLC’s) Registration Statement on Form S-4, filed December 8, 2000 | 333-51464 | 4.6a | ||||||
10 | .36 | Schedule identifying substantially identical agreements to Facility Lease Agreement constituting Exhibit 10.35 | RRI Energy Mid-Atlantic Power Holdings, LLC’s (formerly Reliant Energy Mid-Atlantic Power Holdings, LLC’s) Registration Statement on Form S-4, filed December 8, 2000 | 333-51464 | 4.6b | ||||||
10 | .37 | Pass Through Trust Agreement between Reliant Energy Mid-Atlantic Power Holdings, LLC and Bankers Trust Company, made with respect to the formation of the Series A Pass Through Trust and the issuance of 8.554% Series A Pass Through Certificates, dated as of August 24, 2000 | RRI Energy Mid-Atlantic Power Holdings, LLC’s (formerly Reliant Energy Mid-Atlantic Power Holdings, LLC’s) Registration Statement on Form S-4, filed December 8, 2000 | 333-51464 | 4.4a |
65
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
10 | .38 | Schedule identifying substantially identical agreements to Pass Through Trust Agreement constituting Exhibit 10.37 | RRI Energy Mid-Atlantic Power Holdings, LLC’s (formerly Reliant Energy Mid-Atlantic Power Holdings, LLC’s) Registration Statement on Form S-4, filed December 8, 2000 | 333-51464 | 4.4b | ||||||
10 | .39 | Participation Agreement among (i) Conemaugh Lessor Genco LLC, as Owner Lessor; (ii) Reliant Energy Mid-Atlantic Power Holdings, LLC, as Facility Lessee; (iii) Wilmington Trust Company, as Lessor Manager; (iv) PSEGR Conemaugh Generation, LLC, as Owner Participant; (v) Bankers Trust Company, as Lease Indenture Trustee; and (vi) Bankers Trust Company, as Pass Through Trustee, dated as of August 24, 2000 | RRI Energy Mid-Atlantic Power Holdings, LLC’s (formerly Reliant Energy Mid-Atlantic Power Holdings, LLC’s) Registration Statement on Form S-4, filed December 8, 2000 | 333-51464 | 4.5a | ||||||
10 | .40 | Schedule identifying substantially identical agreements to Participation Agreement constituting Exhibit 10.39 | RRI Energy Mid-Atlantic Power Holdings, LLC’s (formerly Reliant Energy Mid-Atlantic Power Holdings, LLC’s) Registration Statement on Form S-4, filed December 8, 2000 | 333-51464 | 4.5b | ||||||
10 | .41A | First Amendment to Participation Agreement, dated as of November 15, 2001 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2005 | 1-16455 | 10.20 | ||||||
+10 | .41B | Exhibit M to First Amendment to Participation Agreement, dated as of November 15, 2001 | |||||||||
10 | .42 | Schedule identifying substantially identical agreements to First Amendment to Participation Agreement constituting Exhibit 10.41A | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2005 | 1-16455 | 10.21 | ||||||
10 | .43 | Second Amendment to Participation Agreement, dated as of June 18, 2003 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2005 | 1-16455 | 10.22 | ||||||
10 | .44 | Schedule identifying substantially identical agreements to Second Amendment to Participation Agreement constituting Exhibit 10.43 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2005 | 1-16455 | 10.23 |
66
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
10 | .45 | Lease Indenture of Trust, Mortgage and Security Agreement between Conemaugh Lessor Genco LLC, as Owner Lessor, and Bankers Trust Company, as Lease Indenture Trustee, dated as of August 24, 2000 | RRI Energy Mid-Atlantic Power Holdings, LLC’s (formerly Reliant Energy Mid-Atlantic Power Holdings, LLC’s) Registration Statement on Form S-4, filed December 8, 2000 | 333-51464 | 4.8a | ||||||
10 | .46 | Schedule identifying substantially identical agreements to Lease Indenture of Trust constituting Exhibit 10.45 | RRI Energy Mid-Atlantic Power Holdings, LLC’s (formerly Reliant Energy Mid-Atlantic Power Holdings, LLC’s) Registration Statement on Form S-4, filed December 8, 2000 | 333-51464 | 4.8b | ||||||
10 | .47A | Purchase and Sale Agreement by and between Orion Power Holdings, Inc., Reliant Energy, Inc., Great Lakes Power Inc. and Brascan Corporation, dated as of May 18, 2004 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Current Report on Form 8-K, filed May 21, 2004 | 1-16455 | 99.2 | ||||||
+10 | .47B | Schedules to Purchase and Sale Agreement by and between Orion Power Holdings, Inc., Reliant Energy, Inc., Great Lakes Power Inc. and Brascan Corporation, dated as of May 18, 2004 | |||||||||
10 | .48A | Purchase and Sale Agreement between Orion Power Holdings, Inc., as Seller, Reliant Energy, Inc., as Guarantor, and Astoria Generating Company Acquisitions, L.L.C., as Buyer, dated as of September 30, 2005 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Current Report on Form 8-K, filed October 6, 2005 | 1-16455 | 10.1 | ||||||
+10 | .48B | Exhibits and Schedules to Purchase and Sale Agreement between Orion Power Holdings, Inc., as Seller, Reliant Energy, Inc., as Guarantor, and Astoria Generating Company Acquisitions, L.L.C., as Buyer, dated as of September 30, 2005 | |||||||||
10 | .49A | Settlement and Release of Claims Agreement among each of the Reliant Parties, OMOI, each of the California Parties, each of the Additional Claimants, each of the Class Action Parties and each of the Local Governmental Parties (each as defined therein), dated as of October 12, 2005 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Current Report on Form 8-K, filed October 20, 2005 | 1-16455 | 10.1 |
67
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
+10 | .49B | Exhibits to Settlement and Release of Claims Agreement among each of the Reliant Parties, OMOI, each of the California Parties, each of the Additional Claimants, each of the Class Action Parties and each of the Local Governmental Parties (each as defined therein), dated as of October 12, 2005 | |||||||||
*10 | .50 | Executive Life Insurance Plan, effective as of January 1, 1994, including the first and second amendments thereto (RRI Energy, Inc. has adopted certain obligations under this plan with respect to Brian Landrum) | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Amendment No. 8 to Registration Statement on Form S-1, filed April 27, 2001 | 333-48038 | 10.30 | ||||||
*10 | .51 | Transition Stock Plan, effective as of May 4, 2001 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2001 | 1-16455 | 10.37 | ||||||
*10 | .52 | 2002 Stock Plan, effective as of March 1, 2002 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Registration Statement on Form S-8, filed April 19, 2002 | 333-86610 | 4.5 | ||||||
*10 | .53 | Annual Incentive Compensation Plan, effective as of January 1, 2001 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2001 | 1-16455 | 10.9 | ||||||
*10 | .54 | First Amendment to Annual Incentive Compensation Plan, dated as of September 27, 2007 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2008 | 1-16455 | 10.44 | ||||||
*10 | .55 | 2002 Annual Incentive Compensation Plan for Executive Officers, effective as of March 1, 2002 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) 2002 Proxy Statement on Schedule 14A | 1-16455 | Appendix I | ||||||
*10 | .56 | First Amendment to 2002 Annual Incentive Compensation Plan for Executive Officers, dated as of September 27, 2007 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2008 | 1-16455 | 10.46 | ||||||
*10 | .57 | Long-Term Incentive Plan, effective as of January 1, 2001 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2001 | 1-16455 | 10.10 | ||||||
*10 | .58 | 2002 Long-Term Incentive Plan, effective as of June 6, 2002 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Registration Statement on Form S-8, filed April 19, 2002 | 333-86612 | 4.5 | ||||||
*10 | .59 | Deferral Plan, effective as of January 1, 2002 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Registration Statement on Form S-8, filed December 7, 2001 | 333-74790 | 4.1 |
68
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
*10 | .60 | First Amendment to Deferral Plan, effective as of January 14, 2003 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2003 | 1-16455 | 10.5 | ||||||
*10 | .61 | Second Amendment to Deferral Plan, effective as of December 31, 2004 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2008 | 1-16455 | 10.51 | ||||||
*10 | .62 | Deferral and Restoration Plan, effective as of January 1, 2005 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2008 | 1-16455 | 10.52 | ||||||
*10 | .63 | Successor Deferral Plan, effective as of January 1, 2002 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2004 | 1-16455 | 10.30 | ||||||
*10 | .64 | Deferred Compensation Plan, effective as of September 1, 1985, including the first nine amendments thereto (This is now a part of the plan listed as Exhibit 10.63) | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Amendment No. 8 to Registration Statement on Form S-1, filed April 27, 2001 | 333-48038 | 10.25 | ||||||
*10 | .65 | Deferred Compensation Plan, as amended and restated effective as of January 1, 1989, including the first nine amendments thereto (This is now a part of the plan listed as Exhibit 10.63) | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Amendment No. 8 to Registration Statement on Form S-1, filed April 27, 2001 | 333-48038 | 10.26 | ||||||
*10 | .66 | Deferred Compensation Plan, as amended and restated effective as of January 1, 1991, including the first ten amendments thereto (This is now a part of the plan listed as Exhibit 10.63) | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Amendment No. 8 to Registration Statement on Form S-1, filed April 27, 2001 | 333-48038 | 10.27 | ||||||
*10 | .67 | Benefit Restoration Plan, as amended and restated effective as of July 1, 1991, including the first amendment thereto (This is now a part of the plan listed as Exhibit 10.63) | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Amendment No. 8 to Registration Statement on Form S-1, filed April 27, 2001 | 333-48038 | 10.12 | ||||||
*10 | .68A | Key Employee Award Program2004-2006 of the 2002 Long-Term Incentive Plan and the Form of Agreement for Key Employee Award Program, effective as of February 13, 2004 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Quarterly Report on Form 10-Q for the period ended June 30, 2004 | 1-16455 | 10.1 | ||||||
+*10 | .68B | Exhibit B to Key Employee Award Program2004-2006 of the 2002 Long-Term Incentive Plan and the Form of Agreement for Key Employee Award Program, effective as of February 13, 2004 |
69
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
*10 | .69 | First Amendment to the Key Employee Award Program, effective as of August 10, 2005 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2005 | 1-16455 | 10.44 | ||||||
*10 | .70 | Form of 2002 Stock Plan Nonqualified Stock Option Award Agreement, 2003 Grants | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2004 | 1-16455 | 10.39 | ||||||
*10 | .71 | Form of Change in Control Agreement for CEO, CFO and COO | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2008 | 1-16455 | 10.61 | ||||||
*10 | .72 | Form of Change in Control Agreement for certain officers other than CEO, CFO and COO | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2008 | 1-16455 | 10.62 | ||||||
*10 | .73 | Reliant Energy, Inc. Executive Severance Plan, effective as of January 1, 2006 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2005 | 1-16455 | 10.57 | ||||||
*10 | .74 | First Amendment to Reliant Energy, Inc. Executive Severance Plan, dated as of September 27, 2007 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2008 | 1-16455 | 10.64 | ||||||
*10 | .75 | Form of 2002 Long-Term Incentive Plan Nonqualified Stock Option Award Agreement for Directors | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2004 | 1-16455 | 10.53 | ||||||
*10 | .76 | Form of 2002 Long-Term Incentive Plan Restricted Stock Award Agreement for Directors | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2004 | 1-16455 | 10.54 | ||||||
*10 | .77 | Form of Amendment of 2002 Long-Term Incentive Plan Restricted Stock Award Agreement for Directors | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2008 | 1-16455 | 10.67 | ||||||
*10 | .78 | Form of 2002 Long-Term Incentive Plan Quarterly Restricted and Premium Restricted Stock Units Award Agreement for Directors | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2004 | 1-16455 | 10.55 | ||||||
*10 | .79 | Form of 2002 Long-Term Incentive Plan Quarterly Common Stock and Premium Restricted Stock Award Agreement for Directors | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2007 | 1-16455 | 10.65 | ||||||
*10 | .80 | Form of 2002 Long-Term Incentive Plan Restricted Stock Award Agreement for Directors | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2007 | 1-16455 | 10.66 |
70
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
*10 | .81 | Form of Long-Term Incentive Plan Restricted Stock Award Agreement for Directors’ initial grant | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Current Report on Form 8-K, filed August 24, 2006 | 1-16455 | 10.1 | ||||||
*10 | .82 | Reliant Energy, Inc. Non-Employee Directors’ Compensation Program, effective as of October 13, 2008 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2008 | 1-16455 | 10.72 | ||||||
*10 | .83 | 2002 Long-Term Incentive Plan 2008 Long-Term Incentive Award Program for officers (Form of Agreement included with Program) | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Quarterly Report on Form 10-Q for the period ended March 31, 2008 | 1-16455 | 10.1 | ||||||
*10 | .84 | 2002 Long-Term Incentive Plan 2007 Long-Term Incentive Award Program for Officers | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Quarterly Report on Form 10-Q for the period ended March 30, 2007 | 1-16455 | 10.1 | ||||||
*10 | .85 | Form of 2002 Long-Term Incentive Plan 2007 Long-Term Incentive Award Agreement for Officers | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Quarterly Report on Form 10-Q for the period ended March 30, 2007 | 1-16455 | 10.2 | ||||||
*10 | .86 | 2002 Long-Term Incentive Plan 2007 Long-Term Incentive Award Agreement for Mark Jacobs | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Quarterly Report on Form 10-Q for the period ended June 30, 2007 | 1-16455 | 10.3 | ||||||
*10 | .87 | 2002 Long-Term Incentive Plan Amendment to Nonqualified Stock Option Award Agreement by and between Reliant Energy, Inc. and Joel V. Staff dated as of May 16, 2007—March 12, 2003 grant | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Quarterly Report on Form 10-Q for the period ended June 30, 2007 | 1-16455 | 10.4 | ||||||
*10 | .88 | 2002 Long-Term Incentive Plan Amendment to Nonqualified Stock Option Award Agreement by and between Reliant Energy, Inc. and Joel V. Staff dated as of May 16, 2007—May 8, 2003 grant | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Quarterly Report on Form 10-Q for the period ended June 30, 2007 | 1-16455 | 10.5 | ||||||
*10 | .89 | 2002 Long-Term Incentive Plan Amendment to Nonqualified Stock Option Award Agreement by and between Reliant Energy, Inc. and Joel V. Staff dated as of May 16, 2007—August 23, 2003 grant | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Quarterly Report on Form 10-Q for the period ended June 30, 2007 | 1-16455 | 10.6 | ||||||
*10 | .90 | 2002 Long-Term Incentive Plan Amendment to Key Employee Award Program2004-2006 Agreement by and between Reliant Energy, Inc. and Joel V. Staff dated as of May 16, 2007—February 13, 2004 grant | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Quarterly Report on Form 10-Q for the period ended June 30, 2007 | 1-16455 | 10.7 |
71
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
*10 | .91 | 2002 Long-Term Incentive Plan Long-Term Incentive Award Agreement for Rick J. Dobson | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Quarterly Report on Form 10-Q for the period ended September 30, 2007 | 1-16455 | 10.2 | ||||||
*10 | .92 | 2002 Long-Term Incentive Plan Long-Term Incentive Award Agreement for Albert H. Myres, Sr. | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2007 | 1-16455 | 10.77 | ||||||
*10 | .93 | 2002 Long-Term Incentive Plan Long-Term Incentive Award Agreement for Charles Griffey | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2007 | 1-16455 | 10.78 | ||||||
*10 | .94 | 2009 Long Term Incentive Award Program for Officers and Form of Award Agreement | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2009 | 1-16455 | 10.1 | ||||||
*10 | .95 | 2002 Long Term Incentive Plan Director Common Stock Award for Evan J. Silverstein | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2009 | 1-16455 | 10.2 | ||||||
*10 | .96 | 2002 Long Term Incentive Plan Form of Director Annual Award Agreement | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2009 | 1-16455 | 10.3 | ||||||
*10 | .97 | 2002 Long Term Incentive Plan Form of Quarterly Common Stock and Premium Restricted Stock Award for Directors | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2009 | 1-16455 | 10.4 | ||||||
*10 | .98 | Non-Employee Directors’ Compensation Program, effective as of June 19, 2009 | RRI Energy, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2009 | 1-16455 | 10.5 | ||||||
+*10 | .99 | Non-Employee Directors’ Compensation Program, effective as of January 1, 2010 | |||||||||
+*10 | .100 | 2002 Long Term Incentive Plan Form of Restricted Stock Unit Award Agreement for Directors | |||||||||
*+10 | .101 | 2002 Long Term Incentive Plan 2009 Long Term Incentive Award Program for officers (Form of 2009 Long Term Incentive Award Agreement Included with Program) | |||||||||
10 | .102 | Guarantee by NRG Energy, Inc., as Guarantor, in favor of Reliant Energy, Inc. dated as of February 28, 2009 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2008 | 1-16455 | 10.84 |
72
Table of Contents
SEC File or | |||||||||||
Exhibit | Reporter or Registration | Registration | Exhibit | ||||||||
Number | Document Description | Statement | Number | Reference | |||||||
10 | .103 | Agreement Regarding Prosecution of Litigation by and among Merrill Lynch Commodities, Inc., Merrill Lynch & Co., Inc., Reliant Energy Power Supply, LLC, RERH Holdings, LLC, Reliant Energy Retail Holdings, LLC, Reliant Energy Retail Services, LLC, RE Retail Receivables, LLC and Reliant Energy Solutions East, LLC dated as of February 28, 2009 | RRI Energy, Inc.’s (formerly Reliant Energy, Inc.’s) Annual Report on Form 10-K for the year ended December 31, 2008 | 1-16455 | 10.85 | ||||||
*+10 | .104 | Omnibus Amendment Reliant Energy, Inc. Executive Deferral, Incentive and Non-Qualified Plans effective as of May 2, 2009 (amending plans filed as Exhibits 10.51, 10.52, 10.53, 10.55, 10.57, 10.58, 10.59, 10.62 and 10.63) | |||||||||
*+10 | .105 | Omnibus Amendment Reliant Energy, Inc. Severance Plans effective as of May 2, 2009 (amending Reliant Energy, Inc. Executive Severance Plan filed as Exhibit 10.73) | |||||||||
+12 | .1 | RRI Energy, Inc. and Subsidiaries Ratio of Earnings from Continuing Operations to Fixed Charges | |||||||||
+21 | .1 | Subsidiaries of RRI Energy, Inc. | |||||||||
+23 | .1 | Consent of KPMG LLP, independent registered public accounting firm of RRI Energy, Inc. | |||||||||
+31 | .1 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||||
+31 | .2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||||
+32 | .1 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) | |||||||||
+101 | Interactive Data File |
73
Table of Contents
By: /s/ Mark M. Jacobs |
Signature | Title | |||
/s/ Mark M. Jacobs Mark M. Jacobs | President and Chief Executive Officer | |||
/s/ Rick J. Dobson Rick J. Dobson | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | |||
/s/ Thomas C. Livengood Thomas C. Livengood | Senior Vice President and Controller (Principal Accounting Officer) | |||
/s/ E. William Barnett E. William Barnett | Director | |||
/s/ Mark M. Jacobs Mark M. Jacobs | Director | |||
/s/ Steven L. Miller Steven L. Miller | Director | |||
/s/ Laree E. Perez Laree E. Perez | Director | |||
/s/ Evan J. Silverstein Evan J. Silverstein | Director |
74
Table of Contents
CONTROL OVER FINANCIAL REPORTING
/s/ Mark M. Jacobs Mark M. Jacobs President and Chief Executive Officer | /s/ Rick J. Dobson Rick J. Dobson Executive Vice President and Chief Financial Officer |
F-1
Table of Contents
F-2
Table of Contents
CONSOLIDATED STATEMENTS OF OPERATIONS
2009 | 2008 | 2007 | ||||||||||
(thousands of dollars, except per share amounts) | ||||||||||||
Revenues: | ||||||||||||
Revenues (including $(44,170), $(1,151) and $31,662 unrealized gains (losses)) (including $0, $253,001 and $127,083 from affiliates) | $ | 1,824,839 | $ | 3,393,900 | $ | 3,202,528 | ||||||
Expenses: | ||||||||||||
Cost of sales (including $65,961, $(7,405) and $(25,113) unrealized gains (losses)) (including $0, $71,568 and $42,645 from affiliates) | 1,129,249 | 1,913,689 | 2,040,769 | |||||||||
Operation and maintenance | 550,253 | 595,262 | 642,406 | |||||||||
General and administrative | 100,745 | 121,173 | 134,488 | |||||||||
Western states litigation and similar settlements | — | 37,467 | 22,000 | |||||||||
Gains on sales of assets and emission and exchange allowances, net | (21,913 | ) | (92,202 | ) | (25,699 | ) | ||||||
Goodwill and long-lived assets impairments | 210,771 | 304,859 | — | |||||||||
Depreciation and amortization | 269,191 | 312,642 | 398,691 | |||||||||
Total operating expense | 2,238,296 | 3,192,890 | 3,212,655 | |||||||||
Operating Income (Loss) | (413,457 | ) | 201,010 | (10,127 | ) | |||||||
Other Income (Expense): | ||||||||||||
Income of equity investment, net | 605 | 1,198 | 4,686 | |||||||||
Debt extinguishments losses | (7,501 | ) | (2,257 | ) | (113,522 | ) | ||||||
Other, net | (248 | ) | 4,727 | 4 | ||||||||
Interest expense | (186,296 | ) | (199,590 | ) | (262,410 | ) | ||||||
Interest income | 2,516 | 21,178 | 19,638 | |||||||||
Total other expense | (190,924 | ) | (174,744 | ) | (351,604 | ) | ||||||
Income (Loss) from Continuing Operations Before Income Taxes | (604,381 | ) | 26,266 | (361,731 | ) | |||||||
Income tax expense (benefit) | (125,349 | ) | 136,532 | (160,100 | ) | |||||||
Loss from Continuing Operations | (479,032 | ) | (110,266 | ) | (201,631 | ) | ||||||
Income (loss) from discontinued operations | 881,844 | (629,409 | ) | 566,738 | ||||||||
Net Income (Loss) | $ | 402,812 | $ | (739,675 | ) | $ | 365,107 | |||||
Basic Earnings (Loss) per Share: | ||||||||||||
Loss from continuing operations | $ | (1.36 | ) | $ | (0.32 | ) | $ | (0.59 | ) | |||
Income (loss) from discontinued operations | 2.51 | (1.81 | ) | 1.66 | ||||||||
Net income (loss) | $ | 1.15 | $ | (2.13 | ) | $ | 1.07 | |||||
Diluted Earnings (Loss) per Share: | ||||||||||||
Loss from continuing operations | $ | (1.36 | ) | $ | (0.32 | ) | $ | (0.59 | ) | |||
Income (loss) from discontinued operations | 2.51 | (1.81 | ) | 1.66 | ||||||||
Net income (loss) | $ | 1.15 | $ | (2.13 | ) | $ | 1.07 | |||||
F-3
Table of Contents
CONSOLIDATED BALANCE SHEETS
December 31, | ||||||||
2009 | 2008 | |||||||
(thousands of dollars, except per share amounts) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 943,440 | $ | 1,004,367 | ||||
Restricted cash | 24,093 | 2,721 | ||||||
Accounts and notes receivable, principally customer, net | 152,569 | 249,871 | ||||||
Inventory | 331,584 | 314,999 | ||||||
Derivative assets | 132,062 | 161,340 | ||||||
Margin deposits | 198,582 | 32,676 | ||||||
Investment in and receivables from Channelview, net | — | 58,703 | ||||||
Prepayments and other current assets | 86,844 | 124,449 | ||||||
Current assets of discontinued operations ($55,855 and $295,477 of margin deposits) | 108,476 | 2,506,340 | ||||||
Total current assets | 1,977,650 | 4,455,466 | ||||||
Property, Plant and Equipment, net | 4,602,313 | 4,819,789 | ||||||
Other Assets: | ||||||||
Other intangibles, net | 305,913 | 380,554 | ||||||
Derivative assets | 53,138 | 78,879 | ||||||
Prepaid lease | 277,370 | 273,374 | ||||||
Other ($33,793 and $29,012 accounted for at fair value) | 239,078 | 219,552 | ||||||
Long-term assets of discontinued operations | 5,232 | 494,781 | ||||||
Total other assets | 880,731 | 1,447,140 | ||||||
Total Assets | $ | 7,460,694 | $ | 10,722,395 | ||||
LIABILITIES AND EQUITY | ||||||||
Current Liabilities: | ||||||||
Current portion of long-term debt and short-term borrowings | $ | 404,505 | $ | 12,517 | ||||
Accounts payable, principally trade | 142,787 | 156,604 | ||||||
Derivative liabilities | 151,461 | 202,206 | ||||||
Margin deposits | 2,860 | 93,000 | ||||||
Other | 169,898 | 199,026 | ||||||
Current liabilities of discontinued operations ($11,000 and $0 of margin deposits) | 58,452 | 2,375,895 | ||||||
Total current liabilities | 929,963 | 3,039,248 | ||||||
Other Liabilities: | ||||||||
Derivative liabilities | 61,436 | 140,493 | ||||||
Other | 260,547 | 272,079 | ||||||
Long-term liabilities of discontinued operations | 13,700 | 873,190 | ||||||
Total other liabilities | 335,683 | 1,285,762 | ||||||
Long-term Debt | 1,949,771 | 2,610,737 | ||||||
Commitments and Contingencies | ||||||||
Temporary Equity Stock-based Compensation | 6,890 | 9,004 | ||||||
Stockholders’ Equity: | ||||||||
Preferred stock; par value $0.001 per share (125,000,000 shares authorized; none outstanding) | — | — | ||||||
Common stock; par value $0.001 per share (2,000,000,000 shares authorized; 352,785,985 and 349,812,537 issued) | 114 | 111 | ||||||
Additional paid-in capital | 6,259,248 | 6,238,639 | ||||||
Accumulated deficit | (1,972,389 | ) | (2,375,201 | ) | ||||
Accumulated other comprehensive loss | (48,586 | ) | (85,905 | ) | ||||
Total stockholders’ equity | 4,238,387 | 3,777,644 | ||||||
Total Liabilities and Equity | $ | 7,460,694 | $ | 10,722,395 | ||||
F-4
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
2009 | 2008 | 2007 | ||||||||||
(thousands of dollars) | ||||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net income (loss) | $ | 402,812 | $ | (739,675 | ) | $ | 365,107 | |||||
(Income) loss from discontinued operations | (881,844 | ) | 629,409 | (566,738 | ) | |||||||
Loss from continuing operations | (479,032 | ) | (110,266 | ) | (201,631 | ) | ||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||
Goodwill and long-lived assets impairments | 210,771 | 304,859 | — | |||||||||
Depreciation and amortization | 269,191 | 312,642 | 398,691 | |||||||||
Deferred income taxes | (120,646 | ) | 99,930 | (153,344 | ) | |||||||
Net changes in energy derivatives | (21,285 | ) | 8,556 | (6,549 | ) | |||||||
Amortization of deferred financing costs | 7,086 | 6,653 | 9,213 | |||||||||
Debt extinguishments losses | 7,501 | 2,257 | 113,522 | |||||||||
Gains on sales of assets and emission and exchange allowances, net | (21,913 | ) | (92,202 | ) | (25,699 | ) | ||||||
Western states litigation and similar settlements | — | 3,467 | — | |||||||||
Other, net | (13,121 | ) | (10,486 | ) | 6,342 | |||||||
Changes in other assets and liabilities: | ||||||||||||
Accounts and notes receivable, net | 108,985 | 9,978 | (40,630 | ) | ||||||||
Changes in notes, receivables and payables with affiliate, net | 43 | 3,687 | (13,078 | ) | ||||||||
Inventory | (14,711 | ) | (31,862 | ) | (21,863 | ) | ||||||
Margin deposits, net | (256,046 | ) | 199,370 | 285,641 | ||||||||
Net derivative assets and liabilities | (32,460 | ) | 3,049 | (8,253 | ) | |||||||
Western states litigation and similar settlements payments | (3,449 | ) | — | (35,000 | ) | |||||||
Accounts payable | (12,776 | ) | (48,470 | ) | (19,771 | ) | ||||||
Other current assets | 12,269 | 1,969 | 2,559 | |||||||||
Other assets | (6,466 | ) | 10,207 | (12,633 | ) | |||||||
Taxes payable/receivable | (6,883 | ) | 24,325 | (9,166 | ) | |||||||
Other current liabilities | (11,157 | ) | 10,091 | (56,011 | ) | |||||||
Other liabilities | (7,417 | ) | (4,327 | ) | (8,810 | ) | ||||||
Net cash provided by (used in) continuing operations from operating activities | (391,516 | ) | 703,427 | 203,530 | ||||||||
Net cash provided by (used in) discontinued operations from operating activities | 585,045 | (520,732 | ) | 558,213 | ||||||||
Net cash provided by operating activities | 193,529 | 182,695 | 761,743 | |||||||||
Cash Flows from Investing Activities: | ||||||||||||
Capital expenditures | (189,511 | ) | (278,757 | ) | (174,589 | ) | ||||||
Proceeds from sales of assets, net | 35,931 | 526,956 | 82,075 | |||||||||
Proceeds from sales of emission and exchange allowances | 19,180 | 42,458 | 6,815 | |||||||||
Purchases of emission allowances | (22,711 | ) | (60,986 | ) | (91,923 | ) | ||||||
Restricted cash | (4,620 | ) | 530 | (6,326 | ) | |||||||
Other, net | 3,750 | 6,562 | 6,045 | |||||||||
Net cash provided by (used in) continuing operations from investing activities | (157,981 | ) | 236,763 | (177,903 | ) | |||||||
Net cash provided by (used in) discontinued operations from investing activities | 311,800 | (20,128 | ) | (747 | ) | |||||||
Net cash provided by (used in) investing activities | 153,819 | 216,635 | (178,650 | ) | ||||||||
Cash Flows from Financing Activities: | ||||||||||||
Proceeds from long-term debt | — | — | 1,300,000 | |||||||||
Payments of long-term debt | (254,980 | ) | (57,704 | ) | (1,535,887 | ) | ||||||
Increase in short-term borrowings and revolving credit facilities, net | — | — | 6,554 | |||||||||
Payments of financing costs | — | — | (31,245 | ) | ||||||||
Payments of debt extinguishments expenses | (4,778 | ) | (1,017 | ) | (72,779 | ) | ||||||
Proceeds from issuances of stock | 11,245 | 13,570 | 41,317 | |||||||||
Net cash used in continuing operations from financing activities | (248,513 | ) | (45,151 | ) | (292,040 | ) | ||||||
Net cash used in discontinued operations from financing activities | (260,707 | ) | — | — | ||||||||
Net cash used in financing activities | (509,220 | ) | (45,151 | ) | (292,040 | ) | ||||||
Net Change in Cash and Cash Equivalents, Total Operations | (161,872 | ) | 354,179 | 291,053 | ||||||||
Less: Net Change in Cash and Cash Equivalents, Discontinued Operations | (100,945 | ) | (126,118 | ) | 92,066 | |||||||
Cash and Cash Equivalents at Beginning of Period, Continuing Operations | 1,004,367 | 524,070 | 325,083 | |||||||||
Cash and Cash Equivalents at End of Period, Continuing Operations | $ | 943,440 | $ | 1,004,367 | $ | 524,070 | ||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||||||
Cash Payments: | ||||||||||||
Interest paid (net of amounts capitalized) for continuing operations | $ | 194,355 | $ | 205,956 | $ | 299,379 | ||||||
Income taxes paid (net of income tax refunds received) for continuing operations | 2,330 | 12,312 | 2,833 |
F-5
Table of Contents
Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||||||||||||||||||||||
Gain (Loss) | Discontinued | |||||||||||||||||||||||||||||||||||||||||||
on | Benefits | Benefits | Total | Operations | ||||||||||||||||||||||||||||||||||||||||
Available- | Deferred | Actuarial | Net | Accumulated | Accumulated | |||||||||||||||||||||||||||||||||||||||
Additional | For- | Derivative | Net | Prior | Other | Other | Total | |||||||||||||||||||||||||||||||||||||
Common | Paid | Accumulated | Sale | Gains | Gain | Service | Comprehensive | Comprehensive | Stockholders’ | Comprehensive | ||||||||||||||||||||||||||||||||||
Stock | In Capital | Deficit | Securities | (Losses) | (Loss) | Costs | Income (Loss) | Income (Loss) | Equity | Income (Loss) | ||||||||||||||||||||||||||||||||||
(thousands of dollars) | ||||||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2006 | $ | 99 | $ | 6,174,665 | $ | (2,026,316 | ) | $ | — | $ | (178,402 | ) | $ | (15,463 | ) | $ | (10,869 | ) | $ | (204,734 | ) | $ | 6,159 | $ | 3,949,873 | |||||||||||||||||||
Adjustment to initially apply FIN 48 | (468 | ) | 25,683 | 25,215 | ||||||||||||||||||||||||||||||||||||||||
Balance after initial adjustment to apply FIN 48 | 99 | 6,174,197 | (2,000,633 | ) | — | (178,402 | ) | (15,463 | ) | (10,869 | ) | (204,734 | ) | 6,159 | 3,975,088 | |||||||||||||||||||||||||||||
Net income | 365,107 | 365,107 | $ | 365,107 | ||||||||||||||||||||||||||||||||||||||||
Distribution to CenterPoint Energy, Inc. | (2,487 | ) | (2,487 | ) | ||||||||||||||||||||||||||||||||||||||||
Warrants | 1 | 43 | 44 | |||||||||||||||||||||||||||||||||||||||||
Transactions under stock plans | 6 | 43,659 | 43,665 | |||||||||||||||||||||||||||||||||||||||||
Conversion of convertible senior subordinated notes to common stock | 100 | 100 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||||||
Deferred gain from cash flow hedges, net of tax of $3 million | 3,225 | 3,225 | 3,225 | 3,225 | ||||||||||||||||||||||||||||||||||||||||
Reclassification of net deferred loss from cash flow hedges into net income, net of tax of $58 million | 93,933 | 93,933 | (5,030 | ) | 88,903 | 88,903 | ||||||||||||||||||||||||||||||||||||||
Reclassification of benefits net prior service costs into net income, net of tax of $0 | 1,308 | 1,308 | 1,308 | 1,308 | ||||||||||||||||||||||||||||||||||||||||
Reclassification of benefits actuarial net loss into net income, net of tax of $0 | 356 | 356 | 356 | 356 | ||||||||||||||||||||||||||||||||||||||||
Deferred benefits actuarial net gain, net of tax of $0 | 1,725 | 1,725 | 1,725 | 1,725 | ||||||||||||||||||||||||||||||||||||||||
Comprehensive income | $ | 460,624 | ||||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2007 | $ | 106 | $ | 6,215,512 | $ | (1,635,526 | ) | $ | — | $ | (81,244 | ) | $ | (13,382 | ) | $ | (9,561 | ) | $ | (104,187 | ) | $ | 1,129 | $ | 4,477,034 | |||||||||||||||||||
Net loss | (739,675 | ) | (739,675 | ) | $ | (739,675 | ) | |||||||||||||||||||||||||||||||||||||
Warrants | 5 | 2,070 | 2,075 | |||||||||||||||||||||||||||||||||||||||||
Transactions under stock plans | 19,039 | 19,039 | ||||||||||||||||||||||||||||||||||||||||||
Conversion of convertible senior subordinated notes to common stock | 2,018 | 2,018 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||||||
Reclassification of net deferred loss from cash flow hedges into net loss, net of tax of $20 million | 32,605 | 32,605 | (1,129 | ) | 31,476 | 31,476 | ||||||||||||||||||||||||||||||||||||||
Reclassification of benefits net prior service costs into net loss, net of tax of $0 | 961 | 961 | 961 | 961 | ||||||||||||||||||||||||||||||||||||||||
Reclassification of benefits actuarial net loss into net loss, net of tax of $0 | 188 | 188 | 188 | 188 | ||||||||||||||||||||||||||||||||||||||||
Deferred benefits, net of tax of $1 million and $1 million | (20,111 | ) | (810 | ) | (20,921 | ) | (20,921 | ) | (20,921 | ) | ||||||||||||||||||||||||||||||||||
Unrealized gain onavailable-for-sale securities, net of tax of $3 million | 5,449 | 5,449 | 5,449 | 5,449 | ||||||||||||||||||||||||||||||||||||||||
Comprehensive loss | $ | (722,522 | ) | |||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2008 | $ | 111 | $ | 6,238,639 | $ | (2,375,201 | ) | $ | 5,449 | $ | (48,639 | ) | $ | (33,305 | ) | $ | (9,410 | ) | $ | (85,905 | ) | $ | — | $ | 3,777,644 | |||||||||||||||||||
Net income | 402,812 | 402,812 | $ | 402,812 | ||||||||||||||||||||||||||||||||||||||||
Transactions under stock plans | 3 | 20,609 | 20,612 | |||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||||||
Reclassification of net deferred loss from cash flow hedges into net income, net of tax of $11 million | 14,791 | 14,791 | 14,791 | 14,791 | ||||||||||||||||||||||||||||||||||||||||
Reclassification of benefits net prior service costs into net income, net of tax of $0 | 6,046 | 6,046 | 6,046 | 6,046 | ||||||||||||||||||||||||||||||||||||||||
Reclassification of benefits actuarial net loss into net income, net of tax of $0 | 2,977 | 2,977 | 2,977 | 2,977 | ||||||||||||||||||||||||||||||||||||||||
Deferred benefits, net of tax of $0 and $1 million | 10,091 | 351 | 10,442 | 10,442 | 10,442 | |||||||||||||||||||||||||||||||||||||||
Unrealized gain onavailable-for-sale securities, net of tax of $2 million | 3,063 | 3,063 | 3,063 | 3,063 | ||||||||||||||||||||||||||||||||||||||||
Comprehensive income | $ | 440,131 | ||||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2009 | $ | 114 | $ | 6,259,248 | $ | (1,972,389 | ) | $ | 8,512 | $ | (33,848 | ) | $ | (20,237 | ) | $ | (3,013 | ) | $ | (48,586 | ) | $ | — | $ | 4,238,387 | |||||||||||||||||||
F-6
Table of Contents
(1) | Background and Basis of Presentation |
(2) | Summary of Significant Accounting Policies |
(a) | Use of Estimates and Market Risk and Uncertainties. |
• | the reported amounts of assets, liabilities and equity | |
• | the reported amounts of revenues and expenses | |
• | our disclosure of contingent assets and liabilities at the date of the financial statements |
(b) | Principles of Consolidation. |
F-7
Table of Contents
(c) | Revenues. |
(d) | Fair Value Measurements. |
F-8
Table of Contents
December 31, | ||||||||||||||||||||
2009 | ||||||||||||||||||||
Total | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Reclassifications(1) | Fair Value | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Total derivative assets | $ | 137 | $ | 46 | $ | 4 | $ | (2 | ) | $ | 185 | |||||||||
Total derivative liabilities | 49 | 134 | 32 | (2 | ) | 213 | ||||||||||||||
Cash equivalents(2) | 965 | — | — | — | 965 | |||||||||||||||
Other assets(3) | 34 | — | — | — | 34 |
(1) | Reclassifications are required to reconcile to our consolidated balance sheet presentation. | |
(2) | Represent investments in money market funds and are included in cash and cash equivalents and restricted cash in our consolidated balance sheet. We had $943 million of cash equivalents included in cash and cash equivalents and $22 million of cash equivalents included in restricted cash. | |
(3) | Include $13 million inavailable-for-sale securities (shares in a public exchange) and $21 million in trading securities (rabbi trust investments (which are comprised of mutual funds) associated with our non-qualified deferred compensation plans for key and highly compensated employees). |
December 31, | ||||||||||||||||||||
2008 | ||||||||||||||||||||
Total | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Reclassifications(1) | Fair Value | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Total derivative assets | $ | 125 | $ | 111 | $ | 7 | $ | (3 | ) | $ | 240 | |||||||||
Total derivative liabilities | 17 | 208 | 121 | (3 | ) | 343 | ||||||||||||||
Cash equivalents(2) | 1,004 | — | — | — | 1,004 | |||||||||||||||
Other assets(3) | 29 | — | — | — | 29 |
(1) | Reclassifications are required to reconcile to our consolidated balance sheet presentation. | |
(2) | Represent investments in money market funds and are included in cash and cash equivalents in our consolidated balance sheet. We had $1.0 billion of cash equivalents included in cash and cash equivalents. | |
(3) | Include $8 million inavailable-for-sale securities (shares in a public exchange) and $21 million in trading securities (rabbi trust investments (which is comprised of mutual funds) associated with our non-qualified deferred compensation plans for key and highly compensated employees). |
F-9
Table of Contents
Net Derivatives (Level 3) | ||||||||
2009 | 2008 | |||||||
(in millions) | ||||||||
Balance, beginning of period (net asset (liability)) | $ | (114 | ) | $ | 21 | |||
Total gains (losses) realized/unrealized: | ||||||||
Included in earnings(1) | (79 | ) | 127 | |||||
Purchases, issuances and settlements (net) | 165 | (262 | ) | |||||
Transfers in and/or out of Level 3 (net) | — | — | ||||||
Balance, end of period (net asset (liability)) | $ | (28 | ) | $ | (114 | ) | ||
Changes in unrealized gains (losses) relating to derivative assets and liabilities still held as of December 31, 2009 and 2008: | ||||||||
Revenues | $ | (1 | ) | $ | — | |||
Cost of sales | (23 | ) | 5 | |||||
Total | $ | (24 | ) | $ | 5 | |||
(1) | Recorded in revenues and cost of sales. |
2008 | ||||||||
Loss from | ||||||||
Continuing Operations | ||||||||
before Income Taxes | Net Loss | |||||||
(in millions) | ||||||||
Total derivative liabilities | $ | 15 | (1) | $ | 10 | (2) | ||
(1) | This amount represented a decrease in our net derivative liabilities with the corresponding unrealized gains of $7 million and $8 million recorded in revenues and cost of sales, respectively. | |
(2) | This represents an $0.03 impact on loss per share for 2008. |
2008 | ||||||||||||||||
December 31, | ||||||||||||||||
2009 | ||||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value(1) | Value | Value(1) | |||||||||||||
(in millions) | ||||||||||||||||
Fixed rate debt | $ | 2,355 | $ | 2,333 | $ | 2,623 | $ | 2,168 | ||||||||
Total debt | $ | 2,355 | $ | 2,333 | $ | 2,623 | $ | 2,168 | ||||||||
(1) | We based the fair values of our fixed rate debt on market prices and quotes from an investment bank. |
F-10
Table of Contents
(e) | Derivatives and Hedging Activities. |
Primary | ||||||||
Risk | Purpose for Holding or | Transactions that | Transactions that | |||||
Instrument | Exposure | Issuing Instrument(1) | Physically Flow/Settle(2) | Financially Settle(3) | ||||
Power futures, forward, swap and option contracts | Price risk | Power sales to customers | Revenues | Revenues | ||||
Power purchases related to operations | Cost of sales | Revenues | ||||||
Power purchases/sales related to legacy trading and non-core asset management positions(4) | Revenues | Revenues | ||||||
Natural gas and fuel futures, forward, swap and option contracts | Price risk | Natural gas and fuel sales related to operations | Revenues/ Cost of sales | Cost of sales | ||||
Natural gas sales related to power generation(5) | N/A(6) | Revenues | ||||||
Natural gas and fuel purchases related to operations | Cost of sales | Cost of sales | ||||||
Natural gas and fuel purchases/sales related to legacy trading and non-core asset management positions(4) | Cost of sales | Cost of sales | ||||||
Emission and exchange allowances futures(7) | Price risk | Purchases/sales of emission and exchange allowances | N/A(6) | Revenues/ Cost of sales |
(1) | The purpose for holding or issuing does not impact the accounting method elected for each instrument. |
F-11
Table of Contents
(2) | Includes classification of unrealized gains and losses for derivative transactions reclassified to inventory or intangibles upon settlement. | |
(3) | Includes classification formark-to-market derivatives and amounts reclassified from accumulated other comprehensive income (loss) related to cash flow hedges. | |
(4) | See discussion below regarding trading activities. | |
(5) | Natural gas financial swaps and options transacted to economically hedge generation in the PJM region. | |
(6) | N/A is not applicable. | |
(7) | Includes emission and exchange allowances futures for sulfur dioxide (SO2), nitrogen oxide (NOX) and carbon dioxide (CO2). |
(f) | Credit Risk. |
F-12
Table of Contents
Exposure | Credit | Exposure | Number of | Net Exposure of | ||||||||||||||||
Before | Collateral | Net of | Counterparties | Counterparties | ||||||||||||||||
Credit Rating Equivalent | Collateral(1)(2) | Held(3) | Collateral | >10% | >10% | |||||||||||||||
(dollars in millions) | ||||||||||||||||||||
Investment grade | $ | 126 | $ | 12 | $ | 114 | 3 | (4) | $ | 91 | ||||||||||
Non-investment grade | 3 | 3 | — | — | — | |||||||||||||||
No external ratings: | ||||||||||||||||||||
Internally rated — Investment grade | 48 | — | 48 | 1 | (5) | 42 | ||||||||||||||
Internally rated — Non-investment grade | 17 | 16 | 1 | — | — | |||||||||||||||
Total | $ | 194 | $ | 31 | $ | 163 | 4 | $ | 133 | |||||||||||
(1) | The table includes amounts related to certain contracts classified as discontinued operations in our consolidated balance sheets. These contracts settle through the expiration date in 2013. | |
(2) | The table excludes amounts related to contracts classified as normal purchase/normal sale and non-derivative contractual commitments that are not recorded in our consolidated balance sheets, except for any related accounts receivable. Such contractual commitments contain credit and economic risk if a counterparty does not perform. Nonperformance could have a material adverse impact on our future results of operations, financial condition and cash flows. | |
(3) | Collateral consists of cash, standby letters of credit and other forms approved by management. | |
(4) | These counterparties are two power grid operators and one financial institution. | |
(5) | This counterparty is a financial institution. |
(g) | Property, Plant and Equipment and Depreciation Expense. |
F-13
Table of Contents
Estimated Useful | December 31, | |||||||||||
Lives (Years) | 2009 | 2008 | ||||||||||
(in millions) | ||||||||||||
Electric generation facilities | 5 - 35 | $ | 5,378 | (1) | $ | 5,481 | (2) | |||||
Building and building improvements | 5 - 15 | 13 | 27 | |||||||||
Land improvements | 20 - 35 | 191 | 206 | |||||||||
Other | 3 - 10 | 254 | 241 | |||||||||
Land | 109 | 82 | ||||||||||
Assets under construction | 386 | 381 | ||||||||||
Total | 6,331 | 6,418 | ||||||||||
Accumulated depreciation | (1,729 | ) | (1,598 | ) | ||||||||
Property, plant and equipment, net | $ | 4,602 | $ | 4,820 | ||||||||
(1) | Includes $234 million ($212 million net of accumulated depreciation) relating to leasehold improvements for the Keystone, Shawville and Conemaugh plants. The original depreciation periods for these leasehold improvements range from primarily 10 to 31 years. | |
(2) | Includes $169 million ($152 million net of accumulated depreciation) relating to leasehold improvements for the Keystone, Shawville and Conemaugh plants. |
(h) | Intangible Assets and Amortization Expense. |
(i) | Capitalization of Interest Expense. |
(j) | Cash and Cash Equivalents. |
(k) | Restricted Cash. |
(l) | Inventory. |
F-14
Table of Contents
December 31, | ||||||||
2009 | 2008 | |||||||
(in millions) | ||||||||
Materials and supplies, including spare parts | $ | 187 | $ | 159 | ||||
Coal | 97 | 90 | ||||||
Natural gas | 14 | 25 | ||||||
Heating oil | 34 | 41 | ||||||
Total inventory | $ | 332 | $ | 315 | ||||
(m) | Environmental Costs. |
(n) | Asset Retirement Obligations. |
2009 | 2008 | |||||||
(in millions) | ||||||||
Balance, beginning of period | $ | 19 | $ | 21 | ||||
Revisions in estimated cash flows | 8 | (1) | (1 | ) | ||||
Payments | (4 | ) | (1 | ) | ||||
Accretion expense | 2 | 2 | ||||||
Other, net | 1 | (2 | ) | |||||
Balance, end of period | $ | 26 | $ | 19 | ||||
(1) | Primarily relates to changes in timing of expected closures and higher estimated costs. |
(o) | Repair and Maintenance Costs for Power Generation Assets. |
F-15
Table of Contents
(p) | Deferred Financing Costs. |
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Balance, beginning of period | $ | 54 | $ | 62 | $ | 86 | ||||||
Capitalized | — | — | 31 | |||||||||
Amortized | (7 | ) | (7 | ) | (9 | ) | ||||||
Accelerated amortization/write-offs(1) | (5 | ) | (1 | ) | (41 | ) | ||||||
Channelview deconsolidation | — | — | (5 | ) | ||||||||
Balance, end of period | $ | 42 | $ | 54 | $ | 62 | ||||||
(1) | Amounts are considered a portion of the net carrying value of the related debt and are expensed when accelerated as a component of debt extinguishments. |
(q) | New Accounting Pronouncements Adopted. |
(r) | New Accounting Pronouncements Not Yet Adopted. |
F-16
Table of Contents
(3) | Related Party Transactions |
(4) | Long-Lived Assets Impairments |
• | a significant decrease in the market price of a long-lived asset | |
• | a significant adverse change in the manner an asset is being used or its physical condition | |
• | an adverse action by a regulator or legislature or an adverse change in the business climate | |
• | an accumulation of costs significantly in excess of the amount originally expected for the construction or acquisition of an asset | |
• | a current-period loss combined with a history of losses or the projections of future losses | |
• | a change in our intent about an asset from an intent to hold to a greater than 50% likelihood that an asset will be sold or disposed of before the end of its previously estimated useful life |
F-17
Table of Contents
December 31, 2009 | ||
Undiscounted Cash Flow Scenarios Weightings: | ||
5-year market forecast with escalation(1)(2) | 50% | |
5-year market forecast with fundamental view(1) | 50% | |
Range of Assumptions in Fundamental View: | ||
Demand for power growth per year | 1%-2% | |
After-tax rate of return on new construction(3) | 6.5%-9.5% | |
Spread between natural gas and coal prices, $/MMBTU(4) | $3-$5 |
(1) | For each scenario, the first five years of cash flows are the same. | |
(2) | We assumed an annual 2.5% escalation percentage beyond year five. | |
(3) | The low to mid part of the range represents natural gas-fired plants’ required returns and the mid to high part of the range represents coal-fired and nuclear plants’ required returns. | |
(4) | Natural gas and coal prices are prior to transportation costs. |
F-18
Table of Contents
New Castle | Indian River | |||||||
Valuation approach weightings: | ||||||||
Income approach | 100 | % | 100 | % | ||||
Market-based approach | 0 | % | 0 | % | ||||
Risk-adjusted discount rate for the estimated cash flows | 15 | % | 15 | % |
December 31, | 2009 | |||||||||||||||
2009 | Impairment | |||||||||||||||
Level 1 | Level 2 | Level 3 | Charges | |||||||||||||
(in millions) | ||||||||||||||||
New Castle property, plant and equipment(1) | $ | — | $ | — | $ | 44 | $ | 120 | ||||||||
Indian River property, plant and equipment, water rights, permits and emission allowances(2) | — | — | 52 | 91 | ||||||||||||
Total | $ | — | $ | — | $ | 96 | $ | 211 | ||||||||
(1) | New Castle is in our East Coal segment. | |
(2) | Indian River is in our Other segment. |
F-19
Table of Contents
(5) | Intangible Assets |
(a) | Goodwill. |
As of January 1, 2008 | $ | 327 | ||
Goodwill impairment | (305 | ) | ||
Other changes | (22 | )(1) | ||
As of December 31, 2008 | $ | — | ||
(1) | Relates to the sale of our Channelview plant in July 2008 ($5 million) and the sale of our Bighorn plant in October 2008 ($17 million). See notes 21 and 22. |
• | Income approach—We discounted the expected cash flows of each reporting unit. The discount rate used represented the estimated weighted average cost of capital, which reflected the overall level of inherent risk involved in our operations and cash flows and the rate of return an outside investor would expect to earn. To estimate cash flows beyond the final year of our model, we applied a terminal value multiple to the final year EBITDA. | |
• | Market-based approach—We used the guideline public company method, which focused on comparing our risk profile and growth prospects to select reasonably similar/guideline publicly traded companies. |
F-20
Table of Contents
We also used a public transaction method, which focused on exchange prices in actual transactions as an indicator of fair value. |
F-21
Table of Contents
April | April | September | December | |||||||||||||
2007 | 2008 | 2008 | 2008 | |||||||||||||
Income approach assumptions | ||||||||||||||||
EBITDA multiple for terminal values(1) | 8.0 | 8.0 | 7.0 | 7.0 | ||||||||||||
Risk-adjusted discount rate for our estimated cash flows(2) | 9.5 | % | 10.0 | % | 11.0 | % | 13.0 | % | ||||||||
Market-based approach assumptions | ||||||||||||||||
EBITDA multiple for publicly traded company | 8 | 8 | 5 | 6 | ||||||||||||
Valuation approach weightings(3) | ||||||||||||||||
Income approach | 70 | % | 60 | % | 80 | % | 25 | % | ||||||||
Market-based approach | 30 | % | 40 | % | 20 | % | 75 | % |
(1) | Changed primarily due to market factors affecting peer company comparisons. | |
(2) | Increased primarily due to capital structure of peer company comparisons and increased required rate of return on debt and equity capital of peer companies. | |
(3) | Changed primarily due to increased focus on market-based approaches. See discussion above. |
• | Adjusting the carrying value of our property, plant and equipment to values that would be expected in the current credit and market environment | |
• | Adjusting the carrying value of our emission allowances, which then traded at amounts significantly higher than our book value | |
• | Adjusting the carrying value of our debt, which had a lower fair value than our book value | |
• | Adjusting deferred income taxes for changes in the balances listed above |
F-22
Table of Contents
(b) | Other Intangibles. |
Remaining | ||||||||||||||||||||
Weighted | December 31, | |||||||||||||||||||
Average | 2009 | 2008 | ||||||||||||||||||
Amortization | Carrying | Accumulated | Carrying | Accumulated | ||||||||||||||||
Period (Years) | Amount | Amortization | Amount | Amortization | ||||||||||||||||
(in millions) | ||||||||||||||||||||
SO2 emission allowances(1)(2) | — | (1) | $ | 140 | (3) | $ | (14 | )(3) | $ | 178 | (4) | $ | (51 | )(4) | ||||||
NOx emission allowances(1)(5) | — | (1) | 142 | (3) | (2 | )(3) | 145 | (4) | — | (4) | ||||||||||
Power generation site permits(6) | 23 | 41 | (7) | (7 | )(7) | 73 | (14 | ) | ||||||||||||
Water rights(6) | 5 | 5 | (8) | — | (8) | 67 | (18 | ) | ||||||||||||
Other | — | 1 | — | — | — | |||||||||||||||
Total | $ | 329 | $ | (23 | ) | $ | 463 | $ | (83 | ) | ||||||||||
(1) | Amortized to amortization expense on aunits-of-production basis. As of December 31, 2009, we have recorded (a) SO2 emission allowances through the 2039 vintage year and (b) NOx emission allowances through the 2039 vintage year. | |
(2) | During 2009, 2008 and 2007, we purchased $19 million, $48 million and $89 million, respectively, of SO2 emission allowances. | |
(3) | During 2009, we wrote off the fully amortized carrying amount and accumulated amortization for SO2 and NOx emission allowances surrendered of $56 million and $6 million, respectively. | |
(4) | During 2008, we wrote off the fully amortized carrying amount and accumulated amortization for SO2 and NOx emission allowances surrendered of $313 million and $200 million, respectively. | |
(5) | During 2009, 2008 and 2007, we purchased $3 million, $13 million and $3 million, respectively, of NOx emission allowances. | |
(6) | Amortized to amortization expense on a straight-line basis over the estimated lives. | |
(7) | During 2009, we recognized an impairment charge of $21 million relating to permits at our Indian River plant. See note 4. | |
(8) | During 2009, we recognized an impairment charge of $43 million relating to water rights at our Indian River plant. See note 4. |
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Amortization of emission allowances | $ | 24 | $ | 68 | $ | 110 | ||||||
Amortization of power generation site permits, water rights and other | 4 | 4 | 5 | |||||||||
Total amortization expense | $ | 28 | $ | 72 | $ | 115 | ||||||
2010 | $ | 17 | (1) | |
2011 | 15 | (1) | ||
2012 | 15 | (1) | ||
2013 | 14 | (1) | ||
2014 | 14 | (1) |
(1) | These amounts do not include expected amortization expense of emission allowances not purchased as of December 31, 2009. |
F-23
Table of Contents
(6) | Derivatives and Hedging Activities |
December 31, 2009 | ||||||||
Expected to be | ||||||||
Reclassified into | ||||||||
Results of Operations | ||||||||
At the End of the Period | in Next 12 Months | |||||||
(in millions) | ||||||||
De-designated cash flow hedges, net of tax(1)(2) | $ | 34 | $ | 14 | ||||
(1) | No component of the derivatives’ gain or loss was excluded from the assessment of effectiveness. | |
(2) | During 2009, 2008 and 2007, $0 was recognized in our results of operations as a result of the discontinuance of cash flow hedges because it was probable that the forecasted transaction would not occur. |
Derivative Assets | Derivative Liabilities | Net Derivative | ||||||||||||||||||
Current | Long-Term | Current | Long-Term | Assets (Liabilities) | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Non-trading | $ | 66 | $ | 53 | $ | (105 | ) | $ | (61 | ) | $ | (47 | ) | |||||||
Trading | 66 | — | (47 | ) | — | 19 | ||||||||||||||
Total derivatives | $ | 132 | $ | 53 | $ | (152 | ) | $ | (61 | ) | $ | (28 | ) | |||||||
Notional Volumes(2) | ||||||||||||
Commodity | Unit(1) | Current | Long-term | |||||||||
(in millions) | ||||||||||||
Power | MWh | (5 | ) | (6 | ) | |||||||
Capacity energy | MWh | (2 | ) | (1 | ) | |||||||
Natural gas(3) | MMBTU | (3 | ) | 24 | ||||||||
Natural gas basis | MMBTU | (5 | ) | — | ||||||||
Coal | MMBTU | 122 | 176 |
(1) | MWh is megawatt hours and MMBTU is million British thermal units. | |
(2) | Negative amounts indicate net forward sales. | |
(3) | Includes current and long-term volumes related to purchases of put options. |
F-24
Table of Contents
Derivatives not Designated as Hedging Instruments(1) | Revenues | Cost of Sales | ||||||
(in millions) | ||||||||
Non-Trading Commodity Contracts: | ||||||||
Unrealized(2) | $ | (44 | ) | $ | 77 | |||
Realized(3)(4)(5) | 371 | (217 | ) | |||||
Total non-trading | $ | 327 | $ | (140 | ) | |||
Trading Commodity Contracts: | ||||||||
Unrealized(2) | $ | — | $ | (11 | ) | |||
Realized(3) | — | 21 | ||||||
Total trading | $ | — | $ | 10 | ||||
(1) | We had interest rate swaps that were liquidated in 2002 and the related deferred losses in accumulated other comprehensive loss are being amortized into interest expense through 2012. An insignificant amount was amortized during 2009 and 2008. We amortized $5 million during 2007. | |
(2) | As discussed in note 2(e), during 2007, we de-designated our remaining cash flow hedges; the amount reflected here subsequent to that time relates to previously measured ineffectiveness reversing due to settlement of the derivative contracts. | |
(3) | Does not include realized gains or losses associated with cash month transactions, non-derivative transactions or derivative transactions that qualify for the normal purchase/normal sale exception. | |
(4) | Excludes settlement value of fuel contracts classified as inventory upon settlement. | |
(5) | Includes gains or losses from de-designated cash flow hedges reclassified from accumulated other comprehensive loss due to settlement of the derivative contracts. See note 2(e). |
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Revenues | $ | 1 | $ | (8 | ) | $ | 1 | |||||
Cost of sales | 19 | 33 | 18 | |||||||||
Total(1) | $ | 20 | $ | 25 | $ | 19 | ||||||
(1) | Includes realized and unrealized gains and losses on both derivative instruments and non-derivative instruments. |
F-25
Table of Contents
(7) | Debt |
(a) | Overview. |
December 31, | ||||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Stated | Stated | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Rate(1) | Long-term | Current | Rate(1) | Long-term | Current | |||||||||||||||||||
(in millions, except interest rates) | ||||||||||||||||||||||||
Facilities, Bonds and Notes: | ||||||||||||||||||||||||
RRI Energy: | ||||||||||||||||||||||||
Senior secured revolver due 2012 | 1.98 | % | $ | — | $ | — | 3.18 | % | $ | — | $ | — | ||||||||||||
Senior secured notes due 2014 | 6.75 | 279 | — | 6.75 | 498 | (2) | — | |||||||||||||||||
Senior unsecured notes due 2014 | 7.625 | 575 | — | 7.625 | 575 | — | ||||||||||||||||||
Senior unsecured notes due 2017 | 7.875 | 725 | — | 7.875 | 725 | — | ||||||||||||||||||
Subsidiary Obligations: | ||||||||||||||||||||||||
Orion Power Holdings, Inc. senior notes due 2010 (unsecured) | 12.00 | — | 400 | 12.00 | 400 | — | ||||||||||||||||||
PEDFA(3) fixed-rate bonds due 2036 | 6.75 | 371 | — | 6.75 | 408 | (4) | — | |||||||||||||||||
Total facilities, bonds and notes | 1,950 | 400 | 2,606 | — | ||||||||||||||||||||
Other: | ||||||||||||||||||||||||
Adjustment to fair value of debt(5) | — | 5 | 4 | 13 | ||||||||||||||||||||
Total other debt | — | 5 | 4 | 13 | ||||||||||||||||||||
Total debt | $ | 1,950 | $ | 405 | $ | 2,610 | (6) | $ | 13 | |||||||||||||||
(1) | The weighted average stated interest rates are as of December 31, 2009 or 2008. | |
(2) | Excludes $169 million classified as discontinued operations. See note 23. | |
(3) | PEDFA is the Pennsylvania Economic Development Financing Authority. These bonds were issued for our Seward plant. | |
(4) | Excludes $92 million classified as discontinued operations. See note 23. | |
(5) | Debt acquired in the acquisition of Orion Power Holdings, Inc. (Orion Power Holdings) and subsidiaries (Orion Power) was adjusted to fair value as of the acquisition date. Included in interest expense is amortization of $12 million, $11 million and $11 million for valuation adjustments for debt during 2009, 2008 and 2007, respectively. | |
(6) | Excludes $261 million classified as discontinued operations. See note 23. |
Total Committed | Drawn | Letters | Unused | |||||||||||||
Credit | Amount | of Credit | Amount | |||||||||||||
(in millions) | ||||||||||||||||
RRI Energy senior secured revolver due 2012 | $ | 500 | $ | — | $ | — | $ | 500 | ||||||||
RRI Energy letter of credit facility due 2014 | 250 | — | 81 | 169 | ||||||||||||
Total | $ | 750 | $ | — | $ | 81 | $ | 669 | ||||||||
F-26
Table of Contents
RRI Energy | ||||||||
RRI Energy | Consolidated | |||||||
(in millions) | ||||||||
2010 | $ | — | $ | 400 | ||||
2011 | — | — | ||||||
2012 | — | — | ||||||
2013 | — | — | ||||||
2014 | 854 | 854 | ||||||
2015 and thereafter | 725 | 1,096 | ||||||
$ | 1,579 | $ | 2,350 | |||||
(b) | Significant Financing Activity. |
• | Senior secured 6.75% notes: |
• | $127 million through cash tender offer | |
• | $92 million through open market purchases | |
• | These transactions resulted in net loss on extinguishments of $6 million related to the difference between the amounts paid and the net carrying value of the debt |
• | PEDFA fixed-rate bonds: |
• | $35 million through open market purchases | |
• | $2 million through cash tender offer | |
• | These transactions resulted in net loss on extinguishments of $2 million related to the difference between the amounts paid and the net carrying value of the debt |
• | $261 million of our senior secured 6.75% notes ($169 million) and PEDFA fixed-rate bonds ($92 million) purchased with the net proceeds from the sale of our Texas retail business and classified as discontinued operations (see note 23) |
• | Downsize of: |
• | $700 million to $500 million senior secured revolver and extension of maturity from 2009 to 2012 | |
• | $300 million to $250 million senior secured letter of credit facility and extension of maturity from 2010 to 2014 |
• | Issuance of: |
• | $575 million 7.625% senior unsecured notes due 2014 | |
• | $725 million 7.875% senior unsecured notes due 2017 |
• | Repayment of: |
• | $521 million 9.25% senior secured notes due 2010 | |
• | $537 million 9.50% senior secured notes due 2013 | |
• | $400 million senior secured term loan due 2010 |
F-27
Table of Contents
(c) | Credit Facilities and Debt. |
F-28
Table of Contents
(8) | Stockholders’ Equity |
Common Stock | ||||
(shares in thousands) | ||||
As of January 1, 2007 | 337,623 | |||
Issued to benefit plans | 5,562 | |||
Issued for warrants | 1,384 | |||
Issued for converted debt | 11 | |||
As of December 31, 2007 | 344,580 | |||
Issued to benefit plans | 1,064 | |||
Issued for warrants | 3,958 | |||
Issued for converted debt | 211 | |||
As of December 31, 2008 | 349,813 | |||
Issued to benefit plans | 2,973 | |||
As of December 31, 2009 | 352,786 | |||
(9) | Earnings (Loss) Per Share |
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Loss from continuing operations (basic and diluted) | $ | (479 | ) | $ | (110 | ) | $ | (202 | ) | |||
2009 | 2008 | 2007 | ||||||||||
(shares in thousands) | ||||||||||||
Weighted average shares outstanding (basic and diluted) | 351,396 | 347,823 | 342,467 | |||||||||
2009 | 2008 | 2007 | ||||||||||
(shares in thousands, dollars in millions) | ||||||||||||
Shares excluded from the calculation of diluted earnings/loss per share | 537 | (1) | 5,290 | (2) | 10,234 | (2) | ||||||
Shares excluded from the calculation of diluted earnings/loss per share because the exercise price exceeded the average market price | 4,729 | (3) | 2,270 | (3) | 2,005 | (3) |
(1) | Primarily includes stock options and restricted stock. |
F-29
Table of Contents
(2) | Primarily includes stock options and warrants. | |
(3) | Includes stock options. |
(10) | Stock-Based Incentive Plans |
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Stock-based incentive plans compensation expense (pre-tax) | $ | 9 | $ | 9 | $ | 20 | ||||||
Income tax impact (before impact of the valuation allowances) | $ | (2 | ) | $ | (2 | ) | $ | (7 | ) | |||
Time-based stock options | Black-Scholes option-pricing model value on the grant date | |
Time-based restricted stock(1) | Market price of our common stock on the grant date | |
Time-based cash units(2) | Market price of our common stock on each reporting measurement date | |
Performance-based options(3) | Black-Scholes option-pricing model value on each reporting measurement date until accounting grant date | |
Market-based cash units(2) | Monte Carlo simulation valuation model value on each reporting measurement date | |
Employee stock purchase plan | Black-Scholes option-pricing model value on the first day of the offering period |
(1) | Restricted stock and restricted stock units are referred to as “restricted stock.” | |
(2) | These are liability-classified awards. | |
(3) | No awards were granted during 2009, 2008 and 2007. |
F-30
Table of Contents
2009 | ||||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average Remaining | Aggregate | ||||||||||||||
Exercise | Contractual | Intrinsic | ||||||||||||||
Options | Price | Terms (Years) | Value | |||||||||||||
(in millions) | ||||||||||||||||
Beginning of period | 5,718,587 | $ | 15.58 | 4 | $ | 2 | ||||||||||
Exercised | (1,352,237 | )(1) | 4.57 | |||||||||||||
Forfeited | (154,252 | ) | 20.75 | |||||||||||||
Expired | (860,768 | ) | 20.97 | |||||||||||||
End of period | 3,351,330 | (2)(3) | 18.40 | 3 | 1 | |||||||||||
Exercisable at the end of period | 3,025,856 | 17.97 | 2 | 1 | ||||||||||||
(1) | Received proceeds of $6 million. Intrinsic value was $3 million on the exercise dates. No tax benefits were realized in 2009 due to our net operating loss carryforwards. | |
(2) | We estimate that 48,018 of these will be forfeited. | |
(3) | As of December 31, 2009, the total compensation cost related to nonvested time-based stock options not yet recognized and the weighted-average period over which it is expected to be recognized is $2 million and one year, respectively. |
2008 | 2007 | |||||||
(in millions, except per unit amounts) | ||||||||
Weighted average grant date fair value of the time-based options granted | $ | 9.88 | $ | 7.32 | ||||
Proceeds from exercise of time-based options | 2 | 21 | ||||||
Intrinsic value of exercised time-based options | 3 | 26 | ||||||
Tax benefits realized | —(1 | ) | —(1 | ) |
(1) | None realized due to our net operating loss carryforwards. |
2008 | ||||
Expected term in years(1) | 6 | |||
Estimated volatility(2) | 38.37 | % | ||
Risk-free interest rate | 3.17 | % | ||
Dividend yield | 0 | % | ||
Weighted-average fair value | $ | 9.88 |
(1) | The expected term is based on a binomial lattice model. | |
(2) | We estimate volatility based on historical and implied volatility of our common stock. |
F-31
Table of Contents
2009 | ||||||||
Weighted | ||||||||
Average Grant | ||||||||
Shares | Date Fair Value | |||||||
Beginning of period | 1,168,582 | $ | 16.08 | |||||
Granted | 985,898 | 5.09 | ||||||
Vested | (499,646 | )(1) | 8.94 | |||||
Forfeited | (339,655 | ) | 17.39 | |||||
End of period | 1,315,179(2 | ) | 10.21 | |||||
December 31, 2009 total compensation cost related to nonvested time-based restricted stock awards not yet recognized | $ | 5 million | ||||||
Weighted average period over which the nonvested time-based restricted stock is expected to be recognized | 2 years | |||||||
(1) | Based on the market price of our common stock on the vesting date, $2 million in fair value vested. | |
(2) | We estimate that 225,001 of these will be forfeited. |
2008 | 2007 | |||||||
(in millions, except per unit amounts) | ||||||||
Fair value of time-based restricted stock that vested based on market price of our common stock on the vesting date | $ | 6 | $ | 9 | ||||
Weighted-average grant date fair value of time-based restricted stock granted | 19.47 | 18.91 |
F-32
Table of Contents
2009 | ||||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average Remaining | Aggregate | ||||||||||||||
Exercise | Contractual | Intrinsic | ||||||||||||||
Options | Price | Term (Years) | Value | |||||||||||||
(in millions) | ||||||||||||||||
Beginning of period | 2,854,000 | $ | 8.34 | 5 | $ | — | ||||||||||
Expired | (715,200 | ) | 8.94 | |||||||||||||
End of period | 2,138,800 | 8.14 | 3 | — | ||||||||||||
Exercisable at end of period | 2,138,800 | 8.14 | 3 | — | ||||||||||||
Weighted average grant date fair value | N/A | |||||||||||||||
Expected term in years(1) | 3 | |||
Estimated volatility(2) | 31.21 | % | ||
Risk-free interest rate | 4.9 | % | ||
Dividend yield | 0 | % | ||
Weighted-average fair value | 7.52 |
(1) | The expected term is based on a projection of exercise behavior considering the contractual terms and the participants of the option awards. | |
(2) | We estimated volatility based on historical and implied volatility of our common stock. |
2009 | 2008 | 2007 | ||||||||||
Expected term in years | 0.5 | 0.5 | 0.5 | |||||||||
Estimated volatility(1) | 131.35 | % | 37.44 | % | 21.32 | % | ||||||
Risk-free interest rate | 0.30 | % | 2.94 | % | 5.07 | % | ||||||
Dividend yield | 0 | % | 0 | % | 0 | % | ||||||
Weighted-average fair value | $ | 2.90 | $ | 6.42 | $ | 3.87 |
(1) | We estimated volatility based on the historical volatility of our common stock. |
F-33
Table of Contents
(11) | Pension and Postretirement Benefits |
Pension | Postretirement Benefits | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in millions) | ||||||||||||||||
Change in Benefit Obligations | ||||||||||||||||
Beginning of year | $ | 103 | $ | 98 | $ | 81 | $ | 78 | ||||||||
Service cost | 5 | 6 | 1 | 1 | ||||||||||||
Interest cost | 6 | 5 | 4 | 4 | ||||||||||||
Benefits paid | (5 | ) | (4 | ) | (2 | ) | (1 | ) | ||||||||
Settlements(1) | — | (2 | ) | — | — | |||||||||||
Plans amendments/adjustments | 1 | 1 | (3 | ) | 2 | |||||||||||
Actuarial (gain) loss | 4 | (1 | ) | (7 | ) | (3 | ) | |||||||||
Special termination benefits | 2 | — | 1 | — | ||||||||||||
End of year | $ | 116 | $ | 103 | $ | 75 | $ | 81 | ||||||||
Change in Plans’ Assets | ||||||||||||||||
Beginning of year | $ | 54 | $ | 75 | $ | — | $ | — | ||||||||
Employer contributions | 20 | 6 | 2 | 1 | ||||||||||||
Benefits paid | (5 | ) | (4 | ) | (2 | ) | (1 | ) | ||||||||
Effect of settlements(1) | — | (2 | ) | — | — | |||||||||||
Actual investment return | 12 | (21 | ) | — | — | |||||||||||
End of year | $ | 81 | $ | 54 | $ | — | $ | — | ||||||||
Funded status | $ | (35 | ) | $ | (49 | ) | $ | (75 | ) | $ | (81 | ) |
(1) | Settlement during 2008 relates to termination of the Channelview plan. See note 21. |
Pension | Postretirement Benefits | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in millions) | ||||||||||||||||
Current liabilities | $ | — | $ | — | $ | (4 | ) | $ | (3 | ) | ||||||
Noncurrent liabilities | (35 | ) | (49 | ) | (71 | ) | (78 | ) | ||||||||
Net amount recognized | $ | (35 | ) | $ | (49 | ) | $ | (75 | ) | $ | (81 | ) | ||||
F-34
Table of Contents
Pension | Postretirement Benefits | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Service cost | $ | 5 | $ | 6 | $ | 6 | $ | 1 | $ | 1 | $ | 2 | ||||||||||||
Interest cost | 6 | 5 | 5 | 4 | 4 | 4 | ||||||||||||||||||
Expected return on plan assets | (4 | ) | (5 | ) | (4 | ) | — | — | — | |||||||||||||||
Adjustment to annual expense | — | — | — | — | 2 | — | ||||||||||||||||||
Net amortization | 4 | 1 | 1 | 1 | 1 | — | ||||||||||||||||||
Net curtailments (gain) loss | 5 | — | — | (3 | ) | — | — | |||||||||||||||||
Special termination benefits | 2 | — | — | 1 | — | — | ||||||||||||||||||
Net periodic benefit costs | $ | 18 | $ | 7 | $ | 8 | $ | 4 | $ | 8 | $ | 6 | ||||||||||||
Pension | Postretirement Benefits | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Discount rate | 5.50 | % | 5.75 | % | 5.50 | % | 5.75 | % | ||||||||
Rate of compensation increase | 3.0 | % | 3.0 | % | N/A | N/A |
Pension | Postretirement Benefits | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
Discount rate | 5.75 | % | 5.75 | % | 5.75 | % | 5.75 | % | 5.75 | % | 5.75 | % | ||||||||||||
Rate of compensation increase | 3.0 | % | 3.0 | % | 3.0 | % | N/A | N/A | N/A | |||||||||||||||
Expected long-term rate of return on plans assets | 7.5 | % | 7.5 | % | 7.5 | % | N/A | N/A | N/A |
F-35
Table of Contents
2009 | 2008 | 2007 | ||||||||||
Health care cost trend rate assumed for next year(1) | 8.0 | % | 7.9 | % | 8.3 | % | ||||||
Rate to which the cost trend rate is assumed to gradually decline (ultimate trend rate)(1) | 5.5 | % | 5.5 | % | 5.5 | % | ||||||
Year that the rate reaches the ultimate trend rate | 2015 | 2015 | 2015 |
(1) | Represents blended rate for medical and prescription drug costs. |
One-Percentage Point | ||||||||
Increase | Decrease | |||||||
(in millions) | ||||||||
Effect on service and interest cost | $ | 1 | $ | (1 | ) | |||
Effect on accumulated postretirement benefit obligation | 8 | (7 | ) |
Percentage of Plan | ||||||||||||
Assets as of December 31, | Target Allocation(1) | |||||||||||
2009 | 2008 | 2010 | ||||||||||
Domestic equity securities | 34 | % | 38 | % | 35 | % | ||||||
International equity securities | 26 | 20 | 25 | |||||||||
Global equity securities | 10 | 9 | 10 | |||||||||
Debt securities | 30 | 33 | 30 | |||||||||
Total | 100 | % | 100 | % | 100 | % | ||||||
(1) | Our Benefits Committee has determined an allowable range for each category; these percentages represent the mid-point for each respective range. |
F-36
Table of Contents
Asset Class | Index | Weight | ||||
Domestic equity securities | Dow Jones U.S. Total Stock Market Index | 40 | % | |||
International equity securities | MSCI All Country World Ex-U.S. Index | 20 | ||||
Global equity securities | MSCI All Country World Index | 10 | ||||
Debt securities | Barclays Capital Aggregate Bond Index | 30 | ||||
100 | % | |||||
Level 1 | Level 2 | Level 3 | ||||||||||
(in millions) | ||||||||||||
Domestic equity securities(1) | $ | 28 | $ | — | $ | — | ||||||
International equity securities(2) | 21 | — | — | |||||||||
Global equity securities(3) | 8 | — | — | |||||||||
Debt securities(4) | 24 | — | — | |||||||||
Total | $ | 81 | $ | — | $ | — | ||||||
(1) | Comprised of large cap stocks. | |
(2) | Comprised of large cap foreign stocks. | |
(3) | Comprised of both foreign and domestic multi-cap stocks. | |
(4) | Comprised of intermediate-term, investment grade bonds. |
Postretirement | ||||||||
Pension | Benefits | |||||||
(in millions) | ||||||||
2010 | $ | 5 | $ | 4 | ||||
2011 | 5 | 4 | ||||||
2012 | 6 | 5 | ||||||
2013 | 6 | 5 | ||||||
2014 | 6 | 6 | ||||||
2015-2019 | 44 | 32 |
F-37
Table of Contents
(12) | Savings Plan |
(13) | Collective Bargaining Agreements |
(14) | Income Taxes |
(a) | Summary. |
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Current: | ||||||||||||
Federal | $ | (7 | ) | $ | 7 | $ | — | |||||
State | 2 | 29 | (7 | ) | ||||||||
Total current | (5 | ) | 36 | (7 | ) | |||||||
Deferred: | ||||||||||||
Federal | (103 | ) | 57 | (127 | ) | |||||||
State | (17 | ) | 43 | (26 | ) | |||||||
Total deferred | (120 | ) | 100 | (153 | ) | |||||||
Income tax expense (benefit) from continuing operations | $ | (125 | ) | $ | 136 | $ | (160 | ) | ||||
Income tax expense (benefit) from discontinued operations | $ | 410 | $ | (263 | ) | $ | 295 | |||||
2009 | 2008 | 2007 | ||||||||||
Federal statutory rate | (35 | )% | 35 | % | (35 | )% | ||||||
Additions (reductions) resulting from: | ||||||||||||
Federal tax uncertainties | — | 2 | (2 | ) | ||||||||
Federal valuation allowance(1) | 16 | 67 | (7 | ) | ||||||||
State income taxes, net of federal income taxes | (1 | )(2) | 180 | (3) | (4 | ) | ||||||
Goodwill impairment | — | 201 | — | |||||||||
Other, net | (1 | ) | 35 | (4) | 4 | |||||||
Effective rate | (21 | )% | 520 | % | (44 | )% | ||||||
(1) | Our changes to the federal valuation allowance are recorded at RRI Energy, Inc. | |
(2) | Of this percentage, $32 million (5%) relates to an increase in our state valuation allowances. |
F-38
Table of Contents
(3) | Of this percentage, $36 million (142%) relates to an increase in our state valuation allowances. | |
(4) | Of this percentage, $6 million (23%) relates to write-off of book goodwill due to the sale of our Bighorn plant in October 2008. |
December 31, | ||||||||
2009 | 2008 | |||||||
(in millions) | ||||||||
Deferred tax assets: | ||||||||
Current: | ||||||||
Derivative liabilities, net | $ | 10 | $ | 18 | ||||
Employee benefits | 4 | 3 | ||||||
Federal valuation allowance | (3 | ) | (1 | ) | ||||
State valuation allowances | (2 | ) | (5 | ) | ||||
Other | 5 | 9 | ||||||
Total current deferred tax assets | $ | 14 | $ | 24 | ||||
Long-term: | ||||||||
Employee benefits | $ | 66 | $ | 71 | ||||
Net operating loss carryforwards | 638 | 573 | ||||||
Alternative minimum tax credit | 2 | 9 | ||||||
Environmental reserves | 13 | 11 | ||||||
Derivative liabilities, net | 15 | 27 | ||||||
Other | 53 | 42 | ||||||
Federal valuation allowance | (126 | ) | (38 | ) | ||||
State valuation allowances | (133 | ) | (98 | ) | ||||
Other valuation allowances | — | (14 | ) | |||||
Total long-term deferred tax assets | 528 | 583 | ||||||
Total deferred tax assets | $ | 542 | $ | 607 | ||||
Deferred tax liabilities: | ||||||||
Long-term: | ||||||||
Depreciation and amortization | $ | 486 | $ | 562 | ||||
Other | 7 | 7 | ||||||
Total long-term deferred tax liabilities | 493 | 569 | ||||||
Total deferred tax liabilities | $ | 493 | $ | 569 | ||||
Accumulated deferred income taxes, net | $ | 49 | $ | 38 | ||||
F-39
Table of Contents
(b) | Tax Attributes Carryovers. |
Statutory | ||||||||
December 31, | Carryforward | Expiration | ||||||
2009 | Period | Year(s) | ||||||
(in millions) | (in years) | |||||||
Net operating loss carryforwards: | ||||||||
Federal | $ | 1,251 | 20 | 2024 through 2029 | ||||
State | 3,922 | 7 to 20 | 2010 through 2029 | |||||
State tax credit carryforwards | 6 | (1)(2) | 1 to 20 | 2010 through 2027 | ||||
Alternative minimum tax credit carryforwards | 2 | (2) | Unlimited | None |
(1) | Relates primarily to Texas margins tax credit carryforward. | |
(2) | Amount reflects the tax effect. |
(c) | Valuation Allowances. |
Capital, Foreign | ||||||||||||
Federal | State | and Other | ||||||||||
(in millions) | ||||||||||||
As of January 1, 2007 | $ | 25 | $ | 85 | $ | 18 | ||||||
Changes in valuation allowances | (2 | )(1)(2) | (18 | )(2) | 4 | |||||||
Changes in valuation allowance included in accumulated other comprehensive loss | 4 | — | — | |||||||||
Channelview deconsolidation | (13 | ) | — | — | ||||||||
As of December 31, 2007 | 14 | 67 | 22 | |||||||||
Changes in valuation allowances | 18 | (3) | 36 | (4) | (8 | ) | ||||||
Changes in valuation allowance included in accumulated other comprehensive loss | 7 | — | — | |||||||||
As of December 31, 2008 | 39 | 103 | 14 | |||||||||
Changes in valuation allowances | 97 | (5) | 32 | (5) | (14 | ) | ||||||
Changes in valuation allowance included in accumulated other comprehensive loss | (7 | ) | — | — | ||||||||
As of December 31, 2009 | $ | 129 | $ | 135 | $ | — | ||||||
(1) | During 2007, we submitted a revision to taxable income to the Internal Revenue Service filed in our 2003 federal income tax return, which resulted in an increase in our net deferred tax assets related to our net operating losses, which was offset by an increase in our valuation allowance of $19 million. | |
(2) | Net decrease primarily due to 2007 taxable income. | |
(3) | Net increase primarily due to 2008 goodwill impairment. | |
(4) | Net increase primarily due to 2008 taxable loss. | |
(5) | Net increase primarily due to 2009 taxable loss and long-lived assets impairments. |
F-40
Table of Contents
(d) | Income Tax Uncertainties. |
Adoption Effect on | ||||
January 1, 2007 | ||||
Increase (Decrease) | ||||
(in millions) | ||||
Goodwill | $ | (2 | ) | |
Other long-term liabilities | (27 | ) | ||
Accumulated deficit | (25 | ) |
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Beginning of year | $ | 3 | $ | 1 | $ | 4 | (1) | |||||
Increases related to prior years | 1 | 22 | 11 | |||||||||
Decreases related to prior years | (1 | ) | (20 | ) | (11 | ) | ||||||
Increases related to current year | — | — | — | |||||||||
Settlements | — | — | (3 | ) | ||||||||
Lapses in the statute of limitations | — | — | — | |||||||||
End of year | $ | 3 | $ | 3 | $ | 1 | ||||||
(1) | Immediately after adoption. |
December 31, | ||||||||
2009 | 2008 | |||||||
(in millions) | ||||||||
Interest and penalties | $ | 1 | $ | 1 |
Subject to Examination | Currently Under Audit | |||||||
Federal | 2002 to 2009 | 2002 to 2008 | ||||||
Texas | 2000 to 2009 | 2000 to 2006 | ||||||
Pennsylvania | 2005 to 2009 | 2005 to 2006 | ||||||
California | 2003 to 2009 | 2003 to 2006 |
F-41
Table of Contents
(15) | Commitments |
(a) | Lease Commitments. |
F-42
Table of Contents
REMA Leases | Other(1)(2) | Total | ||||||||||
(in millions) | ||||||||||||
2010 | $ | 52 | $ | 64 | $ | 116 | ||||||
2011 | 63 | 63 | 126 | |||||||||
2012 | 56 | 35 | 91 | |||||||||
2013 | 64 | 25 | 89 | |||||||||
2014 | 64 | 25 | 89 | |||||||||
2015 and thereafter | 635 | 97 | 732 | |||||||||
Total | $ | 934 | $ | 309 | $ | 1,243 | ||||||
(1) | Primarily includes tolling arrangement and rental agreements for office space. | |
(2) | Excludes projected sublease income on office space of $47 million. |
(b) | Guarantees and Indemnifications. |
F-43
Table of Contents
December 31, 2009 | ||||||||||||||||
Carrying Amount | ||||||||||||||||
Stated | of Liability | |||||||||||||||
Maximum | Recorded on | |||||||||||||||
Potential | Balance Sheet of | |||||||||||||||
Amount of | Assets Held | RRI Energy (the | ||||||||||||||
Type of Guarantee | Future Payments | Amount Utilized(1) | as Collateral | Parent) | ||||||||||||
(in millions) | ||||||||||||||||
Commodity obligations(2) | $ | 1,634 | $ | 64 | $ | — | $ | — | ||||||||
Standby letters of credit(3) | 88 | 77 | — | — | ||||||||||||
Payment and performance obligations under leases(4) | 3 | — | — | — | ||||||||||||
Non-qualified benefits of CenterPoint’s retirees(5) | 53 | 53 | — | — | ||||||||||||
Total guarantees | $ | 1,778 | $ | 194 | $ | — | $ | — | ||||||||
(1) | This represents the estimated portion of the maximum potential amount of future payments that is utilized as of December 31, 2009. For those guarantees related to obligations that are recorded as liabilities by our subsidiaries, this includes the recorded amount. | |
(2) | RRI Energy has guaranteed the performance of certain of its wholly-owned subsidiaries’ commodity obligations. These guarantees were provided to counterparties in order to facilitate physical and financial agreements in gas, oil, transportation and related commodities and services. Some of these guarantees have varying expiration dates and some can be terminated by RRI Energy upon notice. | |
(3) | RRI Energy has outstanding standby letters of credit, which guarantee the performance of certain of its wholly-owned subsidiaries. As of December 31, 2009, these letters of credit expire on various dates through 2011. |
F-44
Table of Contents
(4) | RRI Energy has guaranteed the payment obligations of certain wholly-owned subsidiaries arising under leases for certain facilities. As of December 31, 2009, these guarantees expire over varying years through 2013. | |
(5) | See above. |
(c) | Other Commitments. |
Fuel | Transportation | |||||||||||
Commitments(1) | Commitments(1) | |||||||||||
Fixed | Variable | Fixed | ||||||||||
Pricing | Pricing | Pricing | ||||||||||
(in millions) | ||||||||||||
2010 | $ | 174 | $ | — | $ | 55 | ||||||
2011 | 62 | — | (2) | 61 | ||||||||
2012 | 12 | — | (2) | 69 | ||||||||
2013 | — | — | (2) | 69 | ||||||||
2014 | — | — | 70 | |||||||||
2015 and thereafter | — | — | 400 | |||||||||
Total | $ | 248 | $ | — | $ | 724 | ||||||
(1) | As of December 31, 2009, the maximum remaining terms under any individual fuel supply contract is three years and any transportation contract is 14 years. | |
(2) | In addition, for 2011 through 2013, we have committed to purchase volumes of 176 million MMBTU under some coal contracts for which the contract prices are subject to negotiation and agreement prior to the beginning of each year and thus the amounts are not included in this table. |
F-45
Table of Contents
2010 | $ | 31 | ||
2011 | 16 | |||
2012 | 6 | |||
2013 | 6 | |||
2014 | 29 | |||
2015 and thereafter | 417 | |||
Total | $ | 505 | ||
Fixed Pricing | ||||
(in millions) | ||||
2010 | $ | 555 | ||
2011 | 474 | |||
2012 | 440 | |||
2013 | 198 | |||
2014 | 100 | |||
Total | $ | 1,767 | ||
2010 | $ | 64 | ||
2011 | 5 | |||
2012 | 3 | |||
2013 | 3 | |||
2014 | 5 | |||
2015 and thereafter | 6 | |||
Total | $ | 86 | ||
(16) | Contingencies |
(a) | Pending Natural Gas Litigation. |
F-46
Table of Contents
(b) | Environmental Matters. |
F-47
Table of Contents
(c) | Other. |
(17) | Settlements and Other Charges |
F-48
Table of Contents
(18) | Supplemental Guarantor Information |
F-49
Table of Contents
2009 | ||||||||||||||||||||
RRI Energy | Guarantors | Non-Guarantors | Adjustments(1) | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Revenues | $ | — | $ | 1,810 | $ | 868 | $ | (853 | ) | $ | 1,825 | |||||||||
Cost of sales | — | 1,397 | 578 | (846 | ) | 1,129 | ||||||||||||||
Operation and maintenance | — | 178 | 378 | (6 | ) | 550 | ||||||||||||||
General and administrative | — | 10 | 92 | (1 | ) | 101 | ||||||||||||||
Western states litigation and similar settlements | — | — | — | — | — | |||||||||||||||
Gains on sales of assets and emission and exchange allowances, net | — | (18 | ) | (4 | ) | — | (22 | ) | ||||||||||||
Long-lived assets impairments | — | 91 | 120 | — | 211 | |||||||||||||||
Depreciation and amortization | — | 130 | 139 | — | 269 | |||||||||||||||
Total | — | 1,788 | 1,303 | (853 | ) | 2,238 | ||||||||||||||
Operating income (loss) | — | 22 | (435 | ) | — | (413 | ) | |||||||||||||
Income of equity investment, net | — | 1 | — | — | 1 | |||||||||||||||
Loss of equity investments of consolidated subsidiaries | (309 | ) | (88 | ) | — | 397 | — | |||||||||||||
Debt extinguishments losses | (6 | ) | (2 | ) | — | — | (8 | ) | ||||||||||||
Interest expense | (144 | ) | (28 | ) | (14 | ) | — | (186 | ) | |||||||||||
Interest income | 2 | — | — | — | 2 | |||||||||||||||
Interest income (expense)—affiliated companies, net | 72 | (10 | ) | (62 | ) | — | — | |||||||||||||
Total other expense | (385 | ) | (127 | ) | (76 | ) | 397 | (191 | ) | |||||||||||
Loss from continuing operations before income taxes | (385 | ) | (105 | ) | (511 | ) | 397 | (604 | ) | |||||||||||
Income tax expense (benefit) | 68 | (10 | ) | (183 | ) | — | (125 | ) | ||||||||||||
Loss from continuing operations | (453 | ) | (95 | ) | (328 | ) | 397 | (479 | ) | |||||||||||
Income from discontinued operations | 856 | 21 | 5 | — | 882 | |||||||||||||||
Net income (loss) | $ | 403 | $ | (74 | ) | $ | (323 | ) | $ | 397 | $ | 403 | ||||||||
F-50
Table of Contents
2008 | ||||||||||||||||||||
RRI Energy | Guarantors | Non-Guarantors | Adjustments(1) | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Revenues | $ | — | $ | 3,322 | $ | 1,514 | $ | (1,442 | ) | $ | 3,394 | |||||||||
Cost of sales | — | 2,743 | 603 | (1,432 | ) | 1,914 | ||||||||||||||
Operation and maintenance | — | 187 | 414 | (6 | ) | 595 | ||||||||||||||
General and administrative | 2 | 26 | 98 | (4 | ) | 122 | ||||||||||||||
Western states litigation and similar settlements | 34 | 3 | — | — | 37 | |||||||||||||||
Gains on sales of assets and emission and exchange allowances, net | — | (91 | ) | (2 | ) | — | (93 | ) | ||||||||||||
Goodwill impairment | — | 29 | 157 | 119 | 305 | |||||||||||||||
Depreciation and amortization | — | 130 | 183 | — | 313 | |||||||||||||||
Total | 36 | 3,027 | 1,453 | (1,323 | ) | 3,193 | ||||||||||||||
Operating income (loss) | (36 | ) | 295 | 61 | (119 | ) | 201 | |||||||||||||
Income of equity investment, net | — | 1 | — | — | 1 | |||||||||||||||
Income (loss) of equity investments of consolidated subsidiaries | (636 | ) | 85 | — | 551 | — | ||||||||||||||
Debt extinguishments losses | (2 | ) | — | — | — | (2 | ) | |||||||||||||
Other, net | — | 1 | 4 | — | 5 | |||||||||||||||
Interest expense | (153 | ) | (27 | ) | (20 | ) | — | (200 | ) | |||||||||||
Interest income | 15 | 5 | 1 | — | 21 | |||||||||||||||
Interest income (expense)—affiliated companies, net | 179 | (116 | ) | (63 | ) | — | — | |||||||||||||
Total other expense | (597 | ) | (51 | ) | (78 | ) | 551 | (175 | ) | |||||||||||
Income (loss) from continuing operations before income taxes | (633 | ) | 244 | (17 | ) | 432 | 26 | |||||||||||||
Income tax expense | 25 | 85 | 26 | — | 136 | |||||||||||||||
Income (loss) from continuing operations | (658 | ) | 159 | (43 | ) | 432 | (110 | ) | ||||||||||||
Income (loss) from discontinued operations | (82 | ) | 10 | (558 | ) | — | (630 | ) | ||||||||||||
Net income (loss) | $ | (740 | ) | $ | 169 | $ | (601 | ) | $ | 432 | $ | (740 | ) | |||||||
F-51
Table of Contents
2007 | ||||||||||||||||||||
RRI Energy | Guarantors | Non-Guarantors | Adjustments(1) | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Revenues | $ | — | $ | 3,398 | $ | 1,605 | $ | (1,800 | ) | $ | 3,203 | |||||||||
Cost of sales | — | 3,050 | 780 | (1,789 | ) | 2,041 | ||||||||||||||
Operation and maintenance | — | 193 | 457 | (7 | ) | 643 | ||||||||||||||
General and administrative | — | 26 | 113 | (4 | ) | 135 | ||||||||||||||
Western states litigation and similar settlements | — | 22 | — | — | 22 | |||||||||||||||
Gains on sales of assets and emission and exchange allowances, net | — | (17 | ) | (9 | ) | — | (26 | ) | ||||||||||||
Depreciation and amortization | — | 157 | 241 | — | 398 | |||||||||||||||
Total | — | 3,431 | 1,582 | (1,800 | ) | 3,213 | ||||||||||||||
Operating income (loss) | — | (33 | ) | 23 | — | (10 | ) | |||||||||||||
Income of equity investment, net | — | 5 | — | — | 5 | |||||||||||||||
Income of equity investments of consolidated subsidiaries | 271 | 3 | — | (274 | ) | — | ||||||||||||||
Debt extinguishments losses | (114 | ) | — | — | — | (114 | ) | |||||||||||||
Interest expense | (184 | ) | (27 | ) | (51 | ) | — | (262 | ) | |||||||||||
Interest income | 11 | 7 | 1 | — | 19 | |||||||||||||||
Interest income (expense)—affiliated companies, net | 327 | (249 | ) | (78 | ) | — | — | |||||||||||||
Total other income (expense) | 311 | (261 | ) | (128 | ) | (274 | ) | (352 | ) | |||||||||||
Income (loss) from continuing operations before income taxes | 311 | (294 | ) | (105 | ) | (274 | ) | (362 | ) | |||||||||||
Income tax benefit | (16 | ) | (119 | ) | (25 | ) | — | (160 | ) | |||||||||||
Income (loss) from continuing operations | 327 | (175 | ) | (80 | ) | (274 | ) | (202 | ) | |||||||||||
Income from discontinued operations | 38 | 4 | 525 | — | 567 | |||||||||||||||
Net income (loss) | $ | 365 | $ | (171 | ) | $ | 445 | $ | (274 | ) | $ | 365 | ||||||||
(1) | These amounts relate to either (a) eliminations and adjustments recorded in the normal consolidation process or (b) reclassifications recorded due to differences in classifications at the subsidiary levels compared to the consolidated level. |
F-52
Table of Contents
December 31, 2009 | ||||||||||||||||||||
RRI Energy | Guarantors | Non-Guarantors | Adjustments(1) | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 922 | $ | — | $ | 26 | $ | (5 | ) | $ | 943 | |||||||||
Restricted cash | — | 17 | 2 | 5 | 24 | |||||||||||||||
Accounts and notes receivable, principally customer, net | 10 | 129 | 14 | — | 153 | |||||||||||||||
Accounts and notes receivable—affiliated companies | 2,210 | 554 | 208 | (2,972 | ) | — | ||||||||||||||
Inventory | — | 153 | 179 | — | 332 | |||||||||||||||
Derivative assets | — | 100 | 32 | — | 132 | |||||||||||||||
Other current assets | 48 | 164 | 88 | (14 | ) | 286 | ||||||||||||||
Current assets of discontinued operations | 129 | 95 | 5 | (121 | ) | 108 | ||||||||||||||
Total current assets | 3,319 | 1,212 | 554 | (3,107 | ) | 1,978 | ||||||||||||||
Property, Plant and Equipment, net | — | 2,227 | 2,375 | — | 4,602 | |||||||||||||||
Other Assets: | ||||||||||||||||||||
Other intangibles, net | — | 50 | 256 | — | 306 | |||||||||||||||
Notes receivable—affiliated companies | 1,067 | 551 | — | (1,618 | ) | — | ||||||||||||||
Equity investments of consolidated subsidiaries | 1,991 | 277 | 18 | (2,286 | ) | — | ||||||||||||||
Derivative assets | — | 48 | 5 | — | 53 | |||||||||||||||
Other long-term assets | 41 | 755 | 371 | (650 | ) | 517 | ||||||||||||||
Long-term assets of discontinued operations | — | 5 | — | — | 5 | |||||||||||||||
Total other assets | 3,099 | 1,686 | 650 | (4,554 | ) | 881 | ||||||||||||||
Total Assets | $ | 6,418 | $ | 5,125 | $ | 3,579 | $ | (7,661 | ) | $ | 7,461 | |||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||
Current portion of long-term debt and short-term borrowings | $ | — | $ | — | $ | 405 | $ | — | $ | 405 | ||||||||||
Accounts payable, principally trade | — | 75 | 68 | — | 143 | |||||||||||||||
Accounts and notes payable—affiliated companies | — | 2,111 | 861 | (2,972 | ) | — | ||||||||||||||
Derivative liabilities | — | 68 | 84 | — | 152 | |||||||||||||||
Other current liabilities | 10 | 126 | 50 | (14 | ) | 172 | ||||||||||||||
Current liabilities of discontinued operations | 9 | 162 | 8 | (121 | ) | 58 | ||||||||||||||
Total current liabilities | 19 | 2,542 | 1,476 | (3,107 | ) | 930 | ||||||||||||||
Other Liabilities: | ||||||||||||||||||||
Notes payable—affiliated companies | — | 1,062 | 556 | (1,618 | ) | — | ||||||||||||||
Derivative liabilities | — | — | 61 | — | 61 | |||||||||||||||
Other long-term liabilities | 572 | 138 | 201 | (650 | ) | 261 | ||||||||||||||
Long-term liabilities of discontinued operations | 3 | 7 | 4 | — | 14 | |||||||||||||||
Total other liabilities | 575 | 1,207 | 822 | (2,268 | ) | 336 | ||||||||||||||
Long-term Debt | 1,579 | 371 | — | — | 1,950 | |||||||||||||||
Commitments and Contingencies | ||||||||||||||||||||
Temporary Equity Stock-based Compensation | 7 | — | — | — | 7 | |||||||||||||||
Total Stockholders’ Equity | 4,238 | 1,005 | 1,281 | (2,286 | ) | 4,238 | ||||||||||||||
Total Liabilities and Equity | $ | 6,418 | $ | 5,125 | $ | 3,579 | $ | (7,661 | ) | $ | 7,461 | |||||||||
F-53
Table of Contents
December 31, 2008 | ||||||||||||||||||||
RRI Energy | Guarantors | Non-Guarantors | Adjustments(1) | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 970 | $ | — | $ | 34 | $ | — | $ | 1,004 | ||||||||||
Restricted cash | — | 1 | 2 | — | 3 | |||||||||||||||
Accounts and notes receivable, principally customer, net | 15 | 216 | 33 | (14 | ) | 250 | ||||||||||||||
Accounts and notes receivable—affiliated companies | 1,100 | 268 | 183 | (1,551 | ) | — | ||||||||||||||
Inventory | — | 153 | 162 | — | 315 | |||||||||||||||
Derivative assets | — | 127 | 34 | — | 161 | |||||||||||||||
Investment in and receivables from Channelview, net | 1 | 58 | — | — | 59 | |||||||||||||||
Other current assets | 5 | 56 | 126 | (30 | ) | 157 | ||||||||||||||
Current assets of discontinued operations | 272 | 211 | 2,661 | (638 | ) | 2,506 | ||||||||||||||
Total current assets | 2,363 | 1,090 | 3,235 | (2,233 | ) | 4,455 | ||||||||||||||
Property, Plant and Equipment, net | — | 2,369 | 2,451 | — | 4,820 | |||||||||||||||
Other Assets: | ||||||||||||||||||||
Other intangibles, net | — | 150 | 264 | (34 | ) | 380 | ||||||||||||||
Notes receivable—affiliated companies | 2,260 | 578 | 54 | (2,892 | ) | — | ||||||||||||||
Equity investments of consolidated subsidiaries | 1,731 | 332 | — | (2,063 | ) | — | ||||||||||||||
Derivative assets | — | 37 | 42 | — | 79 | |||||||||||||||
Other long-term assets | 45 | 749 | 344 | (645 | ) | 493 | ||||||||||||||
Long-term assets of discontinued operations | 2 | 12 | 686 | (205 | ) | 495 | ||||||||||||||
Total other assets | 4,038 | 1,858 | 1,390 | (5,839 | ) | 1,447 | ||||||||||||||
Total Assets | $ | 6,401 | $ | 5,317 | $ | 7,076 | $ | (8,072 | ) | $ | 10,722 | |||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||
Current portion of long-term debt and short-term borrowings | $ | — | $ | — | $ | 13 | $ | — | $ | 13 | ||||||||||
Accounts payable, principally trade | — | 31 | 132 | (6 | ) | 157 | ||||||||||||||
Accounts and notes payable—affiliated companies | — | 1,307 | 244 | (1,551 | ) | — | ||||||||||||||
Derivative liabilities | — | 29 | 173 | — | 202 | |||||||||||||||
Other current liabilities | 10 | 306 | 47 | (72 | ) | 291 | ||||||||||||||
Current liabilities of discontinued operations | 61 | 147 | 2,805 | (637 | ) | 2,376 | ||||||||||||||
Total current liabilities | 71 | 1,820 | 3,414 | (2,266 | ) | 3,039 | ||||||||||||||
Other Liabilities: | ||||||||||||||||||||
Notes payable—affiliated companies | — | 2,132 | 760 | (2,892 | ) | — | ||||||||||||||
Derivative liabilities | — | 4 | 137 | — | 141 | |||||||||||||||
Other long-term liabilities | 547 | 119 | 251 | (645 | ) | 272 | ||||||||||||||
Long-term liabilities of discontinued operations | 198 | 103 | 778 | (206 | ) | 873 | ||||||||||||||
Total other liabilities | 745 | 2,358 | 1,926 | (3,743 | ) | 1,286 | ||||||||||||||
Long-term Debt | 1,798 | 408 | 404 | — | 2,610 | |||||||||||||||
Commitments and Contingencies | ||||||||||||||||||||
Temporary Equity Stock-based Compensation | 9 | — | — | — | 9 | |||||||||||||||
Total Stockholders’ Equity | 3,778 | 731 | 1,332 | (2,063 | ) | 3,778 | ||||||||||||||
Total Liabilities and Equity | $ | 6,401 | $ | 5,317 | $ | 7,076 | $ | (8,072 | ) | $ | 10,722 | |||||||||
(1) | These amounts relate to either (a) eliminations and adjustments recorded in the normal consolidation process or (b) reclassifications recorded due to differences in classifications at the subsidiary levels compared to the consolidated level. |
F-54
Table of Contents
2009 | ||||||||||||||||||||
RRI Energy | Guarantors | Non-Guarantors | Adjustments(1) | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||||||
Net cash provided by (used in) continuing operations from operating activities | $ | (171 | ) | $ | 69 | $ | (296 | ) | $ | 6 | $ | (392 | ) | |||||||
Net cash provided by discontinued operations from operating activities | 134 | 100 | 351 | — | 585 | |||||||||||||||
Net cash provided by (used in) operating activities | (37 | ) | 169 | 55 | 6 | 193 | ||||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||||||
Capital expenditures | — | (23 | ) | (161 | ) | (6 | ) | (190 | ) | |||||||||||
Investments in, advances to and from and distributions from subsidiaries, net(2) | (337 | ) | — | — | 337 | — | ||||||||||||||
Proceeds from sales of assets, net | — | 36 | — | — | 36 | |||||||||||||||
Proceeds from sales of (purchases of) emission and exchange allowances, net | — | 31 | (34 | ) | — | (3 | ) | |||||||||||||
Restricted cash | — | — | — | (5 | ) | (5 | ) | |||||||||||||
Other, net | — | 4 | — | — | 4 | |||||||||||||||
Net cash provided by (used in) continuing operations from investing activities | (337 | ) | 48 | (195 | ) | 326 | (158 | ) | ||||||||||||
Net cash provided by (used in) discontinued operations from investing activities | 704 | 5 | (418 | ) | 21 | 312 | ||||||||||||||
Net cash provided by (used in) investing activities | 367 | 53 | (613 | ) | 347 | 154 | ||||||||||||||
Cash Flows from Financing Activities: | ||||||||||||||||||||
Payments of long-term debt | (218 | ) | (37 | ) | — | — | (255 | ) | ||||||||||||
Changes in notes with affiliated companies, net(3)(4) | — | (115 | ) | 452 | (337 | ) | — | |||||||||||||
Payments of debt extinguishments expenses | (4 | ) | (1 | ) | — | — | (5 | ) | ||||||||||||
Proceeds from issuances of stock | 12 | — | — | — | 12 | |||||||||||||||
Net cash provided by (used in) continuing operations from financing activities | (210 | ) | (153 | ) | 452 | (337 | ) | (248 | ) | |||||||||||
Net cash used in discontinued operations from financing activities | (168 | ) | (69 | ) | (3 | ) | (21 | ) | (261 | ) | ||||||||||
Net cash provided by (used in) financing activities | (378 | ) | (222 | ) | 449 | (358 | ) | (509 | ) | |||||||||||
Net Change in Cash and Cash Equivalents, Total Operations | (48 | ) | — | (109 | ) | (5 | ) | (162 | ) | |||||||||||
Less: Net Change in Cash and Cash Equivalents, Discontinued Operations | — | — | (101 | ) | — | (101 | ) | |||||||||||||
Cash and Cash Equivalents at Beginning of Period, Continuing Operations | 970 | — | 34 | — | 1,004 | |||||||||||||||
Cash and Cash Equivalents at End of Period, Continuing Operations | $ | 922 | $ | — | $ | 26 | $ | (5 | ) | $ | 943 | |||||||||
F-55
Table of Contents
2008 | ||||||||||||||||||||
RRI Energy | Guarantors | Non-Guarantors | Adjustments(1) | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||||||
Net cash provided by continuing operations from operating activities | $ | 58 | $ | 169 | $ | 477 | $ | — | $ | 704 | ||||||||||
Net cash used in discontinued operations from operating activities | (207 | ) | (83 | ) | (231 | ) | — | (521 | ) | |||||||||||
Net cash provided by (used in) operating activities | (149 | ) | 86 | 246 | — | 183 | ||||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||||||
Capital expenditures | — | (30 | ) | (249 | ) | — | (279 | ) | ||||||||||||
Investments in, advances to and from and distributions from subsidiaries, net(2) | 815 | 57 | (57 | ) | (815 | ) | — | |||||||||||||
Proceeds from sales of assets, net | — | 526 | 1 | — | 527 | |||||||||||||||
Proceeds from sales of (purchases of) emission and exchange allowances, net | — | 51 | (70 | ) | — | (19 | ) | |||||||||||||
Restricted cash | — | 1 | — | — | 1 | |||||||||||||||
Other, net | — | 6 | — | — | 6 | |||||||||||||||
Net cash provided by (used in) continuing operations from investing activities | 815 | 611 | (375 | ) | (815 | ) | 236 | |||||||||||||
Net cash provided by (used in) discontinued operations from investing activities | (141 | ) | — | 112 | 9 | (20 | ) | |||||||||||||
Net cash provided by (used in) investing activities | 674 | 611 | (263 | ) | (806 | ) | 216 | |||||||||||||
Cash Flows from Financing Activities: | ||||||||||||||||||||
Payments of long-term debt | (58 | ) | — | — | — | (58 | ) | |||||||||||||
Changes in notes with affiliated companies, net(3) | — | (716 | ) | (99 | ) | 815 | — | |||||||||||||
Payments of debt extinguishment costs | (1 | ) | — | — | — | (1 | ) | |||||||||||||
Proceeds from issuances of stock | 14 | — | — | — | 14 | |||||||||||||||
Net cash used in continuing operations from financing activities | (45 | ) | (716 | ) | (99 | ) | 815 | (45 | ) | |||||||||||
Net cash provided by (used in) discontinued operations from financing activities | — | 18 | (9 | ) | (9 | ) | — | |||||||||||||
Net cash used in financing activities | (45 | ) | (698 | ) | (108 | ) | 806 | (45 | ) | |||||||||||
Net Change in Cash and Cash Equivalents, Total Operations | 480 | (1 | ) | (125 | ) | — | 354 | |||||||||||||
Less: Net Change in Cash and Cash Equivalents, Discontinued Operations | — | — | (126 | ) | — | (126 | ) | |||||||||||||
Cash and Cash Equivalents at Beginning of Period, Continuing Operations | 490 | 1 | 33 | — | 524 | |||||||||||||||
Cash and Cash Equivalents at End of Period, Continuing Operations | $ | 970 | $ | — | $ | 34 | $ | — | $ | 1,004 | ||||||||||
F-56
Table of Contents
2007 | ||||||||||||||||||||
RRI Energy | Guarantors | Non-Guarantors | Adjustments(1) | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||||||
Net cash provided by (used in) continuing operations from operating activities | $ | 155 | $ | (155 | ) | $ | 204 | $ | — | $ | 204 | |||||||||
Net cash provided by (used in) discontinued operations from operating activities | (9 | ) | 41 | 416 | 110 | 558 | ||||||||||||||
Net cash provided by (used in) operating activities | 146 | (114 | ) | 620 | 110 | 762 | ||||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||||||
Capital expenditures | — | (28 | ) | (147 | ) | — | (175 | ) | ||||||||||||
Investments in, advances to and from and distributions from subsidiaries, net(2) | (56 | ) | (5 | ) | 3 | 58 | — | |||||||||||||
Proceeds from sales of assets, net | — | 82 | — | — | 82 | |||||||||||||||
Purchases of emission and exchange allowances, net | — | (42 | ) | (43 | ) | — | (85 | ) | ||||||||||||
Restricted cash | — | (1 | ) | (5 | ) | — | (6 | ) | ||||||||||||
Other, net | — | 6 | — | — | 6 | |||||||||||||||
Net cash provided by (used in) continuing operations from investing activities | (56 | ) | 12 | (192 | ) | 58 | (178 | ) | ||||||||||||
Net cash provided by (used in) discontinued operations from investing activities | 402 | — | (284 | ) | (119 | ) | (1 | ) | ||||||||||||
Net cash provided by (used in) investing activities | 346 | 12 | (476 | ) | (61 | ) | (179 | ) | ||||||||||||
Cash Flows from Financing Activities: | ||||||||||||||||||||
Proceeds from long-term debt | 1,300 | — | — | — | 1,300 | |||||||||||||||
Payments of long-term debt | (1,526 | ) | — | (10 | ) | — | (1,536 | ) | ||||||||||||
Increase in short-term borrowings and revolving credit facilities, net | — | — | 7 | — | 7 | |||||||||||||||
Changes in notes with affiliated companies, net(3)(5) | — | 58 | — | (58 | ) | — | ||||||||||||||
Payments of debt extinguishment costs | (73 | ) | — | — | — | (73 | ) | |||||||||||||
Proceeds from issuances of stock | 41 | — | — | — | 41 | |||||||||||||||
Payments of financing costs | (31 | ) | — | — | ��� | (31 | ) | |||||||||||||
Other, net | 1 | (1 | ) | — | — | — | ||||||||||||||
Net cash provided by (used in) continuing operations from financing activities | (288 | ) | 57 | (3 | ) | (58 | ) | (292 | ) | |||||||||||
Net cash provided by (used in) discontinued operations from financing activities | — | 22 | (31 | ) | 9 | — | ||||||||||||||
Net cash provided by (used in) financing activities | (288 | ) | 79 | (34 | ) | (49 | ) | (292 | ) | |||||||||||
Net Change in Cash and Cash Equivalents, Total Operations | 204 | (23 | ) | 110 | — | 291 | ||||||||||||||
Less: Net Change in Cash and Cash Equivalents, Discontinued Operations | — | (2 | ) | 94 | — | 92 | ||||||||||||||
Cash and Cash Equivalents at Beginning of Period, Continuing Operations | 286 | 22 | 17 | — | 325 | |||||||||||||||
Cash and Cash Equivalents at End of Period, Continuing Operations | $ | 490 | $ | 1 | $ | 33 | $ | — | $ | 524 | ||||||||||
(1) | These amounts relate to either (a) eliminations and adjustments recorded in the normal consolidation process or (b) reclassifications recorded due to differences in classifications at the subsidiary levels compared to the consolidated level. | |
(2) | Net investments in, advances to and from and distributions from subsidiaries are classified as investing activities. | |
(3) | Net changes in notes with affiliated companies are classified as financing activities for subsidiaries of RRI Energy and as investing activities for RRI Energy. |
F-57
Table of Contents
(4) | RRI Energy converted intercompany notes payable of a guarantor subsidiary of $336 million to equity during 2009 | |
(5) | RRI Energy converted intercompany notes payable of a guarantor subsidiary of $753 million to equity during 2007. |
(19) | Unaudited Quarterly Information |
2009 | ||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
(in millions, except per share amounts) | ||||||||||||||||
Revenues | $ | 466 | $ | 390 | $ | 507 | $ | 462 | ||||||||
Loss from continuing operations | (106 | ) | (103 | ) | (19 | ) | (251 | ) | ||||||||
Income (loss) from discontinued operations | (45 | ) | 906 | 4 | 17 | |||||||||||
Net income (loss) | (151 | ) | 803 | (15 | ) | (234 | ) | |||||||||
Basic Earnings (Loss) Per Share: | ||||||||||||||||
Loss from continuing operations | $ | (0.30 | ) | $ | (0.30 | ) | $ | (0.05 | ) | $ | (0.71 | ) | ||||
Income (loss) from discontinued operations | (0.13 | ) | 2.59 | 0.01 | 0.05 | |||||||||||
Net income (loss) | $ | (0.43 | ) | $ | 2.29 | $ | (0.04 | ) | $ | (0.66 | ) | |||||
Diluted Earnings (Loss) Per Share: | ||||||||||||||||
Loss from continuing operations | $ | (0.30 | ) | $ | (0.30 | ) | $ | (0.05 | ) | $ | (0.71 | ) | ||||
Income (loss) from discontinued operations | (0.13 | ) | 2.59 | 0.01 | 0.05 | |||||||||||
Net income (loss) | $ | (0.43 | ) | $ | 2.29 | $ | (0.04 | ) | $ | (0.66 | ) | |||||
2008 | ||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
(in millions, except per share amounts) | ||||||||||||||||
Revenues | $ | 880 | $ | 1,014 | $ | 960 | $ | 540 | ||||||||
Income (loss) from continuing operations | 13 | 82 | 93 | (298 | ) | |||||||||||
Income (loss) from discontinued operations | 364 | 277 | (1,131 | ) | (140 | ) | ||||||||||
Net income (loss) | 377 | 359 | (1,038 | ) | (438 | ) | ||||||||||
Basic Earnings (Loss) Per Share: | ||||||||||||||||
Income (loss) from continuing operations | $ | 0.04 | $ | 0.24 | $ | 0.27 | $ | (0.85 | ) | |||||||
Income (loss) from discontinued operations | 1.05 | 0.79 | (3.24 | ) | (0.40 | ) | ||||||||||
Net income (loss) | $ | 1.09 | $ | 1.03 | $ | (2.97 | ) | $ | (1.25 | ) | ||||||
Diluted Earnings (Loss) Per Share: | ||||||||||||||||
Income (loss) from continuing operations | $ | 0.04 | $ | 0.23 | $ | 0.26 | $ | (0.85 | ) | |||||||
Income (loss) from discontinued operations | 1.03 | 0.78 | (3.19 | ) | (0.40 | ) | ||||||||||
Net income (loss) | $ | 1.07 | $ | 1.01 | $ | (2.93 | ) | $ | (1.25 | ) | ||||||
F-58
Table of Contents
• | seasonal fluctuations in demand for electric energy and energy services | |
• | changes in energy commodity prices, including unrealized gains/losses on energy derivatives | |
• | timing of maintenance expenses |
• | $1.2 billion in income from discontinued operations due to gain on sale of Texas retail business in the second quarter | |
• | $211 million impairment charges relating to long-lived assets at our New Castle and Indian River plants | |
• | $101 million charge for lower of average cost or market adjustments in cost of sales ($25 million in the first quarter, $35 million in the second quarter, $22 million in the third quarter and $19 million in the fourth quarter) | |
• | $129 million change in income tax expense/benefit due to our federal and state valuation allowances ($22 million increase during the first quarter, $7 million decrease during the second quarter, $10 million increase during the third quarter and $104 million increase during the fourth quarter) | |
• | $17 million gain on sales of emission and exchange allowances ($17 million gain in the first quarter) | |
• | $12 million in income from discontinued operations due to the gain on sale of Illinois C&I contracts | |
• | $9 million charge for severance costs recorded in operation and maintenance and general and administrative expenses ($1 million in the first quarter, $4 million in the second quarter, $3 million in the third quarter and $1 million in the fourth quarter) |
• | $305 million goodwill impairment for our then wholesale energy segment in the fourth quarter | |
• | $63 million in income from discontinued operations due to the gain on sale of Northeast C&I contracts | |
• | $48 million change in income tax expense/benefit due to our federal and state valuation allowances in the fourth quarter | |
• | $47 million gain on the sale of our Bighorn plant in the fourth quarter | |
• | $40 million charge for lower of average cost or market adjustments in cost of sales ($15 million in the third quarter and $25 million in the fourth quarter) | |
• | $38 million gain on sales of emission and exchange allowances ($27 million gain in the second, quarter, $10 million gain in the third quarter and $1 million gain in the fourth quarter) | |
• | $37 million charge for Western states litigation and similar settlements ($34 million in the first quarter and $3 million in the third quarter) |
F-59
Table of Contents
(20) | Reportable Segments |
F-60
Table of Contents
F-61
Table of Contents
Adjustments | ||||||||||||||||||||||||||||
East | East | Discontinued | and | |||||||||||||||||||||||||
Coal | Gas | West | Other | Operations | Eliminations | Consolidated | ||||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||
Revenues from external customers(1) | $ | 927 | $ | 509 | $ | 307 | $ | 96 | $ | (14 | )(2) | $ | 1,825 | (3) | ||||||||||||||
Open energy gross margin | $ | 239 | $ | 20 | $ | 14 | $ | — | $ | 273 | ||||||||||||||||||
Other margin | 186 | 188 | 119 | 60 | 553 | |||||||||||||||||||||||
Open gross margin(4) | $ | 425 | $ | 208 | $ | 133 | $ | 60 | $ | 826 | (5) | |||||||||||||||||
Gains on sales of assets and emission and exchange allowances, net | $ | — | $ | — | $ | 3 | $ | — | $ | 19 | (6) | $ | 22 | |||||||||||||||
Long-lived assets impairments | $ | 120 | (7) | $ | — | $ | — | $ | 91 | (8) | $ | — | $ | 211 | ||||||||||||||
Total assets as of December 31, 2009 | $ | 3,446 | (9) | $ | 1,316 | (9) | $ | 175 | (9) | $ | 623 | (9) | $ | 113 | $ | 1,788 | (10) | $ | 7,461 | |||||||||
Expenditures for long-lived assets(11) | $ | 213 | $ | 1 | $ | 7 | $ | 4 | $ | (13 | )(12) | $ | 212 | |||||||||||||||
2008 | ||||||||||||||||||||||||||||
Revenues from external customers(1) | $ | 1,657 | $ | 676 | $ | 706 | $ | 420 | (13) | $ | (65 | )(2) | $ | 3,394 | (14) | |||||||||||||
Open energy gross margin | $ | 719 | $ | 42 | $ | (1 | ) | $ | 1 | $ | 761 | |||||||||||||||||
Other margin | 139 | 145 | 167 | 44 | 495 | |||||||||||||||||||||||
Open gross margin(4) | $ | 858 | $ | 187 | $ | 166 | $ | 45 | $ | 1,256 | (15) | |||||||||||||||||
Gains on sales of assets and emission and exchange allowances, net | $ | — | $ | — | $ | 47 | (16) | $ | 1 | (17) | $ | 45 | (18) | $ | 93 | |||||||||||||
Total assets as of December 31, 2008 | $ | 3,497 | (9) | $ | 1,366 | (9) | $ | 186 | (9) | $ | 752 | (9) | $ | 3,001 | $ | 1,920 | (10) | $ | 10,722 | |||||||||
Expenditures for long-lived assets(11) | $ | 297 | $ | 4 | $ | 6 | $ | 5 | $ | 28 | (12) | $ | 340 | |||||||||||||||
2007 | ||||||||||||||||||||||||||||
Revenues from external customers(1) | $ | 1,394 | $ | 528 | $ | 927 | $ | 489 | (19) | $ | (135 | )(2) | $ | 3,203 | (20) | |||||||||||||
Open energy gross margin | $ | 778 | $ | 50 | $ | 20 | $ | 24 | $ | 872 | ||||||||||||||||||
Other margin | 70 | 109 | 141 | 67 | 387 | |||||||||||||||||||||||
Open gross margin(4) | $ | 848 | $ | 159 | $ | 161 | $ | 91 | $ | 1,259 | (21) | |||||||||||||||||
Gains on sales of assets and emission and exchange allowances, net | $ | — | $ | — | $ | — | $ | — | $ | 26 | (22) | $ | 26 | |||||||||||||||
Total assets as of December 31, 2007 | $ | 3,320 | (9) | $ | 1,419 | (9) | $ | 626 | (9) | $ | 867 | (9) | $ | 2,514 | $ | 2,627 | (10) | $ | 11,373 | |||||||||
Expenditures for long-lived assets(11) | $ | 248 | $ | 8 | $ | 2 | $ | 6 | $ | 3 | (12) | $ | 267 |
F-62
Table of Contents
(1) | All revenues are in the United States. | |
(2) | Primarily relates to unrealized gains/losses on energy derivatives, hedges and other items and other revenues not specifically identified to a particular plant or reportable segment. | |
(3) | Includes $920 million in revenues from a single counterparty, which represented 50% of our consolidated revenues. This counterparty is included in our East Coal and East Gas segments. As of December 31, 2009, $52 million was outstanding from this counterparty and collected in 2010. | |
(4) | Represents our segment profitability measure. | |
(5) | Excludes $(152) million and $22 million of hedges and other items and unrealized gains on energy derivatives, respectively, that are included in our consolidated revenues or cost of sales. | |
(6) | Primarily relates to gains on sales of CO2 exchange allowances and SO2 emission allowances. | |
(7) | Relates to the New Castle plant. See note 4. | |
(8) | Relates to the Indian River plant. See note 4. | |
(9) | Primarily relates to property, plant and equipment, inventory and emission allowances. East Coal segment also includes the prepaid REMA leases of $336 million, $332 million and $329 million for December 31, 2009, December 31, 2008 and December 31, 2007, respectively. Other segment also includes our equity method investment in Sabine Cogen, LP of $19 million, $22 million and $25 million as of December 31, 2009, 2008 and 2007, respectively. | |
(10) | Represents assets not assigned to a segment. Includes primarily cash and cash equivalents, accounts and notes receivable, derivative assets, margin deposits, certain property, plant and equipment related to corporate assets and other assets. The amount as of December 31, 2007 also includes goodwill of $327 million. | |
(11) | Includes capital expenditures for property, plant and equipment and purchases of emission allowances. All of our long-lived assets are in the United States. | |
(12) | Represents non-cash adjustments to reflect capital expenditures on a cash basis (as by segment data is as incurred) and purchases of emission allowances that are not assigned to a segment. | |
(13) | Includes $253 million for affiliates. | |
(14) | Includes $1.6 billion in revenues from a single counterparty, which represented 46% of our consolidated revenues. This counterparty is included in our East Coal and East Gas segments. As of December 31, 2008, $95 million was outstanding from this counterparty and collected in 2009. | |
(15) | Excludes $233 million and $(9) million of hedges and other items and unrealized losses on energy derivatives, respectively, that are included in our consolidated revenues or cost of sales. | |
(16) | Relates to gain on sale of Bighorn plant, which was sold in October 2008. | |
(17) | Relates to gains on the investment in and receivables from Channelview, which was deconsolidated in August 2007 and the plant was sold in July 2008. | |
(18) | Primarily relates to gains on sales of CO2 exchange allowances. | |
(19) | Includes $127 million from affiliates. | |
(20) | Includes $1.0 billion in revenues from a single counterparty, which represented 31% of our consolidated revenues. This counterparty is included in our East Coal and East Gas segments. As of December 31, 2007, $116 million was outstanding from this counterparty and collected in 2008. | |
(21) | Excludes $(104) million and $7 million of hedges and other items and unrealized gains on energy derivatives, respectively, that are included in our consolidated revenues or cost of sales. | |
(22) | Primarily relates to gains on sales of equipment held in storage. |
F-63
Table of Contents
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Open gross margin for all segments | $ | 826 | $ | 1,256 | $ | 1,259 | ||||||
Hedges and other items | (152 | ) | 233 | (104 | ) | |||||||
Unrealized gains (losses) on energy derivatives | 22 | (9 | ) | 7 | ||||||||
Operation and maintenance | (550 | ) | (595 | ) | (643 | ) | ||||||
General and administrative | (101 | ) | (122 | ) | (135 | ) | ||||||
Western states litigation and similar settlements | — | (37 | ) | (22 | ) | |||||||
Gains on sales of assets and emission and exchange allowances, net | 22 | 93 | 26 | |||||||||
Goodwill and long-lived assets impairments | (211 | ) | (305 | ) | — | |||||||
Depreciation and amortization | (269 | ) | (313 | ) | (398 | ) | ||||||
Operating income (loss) | (413 | ) | 201 | (10 | ) | |||||||
Income of equity investment, net | 1 | (1) | 1 | (1) | 5 | (1) | ||||||
Debt extinguishments losses | (8 | ) | (2 | ) | (114 | ) | ||||||
Other, net | — | 5 | — | |||||||||
Interest expense | (186 | ) | (200 | ) | (262 | ) | ||||||
Interest income | 2 | 21 | 19 | |||||||||
Income (loss) from continuing operations before income taxes | $ | (604 | ) | $ | 26 | $ | (362 | ) | ||||
(1) | Relates to our equity method investment in Sabine Cogen, LP, which is included in our Other segment. |
(21) | Sales of Assets and Emission and Exchange Allowances |
(22) | Sale of Channelview’s Plant and the Bankruptcy Filings |
F-64
Table of Contents
December 31, 2009 | ||||
(in millions) | ||||
Restricted cash | $ | 17 | (1) | |
Deferred tax assets relating to federal and state net operating loss carryforwards | 18 | (2) |
(1) | Of this amount, $10 million is payable to a third party and included in accounts payable in our consolidated balance sheet as of December 31, 2009. | |
(2) | We had assessed our future ability to use these deferred tax assets and had provided a valuation allowance for this amount in our consolidated balance sheet prior to the reconsolidation. See note 14. |
(23) | Discontinued Operations |
(a) | Retail Energy Segment. |
F-65
Table of Contents
(b) | Other Discontinued Operations. |
(c) | All Discontinued Operations. |
Retail Energy | New York | European | ||||||||||||||||||
Segment | Plants | Energy | Total | |||||||||||||||||
(in millions) | ||||||||||||||||||||
2009 | ||||||||||||||||||||
Revenues | $ | 2,036 | $ | 2 | $ | — | $ | 2,038 | ||||||||||||
Income before income tax expense/benefit | 1,280 | (1)(2)(3) | 3 | 9 | 1,292 | |||||||||||||||
2008 | ||||||||||||||||||||
Revenues | $ | 9,159 | $ | — | $ | — | $ | 9,159 | ||||||||||||
Income (loss) before income tax expense/benefit | (899 | )(4)(5)(6) | (4 | ) | 10 | (893 | ) | |||||||||||||
2007 | ||||||||||||||||||||
Revenues | $ | 8,006 | $ | (3 | ) | $ | — | $ | 8,003 | |||||||||||
Income before income tax expense/benefit | 855 | (7) | 7 | — | 862 |
(1) | Includes $173 million of unrealized losses on energy derivatives. | |
(2) | Includes $1.2 billion gain on sale (of which $1.1 billion relates to derivatives) of Texas retail business. | |
(3) | Includes $12 million gain on sale of Illinois C&I contracts. | |
(4) | Includes $734 million of unrealized losses on energy derivatives. | |
(5) | Includes $63 million gain on sale of Northeast C&I contracts. | |
(6) | Includes $82 million in losses due to a change in accounting estimate around nonperformance risk on derivative liabilities. | |
(7) | Includes $438 million of unrealized gains on energy derivatives. |
F-66
Table of Contents
December 31, | ||||||||
2009(1) | 2008 | |||||||
(in millions) | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 4 | $ | 105 | ||||
Accounts receivable, principally customer, net | 6 | 870 | ||||||
Derivative assets | 41 | 1,010 | ||||||
Margin deposits | 56 | 295 | ||||||
Accumulated deferred income taxes, net of federal valuation allowance of $1 million and $38 million | — | 217 | ||||||
Other current assets | 1 | 9 | ||||||
Total current assets | 108 | 2,506 | ||||||
Property, Plant and Equipment, net | — | 57 | ||||||
Other Assets: | ||||||||
Goodwill and other intangibles, net | — | 59 | ||||||
Derivative assets | 5 | 324 | ||||||
Accumulated deferred income taxes, net of federal valuation allowance of $0 and $12 million | — | 48 | ||||||
Other | — | 7 | ||||||
Total long-term assets | 5 | 495 | ||||||
Total Assets | $ | 113 | $ | 3,001 | ||||
Current Liabilities: | ||||||||
Accounts payable, principally trade | $ | 2 | $ | 480 | ||||
Derivative liabilities | 35 | 1,637 | ||||||
Accrual for transmission and distribution charges | — | 83 | ||||||
Retail customer deposits | — | 59 | ||||||
Other current liabilities | 21 | 117 | ||||||
Total current liabilities | 58 | 2,376 | ||||||
Other Liabilities: | ||||||||
Derivative liabilities | 5 | 612 | ||||||
Other liabilities | 9 | — | ||||||
Total other liabilities | 14 | 612 | ||||||
Long-term Debt | — | 261 | ||||||
Total long-term liabilities | 14 | 873 | ||||||
Total Liabilities | $ | 72 | $ | 3,249 | ||||
(1) | In connection with our various sales classified as discontinued operations, some activity remains with us and will be classified as such through various dates ending in 2013. |
F-67
Table of Contents
Column A | Column B | Column C | Column D | Column E | ||||||||||||||||
Additions | ||||||||||||||||||||
Balance at | Charged | Charged | Deductions | Balance at | ||||||||||||||||
Beginning | to | to Other | from | End | ||||||||||||||||
Description | of Period | Income | Accounts(1) | Reserves(2) | of Period | |||||||||||||||
(in thousands) | ||||||||||||||||||||
2009 | ||||||||||||||||||||
Reserves deducted from derivative assets and liabilities(3) | $ | (6,425 | ) | $ | 14,489 | $ | — | $ | — | $ | 8,064 | |||||||||
Reserves for severance | — | 9,056 | — | (8,371 | ) | 685 | ||||||||||||||
2008 | ||||||||||||||||||||
Reserves deducted from derivative assets and liabilities(3) | $ | 6,160 | $ | (12,427 | ) | $ | — | $ | (158 | ) | $ | (6,425 | ) | |||||||
2007 | ||||||||||||||||||||
Reserves deducted from derivative assets(3) | $ | 10,747 | $ | (4,428 | ) | $ | — | $ | (159 | ) | $ | 6,160 |
(1) | Represents charges to accumulated other comprehensive income/loss. | |
(2) | Deductions from reserves represent losses or expenses for which the respective reserves were created. In the case of the allowance for doubtful accounts, such deductions are net of recoveries of amounts previously written off. | |
(3) | See notes 2(d), 2(e) and 6 to our consolidated financial statements. |
F-68
Table of Contents
F-69
Table of Contents
2009 | 2008 | 2007 | ||||||||||
(thousands of dollars) | ||||||||||||
Revenues: | ||||||||||||
Revenues | $ | 23,612 | $ | 39,336 | $ | (10,235 | ) | |||||
Revenues—affiliates | 525,403 | 879,332 | 696,856 | |||||||||
Total | 549,015 | 918,668 | 686,621 | |||||||||
Expenses: | ||||||||||||
Cost of sales | 297,852 | 347,761 | 244,695 | |||||||||
Cost of sales—affiliates | 3,874 | 11,535 | 9,930 | |||||||||
Operation and maintenance | 108,290 | 112,507 | 104,600 | |||||||||
Operation and maintenance—affiliates | 66,565 | 59,431 | 57,831 | |||||||||
Facilities leases | 59,848 | 59,848 | 59,848 | |||||||||
General and administrative—affiliates | 56,272 | 45,987 | 44,029 | |||||||||
Gains on sales of assets and emission allowances, net | (501 | ) | (1,247 | ) | (1,969 | ) | ||||||
Goodwill impairment | — | 3,635 | — | |||||||||
Depreciation and amortization | 47,307 | 74,960 | 88,449 | |||||||||
Total operating expense | 639,507 | 714,417 | 607,413 | |||||||||
Operating Income (Loss) | (90,492 | ) | 204,251 | 79,208 | ||||||||
Other Income (Expense): | ||||||||||||
Interest expense | (752 | ) | (1,239 | ) | (1,230 | ) | ||||||
Interest expense—affiliates | (52,561 | ) | (58,935 | ) | (70,485 | ) | ||||||
Interest income | 41 | 396 | 837 | |||||||||
Total other expense | (53,272 | ) | (59,778 | ) | (70,878 | ) | ||||||
Income (Loss) Before Income Taxes | (143,764 | ) | 144,473 | 8,330 | ||||||||
Income tax expense (benefit) | (55,363 | ) | 59,459 | 5,262 | ||||||||
Net Income (Loss) | $ | (88,401 | ) | $ | 85,014 | $ | 3,068 | |||||
F-70
Table of Contents
December 31, | ||||||||
2009 | 2008 | |||||||
(thousands of dollars) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 18,062 | $ | 29,713 | ||||
Restricted cash | 1,541 | 1,632 | ||||||
Accounts receivable | 5,910 | 5,712 | ||||||
Receivables from affiliates, net | 49,337 | 59,770 | ||||||
Inventory | 94,772 | 90,241 | ||||||
Prepaid lease | 59,030 | 59,030 | ||||||
Derivative assets | 32,358 | 34,169 | ||||||
Accumulated deferred income taxes | 19,258 | 29,612 | ||||||
Prepayments and other current assets | 7,309 | 8,591 | ||||||
Total current assets | 287,577 | 318,470 | ||||||
Property, Plant and Equipment, net | 766,429 | 723,478 | ||||||
Other Assets: | ||||||||
Other intangibles, net | 96,603 | 98,727 | ||||||
Derivative assets | 7,816 | 42,126 | ||||||
Accumulated deferred income taxes | 33,818 | 19,145 | ||||||
Prepaid lease | 277,370 | 273,374 | ||||||
Other | 33,886 | 33,432 | ||||||
Total other assets | 449,493 | 466,804 | ||||||
Total Assets | $ | 1,503,499 | $ | 1,508,752 | ||||
LIABILITIES AND MEMBER’S EQUITY | ||||||||
Current Liabilities: | ||||||||
Current portion of long-term debt | $ | 103 | $ | 96 | ||||
Accounts payable, principally trade | 30,421 | 38,134 | ||||||
Subordinated accounts payable to affiliates, net | 309,822 | 161,126 | ||||||
Subordinated interest payable to affiliate | 78,227 | 26,638 | ||||||
Derivative liabilities | 76,291 | 103,176 | ||||||
Note payable to affiliate | 16,191 | — | ||||||
Subordinated working capital facility payable to affiliate | 25,809 | — | ||||||
Other | 19,422 | 50,072 | ||||||
Total current liabilities | 556,286 | 379,242 | ||||||
Other Liabilities: | ||||||||
Derivative liabilities | 64,493 | 136,183 | ||||||
Benefit obligations | 41,966 | 49,648 | ||||||
Taxes payable to RRI Energy, Inc. and related accrued interest | 780 | 27,612 | ||||||
Other | 22,127 | 29,511 | ||||||
Total other liabilities | 129,366 | 242,954 | ||||||
Subordinated Note Payable to Affiliate | 543,563 | 543,563 | ||||||
Long-term Debt | 444 | 546 | ||||||
Commitments and Contingencies | ||||||||
Member’s Equity: | ||||||||
Common stock; no par value (1,000 shares authorized, issued and outstanding) | — | — | ||||||
Additional paid-in capital | 284,672 | 284,672 | ||||||
Retained earnings | 22,018 | 110,307 | ||||||
Accumulated other comprehensive loss | (32,850 | ) | (52,532 | ) | ||||
Total member’s equity | 273,840 | 342,447 | ||||||
Total Liabilities and Member’s Equity | $ | 1,503,499 | $ | 1,508,752 | ||||
F-71
Table of Contents
2009 | 2008 | 2007 | ||||||||||
(thousands of dollars) | ||||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net income (loss) | $ | (88,401 | ) | $ | 85,014 | $ | 3,068 | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||
Goodwill impairment | — | 3,635 | — | |||||||||
Depreciation and amortization | 47,307 | 74,960 | 88,449 | |||||||||
Deferred income taxes | (29,873 | ) | 13,670 | 4,341 | ||||||||
Net changes in energy derivatives | (37,034 | ) | 45,636 | 35,711 | ||||||||
Gains on sales of assets and emission allowances, net | (501 | ) | (1,247 | ) | (1,969 | ) | ||||||
Other, net | (92 | ) | (4 | ) | (27 | ) | ||||||
Changes in other assets and liabilities: | ||||||||||||
Accounts receivable | (198 | ) | (837 | ) | (280 | ) | ||||||
Accounts receivable from affiliates, net | 4,448 | 13,859 | (47,624 | ) | ||||||||
Inventory | (4,531 | ) | (8,859 | ) | (693 | ) | ||||||
Prepaid lease | (3,996 | ) | (3,241 | ) | (5,805 | ) | ||||||
Accounts payable | (2,251 | ) | 2,253 | 3,976 | ||||||||
Other current assets | 1,556 | (1,382 | ) | 246 | ||||||||
Other current liabilities | (2,857 | ) | 3,362 | 199 | ||||||||
Other assets | (454 | ) | 7,389 | 337 | ||||||||
Subordinated accounts payable to affiliates, net | 148,734 | (32,588 | ) | 42,531 | ||||||||
Subordinated interest payable to affiliate, net | 45,448 | (3,162 | ) | (33,787 | ) | |||||||
Income taxes payable/receivable | 67 | 459 | 698 | |||||||||
Taxes payable to RRI Energy, Inc. and related accrued interest | (26,832 | ) | 27,612 | — | ||||||||
Other liabilities | 2,552 | 2,359 | 3,029 | |||||||||
Net cash provided by operating activities | 53,092 | 228,888 | 92,400 | |||||||||
Cash Flows from Investing Activities: | ||||||||||||
Capital expenditures | (76,367 | ) | (70,218 | ) | (33,172 | ) | ||||||
Proceeds from sales of emission allowances—affiliate | 747 | 74 | 3,744 | |||||||||
Purchases of emission allowances—affiliate | (31,312 | ) | (26,473 | ) | (50,799 | ) | ||||||
Restricted cash | 91 | 31 | (1,663 | ) | ||||||||
Other, net | 98 | 1,132 | 752 | |||||||||
Net cash used in investing activities | (106,743 | ) | (95,454 | ) | (81,138 | ) | ||||||
Cash Flows from Financing Activities: | ||||||||||||
Proceeds from note payable to affiliate | 16,191 | — | — | |||||||||
Proceeds from subordinated working capital facility payable to affiliate | 25,809 | — | — | |||||||||
Payments on subordinated note payable to affiliate | — | (75,095 | ) | — | ||||||||
Distributions to RRI Energy, Inc. | — | (57,162 | ) | — | ||||||||
Net cash provided by (used in) financing activities | 42,000 | (132,257 | ) | — | ||||||||
Net Change in Cash and Cash Equivalents | (11,651 | ) | 1,177 | 11,262 | ||||||||
Cash and Cash Equivalents at Beginning of Period | 29,713 | 28,536 | 17,274 | |||||||||
Cash and Cash Equivalents at End of Period | $ | 18,062 | $ | 29,713 | $ | 28,536 | ||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||||||
Cash Payments: | ||||||||||||
Interest paid to affiliate (net of amounts capitalized) | $ | (6,141 | ) | $ | 81,105 | $ | 91,884 | |||||
Interest paid to third parties | 220 | 247 | 286 | |||||||||
Income taxes paid (net of income tax refunds received) | 1,508 | 18,266 | 221 |
F-72
Table of Contents
Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||||||||||||
Benefits | Total | |||||||||||||||||||||||||||||||||||||||
Deferred | Actuarial | Accumulated | ||||||||||||||||||||||||||||||||||||||
Additional | Retained | Derivative | Net | Benefits | Other | Total | Comprehensive | |||||||||||||||||||||||||||||||||
Common Stock | Paid-In | Earnings | Gains | Gain | Net Prior | Comprehensive | Member’s | Income | ||||||||||||||||||||||||||||||||
Shares | Amount | Capital | (Deficit) | (Losses) | (Loss) | Service Costs | Income (Loss) | Equity | (Loss) | |||||||||||||||||||||||||||||||
(thousands of dollars) | ||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2006 | 1,000 | $ | — | $ | 284,672 | $ | 79,387 | $ | (81,075 | ) | $ | (2,861 | ) | $ | (2,737 | ) | $ | (86,673 | ) | $ | 277,386 | |||||||||||||||||||
Net income | 3,068 | 3,068 | $ | 3,068 | ||||||||||||||||||||||||||||||||||||
Deferred gain from cash flow hedges, net of tax of $3 million | 2,929 | 2,929 | 2,929 | 2,929 | ||||||||||||||||||||||||||||||||||||
Reclassification of net deferred loss from cash flow hedges into net income, net of tax of $9 million | 12,802 | 12,802 | 12,802 | 12,802 | ||||||||||||||||||||||||||||||||||||
Reclassification of net prior service costs into net income, net of tax of $0 | 593 | 593 | 593 | 593 | ||||||||||||||||||||||||||||||||||||
Reclassification of actuarial net loss into net income, net of tax of $0 | 40 | 40 | 40 | 40 | ||||||||||||||||||||||||||||||||||||
Deferred benefits, net of tax of $1 million and $2 million | 2,851 | 2,394 | 5,245 | 5,245 | 5,245 | |||||||||||||||||||||||||||||||||||
Comprehensive income | $ | 24,677 | ||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2007 | 1,000 | $ | — | $ | 284,672 | $ | 82,455 | $ | (65,344 | ) | $ | 30 | $ | 250 | $ | (65,064 | ) | $ | 302,063 | |||||||||||||||||||||
Net income | 85,014 | 85,014 | $ | 85,014 | ||||||||||||||||||||||||||||||||||||
Distributions to RRI Energy, Inc. | (57,162 | ) | (57,162 | ) | ||||||||||||||||||||||||||||||||||||
Reclassification of net deferred loss from cash flow hedges into net income, net of tax of $11 million | 17,388 | 17,388 | 17,388 | 17,388 | ||||||||||||||||||||||||||||||||||||
Reclassification of net prior service costs into net income, net of tax of $0 | 419 | 419 | 419 | 419 | ||||||||||||||||||||||||||||||||||||
Reclassification of actuarial net loss into net income, net of tax of $0 | 46 | 46 | 46 | 46 | ||||||||||||||||||||||||||||||||||||
Deferred benefits, net of tax of $4 million | (5,321 | ) | (5,321 | ) | (5,321 | ) | (5,321 | ) | ||||||||||||||||||||||||||||||||
Comprehensive income | $ | 97,546 | ||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2008 | 1,000 | $ | — | $ | 284,672 | $ | 110,307 | $ | (47,956 | ) | $ | (5,245 | ) | $ | 669 | $ | (52,532 | ) | $ | 342,447 | ||||||||||||||||||||
Net loss | (88,401 | ) | (88,401 | ) | $ | (88,401 | ) | |||||||||||||||||||||||||||||||||
Non-cash distributions to RRI Energy, Inc. | 112 | 112 | ||||||||||||||||||||||||||||||||||||||
Reclassification of net deferred loss from cash flow hedges into net loss, net of tax of $11 million | 14,590 | 14,590 | 14,590 | 14,590 | ||||||||||||||||||||||||||||||||||||
Reclassification of net prior service costs into net loss, net of tax of $0 | 508 | 508 | 508 | 508 | ||||||||||||||||||||||||||||||||||||
Reclassification of actuarial net loss into net loss, net of tax of $0 | 240 | 240 | 240 | 240 | ||||||||||||||||||||||||||||||||||||
Deferred benefits, net of tax of $4 million and $0 | 4,086 | 258 | 4,344 | 4,344 | 4,344 | |||||||||||||||||||||||||||||||||||
Comprehensive loss | $ | (68,719 | ) | |||||||||||||||||||||||||||||||||||||
Balance, December 31, 2009 | 1,000 | $ | — | $ | 284,672 | $ | 22,018 | $ | (33,366 | ) | $ | (919 | ) | $ | 1,435 | $ | (32,850 | ) | $ | 273,840 | ||||||||||||||||||||
F-73
Table of Contents
(1) | Background and Basis of Presentation |
(2) | Summary of Significant Accounting Policies |
(a) | Use of Estimates and Market Risk and Uncertainties. |
• | the reported amounts of assets, liabilities and equity | |
• | the reported amounts of revenues and expenses | |
• | disclosure of contingent assets and liabilities at the date of the financial statements |
(b) | Principles of Consolidation. |
F-74
Table of Contents
(c) | Revenues. |
(d) | Fair Value Measurements. |
Level 1: | Level 1 represents unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date. REMA’s cash equivalents are also valued using Level 1 inputs. |
Level 2: | Level 2 represents quoted market prices for similar assets or liabilities in active markets, quoted market prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data. This category includesover-the-counter (OTC) derivative instruments such as forwards. |
Level 3: | This category includes energy derivative instruments whose fair value is estimated based on prices in inactive markets that are not observable. REMA’s OTC derivative instruments that are transacted in less liquid markets with limited pricing information are included in Level 3, which are coal contracts. |
December 31, 2009 | ||||||||||||||||
Total | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
(in millions) | ||||||||||||||||
Total derivative assets | $ | — | $ | 40 | $ | — | $ | 40 | ||||||||
Total derivative liabilities | — | 135 | 6 | 141 | ||||||||||||
Cash equivalents(1) | 18 | — | — | 18 |
(1) | Represent investments in money market funds and are included in cash and cash equivalents in REMA’s consolidated balance sheet. REMA had $18 million of cash equivalents included in cash and cash equivalents. |
F-75
Table of Contents
December 31, 2008 | ||||||||||||||||||||
Total | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Reclassifications | Fair Value | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Total derivative assets | $ | — | $ | 78 | $ | — | $ | (2 | )(1) | $ | 76 | |||||||||
Total derivative liabilities | — | 208 | 33 | (2 | )(1) | 239 | ||||||||||||||
Cash equivalents(2) | 30 | — | — | — | 30 |
(1) | Reclassifications are required to reconcile to the consolidated balance sheet presentation. | |
(2) | Represent investments in money market funds and are included in cash and cash equivalents in REMA’s consolidated balance sheet. REMA had $30 million of cash equivalents included in cash and cash equivalents. |
Net Derivatives | ||||||||
(Level 3) | ||||||||
2009 | 2008 | |||||||
(in millions) | ||||||||
Balance, beginning of period (net asset (liability)) | $ | (33 | ) | $ | 12 | |||
Total gains (losses) realized/unrealized: | ||||||||
Included in earnings(1) | (25 | ) | 36 | |||||
Purchases, issuances and settlements (net) | 52 | (81 | ) | |||||
Transfers in and/or out of Level 3 (net) | — | — | ||||||
Balance, end of period (net asset (liability)) | $ | (6 | ) | $ | (33 | ) | ||
Changes in unrealized gains/losses relating to derivative assets and liabilities still held as of December 31, 2009 and 2008: | ||||||||
Revenues | $ | — | $ | — | ||||
Cost of sales | (6 | ) | 1 | |||||
Total | $ | (6 | ) | $ | 1 | |||
(1) | Recorded in cost of sales. |
2008 | ||||||||
Income before | ||||||||
Income Taxes | Net Income | |||||||
(in millions) | ||||||||
Total derivative liabilities | $ | 2 | (1) | $ | 1 | |||
(1) | This amount represented a decrease in REMA’s derivative liabilities with the corresponding unrealized gains recorded in cost of sales. |
F-76
Table of Contents
(e) | Derivatives and Hedging Activities. |
Primary Exposure | Purpose for Holding or | Transactions that | Transactions that | |||||
Instrument | Risk | Issuing Instrument(1) | Physically Flow/Settle(2) | Financially Settle(3) | ||||
Power forward and swap contracts | Price risk | Power sales to customers | Revenues | Revenues | ||||
Power purchases related to operations | Cost of sales | Revenues | ||||||
Natural gas and fuel forward and swap contracts | Price risk | Natural gas and fuel purchases related to operations | Cost of sales | Cost of sales |
(1) | The purpose for holding or issuing does not impact the accounting method elected for each instrument. | |
(2) | Includes classification of unrealized gains and losses for derivative transactions reclassified to inventory upon settlement. | |
(3) | Includes classification formark-to-market derivatives and amounts reclassified from accumulated other comprehensive income (loss) related to cash flow hedges. |
F-77
Table of Contents
(f) | Credit Risk. |
(g) | Property, Plant and Equipment and Depreciation Expense. |
F-78
Table of Contents
Estimated Useful | December 31, | |||||||||||
Lives (Years) | 2009 | 2008 | ||||||||||
(in millions) | ||||||||||||
Electric generation facilities | 20 – 30 | $ | 986 | (1) | $ | 849 | (2) | |||||
Other | 10 – 26 | 14 | 14 | |||||||||
Land | 26 | 26 | ||||||||||
Assets under construction | 33 | 93 | ||||||||||
Total | 1,059 | 982 | ||||||||||
Accumulated depreciation | (293 | ) | (259 | ) | ||||||||
Property, plant and equipment, net | $ | 766 | $ | 723 | ||||||||
(1) | Includes $234 million ($212 million net of accumulated depreciation) relating to leasehold improvements for the Keystone, Shawville and Conemaugh plants. The original depreciation periods for these leasehold improvements range primarily from 10 to 31 years. | |
(2) | Includes $169 million ($152 million net of accumulated depreciation) relating to leasehold improvements for the Keystone, Shawville and Conemaugh plants. |
(h) | Intangible Assets and Amortization Expense. |
(i) | Income Taxes. |
F-79
Table of Contents
(j) | Capitalization of Interest Expense. |
(k) | Cash and Cash Equivalents. |
(l) | Restricted Cash. |
(m) | Inventory. |
December 31, | ||||||||
2009 | 2008 | |||||||
(in millions) | ||||||||
Materials and supplies, including spare parts | $ | 58 | $ | 50 | ||||
Coal | 25 | 27 | ||||||
Heating oil | 12 | 13 | ||||||
Total inventory | $ | 95 | $ | 90 | ||||
(n) | Environmental Costs. |
(o) | Asset Retirement Obligations. |
2009 | 2008 | |||||||
(in millions) | ||||||||
Balance, beginning of period | $ | 8 | $ | 7 | ||||
Revisions in estimated cash flows | 2 | — | ||||||
Accretion expense | — | 1 | ||||||
Balance, end of period | $ | 10 | $ | 8 | ||||
F-80
Table of Contents
(p) | Repair and Maintenance Costs for Power Generation Assets. |
(q) | Deferred Lease Costs. |
(r) | New Accounting Pronouncements Adopted. |
(s) | New Accounting Pronouncements Not Yet Adopted. |
F-81
Table of Contents
(3) | Related Party Transactions |
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Allocated or charged by RRI Energy | $ | 117 | $ | 100 | $ | 96 |
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Sales to RRI Energy under various commodity agreements(1) | $ | 525 | $ | 879 | $ | 697 | ||||||
Purchases from RRI Energy under various commodity agreements(2) | 3 | 10 | 8 | |||||||||
Fees charged by RRI Energy for these services and included in operation and maintenance—affiliates | 5 | 5 | 5 | |||||||||
Fees charged by RRI Energy for these services and included in cost of sales—affiliates | 1 | 1 | 2 | |||||||||
Sales of emission allowances to RRI Energy(3) | 1 | — | 4 | |||||||||
Gains on emission allowances sales to RRI Energy(4) | — | — | 1 |
(1) | Recorded in revenues—affiliates. | |
(2) | Recorded in cost of sales—affiliates. | |
(3) | Reflects price at which RRI Energy sold the emission allowances to third parties. | |
(4) | Recorded in gains on sales of assets and emission allowances, net. |
F-82
Table of Contents
F-83
Table of Contents
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
REMA LLC cash distributions to RRI Energy | $ | — | $ | 57 | $ | — |
(4) | Review of Long-Lived Assets |
• | a significant decrease in the market price of a long-lived asset | |
• | a significant adverse change in the manner an asset is being used or its physical condition | |
• | an adverse action by a regulator or legislature or an adverse change in the business climate | |
• | an accumulation of costs significantly in excess of the amount originally expected for the construction or acquisition of an asset | |
• | a current-period loss combined with a history of losses or the projections of future losses | |
• | a change in the intent about an asset from an intent to hold to a greater than 50% likelihood that an asset will be sold or disposed of before the end of its previously estimated useful life |
F-84
Table of Contents
December 31, 2009 | ||
Undiscounted Cash Flow Scenarios Weightings: | ||
5-year market forecast with escalation(1)(2) | 50% | |
5-year market forecast with fundamental view(1) | 50% | |
Range of Assumptions in Fundamental View: | ||
Demand for power growth per year | 1%-2% | |
After-tax rate of return on new construction(3) | 8.0%-9.5% | |
Spread between natural gas and coal prices, $/MMBTU(4) | $3-$5 |
(1) | For each scenario, the first five years of cash flows are the same. | |
(2) | REMA assumed an annual 2.5% escalation percentage beyond year five. | |
(3) | The low to mid part of the range represents natural gas-fired plants’ required returns and the mid to high part of the range represents coal-fired and nuclear plants’ required returns. | |
(4) | Natural gas and coal prices are prior to transportation costs. |
F-85
Table of Contents
(5) | Intangible Assets |
(a) | Goodwill. |
(b) | Other Intangibles. |
Remaining | ||||||||||||||||||||
Weighted | December 31, | |||||||||||||||||||
Average | 2009 | 2008 | ||||||||||||||||||
Amortization | Carrying | Accumulated | Carrying | Accumulated | ||||||||||||||||
Period (Years) | Amount | Amortization | Amount | Amortization | ||||||||||||||||
(in millions) | ||||||||||||||||||||
SO2 emission allowances(1)(2) | — | (1) | $ | 71 | (3) | $ | (7 | )(3) | $ | 69 | (4) | $ | (5 | )(4) | ||||||
NOx emission allowances(1)(5) | — | (1) | 35 | (3) | (2 | )(3) | 35 | (4) | — | (4) | ||||||||||
Total | $ | 106 | $ | (9 | ) | $ | 104 | $ | (5 | ) | ||||||||||
(1) | SO2 is sulfur dioxide and NOx is nitrogen oxides. Amortized to amortization expense on aunits-of-production basis. As of December 31, 2009, REMA has recorded (a) SO2 emission allowances through the 2039 vintage year and (b) NOx emission allowances through the 2030 vintage year. | |
(2) | During 2009, 2008 and 2007, REMA purchased $35 million, $5 million and $48 million, respectively, of SO2emission allowances from affiliates. | |
(3) | During 2009, REMA wrote off fully amortized carrying amount and accumulated amortization of SO2 and NOx emission allowances surrendered of $33 million and $2 million, respectively. | |
(4) | During 2008, REMA wrote off fully amortized carrying amount and accumulated amortization of SO2 and NOx emission allowances surrendered of $188 million and $62 million, respectively. | |
(5) | During 2009, 2008 and 2007, REMA purchased $2 million, $7 million and $3 million, respectively, of NOxemission allowances from affiliates. |
F-86
Table of Contents
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Amortization of emission allowances | $ | 11 | $ | 40 | (1) | $ | 56 | |||||
Total | $ | 11 | $ | 40 | $ | 56 | ||||||
(1) | Of this amount, $28 million relates to expense and current liabilities for emission allowances used prior to ownership. These were purchased during the first quarter of 2009. |
2010 | $ | 4(1 | ) | |
2011 | 5(1 | ) | ||
2012 | 5(1 | ) | ||
2013 | 5(1 | ) | ||
2014 | 5(1 | ) |
(1) | These amounts do not include estimated amortization expense of emission allowances not purchased as of December 31, 2009. |
(6) | Derivatives and Hedging Activities |
December 31, 2009 | ||||||||
Expected to be | ||||||||
Reclassified into | ||||||||
Results of Operations | ||||||||
At the End of the Period | in Next 12 Months | |||||||
(in millions) | ||||||||
De-designated cash flow hedges, net of tax(1)(2) | $ | (33 | ) | $ | 14 | |||
(1) | No component of the derivatives’ gain or loss was excluded from the assessment of effectiveness. | |
(2) | During 2009, 2008 and 2007, $0 was recognized in REMA’s results of operations as a result of the discontinuance of cash flow hedges because it was probable that the forecasted transaction would not occur. |
Derivative Assets | Derivative Liabilities | Net Derivative | ||||||||||||||||||
Current | Long-Term | Current | Long-Term | Assets (Liabilities) | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Non-trading | $ | 32 | $ | 8 | $ | (76 | ) | $ | (65 | ) | $ | (101 | ) | |||||||
Total derivatives | $ | 32 | $ | 8 | $ | (76 | ) | $ | (65 | ) | $ | (101 | ) | |||||||
F-87
Table of Contents
Notional Volumes | ||||||||||
Commodity | Unit(1) | Current | Long-term | |||||||
(in millions) | ||||||||||
Coal | MMBTU | 23 | 22(2 | ) |
(1) | MMBTU is million British thermal units. | |
(2) | For 2011, REMA has committed to purchase volumes of 22 million MMBTU (which are included in this table) for which the contract prices are subject to negotiation and agreement prior to the beginning of that year. No coal derivative contracts for the 2011 delivery period have been priced as of December 31, 2009. See note 12(c). |
Derivatives not Designated as Hedging Instruments | Revenues | Cost of Sales | ||||||
(in millions) | ||||||||
Non-Trading Commodity Contracts: | ||||||||
Unrealized(2) | $ | 10 | $ | 27 | ||||
Realized(2)(3)(4) | (36 | ) | — | |||||
Total non-trading | $ | (26 | ) | $ | 27 | |||
(1) | As discussed in note 2(e), during 2007, REMA de-designated its remaining cash flow hedges; the amount reflected here subsequent to that time relates to previously measured ineffectiveness reversing due to settlement of the derivative contracts. | |
(2) | Does not include realized gains or losses associated with cash month transactions, non-derivative transactions or derivative transactions that qualify for the normal purchase/normal sale exception. | |
(3) | Excludes settlement value of fuel contracts classified as inventory upon settlement. | |
(4) | Includes gains or losses from de-designated cash flow hedges reclassified from accumulated other comprehensive loss due to settlement of the derivative contracts. See note 2(e). |
(7) | Debt |
(6) | Pension and Postretirement Benefits |
F-88
Table of Contents
Pension | Postretirement Benefits | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in millions) | ||||||||||||||||
Change in Benefit Obligation | ||||||||||||||||
Beginning of year | $ | 28 | $ | 26 | $ | 37 | $ | 32 | ||||||||
Service cost | 2 | 2 | 1 | 1 | ||||||||||||
Interest cost | 1 | 1 | 2 | 2 | ||||||||||||
Benefits paid | (1 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||||
Actuarial (gain) loss | 1 | — | (7 | ) | 3 | |||||||||||
End of year | $ | 31 | $ | 28 | $ | 32 | $ | 37 | ||||||||
Change in Plan Assets | ||||||||||||||||
Beginning of year | $ | 16 | $ | 20 | $ | — | $ | — | ||||||||
Employer contributions | 5 | 2 | 1 | — | ||||||||||||
Benefits paid | (1 | ) | (1 | ) | (1 | ) | — | |||||||||
Actual investment return | 2 | (5 | ) | — | — | |||||||||||
End of year | $ | 22 | $ | 16 | $ | — | $ | — | ||||||||
Funded status | $ | (9 | ) | $ | (12 | ) | $ | (32 | ) | $ | (37 | ) |
Pension | Postretirement Benefits | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in millions) | ||||||||||||||||
Current liabilities | $ | — | $ | — | $ | (2 | ) | $ | (1 | ) | ||||||
Noncurrent liabilities | (9 | ) | (12 | ) | (30 | ) | (36 | ) | ||||||||
Net amount recognized | $ | (9 | ) | $ | (12 | ) | $ | (32 | ) | $ | (37 | ) | ||||
Pension | Postretirement Benefits | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Service cost | $ | 2 | $ | 2 | $ | 3 | $ | 1 | $ | 1 | $ | 1 | ||||||||||||
Interest cost | 1 | 1 | 1 | 2 | 2 | 1 | ||||||||||||||||||
Expected return on plan assets | (1 | ) | (1 | ) | (1 | ) | — | — | — | |||||||||||||||
Net amortization | 1 | — | — | 1 | 1 | 1 | ||||||||||||||||||
Net periodic benefit costs | $ | 3 | $ | 2 | $ | 3 | $ | 4 | $ | 4 | $ | 3 | ||||||||||||
F-89
Table of Contents
Pension | Postretirement Benefits | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in millions) | ||||||||||||||||
Discount rate | 5.50 | % | 5.75 | % | 5.50 | % | 5.75 | % | ||||||||
Rate of compensation increase | 3.0 | % | 3.0 | % | N/A | N/A |
Pension | Postretirement Benefits | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
Discount rate | 5.75 | % | 5.75 | % | 5.75 | % | 5.75 | % | 5.75 | % | 5.75 | % | ||||||||||||
Rate of compensation increase | 3.0 | % | 3.0 | % | 3.0 | % | N/A | N/A | N/A | |||||||||||||||
Expected long-term rate of return on plan assets | 7.5 | % | 7.5 | % | 7.5 | % | N/A | N/A | N/A |
2009 | 2008 | 2007 | ||||||||||
Health care cost trend rate assumed for next year(1) | 8.0 | % | 7.9 | % | 8.3 | % | ||||||
Rate to which the cost trend rate is assumed to gradually decline (ultimate trend rate)(1) | 5.5 | % | 5.5 | % | 5.5 | % | ||||||
Year that the rate reaches the ultimate trend rate | 2015 | 2015 | 2015 |
(1) | Represents blended rate for medical and prescription drug costs. |
One-Percentage Point | ||||||||
Increase | Decrease | |||||||
(in millions) | ||||||||
Effect on service and interest cost | $ | — | $ | — | ||||
Effect on accumulated postretirement benefit obligation | 4 | (3 | ) |
F-90
Table of Contents
Percentage of Plan Assets | ||||||||||||
as of December 31, | Target Allocation(1) | |||||||||||
2009 | 2008 | 2010 | ||||||||||
Domestic equity securities | 35 | % | 41 | % | 35 | % | ||||||
International equity securities | 25 | 17 | 25 | |||||||||
Global equity securities | 10 | 9 | 10 | |||||||||
Debt securities | 30 | 33 | 30 | |||||||||
Total | 100 | % | 100 | % | 100 | % | ||||||
(1) | RRI Energy’s Benefits Committee has determined an allowable range for each category; these percentages represent the mid-point for each respective range. |
Asset Class | Index | Weight | ||||
Domestic equity securities | Dow Jones U.S. Total Stock Market Index | 40 | % | |||
International equity securities | MSCI All Country World Ex-U.S. Index | 20 | ||||
Global equity securities | MSCI All Country World Index | 10 | ||||
Debt securities | Barclays Capital Aggregate Bond Index | 30 | ||||
100 | % | |||||
F-91
Table of Contents
Level 1 | Level 2 | Level 3 | ||||||||||
(in millions) | ||||||||||||
Domestic equity securities(1) | $ | 8 | $ | — | $ | — | ||||||
International equity securities(2) | 6 | — | — | |||||||||
Global equity securities(3) | 2 | — | — | |||||||||
Debt securities(4) | 6 | — | — | |||||||||
Total | $ | 22 | $ | — | $ | — | ||||||
(1) | Comprised of large cap stocks. | |
(2) | Comprised of large cap foreign stocks. | |
(3) | Comprised of both foreign and domestic multi-cap stocks. | |
(4) | Comprised of intermediate-term, investment grade bonds. |
Postretirement | ||||||||
Pension | Benefits | |||||||
(in millions) | ||||||||
2010 | $ | 1 | $ | 1 | ||||
2011 | 1 | 2 | ||||||
2012 | 1 | 2 | ||||||
2013 | 1 | 2 | ||||||
2014 | 2 | 2 | ||||||
2015-2019 | 13 | 14 |
(9) | Savings Plan |
(10) | Collective Bargaining Agreements |
F-92
Table of Contents
(11) | Income Taxes |
(a) | Summary. |
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Current: | ||||||||||||
Federal | $ | (27 | ) | $ | 27 | $ | — | |||||
State | 2 | 18 | 1 | |||||||||
Total current | (25 | ) | 45 | 1 | ||||||||
Deferred: | ||||||||||||
Federal | (23 | ) | 23 | 1 | ||||||||
State | (7 | ) | (9 | ) | 3 | |||||||
Total deferred | (30 | ) | 14 | 4 | ||||||||
Income tax expense (benefit) | $ | (55 | ) | $ | 59 | $ | 5 | |||||
2009 | 2008 | 2007 | ||||||||||
Federal statutory rate | (35 | )% | 35 | % | 35 | % | ||||||
Additions (reductions) resulting from: | ||||||||||||
State income taxes, net of federal income taxes | (4 | ) | 4 | 29 | ||||||||
Other, net | — | 2 | (1 | ) | ||||||||
Effective rate | (39 | )% | 41 | % | 63 | % | ||||||
F-93
Table of Contents
December 31, | ||||||||
2009 | 2008 | |||||||
(in millions) | ||||||||
Deferred tax assets: | ||||||||
Current: | ||||||||
Derivative liabilities, net | $ | 18 | $ | 29 | ||||
Employee benefits | 1 | 1 | ||||||
Total current deferred tax assets | 19 | 30 | ||||||
Long-term: | ||||||||
Employee benefits | 19 | 23 | ||||||
Net operating loss carryforwards | 62 | 15 | ||||||
Environmental reserves | 7 | 6 | ||||||
Derivative liabilities, net | 23 | 39 | ||||||
Other | 27 | 22 | ||||||
Total long-term deferred tax assets | 138 | 105 | ||||||
Total deferred tax assets | $ | 157 | $ | 135 | ||||
Deferred tax liabilities: | ||||||||
Long-term: | ||||||||
Depreciation and amortization | $ | 108 | $ | 101 | ||||
Total long-term deferred tax liabilities | 108 | 101 | ||||||
Total deferred tax liabilities | $ | 108 | $ | 101 | ||||
Accumulated deferred income taxes, net | $ | 49 | $ | 34 | ||||
(b) | Tax Attribute Carryovers. |
Statutory | ||||||||
December 31, | Carryforward | Expiration | ||||||
2009 | Period | Year(s) | ||||||
(in millions) | (in years) | |||||||
Net operating loss carryforwards: | ||||||||
Federal | $ | 99 | 20 | 2029 | ||||
State | 414 | 7 to 20 | 2016 through 2029 |
(c) | Valuation Allowances. |
(d) | Income Tax Uncertainties. |
F-94
Table of Contents
2008 | ||||
Balance, beginning of period | $ | — | ||
Increases related to prior years | 8 | |||
Decreases related to prior years | (8 | ) | ||
Increases related to current year | — | |||
Settlements | — | |||
Lapses in the statute of limitations | — | |||
Balance, end of period | $ | — | ||
Subject to | Currently Under | |||||||
Examination | Audit | |||||||
Federal | 2002 to 2009 | 2002 to 2008 | ||||||
New Jersey | 2002 to 2009 | 2002 to 2005 | ||||||
Pennsylvania | 2005 to 2009 | 2005 to 2006 |
(12) | Commitments |
(a) | Lease Commitments. |
F-95
Table of Contents
2010 | $ | 52 | ||
2011 | 63 | |||
2012 | 56 | |||
2013 | 64 | |||
2014 | 64 | |||
2015 and thereafter | 635 | |||
Total | $ | 934 | ||
(b) | Guarantees and Indemnifications. |
(c) | Other Commitments. |
F-96
Table of Contents
Fixed Pricing(1) | ||||
(in millions) | ||||
2010 | $ | 174 | ||
2011(2) | 62 | |||
2012 | 12 | |||
2013 | — | |||
2014 | — | |||
2015 and thereafter | — | |||
Total | $ | 248 | ||
(1) | As of December 31, 2009, the maximum remaining term under any individual fuel supply contract is three years. | |
(2) | REMA has committed to purchase volumes of 22 million MMBTU under some coal contracts for which the contract prices are subject to negotiation and agreement prior to the beginning of that year and thus the amounts are not included in this table. |
2010 | $ | 28 | ||
2011 | — | |||
2012 | — | |||
2013 | — | |||
2014 | — | |||
2015 and thereafter | — | |||
Total | $ | 28 | ||
F-97
Table of Contents
F-98
Table of Contents
F-99
Table of Contents
2009 | 2008 | 2007 | ||||||||||
(thousands of dollars) | ||||||||||||
Revenues: | ||||||||||||
Revenues | $ | 9,122 | $ | 14,615 | $ | 22,317 | ||||||
Revenues—affiliates | 302,636 | 570,863 | 542,568 | |||||||||
Total | 311,758 | 585,478 | 564,885 | |||||||||
Expenses: | ||||||||||||
Cost of sales | 275,751 | 247,817 | 227,240 | |||||||||
Cost of sales—affiliates | 1,937 | (3,467 | ) | (5,521 | ) | |||||||
Operation and maintenance | 104,957 | 132,277 | 161,713 | |||||||||
Operation and maintenance—affiliates | 26,958 | 32,787 | 37,696 | |||||||||
Taxes other than income taxes | 8,021 | 10,587 | 11,570 | |||||||||
General and administrative—primarily affiliates | 23,000 | 24,626 | 27,685 | |||||||||
Gains on sales of assets and emission allowances, net—primarily affiliate | (2,654 | ) | (617 | ) | (7,480 | ) | ||||||
Goodwill and long-lived assets impairments | 120,053 | 173,570 | — | |||||||||
Depreciation and amortization | 89,001 | 104,261 | 137,602 | |||||||||
Total operating expenses | 647,024 | 721,841 | 590,505 | |||||||||
Operating Income (Loss) | (335,266 | ) | (136,363 | ) | (25,620 | ) | ||||||
Other Income (Expense): | ||||||||||||
Other, net | 7 | 4,488 | — | |||||||||
Interest expense | (19,375 | ) | (23,284 | ) | (34,314 | ) | ||||||
Interest expense—affiliates | (4,357 | ) | (5,987 | ) | (9,293 | ) | ||||||
Interest income—primarily affiliates | 1,058 | 5,514 | 8,452 | |||||||||
Total other expense | (22,667 | ) | (19,269 | ) | (35,155 | ) | ||||||
Loss from Continuing Operations Before Income Taxes | (357,933 | ) | (155,632 | ) | (60,775 | ) | ||||||
Income tax benefit | (120,973 | ) | (26,323 | ) | (25,737 | ) | ||||||
Loss from Continuing Operations | (236,960 | ) | (129,309 | ) | (35,038 | ) | ||||||
Income (loss) from discontinued operations | 2,644 | (1,480 | ) | 7,124 | ||||||||
Net Loss | $ | (234,316 | ) | $ | (130,789 | ) | $ | (27,914 | ) | |||
F-100
Table of Contents
December 31, | ||||||||
2009 | 2008 | |||||||
(thousands of dollars, except per share amounts) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 5,031 | $ | 2 | ||||
Accounts receivable, principally customer | 511 | 21,971 | ||||||
Receivables from affiliates, net | 27,239 | 45,383 | ||||||
Inventory | 84,223 | 73,564 | ||||||
Accumulated deferred income taxes | 6,037 | 32,830 | ||||||
Collateral posted under agreement with RRI Energy, Inc. | 14,392 | — | ||||||
Prepayments and other current assets | 4,152 | 1,687 | ||||||
Current assets of discontinued operations | — | 29,670 | ||||||
Total current assets | 141,585 | 205,107 | ||||||
Property, Plant and Equipment, net | 1,606,235 | 1,720,944 | ||||||
Other Assets: | ||||||||
Other intangibles, net | 159,533 | 164,950 | ||||||
Long-term note receivable from RRI Energy, Inc. | — | 53,981 | ||||||
Long-term collateral posted under agreement with RRI Energy, Inc. | — | 14,392 | ||||||
Other | 3,046 | 8,365 | ||||||
Total other assets | 162,579 | 241,688 | ||||||
Total Assets | $ | 1,910,399 | $ | 2,167,739 | ||||
LIABILITIES AND STOCKHOLDER’S EQUITY | ||||||||
Current Liabilities: | ||||||||
Current portion of long-term debt | $ | 404,403 | $ | 12,531 | ||||
Accounts payable, principally trade | 37,915 | 47,860 | ||||||
Accrued interest payable | 7,996 | 7,996 | ||||||
Other taxes payable | 10,758 | 13,276 | ||||||
Derivatives liabilities | 7,679 | 69,468 | ||||||
Revolving credit facility with RRI Energy, Inc. | 294,796 | — | ||||||
Other | 7,845 | 16,512 | ||||||
Current liabilities of discontinued operations | 1,283 | 4,486 | ||||||
Total current liabilities | 772,675 | 172,129 | ||||||
Other Liabilities: | ||||||||
Accumulated deferred income taxes | 70,888 | 139,218 | ||||||
Benefit obligations | 51,869 | 62,377 | ||||||
Taxes payable to RRI Energy, Inc. and related accrued interest | 11,952 | 87,408 | ||||||
Other | 13,160 | 9,972 | ||||||
Long-term liabilities of discontinued operations | 3,542 | 3,542 | ||||||
Total other liabilities | 151,411 | 302,517 | ||||||
Revolving Credit Facility with RRI Energy, Inc. | — | 74,471 | ||||||
Long-term Debt | — | 404,403 | ||||||
Commitments and Contingencies | ||||||||
Stockholder’s Equity: | ||||||||
Common stock; par value $1.00 per share (1,000 shares authorized, issued and outstanding) | 1 | 1 | ||||||
Additional paid-in capital | 2,211,139 | 2,211,139 | ||||||
Accumulated deficit | (1,216,712 | ) | (982,396 | ) | ||||
Accumulated other comprehensive loss | (8,115 | ) | (14,525 | ) | ||||
Total stockholder’s equity | 986,313 | 1,214,219 | ||||||
Total Liabilities and Stockholder’s Equity | $ | 1,910,399 | $ | 2,167,739 | ||||
F-101
Table of Contents
2009 | 2008 | 2007 | ||||||||||
(thousands of dollars) | ||||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net loss | $ | (234,316 | ) | $ | (130,789 | ) | $ | (27,914 | ) | |||
(Income) loss from discontinued operations | (2,644 | ) | 1,480 | (7,124 | ) | |||||||
Net loss from continuing operations | (236,960 | ) | (129,309 | ) | (35,038 | ) | ||||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||
Goodwill and long-lived assets impairments | 120,053 | 173,570 | — | |||||||||
Depreciation and amortization | 89,001 | 104,261 | 137,602 | |||||||||
Deferred income taxes | (42,414 | ) | (47,522 | ) | (21,422 | ) | ||||||
Net changes in energy derivatives | (61,789 | ) | 69,468 | 1,108 | ||||||||
Amortization of revaluation of acquired debt | (12,530 | ) | (11,409 | ) | (10,505 | ) | ||||||
Gains on sales of assets and emission allowances, net—primarily affiliate | (2,654 | ) | (617 | ) | (7,480 | ) | ||||||
Other, net | (203 | ) | (1,985 | ) | 64 | |||||||
Changes in other assets and liabilities: | ||||||||||||
Accounts receivable, net | 21,460 | (21,869 | ) | 1,562 | ||||||||
Inventory | (10,660 | ) | (16,331 | ) | (7,384 | ) | ||||||
Other current assets | (28 | ) | 389 | (539 | ) | |||||||
Other assets | (768 | ) | 380 | 4,867 | ||||||||
Accounts payable | (3,802 | ) | 7,780 | (27 | ) | |||||||
Payable to/receivable from affiliates, net | 13,480 | (5,764 | ) | (14,840 | ) | |||||||
Collateral returned (posted) under agreement with RRI Energy, Inc. | — | 2,000 | (788 | ) | ||||||||
Income taxes payable/receivable | (2,675 | ) | 18,633 | 22,938 | ||||||||
Long-term taxes payable to RRI Energy, Inc. and related accrued interest | (75,456 | ) | 22,132 | (18,015 | ) | |||||||
Other current liabilities | (3,067 | ) | 820 | 187 | ||||||||
Other liabilities | (3,450 | ) | 3,281 | (3,680 | ) | |||||||
Net cash provided by (used in) continuing operations from operating activities | (212,462 | ) | 167,908 | 48,610 | ||||||||
Net cash provided by (used in) discontinued operations from operating activities | 30,771 | (56 | ) | 6,726 | ||||||||
Net cash provided by (used in) operating activities | (181,691 | ) | 167,852 | 55,336 | ||||||||
Cash Flows from Investing Activities: | ||||||||||||
Capital expenditures | (83,834 | ) | (174,287 | ) | (109,212 | ) | ||||||
Proceeds from sales of emission allowances—affiliates | 4,531 | 164 | 12,678 | |||||||||
Purchases of emission allowances—affiliates | (8,358 | ) | (44,892 | ) | (9,643 | ) | ||||||
Other, net | 75 | 515 | 883 | |||||||||
Net cash used in continuing operations from investing activities | (87,586 | ) | (218,500 | ) | (105,294 | ) | ||||||
Net cash provided by discontinued operations from investing activities | — | — | 520 | |||||||||
Net cash used in investing activities | (87,586 | ) | (218,500 | ) | (104,774 | ) | ||||||
Cash Flows from Financing Activities: | ||||||||||||
Changes in revolving credit facility with RRI Energy, Inc., net | 220,325 | 37,172 | 24,616 | |||||||||
Repayments from RRI Energy, Inc. under term loan | 53,981 | 13,219 | 25,000 | |||||||||
Net cash provided by financing activities | 274,306 | 50,391 | 49,616 | |||||||||
Net Change in Cash and Cash Equivalents | 5,029 | (257 | ) | 178 | ||||||||
Cash and Cash Equivalents at Beginning of Period | 2 | 259 | 81 | |||||||||
Cash and Cash Equivalents at End of Period | $ | 5,031 | $ | 2 | $ | 259 | ||||||
Supplemental Disclosure of Cash Flow Information: | ||||||||||||
Cash Payments: | ||||||||||||
Interest paid (net of amounts capitalized) to third parties for continuing operations | $ | 31,778 | $ | 34,688 | $ | 44,756 | ||||||
Income taxes paid (net of income tax refunds received) for continuing operations | 758 | (15,663 | ) | (2,858 | ) |
F-102
Table of Contents
Accumulated Other Comprehensive Income (Loss) | Discontinued | |||||||||||||||||||||||||||||||||||||||||||
Benefits | Benefits | Total | Operations | |||||||||||||||||||||||||||||||||||||||||
Deferred | Actuarial | Net | Accumulated | Accumulated | ||||||||||||||||||||||||||||||||||||||||
Additional | Derivative | Net | Prior | Other | Other | Total | Comprehensive | |||||||||||||||||||||||||||||||||||||
Common Stock | Paid-In | Accumulated | Gains | Gain | Service | Comprehensive | Comprehensive | Stockholder’s | Income | |||||||||||||||||||||||||||||||||||
Shares | Amount | Capital | Deficit | (Losses) | (Loss) | Costs | Income (Loss) | Loss | Equity | (Loss) | ||||||||||||||||||||||||||||||||||
(thousands of dollars) | ||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2006 | 1,000 | $ | 1 | $ | 2,211,139 | $ | (823,693 | ) | $ | 2,711 | $ | (5,566 | ) | $ | (3,379 | ) | $ | (6,234 | ) | $ | — | $ | 1,381,213 | |||||||||||||||||||||
Net loss | (27,914 | ) | (27,914 | ) | $ | (27,914 | ) | |||||||||||||||||||||||||||||||||||||
Deferred gain from cash flow hedges, net of tax of $0 | 330 | 330 | 330 | 330 | ||||||||||||||||||||||||||||||||||||||||
Reclassification of net deferred gain from cash flow hedges into net loss, net of tax of $2 million | (3,041 | ) | (3,041 | ) | (3,041 | ) | (3,041 | ) | ||||||||||||||||||||||||||||||||||||
Reclassification of benefits net prior service costs into net loss, net of tax of $0 | 401 | 401 | 401 | 401 | ||||||||||||||||||||||||||||||||||||||||
Reclassification of benefits actuarial net loss into net loss, net of tax of $0 | 170 | 170 | 170 | 170 | ||||||||||||||||||||||||||||||||||||||||
Deferred benefits, net of tax of $1 million and $1 million | 1,100 | 642 | 1,742 | 1,742 | 1,742 | |||||||||||||||||||||||||||||||||||||||
Comprehensive loss | $ | (28,312 | ) | |||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2007 | 1,000 | $ | 1 | $ | 2,211,139 | $ | (851,607 | ) | $ | — | $ | (4,296 | ) | $ | (2,336 | ) | $ | (6,632 | ) | $ | — | $ | 1,352,901 | |||||||||||||||||||||
Net loss | (130,789 | ) | (130,789 | ) | $ | (130,789 | ) | |||||||||||||||||||||||||||||||||||||
Reclassification of benefits net prior service costs into net loss, net of tax of $0 | 397 | 397 | 397 | 397 | ||||||||||||||||||||||||||||||||||||||||
Reclassification of benefits actuarial net loss into net loss, net of tax of $0 | 90 | 90 | 90 | 90 | ||||||||||||||||||||||||||||||||||||||||
Deferred benefits, net of tax of $4 million and $1 million | (7,346 | ) | (1,034 | ) | (8,380 | ) | (8,380 | ) | (8,380 | ) | ||||||||||||||||||||||||||||||||||
Comprehensive loss | $ | (138,682 | ) | |||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2008 | 1,000 | $ | 1 | $ | 2,211,139 | $ | (982,396 | ) | $ | — | $ | (11,552 | ) | $ | (2,973 | ) | $ | (14,525 | ) | $ | — | $ | 1,214,219 | |||||||||||||||||||||
Net loss | (234,316 | ) | (234,316 | ) | $ | (234,316 | ) | |||||||||||||||||||||||||||||||||||||
Reclassification of benefits net prior service costs into net loss, net of tax of $2 million | 3,357 | 3,357 | 3,357 | 3,357 | ||||||||||||||||||||||||||||||||||||||||
Reclassification of benefits actuarial net loss into net loss, net of tax of $1 million | 1,275 | 1,275 | 1,275 | 1,275 | ||||||||||||||||||||||||||||||||||||||||
Deferred benefits, net of tax of $1 million and $0 | 1,489 | 289 | 1,778 | 1,778 | 1,778 | |||||||||||||||||||||||||||||||||||||||
Comprehensive loss | $ | (227,906 | ) | |||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2009 | 1,000 | $ | 1 | $ | 2,211,139 | $ | (1,216,712 | ) | $ | — | $ | (8,788 | ) | $ | 673 | $ | (8,115 | ) | $ | — | $ | 986,313 | ||||||||||||||||||||||
F-103
Table of Contents
(1) | Background and Basis of Presentation |
(2) | Summary of Significant Accounting Policies |
(a) | Use of Estimates and Market Risk and Uncertainties. |
• | the reported amounts of assets, liabilities and equity | |
• | the reported amounts of revenues and expenses | |
• | disclosure of contingent assets and liabilities at the date of the financial statements |
(b) | Principles of Consolidation. |
(c) | Revenues. |
F-104
Table of Contents
(d) | Fair Value Measurements. |
Level 1: | Level 1 represents unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date. Orion Power’s cash equivalents are also valued using Level 1 inputs. |
Level 2: | Level 2 represents quoted market prices for similar assets or liabilities in active markets, quoted market prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data. |
Level 3: | This category includes energy derivative instruments whose fair value is estimated based on prices in inactive markets that are not observable. Orion Power’sover-the-counter (OTC) derivative instruments that are transacted in less liquid markets with limited pricing information are included in Level 3, which are coal contracts. |
December 31, 2009 | ||||||||||||||||
Total | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
(in millions) | ||||||||||||||||
Total derivative assets | $ | — | $ | — | $ | — | $ | — | ||||||||
Total derivative liabilities | — | — | 8 | 8 | ||||||||||||
Cash equivalents(1) | 5 | — | — | 5 |
(1) | Represent investments in money market funds and are included in cash and cash equivalents in Orion Power’s consolidated balance sheet. |
December 31, 2008 | ||||||||||||||||
Total | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Fair Value | |||||||||||||
(in millions) | ||||||||||||||||
Total derivative assets | $ | — | $ | — | $ | — | $ | — | ||||||||
Total derivative liabilities | — | — | 69 | 69 |
F-105
Table of Contents
Net Derivatives | ||||||||
(Level 3) | ||||||||
2009 | 2008 | |||||||
(in millions) | ||||||||
Balance, beginning of period (net asset (liability)) | $ | (69 | ) | $ | — | |||
Total gains (losses) realized/unrealized: | ||||||||
Included in earnings(1) | (33 | ) | — | |||||
Purchases, issuances and settlements (net) | 94 | (69 | ) | |||||
Transfers in and/or out of Level 3 (net) | — | — | ||||||
Balance, end of period (net asset (liability)) | $ | (8 | ) | $ | (69 | ) | ||
Changes in unrealized gains (losses) relating to derivative assets and liabilities still held as of December 31, 2009 and 2008(1) | (8 | ) | — |
(1) | Recorded in cost of sales. |
December 31, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Value | Fair Value(1) | Value | Fair Value(1) | |||||||||||||
(in millions) | ||||||||||||||||
Fixed rate debt | $ | 405 | $ | 403 | $ | 417 | $ | 397 | ||||||||
Total debt | $ | 405 | $ | 403 | $ | 417 | $ | 397 | ||||||||
(1) | Orion Power based the fair value of its fixed rate debt on market prices and quotes from an investment bank. |
(e) | Derivatives and Hedging Activities. |
F-106
Table of Contents
Transactions that | ||||||||
Primary Risk | Purpose for Holding or | Physically | Transactions that | |||||
Instrument | Exposure | Issuing Instrument(1) | Flow/Settle(2) | Financially Settle(3) | ||||
Coal forward and option contracts | Price risk | Coal purchases/sales related to operations | Cost of sales | Cost of sales |
(1) | The purpose for holding or issuing does not impact the accounting method elected for each instrument. | |
(2) | Includes classification of unrealized gains and losses for derivative transactions reclassified to inventory upon settlement. | |
(3) | Includes classification formark-to-market derivatives and amounts reclassified from accumulated other comprehensive income (loss) related to cash flow hedges. |
(f) | Credit Risk. |
F-107
Table of Contents
(g) | Customer Concentration. |
December 31, | ||||||||
2008 | ||||||||
Accounts | Percentage of Total | |||||||
Receivable | Accounts | |||||||
Customer | Balance | Receivable | ||||||
AEP Service Corporation | $ | 5 | 21 | % | ||||
Magnum Coal | 4 | 19 | % | |||||
Conemaugh Fuels | 3 | 14 | % | |||||
Consol Energy | 3 | 15 | % |
Estimated Useful | December 31, | |||||||||||
Lives (Years) | 2009 | 2008 | ||||||||||
(in millions) | ||||||||||||
Electric generation facilities | 20 – 32 | $ | 1,670 | $ | 1,831 | |||||||
Land improvements | 20 – 32 | 81 | 96 | |||||||||
Other | 3 – 10 | 10 | 12 | |||||||||
Land | 13 | 13 | ||||||||||
Assets under construction | 331 | 259 | ||||||||||
Total | 2,105 | 2,211 | ||||||||||
Accumulated depreciation | (499 | ) | (490 | ) | ||||||||
Property, plant and equipment, net | $ | 1,606 | $ | 1,721 | ||||||||
F-108
Table of Contents
(i) | Intangible Assets and Amortization Expense. |
(j) | Capitalization of Interest Expense. |
(k) | Income Taxes. |
(l) | Cash and Cash Equivalents. |
(m) | Inventory. |
F-109
Table of Contents
December 31, | ||||||||
2009 | 2008 | |||||||
(in millions) | ||||||||
Materials and supplies, including spare parts | $ | 36 | $ | 24 | ||||
Coal | 47 | 49 | ||||||
Heating oil | 1 | 1 | ||||||
Total inventory | $ | 84 | $ | 74 | ||||
(n) | Environmental Costs. |
(o) | Asset Retirement Obligations. |
2009 | 2008 | |||||||
(in millions) | ||||||||
Balance, beginning of period | $ | 7 | $ | 8 | ||||
Revisions in estimated cash flows | 6 | (1) | — | |||||
Payments | (3 | ) | (1 | ) | ||||
Accretion expense | 1 | — | ||||||
Balance, end of period | $ | 11 | $ | 7 | ||||
(1) | Primarily relates to changes in timing of expected closures and higher estimated costs. |
(p) | Repair and Maintenance Costs for Power Generation Assets. |
(q) | New Accounting Pronouncements Adopted. |
F-110
Table of Contents
(r) | New Accounting Pronouncement Not Yet Adopted. |
(3) | Related Party Transactions |
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Allocated or charged by RRI Energy | $ | 50 | $ | 57 | $ | 65 |
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Sales to RRI Energy under various commodity agreements(1) | $ | 303 | $ | 571 | $ | 543 | ||||||
Purchases from RRI Energy under various commodity agreements(2) | 2 | 2 | 1 | |||||||||
Gains on coal sales to RRI Energy | — | (3) | 6 | (3) | 6 | (3) | ||||||
Sales of emission allowances to RRI Energy(4) | 5 | — | 13 | |||||||||
Gains on emission allowances sales to RRI Energy(5) | 3 | — | 6 |
F-111
Table of Contents
(1) | Recorded in revenues—affiliates. | |
(2) | Recorded in cost of sales—affiliates. | |
(3) | Recorded in cost of sales—affiliates. | |
(4) | Reflects price at which RRI Energy sold the emission allowances to third parties. | |
(5) | Recorded in gains on sales of assets and emission allowances, net. |
(4) | Long-Lived Assets Impairment |
F-112
Table of Contents
• | a significant decrease in the market price of a long-lived asset | |
• | a significant adverse change in the manner an asset is being used or its physical condition | |
• | an adverse action by a regulator or legislature or an adverse change in the business climate | |
• | an accumulation of costs significantly in excess of the amount originally expected for the construction or acquisition of an asset | |
• | a current-period loss combined with a history of losses or the projections of future losses | |
• | a change in the intent about an asset from an intent to hold to a greater than 50% likelihood that an asset will be sold or disposed of before the end of its previously estimated useful life |
December 31, 2009 | ||
Undiscounted Cash Flow Scenarios Weightings: | ||
5-year market forecast with escalation(1)(2) | 50% | |
5-year market forecast with fundamental view(1) | 50% | |
Range of Assumptions in Fundamental View: | ||
Demand for power growth per year | 1%-2% | |
After-tax rate of return on new construction(3) | 7.5%-8.5% | |
Spread between natural gas and coal prices, $/MMBTU(4) | $3-$5 |
(1) | For each scenario, the first five years of cash flows are the same. | |
(2) | Orion Power assumed an annual 2.5% escalation percentage beyond year five. | |
(3) | The low to mid part of the range represents natural gas-fired plants’ required returns and the mid to high part of the range represents coal-fired and nuclear plants’ required returns. | |
(4) | Natural gas and coal prices are prior to transportation costs. |
F-113
Table of Contents
New Castle | ||||
Valuation approach weightings: | ||||
Income approach | 100 | % | ||
Market-based approach | 0 | % | ||
Risk-adjusted discount rate for the estimated cash flows | 15 | % |
F-114
Table of Contents
2009 | ||||||||||||
December 31, 2009 | Impairment | |||||||||||
Level 1 | Level 2 | Level 3 | Charges | |||||||||
(in millions) | ||||||||||||
New Castle property, plant and equipment | $— | $— | $ | 44 | $ | 120 | ||||||
(5) | Intangible Assets |
(a) | Goodwill. |
As of January 1, 2008 | $ | 174 | ||
Impairment | (174 | ) | ||
As of December 31, 2008 | $ | — | ||
F-115
Table of Contents
• | Income approach—Orion Power discounted its expected cash flows. The discount rate used represented the estimated weighted average cost of capital, which reflected the overall level of inherent risk involved in its operations and cash flows and the rate of return an outside investor would expect to earn. To estimate cash flows beyond the final year of its model, Orion Power applied a terminal value multiple to the final year EBITDA. | |
• | Market-based approach—Orion Power used the guideline public company method, which focused on comparing its risk profile and growth prospects to select reasonably similar/guideline publicly traded companies. Orion Power also used a public transaction method, which focused on exchange prices in actual transactions as an indicator of fair value. |
F-116
Table of Contents
April | April | September | December | |||||||||||||
2007 | 2008 | 2008 | 2008 | |||||||||||||
Income approach assumptions | ||||||||||||||||
EBITDA multiple for terminal values(1) | 8.0 | 8.0 | 7.0 | 7.0 | ||||||||||||
Risk-adjusted discount rate for estimated cash flows(2) | 10.0 | % | 10.5 | % | 11.5 | % | 13.0 | % | ||||||||
Market-based approach | ||||||||||||||||
EBITDA multiple for publicly traded company | 8 | 8 | 5 | 6 | ||||||||||||
Valuation approach weightings(3) | ||||||||||||||||
Income approach | 70 | % | 60 | % | 80 | % | 25 | % | ||||||||
Market-based approach | 30 | % | 40 | % | 20 | % | 75 | % |
(1) | Changed primarily due to market factors affecting peer company comparisons. | |
(2) | Increased primarily due to capital structure of peer company comparisons and increased required rate of return on debt and equity capital of peer companies. | |
(3) | Changed primarily due to increased focus on market-based approaches. See discussion above. |
• | Adjusting the carrying value of property, plant and equipment to values that would be expected in the current credit and market environment | |
• | Adjusting the carrying value of emission allowances, which then traded at amounts significantly higher than book value | |
• | Adjusting the carrying value of debt, which had a lower fair value than book value | |
• | Adjusting deferred income taxes for changes in the balances listed above |
F-117
Table of Contents
(b) | Other Intangibles. |
Remaining | ||||||||||||||||||||
Weighted | December 31, | |||||||||||||||||||
Average | 2009 | 2008 | ||||||||||||||||||
Amortization | Carrying | Accumulated | Carrying | Accumulated | ||||||||||||||||
Period (Years) | Amount | Amortization | Amount | Amortization | ||||||||||||||||
(in millions) | ||||||||||||||||||||
SO2emission allowances(1)(2) | — | (1) | $ | 61 | (3) | $ | (6 | )(3) | $ | 68 | (4) | $ | (12 | )(4) | ||||||
NOxemission allowances(1)(5) | — | (1) | 105 | (3) | — | (3) | 109 | (4) | — | (4) | ||||||||||
Total | $ | 166 | $ | (6 | ) | $ | 177 | $ | (12 | ) | ||||||||||
(1) | SO2 is sulfur dioxide and NOx is nitrogen oxides. Amortized to amortization expense on aunits-of-production basis. As of December 31, 2009, Orion Power has recorded (a) SO2 emission allowances through the 2039 vintage year and (b) NOx emission allowances through the 2039 vintage year. | |
(2) | During 2009, 2008 and 2007, Orion Power purchased $15 million, $18 million and $28, respectively, of SO2 emission allowances from affiliates. | |
(3) | During 2009, Orion Power wrote off the fully amortized carrying amount and accumulated amortization for SO2 and NOx emission allowances surrendered of $20 million and $4 million, respectively. | |
(4) | During 2008, Orion Power wrote off the fully amortized carrying amount and accumulated amortization for SO2 and NOx emission allowances surrendered of $110 million and $76 million, respectively. | |
(5) | During 2009, 2008 and 2007, Orion Power purchased $0, $5 million and $4 million, respectively, of NOx emission allowances from affiliates. |
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Amortization of emission allowances | $ | 10 | $ | 24 | $ | 50 | ||||||
2010 | $ | 7 | (1) | |
2011 | 7 | (1) | ||
2012 | 7 | (1) | ||
2013 | 7 | (1) | ||
2014 | 7 | (1) |
(1) | These amounts do not include expected amortization expense of emission allowances not purchased as of December 31, 2009. |
(6) | Derivatives and Hedging Activities |
F-118
Table of Contents
Derivative Assets | Derivative Liabilities | Net Derivative | ||||||||||||||||||
Current | Long-Term | Current | Long-Term | Assets/(Liabilities) | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Non-trading | $ | — | $ | — | $ | (8 | ) | $ | — | $ | (8 | ) | ||||||||
Total derivatives | $ | — | $ | — | $ | (8 | ) | $ | — | $ | (8 | ) | ||||||||
Notional Volumes | ||||||||||
Commodity | Unit(1) | Current | Long-term | |||||||
(in millions) | ||||||||||
Coal | MMBTU | 54 | 141 | (2) |
(1) | MMBTU is million British thermal units. | |
(2) | For 2011 through 2013, Orion Power has committed to purchase volumes of 141 million MMBTU (which are included in this table) for which the contract prices are subject to negotiation and agreement prior to the beginning of each year. No coal derivative contracts for the 2011 to 2013 delivery periods have been priced as of December 31, 2009. See note 12(c). |
Derivatives Not Designated as Hedging Instruments | Revenues | Cost of Sales | ||||||
(in millions) | ||||||||
Non-Trading Commodity Contracts: | ||||||||
Unrealized | $ | — | $ | 62 | ||||
Realized(1)(2) | — | — | ||||||
Total non-trading | $ | — | $ | 62 | ||||
(1) | Does not include realized gains or losses associated with cash month transactions, non-derivative transactions or derivative transactions that qualify for the normal purchase/normal sale exception. | |
(2) | Excludes settlement value of coal contracts classified as inventory upon settlement. |
(7) | Debt |
December 31, | ||||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Stated | Stated | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Rate(1) | Long-term | Current | Rate(1) | Long-term | Current | |||||||||||||||||||
(in millions, except interest rates) | ||||||||||||||||||||||||
Orion Power Holdings senior notes due 2010 (unsecured) | 12.00 | % | $ | — | $ | 400 | 12.00 | % | $ | 400 | $ | — | ||||||||||||
Adjustment to fair value of debt(2) | — | 5 | 4 | 13 | ||||||||||||||||||||
Total debt | $ | — | $ | 405 | $ | 404 | $ | 13 | ||||||||||||||||
(1) | The weighted average stated interest rates are as of December 31, 2009 or 2008. |
F-119
Table of Contents
(2) | Debt acquired by RRI Energy in the Orion Power acquisition was adjusted to fair value as of the acquisition date. Included in interest expense is amortization of $12 million, $11 million and $11 million for valuation adjustments for debt during 2009, 2008 and 2007, respectively. |
2010 | $ | 400 | ||
2011 | — | |||
2012 | — | |||
2013 | — | |||
2014 | — | |||
2015 and thereafter | — | |||
$ | 400 | |||
(8) | Pension and Postretirement Benefits |
F-120
Table of Contents
Pension | Postretirement Benefits | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in millions) | ||||||||||||||||
Change in Benefit Obligations | ||||||||||||||||
Beginning of year | $ | 65 | $ | 60 | $ | 33 | $ | 33 | ||||||||
Service cost | 2 | 3 | — | — | ||||||||||||
Interest cost | 4 | 3 | 1 | 2 | ||||||||||||
Benefits paid | (3 | ) | (2 | ) | (1 | ) | — | |||||||||
Plan amendments/adjustments | 1 | 1 | (3 | ) | 2 | |||||||||||
Actuarial (gain) loss | 3 | — | (1 | ) | (4 | ) | ||||||||||
Special termination benefits | 2 | — | 1 | — | ||||||||||||
End of year | $ | 74 | $ | 65 | $ | 30 | $ | 33 | ||||||||
Change in Plans’ Assets | ||||||||||||||||
Beginning of year | $ | 34 | $ | 46 | $ | — | $ | — | ||||||||
Employer contributions | 13 | 3 | 1 | — | ||||||||||||
Benefits paid | (3 | ) | (2 | ) | (1 | ) | — | |||||||||
Actual investment return | 8 | (13 | ) | — | — | |||||||||||
End of year | $ | 52 | $ | 34 | $ | — | $ | — | ||||||||
Funded status | $ | (22 | ) | $ | (31 | ) | $ | (30 | ) | $ | (33 | ) |
Postretirement | ||||||||||||||||
Pension | Benefits | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in millions) | ||||||||||||||||
Current liabilities | $ | — | $ | — | $ | (2 | ) | $ | (1 | ) | ||||||
Noncurrent liabilities | (22 | ) | (31 | ) | (28 | ) | (32 | ) | ||||||||
Net amount recognized | $ | (22 | ) | $ | (31 | ) | $ | (30 | ) | $ | (33 | ) | ||||
F-121
Table of Contents
Pension | Postretirement Benefits | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Service cost | $ | 2 | $ | 3 | $ | 3 | $ | — | $ | — | $ | — | ||||||||||||
Interest cost | 4 | 3 | 3 | 1 | 2 | 2 | ||||||||||||||||||
Expected return on plan assets | (3 | ) | (3 | ) | (3 | ) | — | — | — | |||||||||||||||
Adjustment to annual expense | — | — | — | — | 2 | — | ||||||||||||||||||
Net amortization | 3 | 1 | 1 | — | — | — | ||||||||||||||||||
Net curtailments (gain) loss | 5 | — | — | (3 | ) | — | — | |||||||||||||||||
Special termination benefits | 2 | — | — | 1 | — | — | ||||||||||||||||||
Net periodic benefit costs | $ | 13 | $ | 4 | $ | 4 | $ | (1 | ) | $ | 4 | $ | 2 | |||||||||||
Postretirement | ||||||||||||||||
Pension | Benefits | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in millions) | ||||||||||||||||
Discount rate | 5.50 | % | 5.75 | % | 5.50 | % | 5.75 | % | ||||||||
Rate of compensation increase | 3.0 | % | 3.0 | % | N/A | N/A |
Pension | Postretirement Benefits | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
Discount rate | 5.75 | % | 5.75 | % | 5.75 | % | 5.75 | % | 5.75 | % | 5.75 | % | ||||||||||||
Rate of compensation increase | 3.0 | % | 3.0 | % | 3.0 | % | N/A | N/A | N/A | |||||||||||||||
Expected long-term rate of return on plan assets | 7.5 | % | 7.5 | % | 7.5 | % | N/A | N/A | N/A |
2009 | 2008 | 2007 | ||||||||||
Health care cost trend rate assumed for next year(1) | 8.0 | % | 7.9 | % | 8.3 | % | ||||||
Rate to which the cost trend rate is assumed to gradually decline (ultimate trend rate)(1) | 5.5 | % | 5.5 | % | 5.5 | % | ||||||
Year that the rate reaches the ultimate trend rate | 2015 | 2015 | 2015 |
F-122
Table of Contents
(1) | Represents blended rate for medical and prescription drug costs. |
One-Percentage Point | ||||||||
Increase | Decrease | |||||||
(in millions) | ||||||||
Effect on service and interest cost | $ | — | $ | — | ||||
Effect on accumulated postretirement benefit obligation | 3 | (3 | ) |
Percentage of Plan Assets | Target | |||||||||||
as of December 31, | Allocation(1) | |||||||||||
2009 | 2008 | 2010 | ||||||||||
Domestic equity securities | 34 | % | 36 | % | 35 | % | ||||||
International equity securities | 26 | 21 | 25 | |||||||||
Global equity securities | 10 | 9 | 10 | |||||||||
Debt securities | 30 | 34 | 30 | |||||||||
Total | 100 | % | 100 | % | 100 | % | ||||||
(1) | RRI Energy’s Benefits Committee has determined an allowable range for each category; these percentages represent the mid-point for each respective range. |
Asset Class | Index | Weight | ||||
Domestic equity securities | Dow Jones U.S. Total Stock Market Index | 40 | % | |||
International equity securities | MSCI All Country World Ex-U.S. Index | 20 | ||||
Global equity securities | MSCI All Country World Index | 10 | ||||
Debt securities | Barclays Capital Aggregate Bond Index | 30 | ||||
Total | 100 | % | ||||
F-123
Table of Contents
Level 1 | Level 2 | Level 3 | ||||||||||
(in millions) | ||||||||||||
Domestic equity securities(1) | $ | 18 | $ | — | $ | — | ||||||
International equity securities(2) | 13 | — | — | |||||||||
Global equity securities(3) | 5 | — | — | |||||||||
Debt securities(4) | 16 | — | — | |||||||||
Total | $ | 52 | $ | — | $ | — | ||||||
(1) | Comprised of large cap stocks. | |
(2) | Comprised of large cap foreign stocks. | |
(3) | Comprised of both foreign and domestic multi-cap stocks. | |
(4) | Comprised of intermediate-term, investment grade bonds. |
Postretirement | ||||||||
Pension | Benefits | |||||||
(in millions) | ||||||||
2010 | $ | 4 | $ | 2 | ||||
2011 | 4 | 2 | ||||||
2012 | 4 | 2 | ||||||
2013 | 4 | 2 | ||||||
2014 | 4 | 2 | ||||||
2015-2019 | 27 | 12 |
(9) | Savings Plan |
(10) | Collective Bargaining Agreements |
F-124
Table of Contents
(11) | Income Taxes |
(a) | Summary. |
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Current: | ||||||||||||
Federal | $ | (77 | ) | $ | 18 | $ | — | |||||
State | (2 | ) | 3 | (4 | ) | |||||||
Total current | (79 | ) | 21 | (4 | ) | |||||||
Deferred: | ||||||||||||
Federal | (45 | ) | (56 | ) | (18 | ) | ||||||
State | 3 | 9 | (4 | ) | ||||||||
Total deferred | (42 | ) | (47 | ) | (22 | ) | ||||||
Income tax benefit from continuing operations | $ | (121 | ) | $ | (26 | ) | $ | (26 | ) | |||
Income tax benefit from discontinued operations | $ | — | $ | (2 | ) | $ | — | |||||
2009 | 2008 | 2007 | ||||||||||
Federal statutory rate | (35 | )% | (35 | )% | (35 | )% | ||||||
Additions (reductions) resulting from: | ||||||||||||
State income taxes, net of federal income taxes | — | (1) | 5 | (2) | (9 | ) | ||||||
Goodwill impairment | — | 14 | — | |||||||||
Other, net | 1 | (1 | ) | 2 | ||||||||
Effective rate | (34 | )% | (17 | )% | (42 | )% | ||||||
(1) | Of this percentage, $23 million (6%) relates to an increase in Orion Power’s state valuation allowances. | |
(2) | Of this percentage, $18 million (11%) relates to an increase in Orion Power’s state valuation allowances. |
F-125
Table of Contents
December 31, | ||||||||
2009 | 2008 | |||||||
(in millions) | ||||||||
Deferred tax assets: | ||||||||
Current: | ||||||||
Derivative liabilities, net | $ | 3 | $ | 27 | ||||
Employee benefits | 1 | 1 | ||||||
Valuation allowances | — | (1 | ) | |||||
Other | 2 | 5 | ||||||
Total current deferred tax assets | 6 | 32 | ||||||
Long-term: | ||||||||
Employee benefits | 20 | 21 | ||||||
Net operating loss carryforwards | 69 | 35 | ||||||
Other | 5 | 7 | ||||||
Valuation allowances | (43 | ) | (20 | ) | ||||
Total long-term deferred tax assets | 51 | 43 | ||||||
Total deferred tax assets | $ | 57 | $ | 75 | ||||
Deferred tax liabilities: | ||||||||
Long-term: | ||||||||
Depreciation and amortization | $ | 122 | $ | 175 | ||||
Total long-term deferred tax liabilities | 122 | 175 | ||||||
Total deferred tax liabilities | $ | 122 | $ | 175 | ||||
Accumulated deferred income taxes, net | $ | (65 | ) | $ | (100 | ) | ||
Statutory | ||||||||
December 31, | Carryforward | Expiration | ||||||
2009 | Period | Years | ||||||
(in millions) | (in years) | |||||||
Net operating loss carryforwards: | ||||||||
Federal | $ | 49 | 20 | 2029 | ||||
State | 806 | 7 to 20 | 2018 through 2029 |
(c) | Valuation Allowances. |
F-126
Table of Contents
State | ||||
As of January 1, 2007 | $ | 5 | ||
Changes in valuation allowances | (2 | ) | ||
As of December 31, 2007 | 3 | |||
Changes in valuation allowances | 18 | (1) | ||
As of December 31, 2008 | 21 | |||
Changes in valuation allowances | 22 | (2) | ||
As of December 31, 2009 | $ | 43 | ||
(1) | Net increase primarily due to 2008 taxable loss. | |
(2) | Net increase primarily due to 2009 taxable loss and long-lived assets impairment. |
(d) | Income Tax Uncertainties. |
Adoption Effect on | ||||
January 1, | ||||
2007 | ||||
Increase (Decrease) | ||||
(in millions) | ||||
Goodwill | $ | (2 | ) | |
Other long-term liabilities | (3 | ) | ||
Accumulated deficit | (1 | ) |
2009 | 2008 | 2007 | ||||||||||
(in millions) | ||||||||||||
Balance, beginning of period | $ | — | $ | — | $ | — | ||||||
Increases related to prior years | — | 4 | 2 | |||||||||
Decreases related to prior years | — | (4 | ) | (2 | ) | |||||||
Increases related to current year | — | — | — | |||||||||
Settlements | — | — | — | |||||||||
Lapses in the statute of limitations | — | — | — | |||||||||
Balance, end of period | $ | — | $ | — | $ | — | ||||||
F-127
Table of Contents
Subject to | Currently | |||||
Examination | Under Audit | |||||
Federal | 2002 to 2009 | 2002 to 2008 | ||||
Pennsylvania | 2005 to 2009 | 2006 | ||||
New York state and city | 2003 to 2006 | 2003 to 2006 |
(12) | Commitments |
(a) | Lease Commitments. |
(b) | Guarantees and Indemnifications. |
(c) | Other Commitments. |
F-128
Table of Contents
2010 | $ | 1 | ||
2011 | 1 | |||
2012 | — | |||
2013 | — | |||
2014 | 2 | |||
2015 and thereafter | — | |||
Total | $ | 4 | ||
(14) | Settlement |
(15) | Sales of Assets and Emission Allowances |
(16) | Discontinued Operations |
F-129
Table of Contents
New York | ||||
Plants | ||||
2009 | ||||
Revenues | $ | 2 | ||
Income before income tax expense/benefit | 3 | |||
2008 | ||||
Revenues | $ | — | ||
Loss before income tax expense/benefit | (4 | ) | ||
2007 | ||||
Revenues | $ | (3 | ) | |
Income before income tax expense/benefit | 7 |
F-130