9 unchanged sentences
Commodity price risks result from exposures to changes in spot prices, forward prices, volatilities, and correlations between various commodities, such as natural gas, electricity, coal, oil, and emissions credits.
−Removed: NRG manages the commodity price risk of the Company's load servicing obligations and merchant generation operations by entering into various derivative or non-derivative instruments to hedge the variability in future cash flows from forecasted sales and purchases of electricity and fuel.
+Added: NRG manages the commodity price risk of the Company's load servicing obligations and merchant generation operations by entering into various derivative or non-derivative instruments to hedge the variability in future cash flows from forecasted sales and purchases of power and fuel.
NRG measures the risk of the Company's portfolio using several analytical methods, including sensitivity tests, scenario tests, stress tests, position reports and VaR.
5 unchanged sentences
(In millions) 2022 2021
−Removed: VaR as of December 31, (a)
+Added: VaR as of December 31, $ 74 $ 30
For the year ended December 31,
−Removed: (a) Calculation includes entire NRG portfolio as of December 31, 2021
−Removed: (b) Calculation is based on NRG generation assets and load obligations excluding the acquisition of Direct Energy assets and load obligations in the first quarter of 2021
+Added: (a) Calculation is based on NRG generation assets and load obligations excluding the acquisition of Direct Energy assets and load obligations in the first quarter of 2021
+Added: The increase in the range of the daily VaR results was primarily due to increased commodity prices and market volatility during 2022 as compared to 2021.
In order to provide additional information, the Company also uses VaR to estimate the potential loss of derivative financial instruments that are subject to mark-to-market accounting.
These derivative instruments include transactions that were entered into for both asset management and trading purposes.
−Removed: The VaR for the derivative financial instruments calculated using the diversified VaR model for the entire term of these instruments entered into for both asset management and trading was $242 million as of December 31, 2021, primarily driven by asset-backed transactions.
−Removed: The increase in the VaR for derivative financial instruments was primarily due to the acquisition of Direct Energy.
+Added: The VaR for the derivative
+Added: financial instruments calculated using the diversified VaR model for the entire term of these instruments entered into for both asset management and trading was $413 million as of December 31, 2022, primarily driven by asset-backed transactions.
Retail Customer Credit Risk
4 unchanged sentences
As of December 31, 2022, the Company's retail customer credit exposure to Home and Business customers was diversified across many customers and various industries, as well as government entities.
+Added: Current economic conditions may affect the Company's customers' ability to pay bills in a timely manner, which could increase customer delinquencies and may lead to an increase in credit losses.
The Company's provision for credit losses resulting from credit risk was $11 million, $698 million and $108 million for the years ending December 31, 2022, 2021 and 2020, respectively.
−Removed: As a result of Winter Storm Uri, the Company incurred additional credit losses from Business customers primarily due to a segment of customers whose contracts included a pass through of wholesale power prices which were significantly escalated during the storm and from customers who failed to meet their obligations in ERCOT load curtailment programs.
+Added: During the year ended December 31, 2022, the provision for credit losses included the Company's loss mitigation efforts recognized as income of $126 million related to Winter Storm Uri.
+Added: During the year ended December 31, 2021, the provision for credit losses included $596 million of expenses due to the impacts of Winter Storm Uri.
Liquidity Risk
15 unchanged sentences
Cash margin is collected and held at the Company to cover the credit risk of the counterparty until positions settle.
−Removed: As of December 31, 2021, counterparty credit exposure, excluding credit exposure from RTOs, ISOs, and registered commodity exchanges and certain long-term agreements, was $2.2 billion, of which the Company held collateral (cash and letters of credit) against those positions of $598 million resulting in a net exposure of $1.6 billion.
+Added: As of December 31, 2022, counterparty credit exposure, excluding credit exposure from RTOs, ISOs, and registered commodity exchanges and certain long-term agreements, was $2.7 billion, of which the Company held collateral (cash and letters of credit) against those positions of $1.0 billion resulting in a net exposure of $1.7 billion.
NRG periodically receives collateral from counterparties in excess of their exposure.
14 unchanged sentences
Changes in hedge positions and market prices will affect credit exposure and counterparty concentration.
−Removed: During Winter Storm Uri, the Company experienced nonperformance by a counterparty in one of its bilateral financial hedging transactions, resulting in exposure of $403 million.
−Removed: The Company is pursuing all means available to enforce its rights under this transaction but, given the size of the exposure, cannot determine with certainty what the amount of its ultimate recovery will be.
−Removed: The full exposure was recorded as a provision for credit losses during the year ended December 31, 2021.
+Added: During Winter Storm Uri, in February 2021, the Company experienced nonperformance by a counterparty in one of its bilateral financial hedging transactions, resulting in exposure of $403 million.
+Added: During December 2022, the Company received $70 million as part of the Company's loss mitigation efforts related to this exposure.
RTOs and ISOs
7 unchanged sentences
Long-Term Contracts
−Removed: Counterparty credit exposure described above excludes credit risk exposure under certain long-term contracts, primarily solar PPAs.
+Added: Counterparty credit exposure described above excludes credit risk exposure under certain long-term contracts, primarily solar under Renewable PPAs.
As external sources or observable market quotes are not available to estimate such exposure, the Company values these contracts based on various techniques including, but not limited to, internal models based on a fundamental analysis of the market and extrapolation of observable market data with similar characteristics.
5 unchanged sentences
Certain of the Company's hedging and trading agreements contain provisions that entitle the counterparty to demand that the Company post additional collateral if the counterparty determines that there has been deterioration in the Company's credit quality, generally termed “adequate assurance” under the agreements, or require the Company to post additional collateral if there were a downgrade in the Company's credit rating.
−Removed: In addition, as a result of the acquisition of Direct Energy from Centrica, certain of the Company’s agreements as of December 31, 2021, were still supported by credit support posted by Centrica, and as a result could require the Company to post collateral upon a deterioration or downgrade of Centrica.
The collateral potentially required for contracts with adequate assurance clauses that are in a net liability position as of December 31, 2022, was $1.5 billion.
2 unchanged sentences
Currency Exchange Risk
−Removed: NRG is subject to transactional exchange rate risk from transactions with customers in countries outside of the United States, primarily within Canada, as well as from intercompany transactions between affiliates.
−Removed: Transactional exchange rate risk arises from the purchase and sale of goods and services in currencies other than our functional currency or the functional currency of an applicable subsidiary.
+Added: NRG is subject to transactional exchange rate risk from transactions with customers in countries outside of the U.S., primarily within Canada, as well as from intercompany transactions between affiliates.
+Added: Transactional exchange rate risk arises from the purchase and sale of goods and services in currencies other than the Company's functional currency or the functional currency of an applicable subsidiary.
NRG hedges a portion of its forecasted currency transactions with foreign exchange forward contracts.
2 unchanged sentences
The Company is subject to translation exchange rate risk related to the translation of the financial statements of its foreign operations into U.S.
−Removed: Costs incurred and sales recorded by subsidiaries operating outside of the United States are translated into U.S.
+Added: Costs incurred and sales recorded by subsidiaries operating outside of the U.S.
+Added: are translated into U.S.
dollars using exchange rates effective during the respective period.
7 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.