Quarterly report pursuant to Section 13 or 15(d)

Our Portfolio

v3.22.1
Our Portfolio
 3 Months Ended
Mar. 31, 2022
Investments [Abstract]  
Our Portfolio Our Portfolio As of March 31, 2022, our Portfolio included approximately $3.7 billion of equity method investments, receivables, real estate and investments on our balance sheet. The equity method investments represent our non-controlling equity investments in renewable energy and energy efficiency projects and land. The receivables and investments are typically collateralized by contractually committed debt obligations of government entities or private high credit quality obligors and are often supported by additional forms of credit enhancement, including security interests and supplier guaranties. The real estate is typically land and related lease intangibles for long-term leases to wind and solar projects.
In developing and evaluating performance against our credit criteria, we consider a number of qualitative and quantitative criteria including a project’s operating results, loan-to-value ratio, any cash reserves, the ability of expected cash from operations to cover the cash flow requirements currently and into the future, key terms of the transaction, the ability of the borrower to refinance the transaction, the financial and operating capability of the borrower, its sponsors or the obligor as well as any guarantors and the project’s collateral value. In addition, we consider the overall economic environment, the climate solutions sector, the effect of local, industry and broader economic factors, the impact of any variation in weather and the historical and anticipated trends in interest rates, defaults and loss severities for similar transactions.
The following is an analysis of the Performance Ratings of our Portfolio as of March 31, 2022, which is assessed quarterly:
Portfolio Performance
1 (1)
2 (2)
3 (3)
Total
Government Commercial Commercial Commercial
Receivable vintage (dollars in millions)
2022 $ —  $ 2  $ —  $ —  $ 2 
2021 —  305  —  —  305 
2020 —  195  —  —  195 
2019 —  468  2  —  470 
2018 —  265  —  —  265 
2017 26  1  9  —  36 
Prior to 2017 90  103  —  8  201 
Total receivables 116  1,339  11  8  1,474 
Less: Allowance for loss on receivables
 —  (26) (3) (8) (37)
Net receivables (4)
116  1,313  8  —  1,437 
Receivables held-for-sale —  66  —  —  66 
Investments 9  7  —  —  16 
Real estate —  360  —  —  360 
Equity method investments (5)
—  1,842  29  —  1,871 
Total
 $ 125  $ 3,588  $ 37  $ —  $ 3,750 
Percent of Portfolio 3  % 96  % 1  % —  % 100  %
Average remaining balance (6)
$ 6  $ 12  $ 10  $ 4  $ 12 
(1)This category includes our assets where based on our credit criteria and performance to date we believe that our risk of not receiving our invested capital remains low.
(2)This category includes our assets where based on our credit criteria and performance to date we believe there is a moderate level of risk to not receiving some or all of our invested capital.
(3)This category includes our assets where based on our credit criteria and performance to date, we believe there is substantial doubt regarding our ability to recover some or all of our invested capital. Included in this category are two commercial receivables with a combined total carrying value of approximately $8 million as of March 31, 2022, which we have held on non-accrual status since 2017. We expect to continue to pursue our legal claims with regards to these assets.
(4)Total reconciles to the total of the government receivables and commercial receivables lines of the consolidated balance sheets.
(5)Some of the individual projects included in portfolios that make up our equity method investments have government off-takers. As they are part of large portfolios, they are not classified separately. 
(6)Average remaining balance is calculated gross of allowance for loss on receivables and excludes approximately 259 transactions each with outstanding balances that are less than $1 million and that in the aggregate total $93 million.
Receivables
As of March 31, 2022, our allowance for loan losses was $37 million based on our expectation of credit losses over the lives of the receivables in our portfolio. During the three months ended March 31, 2022, we increased our reserve by approximately $1 million, primarily as a result of loans and loan commitments made during the period.
Below is a summary of the carrying value, expected loan funding commitments, and allowance by type of receivable or “Portfolio Segment”, as defined by Topic 326, as of March 31, 2022 and December 31, 2021:
March 31, 2022 December 31, 2021
Gross Carrying Value Loan Funding Commitments Allowance Gross Carrying Value Loan Funding Commitments Allowance
(in millions)
Commercial (1)
1,358  196  37  1,335  184  36 
Government (2)
$ 116  $ —  $ —  $ 125  $ —  $ — 
Total $ 1,474  $ 196  $ 37  $ 1,460  $ 184  $ 36 
(1)As of March 31, 2022, this category of assets includes $781 million of mezzanine loans made on a non-recourse basis to special purpose subsidiaries of residential solar companies which are secured by residential solar assets where we rely on certain limited indemnities, warranties, and other obligations of the residential solar companies or their other subsidiaries. Approximately $702 million of our commercial receivables are loans made to entities in which we also have non-controlling equity investments of approximately $119 million. This total also includes $48 million of lease agreements where we hold legal title to the underlying real estate which are treated under GAAP as receivables since they were deemed to be failed sale/leaseback transactions as described in Note 2 to our financial statements in this Form 10-Q.
Risk characteristics of our commercial receivables include a project’s operating risks, which include the impact of the overall economic environment, the climate solutions sector, the effect of local, industry, and broader economic factors, the impact of any variation in weather and trends in interest rates. We use assumptions related to these risks to estimate an allowance using a discounted cash flow analysis or the PD/LGD method as discussed in Note 2 to our financial statements in this Form 10-Q. All of our commercial receivables are included in Performance Rating 1 in the Portfolio Performance table above, except for $11 million of receivables included in Performance Category 2 and the $8 million of receivables we have placed on non-accrual status which are included in Performance Rating 3. For those assets in Performance Rating 1, the credit worthiness of the obligor combined with the various structural protections of our assets cause us to believe we have a low risk we will not receive our invested capital, however we recorded a $26 million allowance on these $1.3 billion in assets as a result of lower probability assumptions utilized in our allowance methodology.
(2)As of March 31, 2022, our government receivables include $20 million of U.S. federal government transactions and $96 million of transactions where the ultimate obligors are state or local governments.
Risk characteristics of our government receivables include the energy savings or the power output of the projects and the ability of the government obligor to generate revenue for debt service, via taxation or other means. Transactions may have guarantees of energy savings or other performance support from third-party service providers, which typically are entities, directly or whose ultimate parent entity is, rated investment grade by an independent rating agency. All of our government receivables are included in Performance Rating 1 in the Portfolio Performance table above. Our allowance for government receivables is primarily calculated by using PD/LGD methods as discussed in Note 2 to our financial statements in this Form 10-Q. Our expectation of credit losses for these receivables is immaterial given the high credit-quality of the obligors.
The following table reconciles our beginning and ending allowance for loss on receivables by Portfolio Segment:
Three months ended March 31, 2022 Three months ended March 31, 2021
Government Commercial Government Commercial
(in millions)
Beginning balance $ —  $ 36  $ —  $ 36 
Provision for loss on receivables —  1  —  — 
Ending balance $ —  $ 37  $ —  $ 36 
Other than the $8 million of receivables discussed above with a Performance Rating of 3, we have no receivables which are on non-accrual status.
The following table provides a summary of our anticipated maturity dates of our receivables and the weighted average yield for each range of maturities as of March 31, 2022:
Total Less than 1
year		 1-5 years 5-10 years More than 10
years
  (dollars in millions)
Maturities by period (excluding allowance) $ 1,474  $ 49  $ 52  $ 533  $ 840 
Weighted average yield by period 8.1  % 7.4  % 5.9  % 8.3  % 8.1  %
Investments
The following table provides a summary of our anticipated maturity dates of our investments and the weighted average yield for each range of maturities as of March 31, 2022:
 
Total Less than 1
year		 1-5 years 5-10 years More than 10
years
  (dollars in millions)
Maturities by period $ 16  $ —  $ —  $ —  $ 16 
Weighted average yield by period 4.1  % —  % —  % —  % 4.1  %

We had no investments that were impaired or on non-accrual status as of March 31, 2022 or December 31, 2021, and no allowances associated with our investments.
Real Estate
Our real estate is leased to renewable energy projects, typically under long-term triple net leases with expiration dates that range between the years 2033 and 2058 under the initial terms and 2047 and 2080 if all renewals are exercised. The components of our real estate portfolio as of March 31, 2022 and December 31, 2021, were as follows: 
March 31, 2022 December 31, 2021
  (in millions)
Real estate
Land $ 275  $ 269 
Lease intangibles 103  104 
Accumulated amortization of lease intangibles (18) (17)
Real estate $ 360  $ 356 

As of March 31, 2022, the future amortization expense of the intangible assets and the future minimum rental income payments under our land lease agreements are as follows:
Future Amortization Expense Minimum Rental Income Payments
  (in millions)
From April 1, 2022 to December 31, 2022 $ 2  $ 17 
2023 3  24 
2024 3  24 
2025 3  24 
2026 3  25 
2027 3  25 
Thereafter 68  713 
Total $ 85  $ 852 

Equity Method Investments
We have made non-controlling equity investments in a number of renewable energy and energy efficiency projects as well as in a joint venture that owns land with long-term triple net lease agreements to several solar projects that we account for as equity method investments.
As of March 31, 2022, we held the following equity method investments:
Investment Date Investee Carrying Value
    (in millions)
Various Jupiter Equity Holdings LLC $ 563 
Various
Lighthouse Partnerships (1)
428 
Various Phase V Class A LLC 130 
March 2020 University of Iowa Energy Collaborative Holdings LLC 124 
Various Other investees 626 
Total equity method investments $ 1,871 
(1)     Represents the total of three equity investments in a portfolio of renewable assets.
Jupiter Equity Holdings LLC
We have a preferred equity interest in Jupiter Equity Holdings LLC (“Jupiter”) that owns nine operating onshore wind projects and four operating utility-scale solar projects with an aggregate capacity of approximately 2.3 gigawatts. As of March 31, 2022, we have made capital contributions to Jupiter of approximately $546 million related to these projects. The projects feature cash flows from fixed-price power purchase agreements and financial hedges with a weighted average contract life of 13 years, contracted with highly creditworthy off-takers and counterparties.
Jupiter is governed by an amended and restated limited liability company agreement, dated July 1, 2020, by and among Jupiter, one of our subsidiaries and a subsidiary of the project sponsor, and contains customary terms and conditions. We own 100% of the Class A Units in Jupiter corresponding to 49% of the distributions from Jupiter subject to the preferences discussed below. Most major decisions that may impact Jupiter, its subsidiaries or its assets, require the majority vote of a four person committee on which we and the project sponsor each have two representatives. Through Jupiter, we will be entitled to preferred distributions until certain return targets are achieved. Once these return targets are achieved, distributions will be allocated approximately 33% to us and approximately 67% to the sponsor. We and the sponsor each have a right of first offer if the other party desires to transfer any of its equity ownership to a third party on or after July 1, 2023. We use the equity method of accounting to account for our preferred equity interest in Jupiter, and have elected to recognize earnings from this investment one quarter in arrears to allow for the receipt of financial information.
Lighthouse Renewables Portfolio
We have entered into certain agreements relating to the acquisition, ownership and management of approximately $870 million in preferred cash equity investments in four partnerships (the “Lighthouse Partnerships”) that expect to own cash equity interests in an approximately 1.6 gigawatt portfolio of onshore wind, utility-scale solar and solar-plus-storage projects (the “Renewables Portfolio”) developed and managed by the project sponsor. We have made initial investments in the preferred cash equity interests of the Lighthouse Partnerships of approximately $423 million through March 31, 2022, and additional investments are expected to be made in 2022 as the projects become commercially operational. The Renewables Portfolio currently has contracted cash flows with a combined weighted average contract life of greater than 14 years with a diversified group of predominately investment grade corporate, utility, university and municipal offtakers.
Each of the Lighthouse Partnerships are or will be governed by a limited liability company agreement between us and the sponsor serving as managing member and contain customary terms and conditions. Most major decisions that may impact each of the Lighthouse Partnerships, its subsidiaries or its assets, require a unanimous vote of the representatives present at a meeting of a review committee in which a quorum is present. The review committee is a four person committee, which includes two Company representatives and two sponsor representatives. Through each Lighthouse Partnership, commencing on a certain date following the effective date of the applicable limited liability company agreement, we will be entitled to preferred distributions until certain return targets of the Renewables Portfolio are achieved. Subject to customary exceptions, no member of a Lighthouse Partnership can transfer any of its equity ownership in any Lighthouse Partnership to a third party without approval of the review committee of that Lighthouse Partnership. We use the equity method of accounting to account for our preferred equity interest in each Lighthouse Partnership, and have elected to recognize earnings from this investment one quarter in arrears to allow for the receipt of financial information.