Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.23.1
Fair Value Measurements
 3 Months Ended
Mar. 31, 2023
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
Fair value is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value accounting guidance provides a three-level hierarchy for classifying financial instruments. The levels of inputs used to determine the fair value of our financial assets and liabilities carried on the balance sheet at fair value and for those which only disclosure of fair value is required are characterized in accordance with the fair value hierarchy established by ASC 820, Fair Value Measurements. Where inputs for a financial asset or liability fall in more than one level in the fair value hierarchy, the financial asset or liability is classified in its entirety based on the lowest level input that is significant to the fair value measurement of that financial asset or liability. We use our judgment and consider factors specific to the financial assets and liabilities in determining the significance of an input to the fair value measurements. As of March 31, 2023 and December 31, 2022, only our residual assets related to our securitization trusts, our derivatives, and our investments were carried at fair value on the consolidated balance sheets on a recurring basis. The three levels of the fair value hierarchy are described below:
•Level 1 — Quoted prices (unadjusted) in active markets that are accessible at the measurement date.
•Level 2 — Observable prices that are based on inputs not quoted on active markets but corroborated by market data.
•Level 3 — Unobservable inputs are used when little or no market data is available.
The tables below illustrate the estimated fair value of our financial instruments on our balance sheet. Unless otherwise discussed below, fair values for our Level 2 and Level 3 measurements are measured using a discounted cash flow model, contractual terms and inputs which consist of base interest rates and spreads over base rates which are based upon market observation and recent comparable transactions. An increase in these inputs would result in a lower fair value and a decline would result in a higher fair value. Our senior unsecured notes and Convertible Notes are valued using a market based approach and observable prices. The receivables held-for-sale, if any, are carried at the lower of cost or fair value.
  As of March 31, 2023
  Fair Value Carrying
Value		 Level
  (in millions)
Assets
Commercial receivables $ 1,944  $ 1,963  Level 3
Government receivables 93  98  Level 3
Receivables held-for-sale 20  17  Level 3
Investments (1)
10  10  Level 3
Securitization residual assets (2)
193  193  Level 3
Liabilities (3)
Credit facilities $ 359  $ 359  Level 3
Commercial paper notes 100  100  Level 3
Term loan facility 384  384  Level 3
Non-recourse debt 373  404  Level 3
Senior unsecured notes 1,572  1,795  Level 2
Convertible Notes:
2023 Convertible Senior Notes 139  144  Level 2
2025 Exchangeable Senior Notes 190  206  Level 2
Total Convertible Notes 329  350 
Derivative liabilities 32  32  Level 2
(1)The amortized cost of our investments as of March 31, 2023, was $12 million.
(2)Included in securitization assets on the consolidated balance sheet. The amortized cost of our securitization residual assets as of March 31, 2023 was $231 million.
(3)Fair value and carrying value exclude unamortized financing costs.
  As of December 31, 2022
  Fair Value Carrying
Value		 Level
  (in millions)
Assets
Commercial receivables $ 1,859  $ 1,887  Level 3
Government receivables 96  103  Level 3
Receivables held-for-sale 92  85  Level 3
Investments (1)
10  10  Level 3
Securitization residual assets (2)
177  177  Level 3
Liabilities (3)
Credit facilities $ 51  $ 51  Level 3
Commercial paper notes —  —  Level 3
Term loan facility 384  384  Level 3
Non-recourse debt 402  442  Level 3
Senior unsecured notes 1,546  1,784  Level 2
Convertible Notes:
2022 Convertible Senior Notes 137  143  Level 2
2023 Convertible Senior Notes 185  206  Level 2
Total Convertible Notes 322  349 
(1)    The amortized cost of our investments as of December 31, 2022, was $12 million.
(2)    Included in securitization assets on the consolidated balance sheet. The amortized cost of our securitization residual assets as of December 31, 2022 was $224 million.
(3)    Fair value and carrying value exclude unamortized financing costs.

Investments
The following table reconciles the beginning and ending balances for our Level 3 investments that are carried at fair value on a recurring basis:
  For the three months ended March 31,
  2023 2022
  (in millions)
Balance, beginning of period $ 10  $ 18 
Unrealized gains (losses) on investments recorded in OCI —  (2)
Balance, end of period $ 10  $ 16 

The following table illustrates our investments in an unrealized loss position:
Estimated Fair Value
Unrealized Losses (1)
Count of Securities
Securities with a loss shorter than 12 months Securities with a loss longer than 12 months Securities with a loss shorter than 12 months Securities with a loss longer than 12 months Securities with a loss shorter than 12 months Securities with a loss longer than 12 months
(in millions)
March 31, 2023 $ 2  $ 8  $ 0.4  $ 1.3  2  3 
December 31, 2022 4  6  0.7  1.2  4  1 
(1)    Loss position is due to interest rates movements and is not indicative of credit deterioration. We have the intent and ability to hold these investments until a recovery of fair value.
In determining the fair value of our investments we used a risk-free rate and added a range of interest rate spreads based upon recent transactions involving similar assets of approximately 1% to 4% as of March 31, 2023, and 1% to 4% as of December 31, 2022. The weighted average discount rates used to determine the fair value of our investments as of March 31, 2023 and December 31, 2022 were 6.2% and 6.5%, respectively.
Securitization residual assets
The following table reconciles the beginning and ending balances for our Level 3 securitization residual assets that are carried at fair value on a recurring basis, with changes in fair value recorded through AOCI:
  For the three months ended March 31,
  2023 2022
  (in millions)
Balance, beginning of period $ 177  $ 210 
Accretion of securitization residual assets 3  2 
Additions to securitization residual assets 5  5 
Collections of securitization residual assets (1) (3)
Unrealized gains (losses) on securitization residual assets recorded in OCI 9  (22)
Balance, end of period $ 193  $ 192 

The following table illustrates our securitization residual assets in an unrealized loss position:
Estimated Fair Value
Unrealized Losses (1)
Count of Securities
Securities with a loss shorter than 12 months Securities with a loss longer than 12 months Securities with a loss shorter than 12 months Securities with a loss longer than 12 months Securities with a loss shorter than 12 months Securities with a loss longer than 12 months
(in millions)
March 31, 2023 $ 71  $ 99  $ 11  $ 30  40  30 
December 31, 2022 118  51  27  22  66  12 
(1)     Loss position is due to interest rates movements and is not indicative of credit deterioration. We have the intent and ability to hold these investments until a recovery of fair value.
In determining the fair value of our securitization residual assets, we used a market-based risk-free rate and added a range of interest rate spreads, determined based upon recent transactions involving similar assets, of approximately 1% to 6% based upon transactions involving similar assets as of March 31, 2023 and December 31, 2022. The weighted average discount rates used to determine the fair value of our securitization residual assets as of March 31, 2023 and December 31, 2022 were 6.3% and 6.8%, respectively. The difference between fair value and amortized cost is due to interest rate movements, and no securitization residual assets have been in a material loss position for more than 12 months. The unrealized losses are due to interest rate movements, and we have the intent and ability to hold these assets until a recovery of fair value.
Non-recurring Fair Value Measurements
Our financial statements may include non-recurring fair value measurements related to acquisitions and non-monetary transactions, if any. Assets acquired in a business combination, if any, are recorded at their fair value. We may use third-party valuation firms to assist us with developing our estimates of fair value.
Concentration of Credit Risk
Commercial and government receivables, real estate leases and debt investments consist primarily of receivables from various projects, U.S. federal government-backed receivables, and investment grade state and local government receivables and do not, in our view, represent a significant concentration of credit risk given the large number of diverse offtakers and other obligors of the projects. Additionally, certain of our investments are collateralized by projects concentrated in certain geographic regions throughout the United States. These investments typically have structural credit protections to mitigate our risk exposure and, in most cases, the projects are insured for estimated physical loss, which helps to mitigate the possible risk from these concentrations.
We had cash deposits that are subject to credit risk as shown below:
March 31, 2023 December 31, 2022
  (in millions)
Cash deposits $ 142  $ 156 
Restricted cash deposits (included in other assets) 22  20 
Total cash deposits $ 164  $ 176 
Amount of cash deposits in excess of amounts federally insured $ 153  $ 174