Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.24.3
Fair Value Measurements
 9 Months Ended
Sep. 30, 2024
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 September 30, 2024 and December 31, 2023, 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 (as defined below) 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 determined on an individual asset basis.
  As of September 30, 2024
  Fair Value Carrying
Value		 Level
  (in millions)
Assets
Receivables
 $ 2,648  $ 2,900  Level 3
Receivables held-for-sale 24  22  Level 3
Investments (1)
18  18  Level 3
Securitization residual assets (2)
258  258  Level 3
Derivative assets 10  10  Level 2
Liabilities (3)
Credit facilities $ 116  $ 116  Level 3
Commercial paper notes 18  18  Level 3
Term loans payable 420  420  Level 3
Non-recourse debt 137  135  Level 3
Senior unsecured notes 2,858  2,862  Level 2
Convertible Notes:
2025 Exchangeable Senior Notes 213  217  Level 2
2028 Exchangeable Senior Notes 550  404  Level 2
Total Convertible Notes 763  621 
Derivative liabilities 37  37  Level 2
(1)The amortized cost of our investments as of September 30, 2024, was $19 million.
(2)Included in securitization assets on the consolidated balance sheet. The amortized cost of our securitization residual assets net of allowance for credit losses as of September 30, 2024 was $289 million.
(3)Fair value and carrying value exclude unamortized financing costs.
  As of December 31, 2023
  Fair Value Carrying
Value		 Level
  (in millions)
Assets
Receivables
 $ 2,733  $ 3,074  Level 3
Receivables held-for-sale 36  35  Level 3
Investments (1)
7  7  Level 3
Securitization residual assets (2)
219  219  Level 3
Derivative assets 10  10  Level 2
Liabilities (3)
Credit facilities $ 401  $ 401  Level 3
Commercial paper notes 30  30  Level 3
Term loan facilities 736  736  Level 3
Non-recourse debt 158  162  Level 3
Senior unsecured notes 2,251  2,337  Level 2
Convertible Notes:
2025 Exchangeable Senior Notes 202  211  Level 2
2028 Exchangeable Senior Notes 481  408  Level 2
Total Convertible Notes 683  619 
Derivative liabilities 9  9  Level 2
(1)    The amortized cost of our investments as of December 31, 2023, was $8 million.
(2)    Included in securitization assets on the consolidated balance sheet. The amortized cost of our securitization residual assets as of December 31, 2023, was $258 million.
(3)    Fair value and carrying value exclude unamortized financing costs.

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 September 30, For the nine months ended September 30,
  2024 2023 2024 2023
  (in millions)
Balance, beginning of period $ 238  $ 204  $ 219  $ 177 
Accretion of securitization residual assets 5  4  13  11
Additions to securitization residual assets 3  1  32  27 
Collections of securitization residual assets (6) (3) (11) (13)
Unrealized gains (losses) on securitization residual assets recorded in OCI 18  (20) 5  (16)
Provision for loss on securitization residual assets —  (3) —  (3)
Balance, end of period $ 258  $ 183  $ 258  $ 183 
The following table illustrates our securitization residual assets in an unrealized loss position:
Estimated Fair Value
Unrealized Losses (1)
Count of Assets
Assets with a loss shorter than 12 months Assets with a loss longer than 12 months Assets with a loss shorter than 12 months Assets with a loss longer than 12 months Assets with a loss shorter than 12 months Assets with a loss longer than 12 months
(in millions)
September 30, 2024 $ 7  $ 161  $ 0.3  $ 39  10  66 
December 31, 2023 24  164  0.3  41  11  66 
(1)    Other than the assets for which there is a reserve as discussed in Note 5, loss positions are 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 of approximately 1% to 6% based upon transactions involving similar assets as of September 30, 2024 and December 31, 2023. The weighted average discount rates used to determine the fair value of our securitization residual assets as of September 30, 2024 and December 31, 2023 were 6.6% and 6.6%, respectively.
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
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:
September 30, 2024 December 31, 2023
  (in millions)
Cash deposits $ 44  $ 63 
Restricted cash deposits (included in other assets) 15  12 
Total cash deposits $ 59  $ 75 
Amount of cash deposits in excess of amounts federally insured $ 57  $ 63