As of September 30, 2015, our Portfolio included approximately
$1.1 billion of financing receivables, investments, real estate and
equity method investments on our balance sheet. The financing
receivables and investments are typically collateralized by
contractually committed debt obligations of government entities or
private high credit quality obligors and are often supported by
additional forms of credit enhancement, including security
interests and supplier guaranties. The real estate is typically
land and related lease intangibles for long-term leases to wind and
solar projects with high credit quality obligors. The equity method
investments represent our minority equity investments in wind
projects.
The following is an analysis of our Portfolio by type of obligor
and credit quality as of September 30, 2015, with 99% of the
debt and real estate portion of our Portfolio rated investment
grade as shown below:
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Investment Grade |
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| |
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Government (1) |
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Commercial
Investment
Grade(2) |
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Commercial
Non-Investment
Grade (3) |
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Subtotal,
Debt and
Real Estate
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Equity Method
Investments(4) |
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Total |
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| |
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(dollars in
millions) |
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Financing receivables
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$ |
328 |
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$ |
408 |
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$ |
— |
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$ |
736 |
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$ |
— |
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$ |
736 |
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|
Financing receivables held-for-sale
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|
41 |
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|
— |
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|
— |
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41 |
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— |
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41 |
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Investments
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|
— |
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15 |
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13 |
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28 |
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— |
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28 |
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Real estate(5)
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— |
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|
155 |
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— |
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|
155 |
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— |
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|
155 |
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Equity method investments
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— |
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— |
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— |
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— |
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|
165 |
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|
165 |
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Total
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$ |
369 |
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$ |
578 |
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$ |
13 |
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$ |
960 |
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$ |
165 |
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$ |
1,125 |
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% of Debt and Real Estate Portfolio
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|
39 |
% |
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|
60 |
% |
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|
1 |
% |
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|
100 |
% |
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N/A |
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N/A |
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Average Remaining Balance(6)
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$ |
11 |
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$ |
10 |
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$ |
13 |
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$ |
10 |
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$ |
15 |
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$ |
11 |
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| (1) |
Transactions where the ultimate
obligor is the U.S. federal government or state or local
governments where the obligors are rated investment grade (either
by an independent rating agency or based upon our internal credit
analysis). This amount includes $269 million of U.S. federal
government transactions and $100 million of transactions where the
ultimate obligors are state or local governments. Transactions may
have guaranties of energy savings from third party service
providers, the majority of which are entities rated investment
grade by an independent rating agency. |
| (2) |
Transactions where the projects or
the ultimate obligors are commercial entities, including
institutions such as hospitals or universities, that have been
rated investment grade (either by an independent rating agency or
based on our internal credit analysis). Of this total, $51 million
of the transactions have been rated investment grade by an
independent rating agency. Commercial investment grade financing
receivables includes $164 million of internally rated residential
solar loans where the cash flows which support our financing
receivables are subordinated to the tax equity investors (whose
return is largely derived from the renewable energy tax incentives)
and for which we rely on certain tax related indemnities of the
publicly traded residential solar provider. |
| (3) |
Transactions where the projects or
the ultimate obligors are commercial entities, including
institutions such as hospitals or universities, that have ratings
below investment grade (either by an independent rating agency or
using our internal credit analysis). |
| (4) |
Consists of minority ownership
interest in operating wind projects in which we earn a preferred
return. |
| (5) |
Includes the real estate and the
lease intangible assets through which we receive scheduled lease
payments, typically under long-term triple net lease
agreements. |
| (6) |
Excludes 78 transactions each with
outstanding balances that are less than $1 million and that in the
aggregate total $25 million. |
The components of financing receivables as of September 30,
2015 and December 31, 2014, were as follows:
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September 30,
2015 |
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December 31,
2014 |
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(dollars in
millions) |
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Financing receivables
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Financing or minimum lease payments(1)
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$ |
938 |
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$ |
723 |
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Unearned interest income
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(199 |
) |
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(166 |
) |
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Allowance for credit losses
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— |
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(1 |
) |
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Unearned fee income, net of initial direct costs
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(3 |
) |
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(3 |
) |
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Financing receivables(1)
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$ |
736 |
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$ |
553 |
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| (1) |
Excludes $41 million and $62 million
in financing receivables held-for-sale as of September 30,
2015 and December 31, 2014, respectively. |
In accordance with the terms of certain financing receivables
purchase agreements, payments of the purchase price is scheduled to
be made over time, generally within twelve months of entering into
the transaction, and as a result, we have recorded deferred funding
obligations of $78 million and $88 million as of September 30,
2015 and December 31, 2014, respectively. We had $3.0 million
in restricted cash as of December 31, 2014 which was be used
to pay these funding obligations. As of September 30, 2015, we
did not have any cash restricted to pay deferred funding
obligations.
The following table provides a summary of our anticipated maturity
dates of our financing receivables and investments and the weighted
average yield for each range of maturities as of September 30,
2015:
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Total |
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Less than 1
year |
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1-5 years |
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5-10 years |
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More than 10
years |
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(dollars in
millions) |
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Financing Receivables (1)
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Payment due by period
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$ |
736 |
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$ |
0 |
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$ |
146 |
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$ |
39 |
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$ |
551 |
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Weighted average yield by period
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5.5 |
% |
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— |
% |
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6.2 |
% |
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5.3 |
% |
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5.3 |
% |
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Investments
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Payment due by period
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$ |
28 |
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$ |
— |
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$ |
13 |
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$ |
1 |
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$ |
14 |
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Weighted average yield by period
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4.9 |
% |
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— |
% |
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5.7 |
% |
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4.7 |
% |
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4.4 |
% |
| (1) |
Excludes financing receivables
held-for-sale of $41 million. |
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 2045 under the initial terms and 2047
and 2061 if all extensions are exercised. The components of our
real estate portfolio as of September 30, 2015 and
December 31, 2014, were as follows:
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September 30,
2015 |
|
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December 31,
2014 |
|
| |
|
(dollars in
millions) |
|
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Real Estate
|
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|
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Land
|
|
$ |
129 |
|
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$ |
91 |
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Real estate related intangibles
|
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|
27 |
|
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|
23 |
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Accumulated amortization of real estate intangibles
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(1 |
) |
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(0 |
) |
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Real Estate
|
|
$ |
155 |
|
|
$ |
114 |
|
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There are conservation easement agreements covering two of our
properties that limit the use of the property upon expiration of
the respective leases. The real estate related intangible assets
are amortized on a straight-line basis over the lease term. As of
September 30, 2015, the future amortization expense of these
intangible assets is as follows:
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Year Ending December 31,
|
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(dollars in
millions) |
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From October 1, 2015 to December 31, 2015
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$ |
0.2 |
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2016
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|
1.0 |
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2017
|
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|
1.0 |
|
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2018
|
|
|
1.0 |
|
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2019
|
|
|
1.0 |
|
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2020
|
|
|
1.0 |
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Thereafter
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|
20.6 |
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Total
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$ |
25.8 |
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As of September 30, 2015, the future minimum rental income
under our land lease agreements is as follows:
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Year Ending December 31,
|
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(dollars in
millions) |
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|
From October 1, 2015 to December 31, 2015
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$ |
3 |
|
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2016
|
|
|
11 |
|
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2017
|
|
|
11 |
|
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2018
|
|
|
11 |
|
|
2019
|
|
|
11 |
|
|
2020
|
|
|
11 |
|
|
Thereafter
|
|
|
234 |
|
|
|
|
|
|
|
Total
|
|
$ |
292 |
|
|
|
|
|
|
During the nine months ended September 30, 2015, we collected
the outstanding net balance of $0.8 million, on our previously
disclosed estimated recovery amount carried in commercial
non-investment grade financing receivables as a final recovery from
the EnergySource LLC (“EnergySource”) loan and
therefore, we charged off the remaining loan balance of $1.2
million against the allowance of $1.2 million. There was no impact
on the statement of operations for the charge off of this loan
during the three and nine months ended September 30, 2015.
Certain of our executive officers and directors own an indirect
minority interest in EnergySource following the distribution of the
Predecessor’s ownership interest prior to our IPO.
We had no other financing receivables, investments or leases on
nonaccrual status as of September 30, 2015 or
December 31, 2014. There was no provision for credit losses
for the three and nine months ended September 30, 2015 or
2014. We did not have any loan modifications that qualify as
trouble debt restructurings for the three months ended
September 30, 2015 or 2014.