Annual report pursuant to Section 13 and 15(d)

Our Portfolio

v3.3.1.900
Our Portfolio
12 Months Ended
Dec. 31, 2015
Receivables [Abstract]  
Our Portfolio

6. Our Portfolio

As of December 31, 2015, our Portfolio included approximately $1.3 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 December 31, 2015:

 

    Investment Grade                          
    Government (1)     Commercial
Investment
Grade (2)
    Commercial
Non-Investment
Grade (3)
    Subtotal,
Debt and
Real
Estate
    Equity
Method
Investments (4)
    Total  
    (dollars in millions)  

Financing receivables

  $ 401      $ 383      $ —        $ 784      $ —        $ 784   

Financing receivables held-for-sale

    60        —          —          60        —          60   

Investments

    —          16        13        29        —          29   

Real estate (5)

    —          156        —          156        —          156   

Equity method investments

    —          —          —          —          319        319   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 461      $ 555      $ 13      $ 1,029      $ 319      $ 1,348   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

% of Debt and Real Estate Portfolio

    45     54     1     100     N/A        N/A   

Average Remaining Balance (6)

  $ 12      $ 9      $ 13      $ 10      $ 27      $ 12   

 

(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 $297 million of U.S. federal government transactions and $164 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, $12 million of the transactions have been rated investment grade by an independent rating agency. Commercial investment grade financing receivables include $175 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 ownership interests 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 77 transactions each with outstanding balances that are less than $1 million and that in the aggregate total $26 million.

The components of financing receivables of December 31, 2015 and 2014 were as follows:

 

     December 31,  
         2015              2014      
     (dollars in millions)  

Financing receivables

     

Financing or minimum lease payments (1)

   $ 1,025       $ 723   

Unearned interest income

     (238      (166

Allowance for credit losses

     —           (1

Unearned fee income, net of initial direct costs

     (3      (3
  

 

 

    

 

 

 

Financing receivables (1)

   $ 784       $ 553   
  

 

 

    

 

 

 

 

(1) Excludes $60 million and $62 million in financing receivables held-for-sale at December 31, 2015 and 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 $108 million and $88 million as of December 31, 2015 and 2014, respectively.

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 December 31, 2015:

 

     Total     Less than 1 year     1-5 years     5-10 years     More than 10
years
 
           (dollars in millions)  

Financing Receivables (1)

    

Payment due by period

   $ 784      $ —        $ 122      $ 52      $ 610   

Weighted average yield by period

     5     —       6     5     5

Investments

          

Payment due by period

   $ 29      $ 13      $ —        $ 1      $ 15   

Weighted average yield by period

     5     6     —       5     4

 

(1) Excludes financing receivables held-for-sale of $60 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 2080 if all extensions are exercised. The components of our real estate portfolio as of December 31, 2015 and 2014 were as follows:

 

     December 31,  
         2015              2014      
     (dollars in million)  

Real Estate

     

Land

   $ 129       $ 91   

Real estate related intangibles

     28         23   

Accumulated amortization of real estate intangibles

     (1      (0
  

 

 

    

 

 

 

Real Estate

   $ 156       $ 114   
  

 

 

    

 

 

 

 

There are conservation easement agreements covering several 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 contracted lease term. As of December 31, 2015, the future amortization expense of these intangible assets is as follows:

 

     (dollars in millions)  

Year Ending December 31,

  

2016

   $ 1   

2017

     1   

2018

     1   

2019

     1   

2020

     1   

Thereafter

     22   
  

 

 

 

Total

   $ 27   
  

 

 

 

As of December 31, 2015, the future minimum rental income payments under our land lease agreements is as follows:

 

     (dollars in millions)  

Year Ending December 31,

  

2016

   $ 8   

2017

     9   

2018

     10   

2019

     10   

2020

     10   

Thereafter

     250   
  

 

 

 

Total

   $ 297   
  

 

 

 

In December 2013, we recorded an allowance of $11.0 million on the remaining $11.8 million balance of a $24 million loan made in May 2013 to a wholly owned subsidiary of EnergySource LLC (“EnergySource”) to be used for a geothermal project. In November 2014, we entered into a Forbearance and Mutual Release Agreement with EnergySource under which in full satisfaction of the remaining balance of our loan, we would realize a portion of the proceeds from the sale of land held by EnergySource in an estimated amount of $0.8 million. As a result of this agreement, we charged off $9.8 million of the receivable against the allowance, resulting in a remaining allowance of $1.2 million. During the year ended December 31, 2015, we collected the $0.8 million balance, as a final recovery from the 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 effect on the statement of operations for this loan during the years ended December 31, 2015 and 2014. For the year ended December 31, 2013, the loan had an average balance of $24.7 million and we recorded and collected interest income on the loan of $2.4 million. 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 that were impaired or on nonaccrual status as of December 31, 2015, 2014 or 2013. We did not have any loan modifications that qualify as trouble debt restructurings for the years ended December 31, 2015, 2014, or 2013.