6. Our Portfolio
As of March 31, 2016, our Portfolio included approximately
$1.4 billion of financing receivables, investments, real estate and
equity method investments on our balance sheet. The financing
receivables and investments are typically collateralized by
contractually committed debt obligations of government entities or
private high credit quality obligors and are often supported by
additional forms of credit enhancement, including security
interests and supplier guaranties. The real estate is typically
land and related lease intangibles for long-term leases to wind and
solar projects with high credit quality obligors. The equity method
investments represent our minority equity investments in wind
projects.
The following is an analysis of our Portfolio by type of obligor
and credit quality as of March 31, 2016:
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| |
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Investment Grade |
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| |
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Government
(1) |
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Commercial
Investment
Grade(2) |
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Commercial
Non-Investment
Grade (3) |
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Subtotal,
Debt and
Real Estate
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Equity Method
Investments(4) |
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Total |
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| |
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(dollars in
millions) |
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Financing receivables
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$ |
374 |
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$ |
428 |
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$ |
17 |
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$ |
819 |
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$ |
— |
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$ |
819 |
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Financing receivables held-for-sale
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|
42 |
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|
— |
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— |
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|
42 |
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|
— |
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42 |
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Investments
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21 |
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16 |
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— |
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37 |
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— |
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37 |
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Real estate(5)
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— |
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163 |
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— |
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163 |
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— |
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|
163 |
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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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|
304 |
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304 |
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Total
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$ |
437 |
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$ |
607 |
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$ |
17 |
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|
$ |
1,061 |
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$ |
304 |
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$ |
1,365 |
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% of Debt and Real Estate Portfolio
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41 |
% |
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|
57 |
% |
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2 |
% |
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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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$ |
12 |
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$ |
10 |
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$ |
17 |
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$ |
11 |
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$ |
25 |
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$ |
12 |
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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 $260 million of U.S. federal
government transactions and $ 177 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, $11 million
of the transactions have been rated investment grade by an
independent rating agency. Commercial investment grade financing
receivables include $174 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. |
| (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 79 transactions each with
outstanding balances that are less than $1 million and that in the
aggregate total $28 million. |
The components of financing receivables as of March 31, 2016
and December 31, 2015, were as follows:
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March 31,
2016 |
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December 31,
2015 |
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(dollars in
millions) |
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Financing receivables
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Financing or minimum lease payments(1)
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$ |
1,116 |
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$ |
1,025 |
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Unearned interest income
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(295 |
) |
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(238 |
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Allowance for credit losses
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— |
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— |
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Unearned fee income, net of initial direct costs
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(2 |
) |
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(3 |
) |
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Financing receivables(1)
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$ |
819 |
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$ |
784 |
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| (1) |
Excludes $42 million and $60 million
in financing receivables held-for-sale as of March 31, 2016
and December 31, 2015, 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 $63 million and $108 million as of March 31,
2016 and December 31, 2015, respectively.
The following table provides a summary of our anticipated maturity
dates of our financing receivables and investments and the weighted
average yield for each range of maturities as of March 31,
2016:
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Total |
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Less than 1
year |
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1-5 years |
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5-10 years |
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More than 10
years |
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| |
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(dollars in
millions) |
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Financing Receivables (1)
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Maturities by period
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$ |
819 |
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$ |
— |
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$ |
130 |
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$ |
39 |
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$ |
650 |
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Weighted average yield by period
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5 |
% |
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4 |
% |
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6 |
% |
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4 |
% |
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5 |
% |
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Investments
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Maturities by period
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$ |
37 |
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$ |
— |
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$ |
— |
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$ |
1 |
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$ |
36 |
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Weighted average yield by period
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4 |
% |
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— |
% |
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— |
% |
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5 |
% |
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4 |
% |
| (1) |
Excludes financing receivables
held-for-sale of $42 million. |
Our real estate is leased to renewable energy projects, typically
under long-term triple net leases with expiration dates that range
between the years 2033 and 2051 under the initial terms and 2047
and 2080 if all extensions are exercised. The components of our
real estate portfolio as of March 31, 2016 and
December 31, 2015, were as follows:
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March 31, 2016 |
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December 31, 2015 |
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(dollars in
millions) |
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Real Estate
|
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Land
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$ |
132 |
|
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$ |
129 |
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Real estate related intangibles
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|
33 |
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|
28 |
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Accumulated amortization of real estate intangibles
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(2 |
) |
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(1 |
) |
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Real Estate
|
|
$ |
163 |
|
|
$ |
156 |
|
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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 March 31, 2016, 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 April 1, 2016 to December 31, 2016
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$ |
1 |
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2017
|
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|
1 |
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2018
|
|
|
1 |
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2019
|
|
|
1 |
|
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2020
|
|
|
1 |
|
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2021
|
|
|
1 |
|
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Thereafter
|
|
|
25 |
|
|
|
|
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|
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Total
|
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$ |
31 |
|
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|
|
As of March 31, 2016, the future minimum rental income
payments under our land lease agreements are as follows:
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Year Ending December 31,
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(dollars in
millions) |
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From April 1, 2016 to December 31, 2016
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$ |
6 |
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2017
|
|
|
10 |
|
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2018
|
|
|
11 |
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2019
|
|
|
11 |
|
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2020
|
|
|
10 |
|
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2021
|
|
|
11 |
|
|
Thereafter
|
|
|
290 |
|
|
|
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|
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Total
|
|
$ |
349 |
|
|
|
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|
|
We had no financing receivables, investments or leases that were
impaired or on nonaccrual status as of March 31, 2016 or
December 31, 2015. There was no provision for credit losses
for the three months ended March 31, 2016 or 2015. We did not
have any loan modifications that qualify as trouble debt
restructurings for the three months ended March 31, 2016 or
2015.