Quarterly report pursuant to Section 13 or 15(d)

Our Portfolio

v3.4.0.3
Our Portfolio
3 Months Ended
Mar. 31, 2016
Receivables [Abstract]  
Our Portfolio

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:

 

     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

   $ 374      $ 428      $ 17      $ 819      $ —         $ 819   

Financing receivables held-for-sale

     42        —          —          42        —           42   

Investments

     21        16        —          37        —           37   

Real estate(5)

     —          163        —          163        —           163   

Equity method investments

     —          —          —          —          304         304   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total

   $ 437      $ 607      $ 17      $ 1,061      $ 304       $ 1,365   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

% of Debt and Real Estate Portfolio

     41     57     2     100     N/A         N/A   

Average Remaining Balance(6)

   $ 12      $ 10      $ 17      $ 11      $ 25       $ 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 $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:

 

     March 31,
2016
     December 31,
2015
 
     (dollars in millions)  

Financing receivables

     

Financing or minimum lease payments(1)

   $ 1,116       $ 1,025   

Unearned interest income

     (295      (238

Allowance for credit losses

     —           —     

Unearned fee income, net of initial direct costs

     (2      (3
  

 

 

    

 

 

 

Financing receivables(1)

   $ 819       $ 784   
  

 

 

    

 

 

 

 

(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:

 

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

Financing Receivables (1)

    

Maturities by period

   $ 819      $ —        $ 130      $ 39      $ 650   

Weighted average yield by period

     5     4     6     4     5

Investments

      

Maturities by period

   $ 37      $ —        $ —        $ 1      $ 36   

Weighted average yield by period

     4     —       —       5     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:

 

     March 31, 2016      December 31, 2015  
     (dollars in millions)  

Real Estate

     

Land

   $ 132       $ 129   

Real estate related intangibles

     33         28   

Accumulated amortization of real estate intangibles

     (2      (1
  

 

 

    

 

 

 

Real Estate

   $ 163       $ 156   
  

 

 

    

 

 

 

 

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:

 

Year Ending December 31,

   (dollars in
millions)
 

From April 1, 2016 to December 31, 2016

   $ 1   

2017

     1   

2018

     1   

2019

     1   

2020

     1   

2021

     1   

Thereafter

     25   
  

 

 

 

Total

   $ 31   
  

 

 

 

As of March 31, 2016, the future minimum rental income payments under our land lease agreements are as follows:

 

Year Ending December 31,

   (dollars in
millions)
 

From April 1, 2016 to December 31, 2016

   $ 6   

2017

     10   

2018

     11   

2019

     11   

2020

     10   

2021

     11   

Thereafter

     290   
  

 

 

 

Total

   $ 349   
  

 

 

 

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.