10-Q 1 yieldincq1201810-q.htm 10-Q YIELD, INC. Document
                                            

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 
 
 
 
For the Quarterly Period Ended: March 31, 2018
 
 
 
o
 
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number: 001-36002
NRG Yield, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
 
46-1777204
(I.R.S. Employer
Identification No.)
 
 
 
804 Carnegie Center, Princeton, New Jersey
(Address of principal executive offices)
 
08540
(Zip Code)
(609) 524-4500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x       No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x      No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
Accelerated filer o
 
Non-accelerated filer o
 
Smaller reporting company o
Emerging growth company o
 
 
 
 
(Do not check if a smaller reporting company)
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o       No x
As of March 31, 2018, there were 34,586,250 shares of Class A common stock outstanding, par value $0.01 per share, 42,738,750 shares of Class B common stock outstanding, par value $0.01 per share, 65,343,576 shares of Class C common stock outstanding, par value $0.01 per share, and 42,738,750 shares of Class D common stock outstanding, par value $0.01 per share.
 
 
 
 
 


                                            

TABLE OF CONTENTS
Index


2

                                            

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q of NRG Yield, Inc., together with its consolidated subsidiaries, or the Company, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The words "believes," "projects," "anticipates," "plans," "expects," "intends," "estimates" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors, risks and uncertainties include the factors described under Item 1A — Risk Factors in Part I, of the Company's Annual Report on Form 10-K for the year ended December 31, 2017, as well as the following:
The Company's ability to maintain and grow its quarterly dividend;
Potential risks to the Company as a result of the NRG Transaction;
The Company's ability to successfully identify, evaluate and consummate acquisitions from third parties;
The Company's ability to acquire assets from NRG;
The Company's ability to raise additional capital due to its indebtedness, corporate structure, market conditions or otherwise;
Changes in law, including judicial decisions;
Hazards customary to the power production industry and power generation operations such as fuel and electricity price volatility, unusual weather conditions (including wind and solar conditions), catastrophic weather-related or other damage to facilities, unscheduled generation outages, maintenance or repairs, unanticipated changes to fuel supply costs or availability due to higher demand, shortages, transportation problems or other developments, environmental incidents, or electric transmission or gas pipeline system constraints and the possibility that the Company may not have adequate insurance to cover losses as a result of such hazards;
The Company's ability to operate its businesses efficiently, manage maintenance capital expenditures and costs effectively, and generate earnings and cash flows from its asset-based businesses in relation to its debt and other obligations;
The willingness and ability of counterparties to the Company's offtake agreements to fulfill their obligations under such agreements;
The Company's ability to enter into contracts to sell power and procure fuel on acceptable terms and prices as current offtake agreements expire;
Government regulation, including compliance with regulatory requirements and changes in market rules, rates, tariffs and environmental laws;
Operating and financial restrictions placed on the Company that are contained in the project-level debt facilities and other agreements of certain subsidiaries and project-level subsidiaries generally, in the NRG Yield Operating LLC amended and restated revolving credit facility, in the indentures governing the Senior Notes and in the indentures governing the Company's convertible notes;
Cyber terrorism and inadequate cybersecurity, or the occurrence of a catastrophic loss and the possibility that the Company may not have adequate insurance to cover losses resulting from such hazards or the inability of the Company's insurers to provide coverage;
The Company's ability to engage in successful mergers and acquisitions activity; and
The Company's ability to borrow additional funds and access capital markets, as well as the Company's substantial indebtedness and the possibility that the Company may incur additional indebtedness going forward.
Forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors that could cause the Company's actual results to differ materially from those contemplated in any forward-looking statements included in this Quarterly Report on Form 10-Q should not be construed as exhaustive.


3

                                            

GLOSSARY OF TERMS
When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below:
2017 Form 10-K
 
NRG Yield, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2017
2019 Convertible Notes
 
$345 million aggregate principal amount of 3.50% convertible notes due 2019, issued by NRG Yield, Inc.
2020 Convertible Notes
 
$287.5 million aggregate principal amount of 3.25% convertible notes due 2020, issued by NRG Yield, Inc.
2024 Senior Notes
 
$500 million aggregate principal amount of 5.375% unsecured senior notes due 2024, issued by NRG Yield Operating LLC
2026 Senior Notes
 
$350 million aggregate principal amount of 5.00% unsecured senior notes due 2026, issued by NRG Yield Operating LLC
ASC
 
The FASB Accounting Standards Codification, which the FASB established as the source of
authoritative GAAP
ASU
 
Accounting Standards Updates - updates to the ASC
ATM Program
 
At-The-Market Equity Offering Program
August 2017 Drop Down Assets
 
The remaining 25% interest in NRG Wind TE Holdco, an 814 net MW portfolio of twelve wind projects, acquired from NRG on August 1, 2017
Buckthorn Solar Drop Down Asset
 
Buckthorn Renewables, LLC, which owns 100% of Buckthorn Solar Portfolio, LLC, which was acquired by NRG Yield Operating LLC from NRG on March 30, 2018
Buffalo Bear
 
Buffalo Bear, LLC, the operating subsidiary of Tapestry Wind LLC, which owns the Buffalo Bear project
CAFD
 
Cash Available For Distribution, which the Company defines as net income before interest expense, income taxes, depreciation and amortization, plus cash distributions from unconsolidated affiliates, cash receipts from notes receivable, less cash distributions to noncontrolling interests, maintenance capital expenditures, pro-rata EBITDA from unconsolidated affiliates, cash interest paid, income taxes paid, principal amortization of indebtedness and changes in prepaid and accrued capacity payments
Company
 
NRG Yield, Inc. together with its consolidated subsidiaries
CVSR
 
California Valley Solar Ranch
CVSR Drop Down
 
The Company's acquisition from NRG of the remaining 51.05% interest of CVSR Holdco
CVSR Holdco
 
CVSR Holdco LLC, the indirect owner of CVSR
DGPV Holdco 1
 
NRG DGPV Holdco 1 LLC
DGPV Holdco 2
 
NRG DGPV Holdco 2 LLC
DGPV Holdco 3
 
NRG DGPV Holdco 3 LLC
Distributed Solar
 
Solar power projects, typically less than 20 MW in size, that primarily sell power produced to customers for usage on site, or are interconnected to sell power into the local distribution grid
Drop Down Assets
 
Collectively, the June 2014 Drop Down Assets, January 2015 Drop Down Assets, November 2015 Drop Down Assets, CVSR Drop Down, March 2017 Drop Down Assets, August 2017 Drop Down Assets, November 2017 Drop Down Assets and Buckthorn Solar Drop Down Asset
Economic Gross Margin
 
Energy and capacity revenue less cost of fuels
El Segundo
 
El Segundo Energy Center LLC, the indirect, operating subsidiary of Natural Gas Repowering LLC, which owns the El Segundo Energy Center project
Exchange Act
 
The Securities Exchange Act of 1934, as amended
FASB
 
Financial Accounting Standards Board
GAAP
 
Accounting principles generally accepted in the U.S.
GenConn
 
GenConn Energy LLC
GIP
 
Global Infrastructure Partners
HLBV
 
Hypothetical Liquidation at Book Value
IASB
 
International Accounting Standards Board
ISO
 
Independent System Operator, also referred to as RTO
January 2015 Drop Down Assets
 
The Laredo Ridge, Tapestry and Walnut Creek projects, which were acquired by NRG Yield Operating LLC from NRG on January 2, 2015

4

                                            

Kansas South
 
NRG Solar Kansas South LLC, the operating subsidiary of NRG Solar Kansas South Holdings LLC, which owns the Kansas South project
Laredo Ridge
 
Laredo Ridge Wind, LLC, the operating subsidiary of Mission Wind Laredo, LLC, which owns the Laredo Ridge project
LIBOR
 
London Inter-Bank Offered Rate
March 2017 Drop Down Assets
 
(i) Agua Caliente Borrower 2 LLC, which owns a 16% interest (approximately 31% of NRG's 51% interest) in the Agua Caliente solar farm and (ii) NRG's 100% ownership in the Class A equity interests in the Utah Solar Portfolio (defined below), both acquired by the Company on March 27, 2017
Marsh Landing
 
NRG Marsh Landing LLC, formerly GenOn Marsh Landing LLC
MMBtu
 
Million British Thermal Units
MW
 
Megawatts
MWh
 
Saleable megawatt hours, net of internal/parasitic load megawatt-hours
MWt
 
Megawatts Thermal Equivalent
NERC
 
North American Electric Reliability Corporation
Net Exposure
 
Counterparty credit exposure to NRG Yield, Inc. net of collateral
NOLs
 
Net Operating Losses
November 2015 Drop Down Assets
 
75% of the Class B interests of NRG Wind TE Holdco, which owns a portfolio of 12 wind facilities totaling 814 net MW, which was acquired by NRG Yield Operating LLC from NRG on November 3, 2015
November 2017 Drop Down Assets
 
38 MW portfolio of distributed and small utility-scale solar assets, primarily comprised of assets from NRG's Solar Power Partners (SPP) funds, in addition to other projects developed since the acquisition of SPP by NRG, which was acquired by NRG Yield Operating LLC from NRG on November 1, 2017
NRG
 
NRG Energy, Inc.
NRG Power Marketing
 
NRG Power Marketing LLC
NRG Transaction
 
On February 6, 2018, GIP entered into a purchase and sale agreement with NRG for the acquisition of NRG's full ownership interest in the Company and NRG's renewable energy development and operations platform. GIP, NRG and the Company also entered into a consent and indemnity agreement in connection with the purchase and sale agreement.

NRG Wind TE Holdco
 
NRG Wind TE Holdco LLC
NRG Yield LLC
 
The holding company through which the projects are owned by NRG, the holder of Class B and Class D units, and NRG Yield, Inc., the holder of the Class A and Class C units
NRG Yield Operating LLC
 
The holder of the project assets that are owned by NRG Yield LLC
OCI/OCL
 
Other comprehensive income/loss
O&M
 
Operation and Maintenance
Pinnacle
 
Pinnacle Wind, LLC, the operating subsidiary of Tapestry Wind LLC, which owns the Pinnacle project
PPA
 
Power Purchase Agreement
ROFO Agreement
 
Second Amended and Restated Right of First Offer Agreement between the Company and NRG
ROFO Assets
 
Specified assets subject to sale, as described in the ROFO Agreement
RPV Holdco
 
NRG RPV Holdco 1 LLC
RTO
 
Regional Transmission Originator
SEC
 
U.S. Securities and Exchange Commission
Senior Notes
 
Collectively, the 2024 Senior Notes and the 2026 Senior Notes
SPP
 
Solar Power Partners
Taloga
 
Taloga Wind, LLC, the operating subsidiary of Tapestry Wind LLC, which owns the Taloga project
Tapestry
 
Collection of the Pinnacle, Buffalo Bear and Taloga projects
Tax Act
 
Tax Cuts and Jobs Act of 2017

5

                                            

Thermal Business
 
The Company's thermal business, which consists of thermal infrastructure assets that provide steam, hot water and/or chilled water, and in some instances electricity, to commercial businesses, universities, hospitals and governmental units
Third Amendment
 
Third Amendment to Amended and Restated Credit Agreement and Administrative Agent Resignation and Appointment Agreement, dated as of April 30, 2018
U.S.
 
United States of America
Utah Solar Portfolio
 
Collection consists of Four Brothers Solar, LLC, Granite Mountain Holdings, LLC, and Iron Springs Holdings, LLC, which are equity investments owned by Four Brothers Capital, LLC, Granite Mountain Capital, LLC, and Iron Springs Capital, LLC, respectively, and are part of the March 2017 Drop Down Assets acquisition that closed on March 27, 2017
Utility Scale Solar
 
Solar power projects, typically 20 MW or greater in size (on an alternating current, or AC, basis), that are interconnected into the transmission or distribution grid to sell power at a wholesale level
VaR
 
Value at Risk
VIE
 
Variable Interest Entity
Walnut Creek
 
Walnut Creek Energy, LLC, the operating subsidiary of WCEP Holdings, LLC, which owns the Walnut Creek project

6

                                            

PART I - FINANCIAL INFORMATION
ITEM 1 — FINANCIAL STATEMENTS
NRG YIELD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three months ended March 31,
(In millions, except per share amounts)
2018
 
2017 (a)
Operating Revenues
 
 
 
Total operating revenues
$
225

 
$
221

Operating Costs and Expenses
 
 
 
Cost of operations
89

 
85

Depreciation and amortization
81

 
77

General and administrative
5

 
4

Acquisition-related transaction and integration costs
1

 
1

Total operating costs and expenses
176

 
167

Operating Income
49

 
54

Other Income (Expense)
 
 
 
Equity in earnings of unconsolidated affiliates
4

 
19

Other income, net
1

 
1

Loss on debt extinguishment

 
(2
)
Interest expense
(55
)
 
(75
)
Total other expense, net
(50
)
 
(57
)
Loss Before Income Taxes
(1
)
 
(3
)
Income tax benefit
(1
)
 
(1
)
Net Loss

 
(2
)
Less: Pre-acquisition net income of Drop Down Assets
4

 
13

Net Loss Excluding Pre-acquisition Net Income of Drop Down Assets
(4
)
 
(15
)
Less: Loss attributable to noncontrolling interests
(20
)
 
(12
)
Net Income (Loss) Attributable to NRG Yield, Inc.
$
16

 
$
(3
)
Earnings (Loss) Per Share Attributable to NRG Yield, Inc. Class A and Class C Common Stockholders
 
 
 
Weighted average number of Class A common shares outstanding - basic and diluted
35

 
35

Weighted average number of Class C common shares outstanding - basic and diluted
65

 
63

Earnings (Loss) per Weighted Average Class A and Class C Common Share - Basic and Diluted
$
0.16

 
$
(0.03
)
Dividends Per Class A Common Share
0.298

 
0.26

Dividends Per Class C Common Share
$
0.298

 
$
0.26

 
(a) Retrospectively adjusted as discussed in Note 1, Nature of Business.
See accompanying notes to consolidated financial statements.

7

                                            

NRG YIELD, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
Three months ended March 31,
(In millions)
2018
 
2017 (a)
Net Loss
$

 
$
(2
)
Other Comprehensive Gain, net of tax
 
 
 
Unrealized gain on derivatives, net of income tax expense of $3 and $1
17

 
6

Other comprehensive gain
17

 
6

Comprehensive Income
17

 
4

Less: Pre-acquisition net income of Drop Down Assets
4

 
13

Less: Comprehensive loss attributable to noncontrolling interests
(11
)
 
(9
)
Comprehensive Income Attributable to NRG Yield, Inc.
$
24

 
$

 
(a) Retrospectively adjusted as discussed in Note 1, Nature of Business.
See accompanying notes to consolidated financial statements.

8

                                            

NRG YIELD, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except shares)
March 31, 2018
 
December 31, 2017 (a)
ASSETS
(unaudited)
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
173

 
$
148

Restricted cash
104

 
168

Accounts receivable — trade
82

 
95

Inventory
39

 
39

Notes receivable
9

 
13

Prepayments and other current assets
18

 
19

Total current assets
425

 
482

Property, plant and equipment, net
5,340

 
5,410

Other Assets
 
 
 
Equity investments in affiliates
1,169

 
1,178

Intangible assets, net
1,210

 
1,228

Derivative instruments
16

 
1

Deferred income taxes
129

 
128

Other non-current assets
73

 
62

Total other assets
2,597

 
2,597

Total Assets
$
8,362

 
$
8,489

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current Liabilities
 

 
 

Current portion of long-term debt
$
698

 
$
339

Accounts payable — trade
40

 
46

Accounts payable — affiliate
54

 
49

Derivative instruments
9

 
18

Accrued expenses and other current liabilities
58

 
88

Total current liabilities
859

 
540

Other Liabilities
 
 
 
Long-term debt
5,261

 
5,659

Derivative instruments
17

 
31

Other non-current liabilities
99

 
100

Total non-current liabilities
5,377

 
5,790

Total Liabilities
6,236

 
6,330

Commitments and Contingencies
 
 
 
Stockholders' Equity
 
 
 
Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued

 

Class A, Class B, Class C and Class D common stock, $0.01 par value; 3,000,000,000 shares authorized (Class A 500,000,000, Class B 500,000,000, Class C 1,000,000,000, Class D 1,000,000,000); 185,407,326 shares issued and outstanding (Class A 34,586,250, Class B 42,738,750, Class C 65,343,576, Class D 42,738,750) at March 31, 2018 and 184,780,837 shares issued and outstanding (Class A 34,586,250, Class B 42,738,750, Class C 64,717,087, Class D 42,738,750) at December 31, 2017
1

 
1

Additional paid-in capital
1,827

 
1,843

Accumulated deficit
(53
)
 
(69
)
Accumulated other comprehensive loss
(20
)
 
(28
)
Noncontrolling interest
371

 
412

Total Stockholders' Equity
2,126

 
2,159

Total Liabilities and Stockholders' Equity
$
8,362

 
$
8,489

 
(a) Retrospectively adjusted as discussed in Note 1, Nature of Business.


See accompanying notes to consolidated financial statements.

9

                                            

NRG YIELD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three months ended March 31,
 
2018
 
2017 (a)
 
(In millions)
Cash Flows from Operating Activities
 
 
 
Net loss
$

 
$
(2
)
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Equity in earnings of unconsolidated affiliates
(4
)
 
(19
)
Distributions from unconsolidated affiliates
13

 
16

Depreciation and amortization
81

 
77

Amortization of financing costs and debt discounts
7

 
5

Amortization of intangibles and out-of-market contracts
17

 
17

Adjustment for debt extinguishment

 
2

Changes in deferred income taxes
(1
)
 
(1
)
Changes in derivative instruments
(23
)
 
(8
)
Loss on disposal of asset components
2

 
3

Changes in prepaid and accrued liabilities for tolling agreements
(36
)
 
(36
)
Changes in other working capital
9

 
10

Net Cash Provided by Operating Activities
65

 
64

Cash Flows from Investing Activities
 
 
 
Payments for the Drop Down Assets
(42
)
 
(131
)
Capital expenditures
(18
)
 
(6
)
Cash receipts from notes receivable
4

 
4

Return of investment from unconsolidated affiliates
14

 
16

Investments in unconsolidated affiliates
(6
)
 
(7
)
Other
4

 

Net Cash Used in Investing Activities
(44
)
 
(124
)
Cash Flows from Financing Activities
 
 
 
Net contributions from noncontrolling interests
30

 
14

Net distributions and return of capital to NRG prior to the acquisition of Drop Down Assets

 
(21
)
Net proceeds from the issuance of common stock
10

 
7

Payments of dividends and distributions
(55
)
 
(48
)
Payments of debt issuance costs

 
(3
)
Proceeds from the revolving credit facility
20

 

Proceeds from the issuance of long-term debt
14

 
41

Payments for long-term debt
(79
)
 
(105
)
Net Cash Used in Financing Activities
(60
)
 
(115
)
Net Decrease in Cash, Cash Equivalents and Restricted Cash
(39
)
 
(175
)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period
316

 
498

Cash, Cash Equivalents and Restricted Cash at End of Period
$
277

 
$
323

 
(a) Retrospectively adjusted as discussed in Note 1, Nature of Business.
See accompanying notes to consolidated financial statements.

10

                                            

NRG YIELD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1Nature of Business
NRG Yield, Inc., together with its consolidated subsidiaries, or the Company, is a dividend growth-oriented company that has historically served as the primary vehicle through which NRG owns, operates and acquires contracted renewable and conventional generation and thermal infrastructure assets.
The Company believes it is well positioned to be a premier company for investors seeking stable and growing dividend income from a diversified portfolio of lower-risk assets. The Company owns a diversified portfolio of contracted renewable and conventional generation and thermal infrastructure assets in the U.S. The Company’s contracted generation portfolio collectively represents 5,118 net MW as of March 31, 2018. Nearly all of these assets sell substantially all of their output pursuant to long-term offtake agreements with creditworthy counterparties. The weighted average remaining contract duration of these offtake agreements was approximately 15 years as of March 31, 2018 based on CAFD. The Company also owns thermal infrastructure assets with an aggregate steam and chilled water capacity of 1,319 net MWt and electric generation capacity of 123 net MW. These thermal infrastructure assets provide steam, hot and/or chilled water, and, in some instances, electricity to commercial businesses, universities, hospitals and governmental units in multiple locations, principally through long-term contracts or pursuant to rates regulated by state utility commissions.
NRG Yield, Inc. consolidates the results of NRG Yield LLC through its controlling interest, with NRG's interest shown as noncontrolling interest in the financial statements. The holders of NRG Yield, Inc.'s outstanding shares of Class A and Class C common stock are entitled to dividends as declared. NRG receives its distributions from NRG Yield LLC through its ownership of NRG Yield LLC Class B and Class D units.
The following table represents the structure of the Company as of March 31, 2018:
yieldorgpicturerevisedasof04.jpg

11

                                            

On February 6, 2018, Global Infrastructure Partners, or GIP, entered into a purchase and sale agreement with NRG, or the NRG Transaction, for the acquisition of NRG's full ownership interests in the Company and NRG's renewable development and operations platform. The NRG Transaction is subject to certain closing conditions, including customary legal and regulatory approvals. The Company expects the NRG Transaction to close in the second half of 2018. NRG is currently the Company's controlling stockholder and the Company has been highly dependent on NRG for, among other things, growth opportunities and management and administration services. In connection with the NRG Transaction, the Company entered into a Consent and Indemnity Agreement with NRG and GIP setting forth key terms and conditions of the Company's consent to the NRG Transaction.
For further discussion of the NRG Transaction, refer to Item 1 - Business in the Company's 2017 Form 10-K. For risks related to the NRG Transaction and the Company's relationship with NRG see Part I, Item 1A, Risk Factors in the Company's 2017 Form 10-K.
As of March 31, 2018, the Company's operating assets are comprised of the following projects:
Projects
 
Percentage Ownership
 
Net Capacity (MW)(a)
 
Offtake Counterparty
 
Expiration
Conventional
 
 
 
 
 
 
 
 
El Segundo
 
100
%
 
550

 
Southern California Edison
 
2023
GenConn Devon
 
50
%
 
95

 
Connecticut Light & Power
 
2040
GenConn Middletown
 
50
%
 
95

 
Connecticut Light & Power
 
2041
Marsh Landing
 
100
%
 
720

 
Pacific Gas and Electric
 
2023
Walnut Creek
 
100
%
 
485

 
Southern California Edison
 
2023
 
 
 
 
1,945

 
 
 
 
Utility Scale Solar
 
 
 
 
 
 
 
 
Agua Caliente
 
16
%
 
46

 
Pacific Gas and Electric
 
2039
Alpine
 
100
%
 
66

 
Pacific Gas and Electric
 
2033
Avenal
 
50
%
 
23

 
Pacific Gas and Electric
 
2031
Avra Valley
 
100
%
 
26

 
Tucson Electric Power
 
2032
Blythe
 
100
%
 
21

 
Southern California Edison
 
2029
Borrego
 
100
%
 
26

 
San Diego Gas and Electric
 
2038
CVSR
 
100
%
 
250

 
Pacific Gas and Electric
 
2038
Desert Sunlight 250
 
25
%
 
63

 
Southern California Edison
 
2035
Desert Sunlight 300
 
25
%
 
75

 
Pacific Gas and Electric
 
2040
Kansas South
 
100
%
 
20

 
Pacific Gas and Electric
 
2033
Roadrunner
 
100
%
 
20

 
El Paso Electric
 
2031
TA High Desert
 
100
%
 
20

 
Southern California Edison
 
2033
      Utah Solar Portfolio (b) (e)
 
50
%
 
265

 
PacifiCorp
 
2036
 
 
 
 
921

 
 
 
 
Distributed Solar
 
 
 
 
 
 
 
 
Apple I LLC Projects
 
100
%
 
9

 
Various
 
2032
AZ DG Solar Projects
 
100
%
 
5

 
Various
 
2025 - 2033
SPP Projects
 
100
%
 
25

 
Various
 
2026 - 2037
Other DG Projects
 
100
%
 
13

 
Various
 
2023 - 2039
 
 
 
 
52

 
 
 
 
Wind
 
 
 
 
 
 
 
 
Alta I
 
100
%
 
150

 
Southern California Edison
 
2035
Alta II
 
100
%
 
150

 
Southern California Edison
 
2035
Alta III
 
100
%
 
150

 
Southern California Edison
 
2035
Alta IV
 
100
%
 
102

 
Southern California Edison
 
2035
Alta V
 
100
%
 
168

 
Southern California Edison
 
2035
Alta X (b)
 
100
%
 
137

 
Southern California Edison
 
2038
Alta XI (b)
 
100
%
 
90

 
Southern California Edison
 
2038
Buffalo Bear
 
100
%
 
19

 
Western Farmers Electric Co-operative
 
2033
Crosswinds (b) (f)
 
99
%
 
21

 
Corn Belt Power Cooperative
 
2027
Elbow Creek (b) (f)
 
100
%
 
122

 
NRG Power Marketing LLC
 
2022
Elkhorn Ridge (b) (f)
 
66.7
%
 
54

 
Nebraska Public Power District
 
2029
Forward (b) (f)
 
100
%
 
29

 
Constellation NewEnergy, Inc.
 
2017
Goat Wind (b) (f)
 
100
%
 
150

 
Dow Pipeline Company
 
2025

12

                                            

Projects
 
Percentage Ownership
 
Net Capacity (MW)(a)
 
Offtake Counterparty
 
Expiration
Hardin (b) (f)
 
99
%
 
15

 
Interstate Power and Light Company
 
2027
Laredo Ridge
 
100
%
 
80

 
Nebraska Public Power District
 
2031
Lookout (b) (f)
 
100
%
 
38

 
Southern Maryland Electric Cooperative
 
2030
Odin (b) (f)
 
99.9
%
 
20

 
Missouri River Energy Services
 
2028
Pinnacle
 
100
%
 
55

 
Maryland Department of General Services and University System of Maryland
 
2031
San Juan Mesa (b) (f)
 
75
%
 
90

 
Southwestern Public Service Company
 
2025
Sleeping Bear (b) (f)
 
100
%
 
95

 
Public Service Company of Oklahoma
 
2032
South Trent
 
100
%
 
101

 
AEP Energy Partners
 
2029
Spanish Fork (b) (f)
 
100
%
 
19

 
PacifiCorp
 
2028
Spring Canyon II (b)
 
90.1
%
 
29

 
Platte River Power Authority
 
2039
Spring Canyon III (b)
 
90.1
%
 
25

 
Platte River Power Authority
 
2039
Taloga
 
100
%
 
130

 
Oklahoma Gas & Electric
 
2031
Wildorado (b) (f)
 
100
%
 
161

 
Southwestern Public Service Company
 
2027
 
 
 
 
2,200

 
 
 
 
Thermal
 
 
 
 
 
 
 
 
NRG Energy Center Dover LLC
 
100
%
 
103

 
NRG Power Marketing LLC
 
2018
Thermal generation
 
100
%
 
20

 
Various
 
Various
 
 
 
 
123

 
 
 
 
Total net generation capacity(c)
 
 
 
5,241

 
 
 
 
 
 
 
 
 
 
 
 
 
Thermal equivalent MWt (d)
 
100
%
 
1,319

 
Various
 
Various
 
(a) Net capacity represents the maximum, or rated, generating capacity of the facility multiplied by the Company's percentage ownership in the facility as of March 31, 2018.
(b) Projects are part of tax equity arrangements.
(c) The Company's total generation capacity is net of 6 MWs for noncontrolling interest for Spring Canyon II and III. The Company's generation capacity including this noncontrolling interest was 5,247 MWs.
(d) For thermal energy, net capacity represents MWt for steam or chilled water and excludes 134 MWt available under the right-to-use provisions contained in agreements between two of the Company's thermal facilities and certain of its customers.
(e) Represents interests in Four Brothers Solar, LLC, Granite Mountain Holdings, LLC, and Iron Springs Holdings, LLC, all acquired as part of the March 2017 Drop Down Assets (ownership percentage is based upon cash to be distributed).
(f) Projects are part of NRG Wind TE Holdco portfolio.
In addition to the facilities owned or leased in the table above, the Company entered into partnerships to own or purchase solar power generation projects, as well as other ancillary related assets from a related party via intermediate funds.  The Company does not consolidate these partnerships and accounts for them as equity method investments. The Company's net interest in these projects is 262 MW based on cash to be distributed as of March 31, 2018. For further discussions, refer to Note 4, Investments Accounted for by the Equity Method and Variable Interest Entities of this Form 10-Q and Note 5, Investments Accounted for by the Equity Method and Variable Interest Entities to the consolidated financial statements included in the Company's 2017 Form 10-K.
Substantially all of the Company's generation assets are under long-term contractual arrangements for the output or capacity from these assets. The thermal assets are comprised of district energy systems and combined heat and power plants that produce steam, hot water and/or chilled water and, in some instances, electricity at a central plant. Certain district energy systems are subject to rate regulation by state public utility commissions (although they may negotiate certain rates) while the other district energy systems have rates determined by negotiated bilateral contracts.
As described in Note 3, Business Acquisitions, on March 30, 2018, the Company acquired 100% of NRG's interests in Buckthorn Renewables, LLC, which owns a 154 MW construction-stage utility-scale solar generation project, or the Buckthorn Solar Drop Down Asset, for cash consideration of approximately $42 million, subject to working capital adjustments, plus assumed non-recourse debt of approximately $183 million. The project will sell power under a 25-year PPA to the City of Georgetown, Texas starting in July 2018 when it is expected to achieve commercial operation. The purchase price was funded with cash on hand and borrowings from the revolving credit facility.
The acquisition of the Buckthorn Solar Drop Down Asset was accounted for as a transfer of entities under common control. The accounting guidance requires retrospective combination of the entities for all periods presented as if the combinations had been in effect from the beginning of the financial statement period or from the date the entities were under common control (if

13

                                            

later than the beginning of the financial statement period). The recast of the Company's financial statements for the Buckthorn Solar Drop Down Asset did not affect the historical net income attributable to NRG Yield, Inc., weighted average number of shares outstanding, earnings per share or dividends.
Additionally, as described in Note 3, Business Acquisitions, during the year ended December 31, 2017, the Company acquired the November 2017 Drop Down Assets and August 2017 Drop Down Assets from NRG. Similarly to the Buckthorn Solar Drop Down Asset, the Company recast its historical financial statements to combine the entities for the periods presented as if the combinations had been in effect from the beginning of the financial statements period. The recast of the Company's financial statements for the November 2017 Drop Down Assets and August 2017 Drop Down Assets did not affect the historical net income attributable to NRG Yield, Inc., weighted average number of shares outstanding, earnings per share or dividends.
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the SEC’s regulations for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The following notes should be read in conjunction with the accounting policies and other disclosures as set forth in the notes to the consolidated financial statements included in the Company's 2017 Form 10-K. Interim results are not necessarily indicative of results for a full year.
In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all material adjustments consisting of normal and recurring accruals necessary to present fairly the Company's consolidated financial position as of March 31, 2018, and the results of operations, comprehensive income (loss) and cash flows for the three months ended March 31, 2018 and 2017.
Note 2Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions. These estimates and assumptions impact the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could be different from these estimates.
Accumulated Depreciation, Accumulated Amortization
The following table presents the accumulated depreciation included in the property, plant and equipment, net, and accumulated amortization included in intangible assets, net, respectively, as of March 31, 2018 and December 31, 2017:
 
March 31, 2018
 
December 31, 2017
 
(In millions)
Property, Plant and Equipment Accumulated Depreciation
$
1,358

 
$
1,285

Intangible Assets Accumulated Amortization
255

 
237

Noncontrolling Interests
Stockholders' equity represents the equity associated with the Class A and Class C common stockholders, the equity associated with the Class B and Class D common stockholder, NRG, and the third-party interests under certain tax equity arrangements are classified as noncontrolling interests. The following table reflects the changes in the Company's noncontrolling interest balance:
 
(In millions)
Balance as of December 31, 2017 as previously reported
$
391

Net Assets of Buckthorn Solar Drop Down Asset as of December 31, 2017
21

Balance as of December 31, 2017 as recast
$
412

Capital contributions from tax equity investors, net of distributions
30

Payment for the Buckthorn Solar Drop Down Asset
(42
)
Pre-acquisition net income of the Buckthorn Solar Drop Down Asset
4

Comprehensive loss
(11
)
Distributions to NRG, net
(22
)
Balance as of March 31, 2018
$
371


14

                                            

NRG Yield LLC Distributions to NRG
The following table lists the distributions paid to NRG on NRG Yield LLC's Class B and D units during the three months ended March 31, 2018:
 
 
First Quarter 2018
Distributions per Class B Unit
 
$
0.298

Distributions per Class D Unit
 
$
0.298

On April 24, 2018, NRG Yield LLC declared a distribution on its Class A, Class B, Class C and Class D units of $0.309 per unit payable on June 15, 2018 to unit holders of record as of June 1, 2018.
Revenue Recognition
Revenue from Contracts with Customers
On January 1, 2018, the Company adopted the guidance in ASC 606, Revenue from Contracts with Customers, or Topic 606, using the modified retrospective method applied to contracts which were not completed as of the adoption date, with no adjustment required to the financial statements upon adoption. Following the adoption of the new standard, the Company’s revenue recognition of its contracts with customers remains materially consistent with its historical practice. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company's policies with respect to its various revenue streams are detailed below. In general, the Company applies the invoicing practical expedient to recognize revenue for the revenue streams detailed below, except in circumstances where the invoiced amount does not represent the value transferred to the customer.
Thermal Revenues
Steam and chilled water revenue is recognized as the Company transfers the product to the customer, based on customer usage as determined by meter readings taken at month-end. Some locations read customer meters throughout the month, and recognize estimated revenue for the period between meter read date and month-end. For thermal contracts, the Company’s performance obligation to deliver steam and chilled water is satisfied over time and revenue is recognized based on the invoiced amount. The Thermal Business subsidiaries collect and remit state and local taxes associated with sales to their customers, as required by governmental authorities. These taxes are presented on a net basis in the income statement.
As contracts for steam and chilled water are long-term contracts, the Company has performance obligations under these contracts that have not yet been satisfied. These performance obligations have transaction prices that are both fixed and variable, and that vary based on the contract duration, customer type, inception date and other contract-specific factors. For the fixed price contracts, the Company cannot accurately estimate the amount of its unsatisfied performance obligations as it will vary based on customer usage, which will depend on factors such as weather and customer activity.
Power Purchase Agreements, or PPAs
The majority of the Company’s revenues are obtained through PPAs or other contractual agreements. Energy, capacity and where applicable, renewable attributes, from the majority of the Company’s renewable energy assets and certain conventional energy plants is sold through long-term PPAs and tolling agreements to a single counterparty, which is often a utility or commercial customer. The majority of these PPAs are accounted for as leases. ASC 840 requires the minimum lease payments received to be amortized over the term of the lease and contingent rentals are recorded when the achievement of the contingency becomes probable. Judgment is required by management in determining the economic life of each generating facility, in evaluating whether certain lease provisions constitute minimum payments or represent contingent rent and other factors in determining whether a contract contains a lease and whether the lease is an operating lease or capital lease.
Renewable Energy Credits
As stated above, renewable energy credits, or RECs, are usually sold through long-term PPAs. Revenue from the sale of self-generated RECs is recognized when related energy is generated and simultaneously delivered even in cases where there is a certification lag as it has been deemed to be perfunctory.
In a bundled contract to sell energy, capacity and/or self-generated RECs, all performance obligations are deemed to be delivered at the same time and hence, timing of recognition of revenue for all performance obligations is the same and occurs over time. In such cases, it is often unnecessary to allocate transaction price to multiple performance obligations.

15

                                            

Sale of Emission Allowances
The Company records its bank of emission allowances as part of intangible assets. From time to time, management may authorize the transfer of emission allowances in excess of usage from the Company's emission bank to intangible assets held-for-sale for trading purposes. The Company records the sale of emission allowances on a net basis within operating revenue in the Company's consolidated statements of operations.
Disaggregated Revenues     
The following table represents the Company’s disaggregation of revenue from contracts with customers for the three months ended March 31, 2018 along with the reportable segment for each category:
(In millions)
Conventional Generation
 
Renewables
 
Thermal
 
Total
Energy revenue(a)
$
1

 
$
112

 
$
1

 
$
114

Capacity revenue(a)
79

 

 
3

 
82

Contract amortization
(1
)
 
(15
)
 
(1
)
 
(17
)
Other revenue

 
1

 
45

 
46

Total operating revenue
79

 
98

 
48

 
225

Less: Lease revenue
(80
)
 
(101
)
 

 
(181
)
Less: Contract amortization
1

 
15

 
1

 
17

Total revenue from contracts with customers
$

 
$
12

 
$
49

 
$
61

 
(a) The following amounts of energy and capacity revenue relate to leases and are accounted for under ASC 840:
 
 
Conventional Generation
 
Renewables
 
Thermal
 
Total
Energy Revenue
 
$
1

 
$
101

 
$

 
$
102

Capacity Revenue
 
79

 

 

 
79

Contract Amortization
Assets and liabilities recognized from power sales agreements assumed through acquisitions related to the sale of electric capacity and energy in future periods for which the fair value has been determined to be significantly less (more) than market are amortized to revenue over the term of each underlying contract based on actual generation and/or contracted volumes or on a straight-line basis, where applicable.
Contract Balances
The following table reflects the contract assets and liabilities included on the Company’s balance sheet as of March 31, 2018:
(In millions)
 
March 31, 2018
 
 
 
Accounts receivable, net - Contracts with customers
 
$
26

Accounts receivable, net - Leases
 
56

Total accounts receivable, net
 
$
82

 
 
 
Income Taxes
NRG Yield, Inc. is included in certain NRG consolidated unitary state tax return filings which is reflected in NRG Yield, Inc.'s state effective tax rate. If NRG Yield, Inc. filed under a separate standalone methodology, there would be no material change to the state tax benefit as of March 31, 2018.
Reclassifications
Certain prior-year amounts have been reclassified for comparative purposes.

16

                                            

Recent Accounting Developments - Not Yet Adopted
ASU 2016-02 — In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), or Topic 842, with the objective to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and to improve financial reporting by expanding the related disclosures. The guidance in Topic 842 provides that a lessee that may have previously accounted for a lease as an operating lease under current GAAP should recognize the assets and liabilities that arise from a lease on the balance sheet. In addition, Topic 842 expands the required quantitative and qualitative disclosures with regards to lease arrangements. The Company will adopt the standard effective January 1, 2019 and expects to elect certain of the practical expedients permitted, including the expedient that permits the Company to retain its existing lease assessment and classification. The Company is currently working through an adoption plan and evaluating the anticipated impact on the Company's results of operations, cash flows and financial position. While the Company is currently evaluating the impact the new guidance will have on its financial position and results of operations, the Company expects to recognize lease liabilities and right of use assets. The extent of the increase to assets and liabilities associated with these amounts remains to be determined pending the Company’s review of its existing lease contracts and service contracts which may contain embedded leases. While this review is still in process, the Company believes the adoption of Topic 842 may be material to its financial statements. The Company is continuing to monitor potential changes to Topic 842 that have been proposed by the FASB and will assess any necessary changes to the implementation as the guidance is updated.
Note 3Business Acquisitions
2018 Acquisitions
Central CA Fuel Cell 1, LLC On April 18, 2018, the Company acquired the Central CA Fuel Cell 1, LLC project in Tulare, California from FuelCell Energy Finance, Inc., for cash consideration of $11 million, subject to working capital adjustments. The project will add an additional 2.8 MW of thermal capacity to the Company's portfolio, with a 20-year PPA contract with the City of Tulare. The transaction will be reflected in the Company's Thermal segment.
Buckthorn Solar Drop Down Asset On March 30, 2018, the Company acquired 100% of NRG's interests in Buckthorn Renewables, LLC, which owns a 154 MW construction-stage utility-scale solar generation project, located in Texas, or the Buckthorn Solar Drop Down Asset, for cash consideration of approximately $42 million, subject to working capital adjustments. The Company also assumed non-recourse debt of $183 million and non-controlling interest of $19 million (as of acquisition date) attributable to the Class A member, as further described below. A portion of non-recourse debt is expected to convert to a term loan and the remainder of the outstanding debt will be paid down with the remaining contributions from the Class A member upon the project achieving substantial completion in May 2018. The purchase price for the Buckthorn Solar Drop Down Asset was funded with cash on hand and borrowings from the Company's revolving credit facility. The assets and liabilities transferred to the Company relate to interests under common control by NRG and were recorded at historical cost in accordance with ASC 805-50, Business Combinations - Related Issues. The difference between the cash paid and historical value of the entities' equity was recorded as a distribution to NRG and decreased the balance of its noncontrolling interest. Because the transaction constituted a transfer of net assets under common control, the guidance requires retrospective combination of the entities for all periods presented as if the combination has been in effect since the inception of common control.
Buckthorn Solar Portfolio, LLC, a wholly owned subsidiary of Buckthorn Renewables, LLC, is the Class B member in a tax equity partnership, Buckthorn Holdings, LLC, the owner of the Buckthorn Solar Drop Down Asset. The Class A member is a tax equity investor, or TE investor, who receives 99% of allocations of taxable income and other items through the six month anniversary of the placed in service date, at which time the allocations change to 67% through the last calendar year before the flip point, and then back to 99% through the flip point (which occurs when the TE Investor obtains a specified return on its initial investment), at which time the allocations to the TE Investor change to 5% for all the periods thereafter. Before the flip point, the TE investor would receive a priority distribution of distributable cash, as defined, plus a percentage of remaining distributable cash after the priority distribution subject to a percentage cap. On March 30, 2018, the TE Investor made its initial capital contribution of $19 million with the remaining contributions from each partner targeted to be funded in the second quarter of 2018. The project will sell power under a 25-year PPA to the City of Georgetown, Texas starting in July 2018 when it is expected to achieve commercial operation.

17

                                            

The following is a summary of net assets transferred in connection with the acquisition of the Buckthorn Solar Drop Down Asset as of March 31, 2018:
 
(In millions)
Assets:
 
Current assets
$
20

Property, plant and equipment
212

Non-current assets
3

Total assets
235

Liabilities:
 
Debt (Current and non-current) (a)
176

Other current and non-current liabilities
15

Total liabilities
191

Less: noncontrolling interest 
19

Net assets acquired
$
25

 
(a) Net of $7 million of net debt issuance costs.
The following table presents the historical information summary combining the financial information for the Buckthorn Drop Down Asset transferred in connection with the acquisition:
 
As of December 31, 2017
(In millions)
As Previously Reported
 
Buckthorn Solar Drop Down Asset
 
As Currently Reported
Assets:
 
 
 
 
 
Current assets
$
482

 
$

 
$
482

Property, plant and equipment
5,204

 
206

 
5,410

Non-current assets
2,597

 

 
2,597

Total assets
8,283

 
206

 
8,489

Liabilities:
 
 
 
 
 
Debt
5,837

 
161

 
5,998

Other current and non-current liabilities
308

 
24

 
332

Total liabilities
6,145

 
185

 
6,330

Net assets
$
2,138

 
$
21

 
$
2,159

2017 Acquisitions
November 2017 Drop Down Assets On November 1, 2017, the Company acquired a 38 MW solar portfolio primarily comprised of assets from NRG's Solar Power Partners (SPP) funds and other projects developed by NRG, for cash consideration of $74 million, including working capital adjustments, plus assumed non-recourse debt of $26 million.
The purchase price for the November 2017 Drop Down Assets was funded with cash on hand. The assets and liabilities transferred to the Company relate to interests under common control by NRG and were recorded at historical cost in accordance with ASC 805-50, Business Combinations - Related Issues. The difference between the cash paid and historical value of the entities' equity was recorded as a contribution from NRG and increased the balance of its noncontrolling interest. Because the transaction constituted a transfer of net assets under common control, the guidance requires retrospective combination of the entities for all periods presented as if the combination has been in effect since the inception of common control.
August 2017 Drop Down Assets On August 1, 2017, the Company acquired the remaining 25% interest in NRG Wind TE Holdco, a portfolio of 12 wind projects, from NRG for total cash consideration of $44 million, including working capital adjustments. The purchase agreement also included potential additional payments to NRG dependent upon actual energy prices for merchant periods beginning in 2027, which were estimated and accrued as contingent consideration in the amount of $8 million.

18

                                            

The Company originally acquired 75% of NRG Wind TE Holdco on November 3, 2015, or November 2015 Drop Down Assets, which were consolidated with 25% of the net assets recorded as noncontrolling interest. The assets and liabilities transferred to the Company related to interests under common control by NRG and were recorded at historical cost in accordance with ASC 805-50, Business Combination - Related Issues. As the Company had reflected NRG's 25% ownership of NRG Wind TE Holdco in noncontrolling interest, the difference between the cash paid of $44 million, net of the contingent consideration of $8 million, and the historical value of the remaining 25% of $87 million as of July 31, 2017, was recorded as an adjustment to NRG's noncontrolling interest. Since the transaction constituted a transfer of entities under common control, the accounting guidance requires retrospective combination of the entities for all periods presented as if the combination has been in effect from the beginning of the financial statement period or from the date the entities were under common control (if later than the beginning of the financial statement period).
The following tables present a summary of the Company's historical information combining the financial information for the November 2017 Drop Down Assets and August 2017 Drop Down Assets transferred in connection with the acquisition:
 
Three months ended March 31, 2017
 
As Previously Reported (a)
 
November 2017 Drop Down Assets
 
August 2017 Drop Down Assets
 
As Currently Reported
(In millions)
 
 
 
 
 
 
 
Total operating revenues
$
218

 
$
3

 
$

 
$
221

Operating income
54

 

 

 
54

Net loss
(1
)
 
(1
)
 

 
(2
)
Less: Pre-acquisition net income of Drop Down Assets
12

 
(1
)
 
2

 
13

Less: Loss attributable to noncontrolling interests
(10
)
 

 
(2
)
 
(12
)
Net loss attributable to NRG Yield, Inc.
(3
)
 

 

 
(3
)
 
(a) As previously reported in the Company's Form 10-Q for the quarter ended March 31, 2017
March 2017 Drop Down Assets On March 27, 2017, the Company acquired the following interests from NRG: (i) Agua Caliente Borrower 2 LLC, which owns a 16% interest (approximately 31% of NRG's 51% interest) in the Agua Caliente solar farm, one of the ROFO Assets, representing ownership of approximately 46 net MW of capacity and (ii) NRG's interests in the Utah Solar Portfolio. Agua Caliente is located in Yuma County, AZ and sells power subject to a 25-year PPA with Pacific Gas and Electric, with 22 years remaining on that contract. The seven utility-scale solar farms in the Utah Solar Portfolio are owned by the following entities: Four Brothers Capital, LLC, Iron Springs Capital, LLC, and Granite Mountain Capital, LLC. These utility-scale solar farms achieved commercial operations in 2016, sell power subject to 20-year PPAs with PacifiCorp, a subsidiary of Berkshire Hathaway and are part of a tax equity structure with Dominion Solar Projects III, Inc., or Dominion, through which the Company is entitled to receive 50% of cash to be distributed, as further described below. The Company paid cash consideration of $128 million, which includes $4 million of final working capital adjustment paid to the Company by NRG during the period ended March 31, 2018. The acquisition of the March 2017 Drop Down Assets was funded with cash on hand. The Company recorded the acquired interests as equity method investments. The Company also assumed non-recourse debt of $41 million and $287 million on Agua Caliente Borrower 2 LLC and the Utah Solar Portfolio, respectively, as well as its pro-rata share of non-recourse project-level debt of Agua Caliente Solar LLC, as further described in Note 4, Investments Accounted for by the Equity Method and Variable Interest Entities.
The assets and liabilities transferred to the Company relate to interests under common control by NRG and were recorded at historical cost in accordance with ASC 805-50, Business Combination - Related Issues. The difference between the cash paid and the historical value of the entities' equity of $8 million was recorded as an adjustment to NRG's noncontrolling interest. Since the transaction constituted a transfer of entities under common control, the accounting guidance requires retrospective combination of the entities for all periods presented as if the combination has been in effect from the beginning of the financial statement period or from the date the entities were under common control (if later than the beginning of the financial statement period).

19

                                            

Note 4Investments Accounted for by the Equity Method and Variable Interest Entities
Entities that are Consolidated
The Company has a controlling financial interest in certain entities which have been identified as VIEs under ASC 810, Consolidations, or ASC 810. These arrangements are primarily related to tax equity arrangements entered into with third parties in order to monetize certain tax credits associated with wind facilities, as further described in Note 5, Investments Accounted for by the Equity Method and Variable Interest Entities, to the consolidated financial statements included in the Company's 2017 Form 10-K.
Buckthorn Renewables, LLC - As described in Note 3, Business Acquisitions, on March 30, 2018, the Company acquired 100% of NRG’s interest in a 154 MW construction-stage utility-scale solar generation project, Buckthorn Renewables, LLC, which owns 100% interest in Buckthorn Solar Portfolio, LLC, which in turn owns 100% of the Class B membership interests in Buckthorn Holdings, LLC for total consideration of approximately $42 million, subject to working capital adjustments.  Buckthorn Holdings, LLC is a tax equity fund, which is a variable interest entity that is consolidated by Buckthorn Solar Portfolio, LLC. The Company is the primary beneficiary, through its position as managing member, and indirectly consolidates Buckthorn Holdings, LLC through Buckthorn Solar Portfolio, LLC. The Class A member is a tax equity investor who made its initial capital contribution of $19 million on March 30, 2018, which is reflected as noncontrolling interest on the Company’s consolidated balance sheet. The project is expected to begin commercial operations in July 2018, at which time the remaining contributions from each partner would be funded. The Company utilizes the HLBV method to determine the net income or loss allocated to the tax equity investor noncontrolling interest.
Summarized financial information for the Company's consolidated VIEs consisted of the following as of March 31, 2018:
(In millions)
NRG Wind TE Holdco
 
Alta Wind TE Holdco
 
Spring Canyon
 
Buckthorn Renewables, LLC
Other current and non-current assets
$
172

 
$
18

 
$
2

 
$
23

Property, plant and equipment
369

 
430

 
94

 
212

Intangible assets
2

 
259

 

 

Total assets
543

 
707

 
96

 
235

Current and non-current liabilities
195

 
8

 
5

 
191

Total liabilities
195

 
8

 
5

 
191

Noncontrolling interest
9

 
77

 
50

 
19

Net assets less noncontrolling interests
$
339

 
$
622

 
$
41

 
$
25

Entities that are not Consolidated
The Company has interests in entities that are considered VIEs under ASC 810, but for which it is not considered the primary beneficiary.  The Company accounts for its interests in these entities under the equity method of accounting, as further described in Note 5, Investments Accounted for by the Equity Method and Variable Interest Entities, to the consolidated financial statements included in the Company's 2017 Form 10-K.
The Company's maximum exposure to loss as of March 31, 2018 is limited to its equity investment in the unconsolidated entities, as further summarized in the table below:
(In millions)
Maximum exposure to loss
Four Brothers Solar, LLC
$
209

GenConn Energy LLC
100

Granite Mountain Holdings, LLC
76

NRG DGPV Holdco 1 LLC
73

NRG DGPV Holdco 3 LLC
62

NRG DGPV Holdco 2 LLC
61

Iron Springs Holdings, LLC
53

NRG RPV Holdco 1 LLC
52


20

                                            

NRG DGPV Holdco 3 LLC The Company invested $6 million of cash during the three months ended March 31, 2018 into DGPV Holdco 3 LLC and recorded $16 million due to NRG in accounts payable - affiliate as of March 31, 2018 to be funded in tranches as the project milestones are completed. The Company owns approximately 59 MW of distributed solar capacity, based on cash to be distributed, with a weighted average remaining contract life of approximately 22 years as of March 31, 2018.
Utah Solar Portfolio As described in Note 3, Business Acquisitions, on March 27, 2017, as part of the March 2017 Drop Down Assets acquisition, the Company acquired from NRG 100% of the Class A equity interests in the Utah Solar Portfolio, comprised of Four Brothers Solar, LLC, Granite Mountain Holdings, LLC, and Iron Springs Holdings, LLC. The Class B interests of the Utah Solar Portfolio are owned by a tax equity investor, who receives 99% of allocations of taxable income and other items until the flip point, which occurs when the tax equity investor obtains a specified return on its initial investment, at which time the allocations to the tax equity investor change to 50%. The Company generally receives 50% of distributable cash throughout the term of the tax-equity arrangements. The three entities comprising the Utah Solar Portfolio are VIEs. As the Company is not the primary beneficiary, the Company uses the equity method of accounting to account for its interests in the Utah Solar Portfolio. The Company utilizes the HLBV method to determine its share of the income or losses in the investees.
The following tables present summarized financial information for the Company's significant equity method investments:
 
 
 
Three months ended March 31,
(In millions)
 
 
2018
 
2017
Income Statement Data:
 
 
 
 
 
DGPV entities (a)
 
 
 
 
 
Operating revenues
 
 
$
11

 
$
5

Operating loss
 
 

 
(1
)
Net income (loss)
 
 
3

 
(2
)
 
 
March 31, 2018
 
December 31, 2017
Balance Sheet Data:
 
(In millions)
DGPV entities (a)
 
 
 
 
 
Current assets
 
$
92

 
$
74

Non-current assets
 
718

 
671

Current liabilities
 
84

 
83

Non-current liabilities
 
236

 
216

Redeemable noncontrolling interest
 
42

 
44

 
(a) Includes DGPV Holdco 1, DGPV Holdco 2, and DGPV Holdco 3
Non-recourse project-level debt of unconsolidated affiliates
Agua Caliente Financing As described in Note 3, Business Acquisitions, on March 27, 2017, the Company acquired a 16% interest in the Agua Caliente solar facility through its acquisition of Agua Caliente Borrower 2 LLC. As of March 31, 2018, Agua Caliente Solar LLC, the direct owner of the Agua Caliente solar facility, had $815 million outstanding under the Agua Caliente financing agreement with the Federal Financing Bank, or FFB, borrowed to finance the costs of constructing the facility. The Company's pro-rata share of the Agua Caliente financing arrangement was $130 million as of March 31, 2018. Amounts borrowed under the Agua Caliente financing agreement accrue interest at a fixed rate based on U.S. Treasury rates plus a spread of 0.375%, mature in 2037 and are secured by the assets of Agua Caliente Solar LLC. The loans provided by the FFB are guaranteed by the U.S. DOE.

21

                                            

Note 5Fair Value of Financial Instruments
Fair Value Accounting under ASC 820
ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
Level 1—quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.
Level 2—inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
Level 3—unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date.
In accordance with ASC 820, the Company determines the level in the fair value hierarchy within which each fair value measurement in its entirety falls, based on the lowest level input that is significant to the fair value measurement.
For cash and cash equivalents, restricted cash, accounts receivable, accounts receivable — affiliate, accounts payable, current portion of the accounts payable — affiliates, accrued expenses and other liabilities, the carrying amounts approximate fair value because of the short-term maturity of those instruments and are classified as Level 1 within the fair value hierarchy.
The estimated carrying amounts and fair values of the Company’s recorded financial instruments not carried at fair market value are as follows:
 
As of March 31, 2018
 
As of December 31, 2017
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
(In millions)
 
Assets:
 
 
 
 
 
 
 
Notes receivable (a)
$
9

 
$
9

 
$
13

 
$
13

Liabilities:
 
 
 
 
 
 
 
Long-term debt, including current portion (b)
$
6,023

 
$
6,020

 
$
6,066

 
$
6,099

 
(a) Carrying amount as of December 31, 2017, includes the long-term portion of notes receivable, which is recorded in other noncurrent assets on the Company's consolidated balance sheets.
(b) Excludes deferred financing costs, which are recorded as a reduction to long-term debt on the Company's consolidated balance sheets.
The fair value of the Company's publicly-traded long-term debt is based on quoted market prices and is classified as Level 2 within the fair value hierarchy. The fair value of debt securities, non-publicly traded long-term debt and certain notes receivable of the Company are based on expected future cash flows discounted at market interest rates, or current interest rates for similar instruments with equivalent credit quality and are classified as Level 3 within the fair value hierarchy. The following table presents the level within the fair value hierarchy for long-term debt, including current portion as of March 31, 2018, and December 31, 2017:
 
As of March 31, 2018
 
As of December 31, 2017
 
Level 2
 
Level 3
 
Level 2
 
Level 3
 
(In millions)
Long-term debt, including current portion
$
1,472

 
$
4,548

 
$
1,502

 
$
4,597


22

                                            

Recurring Fair Value Measurements
The Company records its derivative assets and liabilities at fair value on its consolidated balance sheet. The following table presents assets and liabilities measured and recorded at fair value on the Company's consolidated balance sheets on a recurring basis and their level within the fair value hierarchy:
 
As of March 31, 2018
 
As of December 31, 2017
 
Fair Value (a)
 
Fair Value (a)
(In millions)
Level 2
 
Level 2
Derivative assets:
 
 
 
Commodity contracts
$

 
$
1

Interest rate contracts
17

 
1

Total assets
17

 
2

Derivative liabilities:
 
 
 
Commodity contracts
2

 
1

Interest rate contracts
24

 
48

Total liabilities
$
26

 
$
49

 
(a) There were no derivative assets or liabilities classified as Level 1 or Level 3 as of March 31, 2018 and December 31, 2017.
Derivative Fair Value Measurements
The Company's contracts are non-exchange-traded and valued using prices provided by external sources. For the Company’s energy markets, management receives quotes from multiple sources. To the extent that multiple quotes are received, the prices reflect the average of the bid-ask mid-point prices obtained from all sources believed to provide the most liquid market for the commodity.
The fair value of each contract is discounted using a risk free interest rate. In addition, a credit reserve is applied to reflect credit risk, which is, for interest rate swaps, calculated based on credit default swaps using the bilateral method. For commodities, to the extent that the net exposure under a specific master agreement is an asset, the Company uses the counterparty’s default swap rate. If the net exposure under a specific master agreement is a liability, the Company uses NRG's default swap rate. For interest rate swaps and commodities, the credit reserve is added to the discounted fair value to reflect the exit price that a market participant would be willing to receive to assume the liabilities or that a market participant would be willing to pay for the assets. As of March 31, 2018, the credit reserve was less than $1 million. It is possible that future market prices could vary from those used in recording assets and liabilities and such variations could be material.
Concentration of Credit Risk
In addition to the credit risk discussion in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Company's 2017 Form 10-K, the following is a discussion of the concentration of credit risk for the Company's financial instruments. Credit risk relates to the risk of loss resulting from non-performance or non-payment by counterparties pursuant to the terms of their contractual obligations. The Company monitors and manages credit risk through credit policies that include: (i) an established credit approval process; (ii) daily monitoring of counterparties' credit limits; (iii) the use of credit mitigation measures such as margin, collateral, prepayment arrangements, or volumetric limits; (iv) the use of payment netting agreements; and (v) the use of master netting agreements that allow for the netting of positive and negative exposures of various contracts associated with a single counterparty. Risks surrounding counterparty performance and credit could ultimately impact the amount and timing of expected cash flows. The Company seeks to mitigate counterparty risk by having a diversified portfolio of counterparties.
Counterparty credit exposure includes credit risk exposure under certain long-term agreements, including solar and other PPAs. As external sources or observable market quotes are not available to estimate such exposure, the Company estimates the exposure related to these contracts based on various techniques including, but not limited to, internal models based on a fundamental analysis of the market and extrapolation of observable market data with similar characteristics. Based on these valuation techniques, as of March 31, 2018, credit risk exposure to these counterparties attributable to the Company's ownership interests was approximately $2.6 billion for the next five years. The majority of these power contracts are with utilities with strong credit quality and public utility commission or other regulatory support. However, such regulated utility counterparties can be impacted by changes in government regulations, which the Company is unable to predict.

23

                                            

Note 6Accounting for Derivative Instruments and Hedging Activities
This footnote should be read in conjunction with the complete description under Note 7, Accounting for Derivative Instruments and Hedging Activities, to the consolidated financial statements included in the Company's 2017 Form 10-K.
Energy-Related Commodities
As of March 31, 2018, the Company had energy-related derivative instruments extending through 2020. At March 31, 2018, these contracts were not designated as cash flow or fair value hedges.
Interest Rate Swaps
As of March 31, 2018, the Company had interest rate derivative instruments on non-recourse debt extending through 2041, a portion of which are designated as cash flow hedges.
Volumetric Underlying Derivative Transactions
The following table summarizes the net notional volume buy of the Company's open derivative transactions broken out by commodity:
 
 
 
Total Volume
 
 
 
March 31, 2018
 
December 31, 2017
Commodity
Units
 
(In millions)
Natural Gas
MMBtu
 
1

 
2

Interest
Dollars
 
$
2,001

 
$
2,050

Fair Value of Derivative Instruments
The following table summarizes the fair value within the derivative instrument valuation on the balance sheet:
 
Fair Value
 
Derivative Assets (a)
 
Derivative Liabilities
 
March 31, 2018
 
December 31, 2017
 
March 31, 2018
 
December 31, 2017
 
(In millions)
Derivatives Designated as Cash Flow Hedges:
 
 
 
 
 
 
 
Interest rate contracts current
$
1

 
$

 
$
2

 
$
4

Interest rate contracts long-term
7

 
1

 
6

 
9

Total Derivatives Designated as Cash Flow Hedges
8

 
1

 
8

 
13

Derivatives Not Designated as Cash Flow Hedges:
 
 
 
 
 
 
 
Interest rate contracts current

 

 
6

 
13

Interest rate contracts long-term
9

 

 
10

 
22

Commodity contracts current

 
1

 
1

 
1

Commodity contracts long-term

 

 
1

 

Total Derivatives Not Designated as Cash Flow Hedges
9

 
1

 
18

 
36

Total Derivatives
$
17

 
$
2

 
$
26

 
$
49

 
(a) Derivative Assets balances classified as current are included within the prepayments and other current assets line item of the consolidated balance sheets as of March 31, 2018 and December 31, 2017.


24

                                            

The Company has elected to present derivative assets and liabilities on the balance sheet on a trade-by-trade basis and does not offset amounts at the counterparty master agreement level. As of March 31, 2018, and December 31, 2017, there was no outstanding collateral paid or received. The following tables summarize the offsetting of derivatives by the counterparty master agreement level as of March 31, 2018, and December 31, 2017:
As of March 31, 2018
Gross Amounts of Recognized Assets/Liabilities
 
Derivative Instruments
 
Net Amount
Commodity contracts(a):
(In millions)
Derivative assets
$

 
$

 
$

Derivative liabilities
(2
)
 

 
(2
)
Total commodity contracts
(2
)
 

 
(2
)
Interest rate contracts:
 
 
 
 
 
Derivative assets
17

 
(2
)
 
15

Derivative liabilities
(24
)
 
2

 
(22
)
Total interest rate contracts
(7
)
 

 
(7
)
Total derivative instruments
$
(9
)
 
$

 
$
(9
)
 
(a) There were no commodity contracts classified as derivative assets as of March 31, 2018.
As of December 31, 2017
Gross Amounts of Recognized Assets/Liabilities
 
Derivative Instruments
 
Net Amount
Commodity contracts:
(In millions)
Derivative assets
$
1

 
$

 
$
1

Derivative liabilities
(1
)
 

 
(1
)
Total commodity contracts

 

 

Interest rate contracts:
 
 
 
 
 
Derivative assets
1

 
(1
)
 

Derivative liabilities
(48
)
 
1

 
(47
)
Total interest rate contracts
(47
)
 

 
(47
)
Total derivative instruments
$
(47
)
 
$

 
$
(47
)
Accumulated Other Comprehensive Loss
The following table summarizes the effects on the Company’s accumulated OCL balance attributable to interest rate swaps designated as cash flow hedge derivatives, net of tax:
 
Three months ended March 31,
 
2018
 
2017
 
(In millions)
Accumulated OCL beginning balance
$
(60
)
 
$
(70
)
Reclassified from accumulated OCL to income due to realization of previously deferred amounts
4

 
4

Mark-to-market of cash flow hedge accounting contracts
13

 
2

Accumulated OCL ending balance, net of income tax benefit of $6 and $15, respectively
(43
)
 
(64
)
Accumulated OCL attributable to noncontrolling interests
(23
)
 
(39
)
Accumulated OCL attributable to NRG Yield, Inc.
$
(20
)
 
$
(25
)
Losses expected to be realized from OCL during the next 12 months, net of income tax benefit of $1
$
11

 
 

25

                                            

The Company's regression analysis for Marsh Landing, Walnut Creek and Avra Valley interest rate swaps, while positively correlated, no longer contain matching terms for cash flow hedge accounting. As a result, the Company voluntarily de-designated the Marsh Landing, Walnut Creek and Avra Valley cash flow hedges as of April 28, 2017, and will prospectively mark these derivatives to market through the income statement.
Impact of Derivative Instruments on the Statements of Operations
The Company has interest rate derivative instruments that are not designated as cash flow hedges. The effect of interest rate hedges is recorded to interest expense. For the three months ended March 31, 2018 and 2017, the impact to the consolidated statements of operations was a gain of $24 million and $4 million, respectively.
A portion of the Company’s derivative commodity contracts relates to its Thermal Business for the purchase of fuel commodities based on the forecasted usage of the thermal district energy centers. Realized gains and losses on these contracts are reflected in the fuel costs that are permitted to be billed to customers through the related customer contracts or tariffs and, accordingly, no gains or losses are reflected in the consolidated statements of income for these contracts.
See Note 5, Fair Value of Financial Instruments, for a discussion regarding concentration of credit risk.


26

                                            

Note 7Long-term Debt
This footnote should be read in conjunction with the complete description under Note 10, Long-term Debt, to the consolidated financial statements included in the Company's 2017 Form 10-K. Long-term debt consisted of the following:
 
 
March 31, 2018
 
December 31, 2017
 
March 31, 2018, interest rate % (a)
 
Letters of Credit Outstanding at March 31, 2018
 
 
(In millions, except rates)
 
 
2019 Convertible Notes
 
$
345

 
$
345

 
3.500
 
 
2020 Convertible Notes
 
288

 
288

 
3.250
 
 
2024 Senior Notes
 
500

 
500

 
5.375
 
 
2026 Senior Notes
 
350

 
350

 
5.000
 
 
NRG Yield LLC and NRG Yield Operating LLC Revolving Credit Facility, due 2019 (b)
 
75

 
55

 
L+2.500
 
$
67

Project-level debt:
 
 
 
 
 
 
 
 
Agua Caliente Borrower 2, due 2038
 
40

 
41

 
5.430
 
17

Alpine, due 2022
 
135

 
135

 
L+1.750
 
16

Alta Wind I - V lease financing arrangements, due 2034 and 2035
 
926

 
926

 
5.696 - 7.015
 
118

Buckthorn Solar, due 2018 and 2025
 
183

 
169

 
L + 1.750
 
10

CVSR, due 2037
 
731

 
746

 
2.339 - 3.775
 

CVSR Holdco Notes, due 2037
 
188

 
194

 
4.680
 
13

El Segundo Energy Center, due 2023
 
369

 
400

 
L+1.75 - L+2.375
 
139

Energy Center Minneapolis, due 2025
 
83

 
83

 
5.950
 

Energy Center Minneapolis Series D Notes, due 2031
 
125

 
125

 
3.550
 

Laredo Ridge, due 2028
 
93

 
95

 
L+1.875
 
10

Marsh Landing, due 2023
 
309

 
318

 
L+2.125
 
38

Tapestry, due 2021
 
158

 
162

 
L+1.625
 
20

Utah Solar Portfolio, due 2022
 
278

 
278

 
various
 
13

Viento, due 2023
 
163

 
163

 
L+3.00
 
27

Walnut Creek, due 2023
 
259

 
267

 
L+1.625
 
65

Other
 
440

 
443

 
various
 
39

Subtotal project-level debt:
 
4,480

 
4,545

 
 
 
 
Total debt
 
6,038

 
6,083

 
 
 
 
  Less current maturities (c)
 
(698
)
 
(339
)
 
 
 
 
Less net debt issuance costs
 
(64
)
 
(68
)
 
 
 
 
Less discounts (d)
 
(15
)
 
(17
)
 
 
 
 
Total long-term debt
 
$
5,261

 
$
5,659

 
 
 
 
 
(a) As of March 31, 2018, L+ equals 3 month LIBOR plus x%, except for Viento, due 2023 where L+ equals 6 month LIBOR plus 3.00% and Buckthorn Solar and Utah Solar Portfolio, where L+ equals 1 month LIBOR plus x%.
(b) Applicable rate is determined by the borrower leverage ratio, as defined in the credit agreement.
(c) The 2019 Convertible Notes become due in February 2019 and are included in current portion of long-term debt on the Company's consolidated balance sheet as of March 31, 2018.
(d) Discounts relate to the 2019 Convertible Notes and 2020 Convertible Notes.
The financing arrangements listed above contain certain covenants, including financial covenants that the Company is required to be in compliance with during the term of the respective arrangement. As of March 31, 2018, the Company was in compliance with all of the required covenants.
The discussion below describes material changes to or additions of long-term debt for the three months ended March 31, 2018.

27

                                            

NRG Yield LLC and NRG Yield Operating LLC Revolving Credit Facility
As of March 31, 2018, the Company had outstanding borrowings of $75 million under the revolving credit facility, which included borrowings of $20 million made during the period ended March 31, 2018, to finance the acquisition of the Buckthorn Solar Drop Down Asset, as well as for general corporate purposes. The Company also had $67 million of letters of credit outstanding.
On February 6, 2018, NRG Yield Operating LLC and NRG Yield LLC amended the revolving credit facility to modify the "change of control" provisions to permit the consummation of the NRG Transaction, and also to permit NRG Yield Operating LLC, NRG Yield LLC and certain subsidiaries to incur up to $1.5 billion of unsecured indebtedness in order to repurchase or make other required cash payments, in each case if applicable, with respect to NRG Yield Operating LLC’s outstanding senior notes and NRG Yield's outstanding convertible notes in connection with the NRG Transaction.
On April 30, 2018, the Company closed on the refinancing of the revolving credit facility, which extended the maturity of the facility to April 28, 2023, and decreased the Company's overall cost of borrowing from L+ 2.50% to L+1.75%. The facility will continue to be used for general corporate purposes including financing of future acquisitions and posting letters of credit.
Project - level Debt
Buckthorn Solar Drop Down Asset Debt
As part of the Buckthorn Solar Drop Down Asset acquisition, the Company assumed non-recourse debt of $183 million relating to Buckthorn Portfolio Solar, LLC. The assumed debt consisted of a Construction Loan and an Investment Tax Credits, or ITC, Bridge Loan, both at an interest rate of LIBOR plus 1.75%. The Construction Loan will convert to a Term Loan with an expected maturity of May 2025, and the ITC Bridge Loan will be paid at substantial completion of the Buckthorn Solar project with the final proceeds from the TE Investor.
Buckthorn Solar entered into a series of fixed for floating interest rate swaps that would fix the interest rate for a minimum of 80% of the outstanding notional amount.  All interest rate swap payments by Buckthorn Solar and its counterparties are made quarterly and LIBOR is determined in advance of each interest period.


28

                                            

Note 8Earnings Per Share
Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding. Shares issued during the year are weighted for the portion of the year that they were outstanding. Diluted earnings per share is computed in a manner consistent with that of basic earnings per share while giving effect to all potentially dilutive common shares that were outstanding during the period.
The reconciliation of the Company's basic and diluted earnings per share is shown in the following tables:
 
 
Three months ended March 31,
 
2018
 
2017
(In millions, except per share data) (a)
Common Class A
 
Common Class C
 
Common Class A
 
Common Class C
Basic and diluted earnings (loss) per share attributable to NRG Yield, Inc. common stockholders
 
 
 
 
 
 
 
Net income (loss) attributable to NRG Yield, Inc.
$
6

 
$
10

 
$
(1
)
 
$
(2
)
Weighted average number of common shares outstanding  basic and diluted
35

 
65

 
35

 
63

Earnings (Loss) per weighted average common share — basic and diluted
$
0.16

 
$
0.16

 
$
(0.03
)
 
$
(0.03
)
 
(a) Basic and diluted earnings (loss) per share might not recalculate due to presenting values in millions rather than whole dollars.
The following table summarizes the Company's outstanding equity instruments that are anti-dilutive and were not included in the computation of the Company's diluted earnings per share:
 
Three months ended March 31,
 
2018
 
2017
 
(In millions of shares)
2019 Convertible Notes - Common Class A
15

 
15

2020 Convertible Notes - Common Class C
10

 
10



29

                                            

Note 9Changes in Capital Structure
At-the-Market Equity Offering Program, or the ATM Program
NRG Yield, Inc. is party to an equity distribution agreement with Barclays Capital Inc., Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and RBC Capital Markets, LLC, as sales agents. Pursuant to the terms of the equity distribution agreement, NRG Yield, Inc. may offer and sell shares of its Class C common stock par value $0.01 per share, from time to time through the sales agents up to an aggregate sales price of $150 million through an at-the-market equity offering program, or the ATM Program. NRG Yield, Inc. may also sell shares of its Class C common stock to any of the sales agents, as principals for its own account, at a price agreed upon at the time of sale.
The Company sold a total of 936,662 of Class C common stock for net proceeds of $16 million during the period ended March 31, 2018, $6 million of which were received in the second quarter of 2018. The Company incurred commission fees of $105 thousand during the period ended March 31, 2018.
As of April 3, 2018, approximately $99 million of Class C common stock remains available for issuance under the ATM Program.
As a result of the Company's sale of shares of Class C common stock under the ATM Program, the public shareholders of Class A and Class C common stock increased their economic and voting interests in NRG Yield, Inc. to 53.9%, and 44.9%, respectively, as of March 31, 2018.
Dividends to Class A and Class C common stockholders
The following table lists the dividends paid on the Company's Class A common stock and Class C common stock during the three months ended March 31, 2018:
 
 
First Quarter 2018
Dividends per Class A share
 
$
0.298

Dividends per Class C share
 
$
0.298

Dividends on the Class A common stock and Class C common stock are subject to available capital, market conditions, and compliance with associated laws, regulations and other contractual obligations. The Company expects that, based on current circumstances, comparable cash dividends will continue to be paid in the foreseeable future.
On April 24, 2018, the Company declared quarterly dividends on its Class A common stock and Class C common stock of $0.309 per share payable on June 15, 2018, to stockholders of record as of June 1, 2018.
The Company also has authorized 10 million shares of preferred stock, par value $0.01 per share. None of the shares of preferred stock have been issued.

30

                                            

Note 10Segment Reporting
The Company’s segment structure reflects how management currently operates and allocates resources. The Company's businesses are segregated based on conventional power generation, renewable businesses which consist of solar and wind, and the thermal and chilled water business. The Corporate segment reflects the Company's corporate costs. The Company's chief operating decision maker, its Chief Executive Officer, evaluates the performance of its segments based on operational measures including adjusted earnings before interest, taxes, depreciation and amortization, or Adjusted EBITDA, and CAFD, as well as economic gross margin and net income (loss).
 
Three months ended March 31, 2018
(In millions)
Conventional Generation
 
Renewables
 
Thermal
 
Corporate
 
Total
Operating revenues
$
79

 
$
98

 
$
48

 
$

 
$
225

Cost of operations
22

 
34

 
33

 

 
89

Depreciation and amortization
26

 
50

 
5

 

 
81

General and administrative

 

 

 
5

 
5

Acquisition-related transaction and integration costs

 

 

 
1

 
1

Operating income (loss)
31

 
14

 
10

 
(6
)
 
49

Equity in earnings of unconsolidated affiliates
3

 
1

 

 

 
4

Other income, net

 
1

 

 

 
1

Interest expense
(7
)
 
(24
)
 
(2
)
 
(22
)
 
(55
)
Income (loss) before income taxes
27

 
(8
)
 
8

 
(28
)
 
(1
)
Income tax benefit

 

 

 
(1
)
 
(1
)
Net Income (Loss)
$
27

 
$
(8
)
 
$
8

 
$
(27
)
 
$

Total Assets
$
1,815

 
$
5,953

 
$
424

 
$
170