Clearway Energy, Inc. (CWEN) Q1 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the NRG Yield, Inc. Q1 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will hav a question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Kevin Cole, Head of Investor Relations. Sir, you may begin.

Thank you, Nova. Good morning and welcome to NRG Yield's first quarter 2017 earnings call. This morning's call is being broadcast live over the phone and via webcast which can be located on our website at www.nrgyield.com under presentations and webcasts. As this is a call for NRG Yield, any statement made on this call that pertain to NRG Energy will be provided from NRG Yield’s perspective. Please note that today's discussion may contain forward-looking statements which are based on assumptions that we believe to be reasonable as of this date. Actual results may differ materially. We urge everyone to review the Safe Harbor in today's presentation as well as the risk factors in our SEC filings. We undertake no obligation to update these statements as a result of future events except as required by law. In addition, we will refer to both GAAP and non-GAAP financial measures. For information regarding our non-GAAP financial measures and reconciliation to the most directly comparable GAAP measures, please refer to today's press release and presentation. Now with that, I'll turn the call over to Chris Sotos, NRG Yield’s President and CEO.

Thank you, Kevin and good morning, everyone. Joining me also providing remarks this morning is Chad Plotkin, NRG Yield's Chief Financial Officer. Turning to Page 3 to our overall business update. First the first quarter, NRG Yield delivered adjusted EBITDA of $184 million and CAFD of $0. During the quarter, we also closed on the acquisitions Agua Caliente and Utah Solar or the March drop down. In addition NYLD is increasing its dividend to $0.27 a share consistent with our goal of growing NRG Yield’s dividend per share 15% year-over-year in 2017. As indicated on our last call, we are updating guidance to take into account the now closed March drop down as well the outage at El Segundo, which we discussed on our last earnings call. Taking these earnings into account, we are increasing NRG Yield’s EBITDA guidance from $865 million to $920 million due to these acquisitions and the effective accounting for common control with NRG. We are also maintaining our CAFD guidance of $255 million as the CAFD from our newly acquired assets is expected to offset the cost incurred due to the outage at El Segundo. Chad will go into more details around our updated guidance in his section. Turning to liquidity, after the completion of the drop down transaction, NYLD has approximately $720 million of total capital sources including $145 million of expected cash available to be deployed during 2017. In the quarter, NYLD issued $7 million under the ATM program on a very efficient basis, which further enhance our sources of capital. Consistent with our previously articulate capital raising strategy, we see avenues to utilize these funds for growth over the next 12 months. As part of that growth through our partnership with NRG, we continue to benefit from our robust ROFO pipeline and have closed on over 500 megawatts of transactions since this time last year. In addition, NYLD has continued to invest in its distributed solar partnership with NRG. Most recently NRG offered to see NYLD’s remaining 25% interest in the NRG Wind Tax Equity Holdco, which subject to negotiation and approvals of NRG Yield’s independent directors, we anticipate closing in the third quarter. Turning to Page 4, I want to take some time to update you on operations on our facilities. As you can see on the left side of the page, we have improved availability across the renewable portfolio since the first quarter of last year. The improvement is primarily due to transitioning operations from third parties to NRG Energy. We have observed that NRG run plants have improved availability by approximately 150 basis points versus the 50 basis point improvements at plants run by outside OEMs. In addition, as evidenced by an improvement represented by California wind, on the chart, we have focused significant effort on improving the results at Alta, including investing in an additional inventory to minimize return the service timing. Unfortunately, as you can see at the bottom of this page, this increased availability did not manifest increased production during the quarter due to the difficult California weather conditions we mentioned earlier this year that persisted through much of the quarter. Due to the shape of anticipated wind production and the pricing of our PPAs, a shortfall in the first quarter is not as detrimental as a shortfall in second and third quarter. And on a preliminary basis, after slow start to the month, we saw production much more reliant with our P50 estimates during April. On the right side of the page, you will see that we recently experienced lower availability on the conventional fleet. While availability was strong during 2016, especially during the key third quarter, we saw setbacks in the first quarter of 2017 with the previously disclosed outage at El Segundo and the latest outage at Walnut Creek. Fortunately at El Segundo through working with our vendor we’re able to present a valid warranty claim in short order, which reduced our expected exposure to $5 million of CAFD versus the $12 million as first anticipated and is closed on our last quarterly call. Unfortunately, Walnut Creek has just emerged from an unexpected outage that was while short-lived negatively impact CAFD by approximately by $8 million before insurance proceeds of which we expect to recover a significant amount by year-end. More importantly, we are working with NRG, our operations and maintenance provider, to have a more deliberate and proactive partnership with GE, Walnut Creek’s OEM. Going forward, NRG will have a dedicated employee working with GE on any issues. This will also include enhancing the monitoring and control environment, so any potential concerns with the assets can be discovered and corrected as soon as possible. Finally, we work with NRG to take steps to harden certain turbine components to improve their durability. Information, while we are disappointed with the performance of a conventional fleet, we are taking concrete actions with NRG and our vendors to improve availability going forward. Now turning to Page 5, I want to address the key item that we’ve focused on during my first year as CEO of NYLD namely continuing NRG Yield on its growth trajectory in partnership with NRG Energy. You can see the strength of the partnership in two key ways. First, as you can see here, the ROFO pipeline has grown by approximately 58 megawatt since last year. While the growth of 58 megawatts may appear mild, it must be considered in the context of the 174 megawatts of assets NRG dropped to NYLD when the ROFO pipeline in the form of CSR and Agua during the past year. Second, NYLD was able to close on an additional 345 megawatts of opportunities that were completely outside of the ROFO pipeline by working with NRG. Overall in the course of the past year, we grew our fleet by over 500 megawatts and NRG maintained its ROFO pipeline [indiscernible]. This level of commitment from NRG coupled with our ability to execute and partnership with them to provide investors with the view of our growth capabilities going forward. With that, I will turn over to Chad to review the financial summary. Chad?

Thank you, Chris. Turning to Slide 7 and beginning with the left side of the slide. Today, NRG Yield is reporting first quarter adjusted EBITDA of $184 million and cash available for distribution of CAFD of $0. As with the past drop down transaction while the acquisition of the interest in Agua Caliente and Utah Solar projects closed near the end of the quarter, drop down transactions are accounted for under common control, so GAAP requires a recast of our financial results as if Energy Yield owned the project since inception while acquisition NRG, which impacted adjusted EBITDA but not CAFD. In the first quarter of 2017, this resulted in a positive $7 million of adjusted EBITDA. Other positives in the quarter relative to our original expectations include the initial contribution from recent growth investments and the distributed generation of partnerships with NRG, which added modestly to adjusted EBITDA, but not yet CAFD given the timing of distributions. Additionally, planned maintenance CapEx of approximately $6 million shifted into subsequent quarters due in part because of poor weather. As discussed on the February earnings call, weak renewable energy conditions and the outage at El Segundo contributed negatively results. From Chris’s earlier slide, production at our solar and California wind portfolios were down 8% and 12% respectively relatively to our median expectations through March of this year largely due to California experiencing a stiff rainiest in the past 123 years. Similar weather conditions were absorbed during April was well, but we did see improvement in the later part of the month, so we remain optimistic that results going forward will be more in line with our forecast. While the forced outage of the El Segundo energy center contributed to lower results at the conventional segment, we are pleased to say that a positive resolution was reached on a warranty claim far earlier than anticipated. As a result, the exposure to CAFD was reduced from $12 million to $5 million. Also during the quarter, we commenced the process of replenishing our capital available for growth by raising approximately $7 million through the issuance of a little more 424,000 shares of Class D common stock under the ATM program. We were able to issue these shares out of CAFD yield of approximately 8%, which we believe is supportive of accretive redeployment in the financing of new growth opportunities. Lastly, we are pleased to announce the next increase in our quarterly dividend to $0.27 per share in the second quarter, a 3.8% increase since last quarter. Moving to the right side of the slide, consistent with our normal practice, we are updating full year financial guidance now that the March drop down transaction has closed. Again, because of the accounting treatment for assets under common control, adjusted EBITDA does include the full year estimated contribution of the March drop down, but CAFD only reflect expectations of actually cash generation from April through December. Additionally, guidance continues to be based P50 median renewable energy conditions for the full year. To capture the positive impact from all capital deployed, we are also using this opportunity to factor in the $16 million invested in the distributed generation partnerships with NRG since the initiation of guidance in November of 2016. In total and for the full year, we anticipate these growth investments will add an estimated $60 million of adjusted EBITDA and $10 million of CAFD. As further delineated in the table, we are also incorporating the revised cost of the El Segundo and other small estimated changes in the platform that when combined with the contribution from invested growth capital brings revised 2017 guidance to $920 million of adjusted EBITDA while maintaining CAFD guidance at $255 million. In the table, however, I do want to highlight two items, which could potentially impact guidance. First, and as Chris, referenced on April 18th, Walnut Creek Unit 1 went into forced outage due to a mechanical failure of a high pressure turbine compressor part that caused downstream damage to the turbine. A mitigation plan designed to ensure the unit was available during the summer was quickly enacted and the unit returned to service on April 30. As noted on the slide, the total amount at risk is approximately $8 million. That said and based on the type of damage experienced to the unit, we are confident in our ability to collect insurance proceeds for a significant portion of the outage cost with the main question as to whether cash reimbursement is received this calendar year and determining the outages effect on 2017 CAFD. Second, as highlighted previously, first quarter financial results at the renewable segment were below expectations by $5 million due to weak generation conditions. We do not factor this into our updated guidance since this deviation is considered on our sensitivities, but we do acknowledge that a positive offset would require periods of production above our median expectations. Please refer to the appendix of this presentation for a summary of the sensitivities. Lastly, and as a reminder, full year guidance continues to be based only on the existing portfolio and exclude the facts from the future deployment of the remaining excess capital available for growth investments, all of which further accretive CAFD per share growth to the platform. And with that, I will turn to Slide 8 to NRG Yield’s available capital. As shown on the Slide, since the establishment of the original 2016 financial guidance, NRG Yield has now deployed $147 million in cash all of which was raised during 2016. While we have seen some operational movements in the platform, NRG Yield currently projects close to $145 million of available cash to invest given the contribution from new growth investments as well as opportunistic financing through the ATM program. When combined with both the revolver and utilized portion of the ATM program, this brings total available capital sources to approximately $720 million. Simply put NRG Yield continues to have significant financial flexibility to execute on its growth objectives. I will now turn the call back to Chris for his closing remarks.

Thank you, Chad. Turning to Page 10, we are maintaining our CAFD guidance and increasing our EBITDA guidance by taking into account the closing of various drop downs and the updated El Segundo outage impacts. While through March, we are beneath our P50 expectations in terms of renewable production, the second and third quarters are much more important for NYLD in terms of CAFD generation and given April preliminary results, we are cautiously optimistic that our renewable production will get back on track. We are also targeting our quarterly dividend at $0.2875 per share or $1.15 per share annualized by year-end. In addition, we recently announced our Q2 dividend of $0.27 a share in line with this trajectory. During the quarter, we are also able to continue demonstrating CAFD per share accretion by closing on our previously announced 311 net megawatt solar acquisitions. We look forward to continuing that pattern in the coming months as NRG recently offered its remaining 25% interest in NRG Wind TE Holdco and we have significant sources of funding available to use on this and other opportunities in 2017 and beyond. In terms of partners while this has taken longer than anticipated given the challenges discussed last quarter, we continue to remain focused on this opportunity and actionable discussions continue with counter parties. We expect to provide update during 2017. Finally, we’re focused on maintaining a strong balance sheet and financial flexibility across the capital structure as demonstrated with our issuance of undrawn ATM at very efficient levels of execution. Thank you. Operator, please open the line for questions.

Thank you. [Operator Instructions] Our first question comes from the line of Abe Azar of Deutsche Bank. Your line is open.

Good morning.

Good morning.

What are you doing independently to prepare for a decision from NRG’s business review committee?

Sure. I think frankly a lot of it is business as usual, I think that’s something we’ve emphasized over the past year with really as you can see through NRG continue to expand the drop down portfolio and spending on development in a lot of ways on a day-to-day basis. There isn’t much that’s changed at all from our perspective. We look at what might happen, but to be factual we are just focused on day-to-day operations and making sure the platform runs as efficiently as it can.

Great. And with several of your competitors lacking committed sponsorship, do you expect NRG Yield to be involved in industry consolidation?

We really don’t comment on M&A in terms of that. So, I’m sorry, no comment.

Okay. And what is your outlook on dividends post-2018, when do you think we will get an update there?

We would anticipate doing that as part of our 2018 guidance, which we’d probably comment in the third quarter kind of the first week in November, third quarter call, first week in November.

Thank you. That’s all I have.

Thank you. Next question comes from the line of Michael Lapides of Goldman Sachs.

Hi, guys. Thanks for taking my question. I actually have two. First of all, can you talk about the renewable asset market, not corporate, but the asset level market in general about whether today the potential returns you are seeing in the market from potentially buying assets from developers or other third parties, how different is that environment versus what you saw two, three, four years ago when you first formed the company?

Sure. First of all, thanks Mike. I think there’s a lot of different data points, but I will try to answer your question kind of on a pretty macro basis is I would say that pricing and bidders we’re not seeing at the highest that we saw kind of in the late 2014, 2015 period frankly due to some actors no longer being in the space. I will say that over the past 12 months, I won’t say that I’ve seen diminution in IRRs that are available on to the market. If you were to compare now versus when Yieldcos were first formed, that’s probably a little bit more difficult comparison, but I think by a little bit tighter, but not necessarily material, so that’s kind of three different phases to try to answer your question.

Got it. I think that helps a lot. Second when you look at your balance sheet, I mean, you are effectively naturally deleveraging over time due to the amortizing nature of your project debt, how do you think about what to do with that balance sheet capacity outside of simply growth? I mean do you re-lever, do you use it to turn off equity issuances and actually maybe even shrink the share count down the road, how are you thinking through that as this natural deleveraging occurs?

Chad, why don’t you take that?

Yeah, thanks, Michael. I guess there is a couple of dynamics. So importantly when we think about the natural deleveraging at the project level, it is important to remember that that debt is structured on a debt service coverage basis. So effectively for lack of a better word, you can almost think about it like mortgage style. So as the principal is coming down over time, the total payment is the same, so it’s not necessarily indicative that there – you create a tremendous amount of project leverage, not to suggest there going to be something incremental in the future. And I think on that front, if you do go back to what Chris had articulated, I’m trying to think when it was, second or third quarter last year about how we think about financing strategy, we will always being first with what can we do with the project level to sort of optimize down there to raise incremental cash. I think at the corporate level, obviously, we continue to be focused really in and around sort of the ratings range we talk about in the past. What is – what I would say though is as we begin to grow and deploy capital and bring in additional CAFD, that does create incremental leverage capacity at the corporate level and to the extent that we can use that leverage capacity within sort of the range we want to target to give ourselves some flexibility on financing new assets in the future – excuse me, new growth projects in the future, we certainly do that. I don’t Chris if you have anything…

Michael, maybe another way to look at it is the number one attribute that will influence to re-lever is an extension of any contracts into the PPAs. To Chad’s point, most of the PPAs and debt are kind of sized together, so the number one attribute that will inform can we re-lever as a traditional capacity for equity is that variable. And fortunately – unfortunately because of our 16-year PPA runway, a lot of that will happen in the future.

Got it. Last thing, how much is left in terms of your investment requirement in the various NRG, DG solar related initiatives whether it’s resi, whether it’s commercial?

Yeah, resi, I know it was zero, but Chad on the…

Yeah, so if you recall, the last funding we did for resi was in the fourth quarter. The total amount we have remaining is in the current partnership is a little over $60 million and then importantly what I would say is in the ROFO pipeline, there is another $250 million of sort of partnership investments capacity in there. So to the extend NRG were to want to create a new partnership with us, that’s something we would consider as part of the ROFO pipeline.

Got it. Thank you, guys. Much appreciated.

Our next question comes from the line of Greg Gordon of Evercore ISI.

Thank you. Good morning.

Good morning, Greg.

When we look at the financial summary slide, slide 7, when you look at the El Segundo outage impact, which was $5 million on EBITDA, $10 on CAFD. Are you sort of telling us that assuming you can get the plant back to what you would consider normal expected level of productivity that’s how much we should think about adding back to first quarter 2018 EBITDA and CAFD?

Yeah, I think, if I look at the $5 million absolutely for El Segundo that makes a lot of sense. I think as you move to CAFD, there is a number of items in there, some of which you will see in the Reg G. So, obviously, if you have an EBITDA – excuse me, a reduction in EBITDA that would naturally flow directly into CAFD. As Chris had also mentioned in his comments, there are some measures we are taking at the margin although when you are looking at a point estimate of guidance, they do start to add up with respect on the operation side to sort of help sort of harden if you will some of the improvements. So there is a little bit of a change in maintenance CapEx as well that’s moving there. I think at this point it would be premature for us to say that that’s something that would be like capitalized if you will in the future, because there will be some year-over-year deviations and maintenance CapEx as we think about we working with NRG and what we want to do. But – so between those two Greg, but, yeah, I think if you look at those outages, I think, that would be the point would be, we obviously don’t expect to have these kind of forced outages every year, so it would make sense if you wanted to normalize things or sort of think about it in the perspective you have.

Okay. So EBITDA could come all the way back, but CAFD might not if you feel that the ongoing level of maintenance capital needs to be marginally higher in order maintain reliability, that kind of…?

Yeah, I think that’s fair. I do think – it’s probably – it’s probably a little premature for us to come to that conclusion because we will obviously look at that over the course of the year and as we get through like candidly annual budgeting cycles, et cetera, and as I said there will be some movements, but certainly between the outage pieces, yes, that would make sense.

Okay. Are there any comments that’s of issues that you can look at when you compare El Segundo and Walnut Creek in terms of what types of equipment is failing, what types of operating practices are not producing the types of results that you need to hit your targets, can you go a little bit deeper into sort of the engineering and operations and what’s going on with those plants to tell us what broke and how you are fixing it?

Sure. Simply stated they are very different. I think at El Segundo and you can take evidence by the fact that we are able to get pretty quick resolution with our vendor under the extended warranty agreed with our analysis that unfortunately was due to a very specific part that the vendor obviously agreed with our conclusion that the part was kind of the issue at hand. In Walnut Creek, obviously, because some of that also occurred last year that’s why, Greg, to your question, we are trying to give a bit more of a holistic approach, they are saying, okay, how do we make certain that, you know, anything that occurs, if monitored, so there is a quicker response to fix it. There is certainly also low dollar items – discussion me and Chad were just were having that can be done to kind of like harden some types of materials and basically some points where you are seeing a little bit higher failure rate than you’d like to have. And so, to answer your question, the two situations are very different. El Segundo is centered around, one, the rotor, that basically we can resolution with pretty quickly. Walnut Creek, a little bit boarder spectrum, that’s why we are taking different steps to address it.

Great. And then, you go out of your way to tell us that if that first quarter renewables put you $5 million behind, but you said April you were seeing improvements. Are you seeing wind speeds and solar installation above P50 already and that is why you are telling us that you are confident that the $920 million in $255 million or is that just a guidance convention and we really need to monitor the performance going forward?

Sure. Couple of question, so I will try to answer them. One, the April generation that we are seeing is approximately at P50 on a preliminary basis, not above P50. Two, to your second question, that’s much more a guidance, that’s an analogy that we are going to use going forward. So, basically, the rest of the year is projected at the P50. And just like many industries, our first quarter is not the most significant for purposes of looking at these calc. So, we wouldn’t want to necessarily revise guidance as long as it’s within the sensitivity around the production we talked about.

Okay. So, before I hang up, I just want to be clear, the $920 million EBITDA, does that assume either A, what happened in the first quarter and P50 for the rest of year? Or does it assume P50 for the rest of the – for the entire year and therefore we need to see above P50 for some period of time to get to the guidance?

Yeah, I think – great. So just to make sure, if you look at the way we did the slide and maybe just trying to capture your point, the $920 million and the $255 million assume P50 effectively for the full year because you will note on the bottom part, we are noting and as I said in my comments, that drag we had in the first quarter, effectively what we are saying is, in order to recover that we would need some period of time above P50. So I think the crisis point, it is sort of a guidance convention we are using which is maintain P50 and then provide you the information as to where would be trending if you will on any quarter depending on how the production actually comes in.

Maybe I’ll say it differently, Greg, if we hit P50 for the rest of the year, we are probably at $915 million with that hurdle.

Okay. I just – that’s what I thought, I just wanted to get it on record.

No, no issues.

I appreciate it. Thank you.

Thank you. Our next question comes from the line of Julien Dumoulin-Smith of UBS. Your line is open.

Hi, good morning, again.

Good morning

Quick couple of questions here. I know we’ve discussed curtailment a little bit in the past, can you discuss curtailment in the context to the first quarter results and also elaborate a little bit on the provisions that provide resiliency in your contracts to curtailment risk, I imagine specifically in California? Then I got a follow up.

Sure. Kind of Chad and I will – we will do this together I think. In many of our contracts there is a right for the offtaker to economically curtail, but there is also caps and other provisions that we kind of put in our budgeting process, so [indiscernible] PPA contracts, there is a curtailment provision, but a lot of time that is put into our budgeting assumptions around those rights and then also there is caps around certain reliability based curtailment as well. So I think in terms of the contracts, yes, they exist, but there are caps that we typically take into account in budgeting. Chad, anything to add to?

Yeah, I think, it’s worth doing. I don’t think we would sit here and tell you that there is absolutely zero risk associated curtailment, certainly there could be point if there was a tremendous amount curtailment for reliability, you could see at least in some of assets where – there could be little bit of a drag. I think what is interesting is some of the data points that we’ve seen from what we’ve seen in the CAISO. So I know like – I think the whole point that we are coming up to, it’s not that the curtailment isn’t happening, but I think from what we are seeing, it is far less of an issue that was candidly originally advertised because I think if we understand it, originally the CAISO came out and talk about as much as 6,000 to 8,000 megawatts of curtailment during the spring season. And I think at least during the data points we’ve seen the highest within March, it was like about 3,500 megawatts curtail and interestingly of that something like 98.5% of it was economic where to Chris’ point, and so in lot of the contracts, you do have protections. So only a small stub of that was really for reliability. And then I think there was even some comments yesterday or a couple of week ago, whenever it was, I know there was another comment from one of the gentlemen at CAISO, where he had actually talked about with some of the hydro conditions where evidently a lot of the operators are actually spilling water versus sort of just generating into [indiscernible]. So I guess long and short of it is there are protections in the agreements, it’s not to say there isn’t any risk at all. There is some risk. But we do think at least with what we’ve seen given actual results, it just certainly hasn’t been as material as I think folks were concerned about as we move to the spring here.

Got it. All right, excellent. And then can you talk about the latest acquisition? I suppose what kind of IRR are you contemplating in contrast to CAFD assets specifically in light of the 10-year remaining life on these assets? In particular, as you would think about those IRRs, what kind of step to enterprising are you imagining after that 10-period overall across the portfolio, how material drop is that?

Apologies, Julien, I think what you are referencing is the asset we haven’t closed on yet, the wind, the 25%?

Yeah, absolutely. I’m sorry, apologies.

Okay, sure. No, issues. I think, once again, we typically don’t disclose, we think of it in terms of an appropriate IRR because obviously that’s a key component of our bidding strategy. The way I would tend to think about it is what percentage of the enterprise value sits in the terminal. And so to your point because where you already own 75% of the asset base to be fair, but I think to your point given that the PPA tenure is relatively short at about 10 years, the merchant component is the key risk – the merchant component of the enterprise value is the key component we will be evaluating. So we don’t give out IRR expectations in terms of bidding, but that’s how we think about the asset.

Basically, maybe said differently, you would think of something better than your typical 10 times CAFD, as in the economics should we bet – you should have a higher return relative to the other details that you contemplated previously?

Everything else will contemplate, yes, for the risk, yes.

Got it. All right, fair enough, guys, thanks you.

Thanks.

Our next question comes from the line of Praful Mehta of Citi. Your line is open.

Hi, guys. Thank you so much.

Good morning.

Morning. So just quickly on the drop down just so I understand, pretty investment based on slide 7, is that $9 million for which you are getting $10 million of CAFD, is that the right number?

Okay, yeah. Sorry, I don’t know, double checking the slide, is the way to think about that. So that is the EBITDA contribution in the first quarter and what we were indicating there, Praful, is most of that is related to the recast under common control because, obviously, we only closed the deal right at the end of March and what we had indicated there is the actual CAFD contribution in the first quarter even with some of the incremental investments in the DG partnerships. There really wasn’t any CAFD in the quarter just due to the timing of distribution. What that $10 million represents is now that we’ve closed the drop downs and we have that capital invested at the $16 million in DG, that is what we would expect to earn this year based off of our forecast at P50. Now, importantly, I would also remind you is especially for the drop down transaction that we closed in March that does not capture the full year expectations for the drop down. If you recall from last quarter, we had indicated that was around $13.3 million. So the way to think about that growth is that’s for the tough part of the year for what we’ve invested as you would move into 2018 and you have the full year contribution of that capital invested, that number would be more in line with what we had disclosed previously.

Got you. So run rate CAFD would be about $13 million like you said and the equity – so I’m just trying to get to like…

Sure.

…where was the CAFD yield leverage to these transactions that were done?

Sure. It can go 13.3 over 130.

Yeah.

Got you. All right.

And then for the – sorry, Praful, for the DG investments, we thought about it in the past, if you look in the appendix, on slide 18, we actually show sort of how to think about the CAFD yields on those investments. Those – that original partnership was structured at an average 7.5% CAFD yield, those were down on a preferred basis, but importantly the first five years of that you’ll note as you look at slide 18, those are at a higher CAFD yields. So, what we always talk to investors and analysts about it is just sort of use that as a way to approximate the CAFD contribution from incremental investments as we make them in the DG partnerships.

Got you. Fair enough. All right. And just stepping back more of the BRC side on the NRG level, obviously, sitting at the NYLD side, NRG as you’ve demonstrated through all these slides and what you’ve said is clearly an important piece for all the drop down in the ROFO pipeline, but if the BRC came out where it said NYLD can probably stay on its own or would look for another partner, how do you see, I guess, the BRC playing out from your prospective? Is there a preferred part that NYLD would see so that it can still maintain its growth pipeline because without NRG, I’m trying to figure out what else would fit to ensure that the growth profile that you see for NYLD is maintained?

Sure. Praful, I’m not going to speculate on exactly what different pacts may happen, but the one thing that I would say is, a little bit to your point, right, growth is an important component of the value proposition at NRG Yield. NRG as it sponsor and having the larger shareholder and the value of its energy yield holdings are significant part of NRG. I’m certain that the BRC does not want any diminution in that value as a result of its actions. So, I don’t want to speculate on how that may happen or what variables are there because as you know there is a lot of different iterations that can occur, but I think the most important fact is that I wouldn’t see the BRC nor NRG no matter what the alternate is wanting to diminish the value of yield.

Fair enough. Thank you, guys.

Thank you. Our next question comes from the line of Angie Storozynski of Macquarie. Your line is open.

Thank you. So just continuing the line if thinking about alternative for NRG yield, so in the first quarter you guys mentioned that you have been engaged in discussions with potential partners, but middle market wind developers had a bit of a [indiscernible] because they were uncertain about the turns in future project given some potential changes to the tax code. Has it changed – do you see that there is more engagement from potential partners? Yeah, that’s all I have for now.

Sure. I would say we see the same level. But I do think unfortunately we haven’t seen a lot more specificity around tax policy. So, Angie, to your question, that the conversations are ongoing and there is still interest, but in terms of a meaningful outcome in the near-term given that tax policy is obviously – we just heard about it I think last week now, that variable is still pretty open. And I think you are seeing that, I think, there was a piece written almost a day or two ago around some of the developers and what they have deal within the tax equity market.

Okay. And my second question, so when you look at the drop downs from NRG into NRG Yield, are these happening basically at an anticipated pace or are you feeling that NRG is trying to drop access basically faster to get more cash in?

Sure. I think, simply stated, we’re at the anticipated pace, there is not – it’s not as though other than the 25% that have just been announced, that there is really assets that are online with the exception of Ivanpah kind of that NRG that it could drop. As you know, we typically take things basically at the commercial operation date, so the only – other than the 25% that has just been announced, the only operative asset is Ivanpah, which I think as we’ve all talked before NRG Yield we want to several consistent quarters of performance before really make sense to negotiate around it. So, simple answer as anticipated.

And then, lastly, I notice that you are accounting available amount under the ATM program for basically cash available for deployment, but you just issued $7 million out of it. Do you feel that there is market capacity to actually fully deploy that ATM at the amounts stated and hence that cash is truly available for deployment?

Chad?

Yeah, hi, Angie. maybe just to make sure that there isn’t any confusion there, so when you said – when we think about the actual cash we have available, which was roughly – it’s $144 million that we got estimated on slide 8, importantly, that only factors in the ATM issuance today be even $7 million. What that is primarily based on is the financing and the capital formation that we completed in 2016 plus the fact that because we have a low payout ratio, we generate internal kind of organic cash that we can invest. So that $144 million, the way we would say it is, as long as you deliver at your P50 expectations and the cash generation comes in, that will come in over the course of the year and we will be able to invest that cash. I think on – to your other point on the $143 million of ATM capacity, we are will prudent and pragmatic as to how we issue into that there, but I think – the $7 million we raised was done very constructively and obviously we would hope that we would see the same kind of constructive conditions as we think about raising additional capital in the future as needed to help facilitate growth.

And Angie…

Thank you. Okay. Go ahead.

I think both of your question, it’s not as though – a lot of it is focused on what we see in terms of opportunities within the next 12 months, so it’s not as though to your question we would kind of try to do $143 million tomorrow that type of thing, because then we obviously be funding ahead of what we see in terms of opportunities at least [indiscernible].

Great. Thank you.

Our next question comes from the line of Paul Ridzon of KeyBanc. Your line is open.

Just as a follow-up to that. So you’ve deployed a $147 million year-to-date, is that second $145 million what you expect to deploy through the balance of the year?

Not what we expect to deploy, but what’s available to deploy, so not necessarily.

Got it. Okay, thank you very much for the clarification.

Sure.

Thank you. And our next question comes from the line of Colin Rusch of Oppenheimer. Your line is open.

Thank you so much. As you kind of look at the sites that you have and the potential for integrating energy storage into the renewable sites, which could then offset some of the curtailment issues and some of the underproduction issues, are you moving down the development [indiscernible] with those asset, what are you seeing in terms of timeline if you are and how can we think about that and the portfolio to go forward?

Sure. Really, NRG Yield doesn’t participate in development per se, obviously, that’s done kind of much more at NRG. I think importantly to your question if kind of – if I interpret it correctly, are we currently looking at incorporating storage at some of our existing sites to help with those issues? The current answer is no. I think storage much more is NRG looking for new contracts. I think for us to simply invest in storage at existing sites without a contract and no additional cash flows, at least right now, it doesn’t seem to make sense to us. Maybe if the curtailment increases or grows with time, that’s a different issues, but right now, we don’t see that.

Okay, great. And then would you consider providing sensitivity around P70 or even P90, some of your competitors are offering [indiscernible] just as a reference. Is that something that you guys could share with us at this point?

I think the sensitivity that we have like the – the sensitivity is around – what P level we have currently, Chad, the sensitivity that we give?

It’s effectively in and around P50, so it’s plus or minus 5 for site in production. So, if that’s your question, Colin – sorry, it was breaking up a little, so I might have missed some.

I was asking about P70 rather than P50, some of your competitors are offering both P70 and P50 guidance just as a reference [indiscernible] portfolio?

Yeah, I think – understood, I mean, I think the way if you look at the sensitivity we provide, right, I think the – while it isn’t – when you do these P levels, it’s a probabilistic number based off of a standard deviation to production, so I’m not going to tell you every asset is exactly the same, but a good proxy is like 5% move for the full year up or down sort of moves from like P25 to P75, which is just a simple way to think about it. So if you look at those sensitivities, that’s essentially the approximation.

All right. Thank you so much guys.

Thank you.

And ladies and gentlemen, that is all the questions that we have for question-and-answer session. I would now like to turn the call back to Chris Sotos for closing remarks.

Thank you, everyone, and look forward to speaking to next quarter. Appreciate it.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the call. You may now disconnect. Everyone have a wonderful day.