Good day, ladies and gentlemen, and welcome to the NRG Yield Fourth Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Mr. Kevin Cole, Head of Investor Relations. Please go ahead, sir.

Thank you, Christie. Good morning, and welcome to NRG Yield's fourth quarter and full-year 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 an earnings call for NRG Yield, any statements made on this call that may 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 the reconciliations to the most directly comparable GAAP measures, please refer to today's press release and this presentation. Now, with that, I'll turn the call over to Chris Sotos, NRG Yield's President and CEO.

Thank you, Kevin. Also presenting today and available for question is Chad Plotkin, NRG Yield's, Chief Financial Officer. Let's begin by turning to Page 3. I am pleased to report that despite some weak wind conditions in 2017, we were able to achieve our EBITDA and CAFD targets, and generated $933 million EBITDA and $267 million of CAFD during the year. Chad will go over our results in more detail on his portion of the presentation. Given our cash flow, NYLD achieved 15.2% in annualized dividend per share growth during 2017, while deploying $319 million of growth capital at approximately 11% average CAFD yield. We're also reaffirming 2018 guidance of $950 million of EBITDA and $280 million of CAFD. We continue to target 15% year-on-year growth in our annualized dividend per share starting with an increase in the first quarter of 2018, $0.298 per share. Importantly, we're continuing to work on our strategic and growth objectives for 2018. Our effort to bringing the NRG, NRG transaction with GIP, as our new sponsor to a close in the second half of 2018 is a clear priority and that work continues to move forward according to schedule. Today, we are also providing update to the over $450 million of capital commitments NYLD has already made this year, including the binding agreements of Buckthorn Solar and Carlsbad Energy Center announced on the Strategic Update Call on February 7th. In total, we expect these investments, as well as the investments in University of Pittsburgh Medical Center and NYLD's distributed generation partnership to generate over $50 million in annual average CAFD when closed. In addition to the capital commitments for our core and new assets, we continue to add value to our existing fleet where possible. As an example of this, in December of 2017,…

Thank you, Chris. I'm turning to Slide 6. Today NRG Yield is reporting fourth quarter adjusted EBITDA of $204 million and cash available for distribution or CAFD of $59 million. For full-year 2017, NRG Yield is reporting adjusted EBITDA of $933 million and CAFD of $267 million both in line with the company's full-year financial guidance. While full-year results were in line with expectations, fourth quarter win resource across the portfolio was especially weak, despite starting the quarter favorably in October. As noted in the Appendix of today's presentation, California, or the Alta project experienced a lack of wind resource which lags the production of less than 50% of median expectations during the month of December. Despite this impact, NRG Yield diversified platform continues to insulate the company's financial performance from these weather-related variances. An example of this was in December with production at the solar portfolio 13% above median expectations. Additionally, fourth quarter results were favorably impacted by a tiny shift in maintenance CapEx of approximately $5 million at the Thermal segment which we anticipate now impacting cash available for distribution in the first half of 2018. During 2017, NRG Yield also delivered on its dividend growth commitments by increasing the dividend by 15.2% since the fourth quarter of 2016. This increase in dividend was accomplished by maintaining an implied payout ratio of less than 76% providing additional cash resources that when combined with the capital formation executed during 2016, afforded NRG Yield the ability to deploy $319 million in growth capital on an accretive basis during 2017. With the passing of the Tax Cuts and Job Act of 2017, NRG Yield stands a benefit over the long run, as the NOL tax runway continues to be approximately 10 years, and importantly, the intrinsic value of the company's project…

Thanks Chad. In closing, our 2018 scorecard reflects a continuation of our growth plans which includes increasing our dividend by at least 15% per share on annualized basis watching our financial guidance. We're also focused on closing a transaction with GIP and have already begun the consent processes through discussions with project lenders, PPA off-takers, and regulatory agencies. Closing seems to be targeted in the second half of 2018, and we will provide more visibility into our long-term growth plans with GIP, inclusive of the growth potential of our ROFO pipeline at that time. Finally, while maintaining a strong balance sheet and leverage profile, we expect to continue to demonstrate CAFD per share accretion by closing on the Buckthorn and Carlsbad acquisitions, continued execution with the DG partnerships in 2018, and beginning operations of our UPMC Thermal facility. We look forward to a strong 2018 and the growth beyond. Thank you. Operator, please open the line for questions.

[Operator Instructions]. Our first question comes from the line of Michael Lapides of Goldman Sachs. Your line is open.

Hey guys, Chris, there's a lot of change in both the yield curve market and the renewable market including what's happening with you for the last 12 to 15 months. Just curious, how you guys are thinking about maybe not in the next three to six months, but over the next couple of years, the landscape for both development, but also asset acquisition especially given some of the larger cap utilities are still involved in buying projects from developers, given the various shift in the yield curve landscape and even given a little bit of a change in the yield curve?

Sure. So a multiple -- first, nice talking to you, Michael. Well there's a number of questions in there, I'll try unpack, but I think looking longer-term, if you were to ask within the yield curve, I think what we were seeing in the industry as a whole is really an evolution of the yield curves to enterprises with much stronger sponsors as kind of the yield curves all very successful in the early part of their lifecycle. You see whether it's kind of CAFD moving to private capital, NextEra Partners getting deconsolidated from NextEra or ourselves looking for long-term basically kind of infrastructure money. But however that's public/private partnership between the two, expect for the CAFD example, really remaining intact. So I think longer term as kind of the yield curves and the growth that's available to them within the renewable space in the U.S. and has outstripped some of the ability of sponsors to cover that, I think you're seeing a shift in the sponsor demographics overtime and may continue to do so as those needs arise. I think to your second question around renewable development and acquisition landscape, I think actually the tax reform legislation that reduced overall corporate taxes means that everything else holds constant, utilities are actually less interested in renewable projects than they were before in terms of ownership because obviously the benefit of that tax yield is significantly less than it was under the previous tax rate. And so from our perspective, we see actually a pretty deep overall target market to look at, in terms of what's going on in renewable development and then also acquisition targets.

Got it. Thank you, Chris. Much appreciated. Finally financing, right, yield curve started to move, just curious if that's kind of shaken anything a little bit in terms of the cost of finance. And in terms of what it does to some of the smaller developers in the market?

Yes, I think, I'd break it down into two parts. I think the high yield market despite the move in treasuries has remained fairly stable. As of yesterday, our 2026s were around 5.29% endorsed. I think you see much more movement in the LIBOR market if you were to look back in terms of three-month LIBOR. So there is your point for new development, yes, LIBOR market is obviously an underpinning of the project finance market as a generalization. So I think that difference in interest cost, to your point, Michael, might make some of the economics of developers a little bit more difficult than it was a couple of years ago, but from our perspective of our cost of financing or purchasing not as much.

Thank you. Our next question is from Jonathan Arnold of Deutsche Bank. Your line is open.

Can you just give us a reminder given some of the ongoing concerns about credit quality in the California IOUs, just what your exposure there is? And how you can manage it? And any concerns in the portfolio from that aspect?

True. The exact amount of CAFD, Chad might have that number but in terms of -- we're obviously actively monitoring it. I think Jonathan you've been part of the industry, you remember I'm sure the California energy crisis in the early 2000s. Basically all of these type of contracts made it through bankruptcy. I think, I am not going to speculate on the bankruptcy of the entities involved which is out in the press, but I think from our perspective, even if that were to occur it's not as though that these contracts are out of the money from their perspective. They're passed through to ratepayers. And so I think while we're monitoring the situation, yes, I think history kind of shows that these contracts have tended to hang in there. And I think also importantly while California is a key market and obviously focused on maintaining a strong and robust RPS standard, obviously as all of those contracts were repriced that will create a fair amount of instability from both developers perspective, but also the banks that finance all those instruments or projects excuse me as well.

Okay. Was Chad going to provide a number there or --?

Yes, I have to cross check it, I think our biggest off-takers is Edison, PG&E I think was about 23% -- probably like in 20% to 25% Edison's probably a little more than 40% all in --

As a percent of CAFD.

As a percent of CAFD, yes.

Perfect, all right. Thank you guys. And then can I just ask -- I’m looking at your data and the 46% number for wind in California in December. Just obviously it seems -- doesn't seems to gel with kind of what we know about the fire situation that month, and yes, the strong winds that kept things burning, so that may just be my perspective being offset. Was this purely wind resource or was it some challenges operationally or something else?

Thanks, Jonathan. No, I mean it was wind resource. I think I'm not going to try to act as a meteorologist. But I think it has something to do with the directions of the winds that were actually causing the fire. So I think the winds that were causing the fire during that period of time were north to south, and given where Alta is, and I think that was the primary driver. So yes, I mean it's funny, but your intuition of what we would have expected and so we called some of the data but yes, look there was anomalous month I think over the course of a 12-month period it tends to even out, but it certainly was a bit of a surprise. But the flip side of that is when you've got the certain type of weather with rain, as well as more sunlight which also comes in that actually improves solar performance by desalinating the panels and obviously more sunlight is helpful. But your question was it availability issue, the answer no.

Perfect. Okay. And then you mentioned obviously this continuing into January and February, are we talking about sort of similar numbers or was December really a very real anomalous thing?

No, December was the extreme I think in my numbers I said quarter to-date through February we're down about 3.6% in generation, and the first quarter versus our expectations and for the quarter we -- the first quarter is negligible from a total CAFD generation and the business. So is definitely the quarter to have, but it has persisted, but again, if you also look at the chart in the slide, you go back to 2016 and we were above our expectations for the full-year of 2017 with little bit weaker in the spirit of a P50 expectation, that's probably not a bad way to think about it.

Our next question is from Julien Dumoulin-Smith of Bank of America. Your line is open.

Hey, guys. This is Antoine calling for Julien. How are you?

Good. How are you, sir?

Good. Quick question so on the committed growth you have CAFD per share increasing by 8%, and then you have this 15% DPS growth target in 2018. Should we expect additional drop-downs this year and if so can you give us a bit more detail on the sources of the growth beyond what's in the ROFO currently?

Sure. I think that's a little of an apple and oranges -- just to make certain we're on those same page. The 15% growth in 2018 doesn't require any of these closed, they obviously will close throughout the year. This is more a lot beyond that timeframe. So just to make sure, we kind of square that out as though -- but the 15% DPS growth in 2018 is conditioned upon these, just our kind of step one. Step two, in terms of growth beyond we have listed on the page from that perspective I think as I've talked about of kind of when we rolled this out February 7th, really at the closing of the transaction -- of the energy transaction with GIP is when we kind of really go through the ROFO pipeline and what ROFO pipeline we have in more granular detail. However, just what’s been publicly disclosed basically the energy pipeline would remain as kind of the Agua Caliente project. The GIP ROFO pipeline would contain the Hawaiian assets, the distributed generation partnerships, Langford and Mesquite Star.

Got it. And then, in terms of how you think about sort of DPS growth and payout target beyond 2018?

We haven't really gotten into DPS growth, I think again that would be something that makes sense once we can kind of show more transparency around the ROFO pipeline and we do that at closings. But I think in terms of payout ratio was kind of indicated 80% to 85% is what are comfortable long-term.

Thank you. Our next question is from Colin Rusch of Oppenheimer. Your line is open.

Thanks so much. I want to follow-up little bit on Michael's question. Just in terms of incremental opportunities with some outsized return potential. Are you taking a look at any sort of portfolios of newer technologies? Not just the battery energy storage, but also things like fuel cells any of the smaller geothermal projects that could layer into this portfolio?

We always look at newer technologies. So you know the ones that you mentioned, several of them, we do look at. So I think that’s definitely a viable portion of our CAFD profile. Would those type of sources ever make up 20% of our CAFD in the near-term? No. Could they make up 5% at some point in time? Potentially.

No, I'll take the rest of it, offline. Thanks so much.

[Operator Instructions]. Our next question is from Cindy Motz of Williams Capital Group. Your line is open.

Hi, thanks for taking my question. I just wanted to follow up on the $280 million. So Chad, that's even with the cap that you guys had, like the $10 million potential for renegotiated costs, you're still good with that? And then just on the -- is the $321 million, that's kind of we should look at that almost like a run rate kind of like what like NextEra Energy Partners does. Like they sort of do it like going out like in the fourth quarter, I'm just guessing. And obviously, for the dividend growth, you're not going to give more guidance right now, but this -- it looks like it would still probably be pretty good. Maybe you'll have some kind of an Analyst Meeting at the end of the year when it closes to give us some more details on that. But just if you could answer that. And then just one other follow-up.

Sure. I guess on the $280 million that’s our current year guidance. So I think any impact on change in cost related to the transaction is underway, that has not factored into that number. I think that is something that we would reflect on a holistic basis later when we -- when we know where we land at that at anywhere at all. On the $321 million, I think that is more -- if you look at that more pro forma on the $280 million just based on the capital that has been committed versus saying that is a run rate number.

Okay. I know it's not the one, but like sort of that's what we should look at with everything being committed sort of the way. Some companies do it exactly what -- like you are doing at sort of how you forecasted for the year. Others look at it sort of on like what I would call an exit basis. And that's what that looks like pro forma to me. But I don't want to put words in your mouth, but -- and then also just how the year lays out. I know first quarter, you're saying -- should we expect generally to lay out like last year in terms of CAFD, similar to 2017 just as it lays out?

Maybe one way to look at it is in the Appendix on Page, give me a second, on Page 18, we provide sort of -- the idea here is to just give investors a view of the seasonality of the portfolio. So if we achieve median expectations you sort of land with that kind of shape up of cash flow or CAFD realization during the quarter -- or excuse me, for the full-year.

Okay, I see. Yes, that's right. So that's pretty much -- that's very similar just from recollections. Okay, great. Thanks a lot.

Thank you.

And our last question comes from the line of Shar Pourreza of Guggenheim Partners. Your line is open.

Hey everyone. This is Eugene actually on for Shar. Just curious if there's anything going on mechanically to consider with PPAs in light of the tax reform, the new tax code, kind of how that adjustment would flow through to the revenues that you are collecting?

The PPAs, the simple answer is, no they're not. If you're kind of going for a regulated return model which would include taxes as part of the calculation of the capital structure, that's not how the vast majority of our PPAs work with kind of the exception of GenPower.

Okay. So you are not collecting some that assume that 35% of that would have, like a windfall of cash just as it flowed for what you pay?

No.

Thank you. And that does conclude our Q&A session for today. I'd like to turn the call back over to Mr. Chris Sotos for any further remarks.

No, that's it. Thanks everyone for attending. And once again, as we continue to push to closing, I look forward updating everyone then. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program.