Clearway Energy Inc (CWEN) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the NRG Yield second-quarter 2015 earnings call. (Operator Instructions). As a reminder, today's call is being recorded.

I would now like to turn the conference over to Matt Orendorff, Managing Director of Investor Relations. Sir, you may begin.

Thank you, Shannon. Good morning and welcome to NRG Yield's second-quarter 2015 earnings call. This morning's call is being broadcast live over the phone and via webcast which can be located at our website at www.NRGYield.com under presentations and webcasts. Because this call will be limited to 30 minutes, we ask that you limit yourself to only one question. As this is the earnings call for NRG Yield, any statements made on the call that may pertain to NRG Energy will be made 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. Such statements are subject to risks and uncertainties that could cause actual results to differ materially. We urge everyone to review the Safe Harbor statement provided in today's presentation as well as the risk factors contained in our SEC filings. We undertake no obligation to update these statements as a result of future events except as required by law.

During this morning's call we will refer to both GAAP and non-GAAP financial measures of the Company's operating and financial results. For information regarding our non-GAAP financial measures and reconciliations to the most recently comparable GAAP measures, please refer to today's press release and this presentation.

With that I will now turn the call over to David Crane, NRG Yield's Chairman and Chief Executive Officer.

Thank you, Matt, and good morning, everyone. Joining me today and participating in the presentation is our Chief Financial Officer, Kirk Andrews, and additionally Mauricio Gutierrez, who is NRG Yield's Chief Operating Officer is here and is available to answer any questions you might have.

Since the NRG Energy call just wrapped up a short time ago, we will try and keep our comments here brief, use as little bit more of your time as necessary.

That being said, it has been an interesting past several weeks both in the Yield co-space generally and the quarter and the year to date has been a bit more eventful for NRG Yield than is usual. So we are going to cover a little bit more ground than we usually do.

So let's start by turning to slide three of the presentation. For the second quarter 2015, NRG Yield achieved $187 million of adjusted EBITDA and $26 million of cash available for distribution.

While Kirk will provide more detail on the drivers of our performance for the quarter, I want to address one element up front. We along with the majority of other large-scale wind operators experienced another quarter of challenging operating conditions for our wind fleet as the majority of the wind resources west of the Mississippi were less than 80% of what would be deemed normal conditions. This unfortunately has caused us to adjust our expectations for wind performance over the remainder of the year and revise our guidance accordingly.

With that said, we continue to be very comfortable with the current and long-term prospects for the Company's dividend program and that is why we continue to increase the annualized dividend payment which is now set at $0.84 per share which represents an increase of 40% in the dividend since our IPO and a 15% increase year on year. As you might note from the Company's press release, we have initiated a target for fourth-quarter 2016 dividend run rate of $1.00 per share on an annualized basis. This implies growth in excess of 19% from current annualized levels.

I want to be very clear here that while our financial performance has not been what we would have liked so far this year, we continue to believe very strongly in our ability to deliver the long-term dividend growth our investors look to us for.

Now looking at the execution for the quarter, NRG Yield made significant progress in expanding commercial prospects for the business. The strategic relationship with NRG Yield again bore fruit. In addition to formalizing the joint venture with NRG Renew to invest up to $100 million in completed distributed solar projects, we received a formal offer from NRG of the third ROFO transaction. This portfolio consists primarily of wind assets NRG acquired in the Edison Mission Energy transaction and we anticipate closing during the third quarter.

These transactions combined with the previously disclosed acquisition of the 25% interest in the Desert Sunlight Solar facility and the recapitalization of the Alt X and XI facilities should enhance the run rate CAFD for NRG Yield by approximately $70 million to $75 million once they are closed.

As we turn to slide four, I want to point out that recent weeks have been a turbulent time for the yield sector and NRG Yield has been negatively affected along with other companies in the sector. Given the importance of having continuous access to a competitive cost of capital to NRG, we have sought to put NRG yield on a path to sustained value creation by focusing on three critical attributes which are more important today than ever.

Starting with portfolio diversification, we never anticipated a drop off in the wind resource as we have witnessed over the past six months but we aimed for diversification precisely so that we could withstand the unexpected. While we are obviously not immune to the financial impacts of reduced wind, the fact that here today we could both continue to grow our dividend on a quarterly basis and also reaffirm the trajectory of future dividend growth is a testament to the success of our portfolio diversification strategy.

The second attribute is M&A. When we initiated NRG Yield two summers ago, we knew there would be multiple followers into the market and we guessed at some point irrational exuberance would grip the acquisition market with some bidders paying exorbitant prices to grow their portfolios. Since we expect to be around for the long-term, we settled on a more prudent robust measured M&A strategy that would strike the right balance between high growth immediately and extending the visible duration of future growth. Striking that proper balance has been and continues to be the focus of this management team which brings me to a final very important point which actually Kirk will elaborate on in significantly greater detail.

Not only do we wish to avoid deals that we view as creating little long-term value in and of themselves, we do so knowing that unlike many of our peers we do not layer our punitive IDR on top of it. We see IDRs as an impediment to the sustainability of a low cost of capital which we view as the key enabler of dividend growth over time.

Said bluntly, given the choice we believe a yieldco investor who will be funding the growth of the vehicle over the long-term should be adverse to sharing dividends on an increasingly on unequitable basis and should always prefer a company without an IDR.

So I will end my comments there and turn it over to Kirk. Kirk?

Thank you, David. Turning to the financial overview on slide six, NRG Yield is reporting second-quarter 2015 adjusted EBITDA of $187 million and cash available for distribution of $26 million. Adjusted EBITDA and CAFD for the second quarter were below our second-quarter guidance due to historically low wind speeds which continued through the quarter and primarily impacting our Alta wind assets in California while also impacting the other wind assets in the fleet.

The chart in the top right corner shows an illustrative view of the Alta average wind speed for the first half of 2015 as compared to the long-term historical average ranges of wind speeds for that region. As you can see, the average wind speeds for the first half of 2015 were significantly below the historic range. Due to the ongoing low wind production impacting the fleet, we have adjusted our expectation on wind production over the balance of 2015.

For the full-year 2015, the Company is updating adjusted EBITDA guidance from $690 million to $660 million and CAFD guidance from $195 million to $160 million reflecting the impact of lower expected wind production. Our revised guidance also reflects the impact of the reduced pace of residential solar drop downs by NRG Home Solar over the balance of 2015 which is offset by the half-year impact of the Desert Sunlight acquisition.

We are also providing guidance on third-quarter 2015 with expected adjusted EBITDA of $195 million and CAFD of $110 million which also reflects the impact of reductions in expected wind production. We do not expect the reduction in 2015 adjusted EBITDA or CAFD guidance to have any impact on either our current dividend or expected long-term dividend growth.

The Company remains confident in its long-term prospects and is targeting an annual dividend rate of $1 dollar per share by the fourth quarter of 2016 which will represent a 19% increase over the current dividend rate and a 67% increase since our first IPO dividend in the fourth quarter of 2013.

During the second quarter, the Company raised net proceeds of $600 million from the issuance of approximately 28 million Class C shares and net proceeds of $281 million from the issuance of senior convertible notes due in 2020 both of which were used to fund the Desert Sunlight acquisition any tax equity refinancing of Alta X and XI.

The tax equity refinancing enabled the monetization of production tax credits and other tax attributes to be generated from the Alta X and XI wind projects and resulted in $119 million of upfront cash proceeds to yield. The Company used the proceeds from this transaction and a portion of the proceeds from the equity and debt offerings to fully repay the $491 million of project level debt associated with the Alta X and XI assets. This transaction is expected to result in incremental CAFD of $28 million on an annualized run rate basis beginning in 2016.

Our revised guidance does not reflect any impact from the tax equity refinancing in 2015 given a substantial portion of the CAFD benefits result from the elimination of principal amortization which was not scheduled to begin until 2016 coincident with the start of the PPAs for those two assets.

During the quarter, we also expanded NRG Yield's revolving credit facility capacity by an additional $45 million bringing total capacity to $495 million providing additional liquidity to temporarily fund acquisitions. NRG Yield completed the formation of the previously announced $100 million DG Solar partnership with NRG Energy during the quarter. Under the terms of this partnership, the Company will receive 95% of the economics until it achieves its targeted return.

In July, the Company was offered the opportunity to purchase a third set of right of first offer assets from NRG Energy specifically a 75% interest in a portfolio of 12 wind assets totaling 814 net megawatts of wind capacity and consisting primarily of assets acquired by NRG Energy in the EME transaction. The Company's independent directors and advisors are evaluating this offer from NRG and assuming agreement with NRG on price, we would expect to fund the closing of the transaction with cash on hand by the end of the quarter.

Turning to slide seven, relative to our 2015 guidance which only reflects the partial impact of the recently completed Desert Sunlight and tax equity transactions, we expect our current portfolio to deliver an annual run rate of adjusted EBITDA of $760 million and CAFD of $245 million. These run rate estimates reflect the full year impact of our two recently completed transactions which combined are expected to contribute approximately $45 million in incremental run rate EBITDA exclusively from desert sunlight and approximately $50 million of annual CAFD through the combination of Desert Sunlight and the tax equity refinancing as well as the impact of Alta X and XI PPAs which begin in 2016 and adjustments to reflect lower wind production on a run rate basis.

Our target annualized dividend rate of $1 per share by the fourth quarter of 2016 implies approximately a 75% payout ratio on our current portfolio annual run rate CAFD which when combined with the robust pipeline of remaining ROFO assets, underscores our confidence in our ability to maintain annual dividend growth consistent with long-term targets.

Turning to slide eight, NRG Yield remains well-positioned to achieve long-term sustainable and efficient total shareholder returns through its superior business model with one of the most diverse mixes of conventional and renewable assets in the growing yield sector. Consisting of fast start natural gas conventional generation, thermal combined heat and power in district energy assets and an array of renewable assets, the Company is well structured to deliver more stable and tax efficient CAFD.

NRG Yield continues to target a 15% to 18% dividend growth into the next decade highlighting our top tier long-term target in the yieldco space which is not dependent on incremental M&A transactions providing our investors with clear visibility as to our ability to deliver on our growth targets.

Through its strategic partnership with NRG, NRG Yield is able to access NRG's proven track record in conventional generation development as highlighted by the addition of the Carlsbad and Mandalay projects to the ROFO pipeline.

NRG also provides Yield's unique platforms of residential solar and distributed generation solar which provides further diversification and incremental CAFD. Importantly, NRG Yield does not have incentive distribution rights for IDRs which overtime allocate a greater and greater portion of the incremental CAFD from acquisitions and drop downs back to the sponsor. NRG is already highly incented to ensure efficient and ongoing growth at NRG Yield as contracted opportunities and NRG Yield's cost of capital advantage are significant components of NRG's overall strategy.

We believe that the absence of IDRs not only helps preserve NRG Yield's low cost of capital advantage, it also permits the Company to appropriately allocate every dollar of incremental CAFD where it rightfully belongs in support of dividend growth and return to our shareholders.

To help underscore this advantage, we provided an illustrative example on slide nine.

To illustrate the long-term drag on CAFD from IDRs and the advantage afforded to NRG Yield and its shareholders without them, we have compared the CAFD impact of a generic $100 million acquisition to both NRG Yield and a competitor within IDR which is at the split IDR level which provides approximately 50% of incremental CAFD back to the sponsor as an incentive payment. Although the acquired asset with an asset level CAFD yield of 8% delivers $8 million of CAFD, NRG Yield without an IDR realizes 100% of the incremental financial benefit of the acquisition while the competitor with a 50% split IDR must pay half of that CAFD back to the sponsor as an incentive.

Importantly while the asset level CAFD from the competitor is 8% on a yield basis, the realized CAFD to that yieldco and the corresponding yield is half of that realized by NRG Yield. Since as a result of the IDR each acquisition would be incrementally less accretive, the competitor yieldco in this illustrative example must pursue twice the volume of acquisition to achieve the same level of accretion leading to larger and more dilutive capital raises over time in order to deliver growth.

The IDR may also create an incentive for sponsors to be more aggressive in pursuing acquisitions in search of higher incentive payments while the absence of IDRs we believe ensures that NRG Yield's approach to acquisitions is better aligned for shareholder interest. As robust acquisition activity continues across the sector, we believe this differentiation will become more apparent as an increasing number of competitors with IDRs move closer to the higher incentive tiers prescribed by the IDR arrangements with their sponsors making NRG Yield's advantage more and more apparent to our shareholders.

With that I will turn it back to David to move to Q&A.

Thank you, Kirk. Operator, Shannon, I think we should open the lines to questions.

(Operator Instructions). Greg Gordon, Evercore ISI.

Thanks. Just to regurgitate back to you so I make sure it is clear, the dollar run rate in the fourth quarter next year it represents a 75% payout on the existing portfolio assuming a lower wind resource?

That is correct and that is on a full run rate basis so that is in annualized dollar that started by the fourth quarter relative to the run rate of the existing portfolio without giving any impact to future drop downs between now and then.

Okay. And what is the financing plan again just to be clear for the assets that have been offered and the relationship to the rooftop solar business? When is the next time that you need to access the equity market at the NYLD level?

As I indicated, Greg, given the current liquidity position of the Company, particularly cash on hand, the near-term offer that was made by NRG in July we would expect to be able to fund that through the existing liquidity that we have. NRG has indicated its intention to offer an additional drop-down later this year. Our expectation is that that drop-down would give rise to the need for additional financing. We are currently roughly on target with our long-term credit ratio and for that reason although the incremental drop-down would obviously expand some debt capacity there so there is some capacity for debt, my expectation is the next time for external financing would be early in 2016 and that would consist at least of some component of equity.

Okay, great. So bottom line is you can get to at least $1 run rate on the existing portfolio, the next drop doesn't need equity, the drop after that would need some?

I think that is a fair summary, yes.

Thank you.

Daniel Eggers, Credit Suisse.

Just looking at the $0.25 run rate or the $1 run rate at the end of 2016, should we be thinking about a penny a quarter if you look at history and kind of where that $0.25 gets to, is that I would look at the progression of dividends in an all else equal world?

On a quarter-by-quarter basis?

Yes.

I think you should assume the ramp up in our dividend relative to our current $0.21 going to $0.25, it would be relatively levelized and while we don't dismiss the possibility of that dividend being increase beyond that level, we are confident at least with the target that we have given with respect to that $0.25 on a quarterly basis or $1 on an annual basis by the fourth quarter of next year.

And I guess just on the future ROFO drop downs given how much the stock has come back in and the rising cost of capital, what conversations do you guys end up having as NYLD back to NRG on pricing of the drop-down value of assets given the fact your cost of capital has gone up?

We look at this on a long-term -- certainly on a long-term basis. Certainly we have seen a tremendous amount of headwinds across the yield sector in terms of where the shares have traded or the stock prices are. I can't really comment that there has been any change on the part of the independent directors. They are currently evaluating that drop-down and I think they do so on the basis of kind of a long-term view from a cost of capital perspective but no indication at this point that there is any anticipation of a change in appetite where cost of capital is concerned with respect to future drop-down valuations at this point.

So the ROFO drop-down that you have coming here shortly, the wind assets, that has been priced and not subject to change?

That has been offered at a price and that price is under negotiation at this point.

Okay, thank you.

Stephen Byrd, Morgan Stanley.

Good morning. I wanted to just talk about the 2016 dividend outlook so you have laid out that under the conditions you laid out, the payout ratio would be up out 75% on the 2015 run rate level as per Greg's question. As you think about incremental drop downs and growth, would those in your mind be more likely to cause an increase in the dividend or a reduction in the payout ratio even further to give you further visibility? What is your sort of mindset in terms of what that incremental drop-down in 2016 might do to the dividend?

As I have indicated before, we feel comfortable with our 15% to 18% of long-term growth target. We think that provides a good balance of both duration and magnitude in terms of dividend growth and as we have said in the past especially episodic M&A transactions, we look to augment the duration of that pipeline. Certainly we don't dismiss the possibility of augmenting that given the fact that 75% payout ratio as I indicated before, I mean relatively easy math since we have 182 million shares outstanding, $1 a share is $182 million in dividends, that is how you get to that 75% payout ratio. That provides us some cushion or ability to consider the possibility of augmenting that target but at this point I would say we continue to be a little bit more duration biased toward incremental CAFD and how it impacts our ability to continue to deliver on long-term growth.

I think Stephens question was slightly different than that or more simple between maintaining the dividend at 15% to 18% growth or the payout ratio of 75% which takes priority. The simple answer is 15% to 18% dividend growth takes priority. I mean obviously the dividend has to within reason obviously you can't pay out more than you have got over time and all that but between those two maintaining the dividend and growth which we have to date, that is first priority for us.

Understood, understood. Then shifting over to the M&A environment at a high level without talking about any particular opportunities, could you comment on the magnitude of opportunities, how competitive they are, are there opportunities for situations that are perhaps less cookie-cutter like some of the deals that you have done before that have been fairly attractive? Or if you could just at a high level discuss that. There is a lot of investor speculation on what that market is really like these days in terms of both magnitude and how attractive or unattractive it is these days?

What I would tell you is there is obviously a lag or I guess new territory in terms of the recent selloff across the Yield space which from where we sit sort of indicates that the market is sort of saturated with yield paper and the market in the greatest traditions of supply and demand has repriced that paper more expensively. How that impacts the M&A environment hasn't been seen yet. Clearly as I think we said on the last call, while we saw that there were opportunities for us because of the greater diversification of the assets that we could look at, we felt that we were priced out of the sort of plain-vanilla contracted wind asset because the prices that we were being seen paid in that space were far beyond anything that we could make work in terms of our own financial analysis.

Part of you sort of hopes that as the sector gets less overheated that some of those opportunities will come back into range for us. But let me put it this way, I am not holding my breath.

So I think there are opportunities around the three pillars of our business but for the most part I would say right now we are really focused on the organic opportunities that are arising out of NRG not only with the home solar but with distributed solar and we like those not only because the relationship with NRG but because they also provide more diversification in terms of off takers and geographies and all that.

So we are comfortable that the growth trajectory that we have laid out is sustainable for us and while we are always looking in the MAA space, it is not predicated on doing some major transactions.

Thank you very much.

Steven Fleishman, Wolfe Research.

Just in one of the slides or slide eight, when you talk about the 15% to 18% in terms of dividend growth, you say through the next decade. When you are saying that, is that your view based on the kind of current portfolio plus what is at NRG as we stand today?

The shortest possible answer to that is yes. As we have said before, we are adhering to the discipline that our ability to deliver on that growth ought to be as close as the relationship that we have with NRG.

Okay, great. And then just if you can, can you maybe be more specific on kind of a walk between the guidance change for 2015 and the pieces that you gave, like how much is due to the wind conditions, the judgment on that and any other pieces?

The simplest way to talk about it is the change which amounts to $30 million on the EBITDA side, that is due to the reduction in the expectations for wind production over the balance of the year and there are really two other pieces within that really just offset each other.

One, the lower pace of drop downs which also means a lower pace of capital deployment is equal and offset to the impact which is roughly half of the full-year run rate from the Desert Sunlight acquisition. So on the Desert Sunlight acquisition, I think we were talking about roughly $45 million of EBITDA and about $22 million of CAFD so on the CAFD side, you are talking about roughly $11 million of incremental CAFD from Desert Sunlight. That is really almost equal and offset to the change due to the reduced volume of installations on drop-downs off our residential solar. So those two components basically offset so net net the 30 million is really attributable to the change in expectations on wind over the balance of the year.

Okay. You have now reset your wind expectations going forward just to be conservative?

Yes. The 2016 or the full run rate also takes into account an adjustment to expected wind production on the back of those run rate numbers as well, that is correct.

Okay, thank you.

Andrew Hughes, Bank of America Merrill Lynch.

Good morning, guys. Thanks for taking the question. The first one and it may be too early to say but given some of the discussion on the NRG call about sort of a brown co, green co split can you discuss or tell us how you would think about managing the NRG Yield entity with either two sort of parent entities or more aligned with one over the other?

Andrew, we really can't because we would be thinking about it over the phone. I mean the only thing I can tell you is that having access to NRG Yield's cost of capital is important to all of the capital intensive parts of the business. So if we ever got to that we would try and make it so that NRG Yield's offices were available to both sides of the split that is part of your hypothetical. But no, there is no detailed planning on that at this point.

Fair enough. And then the wind portfolio following -- or the portfolio following the EME drop-down will be more wind oriented. Curious if you guys have a target portfolio mix in mind longer-term. And related if the decision to cap the fourth quarter dividend in 2016 at a 75% payout ratio, whether or not that has anything to do with sensitivity to a lot of wind in the portfolio or desire to keep more cash on the balance sheet for acquisitions or the puts and takes there? Thanks.

Let me answer the first part. At this point, the Board of NRG Yield, neither the Board nor the independent directors have a sort of technology target. The directors obviously are looking at portfolio theory and diversification all the time. Right now that focus has been more on the concentration of California Utility offtakers and the question whether there could be a point where whether we have too much wind, I'm sort of getting ahead of the Board on this. I don't know if we will get there because while this efficiency of wind resource has occurred in the Western United States, it is hard to imagine a deficiency of wind resource occurring in every geography at the same time.

So certainly the Board will look at that over time but right now there is no Board policy that A, we won't let wind be more than X% of the overall portfolio and as to the second part of your question, Kirk was going to answer that.

So the answer to the second part of your question as to whether the payout ratio is reflective of any considerations around wind production. The answer to that question is no. It is a function of managing that long-term growth. We don't look to hold cash on the balance sheet, the one thing as we talked about before, the fact that we have a less than 100% payout ratio one is a function of our target. To the degree to which it is below our target because we still have a significant amount of ROGO assets left to be offered, that building of cash is relatively temporary and short in nature because the excess cash that is generated by the lower payout ratio serves to offset what would otherwise be third-party capital required or financing rates.

So it is really more a function of those two things and not a function at all of concerns about when. As we have said, we have adjusted the wind production even in the context of our run rate CAFD.

In terms of the drop-down diversification, the only thing I would add to what David had said is the next drop-down, the EME wind portfolio is a more geographically diverse portfolio in terms of wind resource and as I believe if you followed the NRG's guidance in terms of their expectations for drop downs that would be followed up by what they have indicated at NRG an intended drop-down of CVSR as the second portion of the offers left to come in the back half of 2015 so that continues to add to the diversification of the portfolio as well.

All right, thank you, gentlemen.

Julien Dumoulin-Smith, UBS.

Good morning. So I just wanted to touch base real quickly here on technology. Obviously we have seen some IPP peers talking about seeing a little more thermal in the mix. I heard you just now talk about the mix on your side, just a little bit curious open to more thermal as it goes I mean and ultimately do you have an ideal mix of assets just more broadly?

We are certainly more open to more thermal. The opportunities in that sector don't rise that often and they can be pretty competitive. Actually sometimes with a different set of players but we have had good experience with expanding in that area and so certainly we are looking all the time.

I mean this sort of duplicates my answer in terms of do we have an ideal -- have we figured out the ideal mix in our portfolio of the certain various buckets? We have not, we look across each of the buckets for the opportunities that give us the individual opportunities that have the best set of contracted and risk-adjusted returns. So there is no precise target in terms of the size of the various buckets.

Got it. And perhaps just to follow up with that, is there any ideal within the residential? I mean just in terms of thinking about how much of that bucket should be filled by residential and what kind of spread you should see for residential in terms of the yield when you acquire assets?

First of all in the second part of that question as far as spread is concerned, that goes partially to why we structured the arrangement of NRG for drop downs that we did and that is that it is almost for NRG Yield a preferred return so that NRG Yield's return and cash flow is really tied almost exclusively to the contracted period. That is why the transactions or the arrangement with NRG over residential solar is structured as so that NRG Yield's ability to achieve its return is almost exclusively predicated on the contracted period and then any residual value doesn't have to be taken into account by NRG Yield. That is retained by NRG at the end of the day.

The degree to which NRG has the opportunity to recontract those, that is up to its option way down in the future to offer those recontracted leases. But it is more of an acute focus on the contracted cash flows in particular on residential and distributed solar.

And the other thing in terms of portfolio diversification and drop-downs as far as targets, because the drop-down portfolio really kind of comports nicely with the overall profile of existing portfolio in terms of diversification, because we have a nice mix or balance of both conventional generation which has been augmented by the Mandalay and Carlsbad drop-downs so to go inside and complement the solar resource even including residential solar we feel confident that that mix in terms of that drop-down portfolio allows us to maintain what is a pretty balanced mix of contribution to CAFD in the existing portfolio today.

Great, thank you.

Jonathan Arnold, Deutsche Bank.

Just following up on the drivers on the quarter, Kirk, was the slower pace of drops in residential solar a function of the fact that you had Desert Sunlight instead or a function of the business moving slower than you hoped?

No. I would say it was more the latter in terms of residential solar during the quarter and obviously the knock on of which is the adjustment to our expectations I spoke about further. So I would not say it was really that on the residential solar side as far as the quarterly performance is concerned.

Okay, that was it. Thank you.

Michael Lapides, Goldman Sachs.

Real minor one. Is there a change in terms of the amount of megawatts in the EME wind portfolio that you were dropping down meaning the 75% this year and the 25% next year or had that always been the plan? And if it is a change, is the driver cost of capital or is there something else driving that?

No, it is not a cost of capital driver. In late 2014, NRG made the decision to monetize the production tax credits out of that portfolio and as a function of that and importantly as a function of the partnership or the structure that was created at that time, that is really what necessitated the offer of only 75%. And as is many times the case when you have structural complexity, it is for tax purposes. As I think NRG indicated, its intention is to offer the remaining 25% of that drop-down in 2016. So it has nothing to do with financing capacity or anything. It has everything to do with structure and in particular structure on the tax side but again based on NRG's announced intentions, you should expect that the full balance of 100% of that EME portfolio will be completed in 2016 as they have indicated their intention to offer the remaining 25% once we are beyond that window that ensures the efficiency from a tax perspective as far as that drop-down is concerned.

Got it. Is the EBITDA and CAFD on a per megawatt or megawatt hour basis for the remaining 25% similar to what is being dropped this year?

Yes, I would say it is exactly ratable. So as the footnote I believe indicates in the press release, the numbers that we indicated in terms of expectations about EBITDA and CAFD represents that 75% kind of sort of divide that by 0.75 and you basically get the full run rate of the aggregate portfolio. That would give you an indication of what is left to come on that 25% that NRG had indicated its intention to drop-down in 2016.

Got it. Thank you, Kirk. Much appreciated.

Thank you Michael. I think that is it for today. We appreciate you all seeing through and participating and particularly if you sat through both calls NRG, NRG Yield and we will look forward to talking to you next quarter. Thank you.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day.