Clearway Energy Inc (CWEN) 2017 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the NRG Yield, Inc. Q1 2017 Earnings Conference Call. (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, Norma. 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 & Webcasts.

As this is a 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 reconciliations 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 and also providing remarks this morning is Chad Plotkin, NRG Yield's Chief Financial Officer.

Turning to Page 3 for our overall business update. For the first quarter, NRG Yield delivered adjusted EBITDA of $184 million and CAFD of $0. During the quarter, we also closed on the acquisitions of 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 as the outage at El Segundo, which we discussed on our last earnings call. Taking these items into account, we are increasing NRG Yield's EBITDA guidance from $865 million to $920 million due to these acquisitions and the effects of accounting for common control with NRG. We're also maintaining our CAFD guidance of $255 million as the CAFD from our newly acquired asset is expected to offset the costs 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 enhanced our sources of capital.

Consistent with our previously articulated capital-raising strategy, we see avenues to utilize these funds for growth over the next 12 months. To further that growth, through our partnership with NRG, we continue to benefit through 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 sell NYLD the 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 at 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 improved availability by approximately 150 basis points versus 50 basis points improvement at plants run by outside OEMs.

In addition, and as evidenced by an improvement represented by California wind, on the chart, we have focused significant effort on improving results at Alta, including investing in additional inventory to minimize return to service timing. Unfortunately, as you can see at the bottom of this page, this increased availability did not manifest in increased production during the quarter due to the difficult California weather conditions we mentioned earlier this year that persisted through much of the quarter.

Importantly, due to the shape of anticipated wind production and the pricing of our PPAs, our shortfall in the first quarter is not as detrimental as the shortfall in the second and third quarters. And on a preliminary basis, after a slow start to the month, we saw our production much more in line 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 were 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 disclosed on our last quarterly call.

Unfortunately, Walnut Creek has just emerged from an unexpected outage that, while short lived, will negatively impact CAFD by approximately $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 that any potential concerns with the asset can be discovered and corrected as soon as possible. Finally, we will work with NRG to take steps to harden certain turbine components to improve their durability.

In summation, while we're disappointed with the performance of our 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 a key item that we have 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 2 key ways. First, as you can see here, the ROFO pipeline has grown by approximately 58 megawatts 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 from the ROFO pipeline in the form of CVSR 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 size. This level of commitment from NRG, coupled with our ability to execute in partnership with them, should provide investors with a view of our growth capabilities going forward.

With that, I will turn it 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 or CAFD of $0. As with past drop-down transactions, while the acquisition of the interest in Agua Caliente and the 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 NRG Yield owned the project since inception or acquisition by NRG, which impacts 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 in the distributed generation 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 to results. Per Chris' earlier slide, production at our solar and California wind portfolios were down 8% and 12%, respectively, relative to our median expectations through March of this year largely due to California experiencing its fifth-rainiest period in the past 123 years. Similar weather conditions were observed during April as well, but we did see improvement in the latter part of the month so we remain optimistic that results going forward will be more in line with our forecast.

While the forced outage at 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 than 424,000 shares of Class C common stock under the ATM program. We were able to issue these shares at a 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 the 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 reflects expectations of actual cash generation from April through December.

Additionally, guidance continues to be based on 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 outage 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 2 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 30th.

As noted on this 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 in determining the outage's 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 in our sensitivities. But we do acknowledge that a positive offset would require periods of productions 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 excludes effects from the future deployment of the remaining excess capital available for growth investments, all of which we expect to drive further accretive CAFD per share growth to the platform. And with that, I will turn to Slide 8 to discuss 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 unutilized 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're maintaining our CAFD guidance and increasing our EBITDA guidance to take into account the closing of the latest drop-downs and the updated El Segundo outage impacts. While through March we're 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. And additionally, we recently announced our Q2 dividend of $0.27 per share, in line with this trajectory. During the quarter, we're 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 the 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 actual discussions continue with counterparties. We expect to provide an update during 2017.

Finally, we are focused on maintaining a strong balance sheet and financial flexibility across the capital structure, as demonstrated with our issuance on our ATM at very efficient levels of execution.

Thank you. Operator, please open the line for questions.

(Operator Instructions) Our first question comes from the line of Abe Azar of Deutsche Bank.

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, continuing to expand the drop-down portfolio and spending money 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, yes, we look at what might happen, but to be factual, we're 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 will not comment on M&A in terms of that. So, sorry, no comment.

Okay. And what is your outlook on dividends post 2018. When do you think we'll get an update there?

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

Our next question comes from the line of Michael Lapides of Goldman Sachs.

I actually have 2. 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're seeing in the market from potentially buying assets from developers or other third parties, how different is that environment versus what you saw 2, 3, 4 years ago when you first formed the company?

Sure. A lot of -- first of all, thanks, Mike. I think there's a lot of different data points, but I'll try to answer your question kind of on a pretty macro basis. I would say that pricing and bidders, we're not seeing at the highs that we saw kind of in the late '14, '15 period, frankly, due to some actors no longer being in the space. I will say that over the past 12 months, I would say that I've seen diminution in IRRs that are available out into the market. If you were to compare now versus when yieldcos were first formed, that's probably a little more difficult comparison, but I think you know probably a little bit tighter but not necessarily materially so, if that's kind of 3 different phases to try to answer your question.

Got it. No, I think that helps a lot. Second, when you look at your balance sheet, right, I mean, you're 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 relever? Do you use it to turn off equity issuance as in 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?

Yes. Thanks, Michael. I guess, there's 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 like mortgage styles, where the principle is coming down over time, the total payment's the same. So it's not necessarily indicative that there -- you create a tremendous amount of project leverage, not to suggest there couldn't 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 the financing strategy, we will always begin first with what can we do at 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've talked 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 and assuming new growth projects in the future, we'd certainly do that.

Yes. Michael, maybe another way to look at it is, the #1 attribute that will influence our ability to relever is an extension of any contracts under the PPAs. To Chad's point, most of the PPAs and debt are kind of sized together. So the #1 attribute that will inform -- can we relever, is there additional capacity for equity, is that variable. And 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?

Yes, resi, I know it's 0. But Chad, I don't know...

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

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

When we look at the financial summary slide, Slide 7, when you look at the (inaudible) outage impact, which was $5 million on EBITDA, $10 million 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, that's how much we should think about adding back to first quarter 2018 EBITDA and CAFD?

Yes. I think if I looked at the $5 million, absolutely, for El Segundo, that makes a lot of sense. I think as you move to CAFD, there's a number of items in there, some of which you'll see in the Reg G. So obviously, as you have an EBITDA -- or 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're looking at a point estimate of guidance, they do start to add up with respect on the operations 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 as moving through 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 in maintenance CapEx as we think about working with NRG and what we want to do. But -- so between those 2, Greg -- but yes, I think if you look at those outages, I think that would be the point it 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 in the perspective you have.

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

Yes, I think that's fair. I just think it's probably a little premature for us to come to that conclusion because we'll obviously look at that over the course of the year and as we get through 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 common threads 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 at what's going on with those plants to tell us what broke and how you're fixing it?

Sure. Simply stated, they're very different. I think at El Segundo, and you can take evidence by the fact that, yes, we're able to get pretty quick resolution with our vendor under the extended warranty who 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, your question would kind of give a little more of a holistic approach and saying, "Okay. How do we make certain in that anything that occurs gets monitored so there's a quicker response to it to fix it?" There's certain also low dollars items, the discussion you and Chad were just having, that could be done to kind of like harden some types of materials and basically some points where you're seeing a little bit higher failure rate than you'd like type of thing. So to answer your question, the 2 situations are very, very different, El Segundo centered around one, the rotor that basically, we came to resolution with pretty quickly. At Walnut Creek, a little bit broader spectrum, but that's why we're taking different steps to address it.

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

Sure. A couple questions there, so I'll try to answer them. One, the April generation that we're seeing is approximately at P50 on a preliminary basis, not above P50. Two, your second question, that's much more a guidance methodology that we're 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 [calcs]. So we wouldn't want to necessarily revise guidance as long 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 the 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?

Yes. I think Greg, 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'll note on the bottom part, we are noting and as I've said on my comments, that drag we had in the first quarter -- effectively what we're saying is, in order to recover that, we would need some period of time above P50. So I think to Chris' point, it is sort of a guidance convention that we're using which is maintain P50 and then provide you the information as to where we would be trending, if you will, on any quarter depending on how the production actually comes in.

Maybe phrased differently, Greg. If we hit P50 for the rest of the year, we're probably at $915 million with that variable.

Our next question comes from the line of Julien Dumoulin-Smith of UBS.

Quick couple of questions here. I know we've discussed curtailment a little bit in the past. Can you discuss curtailment in the context of 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? And then I've got a follow-up.

Sure. Kind of Chad and I will do this together. I think in many of our contracts, there's a right for the offtake to economically curtail. But there's also caps and other provisions that we kind of put in our budgeting process. So Julien, to your point, in a lot of the PPA contracts, there is a curtailment provision. But a lot of times, that is put into our budgeting assumptions around those rights. And then also, there's 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 and budgeting. Chad, anything to add there?

Yes. I think we're -- Julien, I don't think we would sit here and tell you that there is absolutely 0 risk-associated with curtailment. Certainly, there could be a point, if there was a tremendous amount of curtailment, reliability you could see at least in some of the assets where there could be a little bit of drag. I think what is interesting is some of the data points that we've seen from -- what we have seen on CAISO. So I know like -- I think the whole point that we're coming up to is not that a curtailment isn't happening. But I think from what we're seeing, it is far less of an issue that was candidly originally advertised because I think as we understand it originally, the CAISO came out and talked 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 was in March. There was like about 3,500 megawatts curtailed. And interestingly, of that, something like 98.5% of it was economic where to Chris' point, is a lot of the contracts you do have protections. So only a small step of that was really for reliability. And I think there were even some comments yesterday or a couple of weeks ago, whatever it was, I know there was another comment from one of the gentlemen at the CAISO where he had actually talked about with some of the hydro conditions where evidently, a lot of operators are actually spilling water versus sort of just generating into well price point. So I guess, the long and short of it is, there are protections in the agreement. 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 through 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 of the CAFD? And I ask that specifically in light of the 10-year remaining life on these assets. And in particular, as you would think about those IRRs, what kind of step then in pricing are you imagining after that 10-year period overall across the portfolio? How material a drop is that?

Probably, Julien, I think what you're referencing is the asset we haven't closed on yet, the wind, the 25%.

Yes, absolutely. I'm sorry. I apologize.

No issues. I think once again, we typically don't disclose what we think of in terms of our appropriate IRR because obviously, that's a key component of our bidding strategy. But the way I would tend to think about it is what percent of the enterprise value sits in the terminal. And so to your point, because we majority 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'll be evaluating. So we don't give out IRR expectations in terms of bidding, but that's how we think about the asset.

But basically, maybe said differently, you would think of something better than your typical 10x CAFD as in the economics should be -- you should have a higher return relative to the other deals that you contemplated previously?

Everything else held constant? Yes, with the risk, yes.

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

Just quickly on the drop-down, just so I understand, equity investment based on Slide 7, is that $9 million for which you're getting $10 million of CAFD. Is that the right number?

Okay, yes. Sorry, I was double checking the slide is the way I 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 close 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 partnership, there really wasn't any CAFD in the quarter just due to the timing of distributions. What that $10 million represents is now that we've closed the drop-downs and we have that capital invested, at least the $15 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 stub 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 [share] with the CAFD yield at which these transactions were done?

So it can go $13.3 million, over [$130 million.]

And then for the DG investments, we talked about this in the past. If you look in the appendix, on Slide 18, we actually showed sort of how to think about the CAFD yield on those investments. Those -- that original partnership was structured at an average 7.5% CAFD yield. Those are done on a preferred basis. But importantly, the first 5 years of that, you'll note, if you look at Slide 18, those are at a higher CAFD yield. So what we always talk to investors and analysts about 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 to more of the BRC side on the NRG level. Obviously, sitting back at the NYLD side, NRG, as you've demonstrated through all these slides and what you have said, it's 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 perspective? Is there a preferred path 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 necessarily going to speculate on exactly what different paths 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 its sponsor and the largest shareholder in the value of NRG Yield Holdings, are a 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 yes, I don't want to speculate on how that may happen or what variables there are because as you know, there's a lot of different iterations that could occur. But I think the most important fact is that I wouldn't see the BRC nor NRG, no matter what the alternative is, wanting to diminish the value of Yield.

Our next question comes from the line of Angie Storozynski of Macquarie.

So just continuing this line of thinking about alternatives for NRG Yield. 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 stalemate because they were uncertain about the turns in future projects given some of the potential changes to the tax code. Has it changed? Do you see that there is more engagements from potential partners? Yes, that's all I have for now.

Sure. I would say we see the same levels that I do think unfortunately, we haven't seen a lot more, specifically around tax policies. So Angie, to your question, I would say that the conversations are ongoing and there's still interest. But in terms of a meaningful outcome in the near term given the tax policies, obviously, that we just heard 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 that almost a day or 2 ago around some of the developers and what they have to deal in the tax equity market, so...

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

Sure. I think simply stated, they're at the anticipated pace. There's not -- it's not as though other than the 25% that has been announced that there's really assets that are online, with the exception of Ivanpah kind of at 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 would want to see several consistent quarters of performance before really makes sense to negotiate around it. So simple answer is, as anticipated.

And then lastly, I notice that you're counting the available amount under the ATM program for basically cash available for deployment. But you just issued only $7 million out of it. So do you feel that there's market capacity to actually fully deploy that ATM at the amount stated and hence, that cash is truly available for deployment?

Chad?

Yes. Maybe to just 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 about -- it's $144 million that got estimated on Slide 8, importantly, that only factors in the ATM issuance today by 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 then cash generation comes in, that will come in over the course of the year and we'll be able to invest that cash. I think the other point on the $143 million of ATM capacity, know we'll that be prudent and pragmatic as to how we issue into that on there, But I think we -- 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.

I think also to 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'd kind of try to do $143 million tomorrow type of thing because then we'd obviously be funding ahead of what we see in terms of opportunities, at least concrete ones.

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

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

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

And our next question comes from the line of Colin Rusch of Oppenheimer.

As you guys 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 path of those assets? What are you seeing in terms of the time line if you are -- and how can we think about that in the portfolio as we 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, it's 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. What 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, it is a different issue. 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 that to the public market just as a reference. Is that something that you could share with use at this point?

I think the sensitivity that we have -- like the sensitivities around what P level we have currently, Chad, the sensitivity we give.

It's -- the sensitivity is in around P50. So it's plus or minus 5% in production. So if that's your question, Colin -- sorry, it was breaking up a little bit, so I might have misheard.

I'm sorry. Yes, I know. I was asking about P70 rather than P50. Some of your competitors are offering both P70 and P50 guidance just as a reference on the resiliency of the portfolio.

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

And ladies and gentlemen, that is all the time that we have for our 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 seeing you 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.