Kevin Cole - Head of Investor Relations Chris Sotos - President and CEO Chad Plotkin - CFO.

Colin Rusch - Oppenheimer Shar Pourreza - Guggenheim Partners.

Good day, ladies and gentlemen, and welcome to the NRG Yield Third Quarter 2017 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct the question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference may be recorded.

I would now like to turn the conference over to your host for today's call, Mr. Kevin Cole, Head of Investor Relations. You may begin..

Thank you, LaTonya. Good morning, and welcome to NRG Yield's third quarter 2017 earnings call. This morning's call is being broadcast live over the phone and via webcasts, 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 now 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 an overall business update.

For the third quarter, NRG Yield diversified portfolio delivered strong results with adjusted EBITDA of $265 million and cash available for distribution or CAFD of $134 million.

Due to the strong performance, and the impact of the November Drop Down, which we'll discuss later, we're increasing the company's full-year adjusted EBITDA guidance to $935 million from $920 million, and our CAFD guidance to $260 million from $255 million.

In addition, NRG Yield is increasing its quarterly dividend to $0.288 per share, consistent with our goal of growing our dividend per share 15% year-over-year in 2017. NRG Yield has continued investing in growth with $295 million of capital deployed since the third quarter of 2016.

In addition to the acquisition of a 38 megawatt portfolio of solar assets referred to as the November Drop Down, the company increased investment opportunities through distributed solar partnerships with NRG.

These opportunities include the expansion of the existing partnerships by $10 million as well as the formation of a new $50 million partnership. In total, NRG Yield has about $85 million of remaining investment capacity in its distributed solar partnerships with NRG.

In addition, NRG has offered NYLD, the 154-megawatt Buckthorn Solar project, which builds on a strong year of overall drop-down activity between the two companies. We're also pleased to initiate 2018 guidance with EBITDA of $950 million and CAFD of $280 million, the details of which Chad will go over in his section.

This significant growth will allow us to continue to grow our dividend per share at 15% per annum with a payout ratio of 80% in 2018, before consideration of some additional investments at Walnut Creek.

Lastly, NRG Yield management continues to work closely with NRG on its transformation plan with the resolution of the portion of the transformation plan impacting NYLD expected to be announced by year-end 2017. Turning to Page 4.

I want to provide an overview of the company's November Drop Down transaction, our 38-megawatt portfolio of 68 solar projects located across six states in the U.S.

The acquisition increases the amount of CAFD from solar in NYLD's portfolio with an approximate 16 year weighted average contract life and a diversified group of PPA off-takers, of which over 85% are investment grade. Moving to Page 5. We provide an overview of the economics of the transaction.

NYLD acquired the solar portfolio with cash on hand for an equity purchase price of 71 million before working capital adjustments. As the portfolio generates five year average CAFD of approximately 8.8 million, this results in an attractive asset CAFD yield of 12.4%, helping drive significant CAFD per share accretion of 3.4%.

The transaction enhances NYLD's growth profile with strong five year CAFD accretion and a slight extension of the average contract life from the portfolios current 16 year duration. With that, I will turn over to Chad to review the financial summary.

Chad?.

Thank you, Chris. Beginning on the left-hand side of Slide 7, NRG Yield is reporting third-quarter adjusted EBITDA of $265 million and cash available for distribution or CAFD of $134 million. During the third quarter, NRG Yield's portfolio performed exceptionally well.

In the conventional segment, the company undertook efforts in the first half of the year to ensure strong reliability during the key summer season. This proved fruitful as availability across the gas fleet exceeded 99% in the quarter.

Importantly, this performance occurred at a time when NRG Yield's California gas assets experienced a 26% increase in starts versus the third quarter of 2016, as peak loads in the region were higher than expected.

In the renewable segment, despite poor wind conditions across the company's Texas and Midwest wind projects, the overall portfolio exceeded the company's financial targets in the quarter, largely due to strong resource of the Alta project, which saw production up 12% versus median expectations.

While this performance was strong during the summer season, the Walnut Creek project, as previously disclosed, experienced a number of forced outages over the past year, including the outage at Unit 1 in April, for which we continue to expect receipt of cash insurance proceeds by year-end.

Since that outage, and as referenced on our last two quarterly calls, the company has worked with both NRG and GE to develop a plan to ensure the long-term reliability of the facility.

The resulting analysis made clear that the project required significant investment, not only to ensure near-term performance, but also to protect against long-term issues that could materialize into similar outages into the future.

As a result, the Walnut Creek project company entered into an amended comprehensive service agreement with GE, providing for, amongst other provisions, all required, currently available and future turbine reliability upgrades in exchange for an investment by the project company of approximately $15 million.

This investment will occur over a five year period with the majority of spend occurring in 2018.

Lastly, we're pleased to announce the net increase in our quarterly dividend to $0.288 per share in the fourth quarter, delivering on the company's 15% year-over-year growth target at a total payout ratio of 78% based on updated guidance, which is addressed on the right side of the slide.

With the closing of the November Drop Down transaction, NRG Yield is increasing its financial guidance from $920 million of adjusted EBITDA and $255 million of CAFD to $935 million of adjusted EBITDA and $260 million of CAFD.

As a reminder, because the November Drop Down is accounted for under common control, adjusted EBITDA results now include the full year contribution from the acquisition, but CAFD only reflects actual distributable cash generation from the closing date, which in this instance will result in no impact to 2017 expectations.

As noted in the table, guidance also factors in the benefit of the strong third-quarter performance, which helped reverse some of the underperformance realized in the first half of the year. Additionally, guidance continues to assume the receipt of $8 million in cash insurance proceeds relating to Walnut Creek.

Post third quarter, company performance continues to be based on the portfolio delivering at median production expectations. On that point, and on a preliminary basis, the fourth quarter has started positively with the renewable portfolio seeing modest production upside to expectations in October.

Now let's turn to Slide eight, to discuss 2018 financial guidance. As presented on the left side of the page, we provide a bridge from where the company began in 2017 to 2018 guidance.

As shown in the table, the success in accretive capital deployment during the year has inured to the company with an increase in expected average CAFD of approximately $33 million or 13% growth over original 2017 CAFD guidance.

In addition to other minor changes in the platform, 2018 financial guidance also takes into account the aforementioned investment at Walnut Creek, and it does not factor in any additional growth from new capital deployment, including the next drop-down offer for NRG of Buckthorn Solar or further investment in distributed generation partnerships.

The result is NRG Yield initiation of 2018 guidance of $950 million of adjusted EBITDA and $280 million of cash available for distribution.

Additionally, NRG Yield is reaffirming dividend per share growth of 15% year-over-year by the end of 2018, which based on the growth achieved during 2017, can be achieved at an 80% payout ratio before taking into account the investment to be made at Walnut Creek.

On the right-hand side of the slide, we remind you that guidance is set at expected P50 median renewable energy expectations. So we have provided an update to the annual renewable energy sensitivity chart, incorporating the acquisitions made during 2017.

This chart illustrates the potential CAFD impact versus P50 median expectations, with a 5% change in wind and solar production in each hour over the full year.

However, it is important to note that due to the seasonality of PPA pricing, it is possible that an aggregate 5% change over the year may have a different effect on actual results if a disproportionate amount of this change is concentrated in certain periods. Now moving to Slide nine, to address capital allocation.

Along with the ongoing investments made in the distributed generation partnerships with NRG, the closing of the November Drop Down brings NRG Yield's capital deployment to $295 million since the third quarter of last year, comprising over 90% of available capital allocated for growth.

The success in this execution led to an increase of approximately $33 million in average five year annual CAFD to the platform at accretive levels with an implied average CAFD yield of 11%.

As the company moves forward into 2018, the platform continues to have flexibility through existing permanent financing sources, including excess cash given the target payout ratio into next year as well as the ATM program, which the company continued to access during the third quarter.

Further flexibility remains, with over $425 million of available capital via the undrawn revolver, which the company would intend to utilize not only for working capital needs, but for temporary growth capital providing a bridge until the formation of new permanent capital. And with that, I'll turn the call back to Chris for his closing remarks..

Thank you, Chad. Turning to page 11, the company continues to deliver on its financial commitments by increasing 2017 guidance as discussed, the $935 million in adjusted EBITDA from $920 million and $260 million in CAFD from $255 million, as well as by achieving 15% year-over-year growth in our dividend per share.

This growth was driven in part by the success in growth investments this year, with $295 million of capital deployed since the third quarter of 2016.

Through this period of time, the company has acquired equity stakes in over 200 megawatts of wind projects, approximately 350 megawatts of solar projects and it continues to invest in distributed generation partnerships will fuel growth in CAFD on an accretive basis.

As mentioned earlier, growth through the ROFO continues to be strong as NRG offered the 154-megawatt Buckthorn Solar project that's currently expected to achieve COD in mid-2018 as well as the expansion of the distributed partnership opportunities.

During 2017, we have also demonstrated access to the equity markets via our utilization of our ATM program, and we continue to maintain significant capital to fund future growth investments through our revolving credit facility and internally generating cash flow.

In addition, and consistent with our stated objective of securing additional strategic partners, we are working with NRG regarding the future of its investment in NRG Yield, and we remain focused on outcomes that are in the best interest of NRG Yield shareholders. Thank you. Operator, please open the line for questions..

[Operator Instructions] And we do have a question from Colin Rusch of Oppenheimer..

As you guys are bidding out some of these projects and looking at some of the growth areas, the integration of energy storage is a material change for a number of folks.

Is that really seeming like a material part of your growth plans on the solar side? Or how deep into the wind portfolio are you thinking you can penetrate in some of these energy storage opportunities?.

Sure. I think there's not a lot of growth actually today in that from our perspective. There may be in terms of RFPs, but I would say, we're not seeing a lot of it. You don't see it in the ROFO pipeline today.

But I think, part of your question is, depending on how the NRG process works out, and what a new sponsor may view, there may be more opportunities down the line, but I do think it is important part of the renewable growth story going forward.

Just if you ask me today, what we're seeing in terms of well-defined opportunities for us to participate, those would be limited..

And our next question comes from Shar Pourreza of Guggenheim Partners..

Not a whole lot of questions, just on NRG's announcement this morning that the [BRC] is looking like they will sell 100%. The outlook is 100% sale of the yieldco. It's still preliminary and you will give an announcement probably later in the year, but I'm kind of curious on the state that you're in.

Are we looking at one bidder at this point? Or is it still somewhat of a competitive process?.

Sure. I think I'd really look to view NRG's discussion of the topic on the call. I think -- Mauricio -- we're in the process, whether there is 1 bidder, 5 bidders, 10 bidders, he didn't get into so frankly, I won't either..

[Operator Instructions] And I'm showing no further questions from our phone line..

Okay. Well, thank you very much, everyone, for attending, and I appreciate talking to you. Thank you..

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