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TerraForm Power, Inc. (NASDAQ: TERP ) Q4 2014 Earnings Conference Call February 18, 2015 5:00 PM ET Executives Brett Prior – Director, Investor Relations Carlos Domenech – Chief Executive Officer Alex Hernandez – Chief Financial Officer Analysts Paul Coster – JP Morgan Angie Storozynski – Macquarie Capital Aditya Satghare – FBR Capital Markets Gregg Orrill – Barclays Julien Dumoulin Smith – UBS Brian Chin – Bank of America Merrill Lynch Brian Lee – Goldman Sachs Operator Good day, ladies and gentlemen. And welcome to TerraForm Power Fourth Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Brett Prior, Director of Investor Relations for TerraForm Power. Sir, you may begin. Brett Prior Good afternoon and thank you for joining TerraForm Power’s investor conference call and webcast covering the company’s fourth quarter financial results. I’m joined today by Carlos Domenech, Chief Executive Officer and Alex Hernandez, our Chief Financial Officer. As a customary practice, I will now review our disclosure statement. Our discussions today will refer to certain non-GAAP financial measures, including adjusted EBITDA and cash available for distribution or CAFD. Reconciliation of these non-GAAP measures has been provided in our fourth quarter earnings press release and financials, published on February 18th. Please note that this call contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management’s current expectations. We encourage you to review the Safe Harbor statement contained in today’s press release for a more complete description. In addition, this call includes only information available to us at this time. To the extent you’re listening to this call at a later date via replay, please note this information may be outdated or incomplete. With that, I will now turn the call over to Carlos Domenech, Chief Executive Officer of TerraForm Power. Carlos Domenech Thank you, Brett and good afternoon and welcome to our call. Please turn to slide number four. On today’s call, we will cover in four sections. I’ll start with an overall summary. I’ll then provide an overview of our performance since the IPO and how the company’s position to execute on our growth strategy. I’ll then hand it over to Alex Hernandez, our CFO who will walk you through our Q4 financial results on our 2015 guidance and outlook. Please turn to slide number six. Our Q4 results were ahead of plan, delivering $17 million of cash available for distribution or CAFD. We also increase our fourth quarter dividend by 20% to $1.08 per share annually. Second, as we look forward to 2015, we are reaffirming our given guidance to a $1.30 per share and $214 million of CAFD. Our fleet is currently 1.5 gigawatts that inclusive First Wind assets that were included on our closing and are now on boarding. Our current fleet is operating well. It has a current run rate of CAFD approximately $180 million. This gives us significant visibility to meet our guidance for 2015. Third, we have further enhanced our visibility to grow. And as a result, we have a much larger inventory of this sponsor Drop Downs, which stands at 3.3 gigawatts. This is our three-fold from the 1.1 gigawatt we had just eight months ago at our IPO. Fourth, we have a strong balance sheet and the ability to access multiple sources of liquidity to fund our future growth. Between our cash our revolver and the $1.5 billion warehouse facility, we have the ability to secure a $190 million of incremental CAFD. Finally, we continue to see attractive and accretive M&A opportunities. The acquisition of First Wind has more than doubled our addressable market and also has increased our acquisition pipeline. Turning to slide number eight. I would like to walk you through four key drivers of dividend growth to support the significant opportunity ahead of us. On the top left chart, you see that our sponsors expected growth conversions have doubled for 6 gigawatts to 12 gigawatts in the last eight months. The chart on the top right corners shows that our inventory for Drop Down projects has tripled and is going to 3.3 gigawatts, this is approximately 80% contracted. While our prospects for organic growth remained strong, we also have been busy on the M&A front. On the bottom left chart, you see that nearly one gigawatt of third-party acquisitions have closed since going public. And finally on the bottom right chart, CAFD guidance for 2015 has doubled to $214 million as a result of several acquisition and higher Drop Downs from our sponsor. Turning to slide number nine, the resulting type of this execution has had favorable impact across several key metrics in our IPO. For example, our fleet of installed megawatts as increased by 86%. Our EBITDA and CAFD had increased by 87% and a 100% respectively. Finally, we raised our dividend guidance by 44% and our five-year dividend growth target from 15% to 24%, which is one of the highest growth rates among our peer group. Turning to slide 10. In prior calls, we’ve indicated that we saw significant opportunities on the acquisitions front in various sizes. We also indicated that we will be very disciplined and selective going from small to medium to large transactions. When we look back at the results from last year, we have been able to close acquisitions in each of the categories. The aggregate value of the equity deployed on an accretive basis is slightly over $1.1 billion. In every instance, we have been able to generate returns in excess of 9% on a cash and cash yield basis. These transactions were part of a pretty material proprietary deal flow. Turning to slide number 11. We have built a high quality portfolio, 80% of our fleet is in the U.S. with a balance either in U.S. dollars or hedged. With the acquisition of First Wind operating assets, we now have one-third of our portfolio in wind. This provides a counterbalance to the seasonality of the solar portfolio. Alex is going to give you more perspective on that in a second. As shown on the bottom chart, the vast majority of our power plants are under two years old. They have contracts with high quality counterparties with an average credit rating of A minus and they have an average remaining PPA life of 16 years. Turning to slide 12. We wanted to give you visibility to the projects that makeup at 3.3 gigawatts of Drop Down inventory, nearly 80% of these projects are expected to come online this year and 90% of them are in the U.S. The one gigawatt of wind projects on this list is PTC eligible. Our forecast is not rely on an extension of the PTC or ITC. Turning to slide 13. Our portfolio has grown from 619 new megawatts at IPO to 1.5 gigawatts currently as a result of the completion of recent transactions. We expect to take our operating fleet to 4.9 gigawatts and as we execute on the 2.3 gigawatts of Drop Down inventory. Turning to slide 14, We thought it would be worthwhile to highlight some of the key transactions of TerraForm in 2014 and to show you the performance on a relative basis to comps and the prior market since IPO TerraForm is up 30% and SMP on our yield peer group. I’ll now turn over to Alex Hernandez, our CFO, who covered the fourth quarter results. Alex? Alex Hernandez Thank you, Carlos. Turning to slide 16, we summarize our operating and financial results for the fourth quarter. We are pleased to report that continued growth of our operating fleet. As of yearend we are 930 megawatts in operation in addition to installing another 153 megawatts of organic projects during the quarter. We also added 157 megawatts the acquisitions and Drop Downs to fleet. Taking into account the closing our First Wind which occurred in January, our full operating fleet capacity is now 1.5 gigawatts. Our assets generated 266,000 megawatt hours during the fourth quarter, reflecting a capacity factor of approximately 14%. These results are consistent with the expected seasonality in the production solar energy during the fall and winter months in North America. Revenue during the quarter was $43 million and adjusted EBITDA was $34 million. Cash available for distribution or CAFD for Q4 was $17 million. Results were slightly ahead of our plan driven by the positive impact from Q4 acquisitions and Drop Downs. Turning to slide 17, I’d like to provide you with additional visibility regarding the seasonal characteristics of our fleet. Until our recent acquisition of First Wind our portfolio was comprised of 100% solar generating assets, largely located in North America. Although solar generation is highly predictable year-on-year, solar assets are also seasonal in nature as demonstrate on the chart on the left our solar fully generates greater megawatts hours during the summer months, and fewer megawatts hours during the winter months, particularly during Q4. As you can see on the right hand side of the slide, one of the main reasons we like the First Wind operating assets that they are counter seasonal to our solar fleet. Our wind assets generate most of varying production in the fall and winter months, this was driven by high capacity factors resulting from weather fronts in the Northeast during the fall and winter months. As illustrated by the Greenline line our combined portfolio, which is now two-third solar and one-third wind will reduced seasonality and drive linearity of our business. Turning to slide 18, is worth highlighting that our results were due in part to the accelerated Drop Down from SunEdison of 76 megawatts in the fourth quarter of 2014. These Drop Downs included 50 megawatts in the UK and 26 distributed generation megawatt in the U.S. providing a combine $10 million of annual levered CAFD. Turning to slide 19, here we provided summary of the financing activities occurring Q4 as well as Q1, to some of the acquisitions of Hudson, Capital Dynamics and First Wind. I am pleased to report that we successfully completed 1.5 billion of debt and equity financings fully refinancing our capital structure preserving a quality of our balance sheet and maintaining our liquidity. Of particularly note was the execution of our inaugural $800 million unsecured green bond offerings which refinanced the product term loan. The green bonds provide us an attractive fixed-rate debt instrument for eight years at a coupon of 5, 7, 8 and current yield of 5.2%. Importantly, the down also give us significant financial flexibility to fund future growth and M&A. Pro forma for these financing’s our balance sheet as well position for the yearend. Turning to slide 20, I’d like to provide further clarity to our financial policy to fund our growth. In addition to the 3 and 3.5 times Holdco leverage policy, which we have discussed with you before, we have also target in long-term consolidated leverage of 5 to 5.5 times consolidated debt for EBITDA. Our strategies to put in place long-term amortizing that’s against our largest projects, supporting by long-term contracts to provide national deleveraging of the portfolio, while preserving Holdco debt to fund opportunistic growth and M&A. This financial policy allows us to fund our growth in a discipline manner, while preserving and enhancing the quality of our balance sheet over the long-term. We also had a philosophy of maintaining ample corporate liquidity to support our growth. As you can see in the lower chart, we more than doubled the capacity of our revolving credit facility to $550 million and have $640 million of liquidity as of January 31, 2015. We are grateful to our bank group for their support and continued confidence in TerraForm. Turning to slide 21. We wanted to provide an update on the progress that we and SunEdison have made on the Drop Down warehouse facility, which give you a significant strategic innovation to finance the growth of our business. The Drop Down warehouse facility is a $1.5 billion in aggregate size comprised of $1 billion of debt commitments and $500 million anticipated investment from First Reserve infrastructure. The Drop Down warehouse is designed to provide non-recourse capital for SunEdison to finance the construction of approximately 1.6 gigawatts of First Wind call right assets. For TerraForm, the warehouse provides increased certainty from Drop Downs and the ability to stage assets for several quarters once operational before dropping them into TerraForm. This provides TerraForm Power greater certainty on our growth trajectory for years to come. As a further update from November, we are pleased to report that we have received $1 billion of new debt commitments during this indication process of the warehouse facility which have expanded our debt syndicate. This indication has been led by BofA Merrill Lynch and Citi and has attracted 14 banks and institutional investors. This warehouse is only the first of several other innovations we are working on to create additional sources of liquidity and capital beyond the traditional capital markets, while continuing to drive cost of our capital of our business down. Turning to slide 22. Liquidity offered by corporate revolver and the warehouse facility provide TerraForm total potential liquidity of $2.1 billion to support growth. It’s fully utilized this combined liquidity allows us to capture an additional $190 million of CAFD for a portfolio. I’ll now move to session four and review our 2015 guidance and longer term outlook. Turning to slide 24. We have experienced and anticipate significant growth in EBITDA and CAFD in our business. As mentioned earlier we are reaffirming our 2015 guidance of $214 million, which represents a 100% increase since the IPO in July 2014. Importantly, the current CAFD run rate from our existing fleet as of January 31st is $180 million. This CAFD growth supports the dividend illustrated on the next slide. Turning to slide 25, I’d like to give you greater visibility to our dividend growth trajectory for 2015. As a remainder, we declared a $0.90 annualized Q3 dividend at the time of the IPO. As announced earlier, we have increased the Q4 dividend by 20% to an annualized rate of $1.08 per share. Our current CAFD run rate supports a dividend of $1.03 per share which gives us confidence in our ability to deliver our $1.30 commitment for our shareholders. We anticipate the incremental $0.07 versus our current run rate will be derived from approximately 400 megawatts of SunEdison Drop Downs during the course of 2015. Please also note that the $1.30 dividend guidance is not include incremental M&A during the year and we continue to see a healthy pipeline of third-party opportunities to further supplement our organic growth. Now I’ll turn to slide 26. In closing, we continue to focus on building a great company and delivering best-in-class dividend growth and total returns for our shareholders. This slide which we discussed at the time of the First Wind announcement in November reaffirms our view of TerraForm’s long-term dividend growth trajectory of 24%. This growth is supported by 3.3 gigawatts of call right projects at a 10 gigawatt pipeline from our sponsors’ organic development engine. We will continue our philosophy of driving strong execution, delivering on CAFD growth and translating that CAFD growth to increase dividends for our shareholders. With that, we appreciate your interest in our company and we’ll be pleased to answer your questions. Operator? Question-and-Answer Session Operator [Operator Instructions] Our first question comes from Paul Coster of JP Morgan. Your line is open. Please go ahead. Paul Coster Yes. Thanks very much for taking the questions. Put some first up perhaps you can talk a little bit about the longer term dividend growth especially with 2017 in mind. Do you anticipate a lot of pull forward activity ahead of the ITC reduction and PTC expiry and how do you think bridge from 2017 through to 2019 with the long-term guidance that you’ve given? Carlos Domenech Hi, Paul, good afternoon, thanks for join the call question. As I mentioned earlier our 3.3 gigawatts does not separate from PTC or ITC timing. So we’re to get there and as Alex mentioned we approximately need 400 megawatts to a deliver one or 2015 growth rate. So I think we are pretty well said for 2015. When you look at 16, 17 and 3.3 gigawatts minus the 400 megawatts for 2016, for 2015 I apologize. We didn’t plenty of visibility to grow also as I mentioned earlier we look at our presentation and see a trajectory quarter-over-quarter, page number eight. Let me turn that we talked you, we consistently that increase for our number and also with our sponsor SunEdison at the IPO were 6 gigawatts and now we sit at approximately 12 gigawatts of conversion. So when you think about how we are able to move consequently our call rights from 1.1 to 3.3 the three times increase. That value generate during eight months, so I just a tremendous confidence also when you think about M&A, Paul, we got it just shy of a gigawatt and in eight months and first of all market now with First Wind as more than double. So we really like where we are we continue to see significant M&A opportunity and as soon as continues to pick a momentum so we feel pretty comfortable. Paul Coster I appreciate it. Just one other question so you talk to this warehouse facility and how it allows SunEdison to hope that projects with several quarters improving a visible set up we understand that why their abilities to hold it back for few quarters improving your visibility? Alex Hernandez Paul, it’s Alex, thank you for the question. What is say it give us somewhat of tremendous flexibility so they can focus their capital on developing the pipeline on developing additional projects. Once the project is dropped into the warehouse and gets constructed and considering the warehouse while it becomes operational for several quarters and so we have at our sole option the ability to pull down a project into TerraForm, when we choose and I could be at COD it could be a quarter or two after COD, but it gives us again a lot of flexibility to having warehouse that can store the assets until ready to pull them down on our collections. Carlos Domenech And I’ll just stop there, Paul, when you think about our growth, we are affecting class and frankly we believe that we have ample opportunity to accelerated. So let me see some point you may have make much essentially just continue to drop assets into the vehicle. We like to ensure that we are timing this Drop Downs that makes or so simple one to build financial flexibility both for SunEdison and of course for the shareholders of TerraForm and do it on our [indiscernible]. Paul Coster Excellent, thanks very much. Operator Okay. Our next question comes from Angie Storozynski from Macquarie Capital. Your line is open, please go ahead. Angie Storozynski Thank you. So your points put out a number of announcement do you have any apparent with additional renewable projects and yet you’ve kept your 24% CAFD trigger I am change, this something that we should expect due to update on only for the much higher gross pipeline that First Wind seems to have right now. Carlos Domenech Yeah, Angie, thanks for the question. We are simply speaking to our execute CAFD growth I think I was – you look at page 25 and its important there to highlight. We’ve on-boarded already the first new projects. So on that’s a $1.23, so the deliver on the $1.30, seven additional cents with 3.3 gigawatts, we like where we are. As we continue to execute on our quarterly basis we will revise the 24% growth. Angie Storozynski Okay, because when you guys acquired First Wind you showed us that 24% based on the original 1,600 megawatts of growth. Right now, it seems like the First Wind has doubled that number right, I mean, I’m just trying to make sure I understand it. Okay and so – and you are still keeping it at 24%. Carlos Domenech Yeah. You got it, right now again we are frankly far ahead of most at all on that total return and total growth and we are going to continue to execute and yes we think that we can execute on that long-term guidelines that we’re giving you and whether we do M&A or acceleration of those projects. We’re going to take one quarter at a time. Angie Storozynski Awesome, thank you, and just one follow-up, could you talk about your foreign exchange exposure and your address and what kind of sensitivity for the next year or two we should expect. Carlos Domenech Yes, Alex? Alex Hernandez Angie, thanks for the question, it’s Alex. So to start, I think approximately 80% of our assets are in U.S, a little bit over 90% or U.S. dollar denominated and so less than 10% have currency exposure to them and less largely in U.K. with some diminimus amount in Canada. Of the 10%, we’ve hedged nearly all of it for a period of three years and so we have the diminimus currency exposure for the next three years, there is a CAFD has been hedged. Angie Storozynski Okay, thank you. Carlos Domenech Thank you. Alex Hernandez Thank you. Operator Our next question comes from Aditya Satghare from FBR Capital Markets. Your line is open. Please go ahead. Aditya Satghare Thank you. Good evening guys. Carlos Domenech Aditya, how are you. Aditya Satghare So two questions from my side, one sort of a market question here, so we got a small window of opportunity with the PTC extension, what impact do you think that could have on potential acquisition activity in 2015 within the lease sector. Carlos Domenech Yeah, Aditya, great question, the 1.6 gigawatt that we have is already there from a PTC, ITC and so is that a one gigawatt in wind too, we’re good and that’s great. Now beyond that when we talk to the First Wind team and SunEdison, we saw an opportunity to take down an incremental at 1.5 gigawatts of capacity, PTC capacity. So that’s incremental to what we already have that capacity, we expect to be put to work over the next three, six months is already qualified. So we like that and it’s a simple of that incremental 1.6 gigawatts of capacity that we will have visibility access too. On top of that, what we’re seeing in the industry is some of the small medium players are want to de-risk the execution and are looking for folks that can work with them. And frankly many of the financial institutions do not want to take any exposure, so there is – I’ll call it as a slight quality that is also benefiting us, so those are the three factors that we have for growth for us. Aditya Satghare Thanks. That’s very helpful and then just one follow-up, Alex, you mentioned that there is a $1 billion of syndicated debt capacity. Is that on top of the $1.5 billion liquidity for the warehouse facility or is that inclusive of that? Alex Hernandez It’s inclusive of it. You may remember the time of the deal announcement in November we had the full amount of debt committed from six investment banks in our bank group. Since November, we’ve undertaken a syndication process and so now that facility have garnered a lot of interest in its fully distributed among about 14 institutions, both banks and other financial investors. So we’re seeing some good interest and are very pleased that all of the debt was successfully spoken for. Carlos Domenech I would add to that, Alex mentioned it on our prepared remarks that we have several avenues to our capacity for capital. The structure works because it’s a blind pool of capital. There are specific projects that go against it and given the economics embedded into the structure and the sponsor with SunEdison and then the uptake from TERP. We believe that facility could be scale, but we wanted to show you here what’s committed. We have the ability to flex that up. Aditya Satghare All right, thank you. Thanks for the updates. Operator Our next question comes from Gregg Orrill from Barclays. Your line is open, please go ahead. Gregg Orrill Yes, thank you. I just wanted to double check with the 2015 adjusted EBITDA guidance of $374 million, is that guide up or is there something in comparability that right now, comparable and if you applying guidance. Carlos Domenech Hi, Gregg, thanks for your question. It some just an update that is consistent with our 2014, so again I would say no change I would simple is consistent with 2014. Gregg Orrill Okay, thanks. Carlos Domenech Thank you. Operator Thank you. [Operator Instructions] Our next question comes from Julien Dumoulin-Smith from UBS. Your line is open, please go ahead. Julien Dumoulin Smith Hi, good afternoon. Carlos Domenech Hi, good afternoon, Julien, how are you? Julien Dumoulin Smith Congrats. Carlos Domenech Thank you. Julien Dumoulin Smith I wanted to ask about potential ROFO deals, firstly I’m curious just energy from a left interesting open the door there with the latest press release have been, where do that stand have been when opportunity is that – thoughts and then perhaps more broadly we’ve heard an industry from dominion perhaps potentially others, all potentially a ranging deals with top tier close like yourselves. To monetize their own portfolio of asset, so what your thoughts more broadly by ROFO deals and then more specifically just energy ROFO you have. Carlos Domenech Great, Julien, very big question look at. I wanted comment specifically just on, just energy, while we’ve seeing while we said before actually one of work with folks we could moment one transaction and when we talk about proprietary deal flow embedded into that is literally 100 of relationships with those have different opportunities that bring to us. And that’s part of the [indiscernible] that we have built those over years and we continue to value those – that’s been continue to be very freighting part of our growth and we create value our statement inconsistent my view with aggregate to just energy simple world. So yes, simple answer to – we have expectations for about in others. I said potentially to the medium and it’s first I would [indiscernible] the meaningful their approach to the renewables and how they’re in the last earnings call. I know take other unfortunate well. We want to work with the ITC several well in partner with them. I think that creates on opportunity, first, we are in discussions with the some big close up there that may not have necessarily the deal flow that we do. We frankly see really large set of opportunity, so we cut the deal flow and we caught the ability to structure deals work with our sponsor another large with utilities or we are happy to partner with those. Welcome back I think that you’re going to see some of the utility their more progressive – perhaps trying to our partner with the yield goes. I think that’s really a structural necessity that is respond to happen and we are happy to participating will be participating in the process. Julien Dumoulin Smith Got you. And then fast moving on in terms of your backlog of rather than somewhat assume TerraForm backlog, if you can comment what extended that backlog is emerging markets and kind have probably dedicated chose another yield vehicle versus what can we kind of say is dedicated back towards to yourself or cannot moving that on this eligible through this out being call OCD structure. Carlos Domenech Yeah, Gregg, great question. We look at first when we talk clarify, the 3.3 gigawatts so we have what we call Drop Down inventory that’s already literally from structurally secure to – I said while make sure that’s clear. From the SunEdison when you see that the conversion final we – as a matter of process pick the assets that we believed our in the next 24 months and we’re going to [indiscernible] constructions which medicine and we ultimately ups and down. So in the process well commit my brands are number of that roughly about two-third or some I think will said in the past or markets are projects that take our underwriting criteria and remaining is for emerging markets. You will year Ahmad and Brian talk more about that but you can see today just with the growth that the install base of operating project, we’ve got more than we can chew up for now. Julien Dumoulin Smith Great. And then a last one following up on your First Wind transaction and you think about the wind market and tapping into that, is it necessary to build out or – build out organically to tax build the national opportunity here or do you need to do another development like acquisition to build out the sufficient capacity to kind of grasp the national opportunity. Carlos Domenech Yeah, great question. I’m glad you asked that. On the beginning we said we started with solar and we said that for wind in particular if we do something we’ll do it with a SunEdison like machine and that was really First Wind. First Wind has the development engine and has the culture on the D&A, people that we like to work with just like the folks at SunEdison and very importantly they have a tremendous asset management, services capability that could scale easily to five gigawatts with spending another marginal dollar. So we believe that with First Wind, SunEdison has what it needs to scale not just in the U.S., but also globally, so that creates tremendous synergies in competitive advantages for SunEdison and there for us. So now we have the opportunity and we are aggressively pursuing transactions that are operating our portfolios, but also you’re going to see overtime, our First Wind updating that organic growth engine as they’re organically developed projects. Is that answered your question? Julien Dumoulin Smith Congrats again on the First Wind deal couldn’t agree with you more. Carlos Domenech Yeah, thank you. We were really pleased that the assets were I’ve been awarded and they are cranking and we’re extremely pleased with the performance and everything which is working away we anticipated it would. Julien Dumoulin Smith Thank you. Operator Thank you. [Operator Instructions] And our next question comes from Brian Chin from Bank of America Merrill Lynch. Your line is open. Please go ahead. Brian Chin Hi, good afternoon. Carlos Domenech Hi, Brian, how are you. Brian Chin Very good, thanks. You guys brought up a really interesting point about how when you added the wind portfolio to your solar assets. You’ve reduced the seasonality profile of the fleet. Is that mean at some point in the future if you continue to reduce that seasonality or maintain at a much less seasonal up and down pattern, that there is room for potentially tightening the spread between your dividend and your CAFD or does that relation would be referring that potential tightening of that question going forward. Alex Hernandez Brian, thank you for the question. I think what I say is we continue to manage the business to predictability both on a year-over-year basis as well as a quarterly basis and that was one of many factors that we really like when we were looking at the First Wind transaction. As you know, they have got assets in the Northeast. Those assets run fast when the wind blows in the fall and winter. They have other projects in Hawaii which are driven by entirely different regimes and so there is really nice balance diversification in all of which was translate to our CAFD profile being more linear to the year. Now having said that, we’ll look at that those characteristics for every transaction in Drop Down that we do and look at on the portfolio basis, but I think for the moment, we’re quite comfortable with our 85% payout, but we’ll continue to drive the business towards predictability both quarter-on-quarter and year-on-year. Carlos Domenech Yeah, Brian, I would just add to what Alex said is what do you see on that from page 17 is not an accident on the top right and those numbers are not, they are not illustrative of the real numbers. So we spent a lot of time in and I’ll just say we’re in the business, some of you might have probably tired of hearing me say this, but we’re in the business of reducing variability that’s what we do because we want to be consistent on our portfolio, diversification and therefore predictability on outcomes, that’s why when you asked the question, how much more you’re going to bring – at some point growth for us and excess growth is not an issue. But we’re working very hard just to build the portfolio that has tremendous predictability and consistency and that’s what you see on the right hand side. We expect as we continue to increase our fleet that the variability quarter-by-quarter will continue to smooth out as we bring different asset types and different locals with different fuel types. So I like the green curves. We’re not done with it yet and it’s a key core as to when we underwrite deals were not simply just bringing CAFD. The quality of that CAFD now just from an all-state point of view, but also how we shapes up is important to us. Brian Chin Very helpful. Thank you very much. Carlos Domenech Thank you for the question. Operator Thank you. Our next question comes from Brian Lee from Goldman Sachs. Your line is open. Please go ahead. Brian Lee Hey guys, sorry, I was on mute and apologies if some of these questions have been asked, first I had to jump on late, first thing on your guidance, I just wanted to better understand and clarify the CAFD versus dividend per share outlook, so the CAFD guidance for $248 million that includes Drop Down, is that translate to the $1.30 per share dividend for 2015 or there another target associated with that CAFD for the year? Alex Hernandez Brian, it’s Alex. Thanks for the question. Yes, the $240 million of CAFD guidance for the year translates directly to the $1.30 dividend guidance as well. Today, we’re – we’re at $180 million run rate from our existing portfolio and so the balance little over $40 million of run rate CAFD is coming from incremental Drop Downs from SunEdison during the balance of the year. Brian Lee Okay, that’s helpful. Carlos Domenech I was very temped if we go to page 25 to actually just put the CAFD numbers there for you is make it even simpler, but I got too busy. If you look at the $1.23 is a $1.80 what was tricky in our business and I know you guys wrestle with this is a run rate right, so with First Wind which effectively on boarded on January. We now have a 1.5 operating fleet, so it’s fully I’ll call it integrated is working as cranking like the performance, this is exactly how we wanted to be, so we got $1.80 already, sorry, $180 million already on that January run rate. So the $1.30 simply us ramping up to $214, now if we were to ask me well if you exit throughout the year, that $214 million is a lot larger on a full 12-month basis because we’re simply adding CAFD throughout the year. That’s one when we look at the $0.07 on 2015, it’s only 400 megawatts associated with that because it’s just we added over the quarters, but yes of course Angie is saying, what I mean you got 3.3 gigawatt it seems like you got lot more, but the answer is yes. Brian Lee Okay, I appreciate the color that’s very helpful. Couple of more from me and I’ll pass it on I guess again on the guidance, this time looking longer term out. I was curious can you quantify how much of your 2017 $1.90 per share dividend target is already covered by the First Wind for SunEdison call rights portfolio I just stand is now and then how much would need to come from proposal if we were looking at it kind of these out year targets. Alex Hernandez Thanks, Brian, its Alex. As you look at 2017, most of that $1.90 is covered by the 3.3 gigawatt backlog that we referred to so that backlog is also largely contracted, so we feel very good about having that backlog work its way through the machine to deliver that $1.90. Brian Lee Okay. Carlos Domenech I made the comment earlier on another question that was similar that the numbers that you see here do not assume any M&A. So yeah we gone about gigawatts last eight months where we feel another gigawatt in the next eight months mainly maybe not, SunEdison continue to grow it’s organic engine maybe, maybe not but we like what we are, we like the trends and frankly was doubling our addressable market with First Wind where we got now yet another element for growth that gives us a lot of comfort. Brian Lee Yeah, okay, that’s helpful and then last one from me on that First Wind acquisition I think you mentioned at the time of the acquisition CAFD had $221 million from their pipeline and is that include just the backlog additions or does that also assume full conversion or maybe some partial conversion of the 500 plus megawatts of pipeline. Carlos Domenech Yeah, so the backlog number is approximately 1.4, the pipeline number inclusive of the backlog if 1.6 and so the $220 million number Brian equates to the 1.6 gigawatts of backlog in pipeline. Brian Lee Okay, so you are assuming just to clarify that the full conversion of anything that is in yet considered backlog to eventually become backlog? Carlos Domenech No, the First Wind had a much broader pipeline of opportunities and so we are assuming that only $200 million to $300 million of that pipeline converts into backlog to get you to that number. Carlos Domenech So as your answer is we expect a conversion overtime that’s the simple answer. Brian Lee Okay. Thanks guys. Carlos Domenech Thank you. The other thing I’ll mention as you guys think about portfolio is we haven’t talk much about this one yet, but we did mentioned this on another call is we like to continue to optimize the operational elements so our fleet we often focus on Drop Downs and acquisitions as we’re looking to the 2019 period. We do think about how do we drive higher performance out of the fleet and that’s under the element Brian that’s supporting in our ticket. Operator Thank you. I’m showing no further questions at this time. Brett Prior Great. We appreciate your join us on afternoon and we welcome your questions and look forward to just speaking to you in the next few days and our next call. Thank you. Carlos Domenech Thank you. Operator Ladies and gentlemen, thanks for participating in today’s conference. This concludes our program. You may disconnect. 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