UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K/A
 
Amendment No. 1
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): January 2, 2015
 
NRG YIELD, INC.
(Exact name of Registrant as specified in its charter)
 
Delaware
(State or other jurisdiction of
incorporation)	 	001-36002
(Commission File Number)	 	46-1777204
(IRS Employer Identification No.)	
 
211 Carnegie Center, Princeton, New Jersey 08540
(Address of principal executive offices, including zip code)
 
(609) 524-4500
(Registrant’s telephone number, including area code)
 
N/A
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

 

 
Introductory Note
 
As previously reported, on January 2, 2015, NRG Yield, Inc. (“NRG Yield” or the “Company”) completed its previously announced acquisition of (i) 100% of the membership interests of Mission Wind Laredo, LLC, which indirectly owns Laredo Ridge, a 81 MW wind facility located in Petersburg, Nebraska (“ Laredo Ridge ”), from NRG Wind LLC (“ NRG Wind ”), (ii) 100% of the membership interests of Tapestry Wind LLC, which indirectly owns three wind facilities totaling 204 MW, including Buffalo Bear, a 19 MW wind facility in Oklahoma, Taloga, a 130 MW wind facility in Oklahoma, and Pinnacle, a 55 MW wind facility in West Virginia (Pinnacle, together with Buffalo Bear and Taloga, “ Tapestry ”), from NRG Wind, and (iii) 100% of the membership interests of WCEP Holdings, LLC, which indirectly owns Walnut Creek, a 485 MW natural gas facility located in City of Industry, California (“ Walnut Creek ”, together with Laredo Ridge and Tapestry, the “ Drop-Down Assets ”), from NRG Arroyo Nogales LLC (“ NRG Arroyo Nogales ” and, together with NRG Wind, the “ Sellers ”), pursuant to those certain purchase and sale agreements with the Sellers, each of which are wholly-owned subsidiaries of NRG Energy, Inc. This Current Report on Form 8-K/A (the “ Form 8-K/A ”) amends the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on January 6, 2015 to include the financial statements of the Drop-Down Assets and the pro forma financial information required by Items 9.01(a) and 9.01(b), respectively, and to include the exhibits under Item 9.01(d) of this Form 8-K/A.
 
Section 9 - Financial Statements and Exhibits
 
Item 9.01                                           Financial Statements and Exhibits.
 
(a)                                 Financial Statements of Businesses Acquired.
 
The audited financial statements of Laredo Ridge Wind, LLC as of December 31, 2013 and 2012, and for each of the two years in the period ended December 31, 2013, and the unaudited financial statements of Laredo Ridge Wind, LLC as of September 30, 2014 and for the nine months ended September 30, 2014 are attached to this Form 8-K/A as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference.
 
The audited consolidated financial statements of WCEP Holdings, LLC and its subsidiaries as of December 31, 2013, and for the year ended December 31, 2013, and the unaudited consolidated financial statements of WCEP Holdings, LLC and its subsidiaries as of September 30, 2014 and for the nine months ended September 30, 2014 are attached to this Form 8-K/A as Exhibits 99.3 and 99.4, respectively, and are incorporated herein by reference.
 
The audited consolidated financial statements of Tapestry Wind, LLC and its subsidiaries as of December 31, 2013 and 2012, and for each of the two years in the period ended December 31, 2013, and the unaudited consolidated financial statements of Tapestry Wind, LLC and its subsidiaries as of September 30, 2014 and for the nine months ended September 30, 2014 are attached to this Form 8-K/A as Exhibits 99.5 and 99.6, respectively, and are incorporated herein by reference.
 
(b)                                 Pro Forma Financial Information.
 
The unaudited pro forma condensed combined consolidated financial statements and explanatory notes relating to the Company’s acquisition of the Drop-Down Assets are attached as Exhibit 99.7 to this Form 8-K/A and are incorporated herein by reference.
 
(d)                                 Exhibits.
 
The Exhibit Index attached to this Form 8-K/A is incorporated herein by reference.
 
2

 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 	NRG Yield, Inc.	
 	 	
 	By:	/s/ Brian E. Curci	
 	 	Brian E. Curci	
 	 	Corporate Secretary	
 
Dated: January 16, 2015
 
3

 
EXHIBIT INDEX
 
Exhibit No.	 	Document	
23.1	 	Consent of KPMG LLP.	
23.2	 	Consent of KPMG LLP.	
23.3	 	Consent of KPMG LLP.	
99.1	 	Audited financial statements of Laredo Ridge Wind, LLC as of December 31, 2013 and 2012, and for each of the two years in the period ended December 31, 2013.	
99.2	 	Unaudited financial statements of Laredo Ridge Wind, LLC as of September 30, 2014 and for the nine months ended September 30, 2014.	
99.3	 	Audited consolidated financial statements of WCEP Holdings, LLC and its subsidiaries as of December 31, 2013, and for the year ended December 31, 2013.	
99.4	 	Unaudited consolidated financial statements of WCEP Holdings, LLC and its subsidiaries as of September 30, 2014 and for the nine months ended September 30, 2014.	
99.5	 	Audited consolidated financial statements of Tapestry Wind, LLC and its subsidiaries as of December 31, 2013 and 2012, and for each of the two years in the period ended December 31, 2013.	
99.6	 	Unaudited consolidated financial statements of Tapestry Wind, LLC as of September 30, 2014 and for the nine months ended September 30, 2014.	
99.7	 	Unaudited pro forma combined consolidated financial statements and explanatory notes for the year ended December 31, 2013 and the nine months ended September 30, 2014.	
 
4

Exhibit 23.1
 
Consent of Independent Auditors
 
The Management Committee
Laredo Ridge Wind, LLC:
 
We consent to the incorporation by reference in the registration statement (No. 333-190071) on Form S-8 of NRG Yield, Inc. of our report dated March 28, 2014, with respect to the balance sheets of Laredo Ridge Wind, LLC as of December 31, 2013 and 2012, and the related statements of income, comprehensive income (loss), member’s equity and cash flows for the years ended December 31, 2013 and 2012, which report appears in the Form 8-K/A of NRG Yield, Inc. dated January 16, 2015.
 
(signed) KPMG LLP
 
Los Angeles, California
January 16, 2015

Exhibit 23.2
 
Consent of Independent Auditors
 
The Management Committee
WCEP Holdings, LLC:
 
We consent to the incorporation by reference in the registration statement (No. 333-190071) on Form S-8 of NRG Yield, Inc. of our report dated April 30, 2014, with respect to the consolidated balance sheet of WCEP Holdings, LLC as of December 31, 2013, and the related consolidated statements of income, comprehensive income, member’s equity and cash flows for the year ended December 31, 2013, which report appears in the Form 8-K/A of NRG Yield, Inc. dated January 16, 2015.
 
(signed) KPMG LLP
 
Los Angeles, California
January 16, 2015

Exhibit 23.3
 
Consent of Independent Auditors
 
The Management Committee
Tapestry Wind, LLC:
 
We consent to the incorporation by reference in the registration statement (No. 333-190071) on Form S-8 of NRG Yield, Inc. of our report dated April 23, 2014, with respect to the consolidated balance sheets of Tapestry Wind, LLC as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income (loss), member’s equity and cash flows for the years ended December 31, 2013 and 2012, which report appears in the Form 8-K/A of NRG Yield, Inc. dated January 16, 2015.
 
(signed) KPMG LLP
 
Los Angeles, California
January 16, 2015

Exhibit 99.1
 
LAREDO RIDGE WIND, LLC
(A Delaware Limited Liability Company)
 
Financial Statements
 
December 31, 2013 and 2012
 
(With Independent Auditors’ Report Thereon)

 
LAREDO RIDGE WIND, LLC
(A Delaware Limited Liability Company)
 
Table of Contents
 
 	Page(s)	
 	 	
Independent Auditors’ Report	1	
 	 	
Financial Statements:	 	
 	 	
Balance Sheets	2	
 	 	
Statements of Income	3	
 	 	
Statements of Comprehensive Income (Loss)	4	
 	 	
Statements of Member’s Equity	5	
 	 	
Statements of Cash Flows	6	
 	 	
Notes to Financial Statements	7–13	

 
Independent Auditors’ Report
 
The Management Committee
Laredo Ridge Wind, LLC:
 
We have audited the accompanying financial statements of Laredo Ridge Wind, LLC, which comprise the balance sheets as of December 31, 2013 and 2012, and the related statements of income, comprehensive income (loss), member’s equity, and cash flows for the year then ended, and the related notes to the financial statements.
 
Management’s Responsibility for the Financial Statements
 
Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
 
Auditors’ Responsibility
 
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
 
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
 
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
 
Opinion
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Laredo Ridge Wind, LLC as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the year then ended in accordance with U.S. generally accepted accounting principles.
 
/s/ KPMG LLP
Los Angeles, California
March 28, 2014
 
1

 
LAREDO RIDGE WIND, LLC
(A Delaware Limited Liability Company)
Balance Sheets
December 31, 2013 and 2012
(In thousands)
 
 	 	2013	 	2012	 	
Assets	 	 	 	 	 	
Current assets:	 	 	 	 	 	
Cash and cash equivalents	 	$	2,911	 	2,735	 	
Accounts receivable	 	1,436	 	1,364	 	
Inventory	 	455	 	—	 	
Prepaid expenses and other current assets	 	140	 	511	 	
Total current assets	 	4,942	 	4,610	 	
Noncurrent assets:	 	 	 	 	 	
Wind energy generating system, net of accumulated depreciation of $27,328 and $17,956 in 2013 and 2012, respectively	 	160,012	 	169,384	 	
Deferred financing costs, net	 	3,055	 	3,477	 	
Long-term restricted cash	 	334	 	334	 	
Inventory deposits	 	—	 	425	 	
Total assets	 	$	168,343	 	178,230	 	
Liabilities and Member’s Equity	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	
Accounts payable	 	$	326	 	620	 	
Accounts payable to related parties	 	41	 	91	 	
Accrued liabilities	 	182	 	311	 	
Current maturities of long-term debt	 	2,922	 	2,664	 	
Interest payable	 	12	 	12	 	
Total current liabilities	 	3,483	 	3,698	 	
Long-term debt	 	65,729	 	68,651	 	
Deferred revenue, net	 	49,939	 	52,862	 	
Long-term derivative liabilities	 	3,358	 	8,972	 	
Asset retirement obligation	 	5,025	 	4,729	 	
Total liabilities	 	127,534	 	138,912	 	
Commitments and contingencies	 	 	 	 	 	
Member’s equity	 	40,809	 	39,318	 	
Total liabilities and member’s equity	 	$	168,343	 	178,230	 	
 
See accompanying notes to financial statements.
 
2

 
LAREDO RIDGE WIND, LLC
(A Delaware Limited Liability Company)
Statements of Income
Years ended December 31, 2013 and 2012
(In thousands)
 
 	 	2013	 	2012	 	
Operating revenues:	 	 	 	 	 	
Lease revenue	 	$	16,506	 	15,995	 	
Grant revenue	 	2,923	 	2,923	 	
Energy sales and other revenues	 	5	 	3	 	
Total operating revenues	 	19,434	 	18,921	 	
Operating expenses:	 	 	 	 	 	
Depreciation and accretion	 	9,668	 	9,650	 	
Maintenance and other operating costs	 	3,607	 	3,419	 	
General and administrative	 	31	 	147	 	
Total operating expenses	 	13,306	 	13,216	 	
Income from operations	 	6,128	 	5,705	 	
Interest expense	 	(4,919	)	(5,110	)	
Net income	 	$	1,209	 	595	 	
 
See accompanying notes to financial statements.
 
3

 
LAREDO RIDGE WIND, LLC
(A Delaware Limited Liability Company)
Statements of Comprehensive Income (Loss)
Years ended December 31, 2013 and 2012
(In thousands)
 
 	 	2013	 	2012	 	
Net income	 	$	1,209	 	595	 	
Other comprehensive income:	 	 	 	 	 	
Unrealized gains (losses) on derivatives qualified as cash flow hedges:	 	 	 	 	 	
Unrealized holding gains (losses) arising during the period	 	5,614	 	(968	)	
Other comprehensive gain (loss)	 	5,614	 	(968	)	
Comprehensive income (loss)	 	$	6,823	 	(373	)	
 
See accompanying notes to financial statements.
 
4

 
LAREDO RIDGE WIND, LLC
(A Delaware Limited Liability Company)
Statements of Member’s Equity
Years ended December 31, 2013 and 2012
(In thousands)
 
 	 	Mission Wind Laredo, Inc.	 	 	 	
 	 	 	 	 	 	 	 	Accumulated	 	 	 	
 	 	 	 	 	 	 	 	other	 	Total	 	
 	 	 	 	 	 	Retained	 	comprehensive	 	member’s	 	
 	 	Contributions	 	Distributions	 	deficit	 	loss	 	equity	 	
Balance at December 31, 2011	 	$	132,810	 	(77,345	)	(2,750	)	(8,004	)	44,711	 	
Distributions to member	 	—	 	(5,020	)	—	 	—	 	(5,020	)	
Net income	 	—	 	—	 	595	 	—	 	595	 	
Other comprehensive loss	 	—	 	—	 	—	 	(968	)	(968	)	
Balance at December 31, 2012	 	132,810	 	(82,365	)	(2,155	)	(8,972	)	39,318	 	
Distributions to member	 	—	 	(5,332	)	—	 	—	 	(5,332	)	
Net income	 	—	 	—	 	1,209	 	—	 	1,209	 	
Other comprehensive income	 	—	 	—	 	—	 	5,614	 	5,614	 	
Balance at December 31, 2013	 	$	132,810	 	(87,697	)	(946	)	(3,358	)	40,809	 	
 
See accompanying notes to financial statements.
 
5

 
LAREDO RIDGE WIND, LLC
(A Delaware Limited Liability Company)
Statements of Cash Flows
Years ended December 31, 2013 and 2012
(In thousands)
 
 	 	2013	 	2012	 	
Cash flows from operating activities:	 	 	 	 	 	
Net income	 	$	1,209	 	595	 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	
Depreciation, amortization and accretion	 	10,090	 	10,089	 	
Amortization of deferred revenue	 	(2,923	)	(2,923	)	
Changes in assets and liabilities:	 	 	 	 	 	
Accounts receivable	 	(72	)	134	 	
Prepaid expenses and other current assets	 	371	 	(376	)	
Inventory deposits	 	425	 	—	 	
Inventory	 	(455	)	—	 	
Accounts payable	 	(344	)	522	 	
Accrued liabilities	 	(129	)	(14	)	
Interest payable	 	—	 	(14	)	
Net cash provided by operating activities	 	8,172	 	8,013	 	
Cash flows from investing activities:	 	 	 	 	 	
Capital expenditures	 	—	 	(19	)	
Decrease in long-term restricted cash	 	—	 	83	 	
Net cash provided by investing activities	 	—	 	64	 	
Cash flows from financing activities:	 	 	 	 	 	
Distributions to member	 	(5,332	)	(5,020	)	
Repayment of long-term debt	 	(2,664	)	(2,610	)	
Net cash used in financing activities	 	(7,996	)	(7,630	)	
Net increase in cash and cash equivalents	 	176	 	447	 	
Cash and cash equivalents at beginning of year	 	2,735	 	2,288	 	
Cash and cash equivalents at end of year	 	$	2,911	 	2,735	 	
Supplemental disclosure of cash flow information:	 	 	 	 	 	
Cash paid during the year for interest	 	$	4,466	 	4,687	 	
 
See accompanying notes to financial statements.
 
6

 
(1)                     The Company
 
Laredo Ridge Wind, LLC (the Company), a Delaware limited liability company, a wholly owned subsidiary of Mission Wind Laredo, Inc. (MWL), which is a wholly owned subsidiary of Edison Mission Wind, Inc. (EM Wind), in turn a wholly owned subsidiary of Edison Mission Energy (EME), was formed to construct  and operate a 79.9-megawatt (MW) wind powered electricity-generating system composed of 54 General Electric Company  1.5 MW generators, a power collection system, and power substation (the Windsystem) located in Boone County, Nebraska. Electricity generated by the Windsystem is sold under a power purchase agreement to Nebraska Public Power District. The Windsystem commenced commercial operations on February 1, 2011.
 
On December 17, 2012, EME filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division (the Bankruptcy Court). EME remains in possession of its property and continues its business operations uninterrupted as a “debtor in possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and order of the Bankruptcy Court.
 
On October 18, 2013, EME entered into an acquisition agreement with NRG Energy, Inc. (NRG), that provides for a sale of substantially all of EME’s assets to NRG including its member interests in the Company. The sale is expected to be completed by April 2014.
 
A summary of the major agreements entered into by the Company is set forth below:
 
(a)                     Nebraska Public Power District Power Purchase Agreement
 
The Company sells electricity generated by the turbines to Nebraska Public Power District (NPPD) pursuant to a power purchase agreement (PPA) with a term extending for 20 years from the commercial operation date of February 1, 2011. The terms of the agreement provide for energy rates escalating by 2.5% on an annual basis, as defined in the agreement. Due to the concentration of sales to NPPD, the Company is exposed to credit risk of potential nonperformance by NPPD, which could impact liquidity if NPPD were to experience financial difficulties. As of December 31, 2013 and 2012, NPPD’s credit and long-term senior secured issuer ratings from Standard & Poor’s were A and A+, respectively; ratings from Moody’s Investors Service were A1 and A1, respectively.
 
(b)                     Southwest Power Pool, Inc. Standard Large Generator Interconnection Agreement
 
The Company entered into an interconnection agreement with Southwest Power Pool, Inc. on March 5, 2010 with a term extending for 20 years with provisions for extension.
 
(c)                      General Electric International, Inc. Turbine Operations Support Agreement
 
The Company contracted with General Electric International, Inc. (GE) to provide certain warranty, maintenance, and repair services. The agreement, including extensions, covers a five-year period, which commenced at turbine completion in November 2010. Payments are subject to an annual escalation clause. Total fees incurred for the years ended December 31, 2013 and 2012 were $1,487,000 and $1,458,000, respectively.
 
(d)                     Windsystem Operation and Maintenance Agreement
 
The Company entered into an agreement with Edison Mission Operation & Maintenance, Inc. (EMOM), a wholly owned subsidiary of EME, to provide operation and maintenance services for the balance of plant not covered by the maintenance and service agreement with GE. The agreement has
 
(Continued)
 
7

 
an initial term of five years commencing on May 27, 2010, with provision for annual automatic extension until terminated. The Company incurred costs from EMOM for the years ended December 31, 2013 and 2012 in the amounts of $552,000 and $516,000, respectively. These costs are included in maintenance and other operating costs in the statements of income.
 
(e)                      Wind Park Leases and Easement Agreements
 
The Company has entered into various lease and easement agreements, which grant the Company nonexclusive easement rights to use the land on which the turbines, the substation, operations building, access roads, and other related equipment are located. The Company is obligated to pay easement fees of $6,750 per turbine, which are adjusted annually by 2.5%, plus any crop damage fees. The Company incurred easement fees of $438,000 and $444,000 for the years ended December 31, 2013 and 2012, respectively. These costs are included in maintenance and other operating costs in the statements of income.
 
(2)                     Significant Accounting Policies
 
(a)                     Basis of Presentation
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
(b)                     Cash and Cash Equivalents
 
The Company considers cash and cash equivalents to include cash and money market fund investments. The carrying value of cash and cash equivalents approximates fair value due to money market investments having original maturities of less than three months.
 
(c)                      Derivative Instruments
 
The Company uses interest rate swaps to manage its interest rate exposure on long-term debt. Authoritative guidance on derivatives and hedging establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts). The Company is required to record derivatives on its balance sheets as either assets or liabilities measured at fair value unless otherwise exempted from derivative treatment as a normal sale and purchase. All changes in the fair value of derivative instruments are recognized in earnings, unless specific hedge criteria are met that requires the Company to formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.
 
The accounting guidance for cash flow hedges provides that the effective portion of gains or losses on derivative instruments designated and qualifying as cash flow hedges be reported as a component of other comprehensive income and be reclassified into earnings in the same period that the hedged transaction affects earnings. The remaining gains or losses on the derivative instruments, if any, must be recognized currently in earnings. Derivative and hedging accounting policies are discussed further in note 4 — Derivative Instruments and Risk Management.
 
(Continued)
 
8

 
(d)                     Deferred Financing Costs
 
Deferred financing costs consist of legal fees and closing costs incurred by the Company in obtaining its financing. These costs are amortized using the effective interest method over the term of the financial obligation. As of December 31, 2013 and 2012, accumulated amortization totaled $2,250,000 and $1,827,000, respectively. Amortization expense was $422,000 and $439,000 in 2013 and 2012, respectively, and is included in interest expense in the statements of income.
 
(e)                      Long-Term Restricted Cash
 
Long-term restricted cash consists of debt service or collateral reserves required by the Company’s debt agreements.
 
(f)                        Wind Energy Generating System
 
Plant and equipment are stated at cost. The plant balance includes all costs associated with the acquisition, development, and construction of the Windsystem. Depreciation is recorded using the straight-line method over the Windsystem’s estimated useful life of 20 years.
 
Expenditures for maintenance, repairs, and renewals are expensed as incurred. Expenditures for additions and improvements are capitalized.
 
(g)                     Impairment of Long-Lived Assets
 
The Company reviews the Windsystem for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of the Windsystem is measured by a comparison of its carrying amount to the future undiscounted net cash flows expected to be generated plus any incremental tax credits directly attributable to the Windsystem. If the Windsystem is considered to be impaired, the impairment recognized is measured as the amount by which its carrying amount exceeds its fair value. No impairment losses were recognized during the years ended December 31, 2013 and 2012.
 
(h)                     Inventory
 
Inventory is stated at the lower of weighted average cost or market and consists of spare parts, materials, and supplies. During the year ended December 31. 2013, amounts recorded as inventory deposits, discussed in note 2(i) — Inventory Deposits, were transferred to inventory upon the expiration of the initial two year period of the agreement with GE discussed in note 1(c) — General Electric International, Inc. Turbine Operations Support Agreement.
 
(i)                        Inventory Deposits
 
Inventory deposits include spare parts purchased pursuant to the terms of the agreement with GE. Parts acquired under this agreement are to be replenished by GE as parts are used in turbine maintenance throughout the term of the agreement. These amounts are included at cost. As discussed in note 2(h) — Inventory, amounts recorded as inventory deposits in 2012 were reclassified to inventory in 2013.
 
(j)                        Revenue Recognition
 
An assessment of revenue from electricity sales was conducted to determine whether or not the PPA with NPPD contains an embedded lease. The assessment resulted in a determination that revenue earned by the Company for sale of electricity is subject to lease accounting. However, there are no
 
(Continued)
 
9

 
minimum rental payments required under this agreement and, therefore, rental income is recorded as electricity is delivered at rates defined in the PPA. The Company accounts for renewable energy credits as a bundled component of the associated electricity, with revenue also recorded as the electricity is delivered.
 
The Company accounts for grant income on the deferred method and, accordingly, recognizes operating revenues related to such income over the estimated useful life of the project. In 2011, the Company received $57,492,000 in U.S. Treasury grants (cash grants, under the American Recovery and Reinvestment Act of 2009) that was recorded as deferred revenue and is amortized to income over 20 years. Pursuant to the regulations governing U.S. Treasury Grants, there is a ratable, five-year recapture period on the grant income from the date the related property was put into service if the property ceases to be used as eligible property or is disposed of to a disqualified entity. The recapture period becomes fully vested on December 31, 2015.
 
(k)                     Income Taxes
 
The Company is a single member limited liability company and is included in the consolidated return of its ultimate parent company, along with its member, EM Wind. An enterprise is required to recognize, in its financial statements, the impact of a tax position by determining if the weight of the available evidence indicates it is more likely than not, based on the technical merits, that the position will be sustained on audit. All income tax contingencies would be immaterial if they had to be recognized by the Company. However, because the entity is a limited liability entity that is included in the tax return of its parent company and is not obligated to pay any income taxes, the Company has not reflected a hypothetical tax obligation in its financial statements. If the Company had recorded income taxes, based on a hypothetical separate company return, adjusted for the use of state tax apportionment factors of the consolidated tax group, the income statements would include income tax expense of $593,000 and $1,030,000 for the years ended December 31, 2013 and 2012, respectively.
 
(l)                        Property Taxes
 
The Company’s Windsystem is valued and property taxes are assessed pursuant to Nebraska state statutes. The Company incurred property tax expense of $285,000 and $285,000 for the years ended December 31, 2013 and 2012, respectively.
 
(m)                  Asset Retirement Obligation
 
The Company accounts for its asset retirement obligation by recording the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability was initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. Accretion expense is classified as part of depreciation and accretion in the accompanying statements of income.
 
(Continued)
 
10

 
The Company recorded a liability representing expected future costs associated with site reclamation, facilities dismantlement, and removal of environmental hazards as follows (in thousands):
 
Balance of asset retirement obligation at December 31, 2011	 	$	4,450	 	
Accretion expense	 	279	 	
Balance of asset retirement obligation at December 31, 2012	 	4,729	 	
Accretion expense	 	296	 	
Balance of asset retirement obligation at December 31, 2013	 	$	5,025	 	
 
(3)                     Fair Value Measurements
 
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an exit price). Fair value for a liability should reflect the entity’s nonperformance risk. Fair value is determined using a hierarchy to prioritize inputs to valuation models. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are:
 
·                              Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities;
 
·                              Level 2 — Pricing inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the derivative instruments; and
 
·                              Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurements and unobservable.
 
The Company’s assets carried at fair value consist of money market funds which are classified as Level 1 as fair value is determined by observable market prices (unadjusted) in active markets. Money market funds are included in cash and cash equivalents and long-term restricted cash in the Company’s balance sheets. The Company had money market assets of $1,720,000 and $1,850,000 at December 31, 2013 and 2012, respectively.
 
The interest rate swap liability is classified as Level 2 as the fair value can be determined based on observable values of underlying interest rates. The Company had derivative liabilities related to interest rate swaps of $3,358,000 and $8,972,000 as of December 31, 2013 and 2012, respectively.
 
(4)                     Derivative Instruments and Risk Management
 
Interest Swap
 
On July 27, 2010, the Company, in conjunction with its financing, entered into 15-year amortizing interest rate swap agreements for the purpose of hedging the variability of cash flows in the interest payments due to fluctuations of the London Interbank Offered Rate (LIBOR). These interest rate swap agreements became effective on March 31, 2011 and qualify as effective cash flow hedges, whereby the hedges were reported in the Company’s balance sheets at fair value, with changes in the fair value of the hedges reflected in the statements of comprehensive income (loss). The total notional amount of the hedges was
 
(Continued)
 
11

 
$61,984,000 and $64,378,000 at December 31, 2013 and 2012, respectively. The notional amount of the interest rate swap agreements amortizes each year, such that the Company’s interest payment under the wind financing is approximately 90% hedged. The interest rate swap agreements entitle the Company to receive a floating (three-month LIBOR) rate and pay a fixed rate of 3.460%. The interest rate swap agreements expire in March 2026. The Company recognized unrealized gains (losses) of $5,614,000 and ($968,000) in other comprehensive income (loss) in 2013 and 2012, respectively.
 
The interest rate swap agreements convert the LIBOR-based rates (0.247% and 0.311% at December 31, 2013 and 2012, respectively) in the term loan to a fixed interest rate of 3.46%. Total interest expense related to the swap agreements was $2,043,000 and $2,001,000 for the years ended December 31, 2013 and 2012, respectively. These costs are included in interest expense in the accompanying statements of income.
 
(5)                     Long-Term Debt
 
On July 27, 2010, the Company entered into a credit agreement (the Agreement) with a group of banks for a combination of loans and letters of credit totaling $139,855,000. The Agreement provided for construction loans not exceeding $75,000,000, conversion of the construction loans to a term loan, a cash grant loan not exceeding $53,242,000, a working capital facility of $3,067,000, letters of credit supporting project agreements of $3,000,000 and a debt service reserve of $5,546,000.
 
On March 18, 2011, construction loans totaling $75,000,000 were converted to a 15-year term loan with a final maturity of March 31, 2026. On July 25, 2011, the Company received grant proceeds from the U.S. Department of Treasury and paid off the outstanding principal on the cash grant construction loan totaling $53,098,000. There was no borrowing under the working capital facility at December 31, 2013 and 2012.
 
Amounts outstanding under the Agreement bear interest at variable Eurodollar interest rates specified as LIBOR (0.247% and 0.311% at December 31, 2013 and 2012, respectively), as defined in the Agreement, plus a margin of 2.75% increasing 0.125% on the third, sixth, ninth, and twelfth anniversaries of the conversion date. Under the Agreement, interest expense for the years ended December 31, 2013 and 2012 was $2,155,000 and $2,382,000, respectively.
 
(Continued)
 
12

 
Distributions from the Company are subject to compliance with the terms and conditions defined in the Agreement, including a covenant to meet a required debt service coverage ratio of 1.20 to 1.0. At December 31, 2013, the Company is in compliance with the various restrictive covenants defined in the Agreement.
 
Annual maturities of long-term debt at December 31, 2013 for the next five years and thereafter are summarized as follows (in thousands):
 
Years ending:	 	 	 	
2014	 	$	2,922	 	
2015	 	3,387	 	
2016	 	3,457	 	
2017	 	4,719	 	
2018	 	5,056	 	
Thereafter	 	49,110	 	
 	 	$	68,651	 	
 
The carrying amount of the long-term debt approximates fair value at December 31, 2013 and 2012 due to frequent repricing of the LIBOR interest rates as defined in the Agreement.
 
(6)                     Related Party Transactions
 
In addition to the transactions and relationships described elsewhere in the footnotes to the financial statements, EME and subsidiaries of EME provide support services pursuant to various support agreements with the Company. These agreements provide for the payment of fixed fees that escalate annually, as defined in the agreements and for the reimbursement of certain insurance, consultant, and credit costs. The fixed fee commitments under the agreements total $140,000 plus escalation annually. For the years ended December 31, 2013 and 2012, the Company incurred costs totaling $147,000 and $144,000 under the agreements and reimbursements of $133,000 and $140,000. These costs are included on the statements of income in maintenance and other operating costs.
 
(7)                     Subsequent Events
 
The Company has performed an evaluation of subsequent events through March 28, 2014, which is the date the financial statements are available to be issued.
 
13

Exhibit 99.2
 
LAREDO RIDGE WIND, LLC
(A Delaware Limited Liability Company)
 
Financial Statements
 
(Unaudited)
 
September 30, 2014

 
LAREDO RIDGE WIND, LLC
(A Delaware Limited Liability Company)
 
September 30, 2014
 
Table of Contents
 
 	 	Page	
 	 	 	
Financial Statements:	 	 	
 	 	 	
Balance Sheets	 	1	
 	 	 	
Statements of Operations	 	2	
 	 	 	
Statements of Member’s Equity	 	3	
 	 	 	
Statements of Cash Flows	 	4	
 	 	 	
Notes to Financial Statements	 	5	

 
LAREDO RIDGE WIND, LLC
(A Delaware Limited Liability Company)
Balance Sheets
(Amounts in thousands)
 
 	 	(Successor)	 	 	(Predecessor)	 	
 	 	September 30, 2014	 	 	December 31, 2013	 	
 	 	(Unaudited)	 	 	 	 	
Assets	 	 	 	 	 	 	
 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	
Cash	 	$	1,371	 	 	2,911	 	
Accounts receivable	 	1,245	 	 	1,436	 	
Inventory	 	516	 	 	455	 	
Prepaid expenses and other current assets	 	602	 	 	140	 	
Total current assets	 	3,734	 	 	4,942	 	
 	 	 	 	 	 	 	
Wind energy generating system	 	116,000	 	 	187,340	 	
Accumulated depreciation	 	(2,636	)	 	(27,328	)	
Plant and equipment, net	 	113,364	 	 	160,012	 	
 	 	 	 	 	 	 	
Deferred financing costs, net	 	—	 	 	3,055	 	
Power purchase agreement, net of accumulated amortization of $1,235	 	52,765	 	 	—	 	
Long-term restricted cash	 	—	 	 	334	 	
 	 	 	 	 	 	 	
Total assets	 	$	169,863	 	 	168,343	 	
 	 	 	 	 	 	 	
Liabilities and Member’s Equity	 	 	 	 	 	 	
 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	
Accounts payable	 	$	127	 	 	326	 	
Accounts payable to related parties	 	68	 	 	41	 	
Accrued liabilities	 	304	 	 	182	 	
Derivative liability - current	 	1,836	 	 	—	 	
Interest payable	 	12	 	 	12	 	
Current maturities of long-term obligations	 	3,251	 	 	2,922	 	
Total current liabilities	 	5,598	 	 	3,483	 	
 	 	 	 	 	 	 	
Long-term debt	 	63,456	 	 	65,729	 	
Deferred revenue, net	 	—	 	 	49,939	 	
Long-term derivative liabilities	 	2,459	 	 	3,358	 	
Asset retirement obligation	 	262	 	 	5,025	 	
Total liabilities	 	71,775	 	 	127,534	 	
 	 	 	 	 	 	 	
Commitments and contingencies	 	 	 	 	 	 	
 	 	 	 	 	 	 	
Member’s equity	 	98,088	 	 	40,809	 	
 	 	 	 	 	 	 	
Total liabilities and member’s equity	 	$	169,863	 	 	168,343	 	
 
See accompanying notes to financial statements.
 
1

 
LAREDO RIDGE WIND, LLC
(A Delaware Limited Liability Company)
Unaudited Statements of Operations and Comprehensive Income (Loss)
(Amounts in thousands)
 
 	 	(Successor)	 	 	(Predecessor)	 	(Successor)	 	 	(Predecessor)	 	
 	 	Three months ended
September 30,	 	 	Three months ended
September 30,	 	Six months ended
September 30,	 	 	Three months ended
March 31,	 	Nine months ended
September 30,	 	
 	 	2014	 	 	2013	 	2014	 	 	2014	 	2013	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	
Lease revenue	 	$	1,636	 	 	3,327	 	5,835	 	 	4,862	 	11,852	 	
Grant revenue	 	—	 	 	730	 	—	 	 	731	 	2,192	 	
Total operating revenues	 	1,636	 	 	4,057	 	5,835	 	 	5,593	 	14,044	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and accretion	 	(177	)	 	2,417	 	2,689	 	 	2,421	 	7,250	 	
Maintenance and other operating costs	 	1,020	 	 	957	 	2,013	 	 	1,081	 	2,680	 	
General and administrative	 	—	 	 	4	 	—	 	 	5	 	26	 	
Total operating expenses	 	843	 	 	3,378	 	4,702	 	 	3,507	 	9,956	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from operations	 	793	 	 	679	 	1,133	 	 	2,086	 	4,088	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Expense	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	(608	)	 	(1,250	)	(1,212	)	 	(1,186	)	(3,696	)	
Total other expense	 	(608	)	 	(1,250	)	(1,212	)	 	(1,186	)	(3,696	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (loss) income	 	$	185	 	 	(571	)	(79	)	 	900	 	392	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Comprehensive Income (Loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized (loss) gain on derivatives	 	$	(1,295	)	 	232	 	(2,473	)	 	(1,682	)	4,504	 	
Other comprehensive (loss) income	 	(1,295	)	 	232	 	(2,473	)	 	(1,682	)	4,504	 	
Comprehensive income (loss)	 	$	(1,110	)	 	(339	)	(2,552	)	 	(782	)	4,896	 	
 
See accompanying notes to financial statements.
 
2

 
LAREDO RIDGE WIND, LLC
(A Delaware Limited Liability Company)
Unaudited Statements of Member’s Equity
(Amounts in thousands)
 
 	 	Capital
Contributions	 	Capital
Distributions	 	Retained Deficit	 	Accumulated
Other
Comprehensive
Loss	 	Total Member’s
Equity	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2013 (audited)	 	$	132,810	 	(87,697	)	(946	)	(3,358	)	40,809	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	—	 	—	 	900	 	—	 	900	 	
Capital distribution	 	—	 	(1,700	)	—	 	—	 	(1,700	)	
Other comprehensive loss	 	—	 	—	 	—	 	(1,682	)	(1,682	)	
 	 	 	 	 	 	 	 	 	 	 	 	
Balance at March 31, 2014 (a)	 	$	132,810	 	(89,397	)	(46	)	(5,040	)	38,327	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Balance at April 1, 2014 (a)	 	$	102,857	 	—	 	—	 	—	 	102,857	 	
 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	—	 	—	 	(79	)	—	 	(79	)	
Capital distribution	 	—	 	(3,395	)	—	 	—	 	(3,395	)	
Other comprehensive loss	 	—	 	—	 	—	 	(1,295	)	(1,295	)	
 	 	 	 	 	 	 	 	 	 	 	 	
Balance at September 30, 2014	 	$	102,857	 	(3,395	)	(79	)	(1,295	)	98,088	 	

(a) The differences in the equity balances at March 31, and April1, 2014 reflect the application of pushdown accounting as result of the EME Acquisition.
 
See accompanying notes to financial statements.
 
3

 
LAREDO RIDGE WIND, LLC
(A Delaware Limited Liability Company)
Unaudited Statements of Cash Flows
(Amounts in thousands)
 
 	 	(Successor)	 	 	(Predecessor)	 	
 	 	Six months ended
September 30,	 	 	Three months ended
March 31,	 	Nine months ended
September 30,	 	
 	 	2014	 	 	2014	 	2013	 	
 	 	 	 	 	 	 	 	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	 	
Net (loss) income	 	$	(79	)	 	900	 	392	 	
Adjustments to reconcile net (loss) income to net cash provided by operating activities:	 	 	 	 	 	 	 	 	
Depreciation, amortization, and accretion	 	3,924	 	 	2,523	 	7,567	 	
Amortization of deferred revenue	 	—	 	 	(731	)	(2,192	)	
Changes in derivative instruments	 	(988	)	 	—	 	—	 	
Changes in assets and liabilities	 	 	 	 	 	 	 	 	
Accounts receivable	 	414	 	 	(223	)	(20	)	
Inventory	 	(38	)	 	(24	)	23	 	
Prepaid expenses and other current assets	 	(210	)	 	(252	)	(155	)	
Accounts payable	 	(82	)	 	(90	)	(508	)	
Accrued liabilities	 	189	 	 	(67	)	(31	)	
Interest payable	 	—	 	 	—	 	—	 	
Net cash provided by operating activities	 	3,130	 	 	2,036	 	5,076	 	
 	 	 	 	 	 	 	 	 	
Cash from investing activity	 	 	 	 	 	 	 	 	
Decrease in restricted cash	 	—	 	 	334	 	—	 	
Net cash provided by investing activity	 	—	 	 	334	 	—	 	
 	 	 	 	 	 	 	 	 	
Cash flows from financing activities	 	 	 	 	 	 	 	 	
Distributions to member	 	(4,595	)	 	(1,701	)	(4,033	)	
Repayment of long-term debt	 	(881	)	 	(1,063	)	(1,790	)	
Net cash used in financing activities	 	(5,476	)	 	(2,764	)	(5,823	)	
 	 	 	 	 	 	 	 	 	
Net decrease in cash and cash equivalents	 	(2,346	)	 	(394	)	(747	)	
Cash at beginning of period	 	2,517	 	 	2,911	 	2,735	 	
Cash at end of period	 	$	171	 	 	2,517	 	1,988	 	
 	 	 	 	 	 	 	 	 	
Supplemental disclosures of cash flow information:	 	 	 	 	 	 	 	 	
Cash paid during the period for interest	 	$	2,200	 	 	1,083	 	3,308	 	
 
See accompanying notes to financial statements.
 
4

 
LAREDO RIDGE WIND, LLC
(A Delaware Limited Liability Company)
 
Notes to Unaudited Financial Statements
 
September 30, 2014
 
(1)                     Nature of Business
 
Laredo Ridge Wind, LLC (the Company), a Delaware limited liability company, is a wholly owned subsidiary of Mission Wind Laredo, Inc. (MWL), a wholly owned subsidiary of NRG Wind LLC (NRG Wind), a wholly owned subsidiary of NRG Energy Gas and Wind Holdings LLC, in turn a wholly owned subsidiary of NRG Energy, Inc. (NRG or Parent).
 
The Company, along with NRG Wind, was originally a wholly owned subsidiary of Edison Mission Energy, Inc. (EME) and was formed to construct, own, and operate a 79.9-megawatt (MW) wind powered electricity-generating system composed of 54 General Electric Company (GE) 1.5 MW generators, a power collection system, and power substation (the Windsystem) located in Boone County, Nebraska. The Company sells electricity generated by the turbines to Nebraska Public Power District (NPPD) pursuant to a power purchase agreement (PPA) with a term extending for 20 years from the commercial operation date of February 1, 2011.
 
The Company contracted with General Electric International, Inc. (GE) to provide certain warranty, maintenance, and repair services. The agreement, including extensions, covers a five-year period, which commenced at turbine completion in November 2010.
 
The following notes should be read in conjunction with the accounting policies and other disclosures as set forth in the notes to the Company’s annual financial statements. Interim results are not necessarily indicative of results for a full year.
 
Predecessor and Successor Reporting
 
As further discussed in note 2, Business Acquisition, on April 1, 2014, NRG completed the acquisition of substantially all of the assets of EME, or the EME Acquisition, including its member interests in the Company. The EME Acquisition was accounted for under the acquisition method of accounting. Fair value adjustments have been pushed down to the Company, resulting in the Company’s assets and liabilities being recorded at fair value at April 1, 2014. In addition, effective with the EME Acquisition, the Company adopted the accounting policies of NRG. Therefore, the Company’s financial information prior to the EME Acquisition is not comparable to its financial information subsequent to the EME Acquisition.
 
As a result of the impact of pushdown accounting, the financial statements and certain note presentations separate the Company’s presentations into two distinct periods, the period before the consummation of the EME Acquisition (labeled predecessor) and the period after that date (labeled successor), to indicate the application of different basis of accounting between the periods presented.
 
(2)                     Business Acquisition
 
On April 1, 2014, NRG completed the acquisition of substantially all of the assets of EME. The acquisition was recorded as a business combination under ASC 805,  Business Combinations , with identifiable assets acquired and liabilities assumed recorded at their estimated fair values on the acquisition date. The impact of the acquisition method of accounting was pushed down to the Company, resulting in assets and liabilities of the Company being recorded at fair value as of April 1, 2014.  The initial accounting for the business combination is not complete because the evaluation necessary to assess the fair values of certain
 
5

 
assets acquired is still in process.  The provisional amounts are subject to revision until the evaluations are completed to the extent that additional information is obtained about the facts and circumstances that exists as of the acquisition date.
 
The preliminary allocation of assets and liabilities is as follows (in thousands):
 
 	 	Acquisition Date	 	
 	 	Fair Value	 	
Assets	 	 	 	
Current and non-current assets	 	$	5,046	 	
Net plant and equipment	 	116,000	 	
Power purchase agreement	 	54,000	 	
Total assets acquired	 	$	175,046	 	
 	 	 	 	
Liabilities	 	 	 	
Current and non-current liabilities	 	4,601	 	
Long-term debt	 	67,588	 	
Total liabilties assumed	 	$	72,189	 	
 	 	 	 	
Net assets acquired	 	$	102,857	 	
 
Fair Value Measurements
 
The fair values of the property, plant and equipment and intangible assets at the acquisition date were measured primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in ASC 820.  Significant inputs were as follows:
 
Property, plant and equipment — The estimated fair values were determined primarily based on an income method using discounted cash flows and validated using a market approach based on recent transactions of comparable assets.  The income approach was primarily relied upon as the forecasted cash flows more appropriately incorporate differences in regional markets, plant types, age, useful life, equipment condition and environmental controls of each asset. The income approach also allows for a more accurate reflection of current and expected market dynamics such as supply and demand, commodity prices and regulatory environment as of the acquisition date.
 
Power purchase agreement — The fair value of the PPA acquired was determined utilizing a variation of the income approach where the expected future cash flows resulting from the acquired PPA was reduced by operating costs and charges for contributory assets and then discounted to present value at the weighted average cost of capital of an integrated utility peer group adjusted for project-specific financing attributes.  The values were corroborated with available market data.  The PPA will be amortized over a term of 17 years.
6

 
(3)                     Derivative Instruments and Hedging Activity
 
The Company has fixed for floating interest rate swaps for 90% of its outstanding term loan amount.  The notional amount of the swaps was approximately $60,407,000 as of September 30, 2014. The following table summarizes the effects of the swaps on the Company’s accumulated OCI balance, which reflects the change in the fair value of the swaps (amounts in thousands):
 
Accumulated OCI balance as of April 1, 2014	 	$	—	 	
 	 	 	 	
Mark-to-market of cash flow hedge accounting contracts	 	(1,295	)	
 	 	 	 	
Accumulated OCI balance as of September 30, 2014	 	$	(1,295	)	
 
(4)                     Subsequent events
 
These financial statements and notes reflect the Company’s evaluation of events occurring subsequent to the balance sheet date through January 16, 2015, the date that the financial statements are available to be issued.
 
7

Exhibit 99.3
 
WCEP HOLDINGS, LLC
 
Financial Statements
 
December 31, 2013
 
(With Independent Auditors’ Report Thereon)

 
WCEP HOLDINGS, LLC
 
Table of Contents
 
 	Page(s)	
 	 	
Independent Auditors’ Report	1	
 	 	
Financial Statements:	 	
 	 	
Balance Sheet	2	
 	 	
Statement of Income	3	
 	 	
Statement of Comprehensive Income	4	
 	 	
Statement of Member’s Equity	5	
 	 	
Statement of Cash Flows	6	
 	 	
Notes to Financial Statements	7–14	

 
Independent Auditors’ Report
 
The Management Committee
WCEP Holdings, LLC:
 
We have audited the accompanying financial statements of WCEP Holdings, LLC, which comprise the balance sheet as of December 31, 2013, and the related statement of income, member’s equity, and cash flows for the year then ended, and the related notes to the financial statements.
 
Management’s Responsibility for the Financial Statements
 
Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
 
Auditors’ Responsibility
 
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
 
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
 
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
 
Opinion
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of WCEP Holdings, LLC as of December 31, 2013, and the results of its operations and its cash flows for the year then ended in accordance with U.S. generally accepted accounting principles.
 
 	\s\ KPMG LLP	
 	 	
Los Angeles, California	 	
April 30, 2014	 	
 
1

 
WCEP HOLDINGS, LLC
(A Delaware Limited Liability Company)
Balance Sheet
December 31, 2013
(In thousands)
 
Assets	 	 	 	
Current assets:	 	 	 	
Cash and cash equivalents	 	$	27,694	 	
Accounts receivable	 	13,287	 	
Inventory	 	2,484	 	
Prepaid expenses and other	 	483	 	
Total current assets	 	43,948	 	
Property, plant, and equipment, net	 	540,229	 	
Other assets:	 	 	 	
Restricted cash	 	17,831	 	
Emissions	 	24	 	
Total assets	 	$	602,032	 	
Liabilities and Member’s Equity	 	 	 	
Current liabilities:	 	 	 	
Current portion of long-term debt	 	$	35,424	 	
Accounts payable and accrued liabilities	 	1,333	 	
Accrued interest	 	764	 	
Total current liabilities	 	37,521	 	
Long-term debt, net of current portion	 	434,858	 	
Long-term derivative liabilities	 	31,441	 	
Asset retirement obligation	 	8,346	 	
Total liabilities	 	512,166	 	
Commitments and contingencies	 	 	 	
Member’s equity	 	89,866	 	
Total liabilities and member’s equity	 	$	602,032	 	
 
See accompanying notes to financial statements.
 
2

 
WCEP HOLDINGS, LLC
(A Delaware Limited Liability Company)
Statement of Income
Year ended December 31, 2013
(In thousands)
 
Operating revenues:	 	 	 	
Lease revenue	 	$	83,698	 	
Energy sales and other revenues	 	5,086	 	
Total operating revenues	 	88,784	 	
Operating expenses:	 	 	 	
Fuel	 	4,872	 	
Maintenance and other operating costs	 	13,074	 	
Depreciation and accretion	 	14,060	 	
General and administrative	 	330	 	
Total operating expenses	 	32,336	 	
Income from operations	 	56,448	 	
Other income (expense):	 	 	 	
Interest income	 	8	 	
Interest expense	 	(22,886	)	
Other income (expense), net	 	30	 	
Total other income (expense)	 	(22,848	)	
Net income	 	$	33,600	 	
 
See accompanying notes to financial statements.
 
3

 
WCEP HOLDINGS, LLC
(A Delaware Limited Liability Company)
Statement of Comprehensive Income
December 31, 2013
 
Net income	 	$	33,600	 	
Other comprehensive income, net of tax:	 	 	 	
Change in market value:	 	 	 	
Unrealized gains on cash flow hedges:	 	 	 	
Unrealized holding gains arising during period	 	23,906	 	
Comprehensive income	 	$	57,506	 	
 
See accompanying notes to financial statements.
 
4

 
WCEP HOLDINGS, LLC
(A Delaware Limited Liability Company)
Statement of Member’s Equity
Year ended December 31, 2013
(In thousands)
 
 	 	Edison Mission Arroyo Nogales, Inc	 	
 	 	 	 	 	 	 	 	Accumulated	 	 	 	
 	 	 	 	 	 	 	 	other	 	Total	 	
 	 	Capital	 	Capital	 	Retained	 	comprehensive	 	member’s	 	
 	 	contributions	 	distributions	 	earnings	 	income (loss)	 	equity	 	
Balance at December 31, 2012	 	$	140,111	 	(1,660	)	(30,405	)	(55,347	)	52,699	 	
Net income	 	—	 	—	 	33,600	 	—	 	33,600	 	
Capital distributions	 	—	 	(20,339	)	—	 	—	 	(20,339	)	
Other comprehensive income	 	—	 	—	 	—	 	23,906	 	23,906	 	
Balance at December 31, 2013	 	$	140,111	 	(21,999	)	3,195	 	(31,441	)	89,866	 	
 
See accompanying notes to financial statements.
 
5

 
WCEP HOLDINGS, LLC
(A Delaware Limited Liability Company)
Statement of Cash Flows
Year ended December 31, 2013
(In thousands)
 
Cash flows from operating activities:	 	 	 	
Net income	 	$	33,600	 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	
Depreciation, amortization, and accretion	 	21,556	 	
Loss on sale of emission credits	 	49	 	
Changes in assets and liabilities:	 	 	 	
Accounts receivable	 	(13,289	)	
Inventory	 	(2,484	)	
Prepaid expenses and other current assets	 	(449	)	
Accounts payable and accrued liabilities	 	(18,221	)	
Interest payable	 	724	 	
Net cash provided by operating activities	 	21,486	 	
Cash flows from investing activities:	 	 	 	
Capital expenditures	 	(47,554	)	
Purchased emission credits	 	(57	)	
Proceeds from sale of emission credits	 	13	 	
Net cash used in investing activities	 	(47,598	)	
Cash flows from financing activities:	 	 	 	
Cash distribution to parent	 	(20,339	)	
Proceeds from debt	 	88,411	 	
Increase in restricted cash	 	(15,163	)	
Net cash used in financing activities	 	52,909	 	
Net increase in cash and cash equivalents	 	26,797	 	
Cash and cash equivalents at beginning of period	 	897	 	
Cash and cash equivalents at end of period	 	$	27,694	 	
Supplemental disclosure of cash flow information:	 	 	 	
Cash paid for interest (net of $6,671 capitalized)	 	$	18,139	 	
 
See accompanying notes to financial statements.
 
6

 
(1)                     Nature of Operations
 
WCEP Holdings, LLC (WCEP), a Delaware limited liability company, is an indirect wholly owned subsidiary of Edison Mission Energy (EME). WCEP was organized under Delaware law on May 31, 2011 and has an ownership interest in one gas project. WCEP and its subsidiaries are referred to herein as the “Company.” On October 18, 2013, EME entered into an Acquisition agreement with NRG Energy, Inc. (NRG) that provides for a sale of substantially all of EME’s assets to NRG including its member interests in the Company. The sale closed on April 1, 2014 and the Company’s parent was acquired by NRG Energy Gas and Wind Holdings LLC, a wholly owned subsidiary of NRG.
 
WCEP owns 100% interest in Walnut Creek Energy, LLC, which owns a 479-megawatt (MW) gas-fired simple cycle combustion turbine generating facility located in the City of Industry, California (Walnut Creek). The Walnut Creek project achieved commercial operation in May 2013 and began selling electricity to Southern California Edison (SCE) June 1, 2013 under a Power Purchase Tolling Agreement (PPTA) with the term of 10 years.
 
A summary of the major agreements entered into by the Company is set forth below:
 
(a)                     Limited Liability Company Agreements
 
Subsidiaries of the Company are parties to limited liability company agreements in entities that own the Project. The provisions of these agreements set forth rights and obligations of the ownership entities.
 
(b)                     Southern California Edison Power Purchase Tolling Agreement (SCE PPTA)
 
Under terms of the 10-year SCE PPTA that became effective on November 1, 2010, the Company receives a shaped monthly capacity rate adjusted for availability penalties, a variable O&M charge, start-up charges, and other miscellaneous charges as described in the PPTA. During 2013, the Company recorded lease revenues of $83,698,000.
 
Due to the concentration of sales to SCE, the Company is exposed to credit risk of potential nonperformance by SCE, which could impact liquidity if SCE were to experience financial difficulties. As of December 31, 2013, SCE’s credit and long-term senior secured issuer ratings from Standard & Poor’s and Moody’s Investors Service were BBB+ and A2, respectively.
 
(c)                      Southern California Edison Company Large Generator Interconnection Agreement
 
The Company entered into an interconnection agreement (LGIA) with SCE and California Independent System Operator Corporation (CAISO) on July 20, 2011 with an initial 30-year term and automatically renewed for successive one-year periods thereafter, unless otherwise terminated.
 
(d)                     GE Packaged Power, Inc. Contractual Service Agreement
 
The Company contracted with GE Packaged Power, Inc. (GE) to provide certain warranty, maintenance, and repair services. The agreement shall terminate upon the first to occur of a) the date which all covered units have reached their respective performance end dates or b) 20 years from the contract’s effective date of December 9, 2011. Payments are subject to an annual escalation clause. Total fees incurred for the year ended December 31, 2013 were $516,000. These costs are included in the statement of income as part of maintenance and other operating costs.
 
(Continued)
 
7

 
(e)                      Operation and Maintenance Agreement
 
The Company entered into an agreement with Edison Mission Operation & Maintenance, Inc. (EMOM), a wholly owned subsidiary of EME, to provide operation and maintenance services not covered by the maintenance and service agreement with GE (described above). The agreement will continue until terminated by either party, with 90-day prior written notice. The Company incurred costs from EMOM in the amount of $2,957,000 for the year ended December 31, 2013. These costs are included in the statement of income as part of maintenance and other operating costs.
 
(2)                     Summary of Significant Accounting Policies
 
(a)                     Basis of Presentation
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
(b)                     Cash and Cash Equivalents
 
The Company considers cash and cash equivalents to include cash and money market fund investments. The carrying value of cash equivalents approximates fair value as all investments have original maturities of three months or less at the time of purchase. For further discussion of money market funds, see note 3 — Fair Value Measurements.
 
(c)                      Inventory
 
Inventory consists of spare parts, materials, and supplies to be used in the operation of the facility. Inventory is stated at the lower of weighted average cost or market.
 
(d)                     Plant and Equipment
 
Plant and equipment are stated at cost. The plant balance includes all costs associated with the development and construction of the facility. The Facility costs include interest capitalized during the construction period of approximately $29,036,000. Depreciation is computed on a straight-line basis over the Facility’s estimated useful life of 30 years, which commenced as the Company placed the turbines in service.
 
Expenditures for maintenance, repairs, and renewals are expensed as incurred. Expenditures for additions and improvements are capitalized.
 
(e)                      Impairment of Long-Lived Assets
 
Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the carrying amount of a long-lived asset exceeds the amount of the expected future undiscounted cash flows, an impairment loss is recognized for the excess of the carrying amount over fair value. No impairment losses were recognized during the year ended December 31, 2013.
 
(Continued)
 
8

 
(f)                        Derivative Instruments
 
The Company uses interest rate swaps to manage its interest rate exposure on long-term debt. Authoritative guidance on derivatives and hedging establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts). The Company is required to record derivatives on its consolidated balance sheet as either assets or liabilities measured at fair value unless otherwise exempted from derivative treatment as a normal sale and purchase. All changes in the fair value of derivative instruments are recognized currently in earnings, unless specific hedge criteria are met, which requires that the Company formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.
 
The accounting guidance for cash flow hedges provides that the effective portion of gains or losses on derivative instruments designated and qualifying as cash flow hedges be reported as a component of other comprehensive income and be reclassified into earnings in the same period during which the hedged transaction affects earnings. The remaining gains or losses on the derivative instruments, if any, must be recognized currently in earnings. Derivative and hedging accounting policies are discussed further in note 4 — Derivative Instruments and Risk Management.
 
(g)                     Deferred Financing Costs
 
Deferred financing costs consist of legal fees and closing costs incurred by the Company in obtaining its financing. These costs were being amortized using the effective interest method over the construction loan term of 23 months, which converted to a term loan effective June 21, 2013. As of December 31, 2013, accumulated amortization totaled $18,368,000. Amortization expense, net of capitalized interest, of $3,986,000 is included in interest expense on the statement of income.
 
(h)                     Financial Instruments
 
Financial instruments that potentially subject the Company to significant concentrations of credit or valuation risk consist principally of cash equivalents and accounts receivable.
 
The carrying amounts reported in the balance sheet for cash and cash equivalents and accounts receivable approximate fair value.
 
(i)                        Restricted Cash
 
Restricted cash consists of collateral reserves required by the Company’s debt agreements. At December 31, 2013, the Company’s restricted cash included $17,831,000 to support remaining construction costs and debt services.
 
(j)                        Revenue Recognition
 
An assessment of revenue from electricity sales was conducted to determine whether or not the PPTA with SCE contains an embedded lease. The assessment resulted in a determination that revenue earned by the Company for sale of electricity is subject to lease accounting. The capacity payments are considered minimum rental payments and accordingly, they are amortized over the term of the lease on a basis that is representative of the time pattern in which benefit is derived from the asset. Variable amounts are considered contingent rental income and recorded when earned.
 
(Continued)
 
9

 
(k)                     Income Taxes
 
The Company is a single member limited liability company and is included in the consolidated return of its ultimate parent company. An enterprise is required to recognize, in its consolidated financial statements, the impact of a tax position by determining if the weight of the available evidence indicates it is more likely than not, based on the technical merits, that the position will be sustained on audit. All income tax contingencies would be immaterial if they had to be recognized by the Company. However, because the entity is a limited liability entity that is included in the tax return of its parent company and is not obligated to pay any income taxes, the Company has not reflected a hypothetical tax obligation in its consolidated financial statements.
 
If the Company had recorded income taxes, based on a hypothetical separate company return, adjusted for the use of state tax apportionment factors of the consolidated tax group, the income statements would include income tax expense of $13,186,000 for the year ended December 31, 2013.
 
(l)                        Property Taxes
 
The Company’s asset is valued and property taxes are assessed pursuant to California state statute. The Company incurred property tax expense of $3,652,000 for the year ended December 31, 2013, which are included in the statement of income as part of maintenance and other operating costs.
 
(m)                  Asset Retirement Obligation
 
The Company records the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, entity cost is capitalized by increasing the carrying amount of the related long-lived asset. Over time, the liability is increased to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, the obligation will be settled and a gain or loss will be recognized for the difference between the recorded obligation and the actual cost. Accretion expense is classified as part of depreciation and accretion on the statement of income.
 
The Company recorded a liability representing expected future costs associated with site reclamation, facilities dismantlement, and removal of environmental hazards as follows (in thousands):
 
Balance of asset retirement obligation at December 31, 2012	 	$	—	 	
New asset retirement obligation	 	8,079	 	
Accretion expense	 	267	 	
Balance of asset retirement obligation at December 31, 2013	 	$	8,346	 	
 
(3)                     Fair Value Measurements
 
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an exit price). The hierarchy, established by authoritative accounting guidance, gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are:
 
·                  Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities;
 
(Continued)
 
10

 
·                  Level 2 — Pricing inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the derivative instruments; and
 
·                  Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurements and unobservable.
 
The Company’s assets and liabilities carried at fair value consist of money market funds, which are generally classified as Level 1 as fair value is determined by observable market prices (unadjusted) in active markets. Money market funds totaling $27,694,000 are included in cash and cash equivalents in the Company’s balance sheet at December 31, 2013.
 
The interest rate swap liability is classified as Level 2 as the fair value can be determined based on observable values of underlying interest rates. The Company had derivative liabilities related to interest rate swaps of $31,441,000 as of December 31, 2013. Interest payable amounts related to the swap liability are included in interest payable on the Company’s balance sheet. The Company had interest payable related to the rate swap liability of $344,000 at December 31, 2013.
 
(4)                     Derivative Instruments and Risk Management
 
Interest Swap
 
On June 30, 2013, the Company entered into 10-year amortizing interest rate swap agreements for the purpose of hedging the variability of cash flows in the interest payments due to fluctuations of the London Interbank Offered Rate (LIBOR). These interest rate swap agreements became effective on July 27, 2011 and qualify as effective cash flow hedges, whereby the hedges were reported in the Company’s balance sheet at fair value, with changes in the fair value of the hedges reflected in member’s equity. The total notional amount of the hedges was $423,254,193 at December 31, 2013. The notional amount of the interest rate swap agreements amortizes each year, such that the Company’s interest payment under the financing is approximately 90% hedged. The interest rate swap agreements entitle the Company to receive a floating (three-month LIBOR) rate and pay a fixed rate of 4.0025% for the Company and 3.5429% for the Project. The interest rate swap agreements expire in May 2023. The Company recognized unrealized gains of $23,906,000 in other comprehensive income at December 31, 2013.
 
The interest rate swap agreements convert the LIBOR-based rates (0.2375% for the Company and 0.24660% for the Project at December 31, 2013) in the term loan to a fixed interest rate of 4.0025% for the Company and 3.5429% for the Project. Total interest expense, net of amounts capitalized, related to the swap agreements was $7,808,000 for the year ended December 31, 2013. These costs are included in interest expense in the accompanying statement of income.
 
(5)                     Long-Term Debt
 
On July 27, 2011, the Companies entered into a financing agreement (the Agreement) with a group of banks for a combination of loans and letters of credit totaling $617,071,000. The Agreement provided for construction loans not exceeding $495,142,000, conversion of the construction loans to a term loan, a working capital facility of $5,000,000, letters of credit supporting project agreements of $77,910,000 and a debt service reserve of $39,019,000.
 
On June 21, 2013, construction loans totaling $495,142,000 were converted to a 10-year term loan with a final maturity of May 31, 2023. There was no borrowing under the working capital facility at December 31, 2013.
 
(Continued)
 
11

 
Amounts outstanding under the Agreement bear interest at variable Eurodollar interest rates specified as LIBOR, as defined in the Agreement, plus a margin of 2.25% for Walnut Creek Energy, LLC increasing 0.25% on the third, sixth, and ninth anniversaries of the conversion date. WCEP Holdings has a margin of 4.00%. Under the Agreement, interest expense, net of amounts capitalized for the year ended December 31, 2013 was $9,731,000.
 
Distributions from the Company are subject to compliance with the terms and conditions defined in the Agreement, including a covenant to meet a required debt service coverage ratio of 2.5 to 1.0 for WCEP Holdings, LLC and 1.20 to 1.0 for Walnut Creek Energy, LLC. At December 31, 2013, the Company is in compliance with the various restrictive covenants defined in the Agreement.
 
Annual maturities of long-term debt at December 31, 2013 for the next five years and thereafter are summarized as follows (in thousands):
 
Years ending:	 	 	 	
2014	 	$	35,424	 	
2015	 	37,984	 	
2016	 	39,676	 	
2017	 	41,716	 	
2018	 	45,055	 	
Thereafter	 	270,427	 	
 	 	$	470,282	 	
 
The carrying amount of the long-term debt approximates fair value at December 31, 2013 due to frequent repricing of the LIBOR interest rates as defined in the Agreement.
 
(6)                     Plant and Equipment
 
Plant and equipment consist of the following components at December 31, 2013 (in thousands):
 
Power plant facilities	 	$	553,937	 	
Rolling stock	 	85	 	
 	 	554,022	 	
Less accumulated depreciation	 	(13,793	)	
 	 	$	540,229	 	
 
The depreciable life of the operating facility exceeds the term of the related power purchase agreement (note 1). Management believes the useful life is appropriate and that the facility will continue to operate profitably subsequent to the expiration of the power purchase agreements.
 
(Continued)
 
12

 
(7)                     Related Party Transactions
 
In addition to the transactions and relationships described elsewhere in the notes to the financial statements, the Company has the following related party transactions and relationships:
 
(a)                     Other Agreements
 
The Company entered into an Asset Services Agreement effective July 1, 2011 with EME, subsequently assigned to Edison Mission Asset Services (EMAS), a wholly owned subsidiary of EME on October 29, 2012.  The agreement provides for construction, technical and administrative services. Amounts charged totaled $438,000 for the year ended December 31, 2013. These are invoiced at cost and are settled monthly in cash. Construction and technical costs were capitalized through COD, while administrative costs were expensed. Expensed costs totaled $160,000 for the year ended December 31, 2013 and are included in the statement of income as part of maintenance and other operating costs.
 
The Company reimbursed EME for certain insurance and other project costs charged to employee’s purchasing card. Reimbursements totaled $1,115,000 for the year ended December 31, 2013. These are invoiced at cost and are settled monthly in cash. These costs have been recorded as prepaid administrative costs, facility costs, or expensed as appropriate.
 
(Continued)
 
13

 
(8)                     Commitments and Contingencies
 
(a)                     Lease Commitments
 
On March 11, 2008, the Company entered into a land lease with Industry Urban-Development Agency through the initial term of May 31, 2036. The Company agreed to pay $1,000 per year ending with the year in which the Project completes its 10th year of commercial operations and $1,304,000 for each subsequent year through the end of the initial term.
 
In August 2009, the lease was amended to include an adjustment payment during the period June 1, 2013 and May 31, 2023 for property tax liability based on a percentage of the difference between the assessed value of the property and a threshold amount. A payment is due each April 1 and October 1. The Company incurred property rent of $1,849,000 for the year ended December 31, 2013.
 
Future minimum payments for operating leases as of December 31, 2013 are estimated as follows (in thousands):
 
Years ending December 31:	 	 	 	
2014	 	$	2,557	 	
2015	 	1,994	 	
2016	 	1,084	 	
2017	 	79	 	
2018	 	19	 	
Thereafter	 	16,847	 	
 	 	$	22,580	 	
 
(9)                     Subsequent Events
 
The Company has performed an evaluation of subsequent events through April 30, 2014, which is the date the financial statements are available to be issued.
 
14

Exhibit 99.4
 
WCEP HOLDINGS, LLC
 
Financial Statements
 
(Unaudited)
 
September 30, 2014

 
WCEP HOLDINGS, LLC
 
Table of Contents
 
 	Page(s)	
 	 	
Financial Statements:	 	
 	 	
Balance Sheets	2	
 	 	
Statements of Income	3	
 	 	
Statements of Member’s Equity	4	
 	 	
Statements of Cash Flows	5	
 	 	
Notes to Financial Statements	6—9	
 
1

 
WCEP Holdings, LLC And Subsidiaries
(A Delaware Limited Liability Company)
Consolidated Balance Sheets
(in thousands)
 
 	 	Successor	 	 	Predecessor	 	
 	 	As of September 30,
2014	 	 	As of December 31,
2013	 	
 	 	(Unaudited)	 	 	 	 	
Assets	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	
Cash and cash equivalents	 	$	13,256	 	 	$	27,694	 	
Accounts receivable	 	21,385	 	 	13,287	 	
Inventory	 	3,133	 	 	2,484	 	
Prepaid expenses and other	 	192	 	 	483	 	
Total current assets	 	37,966	 	 	43,948	 	
 	 	 	 	 	 	 	
Property, plant & equipment, net of accumulated depreciation of $9,249 and $13,658	 	515,751	 	 	540,229	 	
 	 	 	 	 	 	 	
Other assets:	 	 	 	 	 	 	
Restricted cash	 	22,241	 	 	17,831	 	
Emission credits	 	16	 	 	24	 	
Other intangible assets, net of accumulated amortization of $10,000 and $0	 	170,000	 	 	—	 	
Total assets	 	$	745,974	 	 	$	602,032	 	
 	 	 	 	 	 	 	
Liabilities & Member’s Equity	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	
Current portion of long-term debt	 	$	37,472	 	 	$	35,424	 	
Accounts payable and accrued liabilities	 	5,070	 	 	1,333	 	
Accrued interest	 	755	 	 	764	 	
Derivative instruments	 	12,478	 	 	—	 	
Total current liabilities	 	55,775	 	 	37,521	 	
 	 	 	 	 	 	 	
Long-term debt, net of current portion	 	406,574	 	 	434,858	 	
Long-term derivative liabilities	 	16,455	 	 	31,441	 	
Deferred revenue	 	22,608	 	 	—	 	
Asset retirement obligation	 	8,763	 	 	8,346	 	
Total liabilities	 	510,175	 	 	512,166	 	
 	 	 	 	 	 	 	
Commitments and contingencies	 	 	 	 	 	 	
 	 	 	 	 	 	 	
Member’s equity	 	235,799	 	 	89,866	 	
Total liabilities and member’s equity	 	$	745,974	 	 	$	602,032	 	
 
2

 
WCEP Holdings, LLC And Subsidiaries
(A Delaware Limited Liability Company)
Consolidated Statements of Operations and Comprehensive Income/(Loss)
For the nine months ended September 30, 2014 and 2013
(Unaudited)
 
 	 	Successor	 	 	Predecessor	 	
 	 	April 1, 2014
through
September 30, 2014	 	 	January 1, 2014
through
March 31, 2014	 	January 1, 2013
through
September 30, 2013	 	
 	 	(In thousands)	 	 	(In thousands)	 	(In thousands)	 	
Operating Revenues	 	 	 	 	 	 	 	 	
Energy revenue	 	$	—	 	 	$	—	 	$	5,014	 	
Lease revenue	 	74,063	 	 	9,920	 	65,017	 	
Revenue levelization adjustments	 	(22,608	)	 	—	 	—	 	
Other revenue	 	(10,000	)	 	—	 	—	 	
Total operating revenues	 	41,455	 	 	9,920	 	70,031	 	
Operating Expenses	 	 	 	 	 	 	 	 	
Fuel	 	602	 	 	226	 	4,872	 	
Maintenance and other operating costs	 	9,111	 	 	4,499	 	8,248	 	
Depreciation, amortization and accretion	 	9,530	 	 	4,843	 	9,362	 	
Total operating expenses	 	19,243	 	 	9,568	 	22,482	 	
Income from operations	 	22,212	 	 	352	 	47,549	 	
Other Income/(Expense)	 	 	 	 	 	 	 	 	
Interest income	 	46	 	 	153	 	—	 	
Interest expense	 	(7,451	)	 	(7,022	)	(15,570	)	
Other income, net	 	 	 	 	135	 	30	 	
Total other expense	 	(7,405	)	 	(6,734	)	(15,540	)	
Net income/(loss)	 	14,807	 	 	(6,382	)	32,009	 	
 	 	 	 	 	 	 	 	 	
Other comprehensive (loss)/income:	 	 	 	 	 	 	 	 	
Unrealized (loss)/gain on derivatives	 	(5,162	)	 	(775	)	17,956	 	
Other comprehensive (loss)/income	 	(5,162	)	 	(775	)	17,956	 	
Comprehensive income/(loss)	 	$	9,645	 	 	$	(7,157	)	$	49,965	 	
 
3

 
WCEP Holdings, LLC And Subsidiaries
(A Delaware Limited Liability Company)
Consolidated Statements of Member’s Equity
(Unaudited)
 
 	 	Capital
Contributions	 	Capital
Distributions	 	Retained (Deficit)/
Earnings	 	Accumulated
Other
Comprehensive
Loss	 	Total Member’s
Equity	 	
 	 	 	(In thousands)	 	 	
Predecessor	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2013	 	140,111	 	(21,999	)	3,195	 	(31,441	)	89,866	 	
Net loss	 	—	 	—	 	(6,382	)	—	 	(6,382	)	
Capital distributions	 	—	 	(15,400	)	—	 	—	 	(15,400	)	
Other comprehensive loss	 	—	 	—	 	—	 	(775	)	(775	)	
Balance at March 31, 2014	 	$	140,111	 	$	(37,399	)	$	(3,187	)	$	(32,216	)	$	67,309	 	

Successor	 	 	 	 	 	 	 	 	 	 	 	
Balance at April 1, 2014	 	$	238,138	 	$	—	 	$	—	 	$	—	 	$	238,138	 	
Net income	 	—	 	—	 	14,807	 	—	 	14,807	 	
Purchase accounting adjustments	 	16	 	—	 	—	 	—	 	16	 	
Dividend distributions	 	—	 	—	 	(12,000	)	—	 	(12,000	)	
Other comprehensive loss	 	—	 	—	 	—	 	(5,162	)	(5,162	)	
Balance at September 30, 2014	 	$	238,154	 	$	—	 	$	2,807	 	$	(5,162	)	$	235,799	 	

4

 
WCEP Holdings, LLC And Subsidiaries
(A Delaware Limited Liability Company)
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2014 and 2013
(Unaudited)
 
 	 	Successor	 	 	Predecessor	 	
 	 	April 1, 2014
through
September 30, 2014	 	 	January 1, 2014
through
March 31, 2014	 	January 1, 2013
through
September 30, 2013	 	
 	 	(In thousands)	 	 	(In thousands)	 	(In thousands)	 	
 	 	 	 	 	 	 	 	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	 	
Net income/( loss)	 	$	14,807	 	 	$	(6,382	)	$	32,009	 	
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:	 	 	 	 	 	 	 	 	
Depreciation, amortization and accretion	 	9,530	 	 	4,843	 	9,362	 	
Amortization of deferred financing costs	 	—	 	 	—	 	7,497	 	
Amortization of contract intangibles	 	10,000	 	 	—	 	—	 	
Loss on sale of emissions	 	—	 	 	—	 	49	 	
Purchase accounting adjustment-amortization of OCI	 	(6,728	)	 	—	 	—	 	
Changes in assets and liabilities:	 	 	 	 	 	 	 	 	
Accounts receivable	 	(14,156	)	 	6,094	 	(17,358	)	
Inventory	 	(557	)	 	(91	)	(2,285	)	
Prepaid expenses and other current assets	 	2,328	 	 	(2,068	)	(706	)	
Accounts payable and accrued liabilities	 	1,197	 	 	1,870	 	(16,352	)	
Interest payable	 	679	 	 	(24	)	1,100	 	
Revenue levelization adjustments	 	22,608	 	 	—	 	—	 	
Net cash provided by operating activities	 	39,708	 	 	4,242	 	13,316	 	
 	 	 	 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	
(Increase)/decrease in restricted cash	 	(8,439	)	 	4,029	 	(13,496	)	
Capital expenditures	 	—	 	 	(342	)	(51,305	)	
Purchased emission credits	 	—	 	 	—	 	(57	)	
Net cash (used in)/provided by investing activities	 	(8,439	)	 	3,687	 	(64,858	)	
 	 	 	 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	
Cash distribution to parent	 	(12,000	)	 	(15,400	)	(20,339	)	
Proceeds from debt	 	—	 	 	—	 	113,270	 	
Repayment of long-term debt	 	(20,584	)	 	(5,652	)	(16,565	)	
Net cash (used in)/provided by financing activities	 	(32,584	)	 	(21,052	)	76,366	 	
Net (decrease) increase in cash and cash equivalents	 	(1,315	)	 	(13,123	)	24,824	 	
 	 	 	 	 	 	 	 	 	
Cash and cash equivalents at beginning of period	 	14,571	 	 	27,694	 	897	 	
Cash and cash equivalents at end of period	 	$	13,256	 	 	$	14,571	 	$	25,721	 	
 	 	 	 	 	 	 	 	 	
Supplemental disclosures of cash flow information:	 	 	 	 	 	 	 	 	
Cash paid for interest, net of amount capitalized	 	$	14,163	 	 	$	7,047	 	$	10,447	 	
 
5

 
WCEP HOLDINGS, LLC
Notes to Financial Statements
September 30, 2014
 
(1)                     Nature of Operations
 
WCEP Holdings, LLC, or WCEP, a Delaware limited liability company, is an indirect wholly owned subsidiary of NRG Energy, Inc., or NRG. WCEP was organized under Delaware law on May 31, 2011 and has an ownership interest in one gas project. WCEP and its subsidiaries are referred to herein as the “Company.” On April 1, 2014, NRG completed the acquisition of substantially all of the assets of Edison Mission Energy, or EME, the EME Acquisition, including its member interests in the Company. The Company’s parent was acquired by NRG Energy Gas and Wind Holdings LLC, a wholly owned subsidiary of NRG.
 
WCEP owns 100% interest in Walnut Creek Energy, LLC, (Walnut Creek) which owns a 479-megawatt gas-fired simple cycle combustion turbine generating facility located in the City of Industry, California. The Walnut Creek project achieved commercial operation in May 2013 and began selling electricity to Southern California Edison (SCE) on June 1, 2013 under a Power Purchase Tolling Agreement (PPTA) with the term of 10 years. Under terms of the 10-year SCE PPTA that became effective on November 1, 2010, the Company receives a shaped monthly capacity rate adjusted for availability penalties, a variable O&M charge, start-up charges, and other miscellaneous charges as described in the PPTA. During the period from April 1, 2014 through September 30, 2014, the period from January 1, 2014 through March 31, 2014 and the nine months ended September 30, 2013, the Company recorded lease revenues of $74,063,000, $9,920,000 and $65,017,000, respectively.
 
Predecessor and Successor Reporting
 
As further discussed in note 3, Business Acquisition, on April 1, 2014, NRG completed the acquisition of substantially all of the assets of EME, or the EME Acquisition, including its member interests in the Company. The EME Acquisition was accounted for under the acquisition method of accounting. Fair value adjustments have been pushed down to the Company, resulting in the Company’s assets and liabilities being recorded at fair value at April 1, 2014. In addition, effective with the EME Acquisition, the Company adopted the accounting policies of NRG. Therefore, the Company’s financial information prior to the EME Acquisition is not comparable to its financial information subsequent to the EME Acquisition.
 
As a result of the impact of pushdown accounting, the consolidated financial statements and certain note presentations separate the Company’s presentations into two distinct periods, the period before the consummation of the EME Acquisition (labeled predecessor) and the period after that date (labeled successor), to indicate the application of different basis of accounting between the periods presented.
 
The following notes should be read in conjunction with the accounting policies and other disclosures as set forth in the notes to the Company’s annual financial statements. Interim results are not necessarily indicative of results for a full year.
 
6

 
(2)                     Business Acquisition
 
On April 1, 2014, NRG completed the EME Acquisition. The acquisition was recorded as a business combination under ASC 805,  Business Combinations , with identifiable assets acquired and liabilities assumed recorded at their estimated fair values on the acquisition date. As discussed in note 1,  Nature of Operations , the acquisition method of accounting impacts have been pushed down to the Company, resulting in certain assets and liabilities of the Company being recorded at fair value as of April 1, 2014. The initial accounting for the business combination is not complete because the evaluation necessary to assess the fair values of certain assets acquired is still in process.  The provisional amounts are subject to revision until the evaluations are completed to the extent that additional information is obtained about the facts and circumstances that exist as of the acquisition date.
 
The preliminary allocation of assets and liabilities is as follows (in thousands):
 
 	 	Fair Value	 	
Assets	 	 	 	
Current and non-current assets	 	$	40,698	 	
Net plant and equipment	 	520,000	 	
Other intangible assets	 	185,000	 	
Total assets acquired	 	$	745,698	 	
 	 	 	 	
Liabilities	 	 	 	
Current and non-current liabilities	 	$	79,155	 	
Long-term debt	 	428,405	 	
Total liabilties assumed	 	507,560	 	
 	 	 	 	
Net assets acquired	 	$	238,138	 	
 
7

 
Fair Value Measurements
 
The fair values of the property, plant and equipment and intangible assets at the acquisition date were measured primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in ASC 820.  Significant inputs were as follows:
 
Property, plant and equipment — The estimated fair values were determined primarily based on an income method using discounted cash flows and validated using a market approach based on recent transactions of comparable assets.  The income approach was primarily relied upon as the forecasted cash flows more appropriately incorporate differences in regional markets, plant types, age, useful life, equipment condition and environmental controls of each asset. The income approach also allows for a more accurate reflection of current and expected market dynamics such as supply and demand, commodity prices and regulatory environment as of the acquisition date.
 
Intangible assets — The fair value of the PPTA acquired was determined utilizing a variation of the income approach where the expected future cash flows resulting from the acquired PPTA was reduced by operating costs and charges for contributory assets and then discounted to present value at the weighted average cost of capital of an integrated utility peer group adjusted for project-specific financing attributes.  The values were corroborated with available market data. The PPTA intangible assets will be amortized over the remaining 9 years term of the PPTA.
 
(3)                     Accounting for Derivative Instruments and Hedging Activities
 
(a)     Interest Rate Swaps
 
On June 30, 2013, the Company entered into 10-year amortizing interest rate swap agreements for the purpose of hedging the variability of cash flows in the interest payments due to fluctuations of the London Interbank Offered Rate, or LIBOR. These interest rate swap agreements became effective on July 27, 2011 and qualify as effective cash flow hedges. The interest rate swap agreements entitle the Company to receive a floating (three-month LIBOR) rate and pay a fixed rate of 4.0025% for the Company and 3.5429% for Walnut Creek. The interest rate swap agreements expire in May 2023.
 
The interest rate swap agreements convert the LIBOR-based rates (0.23710% and 0.23745% for the Company and 0.23310% and 0.24660% for Walnut Creek at September 30, 2014 and December 31, 2013, respectively) in the term loan to a fixed interest rate of 4.0025% for the Company and 3.5429% for Walnut Creek.
 
Total interest expense, net of amounts capitalized in 2013, related to the swap agreements was $7,122,000, $3,543,000 and $4,129,000 for the period from April 1, 2014 through September 30, 2014, the period from January 1, 2014 through March 31, 2014 and the nine months ended September 30, 2013, respectively. These costs are included in interest expense in the accompanying consolidated statements of operations.
 
(b)     Volumetric Underlying Derivative Transactions
 
The Company’s interest rate swaps had a notional volume of $399,641,000 and $423,254,000 at September 30, 2014 and December 31, 2013, respectively. The notional amount of the interest rate swap agreements amortizes each year, such that the Company’s interest payment under the financing is approximately 90% hedged.
 
8

 
(c)      Fair Value of Derivative Instruments
 
The following table summarizes the Company’s derivative liabilities on the balance sheets (in thousands):
 
 	 	Successor	 	 	Predecessor	 	
 	 	September 30, 2014	 	 	December 31, 2013	 	
Derivatives designated as cash flow hedges:	 	 	 	 	 	 	
Interest rate contracts current	 	$	12,478	 	 	$	—	 	
Interest rate contracts long term	 	16,455	 	 	31,441	 	
Total derivatives	 	$	28,933	 	 	$	31,441	 	
 
Interest payable amounts related to the swap liability are included in interest payable on the Company’s balance sheets. The Company had interest payable related to the rate swap liability of $340,000 and $344,000 at September 30, 2014 and December 31, 2013, respectively.
 
(d)   Accumulated Other Comprehensive Income (Loss)
 
The following table presents the gains (losses) on the interest rate swaps designated as cash flow hedges in the consolidated statements of operations and other comprehensive income (loss) (in thousands):
 
 	 	April 1, 2014
through
September 30, 2014	 	 	January 1, 2014
through
March 31, 2014	 	January 1, 2013
through
September 30, 2013	 	
Recognized in OCI on interest rate derivatives	 	$	(5,162	)	 	$	(775	)	$	17,956	 	

All of the forecasted transactions (future interest payments) were deemed probable of occurring; therefore, no cash flow hedges were discontinued and no amount was recognized in the Company’s results of operations as a result of discontinued cash flow hedges.
 
(4)                     Subsequent events
 
These financial statements and notes reflect the Company’s evaluation of events occurring subsequent to the balance sheet date through January 16, 2015, the date that the financial statements are available to be issued.
 
9

Exhibit 99.5
 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
Consolidated Financial Statements
 
December 31, 2013 and 2012
 
(With Independent Auditors’ Report Thereon)

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
Table of Contents
 
 	 	Page(s)	 	
 	 	 	 	
Independent Auditors’ Report	 	1	 	
 	 	 	 	
Consolidated Financial Statements:	 	 	 	
 	 	 	 	
Consolidated Balance Sheets	 	2	 	
 	 	 	 	
Consolidated Statements of Operations	 	3	 	
 	 	 	 	
Consolidated Statements of Comprehensive Income (Loss)	 	4	 	
 	 	 	 	
Consolidated Statements of Member’s Equity	 	5	 	
 	 	 	 	
Consolidated Statements of Cash Flows	 	6	 	
 	 	 	 	
Notes to Consolidated Financial Statements	 	7–15	 	

 
Independent Auditors’ Report
 
The Management Committee
Tapestry Wind, LLC:
 
We have audited the accompanying consolidated financial statements of Tapestry Wind, LLC and its subsidiaries, which comprise the consolidated balance sheets as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income (loss), member’s equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.
 
Management’s Responsibility for the Financial Statements
 
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
 
Auditors’ Responsibility
 
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
 
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
 
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
 
Opinion
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tapestry Wind, LLC and its subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for the years then ended in accordance with U.S. generally accepted accounting principles.
 
/s/ KPMG LLP
Los Angeles, California
April 23, 2014
 
1

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
Consolidated Balance Sheets
December 31, 2013 and 2012
(In thousands)
 
 	 	2013	 	2012	 	
Assets	 	 	 	 	 	
Current assets:	 	 	 	 	 	
Cash and cash equivalents	 	$	3,968	 	6,450	 	
Accounts receivable	 	3,963	 	4,953	 	
Accounts receivable from affiliates	 	—	 	116	 	
Inventory	 	82	 	36	 	
Restricted cash	 	—	 	2	 	
Prepaid expenses and other current assets	 	424	 	666	 	
Total current assets	 	8,437	 	12,223	 	
Wind energy generating system, net of accumulated depreciation of $56,947 and $34,387 in 2013 and 2012, respectively	 	393,780	 	416,114	 	
Inventory deposits	 	5,640	 	—	 	
Deferred financing costs, net	 	6,667	 	7,858	 	
Long-term restricted cash	 	9	 	44	 	
Long-term derivative assets	 	4,457	 	—	 	
Total assets	 	$	418,990	 	436,239	 	
Liabilities and Member’s Equity	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	
Accounts payable	 	$	2,555	 	872	 	
Accounts payable to related parties	 	148	 	256	 	
Accrued liabilities	 	845	 	1,040	 	
Interest payable	 	27	 	28	 	
Current maturities of long-term debt	 	9,812	 	8,191	 	
Total current liabilities	 	13,387	 	10,387	 	
Long-term debt, net of current maturities	 	191,523	 	201,335	 	
Deferred revenue, net	 	109,745	 	115,953	 	
Long-term derivative liabilities	 	—	 	10,352	 	
Asset retirement obligations	 	8,088	 	7,605	 	
Total liabilities	 	322,743	 	345,632	 	
Commitments and contingencies	 	 	 	 	 	
Member’s equity	 	96,247	 	90,607	 	
Total liabilities and member’s equity	 	$	418,990	 	436,239	 	
 
See accompanying notes to consolidated financial statements.
 
2

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
Consolidated Statements of Operations
Years ended December 31, 2013 and 2012
(In thousands)
 
 	 	2013	 	2012	 	
Operating revenues:	 	 	 	 	 	
Electric revenue	 	$	14,847	 	13,509	 	
Lease and other revenue	 	25,135	 	24,079	 	
Operating revenues from marketing affiliate	 	7	 	(99	)	
Grant revenue	 	6,208	 	5,263	 	
Total operating revenues	 	46,197	 	42,752	 	
Operating expenses:	 	 	 	 	 	
Depreciation and accretion	 	23,043	 	22,940	 	
Maintenance and other operating costs	 	8,950	 	9,915	 	
General and administrative	 	458	 	1,628	 	
Total operating expenses	 	32,451	 	34,483	 	
Income from operations	 	13,746	 	8,269	 	
Other income (expense):	 	 	 	 	 	
Interest income	 	1	 	32	 	
Interest expense	 	(11,223	)	(11,648	)	
Total other expense	 	(11,222	)	(11,616	)	
Net income (loss)	 	$	2,524	 	(3,347	)	
 
See accompanying notes to consolidated financial statements.
 
3

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
Consolidated Statements of Comprehensive Income (Loss)
Years ended December 31, 2013 and 2012
(In thousands)
 
 	 	2013	 	2012	 	
Net income (loss)	 	$	2,524	 	(3,347	)	
Other comprehensive income (loss):	 	 	 	 	 	
Unrealized gains (losses) on derivatives qualified as cash flow hedges:	 	 	 	 	 	
Unrealized holding gains (losses) arising during the period	 	14,808	 	(4,345	)	
Other comprehensive income (loss)	 	14,808	 	(4,345	)	
Comprehensive income (loss)	 	$	17,332	 	(7,692	)	
 
See accompanying notes to consolidated financial statements.
 
4

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
Consolidated Statements of Member’s Equity
Years ended December 31, 2013 and 2012
(In thousands)
 
 	 	Edison Mission Wind, Inc.	 	 	 	
 	 	 	 	 	 	 	 	Accumulated	 	 	 	 	 	
 	 	 	 	 	 	 	 	other	 	Purchase	 	Total	 	
 	 	 	 	 	 	Retained	 	comprehensive	 	noncontrolling	 	member’s	 	
 	 	Contributions	 	Distributions	 	deficit	 	income (loss)	 	interest	 	equity	 	
Balances at December 31, 2011	 	$	430,904	 	(193,175	)	(1,764	)	(6,006	)	(4,803	)	225,156	 	
Contributions from member	 	16,235	 	—	 	—	 	—	 	—	 	16,235	 	
Distributions to member	 	—	 	(143,092	)	—	 	—	 	—	 	(143,092	)	
Net loss	 	—	 	—	 	(3,347	)	—	 	—	 	(3,347	)	
Other comprehensive loss	 	—	 	—	 	—	 	(4,345	)	—	 	(4,345	)	
Balances at December 31, 2012	 	447,139	 	(336,267	)	(5,111	)	(10,351	)	(4,803	)	90,607	 	
Distributions to member	 	—	 	(11,692	)	—	 	—	 	—	 	(11,692	)	
Net income	 	—	 	—	 	2,524	 	—	 	—	 	2,524	 	
Other comprehensive income	 	—	 	—	 	—	 	14,808	 	—	 	14,808	 	
Balances at December 31, 2013	 	$	447,139	 	(347,959	)	(2,587	)	4,457	 	(4,803	)	96,247	 	
 
See accompanying notes to consolidated financial statements.
 
5

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
Consolidated Statements of Cash Flows
Years ended December 31, 2013 and 2012
(In thousands)
 
 	 	2013	 	2012	 	
Cash flows from operating activities:	 	 	 	 	 	
Net income (loss)	 	$	2,524	 	(3,347	)	
Adjustments to reconcile net income (loss) to net cash provided by operating activities:	 	 	 	 	 	
Depreciation, amortization, and accretion	 	24,234	 	24,232	 	
Amortization of deferred revenue	 	(6,208	)	(5,263	)	
Changes in assets and liabilities:	 	 	 	 	 	
Accounts receivable	 	1,106	 	(2,537	)	
Prepaid expenses and other current assets	 	242	 	(221	)	
Inventory	 	(46	)	—	 	
Inventory deposits	 	(5,640	)	—	 	
Proceeds from U.S. Treasury grants	 	—	 	44,185	 	
Accounts payable	 	2,282	 	(985	)	
Accrued liabilities	 	(195	)	(1,490	)	
Interest payable	 	(1	)	(28	)	
Net cash provided by operating activities	 	18,298	 	54,546	 	
Cash flows from investing activity:	 	 	 	 	 	
Capital expenditures	 	(934	)	(12,824	)	
Net cash used in investing activity	 	(934	)	(12,824	)	
Cash flows from financing activities:	 	 	 	 	 	
Contributions from member	 	—	 	13,480	 	
Distributions to member	 	(11,692	)	(143,092	)	
Repayment of long-term debt	 	(8,191	)	(4,474	)	
Borrowings transferred from escrow pending completion of project construction	 	37	 	97,041	 	
Financing costs	 	—	 	(1,203	)	
Net cash used in financing activities	 	(19,846	)	(38,248	)	
Net increase (decrease) in cash and cash equivalents	 	(2,482	)	3,474	 	
Cash and cash equivalents at beginning of year	 	6,450	 	2,976	 	
Cash and cash equivalents at end of year	 	$	3,968	 	6,450	 	
Supplemental disclosures of cash flow information:	 	 	 	 	 	
Noncash capital contributions from member	 	$	—	 	2,755	 	
Cash paid for interest	 	10,031	 	10,330	 	
 
See accompanying notes to consolidated financial statements.
 
6

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
Notes to Consolidated Financial Statements
 
December 31, 2013 and 2012
 
(1)                     The Company
 
(a)                     Formation
 
Tapestry Wind, LLC (Tapestry), a Delaware limited liability company, was formed on September 26, 2011 in anticipation of issuing debt in 2012 based on future cash flows from a portfolio of wind projects. Tapestry is a wholly owned subsidiary of Edison Mission Wind, Inc. (EM Wind), which was in turn, a wholly owned subsidiary of Edison Mission Energy (EME). On October 18, 2013, EME entered into an acquisition agreement with NRG Energy, Inc. (NRG), that provided for the sale of substantially all of EME’s assets to NRG including its member interests in the Company. The sale closed on April 1, 2014 and EM Wind was acquired by NRG Energy Gas and Wind Holdings LLC, a wholly owned subsidiary of NRG.
 
On November 1, 2011, Tapestry received, as capital contributions, ownership interest in the three wind projects described below: Taloga Wind, Pinnacle Wind, and Buffalo Bear. Tapestry and its subsidiaries are referred to herein as the “Company.” These contribution transactions were transfer of businesses under common control. Therefore, the assets and liabilities acquired were recorded at their historical carrying value.
 
(b)                     Description of Projects
 
Taloga
 
Tapestry owns a 100% interest in Taloga Wind, LLC (Taloga), which owns a 129.6-megawatt wind farm located in Dewey County, Oklahoma. The project sells electricity to Oklahoma Gas and Electric Company under a 20-year power purchase agreement (PPA). The project achieved commercial operation in July 2011.
 
Pinnacle
 
Tapestry owns a 100% interest in Pinnacle Wind, LLC (Pinnacle), which owns a 55.2-megawatt wind farm located in Mineral County, West Virginia. The project sells electricity to The Maryland Department of General Services and The University System of Maryland under PPAs with terms of 20 years for each respective institution. The project achieved commercial operation in December 2011.
 
Buffalo Bear
 
Tapestry owns a 100% interest in Buffalo Bear, LLC (Buffalo Bear), which owns an 18.9-megawatt wind farm located in Harper County, Oklahoma. The project sells electricity to Western Farmers Electric Cooperative under a 25-year PPA. The project achieved commercial operation in December 2008.
 
Taloga, Pinnacle, and Buffalo Bear are individually referred to as a “Project” or collectively referred to as “Projects.”
 
(Continued)
 
7

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
Notes to Consolidated Financial Statements
 
December 31, 2013 and 2012
 
(2)                     Significant Accounting Policies
 
(a)                     Basis of Presentation
 
The consolidated financial statements include the accounts of the Company. All significant intercompany transactions and balances have been eliminated in the consolidated financial statements.
 
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
(b)                     Cash and Cash Equivalents
 
The Company considers cash and cash equivalents to include cash and money market fund investments. The carrying value of cash and cash equivalents approximates fair value due to original maturities of less than three months.
 
(c)                      Inventory
 
Inventory is stated at the lower of weighted average cost or market and consists of spare parts, materials, and supplies.
 
(d)                     Derivative Instruments
 
The Company uses interest rate swaps to manage its interest-rate exposure on long-term debt. Authoritative guidance on derivatives and hedging establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts). The Company is required to record derivatives on its consolidated balance sheets as either assets or liabilities measured at fair value unless otherwise exempted from derivative treatment as a normal sale and purchase. All changes in the fair value of derivative instruments are recognized currently in earnings, unless specific hedge criteria are met, which requires that the Company formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.
 
The accounting guidance for cash flow hedges provides that the effective portion of gains or losses on derivative instruments designated and qualifying as cash flow hedges be reported as a component of other comprehensive income and be reclassified into earnings in the same period during which the hedged transaction affects earnings. The remaining gains or losses on the derivative instruments, if any, must be recognized currently in earnings. Derivative and hedging accounting policies are discussed further in note 3 — Derivative Instruments and Risk Management.
 
(e)                      Deferred Financing Costs
 
Deferred financing costs consist of legal fees and closing costs incurred by the Company in obtaining its financing. These costs are amortized using the effective interest method over the term of the financing obligation. Amortization expense included as part of interest expense in the consolidated
 
(Continued)
 
8

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
Notes to Consolidated Financial Statements
 
December 31, 2013 and 2012
 
statements of operations was $1,191,000 and $1,292,000 for the years ended December 31, 2013 and 2012, respectively. Accumulated amortization was $2,499,000 and $1,308,000 for the years ended December 31, 2013 and 2012, respectively.
 
(f)                        Restricted Cash
 
Restricted cash consisted of funds held in escrow pending the completion of the Pinnacle Wind project and of debt service or collateral reserves required by the Company’s debt agreements. The Company had $0 and $2,000 in escrowed funds and $9,000 and $44,000 of funds restricted for debt service and collateral reserves for the years ended December 31, 2013 and 2012, respectively.
 
(g)                     Income Taxes
 
The Company is a single member limited liability company and is included in the consolidated return of its ultimate parent company. An enterprise is required to recognize, in its consolidated financial statements, the impact of a tax position by determining if the weight of the available evidence indicates it is more likely than not, based on the technical merits, that the position will be sustained on audit. All income tax contingencies would be immaterial if they had to be recognized by the Company. However, because the entity is a limited liability entity that is included in the tax return of its parent company and is not obligated to pay any income taxes, the Company has not reflected a hypothetical tax obligation in its consolidated financial statements.
 
If the Company had recorded income taxes, based on a hypothetical separate company return, adjusted for the use of state tax apportionment factors of the consolidated tax group, the income statements would include income tax benefit of $453,000 and $6,203,000 for the years ended December 31, 2013 and 2012, respectively.
 
(h)                     Property, Plant, and Equipment
 
Property, plant, and equipment, including leasehold improvements and construction in progress, are capitalized at cost and principally comprise wind energy generating systems and related facilities. Depreciation is computed by using the straight-line method over the useful life of the property, plant, and equipment.
 
Useful lives for property, plant, and equipment are as follows:
 
Wind energy generating systems	 	20 years	 	
Equipment, furniture, and fixtures	 	3 to 7 years	 	
 
Expenditures for maintenance, repairs, and renewals are expensed as incurred. Expenditures for additions and improvements are capitalized.
 
(i)                        Impairment of Long-Lived Assets
 
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of long-lived assets is measured by a comparison of its carrying amount, to its future net undiscounted cash flows
 
(Continued)
 
9

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
Notes to Consolidated Financial Statements
 
December 31, 2013 and 2012
 
expected to be generated plus production tax credits. If the net book value of a long-lived asset or asset group is less than the related future undiscounted net cash flows, the long-lived asset or asset group is considered to be impaired. The amount of the impairment is measured as the net book value in excess of its fair value. No impairment losses were recognized during the years ended December 31, 2013 and 2012.
 
(j)                        Inventory Deposits
 
Inventory deposits include spare parts purchased pursuant to the terms of the maintenance and service agreement with the turbine supplier. Parts acquired under this agreement are to be replenished by turbine supplier as parts are used in turbine maintenance throughout the term of the agreement. These amounts are included at cost.
 
(k)                     Asset Retirement Obligations
 
The Company accounts for its asset retirement obligations by recording the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability was initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. Accretion expense is classified as part of depreciation and accretion.
 
The Company recorded a liability representing expected future costs associated with site reclamation, facilities dismantlement, and removal of environmental hazards as follows (in thousands):
 
Balance of asset retirement obligations at December 31, 2011	 	$	7,151	 	
Accretion expense	 	454	 	
Balance of asset retirement obligations at December 31, 2012	 	7,605	 	
Accretion expense	 	483	 	
Balance of asset retirement obligations at December 31, 2013	 	$	8,088	 	
 
(l)                        Revenue Recognition
 
An assessment of revenue from electricity sales under long-term power sales agreements was conducted to determine whether or not the power sales agreements contain an embedded lease. The assessment resulted in a determination that revenue earned by Taloga and Buffalo Bear is subject to lease accounting. However, there are no minimum rental payments required under the related agreement and; therefore, rental income is recorded as electricity is delivered at rates defined in the PPAs. Revenue earned by Pinnacle is not subject to lease accounting. Electricity sales are recognized as energy is delivered to the specified parties at the rate defined in the PPAs. The Company accounts for renewable energy credits as a bundled component of the associated electricity, with revenue also recorded as the electricity is delivered.
 
(Continued)
 
10

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
Notes to Consolidated Financial Statements
 
December 31, 2013 and 2012
 
The Company accounts for grant income on the deferred method and, accordingly, will recognize operating revenues related to such income over the estimated useful life of the applicable projects. In 2012 and 2011, the Company received $44,185,000 and $78,346,000, respectively, in U.S. Treasury grants (cash grants, under the American Recovery and Reinvestment Act of 2009) that was recorded as deferred revenue and is amortized to income over 20 years. Pursuant to the regulations governing U.S. treasury grants, there is a ratable, five year recapture period on the grant income from the date the related property was put into service if the property ceases to be used as eligible property or is disposed of to a disqualified entity. The recapture period for the grants received in 2012 and 2011 becomes fully vested on February 28, 2017 and July 13, 2016, respectively.
 
The Company accounts for income from state tax credits (Credits) sold when ownership transfers to Cash Flow Enhancement Strategies, LLC (CFES), which is further discussed in note 5(c).
 
(3)                     Derivative Instruments and Risk Management
 
Interest Swap
 
On December 21, 2011, the Company, in conjunction with its wind financing, entered into 10-year amortizing interest rate swap agreements for the purpose of hedging the variability of cash flows in the interest payments due to fluctuations of the London Interbank Offered Rate (LIBOR). These interest rate swap agreements became effective on December 30, 2011 and qualify as effective cash flow hedges, whereby the hedges were reported in the Company’s consolidated balance sheets at fair value, with the change in the fair value of the hedges reflected in the consolidated statements of comprehensive loss. The total notional amount of the hedges was $181,201,000 and $188,573,000 at December 31, 2013 and 2012, respectively. The notional amount of the interest rate swap agreements amortizes each year, such that the Company’s interest payment under the wind financing is approximately 90% hedged. The interest rate swap agreements entitle the Company to receive a floating (three-month LIBOR) rate and pay a fixed rate of 2.21%. The interest rate swap agreements expire in December 2021. The Company recognized unrealized gains of $14,808,000 and unrealized losses of $4,345,000 in other comprehensive income (loss) at December 31, 2013 and 2012, respectively.
 
The Company also entered into forward starting interest rate swap agreements at 3.57% to hedge the probable forecasted refinancing of the final maturity payment of the term loan and shall be effective on December 21, 2021.
 
The interest rate swaps convert the LIBOR-based rates (0.25% and 0.32% at December 31, 2013 and 2012, respectively) in the term loan to a fixed interest rate of 2.21%. Total interest expense related to the swap agreements was $3,633,000 and $3,395,000 for the years ended December 31, 2013 and 2012, respectively. These costs are included in the accompanying consolidated statements of operations as interest expense.
 
(4)                     Fair Value Measurements
 
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an exit price). Fair value for a liability should reflect the entity’s nonperformance risk. Fair value is determined using a
 
(Continued)
 
11

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
Notes to Consolidated Financial Statements
 
December 31, 2013 and 2012
 
hierarchy to prioritize inputs to valuation models. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are:
 
·                  Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities;
 
·                  Level 2 — Pricing inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the derivative instruments; and
 
·                  Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurements and unobservable.
 
The Company’s assets carried at fair value consist of money market funds which are classified as Level 1 as fair value is determined by observable market prices (unadjusted) in active markets. Money market funds are included in cash and cash equivalents and restricted cash in the Company’s consolidated balance sheets. The Company had money market assets of $664,000 and $1,685,000 at December 31, 2013 and 2012, respectively.
 
The interest rate swap liabilities are classified as Level 2 as the fair value can be determined based on observable values of underlying interest rates. The Company had derivative assets related to interest rate swaps of $4,457,000 and liabilities of $10,352,000 as of December 31, 2013 and 2012, respectively.
 
(5)                     Project Agreements
 
A summary of the major agreements entered into by the Company is set forth below:
 
(a)                     Limited Liability Company Agreements
 
The subsidiaries of the Company are parties to limited liability company agreements. The provisions of these agreements set forth rights and obligations of the subsidiary.
 
(b)                     Power Purchase Agreements
 
The Projects sell electricity generated by the wind energy generating systems to utilities or other third-parties. Payment is made based on actual production at contractually predetermined energy rates which in some case are escalated on an annual basis.
 
Under the terms of the Taloga power purchase agreement, Taloga is required to deliver minimum quantities of electric energy on a 36-month rolling average basis. If the project fails to achieve minimum deliveries, it could be subject to damages as defined in the agreement. Taloga exceeded required minimum deliveries of electric energy for the year ended December 31, 2013.
 
(c)                      Zero-Emission Facilities Tax Credit Purchase and Sale Agreement
 
Buffalo Bear and Taloga have entered into zero-emission facilities tax credit purchase and sale agreements with CFES to facilitate the transfer and sale of the Company’s zero-emission Credits to
 
(Continued)
 
12

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
Notes to Consolidated Financial Statements
 
December 31, 2013 and 2012
 
third-parties. The term of the agreements are 10 years covering all Credits generated through 2018 for Buffalo Bear and 2022 for Taloga and may be terminated upon providing written notice. CFES pays an amount equal to 88% of the face value of the Credits, as defined in the agreement. For the years ended December 31, 2013 and 2012, the Company sold Credits to CFES and recognized $1,996,000 and $1,406,000, respectively, which was included on the consolidated statements of operations in lease and other revenue.
 
(d)                     Maintenance and Service Agreements
 
Each of the Projects has contracted with the turbine supplier for its project to provide certain warranty, maintenance, and repair services. The agreements, including extensions, generally cover a five-year period commencing on completion of construction. Payment provisions generally provide for a monthly fee per turbine plus escalation. Total fees incurred during 2013 and 2012 were $4,079,000 and $4,086,000, respectively. These costs are included on the consolidated statements of operations as part of maintenance and other operating costs.
 
Buffalo Bear entered into a maintenance and service agreement with Suzlon Wind Energy Corporation (Suzlon). Pursuant to the agreement’s warranty provisions, the measured average availability for the project’s wind turbine generators shall not be less than 97% for the remainder of the warranty period. Suzlon shall pay liquidated damages to the project for lost revenues and income in the event that the measured average availability of the wind turbine generators falls below 97%. For the years ended December 31, 2013 and 2012, the Company recognized lost revenues of $75,000 and $0, respectively, which was included on the consolidated statements of operations in lease and other revenue.
 
Suzlon is currently experiencing significant adverse credit and liquidity issues. As a result, the Company’s ability to enforce performance and warranty guarantees is subject to the credit risk of this counterparty.
 
(e)                      Operation and Maintenance Agreements
 
Each of the Projects has entered into agreements with Edison Mission Operation and Maintenance, Inc. (EMOM), a wholly owned subsidiary of EME, to provide operation and maintenance services for the balance of the plant not covered by the turbine supplier’s maintenance and service agreement and for the post warranty period. The agreements generally have a term of five years commencing on completion of construction with provisions for extension until terminated. Total costs incurred under these agreements during the years ended December 31, 2013 and 2012 were $1,256,000 and $1,425,000, respectively. These costs are included on the consolidated statements of operations as part of maintenance and other operating costs.
 
(f)                        Wind Park Easement Agreements
 
Each of the Projects has entered into various easement agreements, which grant the project nonexclusive easement rights to use the land on which wind energy generating systems, the substation, operations building, access roads, and other related equipment are located. Each Project is obligated to pay easement fees ranging from 2.5% to 4% of their gross operating revenues. Total
 
(Continued)
 
13

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
Notes to Consolidated Financial Statements
 
December 31, 2013 and 2012
 
costs incurred under these agreements during the years ended December 31, 2013 and 2012 were $1,072,000 and $998,000, respectively. These costs are included on the consolidated statements of operations as part of maintenance and other operating costs.
 
(6)                     Long-Term Debt
 
In December 2011, the Company completed a nonrecourse financing of its interests in the Taloga, Pinnacle, and Buffalo Bear wind projects. The financing included a $214 million 10-year partially amortizing term loan (expiring in December 2021), a $12 million 10-year debt service reserve letter of credit facility, an $8 million 10-year project letter of credit facility and an $8 million 10-year working capital facility. Interest under the term loans accrues at LIBOR plus 2.5% initially, with the rate increasing 0.125% on the fourth anniversary of the closing date. A total of $97 million of cash proceeds received was deposited into restricted cash as of December 31, 2011. These funds became available in December 2012 when the Pinnacle project achieved certain completion milestones. Interest expense for the years ended December 31, 2013 and 2012 was $5,821,000 and $6,432,000, respectively.
 
The Company entered into interest rate swap agreements to hedge the majority of the variable interest rate exposure under the term loan. For further details regarding the interest rate swap agreements, see note 3 — Derivative Instruments and Risk Management.
 
Distributions from the Company are subject to compliance with the terms and conditions of its credit agreements, including a covenant to meet a 12-month historic debt service coverage ratio as specified in the agreements of 1.2 to 1.0.
 
Annual maturities on long-term debt at December 31, 2013 for the next five years and thereafter are summarized as follows (in thousands):
 
Years ending December 31:	 	 	 	
2014	 	$	9,812	 	
2015	 	10,568	 	
2016	 	9,094	 	
2017	 	10,189	 	
2018	 	11,029	 	
Thereafter	 	150,643	 	
 	 	$	201,335	 	
 
At December 31, 2013 and 2012, the amount of outstanding letters of credit was $20 million. The Company recorded costs of $575,000 and $464,000 associated with these letters of credit for the years
 
(Continued)
 
14

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
Notes to Consolidated Financial Statements
 
December 31, 2013 and 2012
 
ended December 31, 2013 and 2012, respectively. These costs are included on the consolidated statements of operations as part of interest expense.
 
The carrying amount of the long-term debt approximates fair value at December 31, 2013 and 2012 due to frequent repricing of the LIBOR interest rates as defined in the agreement.
 
(7)                     Related Party Transactions
 
The Company has the following related party transactions and relationships in addition to the EMOM Operations and Maintenance Agreement described in note 5 — Project Agreements:
 
(a)                     Transactions with EME
 
The Company incurred costs from EME and subsidiaries of EME, for certain insurance, consultant, and credit costs which totaled $823,000 and $2,527,000 for the years ended December 31, 2013 and 2012, respectively. These are invoiced at cost and are settled monthly in cash. These costs are included in the consolidated balance sheets and consolidated statements of operations as follows (in thousands):
 
 	 	2013	 	2012	 	
Expensed	 	$	823	 	1,524	 	
Capitalized deferred financing	 	—	 	1,003	 	
 	 	$	823	 	2,527	 	
 
(b)                     Transactions with EMMT
 
The Projects have entered into services, purchase, and sale agreements with Edison Mission Marketing & Trading, Inc. (EMMT), a wholly owned subsidiary of EME, to provide scheduling, dispatch, and transaction services. The agreements may be terminated upon providing a 30-day written notice. The Company incurred net costs in the amount of $19,000 and $23,000 from EMMT for the years ended December 31, 2013 and 2012, respectively. These costs are included in the consolidated statements of operations as part of operating revenues.
 
(8)                     Subsequent Events
 
The Company has performed an evaluation of subsequent events through April 23, 2014, which is the date the consolidated financial statements are available to be issued. As discussed in Note 1- The Company, NRG completed the purchase of substantially all of the assets of EME including its member interests in the Company on April 1, 2014.
 
15

Exhibit 99.6
 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
Consolidated Financial Statements
 
(Unaudited)
 
September 30, 2014

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
September 30, 2014
 
Table of Contents
 
 	 	Page(s)	
 	 	 	
Consolidated Financial Statements:	 	 	
 	 	 	
Consolidated Balance Sheets	 	1	
 	 	 	
Consolidated Statements of Operations	 	2	
 	 	 	
Consolidated Statements of Member’s Equity	 	3	
 	 	 	
Consolidated Statements of Cash Flows	 	4	
 	 	 	
Notes to Consolidated Financial Statements	 	5 – 7	

 
Tapestry Wind, LLC
(A Delaware Limited Liability Company)
Consolidated Balance Sheets
(Amounts in thousands)
 
 	 	(Successor)	 	 	(Predecessor)	 	
 	 	September 30, 2014	 	 	December 31, 2013	 	
 	 	(Unaudited)	 	 	 	 	
Assets	 	 	 	 	 	 	
 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	
Cash	 	$	6,207	 	 	$	3,968	 	
Accounts receivable	 	2,030	 	 	3,963	 	
Accounts receivable from related parties	 	13	 	 	—	 	
Inventory	 	5,870	 	 	82	 	
Prepaid expenses and other current assets	 	263	 	 	424	 	
Total current assets	 	14,383	 	 	8,437	 	
 	 	 	 	 	 	 	
Property, plant and equipment	 	280,000	 	 	450,727	 	
Accumulated depreciation	 	(6,607	)	 	(56,947	)	
Net plant and equipment	 	273,393	 	 	393,780	 	
 	 	 	 	 	 	 	
Inventory deposits	 	—	 	 	5,640	 	
Deferred financing costs, net	 	—	 	 	6,667	 	
Power purchase agreements, net of accumulated amortization of $1,324	 	65,676	 	 	—	 	
Restricted cash long-term	 	—	 	 	9	 	
Long-term derivative assets	 	3,302	 	 	4,457	 	
 	 	 	 	 	 	 	
Total assets	 	$	356,754	 	 	$	418,990	 	
 	 	 	 	 	 	 	
Liabilities & Member’s Equity	 	 	 	 	 	 	
 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	
Accounts payable	 	$	765	 	 	$	2,555	 	
Accounts payable to related parties	 	270	 	 	148	 	
Accrued liabilities	 	1,073	 	 	845	 	
Derivative liability - current	 	3,204	 	 	—	 	
Interest payable	 	28	 	 	27	 	
Current maturities of long-term obligations	 	10,438	 	 	9,812	 	
Total current liabilities	 	15,778	 	 	13,387	 	
 	 	 	 	 	 	 	
Long-term debt, net of current portion	 	184,307	 	 	191,523	 	
Deferred revenue, net	 	—	 	 	109,745	 	
Asset retirement obligation	 	416	 	 	8,088	 	
Total liabilities	 	200,501	 	 	322,743	 	
 	 	 	 	 	 	 	
Commitments and contingencies	 	 	 	 	 	 	
 	 	 	 	 	 	 	
Member’s equity	 	156,253	 	 	96,247	 	
 	 	 	 	 	 	 	
Total liabilities and member’s equity	 	$	356,754	 	 	$	418,990	 	
 
See accompanying notes to financial statements.
 
1

 
Tapestry Wind, LLC
(A Delaware Limited Liability Company)
Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss)
(Amounts in thousands)
 
 	 	(Successor)	 	 	(Predecesor)	 	(Successor)	 	 	(Predecesor)	 	(Predecesor)	 	
 	 	Three months ended 
September 30,	 	 	Three months ended 
September 30,	 	Six months ended 
September 30,	 	 	Three months ended 
March 31,	 	Nine months ended 
September 30,	 	
 	 	2014	 	 	2013	 	2014	 	 	2014	 	2013	 	
 	 	(In thousands)	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	
Electric revenue	 	$	13,374	 	 	$	1,937	 	$	16,277	 	 	$	4,852	 	$	10,690	 	
Lease and other revenue	 	(6,850	)	 	4,759	 	28	 	 	8,920	 	18,917	 	
Power purchase agreement amortization	 	(1,324	)	 	—	 	(1,324	)	 	—	 	—	 	
Operating revenues from marketing affiliate	 	(12	)	 	(47	)	(24	)	 	(108	)	(64	)	
Grant revenue	 	—	 	 	1,552	 	—	 	 	1,552	 	4,656	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating revenues	 	5,188	 	 	8,201	 	14,957	 	 	15,216	 	34,199	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and accretion	 	1,649	 	 	5,763	 	6,691	 	 	5,768	 	17,276	 	
Maintenance and other operating costs	 	2,321	 	 	2,254	 	4,595	 	 	2,273	 	6,597	 	
General and administrative	 	—	 	 	45	 	—	 	 	170	 	315	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating expenses	 	3,970	 	 	8,062	 	11,286	 	 	8,211	 	24,188	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from operations	 	1,218	 	 	139	 	3,671	 	 	7,005	 	10,011	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Income (Expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income	 	2	 	 	—	 	3	 	 	—	 	1	 	
Interest expense	 	(1,526	)	 	(2,811	)	(3,039	)	 	(2,701	)	(8,427	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other income (expense)	 	(1,524	)	 	(2,811	)	(3,036	)	 	(2,701	)	(8,426	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	(306	)	 	$	(2,672	)	$	635	 	 	$	4,304	 	$	1,585	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Comprehensive Income (Loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrealized (loss) gain on derivatives	 	$	(4,237	)	 	$	328	 	$	(7,950	)	 	$	(2,510	)	$	12,073	 	
Other comprehensive (loss) income	 	(4,237	)	 	328	 	(7,950	)	 	(2,510	)	12,073	 	
Comprehensive (loss) income	 	$	(4,543	)	 	$	(2,344	)	$	(7,315	)	 	$	1,794	 	$	13,658	 	
 
See accompanying notes to financial statements.
 
2

 
Tapestry Wind, LLC
(A Delaware Limited Liability Company)
Unaudited Consolidated Statements of Member’s Equity
(Amounts in thousands)
 
 	 	Capital 
Contributions	 	Capital 
Distributions	 	Retained 
Earnings 
(Deficit)	 	Accumulated 
Other 
Comprehensive
Income (Loss)	 	Purchase Non-
Controlling 
Interest	 	Total Member’s
Equity	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2013 (audited)	 	$	447,139	 	$	(347,959	)	$	(2,587	)	$	4,457	 	$	(4,803	)	$	96,247	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Distributions to member	 	—	 	(1,100	)	—	 	—	 	—	 	(1,100	)	
Net income	 	—	 	—	 	4,304	 	—	 	—	 	4,304	 	
Other comprehensive loss	 	—	 	—	 	—	 	(2,510	)	—	 	(2,510	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at March 31, 2014 (a)	 	$	447,139	 	$	(349,059	)	$	1,717	 	$	1,947	 	$	(4,803	)	$	96,941	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at April 1, 2014 (a)	 	$	166,114	 	$	—	 	$	—	 	$	—	 	$	—	 	$	166,114	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Distributions to member	 	—	 	(6,259	)	—	 	—	 	—	 	(6,259	)	
Net loss	 	—	 	—	 	635	 	—	 	—	 	635	 	
Other comprehensive loss	 	—	 	—	 	—	 	(4,237	)	—	 	(4,237	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at September 30, 2014	 	$	166,114	 	$	(6,259	)	$	635	 	$	(4,237	)	$	—	 	$	156,253	 	

(a) The differences in the equity balances at March 31, and April1, 2014 reflect the application of pushdown accounting as result of the EME Acquisition.
 
See accompanying notes to financial statements.
 
3

 
Tapestry Wind, LLC
(A Delaware Limited Liability Company)
Unaudited Consolidated Statements of Cash Flows
(Amounts in thousands)
 
 	 	(Successor)	 	 	(Predecessor)	 	
 	 	Six months ended
September 30,	 	 	Three months ended
March 31,	 	Nine months ended 
September 30,	 	
 	 	2014	 	 	2014	 	2013	 	
 	 	 	 	 	 	 	 	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	 	
Net income	 	$	635	 	 	$	4,304	 	$	1,585	 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	 	 	 	
Depreciation, amortization and accretion	 	8,015	 	 	6,054	 	18,172	 	
Amortization of deferred revenue	 	—	 	 	(1,552	)	(4,656	)	
Changes in derivative instruments	 	(1,772	)	 	—	 	—	 	
Changes in assets and liabilities:	 	 	 	 	 	 	 	 	
Accounts receivable	 	4,771	 	 	(2,851	)	1,821	 	
Inventory deposits	 	—	 	 	(148	)	(3,505	)	
Prepaid expenses and other current assets	 	(18	)	 	179	 	105	 	
Accounts payable	 	(80	)	 	(1,588	)	620	 	
Accrued liabilities	 	33	 	 	195	 	(376	)	
Interest payable	 	2	 	 	(1	)	(1	)	
Net cash provided by operating activities	 	11,586	 	 	4,592	 	13,765	 	
 	 	 	 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	
Capital expenditures	 	—	 	 	—	 	(876	)	
Restricted cash	 	—	 	 	9	 	—	 	
Net cash provided by investing activities	 	—	 	 	9	 	(876	)	
 	 	 	 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	
Member’s distributions	 	(7,259	)	 	(1,100	)	(8,692	)	
Repayment of long-term debt	 	(3,218	)	 	(3,371	)	(5,316	)	
Net cash used in financing activities	 	(10,477	)	 	(4,471	)	(14,008	)	
 	 	 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	 	1,109	 	 	130	 	(1,119	)	
Cash at beginning of period	 	4,098	 	 	3,968	 	6,450	 	
 	 	 	 	 	 	 	 	 	
Cash at end of period	 	$	5,207	 	 	$	4,098	 	$	5,331	 	
 	 	 	 	 	 	 	 	 	
Supplemental disclosures of cash flow information:	 	 	 	 	 	 	 	 	
Cash paid for interest	 	$	4,809	 	 	$	2,414	 	$	7,530	 	
 
See accompanying notes to financial statements.
 
4

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
Notes to Unaudited Consolidated Financial Statements
 
September 30, 2014
 
(1)                     The Company
 
(a)                     Formation
 
Tapestry Wind, LLC (Tapestry), a Delaware limited liability company, was formed on September 26, 2011 in anticipation of issuing debt in 2012 based on future cash flows from a portfolio of wind projects. Tapestry is a wholly owned subsidiary of NRG Wind LLC. (NRG Wind), is a wholly owned subsidiary of NRG Energy Gas and Wind Holdings LLC, in turn a wholly owned subsidiary of NRG Energy, Inc. (NRG or Parent).
 
Tapestry, along with NRG Wind, was originally a wholly owned subsidiary of Edison Mission Energy, Inc. (EME), Tapestry received, as capital contributions, ownership interest in the three wind projects described below: Taloga Wind, Pinnacle Wind, and Buffalo Bear. Tapestry and its subsidiaries are referred to herein as the “Company.”
 
(b)                     Description of Projects
 
Taloga
 
Tapestry owns a 100% interest in Taloga Wind, LLC (Taloga), which owns a 129.6-megawatt wind farm located in Dewey County, Oklahoma. The project sells electricity to Oklahoma Gas and Electric Company under a 20-year power purchase agreement (PPA). The project achieved commercial operation in July 2011.
 
Pinnacle
 
Tapestry owns a 100% interest in Pinnacle Wind, LLC (Pinnacle), which owns a 55.2-megawatt wind farm located in Mineral County, West Virginia. The project sells electricity to The Maryland Department of General Services and The University System of Maryland under PPAs with terms of 20 years for each respective institution. The project achieved commercial operation in December 2011.
 
Buffalo Bear
 
Tapestry owns a 100% interest in Buffalo Bear, LLC (Buffalo Bear), which owns a 18.9-megawatt wind farm located in Harper County, Oklahoma. The project sells electricity to Western Farmers Electric Cooperative under a 25-year PPA. The project achieved commercial operation in December 2008.
 
Taloga, Pinnacle, and Buffalo Bear are individually referred to as a “Project” or collectively referred to as “Projects.”
 
5

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
Notes to Unaudited Consolidated Financial Statements
 
September 30, 2014
 
(c)                      Predecessor and Successor Reporting
 
As further discussed in note 2, Business Acquisition, on April 1, 2014, NRG completed the acquisition of substantially all of the assets of EME, or the EME Acquisition, including its member interests in the Company. The EME Acquisition was accounted for under the acquisition method of accounting. Fair value adjustments have been pushed down to the Company, resulting in the Company’s assets and liabilities being recorded at fair value at April 1, 2014. In addition, effective with the EME Acquisition, the Company adopted the accounting policies of NRG. Therefore, the Company’s financial information prior to the EME Acquisition is not comparable to its financial information subsequent to the EME Acquisition.
 
As a result of the impact of pushdown accounting, the financial statements and certain note presentations separate the Company’s presentations into two distinct periods, the period before the consummation of the EME Acquisition (labeled predecessor) and the period after that date (labeled successor), to indicate the application of different basis of accounting between the periods presented.
 
The following notes should be read in conjunction with the accounting policies and other disclosures as set forth in the notes to the Company’s annual financial statements. Interim results are not necessarily indicative of results for a full year.
 
(2)                     Business Acquisition
 
On April 1, 2014, NRG completed the acquisition of substantially all of the assets of EME. The acquisition was recorded as a business combination under ASC 805,  Business Combinations , with identifiable assets acquired and liabilities assumed recorded at their estimated fair values on the acquisition date. The impact of the acquisition method of accounting was pushed down to the Company, resulting in assets and liabilities of the Company being recorded at fair value as of April 1, 2014.  The initial accounting for the business combination is not complete because the evaluation necessary to assess the fair values of certain assets acquired is still in process.  The provisional amounts are subject to revision until the evaluations are completed to the extent that additional information is obtained about the facts and circumstances that exists as of the acquisition date.
 
The preliminary allocation of assets and liabilities is as follows (in thousands):
 
6

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
Notes to Unaudited Consolidated Financial Statements
 
September 30, 2014
 
 	 	Acquisition Date	 	
 	 	Fair Value	 	
Assets	 	 	 	
Current and non-current assets	 	$	33,980	 	
Net plant and equipment	 	280,000	 	
Power purchase agreements	 	67,000	 	
Total assets acquired	 	$	380,980	 	
 	 	 	 	
Liabilities	 	 	 	
Current and non-current liabilities	 	16,903	 	
Long-term debt	 	197,963	 	
Total liabilties assumed	 	$	214,866	 	
 	 	 	 	
Net assets acquired	 	$	166,114	 	
 
Fair Value Measurements
 
The fair values of the property, plant and equipment and intangible assets at the acquisition date were measured primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in ASC 820.  Significant inputs were as follows:
 
Property, plant and equipment — The estimated fair values were determined primarily based on an income method using discounted cash flows and validated using a market approach based on recent transactions of comparable assets.  The income approach was primarily relied upon as the forecasted cash flows more appropriately incorporate differences in regional markets, plant types, age, useful life, equipment condition and environmental controls of each asset. The income approach also allows for a more accurate reflection of current and expected market dynamics such as supply and demand, commodity prices and regulatory environment as of the acquisition date.
 
Power purchase agreements — The fair value of the PPAs acquired was determined utilizing a variation of the income approach where the expected future cash flows resulting from the acquired PPAs were reduced by operating costs and charges for contributory assets and then discounted to present value at the weighted average cost of capital of an integrated utility peer group adjusted for project-specific financing attributes.  The values were corroborated with available market data.  The PPAs will be amortized over a term of approximately 17 years.
 
7

 
TAPESTRY WIND, LLC AND SUBSIDIARIES
(A Delaware Limited Liability Company)
 
Notes to Unaudited Consolidated Financial Statements
 
September 30, 2014
 
(3)                     Derivative Instruments and Hedging Activity
 
The Company has fixed for floating interest rate swaps for 90% of its outstanding term loan amount. The notional amount of the swaps was approximately $175,271,000 as of September 30, 2014. The Company also entered into forward starting interest rate agreements to hedge the probable forecasted refinancing of the final maturity payment of the term loan and shall be effective on December 21, 2021. The following table summarizes the effects of the swaps on the Company’s accumulated other comprehensive income (OCI) balance, which reflects the change in the fair value of the swaps (amounts in thousands):
 
Accumulated OCI balance as of April 1, 2014	 	$	—	 	
 	 	 	 	
Mark-to-market of cash flow hedge accounting contracts	 	(4,237	)	
 	 	 	 	
Accumulated OCI balance as of September 30, 2014	 	$	(4,237	)	
 
(4)                     Subsequent events
 
These financial statements and notes reflect the Company’s evaluation of events occurring subsequent to the balance sheet date through January 16, 2015, the date that the financial statements are available to be issued.
 
8

Exhibit 99.7
 
Unaudited Pro Forma Consolidated Combined Financial Statements
 
The Unaudited Pro Forma Consolidated Combined Financial Statements, (the “pro forma financial statements”) combine the historical consolidated financial statements of NRG Yield, Inc., or the Company, and the financial statements of the entities that were acquired by the Company to illustrate the potential effect of the acquisition. The Company acquired Laredo Ridge Wind, LLC, WCEP Holdings, LLC and its subsidiaries and Tapestry Wind, LLC and its subsidiaries, or the Drop-Down Assets, from NRG Energy, Inc., or NRG, on January 2, 2015.  The pro forma financial statements are based on, and should be read in conjunction with, the:
 
· accompanying notes to the Unaudited Pro Forma Consolidated Combined Financial Statements;
 
· consolidated financial statements of the Company for the year ended December 31, 2013 and for the nine  months ended September 30, 2014 and the notes relating thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014; and
 
· financial statements of Laredo Ridge Wind, LLC, WCEP Holdings, LLC and its subsidiaries and Tapestry Wind, LLC and its subsidiaries for the year ended December 31, 2013 and for the nine months ended September 30, 2014 and the notes relating thereto included within Exhibits 99.1, 99.2, 99.3, 99.4, 99.5 and 99.6 to this Form 8-K/A.
 
The historical consolidated financial statements have been adjusted in the pro forma financial statements to give effect to pro forma events that are (1) directly attributable to the acquisition of the Drop-Down Assets, (2) factually supportable and (3) with respect to the pro forma statements of operations, expected to have a continuing impact on the combined results. The Unaudited Pro Forma Consolidated Combined Statements of Operations or the pro forma statement of operations, for the year ended December 31, 2013 and for the nine months ended September 30, 2014, give effect to the acquisition as if it occurred on January 1, 2013. The Unaudited Pro Forma Consolidated Combined Balance Sheet, or the pro forma balance sheet, as of September 30, 2014, gives effect to the acquisition as if it occurred on September 30, 2014.
 
The Drop-Down Assets were acquired by NRG on April 1, 2014 and NRG applied the acquisition method of accounting under U.S. GAAP and the regulations of the U.S. Securities and Exchange Commission, and recorded the acquired assets and liabilities at fair market value on the date of the acquisition.  As the Drop-Down Assets and the Company are under common control, the Drop-Down Assets were transferred to the Company at historical carrying value. For periods in the pro forma financial statements prior to April 1, 2014, adjustments were made to reflect the accounting for NRG’s acquisition of the Drop-Down Assets as if it occurred on January 1, 2013.
 
The pro forma financial statements have been presented for informational purposes only and are not necessarily indicative of what the combined company’s results of operations and financial position would have been had the acquisition of the Drop-Down Assets been completed on the dates indicated.  The Company could incur significant costs to integrate the businesses. The pro forma financial statements do not reflect the cost of any integration activities or benefits that may result from synergies that may be derived from any integration activities.  In addition, the pro forma financial statements do not purport to project the future results of operations or financial position of the combined company.

 
Unaudited Pro Forma Consolidated Combined Income Statement
Nine Months Ended September 30, 2014
 
 	 	NRG Yield, Inc.
Historical	 	WCEP Holdings,
LLC and
subsidiaries	 	Tapestry Wind,
LLC and
subsidiaries	 	Laredo Ridge
Wind, LLC	 	Combined Drop-
Down Assets	 	Pro Forma
Adjustments	 	Pro Forma
Combined	 	
 	 	(in millions, except per share amounts)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating revenues	 	435	 	51	 	30	 	11	 	92	 	(5	)(a)	522	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Costs and Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of operations	 	157	 	15	 	7	 	3	 	25	 	—	 	182	 	
Depreciation and amortization	 	94	 	14	 	12	 	5	 	31	 	3	(b)	128	 	
General and administrative - affiliate	 	7	 	—	 	—	 	—	 	—	 	—	 	7	 	
Acquisition-related ransaction and integration costs	 	2	 	—	 	—	 	—	 	—	 	—	 	2	 	
Total operating costs and expenses	 	260	 	29	 	19	 	8	 	56	 	3	 	319	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Income	 	175	 	22	 	11	 	3	 	36	 	(8	)	203	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Income (Expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity in earnings of unconsolidated affiliates	 	26	 	—	 	—	 	—	 	—	 	—	 	26	 	
Other income, net	 	2	 	—	 	—	 	—	 	—	 	—	 	2	 	
Interest expense	 	(97	)	(14	)	(6	)	(2	)	(22	)	(4	)(c)	(123	)	
Total other expense	 	(69	)	(14	)	(6	)	(2	)	(22	)	(4	)	(95	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income Before Income Taxes	 	106	 	8	 	5	 	1	 	14	 	(12	)	108	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense	 	15	 	—	 	—	 	—	 	—	 	1	(d)	16	 	
Net Income	 	91	 	8	 	5	 	1	 	14	 	(13	)	92	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Less: Pre-acquisition net income of acquired ROFO Assets	 	17	 	 	 	 	 	 	 	 	 	 	 	17	 	
Net Income Excluding Pre-acquisition Net Income of Acquired ROFO Assets	 	74	 	 	 	 	 	 	 	 	 	 	 	75	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Less: Net income attributable to noncontrolling interest	 	58	 	—	 	—	 	—	 	—	 	1	(e)	59	 	
Net Income Attributable to NRG Yield, Inc.	 	16	 	8	 	5	 	1	 	14	 	(14	)	16	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings per share attributable to Class A common stockholders	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic weighted average number of Class A common shares outstanding	 	25	 	 	 	 	 	 	 	 	 	—	 	25	 	
Basic earnings per Class A common share	 	$	0.62	 	 	 	 	 	 	 	 	 	 	 	$	0.62	 	
Diluted weighted average number of Class A common shares outstanding	 	25	 	 	 	 	 	 	 	 	 	 	 	25	 	
Diluted earnings per Class A common share	 	$	0.62	 	 	 	 	 	 	 	 	 	 	 	$	0.62	 	

 
Unaudited Pro Forma Consolidated Combined Income Statement
Year Ended December 31, 2013
 
 	 	NRG Yield, Inc.
Historical(f)	 	WCEP Holdings,
LLC and
subsidiaries	 	Tapestry
Wind, LLC
and
subsidiaries	 	Laredo
Ridge Wind,
LLC	 	Combined Drop-
Down Assets	 	Pro Forma
Adjustments	 	Pro Forma
Combined	 	
 	 	(in millions, except per share amounts)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating revenues	 	379	 	89	 	46	 	19	 	154	 	(20	)(a)	513	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Costs and Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of operations	 	144	 	18	 	9	 	3	 	30	 	—	 	174	 	
Depreciation and amortization	 	61	 	14	 	23	 	10	 	47	 	(2	)(b)	106	 	
General and administrative - affiliate	 	7	 	—	 	—	 	—	 	—	 	—	 	7	 	
Total operating costs and expenses	 	212	 	32	 	32	 	13	 	77	 	(2	)	287	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Income	 	167	 	57	 	14	 	6	 	77	 	(18	)	226	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Income (Expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity in earnings of unconsolidated affiliates	 	22	 	—	 	—	 	—	 	—	 	—	 	22	 	
Other income, net	 	3	 	—	 	—	 	—	 	—	 	—	 	3	 	
Interest expense	 	(52	)	(23	)	(11	)	(5	)	(39	)	(5	)(c)	(96	)	
Total other expense	 	(27	)	(23	)	(11	)	(5	)	(39	)	(5	)	(71	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income Before Income Taxes	 	140	 	34	 	3	 	1	 	38	 	(23	)	155	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income tax expense	 	8	 	—	 	—	 	—	 	—	 	2	(d)	10	 	
Net Income	 	132	 	34	 	3	 	1	 	38	 	(25	)	145	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Less: Pre-acquisition net income of acquired ROFO Assets	 	23	 	 	 	 	 	 	 	 	 	 	 	23	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Income Excluding Pre-acquisition Net Income of Acquired ROFO Assets	 	109	 	 	 	 	 	 	 	 	 	 	 	122	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Less: Predecessor income prior to initial public offering on July 22, 2013	 	54	 	 	 	 	 	 	 	 	 	 	 	54	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Income Subsequent to Initial Public Offering	 	55	 	 	 	 	 	 	 	38	 	(25	)	68	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Less: Net income attributable to noncontrolling interest	 	42	 	 	 	 	 	 	 	—	 	10	(e)	52	 	
Net Income Attributable to NRG Yield, Inc.	 	13	 	 	 	 	 	 	 	38	 	(35	)	16	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings per share attributable to Class A common stockholders	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic weighted average number of Class A common shares outstanding	 	23	 	 	 	 	 	 	 	 	 	 	 	23	 	
Basic earnings per Class A common share	 	$	0.57	 	 	 	 	 	 	 	 	 	 	 	$	0.69	 	
Diluted weighted average number of Class A common shares outstanding	 	23	 	 	 	 	 	 	 	 	 	 	 	23	 	
Diluted earnings per Class A common share	 	$	0.57	 	 	 	 	 	 	 	 	 	 	 	$	0.69	 	

 
Unaudited Pro Forma Consolidated Combined Balance Sheet
As of September 30, 2014
 
 	 	NRG Yield, Inc.
Historical	 	WCEP Holdings,
LLC and
subsidiaries	 	Tapestry
Wind, LLC
and
subsidiaries	 	Laredo Ridge
Wind, LLC	 	Combined Drop-
Down Assets	 	Pro Forma
Adjustments	 	Pro Forma
Combined	 	
ASSETS (in millions)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	372	 	13	 	6	 	1	 	$	20	 	$	(270	)(g)	$	122	 	
Restricted cash	 	54	 	22	 	—	 	—	 	22	 	—	 	76	 	
Accounts receivable - trade, net	 	80	 	22	 	2	 	1	 	25	 	—	 	105	 	
Accounts receivable - affiliate	 	4	 	—	 	—	 	—	 	—	 	—	 	4	 	
Inventory	 	17	 	3	 	6	 	1	 	10	 	—	 	27	 	
Notes receivable	 	6	 	—	 	—	 	—	 	—	 	—	 	6	 	
Prepayments and other current assets	 	22	 	—	 	1	 	1	 	2	 	—	 	24	 	
Total current assets	 	555	 	60	 	15	 	4	 	79	 	(270	)	364	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Property, Plant and Equipment	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total property, plant & equipment	 	3,542	 	525	 	280	 	116	 	921	 	—	 	4,463	 	
Less accumulated depreciation	 	(266	)	(9	)	(7	)	(3	)	(19	)	—	 	(285	)	
Property, plant and equipment, net of accumulated depreciation	 	3,276	 	516	 	273	 	113	 	902	 	—	 	4,178	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity investments in affiliates	 	230	 	—	 	—	 	—	 	—	 	—	 	230	 	
Notes receivable	 	17	 	—	 	—	 	—	 	—	 	—	 	17	 	
Intangible assets, net of accumulated amortization	 	1,517	 	170	 	66	 	53	 	289	 	—	 	1,806	 	
Derivative instruments	 	7	 	—	 	3	 	—	 	3	 	—	 	10	 	
Deferred income taxes	 	204	 	—	 	—	 	—	 	—	 	—	 	204	 	
Other non-current assets	 	93	 	—	 	—	 	—	 	—	 	—	 	93	 	
 	 	 	 	 	 	 	 	 	 	 	 	—	 	 	 	
Total other assets	 	2,068	 	170	 	69	 	53	 	292	 	—	 	2,360	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Assets	 	$	5,899	 	$	746	 	$	357	 	$	170	 	$	1,273	 	$	(270	)	$	6,902	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current portion of long-term debt and capital leases	 	$	157	 	$	37	 	$	11	 	$	3	 	$	51	 	$	—	 	$	208	 	
Accounts payable	 	15	 	—	 	1	 	—	 	1	 	—	 	16	 	
Payable to affiliates	 	48	 	1	 	—	 	—	 	1	 	—	 	49	 	
Derivative instruments valuation	 	30	 	13	 	3	 	2	 	18	 	—	 	48	 	
Accrued expenses and other current liabilities	 	52	 	5	 	1	 	1	 	7	 	—	 	59	 	
Total current liabilities	 	302	 	56	 	16	 	6	 	78	 	—	 	380	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Long-term debt and capital leases	 	3,926	 	406	 	184	 	64	 	654	 	210	(h)	4,790	 	
Out of market contracts	 	5	 	—	 	—	 	—	 	—	 	—	 	5	 	
Derivative instruments	 	23	 	16	 	—	 	2	 	18	 	—	 	41	 	
Other non current liabilities	 	29	 	32	 	1	 	—	 	33	 	—	 	62	 	
Total non-current liabilities	 	3,983	 	454	 	185	 	66	 	705	 	210	 	4,898	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total Liabilities	 	4,285	 	510	 	201	 	72	 	783	 	210	 	5,278	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stockholders’ Equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Additional paid-in capital	 	1,336	 	238	 	160	 	99	 	497	 	(497	)(i)	1,336	 	
Retained earnings (accumulated deficit)	 	5	 	3	 	—	 	(1	)	2	 	(2	)(i)	5	 	
Accumulated other comprehensive loss	 	(6	)	(5	)	(4	)	—	 	(9	)	—	 	(15	)	
Noncontrolling interest	 	279	 	—	 	—	 	—	 	—	 	19	(i)	298	 	
Total Stockholders’ Equity	 	1,614	 	236	 	156	 	98	 	490	 	(480	)	1,624	 	
 	 	 	 	 	 	 	 	 	 	 	 	—	 	 	 	
Total Liabilities and Stockholders’ Equity	 	$	5,899	 	$	746	 	$	357	 	$	170	 	$	1,273	 	$	(270	)	$	6,902	 	

 
Notes to the Unaudited Pro Forma Consolidated Combined Financial Statements
 
(a)                              Represents the amortization of the value of the power purchase agreements that were recorded in connection with NRG’s accounting for the acquisition of the Drop-Down Assets.  Also represents the removal of grant revenue for all pre-acquisition periods to conform the previous policy for recording the receipt of cash grants as deferred revenue to NRG’s policy of reducing the value of the related property, plant and equipment.
(b)                              Represents the estimated change in net depreciation expense resulting from fair value adjustments to the acquired property, plant and equipment in connection with NRG’s accounting for the acquisition of the Drop-Down Assets.  The estimated useful lives of the property, plant and equipment range from 18 to 23 years.
(c)                               Reflects the estimated increase in interest expense for borrowings necessary to fund the purchase price of the acquisition. To fund the purchase price of the acquisition, in January 2015, the Company borrowed approximately $210 million of its revolving credit facility. The facility bears interest at a rate of 1-month LIBOR plus 2.25%.
(d)                              Represents the adjustment to record the tax effect of the reduction in revenue, change in depreciation expense and increase in interest expense, calculated utilizing the Company’s estimated combined statutory federal and state tax rate of 40.0%.
(e)                               Represents the adjustment to record noncontrolling interest associated with the results of the Drop-Down Assets in Yield Inc.’s results.
(f)                                The Company acquired the TA High Desert, RE Kansas South, and El Segundo projects, or the Acquired ROFO Assets, on June 30, 2014.  The acquisition was accounted for as a transfer of entities under common control. Accordingly, the consolidated statement of operations for the year ended December 31, 2013 was retrospectively recast to include the results of these assets as if the transfer had taken place on January 1, 2013. Net income for the Acquired ROFO Assets is not included in the net income attributable to NRG Yield, Inc.
(g)                               Represents cash utilized to fund the purchase price of the Drop-Down Assets.
(h)                              Represents the additional borrowings necessary to fund the purchase price of the acquisition.  To fund the purchase price of the acquisition, in January 2015, the Company borrowed approximately $210 million of its revolving credit facility.
(i)                                  Represents the adjustment to reclassify the equity of the Drop-Down Assets to non-controlling interest. The acquisition represents a transfer of interests under common control and the equity was transferred at carrying value with no gain or loss recorded.