Project Assets | 8. Project Assets As of September 30, 2015, project assets, current and non-current, mainly consist of the SEF development across U.S.A., UK, Japan and the PRC, with the amount of $66,981 (2014: $48,520), $40,753 (2014: $14,000), $20,582 (2014: $12,826) and $41,786 (2014: 19,849) respectively. Project assets consist of the following: September 30, December 31, Under development-Company as project owner $ 129,527 $ 75,346 Under development-Company expected to be project owner upon the completion of construction* 40,575 19,849 Total project assets 170,102 95,195 Current, net of impairment loss $ 101,687 $ 73,930 Noncurrent $ 68,415 $ 21,265 * All of the projects costs under this category were recorded as project assets, noncurrent. Project assets under development-Company as project owner are primarily related to the following projects: Calwaii Projects In 2014, the Company acquired solar PV assets, primarily including land use right and pre-contract costs relating to forty-three solar PV systems owned by Calwaii. During the nine-month period ended September 30, 2015, sales of four solar PV systems were consummated (see below). As of September 30, 2015 and December 31, 2014, incurred costs for PV solar systems under the Calwaii’s projects in Hawaii amounted to $23,570 and $23,943 respectively. Solar Mountain Creek Parent LLC The carrying amount of this project amounted to $17,239 and 17,864, net of impairment of $2,787 and $2,055 as of September 30, 2015 and December 31, 2014 respectively. Pursuant to a letter of intent dated November 10, 2014 and a sales agreement dated December 31, 2014, the Company agreed to sell the PV solar systems of this project upon its completion of construction at a consideration of $17,864. In July 2015, the Company entered into a supplemental agreement to extend the deadline of final completion to the end of 2015 and compensate the buyer up to $625. The compensation would be deducted from the consideration. Management assessed the recoverable amounts of this project asset and as a result the carrying amount of this project asset was written down to the recoverable amount of $17,239. The estimate of recoverable amount of this project asset was based on this asset’s fair value less costs of disposal, and the fair value was determined by reference to the quoted price from third party. The Company accounted for this sales transaction using the deposit method under ASC 360-20, Real Estate Accounting, and did not recognize any revenue and profit for this sales transaction for the year ended December 31, 2014 and the nine-month period ended September 30, 2015 as certain closing conditions as specified in the sales agreement had not been met and accordingly sales had not been consummated as of September 30, 2015. RE Capital Projects In April 2015, the Company entered into an interest purchase agreement with RE Capital Pte. Ltd. to acquire its 100% membership interest in seventeen PV project companies in Japan (“RE Capital companies”) at a consideration of $8,800 consisting of $3,300 cash and $5,500 worth of the Company’s common stock (See Note 18 — Stockholders’ Equity). RE Capital companies’ total assets and liabilities only included land and pre-contract cost related to solar projects of 52MWs in total. Additionally, RE Capital companies had not entered into any power generation contracts with any utilities companies. As a result, Management concluded that the acquisition of 100% managing member interest in RE Capital companies did not meet the definition of a business combination as the primary inputs (the solar plant, which had yet to be constructed) were not available on the acquisition date. As of September 30, 2015, the payment made and cost incurred of $8,123 in total up to September 30, 2015 were included and recorded as project assets. Solar Park Development 4 Ltd In June 2015, the Company entered into another shares sales agreement with Blackrock Income UK Holding Limited to transfer the 100% outstanding share of Solar Park Development 4 Ltd at a consideration of $10,716 (equivalent to GBP7,000), which owned a grid-connected solar project of 6.2 MW developed by the Company. The Company accounted for this sales transaction using the deposit method under ASC 360-20, Real Estate Accounting as of September 30, 2015. As of September 30, 2015, the Company didn’t recognize any revenue and profit for this sales transaction as certain closing conditions specified in the agreement had not been met and accordingly the sales had not been consummated. As of September 30, 2015 and December 31, 2014, the related project costs recorded and included as project assets amounted to $10,011 and $2,022 respectively. Solar Park Development 2 Ltd As of September 30, 2015, the solar project of 15MW owned by Solar Park Development 2 Ltd was grid-connected. As of September 30, 2015 and December 31, 2014, the related project asset costs recorded and included as project assets amounted to $24,516 and $5,947 respectively. The Company is negotiating with a potential buyer to sell this project at a consideration of $25,509 (equivalent to GBP16,664). Beaver Run Project In 2014, the Company acquired solar PV assets, primarily including land use right and pre-contract costs relating to a solar PV system owned by Beaver Run in New Jersey. As of September 30, 2015 and December 31, 2014, the related project asset costs recorded and included as project assets amounted to $25,249 and $5,686 respectively. The construction of this project had not been completed as of September 30, 2015. Sukagawa Project In 2014, the Company acquired solar PV assets, primarily including land title and pre-contract costs relating to a solar PV system of 25MW in Japan. The carrying amount of this project amounted to $5,008 and $4,520, net of impairment of $1,177 and nil as of September 30, 2015 and December 31, 2014 respectively. As of September 30, 2015, the Company intended to sell this project. The Company assessed their recoverable amounts and as a result the carrying amount of this project asset was written down to the recoverable amount by $1,177 which is recorded as cost of goods sold in the condensed consolidated statement of operations for the nine-month and three month periods ended September 30, 2015. The estimate of recoverable amount of this project asset was based on this asset’s fair value less costs of disposal, and the fair value was determined by reference to the quoted price from third party for this project asset. Other Projects In addition to the above significant projects, the Company’s project assets consists of a number of individually insignificant projects of $15,811 and $15,364 in aggregate as of September 30, 2015 and December 31, 2014 respectively, of which $3,085 and $3,848 of project assets were under construction respectively. During the nine-month periods ended September 30, 2015, the Company recognized sales revenue for the following projects: Calwaii Projects Pursuant to a sales agreement dated September 18, 2014, the Company agreed to sell four out of the thirty-nine PV solar systems of Calwaii’s project upon their completion of construction at a consideration of $5,860. The Company accounted for this sales transaction under ASC 360-20, Real Estate Accounting, and did not recognize any revenue and profit for this sales transaction for the year ended December 31, 2014 and three-month period ended March 31, 2015 as certain closing conditions, including but not limited to grid connection specified in the sales agreement, had not been met. As of June 30, 2015, all closing conditions had been met and sales had been consummated. Accordingly, the Company recognized revenue and cost for these solar projects of $5,860 and $5,850, respectively. As of September 30, 2015, the Company had received $3,761 for the sales of this project. The Company has initiated the dispute resolution process to request the settlement of the remaining receivable of $2,099 pursuant to the sales agreement, which required the delivery of a dispute notice to the customer, Hi-Kilowatts LLC (“Hi-Kilowatts”), describing the issues and claims of the Company. This dispute notice was delivered to Hi-Kilowatts on October 17, 2015. Hi-Kilowatts’ response to the Company’s dispute notice was received on October 30, 2015, which described the issues and claims of Hi-Kilowatts. Both parties have their respective senior officers negotiate in good faith to resolve the dispute. In the event the parties are unable to resolve the dispute by December 30, 2015, the parties shall submit the dispute to mediation. If the parties are unable to resolve the dispute through mediation, then either party may pursue any other remedies available at law or in equity. The Company are seeking damages from Hi-Kilowatts for the unpaid receivable and breach of the sales agreement. The parties are in the process of negotiating a settlement agreement. Solar Park Development 3 Ltd In June 2015, the Company entered into a shares sales agreement with Blackrock Income UK Holding Limited to transfer the 100% outstanding share of Solar Park Development 3 Ltd at a consideration of $16,088 (equivalent to GBP10,532), which owned a grid-connected solar project of 9.5 MW developed by the Company. The Company accounted for this sales transaction under ASC 360-20, Real Estate Accounting. As of June 30, 2015, all closing conditions specified in the shares sales agreement had been met and the Company recognized revenue and cost for this solar project of $16,088 and 14,854, respectively during the three-month period ended June 30, 2015. The receivable of $16,088 were fully settled by Blackrock Income UK Holding Limited in July 2015. Project assets under development-Company expected to be project owner upon completion of construction are related to the following projects: In late 2014, the Company entered into two EPC contracts with third-party projects owners under an arrangement pursuant to which there was mutual understanding between the Company and the respective project owners that the title and ownership of the PV solar power systems would transfer to the Company upon the completion of construction and grid connection of the PV systems under the EPC contracts by the Company. The PV solar systems were pledged to the Company, as part of the EPC contract terms, to secure the expected title transfer upon grid connection. In 2015, the Company entered into similar arrangement with two third-party project owners. Unlike other EPC contracts which are accounted for in accordance with ASC 605, no revenue is recognized for these four EPC contracts as no revenue is expected to be realized or earned from the EPC contracts, which were signed to facilitate the construction of the related solar PV systems by the Company and secure the Company’s financial interests in these projects through the pledge of the related solar PV systems. Given the substance of the transactions, the mutual understanding reached between the Company and the third-party project owners and the remote possibility of not obtaining the legal title upon grid connection, the Company accounts for these projects as owned and record the costs incurred under Project Assets on the condensed consolidated balance sheet. Based on the Company’s intention to sell or hold for own use, the projects costs incurred for these EPC contracts are presented as operating activities or investing activities respectively in the condensed consolidated statement of cash flows. As of September 30, 2015, the Company had respectively entered with these projects owners either a memorandum of understanding or pre-acquisition agreement to confirm the future transfer of the title and ownership upon the completion of construction and grid connection of the related PV systems. |