| Acquisitions | ACQUISITIONS 2015 Acquisitions Acquisition of First Wind On January 29, 2015 , the Company, through Terra LLC, acquired from First Wind Holdings, LLC (together with its subsidiaries, “First Wind”) operating renewable energy facilities that have a combined nameplate capacity of 521.1 MW, including 500.0 MW of wind power plants and 21.1 MW of solar generation facilities (the “First Wind Acquisition”). The operating renewable energy facilities the Company acquired are located in Maine, New York, Hawaii, Vermont and Massachusetts and are contracted under PPAs including energy hedge contracts. Certain of the renewable energy facilities also receive revenue from RECs. The cash purchase price for this acquisition was $811.6 million , net of cash acquired. During the year-ended December 31, 2015, the Company acquired an operating wind facility located in Texas and seven solar generation facilities located in Utah from SunEdison with a combined nameplate capacity of 222.6 MW. These facilities were initially acquired by SunEdison from First Wind on January 29, 2015. The purchase price paid by SunEdison to the third-party for these facilities was $168.4 million , net of cash acquired. The acquisitions were treated as transactions between entities under common control and as a result the acquisition accounting as of January 29, 2015 by SunEdison has been reflected in these consolidated financial statements. Acquisition of Northern Lights Solar Generation Facilities On June 30, 2015 , the Company acquired two utility-scale, ground mounted solar generation facilities ("Northern Lights") from Invenergy Solar LLC. The facilities are located in Ontario, Canada and have a combined nameplate capacity of 25.4 MW. The facilities are contracted under long-term PPAs with an investment grade utility with a credit rating of Aa2 as of the acquisition date. The purchase price for this acquisition was 125.4 million Canadian Dollars ("CAD") (equivalent of $101.1 million on the acquisition date), net of cash acquired, including the repayment of project-level debt and breakage fees for the termination of interest rate swaps. Acquisition of Invenergy Wind Power Plants On December 15, 2015 , the Company acquired operating wind power plants with a combined nameplate capacity of 831.5 MW (net) from Invenergy Wind Global LLC (together with its subsidiaries, “Invenergy Wind”) for $1.3 billion in cash and the assumption of $531.2 million of non-recourse indebtedness. The wind power plants that the Company acquired from Invenergy Wind have contracted PPAs with an average counterparty credit rating of AA as of the acquisition date. Invenergy Wind will retain a 9.9% non-controlling interest in wind power plants located in the U.S. that the Company acquired and will provide certain operation and maintenance services for such assets. Acquisition of Integrys Solar Generation Facilities During the year ended December 31, 2015, the Company acquired 56 solar generation facilities with a combined nameplate capacity of 32.0 MW (net) from Integrys Group, Inc. ("Integrys") for a purchase price of $ 70.7 million , net of cash acquired, and $15.9 million of project-level debt assumed. The facilities are located in Arizona, California, Connecticut, Massachusetts, New Jersey and Pennsylvania. The facilities are contracted under long-term PPAs with commercial and municipal customers. Acquisition of Other Solar Generation Facilities During the year-ended December 31, 2015, the Company acquired two solar generation facilities from SunEdison with a combined nameplate capacity of 38.8 MW. These facilities were initially acquired by SunEdison through other unaffiliated third parties during the year-ended December 31, 2015. The purchase price paid by SunEdison to the third parties for these acquisitions was $18.9 million , net of cash acquired. The acquisitions were treated as transactions between entities under common control and as a result the acquisition accounting by SunEdison has been reflected in these consolidated financial statements. During the year ended December 31, 2015, the Company acquired 10 solar generation facilities with a combined nameplate capacity of 3.8 MW for a purchase price of $ 19.9 million , net of cash acquired. The facilities are located in Ontario, Canada. Acquisition Accounting for the 2015 Acquisitions The acquisition accounting for the First Wind, Northern Lights, Integrys and other solar generation facilities acquisitions was completed as of the fourth quarter of 2015, at which point the provisional fair values became final. The final amounts for these acquisitions are included in the table within the "Acquisition Accounting" section of this footnote below. The acquisition accounting for the Invenergy Wind acquisition was initially completed as of the second quarter of 2016, at which point the provisional fair values became final. However, during the fourth quarter of 2016, management identified immaterial errors in the final opening balance sheet. The errors resulted in an increase of $45.9 million to renewable energy facilities, a decrease of $37.0 million to intangible assets, an increase of $3.0 million to accounts payable, accrued expenses and other current liabilities, an increase of $5.0 million to other long-term liabilities, a decrease of $7.1 million to redeemable non-controlling interest and an increase of $8.0 million to non-controlling interest. The final amounts for this acquisition are included in the table directly below. The opening balance sheet errors, including the income statement impact, were corrected in the fourth quarter of 2016. The income statement impact resulted in an increase to depreciation expense and a net decrease to amortization expense. If the errors had been corrected in the second quarter of 2016, it would have resulted in a $0.4 million decrease in the net loss for the three and six months ended June 30, 2016 reported in the Form 10-Q for the second quarter of 2016 and a $0.4 million and $0.8 million decrease, respectively, in the net loss for the three and nine months ended September 30, 2016 reported in the Form 10-Q for the third quarter of 2016. Management performed an assessment of the balance sheet and income statement impact on its previously issued second and third quarter filings and determined it to be immaterial. Invenergy Wind 2015 Final (In thousands) As of June 30, 2016 Q4 2016 Corrections As of December 31, 2016 Renewable energy facilities $ 1,477,888 $ 45,903 $ 1,523,791 Accounts receivable 25,811 — 25,811 Intangible assets 748,300 (37,000 ) 711,300 Restricted cash 31,247 — 31,247 Derivative assets 32,311 — 32,311 Other assets 20,148 — 20,148 Total assets acquired 2,335,705 8,903 2,344,608 Accounts payable, accrued expenses and other current liabilities 23,195 3,041 26,236 Long-term debt, including current portion 531,221 — 531,221 Deferred income taxes 242 — 242 Asset retirement obligations 47,346 — 47,346 Other long-term liabilities 6,004 5,000 11,004 Total liabilities assumed 608,008 8,041 616,049 Redeemable non-controlling interest 140,635 (7,138 ) 133,497 Non-controlling interest 308,000 8,000 316,000 Purchase price, net of cash acquired $ 1,279,062 $ — $ 1,279,062 The final acquisition-date fair values of assets, liabilities and non-controlling interest pertaining to the Invenergy Wind acquisition as of December 31, 2016 reflect the following changes from the initial opening balance sheet as of December 31, 2015; an increase of $37.0 million to renewable energy facilities, a decrease of $37.0 million to intangible assets, an increase of $8.1 million to other assets, an increase of $3.0 million to accounts payable, accrued expenses and other current liabilities, an increase of $5.0 million to other long-term liabilities, a decrease of $7.9 million in redeemable non-controlling interest and an increase of $8.0 million to non-controlling interest. The provisional amounts as of December 31, 2015 are included within the " Acquisition Accounting " section of this footnote below. The operating revenues and net loss of the facilities acquired in 2015 reflected in the consolidated statements of operations for the year ended December 31, 2015 were $161.1 million and $8.8 million , respectively. 2014 Acquisitions During the year ended December 31, 2014, the Company acquired various facilities referred to as Mt. Signal, Stonehenge Operating Projects, Capital Dynamics and Hudson Energy, as well as various other renewable energy facilities. The acquisition accounting for these 2014 acquisitions was finalized during 2015. The final acquisition-date fair value amounts for these acquisitions as of December 31, 2015, as well as the provisional amounts as of December 31, 2014, are included in the tables within the "Acquisition Accounting" section of this footnote below. The operating revenues and net income of the facilities acquired in 2014 reflected in the consolidated statements of operations for the year ended December 31, 2014 were $60.8 million and $12.5 million , respectively. Goodwill Goodwill is recorded as the difference between the aggregate consideration paid for an acquisition and the fair value of the net tangible and identified intangible assets acquired. During 2015, the Company recorded $55.9 million of goodwill attributable to the acquisition of Capital Dynamics, which provided the Company with a distributed generation platform. The goodwill existed within the Company's Distributed Generation reporting unit within the solar reportable segment and is not deductible for federal income tax purposes. The Company performed its annual impairment test of the carrying value of its goodwill as of December 1, 2016, and concluded that the goodwill balance of $55.9 million was fully impaired (see Note 8. Goodwill for further discussion). Valuation of Non-controlling Interest First Wind The majority of the fair value of the non-controlling interest was determined using a market approach using a quoted price for the instrument. Upon the acquisition of the First Wind assets, the Company purchased a portion of the equity interest from the non-controlling interest holders of one of the joint venture investment funds. The quoted price for the purchase of a portion of the non-controlling interest is the best indicator of fair value and was supported by a discounted cash flow technique. The Company estimated the fair value of the remainder of the non-controlling interest balances using a discounted cash flow approach. Invenergy Wind The fair value of the non-controlling interest for Invenergy Wind was determined using a discounted cash flow approach. The non-controlling interest represents the fair value of 9.9% sponsor equity held by Invenergy Wind. Sun Edison LLC, a wholly owned subsidiary of SunEdison, acting as intermediary, entered into certain option arrangements with Invenergy Wind for its remaining 9.9% interest in the Acquired Companies (the ‘‘Invenergy Wind Interest’’). Simultaneously, Terra LLC entered into a back to back option agreement with Sun Edison LLC on substantially identical terms (collectively the "Option Agreements"). The Option Agreements effectively permit (i) Terra LLC to exercise a call option to purchase the Invenergy Wind Interest over a 180 -day period beginning on September 30, 2019, and (ii) Invenergy Wind to exercise a put option with respect to the Invenergy Wind Interest over a 180 -day period beginning on September 30, 2018. The exercise prices of the put and call options described above would be based on the determination of the fair market value of the Invenergy Wind Interest at the time the relevant option is exercised, subject to certain minimum and maximum thresholds set forth in the Option Agreements. The minimum put option price per the Option Agreements is $137.8 million in aggregate. As the put options represent redemption rights outside the control of the Company, this non-controlling interest was classified as redeemable non-controlling interest as of December 31, 2016 and 2015. The Company accretes this redeemable non-controlling interest, using the straight-line method, from the acquisition date fair value to the redemption value over the period through September 30, 2018. Accretion adjustments to the carrying value of this redeemable non-controlling interest are recorded against additional paid-in capital. As part of the Settlement Agreement (which was approved by the Bankruptcy Court), with certain limited exceptions, all agreements, including the Option Agreement between Terra LLC and Sun Edison LLC, will be rejected as of the effectiveness of the settlement, which will occur upon the consummation of the Merger, subject to satisfaction of conditions precedent, or an alternative transaction that is jointly supported by the Company and SunEdison or a Stand-Alone Conversion. If the Option Agreement is rejected under the Settlement Agreement, the Company would not expect to be obligated to perform on its Option Agreement. Acquisition Accounting The acquisition-date fair values of assets, liabilities and non-controlling interests pertaining to business combinations as of December 31, 2015, were as follows: 2015 Preliminary 2015 Final 2014 Final (In thousands) Invenergy Wind First Wind Other First Wind 1 Northern Lights Integrys Other Mt. Signal Capital Dynamics Other Renewable energy facilities in service $ 1,486,746 $ 795,462 $ — $ 62,018 $ 69,935 $ 7,931 $ 649,570 $ 190,352 $ 256,912 Construction in progress — — 264,858 — — 28,878 — — — Accounts receivable 25,811 30,031 — 1,361 2,610 — 11,687 8,331 9,906 Intangible assets 748,300 123,600 — 39,000 28,966 12,454 119,767 74,236 120,624 Goodwill — — — — — — — 55,874 — Deferred income taxes — — — — — — — — — Restricted cash 31,247 7,240 60 — 827 — 22,165 15 14,720 Derivative assets 32,311 44,755 — — — — — — — Other assets 12,070 5,873 — 11 234 200 12,621 348 9,552 Total assets acquired 2,336,485 1,006,961 264,918 102,390 102,572 49,463 815,810 329,156 411,714 Accounts payable, accrued expenses and other current liabilities 23,195 9,854 442 440 409 1,854 22,725 1,478 3,016 Long-term debt, including current portion 531,221 47,400 72,881 — 15,882 — 413,464 — 136,156 Deferred income taxes 242 — — — — — — 25,129 927 Asset retirement obligations 47,346 19,890 — 818 5,730 509 4,656 13,073 17,374 Other long-term liabilities 6,004 18,562 23,237 — 5,786 — — 12,100 5,242 Total liabilities assumed 608,008 95,706 96,560 1,258 27,807 2,363 440,845 51,780 162,715 Redeemable non-controlling interest 141,415 3,076 — — — 8,298 — 20,194 2,250 Non-controlling interest 308,000 96,624 — — 4,045 — 83,310 — 2,000 Purchase price, net of cash acquired $ 1,279,062 $ 811,555 $ 168,358 $ 101,132 $ 70,720 $ 38,802 $ 291,655 $ 257,182 $ 244,749 ———— (1) Represents renewable energy facilities with a combined nameplate capacity of 222.6 MW acquired from SunEdison during the year ended December 31, 2015. These facilities were acquired by SunEdison from First Wind on January 29, 2015. As noted above, the acquisition accounting for the business combinations that occurred during 2014 was not finalized until 2015. The estimated acquisition-date fair values of assets, liabilities and non-controlling interests pertaining to these business combinations as of December 31, 2014, were as follows: Capital Other (In thousands) Dynamics Mt. Signal Acquisitions Renewable energy facilities in service $ 200,712 $ 649,005 $ 245,828 Accounts receivable 4,511 11,617 11,251 Intangible assets 83,114 117,925 140,248 Deferred income taxes 22,129 — — Restricted cash 15 22,165 14,688 Other assets 687 12,621 4,987 Total assets acquired 311,168 813,333 417,002 Accounts payable, accrued expenses and other current liabilities 5,925 24,813 7,410 Long-term debt, including current portion — 413,464 137,472 Deferred income taxes 25,191 — 892 Asset retirement obligations 6,749 4,656 18,058 Total liabilities assumed 37,865 442,933 163,832 Redeemable non-controlling interest 16,600 — 7,738 Non-controlling interest — 78,745 2,175 Purchase price, net of cash acquired $ 256,703 $ 291,655 $ 243,257 The acquired renewable energy facilities' non-financial assets and other long-term liabilities primarily represent estimates of the fair value of acquired PPA and REC contracts based on significant inputs that are not observable in the market and thus represent a Level 3 measurement (as defined in Note 14 . Fair Value of Financial Instruments ). The estimated fair values were determined based on an income approach. Refer below for additional disclosures related to the acquired intangibles. 2015 Acquisitions - Intangibles at Acquisition Date The following table summarizes the final fair value and weighted average amortization period of acquired intangible assets and liabilities as of the acquisition date for transactions closed during 2015. The acquisition accounting was finalized during 2015 for all 2015 acquisitions, with the exception of Invenergy Wind, which was finalized in 2016. The final intangibles fair value reflects the following changes from the initial opening balance sheet for Invenergy; a decrease of $2.7 million to favorable rate revenue contracts, a decrease of $34.3 million to the in-place value of market rate revenue contracts and an increase of $5.0 million to unfavorable rate O&M contracts. Fair Value (In thousands) Invenergy First Northern Integrys Other Intangible assets Favorable rate revenue contracts $ 547,300 $ 3,900 $ 39,000 $ 21,168 $ 12,454 In-place value of market rate revenue contracts 164,000 103,900 — 7,798 — Favorable rate land leases — 15,800 — — — Intangible liabilities Unfavorable rate revenue contracts — 17,200 — 5,786 — Unfavorable rate O&M contracts 5,000 — — — — Unfavorable rate land lease — 1,000 — — — Weighted Average Amortization Period 1 (In years) Invenergy First Northern Integrys Other Intangible assets Favorable rate revenue contracts 17 3 18 12 20 In-place value of market rate revenue contracts 22 18 — 22 — Favorable rate land leases — 20 — — — Intangible liabilities Unfavorable rate revenue contracts — 6 — 19 — Unfavorable rate O&M contracts 4 — — — — Unfavorable rate land lease — 18 — — — ———— (1) For purposes of this disclosure, the weighted average amortization period is determined based on a weighting of the individual intangible fair values against the total fair value for each major intangible asset and liability class. 2014 Acquisitions - Intangibles at Acquisition Date The following table summarizes the fair value and weighted average amortization period of acquired intangible assets and liabilities as of the acquisition date for transactions closed during 2014. The fair values in the table below reflect the final acquisition accounting balances. The preliminary acquisition accounting as of December 31, 2014 reflected all intangible values as favorable rate revenue contracts with the exception of Mt. Signal, which was valued as an in-place market rate revenue contract. Fair Value (In thousands) Mt. Signal Capital Other Intangible assets Favorable rate revenue contracts $ — $ 26,000 $ 70,179 In-place value of market rate revenue contracts 119,767 48,236 50,445 Intangible liabilities Unfavorable rate revenue contracts — 12,100 — Weighted Average Amortization Period 1 (In years) Mt. Signal Capital Other Intangible assets Favorable rate revenue contracts — 18 19 In-place value of market rate revenue contracts 25 23 15 Intangible liabilities Unfavorable rate revenue contracts — 7 — ———— (1) For purposes of this disclosure, the weighted average amortization period is determined based on a weighting of the individual intangible fair values against the total fair value for each major intangible asset and liability class. Unaudited Pro Forma Supplementary Data The unaudited pro forma supplementary data presented in the table below gives effect to the significant 2015 acquisitions, Invenergy Wind, First Wind and Northern Lights, as if those transactions had each occurred on January 1, 2014. Additionally, the table below gives effect to the significant 2014 acquisitions, Capital Dynamics and Mt. Signal, as if these transactions had occurred on January 1, 2013. The unaudited pro forma supplementary data is provided for informational purposes only and should not be construed to be indicative of the Company’s results of operations had the acquisitions been consummated on the date assumed or of the Company’s results of operations for any future date. Year Ended December 31, (In thousands, unaudited) 2015 2014 Total operating revenues, net $ 605,441 $ 427,098 Net loss (128,588 ) (102,010 ) Acquisition costs incurred by the Company related to third party acquisitions were $2.7 million , $55.8 million and $15.2 million for the years ended December 31, 2016 , 2015 and 2014, respectively. These costs are reflected as acquisition and related costs and acquisition and related costs - affiliate in the consolidated statements of operations and are excluded from the respective unaudited pro forma net loss amounts disclosed above. |
