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EX-31.1 - EXHIBIT 31.1 CEO CERTIFICATION - SUNEDISON, INC.sune-3312015xexhibit311.htm
EX-31.2 - EXHIBIT 31.2 CFO CERTIFICATION - SUNEDISON, INC.sune-3312015xexhibit312.htm
EX-10.1 - EXHIBIT 10.1 2015 AMENDMENT TO EMPLOYMENT AGREEMENT - SUNEDISON, INC.ahmadchatila2015amendmentt.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ______________________________________________________________
FORM 10-Q
 ______________________________________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 001-13828
 ______________________________________________________________
SunEdison, Inc.
(Exact name of registrant as specified in its charter)
 ______________________________________________________________
Delaware
 
56-1505767
(State or other jurisdiction of
incorporation or organization)
 
(I. R. S. Employer
Identification No.)
 
 
 
13736 Riverport Drive, Suite 180
Maryland Heights, Missouri
 
63043
(Address of principal executive offices)
 
(Zip Code)
(314) 770-7300
(Registrant’s telephone number, including area code)
 ______________________________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    o  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
x
  
Accelerated filer
 
o
 
 
 
 
Non-accelerated filer
 
o (Do not check if a smaller reporting company)
  
Smaller reporting company
 
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o     No  x
The number of shares of the registrant’s common stock outstanding at April 30, 2015 was 274,515,007.
 




Table of Contents





PART I—FINANCIAL INFORMATION

Item 1.
Financial Statements.

SUNEDISON, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
 
Three Months Ended March 31,
 
2015
 
2014
Net sales
$
323

 
$
340

Cost of goods sold
289

 
302

Gross profit
34

 
38

Operating expenses:
 
 

Marketing and administration
193

 
88

Research and development
5

 
5

Restructuring charges
53

 
7

Operating loss
(217
)
 
(62
)
Non-operating expense (income):
 
 
 
Interest expense
156

 
67

Interest income
(2
)
 
(3
)
Loss on early extinguishment of debt
20

 

Loss on convertible notes derivatives, net

 
452

Other, net
16

 
7

Total non-operating expense
190

 
523

Loss from continuing operations before income tax (benefit) expense and equity in (loss) earnings of equity method investments
(407
)
 
(585
)
Income tax (benefit) expense
(106
)
 
17

Loss from continuing operations before equity in (loss) earnings of equity method investments
(301
)
 
(602
)
Equity in (loss) earnings of equity method investments, net of tax
(4
)
 
1

Loss from continuing operations
(305
)

(601
)
Loss from discontinued operations, net of tax
(119
)
 
(15
)
Net loss
(424
)

(616
)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests
52

 
2

Net loss attributable to SunEdison stockholders
$
(372
)
 
$
(614
)
 
 
 
 
Amounts attributable to SunEdison stockholders:
 
 
 
Loss from continuing operations
$
(251
)
 
$
(599
)
Loss from discontinued operations, net of tax
(121
)
 
(15
)
Net loss attributable to SunEdison stockholders
$
(372
)
 
$
(614
)
 
 
 
 
Basic loss per share (see Note 14):





Continuing operations
$
(0.92
)

$
(2.25
)
Discontinued operations
(0.44
)

(0.06
)
Total basic loss per share
$
(1.36
)

$
(2.31
)






Diluted loss per share (see Note 14):





Continuing operations
$
(0.92
)

$
(2.25
)
Discontinued operations
(0.44
)

(0.06
)
Total diluted loss per share
$
(1.36
)

$
(2.31
)
See accompanying notes to unaudited condensed consolidated financial statements.






SUNEDISON, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In millions)
 
Three Months Ended March 31,
 
2015

2014
Net loss
$
(424
)
 
$
(616
)
Other comprehensive gain, net of tax:
 
 
 
Net foreign currency translation adjustments
33

 
1

Net gain on hedging instruments

 
9

Net adjustments for benefit plans
44

 
1

Other comprehensive gain, net of tax
77

 
11

Total comprehensive loss
(347
)
 
(605
)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests
52

 
2

Net other comprehensive loss attributable to noncontrolling interests and redeemable noncontrolling interests
11

 
1

Comprehensive loss attributable to SunEdison stockholders
$
(284
)
 
$
(602
)
See accompanying notes to unaudited condensed consolidated financial statements.



































5



SUNEDISON, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
 
March 31,
2015

December 31,
2014
Assets

 

Current assets:

 

Cash and cash equivalents
$
789

 
$
856

Cash committed for construction projects, including consolidated variable interest entities of $64 and $32 in 2015 and 2014, respectively
130

 
131

Current portion of restricted cash
174

 
156

Accounts receivable, net
290

 
373

Prepaid and other current assets
1,032

 
909

Current assets of discontinued operations

 
365

Total current assets
2,415


2,790

Investments
261

 
149

Property, plant and equipment, net:

 

Renewable energy systems, including consolidated variable interest entities of $2,419 and $2,312 in 2015 and 2014, respectively, net of accumulated depreciation of $404 and $334 in 2015 and 2014, respectively
6,931

 
5,336

Other property, plant and equipment, net of accumulated depreciation of $235 and $238 in 2015 and 2014, respectively
1,311

 
1,140

Restricted cash
117

 
115

Goodwill
402

 
73

Other intangible assets
1,625

 
586

Other assets
750

 
626

Non-current assets of discontinued operations

 
685

Total assets
$
13,812


$
11,500

 
 
 
 
Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt and short-term borrowings, including consolidated variable interest entities of $114 and $423 in 2015 and 2014, respectively
$
1,414

 
$
1,078

Accounts payable
1,050

 
1,098

Accrued and other current liabilities
772

 
660

Current portion of deferred revenue
83

 
92

Current portion of contingent consideration related to acquisitions
399

 
26

Current liabilities of discontinued operations

 
192

Total current liabilities
3,718


3,146

Long-term debt, less current portion, including consolidated variable interest entities of $1,453 and $1,169 in 2015 and 2014, respectively
7,747

 
5,915

Deferred revenue, less current portion
186

 
204

Contingent consideration related to acquisitions
118

 
17

Other liabilities
548

 
442

Non-current liabilities of discontinued operations

 
291

Total liabilities
12,317


10,015

 
 
 
 
Redeemable noncontrolling interests
34

 

Stockholders’ equity:
 
 
 
Preferred stock, $.01 par value, 50.0 shares authorized, none issued or outstanding in 2015 or 2014

 

Common stock, $.01 par value, 700.0 shares authorized and 274 and 273 shares issued in 2015 and 2014, respectively
3

 
3

Additional paid-in capital
1,868

 
1,698

Accumulated deficit
(1,721
)
 
(1,348
)
Accumulated other comprehensive loss
(22
)
 
(111
)
Treasury stock, 0.5 and 0.4 shares in 2015 and 2014, respectively
(10
)
 
(9
)
Total SunEdison stockholders’ equity
118

 
233

Noncontrolling interests
1,343

 
1,252

Total stockholders’ equity
1,461

 
1,485

Total liabilities, redeemable noncontrolling interests and stockholders’ equity
$
13,812

 
$
11,500

See accompanying notes to unaudited condensed consolidated financial statements.

6



SUNEDISON, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 
Three Months Ended March 31,
2015

2014
Cash flows from operating activities:



Net loss
(424
)

(616
)
Adjustments to reconcile net loss to net cash used in operating activities:
 

 
Depreciation and amortization
84


62

Stock-based compensation
19


9

Deferred tax benefit
(97
)

(3
)
Deferred revenue
(15
)

(50
)
Restructuring charges
53

 

Loss on sale of equity interest in SSL
123



Loss on convertible notes derivatives, net


452

Loss on early extinguishment of debt
20



Other non-cash
12


2

Changes in operating assets and liabilities:



Accounts receivable
82


54

Prepaid and other current assets
(33
)

(31
)
Accounts payable
(131
)

(114
)
Deferred revenue for renewable energy systems
18


58

Accrued liabilities
13


32

Other assets and liabilities
(32
)

(70
)
Net cash used in operating activities
(308
)

(215
)
Cash flows from investing activities:



Capital expenditures
(62
)

(20
)
Construction of renewable energy systems
(344
)

(326
)
Proceeds from sale of equity interest in SSL
188

 

Purchases of cost and equity method investments
(10
)

(19
)
Change in restricted cash
29


(14
)
Change in cash committed for construction projects
(2
)

81

Cash paid for acquisitions, net of cash acquired
(1,530
)

(14
)
Other
(31
)


Net cash used in investing activities
(1,762
)

(312
)
Cash flows from financing activities:





Proceeds from short-term and long-term debt
2,386


462

Principal payments on short-term and long-term debt
(619
)

(21
)
Payment for capped call option
(38
)
 

Proceeds from TerraForm equity offering
391



Common stock issued and repurchased
4



Contributions from noncontrolling interests
4


10

Cash paid for contingent consideration for acquisitions
(9
)

(2
)
Debt financing fees
(67
)

(32
)
Dividends paid by TerraForm Power
(17
)


Other
(55
)

2

Net cash provided by financing activities
1,980


419

Effect of exchange rate changes on cash and cash equivalents
(2
)

(2
)
Net decrease in cash and cash equivalents
(92
)

(110
)
Cash used by discontinued operations (see Note 2)
(25
)

(3
)
Net change in cash and cash equivalents from continuing operations
(67
)

(107
)
Cash and cash equivalents at beginning of period
856


533

Cash and cash equivalents at end of period
$
789


$
426

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Net debt transferred to and assumed by buyer upon sale of renewable energy systems
49

 
160

See accompanying notes to unaudited condensed consolidated financial statements.

7



Notes to Unaudited Condensed Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of SunEdison, Inc. and subsidiaries ("SunEdison"), in our opinion, include all adjustments (consisting of normal, recurring items) necessary to present fairly our financial position and results of operations and cash flows for the periods presented. SunEdison has presented the unaudited condensed consolidated financial statements in accordance with the Securities and Exchange Commission's (the "SEC's") requirements for Form 10-Q and Article 10 of Regulation S-X and consequently, these financial statements do not include all disclosures required by U.S. generally accepted accounting principles ("U.S. GAAP"). These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2014, which contains SunEdison's audited financial statements for such year. Operating results for the three month period ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.
The accompanying unaudited condensed consolidated financial statements of SunEdison include the consolidated results of TerraForm Power, Inc. ("TerraForm") which is a separate SEC registrant. The results of TerraForm are reported as our TerraForm Power reportable segment, as described in Note 17. References to "SunEdison", "we", "our" or "us" within the accompanying unaudited condensed consolidated financial statements refer to the consolidated reporting entity.
On January 20, 2015, we disposed of our controlling interest in SunEdison Semiconductor Ltd. ("SSL") in an underwritten public offering (see Note 2). The results of SSL, a separate SEC registrant, were previously reported as our Semiconductor Materials reportable segment. As a result of this transaction, SSL was deconsolidated from our consolidated financial statements and SSL's historical results of operations and financial position are reported as discontinued operations for all periods presented. Additionally, Semiconductor Materials is no longer reported as a reportable segment. We have retained a noncontrolling interest in SSL which is accounted for as an equity method investment. Unless indicated otherwise, the information in the accompanying notes to the condensed consolidated financial statements relates to our continuing operations.
Use of Estimates
In preparing our unaudited condensed consolidated financial statements, we use estimates and assumptions that may affect reported amounts and disclosures. Estimates are used when accounting for investments; depreciation; amortization; leases; asset impairments; accrued liabilities including restructuring, warranties, and employee benefits; derivatives, including the embedded conversion options, note hedges, and warrants associated with our outstanding senior convertible notes; stock-based compensation; income taxes; renewable energy system installation and related costs; percentage-of-completion on long-term construction contracts; the fair value of assets and liabilities recorded in connection with business combinations; and asset valuations, including allowances, among others. These estimates and assumptions are based on current facts, historical experience and various other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources. To the extent there are material differences between the estimates and actual results, our future results of operations would be affected.
New Accounting Standards
In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 limits the requirement to report discontinued operations to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. ASU 2014-08 also requires expanded disclosures concerning discontinued operations, disclosures of certain financial results attributable to a disposal of a significant component of an entity that does not qualify for discontinued operations reporting and expanded disclosures for long-lived assets classified as disposed of or held for sale. The adoption of ASU 2014-08 effective as of January 1, 2015 did not have a material impact on our consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. This ASU will be effective for us beginning January 1, 2017; however, in April 2015, the FASB proposed a one year delay in the effective date of the standard. This ASU allows for both retrospective and modified-retrospective methods of adoption. Early application is not permitted. We have not determined which transition method we will adopt, and we are currently evaluating the impact that ASU 2014-09 will have on our consolidated financial statements and related disclosures upon adoption.

8



In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued and to provide related disclosures. ASU 2014-15 is effective for us for our fiscal year ending December 31, 2016 and for interim periods thereafter. We are currently evaluating the impact of this standard on our consolidated financial statements.
In January 2015, the FASB issued ASU No. 2015-01, Income Statement —Extraordinary and Unusual Items (Subtopic 225-20), which eliminates the concept of reporting for extraordinary items. ASU 2015-01 is effective for us for our fiscal year ending December 31, 2016 and for interim periods thereafter. We are currently evaluating the impact of this standard on our consolidated financial statements.
In February 2015, the FASB issued ASU No. 2015-02, Consolidation, which reduces the number of consolidation models and simplifies the current standard. Entities may no longer need to consolidate a legal entity in certain circumstances based solely on its fee arrangements when certain criteria are met. ASU 2015-02 reduces the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity. ASU 2015-02 is effective for us for our fiscal year ending December 31, 2016. We are currently evaluating the impact of this standard on our consolidated financial statements.
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU 2015-03 is effective for us on a retrospective basis on January 1, 2016. Early adoption is permitted, but only for debt issuance costs that have not been reported in financial statements previously issued or available for issuance. We are currently evaluating the impact of this standard on our consolidated financial statements.
2. DISCONTINUED OPERATIONS
On January 20, 2015, we disposed of 12,951,347 ordinary shares of SSL in connection with an underwritten public offering of 17,250,000 ordinary shares at a price of $15.19 per share. As a result of this transaction, we no longer hold a controlling interest in SSL. As of March 31, 2015, we own 10,608,904 of SSL's ordinary shares, which represents a 25.6% ownership interest in SSL. Our remaining interest in SSL is accounted for as an equity method investment. The disposal of our controlling interest in SSL represents the disposal of a component and is a strategic shift that has a major effect on our operations and financial results, and thus we have reported the historical results of operations and financial position of SSL as discontinued operations in the condensed consolidated financial statements for all periods presented.
We recognized a loss associated with the disposal of SSL shares of $123 million within discontinued operations in the condensed consolidated statements of operations.
The following table summarizes the results from the discontinued operations of SSL included in the condensed consolidated statement of operations:

9



 
Three Months Ended March 31,

2015
 
2014
In millions
 
 
 
Net sales
$
58

 
$
206

Cost of goods sold
52

 
198

        Gross profit
6

 
8

Operating expenses
9

 
25

Operating loss
(3
)

(17
)
Loss on disposal
123

 

Other income
(7
)
 
(5
)
Loss from discontinued operations before tax
(119
)

(12
)
Income tax expense

 
3

Loss from discontinued operations, net of tax
(119
)

(15
)
Net (income) loss attributable to noncontrolling interests
(2
)
 

Net loss attributable to shareholders
$
(121
)
 
$
(15
)
The following table summarizes the cash flows of discontinued operations of SSL included in the condensed consolidated statements of cash flows:
 
Three Months Ended March 31,
 
2015
 
2014
In millions
 
 
 
Cash flows from discontinued operations:
 
 
 
Net cash (used in) provided by operating activities of discontinued operations
$
(1
)
 
$
44

Net cash used in investing activities of discontinued operations
(23
)
 
(16
)
Net cash used in financing activities of discontinued operations

 
(31
)
Effect of exchange rate changes on cash and cash equivalents
(1
)
 

Cash used by discontinued operations
$
(25
)
 
$
(3
)
As of March 31, 2015, the carrying value of our equity method investment in SSL was $186 million. Subsequent to January 20, 2015, we recognize our interest in SSL's net income (loss) in equity in (loss) earnings of equity method investments, net of tax in the condensed consolidated statement of operations. SSL continues to purchase polysilicon from us on a purchase order basis at a current price of $30 per kilogram. Net sales of polysilicon to SSL for the three months ended March 31, 2015 and 2014 were $17 million and $13 million, respectively. As of March 31, 2015, the net receivable balance due to SunEdison from SSL was $14 million.
One of our board members serves on the board of directors of SSL. Additionally, we and SSL have entered into the following agreements that effected the separation of SSL’s business from ours and provide a framework for our ongoing relationship with SSL:
Separation Agreement - The separation agreement governs certain pre-offering transactions between SSL and us, as well as aspects of the relationship between SSL and us following SSL’s IPO and related transactions, which are not otherwise governed by the other agreements set forth below. The separation agreement provides further assurances and covenants between SSL and us to ensure that the separation of SSL’s business from SunEdison was the intent of SSL and that commercially reasonable efforts will be taken to do all things reasonably necessary to consummate and make effective the transactions. The separation agreement provides for mutually agreed exchange of information, confidentiality, dispute resolution methods and limitations of liability.
Patent and Technology Cross-License Agreement - Under the patent and technology cross-license agreement, SSL agreed to license to us substantially all of its patents, patent applications, software, trade secrets, know-how and other intellectual property that have application in our solar energy business, and we licensed to SSL substantially all of our patents, patent applications, software, trade secrets, know-how and other intellectual property that have application in its semiconductor wafer business. The intellectual property licensed by us to SSL under the agreement excludes all intellectual property related to CCZ, diamond coated wire, FBR and high-pressure FBR, with such arrangements to be set forth in separate agreements as described below.

10



CCZ and Diamond Coated Wire License Agreement - Under the CCZ and diamond coated wire license agreement, we licensed to SSL and certain of its subsidiaries in the United States and Italy our U.S. and foreign patents and patent applications and technology (including discoveries, conceptions, ideas, improvements, enhancements and inventions and data) relating to CCZ silicon crystal growth and diamond coated wire technology, provided that SSL’s use of such licensed intellectual property is limited to the semiconductor industry and the production of semiconductor wafers. The agreement prohibits SSL from using the licensed intellectual property for the manufacture of polysilicon, the manufacture of materials used in the solar photovoltaic industry, or for balance of system hardware or software used in solar systems. Additionally, the agreement prohibits us from licensing the applicable intellectual property to any third party for use in the production of semiconductor wafers and similar uses in the semiconductor industry.
Technology Joint Development Agreement - The technology joint development agreement provides a framework for joint development and other collaborative activities between SSL and SunEdison. Under the agreement, the parties may agree to conduct one or more joint development programs, the specific terms and conditions of which will be set forth in a separate statement of work for each joint development program.
Trademark License Agreement - We granted to SSL a royalty-free license to use certain of our trademarks for a period of time following the completion of SSL's IPO.
Transition Services Agreement - Under the transition services agreement, we and SSL agreed to mutually provide each other certain corporate, general and administrative services following the completion of SSL’s IPO for the term set forth for such service in each annex to the agreement.
Tax Matters Agreement - The tax matters agreement governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes.
Registration Rights Agreement - Under the registration rights agreement, SSL agreed that, upon our request, SSL will use its reasonable best efforts to effect the registration under applicable federal and state securities laws of its ordinary shares held by us following its IPO.
3. ACQUISITIONS
Acquisition of First Wind
On January 29, 2015, we and TerraForm First Wind ACQ, LLC, a subsidiary of TerraForm Power Operating, LLC (“TerraForm Operating”), as assignee of Terra LLC under the Purchase Agreement (as defined below), completed the previously announced acquisition of First Wind Holdings, LLC (“Parent,” together with its subsidiaries, “First Wind”), pursuant to a purchase and sale agreement, dated as of November 17, 2014, as amended by the First Amendment to the Purchase and Sale Agreement, dated as of January 28, 2015 (together, the “Purchase Agreement”), among SunEdison, TerraForm Power, Terra LLC, First Wind, the members of First Wind and certain other persons party thereto (the “Acquisition”). In the Acquisition, TerraForm First Wind ACQ, LLC purchased from First Wind 500 MW of operating wind power assets and 21 MW of operating solar power assets, and SunEdison purchased all of the equity interests of Parent and all of the outstanding equity interests in certain subsidiaries of Parent that own, directly or indirectly, 306 MW of operating wind power assets, wind and solar development projects representing 1.6 GW of pipeline and backlog and development opportunities representing more than 6.4 GW of wind and solar projects.
Pursuant to the terms of the Purchase Agreement, SunEdison and TerraForm Operating paid total consideration of $2,442 million, which was comprised of cash consideration of $762 million paid by SunEdison and $863 million paid by TerraForm, the issuance of 336 million in aggregate principal amount of 3.75% Guaranteed Exchangeable Senior Secured Notes due 2020 (see Note 8), and contingent consideration measured at fair value of $481 million. The maximum undiscounted potential payout of contingent consideration is $510 million over the three year period following the date of acquisition and we believe it is probable the maximum amount will be paid.
The initial accounting for this business combination is not complete because the evaluation necessary to assess the fair values of certain net assets acquired is in process. The provisional amounts are subject to revision until the evaluations are completed to the extent that any additional information is obtained about the facts and circumstances that existed as of the acquisition date.

11



The provisional estimated allocation of assets and liabilities is as follows:
 
Total Estimated Allocation
In millions
 
Cash and cash equivalents
$
103

Restricted cash
278

Accounts receivable
12

Renewable energy systems and other property, plant and equipment
1,205

Goodwill
332

Other intangible assets
1,089

Other assets
89

Total assets acquired
3,108

Accounts payable and accrued liabilities
47

Long-term debt
306

Other liabilities
192

Total liabilities assumed
545

Redeemable noncontrolling interests
7

Noncontrolling interests
114

Fair value of net assets acquired
$
2,442

Total assets acquired are comprised of $2,042 million attributable to the Renewable Energy Development segment and $1,066 million attributable to the TerraForm Power segment.
The preliminary purchase accounting resulted in the recording of indefinite lived intangible assets using provisional amounts for power plant development arrangements totaling $963 million. Additionally, provisional amounts were used to record certain amortizable intangible assets comprised of long-term power purchase agreements ("PPAs") and feed-in tariffs ("FiTs") totaling $126 million. The long-term PPAs and FiTs are subject to amortization with no residual value. The estimated fair values were determined based on an income approach and the estimated useful lives of the intangible assets range from 11 to 17 years.
The net sales and net loss related to the acquisition of First Wind reflected in the accompanying condensed consolidated statement of operations for the three months ended March 31, 2015 were $26 million and $1 million, respectively. The unaudited pro forma supplementary data presented in the table below gives effect to the acquisitions as if the transactions occurred on January 1, 2014. The pro forma supplementary data is provided for informational purposes only and should not be construed to be indicative of our results of operations had the acquisitions been consummated on the date assumed or of our results of operations for any future date.
 
Three Months Ended March 31,
 
2015
 
2014
In millions
 
 
 
Net sales
$
334

 
$
371

Net loss
(439
)
 
(665
)
The unaudited pro forma net loss for the quarters ended March 31, 2015 and 2014 includes non-recurring pro forma adjustments of $9 million and $26 million, respectively, for interest expense and amortization of deferred financing costs associated with debt incurred for the acquisition of First Wind. Also reflected in the pro forma net loss for the quarter ended March 31, 2014 is the reversal of losses totaling $75 million attributable to the results of certain First Wind operating projects that we did not acquire.
SMP Ltd.
In February 2011, we entered into a joint venture (SMP Ltd. or "SMP") with Samsung Fine Chemicals Co. Ltd. ("SFC") for the construction and operation of a new facility to produce high purity polysilicon in Ulsan, South Korea. SMP will manufacture and supply polysilicon to us and to international markets. Prior to May 28, 2014, our ownership interest in SMP was 50% and Samsung Fine Chemicals Co. Ltd. owned the other 50%. Also prior to May 28, 2014, we accounted for our interest in SMP using the equity method of accounting.

12



In September 2011, we executed a Supply and License Agreement with SMP under which we license and sell to SMP certain technology and related equipment used for producing polysilicon. In accordance with the Supply and License Agreement, we have received proceeds based on certain milestones we have achieved throughout the construction, installation and testing of the equipment. These proceeds received from SMP under the Supply and License Agreement were recorded as a reduction in our basis in the SMP investment and to the extent that our basis in the investment was zero, the remaining proceeds received were recorded as a long-term liability. The cash received was recorded as an investing inflow within the consolidated statement of cash flows. As of May 28, 2014, our net equity method investment balance in SMP was $13 million.    
On May 28, 2014, we acquired from SFC an approximate 35% interest in SMP for a cash purchase price of $141 million ($71 million, net of cash acquired). Prior to the completion of the SSL IPO (see Note 2), SunEdison contributed this approximate 35% interest in SMP to SSL. After the purchase of an additional 35% interest in SMP, we owned a combined 85% interest, and obtained control over SMP's assets and operations. As a result of obtaining control of SMP, we consolidated SMP's assets and operations into our financial statements. As a result of the disposal of our controlling interest in SSL (see Note 2), our consolidated ownership interest in SMP was reduced to 50%. We continue to consolidate the assets and operations of SMP as we control the entity.
The allocation of the purchase price is as follows:
 
Purchase Price Allocation
In millions
 
Cash and cash equivalents
$
70

Prepaid and other current assets
12

Other property, plant and equipment
788

Total assets acquired
870

Accounts payable
135

Accrued and other liabilities
5

Long-term debt
382

Total liabilities assumed
522

Noncontrolling interests
48

Fair value of net assets acquired
$
300

Management completed the purchase accounting valuation for this transaction and any future adjustments due to changes of the assumptions used to calculate the fair value of acquisition related assets and liabilities will be reflected in the consolidated statements of operations.
TerraForm Acquisitions
Mt. Signal
Effective July 2, 2014, TerraForm acquired a controlling interest in Imperial Valley Solar 1 Holdings II, LLC, which owns a 266 MW utility scale renewable energy system located in Mt. Signal, California ("Mt. Signal"). TerraForm acquired Mt. Signal from an indirect wholly-owned subsidiary of Silver Ridge Power, LLC ("SRP") in exchange for share-based consideration in TerraForm consisting of (i) 5,840,000 Class B1 units (and a corresponding number of shares Class B1 common stock) equal in value to $146 million and (ii) 5,840,000 Class B units (and a corresponding number of shares Class B common stock) equal in value to $146 million.
Prior to the TerraForm IPO, SRP was owned 50% by R/C US Solar Investment Partnership, L.P. (“Riverstone”) and 50% by SunEdison, who acquired all of AES US Solar, LLC's (“AES Solar”), a subsidiary of The AES Corporation, equity ownership interest in SRP (see "Silver Ridge Power, LLC" section below). In connection with its acquisition of AES Solar's interest in SRP, SunEdison entered into a Master Transaction Agreement (the "MTA") with Riverstone pursuant to which the parties agreed to sell Mt. Signal to TerraForm and to distribute the Class B units (and shares of Class B common stock) to SunEdison and the Class B1 units (and shares of Class B1 common stock) to Riverstone.
Capital Dynamics
On December 18, 2014, TerraForm acquired 78 MW of distributed generation renewable energy systems in the U.S. from Capital Dynamics U.S. Solar Energy Fund, L.P., a closed-end private equity fund. This portfolio consists of 42 solar energy

13



systems located in California, Massachusetts, New Jersey, New York, and Pennsylvania. The purchase price for this acquisition was $258 million ($258 million, net of cash acquired).
Other TerraForm Acquisitions
During the year ended December 31, 2014, TerraForm completed the acquisitions of 100% of the ownership interests in entities that owned and operated 168 solar energy systems in the U.S., Canada and the U.K. with an aggregate capacity of 128 MW. The aggregate consideration paid for these acquisitions was $250 million ($244 million, net of cash acquired). These acquisitions were made in order to support the development of TerraForm's initial portfolio of renewable energy generation assets.
The initial accounting for the Mt. Signal, Capital Dynamics and certain other business combinations are not complete because the evaluations necessary to assess the fair values of certain net assets acquired are in process. The provisional amounts are subject to revision until the evaluations are completed to the extent that any additional information is obtained about the facts and circumstances that existed as of the acquisition dates.
The estimated allocations of assets and liabilities are as follows:
 
Preliminary
 
Final
 
Total Estimated Allocation
 
Mt. Signal
 
Capital Dynamics
 
Other TerraForm Acquisitions
 
Other TerraForm Acquisitions
 
In millions
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$

 
$
4

 
$
2

 
$
6

Accounts receivable
12

 
2

 
7

 
2

 
23

Renewable energy systems
649

 
217

 
103

 
151

 
1,120

Restricted cash
22

 

 
5

 
9

 
36

Intangible assets
118

 
72

 
22

 
105

 
317

Other assets
13

 
23

 
1

 
4

 
41

Total assets acquired
814


314


142


273

 
1,543

Accounts payable and accrued liabilities
25

 
1

 
3

 
1

 
30

Long-term debt
413

 

 
65

 
73

 
551

Other liabilities
5

 
38

 
8

 
11

 
62

Total liabilities assumed
443


39


76


85

 
643

Redeemable noncontrolling interests

 
17

 
2

 

 
19

Noncontrolling interests
79

 

 
1

 
1

 
81

Fair value of net assets acquired
$
292


$
258


$
63


$
187

 
$
800

The purchase accounting for these acquisitions resulted in recognition of intangible assets for long-term power purchase agreements totaling $317 million. These intangible assets are subject to amortization with no residual value. The estimated fair values were determined based on an income approach, and the estimated useful lives of these intangible assets range from 3 to 25 years.
Silver Ridge Power, LLC
On July 2, 2014, we completed the acquisition of 50% of the outstanding limited liability company interests of SRP from AES Solar for total cash consideration of $179 million ($134 million, net of cash acquired). The remaining 50% of the outstanding limited liability company interests of SRP will continue to be held by Riverstone. SRP’s solar power plant operating projects included the Mt. Signal solar project. Concurrently with entry into the Acquisition Agreement, we also entered into the MTA with Riverstone. Pursuant to the MTA, concurrently with the closing of the TerraForm IPO, SRP contributed Mt. Signal to the operating entity of TerraForm in exchange for total consideration valued at $292 million. Consequently, Mt. Signal is consolidated by TerraForm as discussed above and is excluded from the following provisional accounting for the acquired interest in SRP.
Through our acquisition of this interest in SRP, we acquired 50% of (i) 336 MW of solar power plant operating projects and (ii) a 40% interest in CSOLAR IV West, LLC (“CSolar”), which is currently developing a 183 MW solar power facility with an executed power purchase agreement in place with a high-credit utility off-taker. Pursuant to the MTA, concurrently with the closing of the TerraForm IPO, the parties also entered into a purchase and sale agreement with respect to CSolar. The purchase and sale agreement provides that, following completion of CSolar, which is expected in 2016, and subject to customary closing

14



conditions and receipt of regulatory approvals, we will acquire Riverstone’s share of SRP’s interest in CSolar. Thereafter, we intend to contribute 100% of SRP’s 40% interest in CSolar to TerraForm.
The allocation of the purchase price for SRP, excluding Mt. Signal, is as follows:
 
Purchase Price Allocation
In millions
 
Cash and cash equivalents
$
45

Restricted cash
48

Accounts receivable
26

Investments
115

Renewable energy systems
573

Intangible assets
206

Goodwill
27

Prepaid and other assets
112

Total assets acquired
1,152

Accounts payable
13

Accrued liabilities
282

Long-term debt
686

Other liabilities
82

Total liabilities assumed
1,063

Noncontrolling interests
56

Fair value of net assets acquired
$
33

The purchase accounting resulted in the recording of long-term PPAs and FiTs totaling $206 million. The long-term PPAs and FiTs are intangible assets subject to amortization with no residual value. The estimated fair values were determined based on an income approach and the estimated useful lives of the intangible assets range from 17 to 19 years.
In addition, we also obtained a right, but not an obligation, to acquire AES Solar’s 50% interest in a portfolio of projects located in Italy prior to August 31, 2015 for a purchase price of $42 million, subject to certain specified adjustments. We also assumed responsibility for operations and management and asset management for SRP’s entire projects portfolio. We will determine in the future whether these projects will be held on our balance sheet or, subject to Riverstone’s consent, sold to third parties.
Management completed the purchase accounting for this transaction and any future adjustments due to changes of the assumptions used to calculate the fair value of acquisition related assets and liabilities will be reflected in the consolidated statements of operations.
Energy Matters Pty. Ltd.
On August 29, 2014, we completed the acquisition of 100% of the ownership interest in Energy Matters Pty. Ltd. ("Energy Matters"), a residential and distributed generation solar entity with operations in Australia and New Zealand. We acquired Energy Matters in exchange for total consideration of $15 million, consisting of cash paid at closing of $3 million ($2 million, net of cash acquired) and contingent consideration valued at $11 million, with a remaining $1 million in cash which was subsequently paid in April 2015. The purchase accounting resulted in the recording of an estimated amount for goodwill totaling $11 million.
Other Acquisitions
During the fourth quarter of 2014, we completed the acquisitions of certain businesses for total consideration of $21 million, consisting of cash paid at closing of $12 million (net of cash acquired), contingent consideration of $5 million and $4 million in cash payable over the next four years. The preliminary purchase accounting for these acquisitions resulted in the recording of provisional amounts for goodwill totaling $10 million. During the first quarter of 2015, we completed the acquisitions of certain businesses for total consideration of $13 million. The initial accounting for these business combinations is not complete because the evaluation necessary to assess the fair values of certain net assets acquired, along with the fair value of contingent consideration, is in process. The provisional amounts are subject to revision until the evaluations are completed to the extent that any additional information is obtained about the facts and circumstances that existed as of the acquisition dates.

15



4. INVESTMENTS
The carrying value of investments consists of the following:
 
As of March 31, 2015
 
As of December 31, 2014
In millions
 
 
 
Equity method investments:
 
 
 
SSL (see Note 2)
186

 

Other
56

 
133

Cost method and other investments
19

 
16

Total investments
$
261

 
$
149

5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
 
 
As of March 31, 2015
 
As of December 31, 2014
In millions
 
 
 
 
Land
 
$
125

 
$
7

Software
 
10

 
10

Buildings and improvements
 
91

 
98

Machinery and equipment
 
505

 
458

Renewable energy systems
 
5,935

 
4,709

Total property, plant and equipment in service, at cost
 
$
6,666

 
$
5,282

Less accumulated depreciation
 
(639
)
 
(572
)
Total property, plant and equipment in service, net
 
$
6,027

 
$
4,710

Construction in progress – renewable energy systems
 
1,396

 
956

Construction in progress – other
 
819

 
810

Total property, plant and equipment, net
 
$
8,242

 
$
6,476

6. GOODWILL
The changes in the carrying amount of goodwill during the three months ended March 31, 2015 are as follows:
In millions
 
 
Balance as of December 31, 2014
 
$
73

Goodwill recognized in acquisitions (see Note 3)
 
332

Measurement period adjustments
 
(1
)
Currency translation adjustment
 
(2
)
Balance as of March 31, 2015
 
$
402

Goodwill balances referenced above relate to the Renewable Energy Development segment.
7. OTHER INTANGIBLE ASSETS

16



Other intangible assets consist of the following:
 
 
March 31, 2015
 
December 31, 2014
 
Weighted
Average
Amortization
Period (years)
Gross Carrying Amount
 
Accumulated Amortization
Allocated to Renewable Energy
Systems
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
Allocated to Renewable Energy
Systems
 
Net Carrying Amount
In millions
 
 
 
 
 
 
 
 
 
 
 
 
Amortizable intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
PPAs and FiTs
19
$
635

 
$
(18
)
 
$
617

 
$
553

 
$
(13
)
 
$
540

Other
6
25

 
(10
)
 
15

 
29

 
(9
)
 
20

Total amortizable intangible assets
19
$
660

 
$
(28
)
 
$
632

 
$
582

 
$
(22
)
 
$
560

Indefinite lived assets:
 
 
 
 
 
 
 
 
 
 
 
 
Power plant development arrangements
Indefinite
$
1,083

 
$
(93
)
 
$
990

 
$
116

 
$
(93
)
 
$
23

Other
Indefinite
3

 

 
3

 
3

 

 
3

Total indefinite lived assets
 
$
1,086

 
$
(93
)
 
$
993

 
$
119

 
$
(93
)
 
$
26

Total other intangible assets
 
$
1,746

 
$
(121
)
 
$
1,625

 
$
701

 
$
(115
)
 
$
586

8. DEBT AND CAPITAL LEASE OBLIGATIONS
Debt (including consolidated VIEs) and capital lease obligations outstanding consist of the following:

 
 
 
As of March 31, 2015
 
As of December 31, 2014
In millions
 
Weighted Average Annual Interest Rate
 
Total
 
Current and Short-Term
 
Long-Term
 
Total
 
Current and Short-Term
 
Long-Term
Renewable Energy Development segment debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Convertible senior notes due 2018, net of discount
 
2.00%
 
$
492

 
$

 
$
492

 
$
485

 
$

 
$
485

Convertible senior notes due 2020, net of discount
 
0.25%
 
438

 

 
438

 
432

 

 
432

Convertible senior notes due 2021, net of discount
 
2.75%
 
435

 

 
435

 
429

 

 
429

Convertible senior notes due 2022, net of discount
 
2.38%
 
334

 

 
334

 

 

 

Margin loan due 2017(a)
 
6.25%
 
410

 

 
410

 

 

 

Exchangeable notes due 2020(a)
 
3.75%
 
336

 

 
336

 

 

 

Acquisition facility(a)
 
8.50%
 
150

 
2

 
148

 
150

 
2

 
148

SMP Ltd. credit facilities(a)
 
5.40%
 
366

 
55

 
311

 
355

 
107

 
248

System pre-construction, construction and term debt(b)
 
5.28%
 
2,064

 
678

 
1,386

 
1,768

 
632

 
1,136

Capital leaseback obligations(a)
 
2.98%
 
80

 
3

 
77

 
81

 
3

 
78

Financing leaseback obligations(c)
 
4.58%
 
1,387

 
12

 
1,375

 
1,404

 
14

 
1,390

Other credit facilities(d)
 
3.20%
 
474

 
434

 
40

 
291

 
240

 
51

Total Renewable Energy Development segment debt
 
 
 
$
6,966

 
$
1,184

 
$
5,782


$
5,395

 
$
998

 
$
4,397

TerraForm Power segment debt(a):
 
 
 

 

 

 

 

 

Senior notes due 2023, net of discount
 
5.88%
 
$
795

 
$

 
$
795

 
$

 
$

 
$

Term loan facility
 
5.33%
 

 

 

 
574

 
6

 
568

Revolving credit facility
 
2.68%
 
150

 
150

 

 

 

 

Other system financing transactions
 
4.80%
 
1,250

 
80

 
1,170

 
1,024

 
74

 
950

Total TerraForm Power segment debt
 
 
 
$
2,195

 
$
230

 
$
1,965


$
1,598

 
$
80

 
$
1,518

Total debt outstanding
 
 
 
$
9,161

 
$
1,414

 
$
7,747


$
6,993

 
$
1,078

 
$
5,915

________________________
(a) Non-recourse to SunEdison
(b) Includes $8 million of debt with recourse to SunEdison as of March 31, 2015 and December 31, 2014

17



(c) Includes $32 million of debt with recourse to SunEdison as of March 31, 2015 and December 31, 2014  
(d) Includes $284 million and $215 million of debt with recourse to SunEdison as of March 31, 2015 and December 31, 2014, respectively
Renewable Energy Development Segment Debt
Convertible Senior Notes Due 2018 and 2021
On December 20, 2013, we issued $600 million in aggregate principal amount of 2.00% convertible senior notes due 2018 (the "2018 Notes") and $600 million aggregate principal amount of 2.75% convertible senior notes due 2021 (the "2021 Notes", and together with the 2018 Notes, the "2018/2021 Notes") in a private placement offering. We received net proceeds, after payment of debt financing fees, of $1,167 million in the offering, before the redemption of the $550 million outstanding aggregate principal amount of the 7.75% senior notes due 2019 and the repayment of the $200 million outstanding aggregate principle amount of the 10.75% second lien term loan and before payment of the net cost of the call spread overlay described below.
Interest on the 2018 Notes is payable on April 1 and October 1 of each year, beginning on April 1, 2014. Interest on the 2021 Notes is payable on January 1 and July 1 of each year, beginning on July 1, 2014. The 2018 Notes and the 2021 Notes mature on October 1, 2018 and January 1, 2021, respectively, unless earlier converted or purchased.
The 2018/2021 Notes are convertible at any time until the close of business on the business day immediately preceding July 1, 2018 (in the case of the 2018 Notes) or October 1, 2020 (in the case of the 2021 Notes) only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending March 31, 2014, if the closing sale price of our common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than 120% of the conversion price of the 2018/2021 Notes in effect on each applicable trading day; (2) during the five consecutive business day period following any 10 consecutive trading-day period in which the trading price for the 2018/2021 Notes for each such trading day is less than 98% of the closing sale price of our common stock on such trading day multiplied by the applicable conversion rate on such trading day; or (3) upon the occurrence of specified corporate events. As condition (1) was met during the first quarter of 2015, the 2018/2021 Notes were convertible as of March 31, 2015. On and after July 1, 2018 (in the case of the 2018 Notes) or October 1, 2020 (in the case of the 2021 Notes) and until the close of business on the second scheduled trading day immediately prior to the applicable stated maturity date, the 2018/2021 Notes are convertible regardless of the foregoing conditions based on an initial conversion price of $14.62 per share of our common stock.
The conversion price will be subject to adjustment in certain events, such as distributions of dividends or stock splits. The 2018/2021 Notes are convertible only into cash, shares of our common stock or a combination thereof at our election. However, we were required to settle conversions solely in cash until we obtained the requisite approvals from our stockholders to (i) amend our restated certificate of incorporation to sufficiently increase the number of authorized but unissued shares of our common stock to permit the conversion and settlement of the 2018/2021 Notes into shares of our common stock, and (ii) authorize the issuance of the maximum numbers of shares described above in accordance with the continued listing standards of The New York Stock Exchange. At our annual stockholders meeting on May 29, 2014, the requisite majority of the outstanding shares of our common stock approved these measures, and we subsequently filed a related amendment to the SunEdison's Articles of Incorporation with the Secretary of State of the State of Delaware. Holders may also require us to repurchase all or a portion of the 2018/2021 Notes upon a fundamental change, as defined in the indenture agreement, at a cash repurchase price equal to 100% of the principal amount plus accrued and unpaid interest. In the event of certain events of default, such as our failure to make certain payments, pay debts as they become due or perform or observe certain obligations thereunder, the trustee or holders of a specified amount of then-outstanding 2018/2021 Notes will have the right to declare all amounts then outstanding due and payable. We may not redeem the 2018/2021 Notes prior to the applicable stated maturity date.
The 2018/2021 Notes are general unsecured obligations and rank senior in right of payment to any of our future indebtedness that is expressly subordinated in right of payment to the 2018/2021 Notes; equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated; effectively subordinated in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and effectively subordinated to all existing and future indebtedness (including trade payables) incurred by our subsidiaries.
From December 20, 2013 through May 29, 2014, the period in which we would have been required to settle conversions in cash if exercised, the embedded conversion options (the "2018/2021 Conversion Options") within the 2018/2021 Notes were separated from the 2018/2021 Notes and accounted for separately as derivative instruments (derivative liabilities) with changes in fair value reported in the consolidated statements of operations, as further discussed in the Loss on Convertible Notes Derivatives section below. Upon obtaining the requisite approvals from our stockholders discussed above, the 2018/2021

18



Conversion Options were considered equity instruments. Thus, as of May 29, 2014, the 2018/2021 Conversion Options were remeasured at fair value, or $888 million, with the change in fair value reported in the consolidated statement of operations, and the resulting fair value of the 2018/2021 Conversion Options was reclassified to Stockholders' Equity. Changes in fair value subsequent to May 29, 2014 are not recognized in the consolidated statement of operations as long as the instruments continue to qualify to be classified as equity.
Call Spread Overlay for Convertible Senior Notes Due 2018 and 2021
Concurrent with the issuance of the 2018/2021 Notes, we entered into privately negotiated convertible note hedge transactions (collectively, the "2018/2021 Note Hedges") and warrant transactions (collectively, the "2018/2021 Warrants" and together with the 2018/2021 Note Hedges, the “2018/2021 Call Spread Overlay”), with certain of the initial purchasers of the 2018/2021 Notes or their affiliates. Assuming full performance by the counterparties, the 2018/2021 Call Spread Overlay is designed to effectively reduce our potential payout over the principal amount on the 2018/2021 Notes upon conversion.
Under the terms of the 2018/2021 Note Hedges, we purchased from affiliates of certain of the initial purchasers of the 2018/2021 Notes options to acquire, at an exercise price of $14.62 per share, subject to anti-dilution adjustments, up to 82 million shares of our common stock. Each 2018/2021 Note Hedge is a separate transaction, entered into by us with each option counterparty, and is not part of the terms of the 2018/2021 Notes. Each 2018/2021 Note Hedge is exercisable upon the conversion of the 2018/2021 Notes and expires on the corresponding maturity dates of the 2018/2021 Notes. The option counterparties are generally obligated to settle their obligations to us upon exercise of the 2018/2021 Note Hedges in the same manner as we satisfy our obligations to holders of the 2018/2021 Notes.
Under the terms of the 2018/2021 Warrants, we sold to affiliates of certain of the initial purchasers of the 2018/2021 Notes warrants to acquire, on the stated expiration date of each 2018/2021 Warrant, up to 82 million shares of our common stock at an exercise price of $18.35 and $18.93 per share, respectively, subject to anti-dilution adjustments. Each 2018/2021 Warrant transaction is a separate transaction, entered into by us with each option counterparty, and is not part of the terms of the 2018/2021 Notes.
From December 20, 2013 through May 29, 2014, the period in which we would have been required to settle the 2018/2021 Note Hedges and 2018/2021 Warrants in cash if exercised, these instruments were required to be accounted for as derivative instruments with changes in fair value reported in the consolidated statements of operations, as further discussed in the Loss on Convertible Notes Derivatives section below. Upon obtaining the requisite approvals from our stockholders discussed above, the 2018/2021 Note Hedges and 2018/2021 Warrants were considered equity instruments. Thus, as of May 29, 2014, the 2018/2021 Note Hedges and 2018/2021 Warrants were remeasured at fair value (asset of $880 million and liability of $753 million respectively), with the changes in fair value reported in the consolidated statement of operations, and the resulting fair values of the 2018/2021 Note Hedges and 2018/2021 Warrants were reclassified to Stockholders' Equity. Changes in fair value subsequent to May 29, 2014 will not be recognized in the consolidated statement of operations as long as the instruments continue to qualify to be classified as equity.
The net increase in additional paid in capital during the second quarter of 2014 as a result of the reclassification of the 2018/2021 Conversion Options, 2018/2021 Note Hedges and 2018/2021 Warrants was $762 million.
Loss on Convertible Notes Derivatives
For the three month period ended March 31, 2014, we recognized a net loss of $452 million related to the change in the fair value of the 2018/2021 Conversion Options, the 2018/2021 Note Hedges and 2018/2021 Warrants (the "2018/2021 Convertible Notes Derivatives") prior to the reclassification of these instruments to Stockholders' Equity as discussed above, which is reported in loss on convertible notes derivatives, net in the consolidated statement of operations, as follows:
In millions
March 31, 2014
Conversion Options
$
(317
)
Note Hedges
300

Warrants
(435
)
Total loss on convertible note derivatives, net
$
(452
)
The 2018/2021 Convertible Notes Derivatives were measured at fair value using a Black-Scholes valuation model as these instruments are not traded on an open market. Significant inputs to the valuation model, which have been identified as Level 2

19



inputs, were as follows:
 
Conversion Option
 
Note Hedges
 
Warrants
 
Due 2018
 
Due 2021
 
Due 2018
 
Due 2021
 
Due 2018
 
Due 2021
Stock price
$20.50
 
$20.50
 
$20.50
 
$20.50
 
$20.50
 
$20.50
Exercise price
$14.62
 
$14.62
 
$14.62
 
$14.62
 
$18.35
 
$18.93
Risk-free rate
1.34%
 
1.95%
 
1.30%
 
1.93%
 
1.45%
 
2.30%
Volatility
45.0%
 
45.0%
 
45.0%
 
45.0%
 
42.0%
 
42.0%
Dividend yield
—%
 
—%
 
—%
 
—%
 
—%
 
—%
Maturity
2018
 
2021
 
2018
 
2021
 
2018
 
2021
Further details of the inputs above are as follows:
Stock price - The closing price of our common stock on the last trading day of the quarter
Exercise price - The exercise (or conversion) price of the derivative instrument
Risk-free rate - The Treasury Strip rate associated with the life of the derivative instrument
Volatility - The volatility of our common stock over the life of the derivative instrument
Convertible Senior Notes Due 2020
On June 10, 2014, we issued $600 million in aggregate principal amount of 0.25% convertible senior notes due 2020 (the "2020 Notes") in a private placement offering. We received net proceeds, after payment of debt financing fees, of $585 million in the offering, before payment of the net cost of the call spread overlay described below.
Interest on the 2020 Notes is payable on July 15 and January 15 of each year, beginning on January 15, 2015. The 2020 Notes mature on January 15, 2020, unless earlier converted or purchased.
The 2020 Notes are convertible at any time until the close of business on the business day immediately preceding October 15, 2019 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending September 30, 2014, if the closing sale price of our common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than 130% of the conversion price of the 2020 Notes in effect on each applicable trading day; (2) during the five consecutive business day period following any 10 consecutive trading-day period in which the trading price for the 2020 Notes for each such trading day is less than 98% of the closing sale price of our common stock on such trading day multiplied by the applicable conversion rate on such trading day; or (3) upon the occurrence of specified corporate events. The 2020 Notes were not convertible as of March 31, 2015. On and after October 15, 2019 and until the close of business on the second scheduled trading day immediately prior to the applicable stated maturity date, the 2020 Notes are convertible regardless of the foregoing conditions based on an initial conversion price of $26.87 per share of our common stock.
The conversion price will be subject to adjustment in certain events, such as distributions of dividends or stock splits. The 2020 Notes are convertible only into cash, shares of our common stock or a combination thereof at our election. Holders may also require us to repurchase all or a portion of the 2020 Notes upon a fundamental change, as defined in the indenture agreement, at a cash repurchase price equal to 100% of the principal amount plus accrued and unpaid interest. In the event of certain events of default, such as our failure to make certain payments or perform or observe certain obligations thereunder, the trustee or holders of a specified amount of then-outstanding 2020 Notes will have the right to declare all amounts then outstanding due and payable. We may not redeem the 2020 Notes prior to the applicable stated maturity date.
The 2020 Notes are general unsecured obligations and rank senior in right of payment to any of our future indebtedness that is expressly subordinated in right of payment to the 2020 Notes; equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated; effectively subordinated in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and to all existing and future indebtedness (including trade payables) incurred by our subsidiaries.
The embedded conversion options within the 2020 Notes are indexed to our common stock and thus were classified as equity instruments upon issuance of the 2020 Notes. The initial fair value of the embedded conversion options was recognized as a reduction in the carrying value of the 2020 Notes in the consolidated balance sheet and such discount will be amortized and recognized as interest expense over the term of the 2020 Notes. Subsequent changes in fair value are not recognized as long as the instruments continue to qualify to be classified as equity.

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Call Spread Overlay for Convertible Senior Notes Due 2020
Concurrent with the issuance of the 2020 Notes, we entered into privately negotiated convertible note hedge transactions (collectively, the "2020 Note Hedge") and warrant transactions (collectively, the "2020 Warrants" and together with the 2020 Note Hedge, the “2020 Call Spread Overlay”), with certain of the initial purchasers of the 2020 Notes or their affiliates. Assuming full performance by the counterparties, the 2020 Call Spread Overlay is meant to effectively reduce our potential payout over the principal amount on the 2020 Notes upon conversion of the 2020 Notes.
Under the terms of the 2020 Note Hedge, we bought from affiliates of certain of the initial purchasers of the 2020 Notes options to acquire, at an exercise price of $26.87 per share, subject to anti-dilution adjustments, up to 22 million shares of our common stock. Each 2020 Note Hedge is a separate transaction, entered into by us with each option counterparty, and is not part of the terms of the 2020 Notes. Each 2020 Note Hedge is exercisable upon the conversion of the 2020 Notes and expires on the corresponding maturity dates of the 2020 Notes.
Under the terms of the 2020 Warrants, we sold to affiliates of certain of the initial purchasers of the 2020 Notes warrants to acquire, on the stated expiration date of each Warrant, up to 22 million shares of our common stock at an exercise price of $37.21 per share, subject to anti-dilution adjustments. Each 2020 Warrant transaction is a separate transaction, entered into by us with each option counterparty, and is not part of the terms of the 2020 Notes.
The 2020 Note Hedge and 2020 Warrants are indexed to our common stock and thus were classified as equity instruments upon issuance and recognized at fair value based on the negotiated transaction prices. Subsequent changes in fair value are not recognized as long as the instruments continue to qualify to be classified as equity.
Convertible Senior Notes Due 2022
On January 27, 2015, we issued $460 million in aggregate principal amount of 2.375% convertible senior notes due 2022 (the "2022 Notes") in a private placement offering. We received net proceeds, after payment of debt financing fees, of $448 million in the offering, before payment of the net cost of the capped call feature described below.
Interest on the 2022 Notes is payable semiannually on April 15 and October 15 of each year, beginning on October 15, 2015. The 2022 Notes mature on April 15, 2022, unless earlier converted or repurchased.
The 2022 Notes are convertible at any time until the close of business on the business day immediately preceding April 15, 2022 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending March 31, 2015, if the closing sale price of our common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than 130% of the conversion price of the 2022 Notes in effect on each applicable trading day; (2) during the five consecutive business day period following any 10 consecutive trading-day period in which the trading price for the 2022 Notes for each such trading day is less than 98% of the closing sale price of our common stock on such trading day multiplied by the applicable conversion rate on such trading day; or (3) upon the occurrence of specified corporate events. The 2022 Notes were not convertible as of March 31, 2015. On and after January 15, 2022 and until the close of business on the second scheduled trading day immediately prior to the applicable stated maturity date, the 2022 Notes are convertible regardless of the foregoing conditions based on an initial conversion price of $25.25 per share of our common stock.
The conversion price will be subject to adjustment in certain events, such as distributions of dividends or stock splits. The 2022 Notes are convertible only into cash, shares of our common stock or a combination thereof at our election. Holders may also require us to repurchase all or a portion of the 2022 Notes upon a fundamental change, as defined in the indenture agreement, at a cash repurchase price equal to 100% of the principal amount plus accrued and unpaid interest. In the event of certain events of default, such as our failure to make certain payments or perform or observe certain obligations thereunder, the trustee or holders of a specified amount of then-outstanding 2022 Notes will have the right to declare all amounts then outstanding due and payable. We may not redeem the 2022 Notes prior to the applicable stated maturity date.
The 2022 Notes are general unsecured obligations and rank senior in right of payment to any of our future indebtedness that is expressly subordinated in right of payment to the 2022 Notes; equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated; effectively subordinated in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and to all existing and future indebtedness (including trade payables) incurred by our subsidiaries.
Capped Call Feature

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In connection with the issuance of the 2022 Notes in January 2015, we paid $38 million to enter into privately negotiated capped call option agreements to reduce the potential dilution to holders of our common stock upon conversion of the 2022 Notes. The capped call option agreements have a cap price of $32.72 and an initial strike price of $25.25, which is equal to the initial conversion price of the 2022 Notes. The capped call options expire on April 15, 2022. The capped call option agreements are separate transactions, are not a part of the terms of the 2022 Notes, and do not affect the rights of the holders of the 2022 Notes. The capped call transactions are expected generally to reduce the potential dilution with respect to our common stock upon conversion of the 2022 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2022 Notes, as the case may be, upon any conversion of notes in the event that the market price of our common stock is greater than the strike price of the capped call transactions, with such reduction of potential dilution or offset of cash payments subject to a cap based on the cap price of the capped call transactions.
Margin Loan
On January 29, 2015, a wholly-owned subsidiary of SunEdison entered into a margin loan agreement (the “Margin Loan Agreement”) with the lenders party thereto (each, a “Lender”) and Deutsche Bank AG, as the administrative agent and the calculation agent thereunder, and SunEdison concurrently entered into a guaranty agreement in favor of the administrative agent for the benefit of each of the Lenders, pursuant to which SunEdison guaranteed all of the subsidiary’s obligations under the Margin Loan Agreement. Under the Margin Loan Agreement, the subsidiary borrowed $410 million in term loans. The net proceeds of the term loans, less certain expenses, were made available to SunEdison to fund the acquisition of First Wind Holdings, LLC. The term loans mature on January 29, 2017. All outstanding amounts under the Margin Loan Agreement bear interest at a rate per annum equal to a three-month Eurodollar rate plus an applicable margin, and interest is payable quarterly. As of March 31, 2015, the applicable interest rate was 6.25%.
The Margin Loan Agreement requires the subsidiary to maintain a loan to value ratio not to exceed 50% (based on the value of the Class A common stock of TerraForm (“TerraForm Class A Common Stock”), which certain of the collateral may be exchanged for). In the event that this ratio is not maintained, the subsidiary must post additional cash collateral under the Margin Loan Agreement and/or elect to repay a portion of the term loans thereunder. In addition, the Margin Loan Agreement requires the repayment of all or a portion of the term loans made thereunder upon the occurrence of certain events customary for financings of this nature, including other events relating to the price, liquidity or value of TerraForm Class A Common Stock, certain events or extraordinary transactions related to TerraForm and certain events related to SunEdison.
The Borrower’s obligations under the Margin Loan Agreement are secured by a first priority lien on shares of Class B common stock in TerraForm, and Class B units and incentive distribution rights in TerraForm Power, LLC (“Terra LLC”), in each case, that are owned by the subsidiary. The Margin Loan Agreement contains customary representations and warranties, covenants and events of default for financings of this nature. Upon the occurrence and during the continuance of an event of default, any lender may declare the term loans due and payable, exercise remedies with respect to the collateral and demand payment from SunEdison of the obligations under the Margin Loan Agreement then due and payable. TerraForm has agreed to certain obligations in connection with the Margin Loan Agreement relating to its equity securities.
We paid fees of $11 million upon entry into the Margin Loan Agreement, which were recognized as deferred financing fees.
First Wind Bridge Credit Facility
On November 17, 2014, we entered into a credit agreement with the lenders identified therein and Barclays Bank PLC, as administrative agent, arranger, lender, and letter of credit issuer (the “First Wind Bridge Credit Facility”). The First Wind Bridge Credit Facility provided for a senior secured letter of credit facility in an aggregate principal amount up to $815 million. The purpose of the First Wind Bridge Credit Facility was to provide an interim line of credit to backstop expenses related to the acquisition of First Wind Holdings, LLC. The First Wind Bridge Credit Facility was terminated in conjunction with the acquisition consummation on January 29, 2015. No amounts were drawn under the First Wind Bridge Credit Facility.
First Wind Exchangeable Notes
On January 29, 2015, a wholly-owned subsidiary of SunEdison, issued $337 million aggregate principal amount of 3.75% Guaranteed Exchangeable Senior Secured Notes due 2020 (the “Exchangeable Notes”) in a private placement pursuant to an indenture agreement (the “Exchangeable Notes Indenture”), among the subsidiary, SunEdison, as guarantor, and Wilmington Trust, National Association, as exchange agent, registrar, paying agent and collateral agent (the “Exchangeable Notes Trustee”). In connection with the issuance of the Exchangeable Notes, the subsidiary also entered into a pledge agreement with the Exchangeable Notes Trustee, in its capacity as collateral agent, providing for the pledge of TerraForm shares of Class B common stock and Terra LLC’s Class B units held by the subsidiary (the “Class B Securities”) as described below.

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The proceeds of the Exchangeable Notes made up a portion of SunEdison’s upfront consideration for the acquisition of First Wind Holdings, LLC. The Exchangeable Notes bear interest at a rate of 3.75% per annum and mature on January 15, 2020. Interest on the Exchangeable Notes are payable semiannually in arrears to holders of record at the close of business on January 1 or July 1 immediately preceding the interest payment date on January 15 and July 15 of each year, commencing on July 15, 2015.
The Exchangeable Notes are secured by a first priority lien on the Class B Securities, equal to the number of shares of TerraForm Class A Common Stock initially issuable upon exchange of the Exchangeable Notes, including the maximum number of shares of TerraForm Class A Common Stock to be issued upon exchange in connection with a make-whole fundamental change, which Class B Securities were transferred by SunEdison to the subsidiary upon issuance of the Exchangeable Notes. SunEdison will transfer to the subsidiary, and the subsidiary will pledge, on a first priority basis, additional shares of the Class B Securities in connection with any adjustment to the exchange rate, so that, at all times, the Class B Securities equal to the full number of shares of TerraForm Class A Common Stock issuable upon exchange of the Exchangeable Notes shall be held by the subsidiary and subject to such first priority lien. The Exchangeable Notes are fully and unconditionally guaranteed by SunEdison. The Exchangeable Notes and the guarantees are pari passu in right of payment to the SunEdison’s obligations under its outstanding convertible debt.
Holders of the Exchangeable Notes may exchange their Exchangeable Notes at their option on or after January 29, 2016 at any time prior to the close of business on the business day immediately preceding the maturity date. Upon exchange, the subsidiary will deliver shares of TerraForm Class A Common Stock, based upon the applicable exchange rate (together with a cash payment in lieu of delivering any fractional share). The initial exchange rate is 28.9140 shares of TerraForm Class A Common Stock per $1,000 principal amount of Exchangeable Notes, equivalent to an initial exchange price of approximately $34.58 per share of TerraForm Class A Common Stock. The exchange rate is subject to adjustment in some events but will not be adjusted for accrued interest.
The subsidiary may not redeem the relevant Exchangeable Note prior to the maturity date, and no “sinking fund” is provided for the Exchangeable Notes. Upon the occurrence of a “Fundamental Change” (as defined in the Exchangeable Notes Indenture), holders of the Exchangeable Notes may require the subsidiary to repurchase for cash the Exchangeable Notes at a price equal to 100% of the principal amount of the Exchangeable Notes being repurchased plus any accrued and unpaid interest up to, but excluding, the repurchase date; provided, however, that if the repurchase date is after a regular record date and on or prior to the interest payment date to which it relates, the subsidiary will instead pay interest accrued to the interest payment date to the holder of record of the Exchangeable Note as of the close of business on the regular record date, and the Fundamental Change purchase price shall then be equal to 100% of the principal amount of the note subject to purchase and will not include any accrued and unpaid interest. In addition, following certain events that constitute “Make-Whole Fundamental Changes” (as defined in the Exchangeable Notes Indenture), the subsidiary will increase the exchange rate for holders who elect to exchange Exchangeable Notes in connection with such events in certain circumstances.
Renewable Energy Credit Facility
On February 28, 2014, we entered into a credit agreement with the lenders identified therein, Wells Fargo Bank, National Association, as administrative agent, Goldman Sachs Bank USA and Deutsche Bank Securities Inc., as joint lead arrangers and joint syndication agents, and Goldman Sachs Bank USA, Deutsche Bank Securities Inc., Wells Fargo Securities, LLC and Macquarie Capital (USA) Inc., as joint bookrunners (the “Credit Facility”). The Credit Facility provided for a senior secured letter of credit facility in an aggregate principal amount up to $265 million and has a term ending February 28, 2017. In the second quarter 2014, the parties added additional issuers to the Credit Facility to increase the funds available from $265 million to $315 million. Also in the second quarter of 2014, all related parties executed an amendment allowing us to increase aggregate funds committed up to $800 million ($400 million prior to amendment), subject to certain conditions. In the fourth quarter of 2014, the parties added additional issuers to the Credit Facility to increase the funds available from $315 million to $540 million. Also in the fourth quarter of 2014, all parties executed an amendment permitting us to secure additional financing in an amount up to $815 million for the First Wind Bridge Facility (see "First Wind Bridge Credit Facility"). In the first quarter of 2015, an issuer that remains party to the facility committed $25 million in additional funds, increasing the aggregate funding under the Credit Facility from $540 million to $565 million. In addition, the parties executed an amendment permitting us to secure additional financing in an amount up to $410 million secured by certain equity interests in TerraForm Power, Inc. (see "Margin Loan Agreement") and to issue up to $500 million in convertible senior notes due 2022 (see "2022 Notes"). In April 2015, several issuers that remain party to the Credit Facility committed $75 million in additional funds, increasing the aggregate funding under the Credit Facility from $565 million to $640 million.
The Credit Facility will be used to backstop outstanding letters of credit issued by Bank of America, N.A. under our former revolving credit facility until they expire, as well as for general corporate purposes. In addition, the amendment to the Credit Facility will permit investments in (i) a subsidiary formed for the purpose of owning subsidiaries that own and operate

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Alternative Fuel Energy Systems (as defined in the Credit Facility) and (ii) wind, biomass, natural gas, hydroelectric, geothermal or other clean energy generation installations or hybrid energy generation installations. We paid fees of $6 million upon entry into the Credit Facility, which were recognized as deferred financing fees.
Our obligations under the Credit Facility are guaranteed by certain of our domestic subsidiaries. Our obligations and the guaranty obligations of our subsidiaries are secured by first priority liens on and security interests in substantially all present and future assets of SunEdison and the subsidiary guarantors, including a pledge of the capital stock of certain of our domestic and foreign subsidiaries.
Interest under the Credit Facility accrues on the daily amount available to be drawn under outstanding letters of credit or bankers' acceptances, at an annual rate of 3.75%. Interest is due and payable in arrears at the end of each fiscal quarter and on the maturity date of the Credit Facility. Drawn amounts on letters of credit are due within seven business days, and interest accrues on drawn amounts at a base rate plus 2.75%.
The Credit Facility, as amended, contains representations, covenants and events of default typical for credit arrangements of comparable size, including maintaining a consolidated leverage ratio of 3.0 to 1.0 which excludes the 2018/2021 Notes, 2020 Notes and 2022 Notes (measurement commencing with the last day of the fiscal quarter ending December 31, 2014 and a minimum liquidity amount (measurement commencing with the last day of the fiscal quarter ending June 30, 2014) of the lesser of (i) $400 million and (ii) the sum of (x) $300 million plus (y) the amount, if any, by which the aggregate commitments exceed $300 million at such time. The Credit Facility also contains a customary material adverse effects clause and a cross default clause. The cross default clause is applicable to defaults on other indebtedness of SunEdison, Inc. in excess of $50 million, including the 2018/2021 Notes, 2020, and 2022 Notes but excluding our non-recourse indebtedness.
The Credit Facility also contains mandatory prepayment and/or cash collateralization provisions applicable to specified asset sale transactions as well as our receipt of proceeds from certain insurance or condemnation events and the incurrence of additional indebtedness.
As of March 31, 2015, we had $565 million of outstanding third party letters of credit backed by the Credit Facility.
Acquisition Facility
On December 22, 2014, a subsidiary entered into a credit and guaranty agreement with various lenders and J.P. Morgan, as administrative agent, collateral agent, documentation agent, sole lead arranger, sole lead bookrunner, and syndication agent (the “Acquisition Facility”). The Acquisition Facility provides for a term loan credit facility in the amount of $150 million which will be used for the acquisition of certain renewable energy generation assets. In May 2015, three additional lenders became party to the Acquisition Facility and committed additional funds, increasing the aggregate funding under the Acquisition Facility from $150 million to $362 million.
The TerraForm Global Acquisition Facility will mature on the earlier of December 22, 2016 and the date on which all loans under the Acquisition Facility become due and payable in full, whether by acceleration or otherwise. The principal amount of loans under the TerraForm Global Acquisition Facility is payable in consecutive semiannual installments on June 22, 2015 and December 22, 2015, in each case, in an amount equal to 0.5% of the original principal balance of the loans funded prior to such payment, with the remaining balance payable on the maturity date. Loans under the TerraForm Global Acquisition Facility are non-recourse debt to entities outside of the legal entities that subscribe to the debt.
Loans and each guarantee under the Acquisition Facility are secured by first priority security interests in all of the subsidiary's assets and the assets of the subsidiary's domestic subsidiaries. Interest is based on the subsidiary's election of either a base rate plus the sum of 6.5% and a spread (as defined) or a reserve adjusted eurodollar rate plus the sum of 7.5% and the spread. The reserve adjusted eurodollar rate will be subject to a floor of 1.0% and the base rate will be subject to a floor of 2.0%. The spread will initially be 0.50% per annum, commencing on the five-month anniversary of the closing date, and will increase by an additional 0.25% per annum every ninety days thereafter. As of March 31, 2015, the interest rate under the Acquisition Facility was 8.5%. The Acquisition Facility contains customary representations, warranties, and affirmative and negative covenants, including a minimum debt service coverage ratio applicable to the subsidiary (1.15:1.00 starting March 31, 2015) that will be tested quarterly. The Acquisition Facility loans may be prepaid in whole or in part without premium or penalty, and outstanding Acquisition Facility loans must be prepaid in certain specified circumstances.
At March 31, 2015, TerraForm Global had borrowed $150 million under the Acquisition Facility. We paid debt issuance fees of $7 million upon entry into the Acquisition Facility, which were recognized as deferred financing fees.
SMP Ltd. Credit Facilities

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As a result of the acquisition of SMP Ltd. discussed in Note 3, our consolidated long-term debt includes SMP Ltd.'s four non-recourse term loan facilities and its working capital revolving credit facility. The term loan facilities provide for a maximum credit amount of 475 billion South Korean won in aggregate, which translates to $430 million as of March 31, 2015. The credit facilities hold maturity dates ranging from March 2019 to May 2019. Principal and interest on the term loan facilities are paid quarterly, with annual fixed interest rates ranging from 5.25% to 5.5%. As of March 31, 2015, a total of $366 million was outstanding under the term loan facilities.
Project Financing
Our renewable energy systems for which we have short-term and long-term debt, capital leaseback and finance obligations are included in separate legal entities. Of this total debt outstanding, $3,676 million relates to project specific non-recourse financing that is backed by renewable energy system operating assets. This debt has recourse to those separate legal entities but no recourse to us under the terms of the applicable agreements. These finance obligations are fully collateralized by the related renewable energy system assets and may also include limited guarantees by us related to operations, maintenance and certain indemnities.
Project Construction Facilities
On March 26, 2014, we entered into a financing agreement with certain lenders; Wilmington Trust, National Association, as administrative agent; Deutsche Bank Trust Company Americas, as collateral agent and loan paying agent; and Deutsche Bank Securities Inc., as lead arranger, bookrunner, structuring bank and documentation agent (the “Construction Facility”). The Construction Facility originally provided for a senior secured revolving credit facility in an amount up to $150 million and has a term ending March 26, 2017. During the third quarter of 2014, the parties agreed to increase the amount available under the Construction Facility to $285 million. The Construction Facility is used to support the development and acquisition of new projects in the United States and Canada. Subject to certain conditions, we may request that the aggregate commitments be increased to an amount not to exceed $300 million. We paid fees of $8 million upon entry into the Construction Facility, which were recognized as deferred financing fees.
Loans under the Construction Facility are non-recourse debt to entities outside of the project company legal entities that subscribe to the debt and are secured by a pledge of collateral of the project company, including the project contracts and equipment. Interest on loans under the Construction Facility is based on our election of either LIBOR plus an applicable margin of 3.5%, or a defined prime rate plus an applicable margin of 2.5%. As of March 31, 2015, the interest rate under the Construction Facility was 5.75%.
The Construction Facility contains customary representations, warranties, and affirmative and negative covenants, including a material adverse effects clause whereby a breach may disallow a future draw but not acceleration of payment and a cross default clause whose remedy, among other rights, includes the right to restrict future loans as well as the right to accelerate principal and interest payments. Covenants primarily relate to the collateral amounts and transfer of right restrictions.
At March 31, 2015, we had borrowed $52 million under the Construction Facility, which is classified under system pre-construction, construction and term debt. As of March 31, 2015, we had $94 million blocked for currently funded projects, which reduced the available capacity. Therefore, letters of credit could be issued under the Construction Facility for the remaining capacity totaling $139 million as of March 31, 2015.
In the event additional construction financing is needed, and we are unable to obtain alternative financing, or if we have inadequate net working capital, such inability to fund future projects may have an adverse impact on our business growth plans, financial position and results of operations.
System Pre-Construction, Construction and Term Debt
We typically finance our renewable energy projects through project entity specific debt secured by the project entity's assets (mainly the renewable energy system) with no recourse to us. Typically, financing arrangements provide for a construction loan, which upon completion will be converted into a term loan, and generally do not restrict the future sale of the project entity to a third party buyer. As of March 31, 2015, we had system pre-construction, construction and term debt outstanding of $2,064 million, which is comprised of a combination of fixed and variable rate debt. The variable rate debt has interest rates tied to the London Interbank Offered Rate, the Euro Interbank Offer Rate, the Canadian Dollar Offered Rate, the Johannesburg Interbank Acceptance Rate, and the Prime Rate. The variable interest rates have primarily been hedged by our outstanding interest rate swaps as discussed in Note 9. The interest rates on these obligations range from 1.6% to 14.0% and have maturities that range from 2015 to 2031. The weighted average interest rate on the same construction and term debt was 5.28% as of March 31, 2015.

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As of March 31, 2015, $532 million in non-recourse project debt was included in our consolidated long-term debt as a result of the acquisition of SRP as discussed in Note 3. The weighted average interest rate on this debt was 3.61% as of March 31, 2015. In the third quarter of 2014, legislation changes in Italy introduced modifications to the feed in tariff programs that were previously guaranteed by the Italian government. As of March 31, 2015, we have concluded that these legislation changes did not result in an event of default under the relevant credit agreements.
During the second quarter of 2012, we violated covenants on two non-recourse solar energy system loans as a result of devaluation in the Indian Rupee. The renewable energy systems for these two project companies collateralized the loans and there is no recourse outside of these project companies for payment. On September 28, 2012, we obtained a waiver from the lender for the covenant violations, which had a grace period which expired on November 20, 2013. On July 4, 2014, we amended our loan agreements which included revisions to the financial covenants applicable to future periods and obtained a waiver for all prior covenant violations. As of March 31, 2015, we were again in violation of covenants for these two loans, and we intend to seek a waiver from the lender. The amount outstanding of $21 million under both loans was classified as current as of March 31, 2015.
Capital Leaseback Obligations
We are party to master lease agreements that provide for the sale and simultaneous leaseback of certain renewable energy systems constructed by us. As of March 31, 2015, we had $80 million of capital lease obligations outstanding. Generally, this classification occurs when the term of the lease is greater than 75% of the estimated economic life of the solar energy system and the transaction is not subject to real estate accounting. The terms of the leases are typically 25 years with certain leases providing terms as low as 10 years and providing for early buyout options. The specified rental payments are based on projected cash flows that the solar energy system will generate. We have not entered into any arrangements that have resulted in accounting for the sale-leaseback as a capital lease since November 2009.
Financing Leaseback Obligations
For certain transactions we account for the proceeds of sale-leasebacks as financings, which are typically secured by the renewable energy system asset and its future cash flows from energy sales, but without recourse to us under the terms of the arrangement. The structure of the repayment terms under the lease results in negative amortization throughout the financing period, and we therefore recognize the lease payments as interest expense. The balance outstanding for sale-leaseback transactions accounted for as financings as of March 31, 2015 is $1,387 million, which includes the below mentioned transactions. The maturities range from 2021 to 2039 and are collateralized by the related solar energy system assets with a carrying amount of $1,285 million.
On March 31, 2011, one of our project subsidiaries executed a master lease agreement with a U.S. financial institution which provides for the sale and simultaneous leaseback of certain renewable energy systems constructed by us. The total capacity under this agreement is $125 million, of which $124 million is outstanding and $1 million is available as of March 31, 2015. The specified rental payments under the master lease agreement are based on projected cash flows that the renewable energy systems generate.
On September 24, 2012, one of our project subsidiaries executed a master lease agreement with a U.S. financial institution which provides for the sale and simultaneous leaseback of certain renewable energy systems constructed by us. The total capacity under this agreement was $102 million, of which $97 million is outstanding and $5 million was available as of March 31, 2015. The specified rental payments under the master lease agreement are based on projected cash flows that the renewable energy systems generate.
Other Credit Facilities
On December 19, 2014, a subsidiary entered into a credit and guaranty agreement with the Oversea-Chinese Banking Corporation Limited ("OCBC") as sole lead arranger and lender (the “OCBC Facility"). The OCBC Facility provides for a draft loan credit facility in an amount up to $120 million. On December 30, 2014, the subsidiary borrowed $119 million under the OCBC Facility to fund a portion of the purchase price for certain tax credit qualified turbines. The borrowings under the OCBC Facility will mature 6 months from the funding date unless payment is otherwise accelerated, subject to certain conditions. The principal and interest amount outstanding under the OCBC Facility is payable in full at maturity. Interest is calculated at an amount equal to LIBOR plus an applicable margin of 1.25%. As of March 31, 2015, interest was calculated at approximately 1.6%. In conjunction with the borrowing, an immaterial amount of debt issuance cost was recognized.
Of the remaining amount classified as other credit facilities at March 31, 2015, $103 million represents the cash proceeds that we received in connection with executed solar energy system sales contracts that have not met the sales recognition requirements under real estate accounting and have been accounted for as a financing transaction. The outstanding amount

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relates to cash proceeds received in connection with 14 projects for which we have substantial continuing involvement. There are no principal or interest payments associated with these transactions.
Capitalized Interest
During both the periods ended March 31, 2015 and 2014, we capitalized $10 million of interest.
TerraForm Power Segment Debt
TerraForm Credit Facilities
On July 23, 2014, in connection with the closing of the TerraForm IPO, TerraForm Operating, LLC ("Terra Operating LLC") and TerraForm Power, LLC ("Terra LLC"), both wholly-owned subsidiaries of TerraForm, entered into a revolving credit facility (the "2017 TerraForm Revolver") and a term loan facility (the "2019 TerraForm Term Loan" and together with the 2017 TerraForm Revolver, the “2014 TerraForm Credit Facilities”).
On January 28, 2015, TerraForm repaid the remaining outstanding principal balance on the 2019 TerraForm Term Loan of $574 million in full. TerraForm recognized a $12 million loss on the extinguishment of debt during the three months ended March 31, 2015 as a result of this repayment.
On January 28, 2015, TerraForm replaced the 2017 TerraForm Revolver with a new $550 million revolving credit facility (the "2020 TerraForm Revolver "). The 2020 TerraForm Revolver consists of a revolving credit facility in an amount of at least $550 million (available for revolving loans and letters of credit) and permits TerraForm to increase commitments to up to $725 million in the aggregate, subject to customary closing conditions. TerraForm recognized a $1 million loss on the extinguishment of debt during the three months ended March 31, 2015 as a result of exchange.
On May 4, 2015, TerraForm exercised its option to increase its borrowing capacity under the Revolver by $100.0 million. As a result of this transaction, TerraForm now has a total borrowing capacity of $650.0 million under the Revolver.
The 2020 TerraForm Revolver matures on January 27, 2020. Each of Terra Operating LLC's and Terra LLC’s existing and subsequently acquired or organized domestic restricted subsidiaries (excluding non-recourse subsidiaries) are or will become guarantors under the 2020 TerraForm Revolver.
All outstanding amounts under the 2020 TerraForm Revolver will bear interest initially at a rate per annum equal to, at Terra Operating LLC’s option, either (i) a base rate plus a margin of 1.50% or (ii) a reserve adjusted Eurodollar rate plus a margin of 2.50%. After the fiscal quarter ended June 30, 2015, the base rate margin will range between 1.25% and 1.75% and the Eurodollar rate margin will range between 2.25% and 2.75% as determined by reference to a leverage-based grid.
The 2020 TerraForm Revolver provides for voluntary prepayments, in whole or in part, subject to notice periods, and requires Terra Operating LLC to prepay outstanding borrowings in an amount equal to 100% of the net cash proceeds received by Terra LLC or its restricted subsidiaries from the incurrence of indebtedness not permitted by the 2020 TerraForm Revolver by Terra Operating LLC or its restricted subsidiaries.
The 2020 TerraForm Revolver, each guaranty and any interest rate, currency hedging or hedging of renewable energy credits obligations of Terra Operating LLC or any guarantor owed to the administrative agent, any arranger or any lender under the 2020 TerraForm Revolver is secured by first priority security interests in (i) all of Terra Operating LLC's and each guarantor’s assets, (ii) 100% of the capital stock of each of Terra Operating LLC’s and its domestic restricted subsidiaries and 65% of the capital stock of Terra Operating LLC’s foreign restricted subsidiaries, and (iii) all intercompany debt. Notwithstanding the foregoing, collateral under the 2020 TerraForm Revolver excludes the capital stock of non-recourse subsidiaries.
Senior Notes due 2023
On January 28, 2015, our indirect subsidiary Terra Operating LLC issued $800 million of 5.875% senior notes due 2023 at a price of 99.214% or the "TerraForm Senior Notes." Terra Operating LLC used the net proceeds from the offering to fund a portion of the price of the First Wind acquisition. The Senior Notes are senior obligations of Terra Operating LLC and are guaranteed by Terra LLC and each of Terra Operating LLC's existing and future subsidiaries that guarantee its senior secured credit facility, subject to certain exceptions. Interest on the Senior Notes is payable on February 1 and August 1 of each year, beginning on August 1, 2015.
Bridge Facility
On March 31, 2015, TerraForm entered into an agreement with Morgan Stanley Senior Funding, Inc. which provides TerraForm with up to a $515.0 million senior unsecured ridge facility (the "Bridge Facility"). The Bridge Facility may be used

27



by TerraForm, subject to ce1tain conditions, to fund acquisitions, to repay certain indebtedness of acquisition facilities and to pay related fees and expenses. On April 20, 2015, the Bridge Facility was amended to add Citigroup Global Markets Inc., Barclays Bank PLC and J.P. Morgan Securities ~C as participants to the Bridge Facility in addition to Morgan Stanley Senior Funding, Inc.
Other System Financing Obligations
Other TerraForm Power system financing obligations primarily consist of $402 million of long-term debt assumed as a result of the acquisition of Mt. Signal. The senior secured notes bear interest at 6% and mature in 2038. Interest on the notes is payable semi-annually on June 30 and December 31 of each year, commencing on June 30, 2013. A letter of credit facility was also extended to the project company to satisfy certain security obligations under the PPA, other project agreements and the notes. The facility will terminate on the earlier of July 2, 2019 and the fifth anniversary of the Mt. Signal project’s completion date.
In addition, as of March 31, 2015, $211 million of fixed rate non-recourse debt financing arrangements used to finance the construction of a solar power plant in Chile are included in the balance of other system financing obligations. These agreements were executed in the third quarter of 2013. The weighted average interest rate on these obligations as of March 31, 2015 was 6.00%.
9. DERIVATIVES AND HEDGING INSTRUMENTS
SunEdison's hedging activities consist of:
In millions
 
 
 
Assets (Liabilities or Equity) Fair Value
Type of Instrument
 
Balance Sheet Classification
 
As of March 31, 2015
 
As of December 31, 2014
Derivatives designated as hedging:
 

 

Interest rate swaps
 
Other assets
 
$

 
$
2


 
Accumulated other comprehensive income
 

 
(2
)
Interest rate swaps
 
Other liabilities
 
(62
)
 
(8
)

 
Accumulated other comprehensive loss
 
7

 
7

Cross currency swaps
 
Other assets
 
76

 
76

 
 
Other liabilities
 
(50
)
 
(55
)

 
Accumulated other comprehensive loss (income)
 
9

 
(21
)
Commodity derivative
 
Other liabilities
 
(8
)
 


 
Accumulated other comprehensive income
 
(14
)
 

Derivatives not designated as hedging:
 


 


Currency forward contracts
 
Other assets
 
3

 
2

 
 
Other liabilities
 
(1
)
 
(4
)
Interest rate swaps
 
Other liabilities
 
(34
)
 
(61
)
Commodity derivative
 
Other assets
 
41

 

 
 
 
 

 

 
 
 
 
Losses (Gains)
In millions
 
Statement of Operations Classification
 
Three Months Ended March 31, 2015
 
Three Months Ended March 31, 2014
Derivatives not designated as hedging:
 

 

Currency forward contracts
 
Other, net
 
$
(4
)
 
$
10

Interest rate swaps
 
Interest expense
 
32

 
9

Commodity derivative
 
Net sales
 
4

 

Note hedges
 
Gain on convertible note derivative
 

 
(300
)
Conversion options
 
Loss on convertible note derivative
 

 
317

Warrants
 
Loss on convertible note derivative
 

 
435

To mitigate financial market risks of fluctuations in foreign currency exchange rates, we utilize currency forward contracts. We do not use derivative financial instruments for speculative or trading purposes. We generally hedge transactional currency risks with currency forward contracts. Gains and losses on these foreign currency exposures are generally offset by corresponding losses and gains on the related hedging instruments, reducing our net exposure. A substantial portion of our revenue and capital

28



spending is transacted in U.S. Dollars. However, we do enter into transactions in other currencies, primarily the Euro, the Japanese Yen, the Canadian Dollar, the South African Rand, Korean Won and certain other Asian currencies. To protect against reductions in value and volatility of future cash flows caused by changes in foreign exchange rates, we have established transaction-based hedging programs. Our hedging programs reduce, but do not always eliminate, the impact of foreign currency exchange rate movements. At any point in time, we may have outstanding contracts with several major financial institutions for these hedging transactions. Our maximum credit risk loss with these institutions is limited to any gain on our outstanding contracts. As of March 31, 2015 and December 31, 2014, these currency forward contracts had net notional amounts of $274 million and $294 million, respectively, and are accounted for as economic hedges. There were no outstanding currency forward contracts designated as cash flow hedges as of March 31, 2015 and December 31, 2014.
During the second quarter of 2013, we entered into a cross currency swap with a notional amount of $186 million accounted for as a cash flow hedge. The amounts recorded to the consolidated balance sheet, as provided in the table above, represent the fair value of the net amount that would settle on the balance sheet date if the swap was transferred to other third parties or canceled by us. The effective portion of this cash flow hedge instrument during the quarter ended March 31, 2015 was recorded to accumulated other comprehensive loss (income) in the condensed consolidated balance sheet. No amount of ineffectiveness was recognized during the quarters ended March 31, 2015 and December 31, 2014.
As of March 31, 2015, we are party to certain interest rate swap instruments that are accounted for using hedge accounting. These instruments are used to hedge floating rate debt and are accounted for as cash flow hedges. Under the interest rate swap agreements, we pay the fixed rate and the financial institution counterparties to the agreements pay us a floating interest rate. The amount recorded in the consolidated balance sheet represents the estimated fair value of the net amount that we would settle on March 31, 2015 if the agreements were transferred to other third parties or cancelled by us. The effective portion of these cash flow hedges was a net loss of $7 million and $5 million for the quarters ended March 31, 2015 and December 31, 2014, which was recognized in accumulated other comprehensive loss (income) in the condensed consolidated balance sheet. There was no material ineffectiveness recorded for the quarters ended March 31, 2015 and 2014.
As of March 31, 2015, we are party to certain interest rate swap instruments that are accounted for as economic hedges. These instruments are used to hedge floating rate debt and are not accounted for as cash flow hedges. Under the interest rate swap agreements, we pay the fixed rate and the financial institution counterparties to the agreements pay us a floating interest rate. The amount recorded in the consolidated balance sheet represents the estimated fair value of the net amount that we would settle on March 31, 2015, if the agreements were transferred to other third parties or cancelled by us. Because these hedges are deemed economic hedges and not accounted for under hedge accounting, the changes in fair value are recorded to non-operating expense (income) within the consolidated statement of operations. The fair value of these hedges was a net liability of $34 million and $61 million as of March 31, 2015 and December 31, 2014, respectively.
Through our acquisition of First Wind, we became party to certain commodity contracts used to hedge the cash flows associated with commodity price variability inherent in electricity sales arrangements. If we sell electricity to an independent system operator market and there is no PPA available, we may enter into a commodity contract to stabilize all or a portion of our estimated revenue stream.
As of March 31, 2015, we are party to one such commodity contract that is accounted for using hedge accounting. This commodity contract requires physical delivery of specific quantities of electricity at a fixed price, and, if actual monthly quantities produced are insufficient to make such deliveries, we are obligated to purchase the shortfall amount in the electricity market and deliver it to the counterparty. As this commodity contract has been designated as a cash flow hedge, the changes in its fair value are recognized in other comprehensive income in the condensed consolidated balance sheet. The fair value of this commodity contract was recorded as a liability of $8 million as of March 31, 2015.
As of March 31, 2015, we are party to certain other First Wind-related commodity contracts that are accounted for as economic hedges. These price swap agreements involve periodic settlements for specific quantities of electricity based on a fixed price and are obligated to pay the counterparty market price for the same quantities of electricity. As these hedges are deemed economic hedges and not accounted for under hedge accounting, the changes in fair value are recognized in net sales in the condensed consolidated statement of operations. The fair values of these hedges were recorded as an asset totaling $41 million as of March 31, 2015.
In connection with the senior convertible notes issued in December 2013 and June 2014 as discussed in Note 8, we entered into privately negotiated convertible note hedge transactions and warrant transactions. Assuming full performance by the counterparties, these instruments are meant to effectively reduce our potential payout over the principal amount on the senior convertible notes upon conversion. Refer to Note 8 for additional information.
In connection with the senior convertible notes issued in January 2015 as discussed in Note 8, we entered into privately negotiated capped call option agreements. Assuming full performance by the counterparties, these instruments are meant to

29



reduce the potential dilution to holders of our common stock upon conversion of the 2022 Notes. Refer to Note 8 for additional information.
10. FAIR VALUE MEASUREMENTS
The following table summarizes the financial instruments measured at fair value on a recurring basis classified in the fair value hierarchy (Level 1, 2 or 3) based on the inputs used for valuation in the accompanying consolidated balance sheets:
 
 
As of March 31, 2015
 
As of December 31, 2014
Assets (liabilities) in millions
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Interest rate swap assets
 
$

 
$

 
$

 
$

 
$

 
$
2

 
$

 
$
2

Interest rate swap liabilities
 

 
(96
)
 

 
(96
)
 

 
(69
)
 

 
(69
)
Currency forward contract assets
 
3

 

 

 
3

 
2

 

 

 
2

Currency forward contract liabilities
 
(1
)
 

 

 
(1
)
 
(4
)
 

 

 
(4
)
Cross currency swap assets
 

 
76

 

 
76

 

 
76

 

 
76

Cross currency swap liability
 

 
(50
)
 

 
(50
)
 

 
(55
)
 

 
(55
)
Commodity contract assets
 

 
41

 

 
41

 

 

 

 

Commodity contract liability
 

 

 
(8
)
 
(8
)
 

 

 

 

Contingent consideration related to acquisitions
 

 

 
(517
)
 
(517
)
 

 

 
(43
)
 
(43
)
Total
 
$
2


$
(29
)

$
(525
)

$
(552
)

$
(2
)

$
(46
)

$
(43
)

$
(91
)
The fair values of assets and liabilities are determined using either unadjusted quoted prices in active markets (Level 1) or pricing inputs that are observable (Level 2) whenever that information is available and using unobservable inputs (Level 3) to estimate fair value only when relevant observable inputs are not available. We use valuation techniques that maximize the use of observable inputs. Assets and liabilities are classified in their entirety based on the lowest priority level of input that is significant to the fair value measurement.
Our interest rate swaps are considered over the counter derivatives, and fair value is calculated using a present value model with contractual terms for maturities, amortization and interest rates. Level 2, or market observable inputs, such as yield and credit curves are used within the present value models in order to determine fair value.
The fair value of our currency forward contracts is measured by the amount that would have been paid to liquidate and repurchase all open contracts. See Note 9 for additional discussion.
The primary inputs to the valuation models for commodity contracts are forward commodity pricing curves, risk-free discount rates and, to a lesser degree, credit spreads and volatilities. Where observable inputs are available for substantially the full term of the asset or liability, the instrument is categorized in Level 2. If the inputs into the valuation models are not corroborated by market data, the valuation for these contracts is established using techniques including extrapolation from, or interpolation between, forward prices for actively traded contracts, and a calculation of implied volatilities. An increase or decrease in forward prices would result in a decrease or increase, respectively, and an increase or decrease in implied volatilities would result in an increase or decrease, respectively, in the fair value measurement for the commodity contracts. When such inputs have a significant impact on the measurement of fair value, the instrument is categorized as Level 3. We regularly evaluate and validate the inputs used to determine fair value by using pricing services to support the market price of the underlying commodity.
See Note 12 for disclosures related to contingent consideration related to acquisitions.
There were no transfers between Level 1 and Level 2 financial instruments during the three month period ended March 31, 2015.
The tables below present changes in fair value for all cash instrument assets and liabilities categorized as Level 3 as of the end of the period:

30



 
Level 3 Cash Instrument Assets at Fair Value for the Three Months Ended March 31, 2015
 
Balance, Beginning of Period
 
Assets (Liability)Recognized in First Wind Purchase Accounting
 
Net Unrealized Gains/(Losses) Relating to Instruments Still Held at Period End
 
Balance, End of Period
In millions
 
 
 
 
 
 
 
Commodity contracts-energy

 
(22.0
)
 
14.0

 
(8.0
)
The following table presents the carrying amount and estimated fair value of our outstanding short-term debt, long-term debt and capital lease obligations as of March 31, 2015 and December 31, 2014, respectively:
 
As of March 31, 2015
 
As of December 31, 2014
In millions
Carrying Amount
 
Estimated Fair Value (1)
 
Carrying Amount
 
Estimated Fair Value (1)
Total debt and capital lease obligations
$
9,161

 
$
9,299

 
$
6,993

 
$
6,803

__________________________
(1)Fair value of our debt, excluding our 2018, 2020, 2021, and 2022 Notes, is calculated using a discounted cash flow model with consideration for our non-performance risk (Level 3 assumptions). The estimated fair value of our 2018, 2020, 2021, and 2022 Notes were based on a broker quotation (Level 1). The estimated fair value of our renewable energy system debt related to sale-leasebacks is significantly lower than the carrying value of such debt because the fair value estimate is based on the fair value of our fixed lease payments over the term of the leases (Level 3 assumptions). Under real estate accounting, this debt is recorded as a financing obligation, and substantially all of our lease payments are recorded as interest expense with little to no reduction in our debt balance over the term of the lease. As a result, our outstanding sale-leaseback debt obligations will generally result in a one-time gain recognition at the end of the leases for the full amount of the debt. The timing difference between expense and gain recognition will result in increased expense during the term of the leases with a gain recognized at the end of the lease.
11. INCOME TAXES
In general, we record income tax expense (benefit) each quarter based on our best estimate as to the full year's effective tax rate. This estimated tax expense (benefit) is reported based on a pro-ration of the actual income earned in the period divided by the full year forecasted income (loss). There are certain items, however, which are given discrete period treatment, and the tax effects of those items are reported in the quarter that such events arise. Items that give rise to discrete recognition include (but are not limited to) finalizing tax authority examinations, changes in statutory tax rates and expiration of a statute of limitations.
The process for calculating income tax expense (benefit) includes estimating current taxes due and assessing temporary differences between the recognition of assets and liabilities for tax and financial statement reporting purposes. The income tax benefit in the three month period ending March 31, 2015 is associated with tax expense as result of worldwide operational earnings mix at various rates, a tax benefit of $48 million related to the ability to use acquired deferred tax liabilities as a source of income against current year generated deferred tax assets, a tax benefit of $33 million for the establishment of deferred taxes related to certain convertible note transactions, a tax benefit of $13 million related to reduction of valuation allowance due to a taxable gain recognized in stockholders’ equity utilizing tax attributes previously offset with valuation allowance and a tax benefit of $3 million for reversal of certain liabilities for uncertain tax positions. We regularly review our deferred tax assets for realizability, taking into consideration all available evidence, both positive and negative, including cumulative losses, projected future pre-tax and taxable income (losses), the expected timing of the reversals of existing temporary differences and the expected impact of tax planning strategies. Our total deferred tax assets, net of valuation allowance, or deferred tax liabilities as of March 31, 2015 and December 31, 2014, were a $64 million deferred tax liability and $30 million deferred tax asset, respectively. We believe that it is more likely than not, based on our projections of future taxable income in certain jurisdictions, that we will generate sufficient taxable income to realize the benefits of the net deferred tax assets which have not been offset by a valuation allowance at March 31, 2015.
We are subject to income taxes in the United States and numerous foreign jurisdictions. From time to time, we are subject to income tax audits in these jurisdictions. We believe that our tax return positions are fully supported, but tax authorities may challenge certain positions, which may not be fully sustained. Our income tax expense includes amounts intended to satisfy income tax assessments that may result from these challenges. Determining the income tax expense for these potential assessments and recording the related assets and liabilities requires significant judgments and estimates. Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. We review our liabilities quarterly, and we may adjust such liabilities due to proposed assessments by tax authorities, changes in facts and circumstances, issuance of new regulations or new case law, negotiations between tax authorities of different countries concerning our transfer prices, the resolution of entire audits or the expiration of statutes of limitations. Adjustments, if

31



required, are most likely to occur in the year during which major audits are closed. The total accrual for uncertain tax positions was $13 million and $17 million as of March 31, 2015 and December 31, 2014, respectively.
The undistributed earnings of certain foreign subsidiaries are expected to be remitted to the U.S. parent corporation in the foreseeable future. The impact of the undistributed earnings that are currently expected to be remitted to the U.S. parent corporate in the foreseeable future is not material to the consolidated financial statements and would be fully offset by valuation allowances. The undistributed earnings of a substantial number of all other foreign subsidiaries are not expected to be remitted to the U.S. parent corporation in the foreseeable future. We plan foreign remittance amounts based on projected cash flow needs as well as the working capital and long-term investment requirements of our foreign subsidiaries and our domestic operations. Of our cash and cash equivalents and cash committed for construction projects as of March 31, 2015, $133 million was held by our foreign subsidiaries, a portion of which may be subject to repatriation tax effects.
We are currently under examination by the IRS for the 2011 and 2012 tax years. We are also under examination by certain foreign tax jurisdictions. We believe it is reasonably possible that some portions of these examinations could be completed within the next twelve months and have currently recorded amounts in the financial statements that are reflective of the current status of these examinations.
12. COMMITMENTS AND CONTINGENCIES
Contingent Consideration
We have recognized liabilities for contingent consideration as of March 31, 2015 in connection with the acquisitions of eight entities. The amount payable in cash is based on the entities achieving specific financial metrics or milestones in the development, installation and interconnection of renewable energy systems or shipment of solar modules for residential and small commercial installations.
We have estimated the fair value of the contingent consideration outstanding as of March 31, 2015 related to acquisitions to be $517 million, which reflects a discount at a credit adjusted interest rate for the period of the contingency. That measure is based on significant inputs that are not observable in the market, including a discount rate and a probability adjustment related to the entities' ability to meet operational metrics. The aggregate maximum payouts which could occur under these arrangements are $545 million.
The following table summarizes changes to the contingent consideration liability, a recurring Level 3 measurement, for the three month periods ended March 31, 2015 and 2014.
 
 
Contingent Consideration Related to Acquisitions 
In millions
 
 
Balance at December 31, 2013
 
$
35

Total unrealized losses included in earnings(1)
 
1

Payment of contingent consideration
 
(4
)
Balance at March 31, 2014
 
$
32

Balance at December 31, 2014
 
43

Initial recognition of contingent consideration related to acquisitions
 
483

Total unrealized losses included in earnings(1)
 
5

Payment of contingent consideration
 
(13
)
Foreign currency translation adjustment
 
(1
)
Balance at March 31, 2015
 
$
517

The amount of total losses for the three months ended March 31, 2014 included in earnings attributable to the change in unrealized losses relating to assets and liabilities still held at the reporting date
 
$
1

The amount of total losses for the three months ended March 31, 2015 included in earnings attributable to the change in unrealized losses relating to assets and liabilities still held at the reporting date
 
$
5

__________________________
(1)
Amounts reported in marketing and administration expense in the condensed consolidated statements of operations for fair value adjustments and to interest expense for accretion.
Indemnification

32



We have agreed to indemnify some of our solar wafer customers against claims of infringement of the intellectual property rights of others in our sales contracts with these customers. Historically, we have not paid any claims under these indemnification obligations and we do not have any pending indemnification claims as of March 31, 2015.
We generally warrant the operation of our renewable energy systems for a period of time. Certain parts and labor warranties from our vendors can be assigned to our customers. Due to the absence of historical material warranty claims and expected future claims, we have not recorded a material warranty accrual related to renewable energy systems as of March 31, 2015. We may also indemnify our customers for tax credits and feed-in tariffs associated with the systems we construct and then sell, including sale-leasebacks. During the three month period ended March 31, 2015, we made no additional payments, net of recoveries, under the terms of the lease agreements to indemnify our sale-leaseback customers for shortfalls in amounts approved by the U.S. Treasury Department related to Grant in Lieu program tax credits. Based on current information, we are unable to estimate additional exposures to the indemnification of tax credits and feed-in tariffs.
In connection with certain contracts to sell renewable energy systems directly or as sale-leasebacks, our SunEdison LLC subsidiary has guaranteed the systems' performance for various time periods following the date of interconnection. Also, under separate operations and maintenance services agreements, SunEdison LLC has guaranteed the uptime availability of the systems over the term of the arrangements, which may last up to 25 years. To the extent there are shortfalls in either of the guarantees, SunEdison LLC is required to indemnify the purchaser up to the guaranteed amount through a cash payment. The maximum losses that SunEdison LLC may be subject to for non-performance are contractually limited by the terms of each executed agreement.
PBGC Notice
SunEdison received a notice from the Pension Benefit Guaranty Corporation (“PBGC”) in May 2014 that it intends to require an additional contribution to the U.S. pension plan under ERISA section 4062(e), which was transferred to SSL upon the completion of the SSL initial public offering. SunEdison has not received a formal assessment or concluded the negotiation process with the PBGC. The PBGC announced on July 8, 2014, a moratorium through the end of 2014 on the enforcement of 4062(e) cases. In December 2014, a new law went into effect that states 90% funded plans are not required to make additional contributions to cover liability shortages. Under this new ruling, we have not made any modifications to the U.S. pension plan assets because the U.S. pension plan is over 90% funded. We do not expect any final resolution with the PBGC to have a material impact on our financial condition or results of operations.
Legal Proceedings
We are involved in various legal proceedings, claims, investigations and other legal matters which arise in the ordinary course of business. Although it is not possible to predict the outcome of these matters, we believe that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on our financial position, cash flows or results of operations.
Jerry Jones v. SunEdison, Inc., et al.
On December 26, 2008, a putative class action lawsuit was filed in the U.S. District Court for the Eastern District of Missouri by plaintiff, Jerry Jones, purportedly on behalf of all participants in and beneficiaries of SunEdison's 401(k) Savings Plan (the "Plan") between September 4, 2007 and December 26, 2008, inclusive. The complaint asserted claims against SunEdison and certain of its directors, employees and/or other unnamed fiduciaries of the Plan. The complaint alleges that the defendants breached certain fiduciary duties owed under the Employee Retirement Income Security Act, generally asserting that the defendants failed to make full disclosure to the Plan's participants of the risks of investing in SunEdison's stock and that the company's stock should not have been made available as an investment alternative in the Plan. The complaint also alleges that SunEdison failed to disclose certain material facts regarding SunEdison's operations and performance, which had the effect of artificially inflating SunEdison's stock price.
On June 1, 2009, an amended class action complaint was filed by Mr. Jones and another purported participant of the Plan, Manuel Acosta, which raises substantially the same claims and is based on substantially the same allegations as the original complaint. However, the amended complaint changes the period of time covered by the action, purporting to be brought on behalf of beneficiaries of and/or participants in the Plan from June 13, 2008 through the present, inclusive. The amended complaint seeks unspecified monetary damages, including losses the participants and beneficiaries of the Plan allegedly experienced due to their investment through the Plan in SunEdison's stock, equitable relief and an award of attorney's fees. No class has been certified and discovery has not begun. The company and the named directors and employees filed a motion to dismiss the complaint, which was fully briefed by the parties as of October 9, 2009. The parties each subsequently filed notices of supplemental authority and corresponding responses. On March 17, 2010, the court denied the motion to dismiss. The SunEdison defendants filed a motion for reconsideration or, in the alternative, certification for interlocutory appeal, which was

33



fully briefed by the parties as of June 16, 2010. The parties each subsequently filed notices of supplemental authority and corresponding responses. On October 18, 2010, the court granted the SunEdison defendants' motion for reconsideration, vacated its order denying the SunEdison defendants' motion to dismiss, and stated that it will revisit the issues raised in the motion to dismiss after the parties supplement their arguments relating thereto. Both parties filed briefs supplementing their arguments on November 1, 2010. On June 28, 2011, plaintiff Jerry Jones filed a notice of voluntary withdrawal from the action. On June 29, 2011, the court entered an order withdrawing Jones as one of the plaintiffs in this action. The parties each have continued to file additional notices of supplemental authority and responses thereto. On September 27, 2012, the SunEdison defendants moved for oral argument on their pending motion to dismiss; plaintiff Manuel Acosta joined in the SunEdison defendants' motion for oral argument on October 9, 2012. On March 24, 2014, the court granted our motion to dismiss but the plaintiffs filed, and the court in April 2014 granted, a motion to stay entry of final judgment pending a Supreme Court decision in a case that could have implications in this matter. That Supreme Court case was decided in June 2014, and the plaintiffs filed a motion for reconsideration with the district court, based on that Supreme Court decision. We believe that we continue to have good reason for a dismissal and intend to vigorously defend this motion.
SunEdison believes the above class action is without merit, and we will assert a vigorous defense. Due to the inherent uncertainties of litigation, we cannot predict the ultimate outcome or resolution of the foregoing class action proceedings or estimate the amounts of, or potential range of, loss with respect to these proceedings. An unfavorable outcome is not expected to have a material adverse impact on our business, results of operations and financial condition. We have indemnification agreements with each of our present and former directors and officers, under which we are generally required to indemnify each such director or officer against expenses, including attorney's fees, judgments, fines and settlements, arising from actions such as the lawsuits described above (subject to certain exceptions, as described in the indemnification agreements).
Wacker Chemie AG v. SunEdison, Inc.
On December 20, 2012, Wacker Chemie AG (“Wacker”) filed a notice of arbitration with the Swiss Chambers’ Arbitration Institution (the “SCAI”) against the company, requesting the resolution of a dispute arising from two agreements and a subsequent settlement agreement entered into between Wacker and the company. Following a hearing before the Arbitral Tribunal where procedural matters were established by the SCAI pursuant to the parties’ agreement, on September 27, 2013, Wacker filed a complete statement of claim. In the statement of claim, Wacker alleged that we failed to comply with our contractual obligations, in particular that we failed to take or pay for certain quantities of polycrystalline silicon as required under the settlement agreement. Wacker claimed a payment of 23 million euro plus interest for the payment of outstanding invoices and an amount of 92 million euro plus interest for damages it claims as a result of the alleged breach by the company through December 2013. During the first quarter of 2015, the parties negotiated to settle all claims and disputes relating to the previous agreements. During these negotiations, we indicated to Wacker our willingness to settle this matter for an amount that exceeded the estimate of the liability previously recognized in connection with our 2011 restructuring activities. As a result, we recognized a restructuring charge of $53 million during the three months ended March 31, 2015 to adjust the recorded contingent liability to our best estimate of the potential loss.
Daniel Gerber v. Wiltshire Council
On March 5, 2015, the U.K. High Court issued a verdict that quashed (nullified) the planning permission necessary to build an 11 MW renewable energy facility in Wiltshire, England. This facility has now commenced commercial operations. The court found that, among other issues, the local Wiltshire council failed to properly notify a local landowner (the claimant) or notify the English historic preservation agency before granting the permission. U.K. counsel have advised us that the quashing of this planning permission deviates significantly from established case law. We filed our appeal of this ruling on March 25, 2015, and we plan to assert a vigorous defense. At this time, we do not have enough information regarding the probable outcome or the estimated range of reasonably probable losses associated with this ruling, and as of March 31, 2015, no such accrual has been recorded in the condensed consolidated financial statements.
From time to time, we may conclude it is in the best interests of our stockholders, employees, vendors and customers to settle one or more litigation matters, and any such settlement could include substantial payments; however, other than as may be noted above, we have not reached this conclusion with respect to any particular matter at this time. There are a variety of factors that influence our decision to settle any particular individual matter, and the amount we may choose to pay or accept as payment to settle such matters, including the strength of our case, developments in the litigation (both expected and unexpected), the behavior of other interested parties, including non-parties to the matter, the demand on management time and the possible distraction of our employees associated with the case and/or the possibility that we may be subject to an injunction or other equitable remedy. It is difficult to predict whether a settlement is possible, the amount of an appropriate settlement or when is the opportune time to settle a matter in light of the numerous factors that go into the settlement decision.
13. STOCKHOLDERS’ EQUITY

34



The following table presents the change in total stockholders' equity for the three month period ended March 31, 2015:
 
 
SunEdison Stockholders’
Equity
 
Noncontrolling
Interests
 
Total Stockholders' Equity
 
Redeemable Noncontrolling Interests
In millions
 
 
 
 
 
 
 
 
Balance, January 1, 2015
 
$
233

 
$
1,252

 
$
1,485

 
$

Net loss
 
(372
)
 
(52
)
 
(424
)
 

Other comprehensive loss before reclassifications, net of tax
 
(11
)
 
(11
)
 
(22
)
 

Deconsolidation of SSL (see Note 2)
 
99

 
(158
)
 
(59
)
 

Issuance of 2022 Notes, net of tax (see Note 8)
 
57

 

 
57

 

Stock plans, net
 
17

 
5

 
22

 

TerraForm follow-on equity offering, net of tax
 
36

 
342

 
378

 

Dividends paid by TerraForm Power
 

 
(17
)
 
(17
)
 

TerraForm equity reallocation
 
59

 
(59
)
 

 

Acquisition of First Wind (see Note 3)
 

 
114

 
114

 
7

Measurement period adjustments (see Note 3)
 

 
(19
)
 
(19
)
 
19

Other activity of noncontrolling interests
 

 
(54
)
 
(54
)