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EX-32 - CEO & CFO CERTIFICATION - SUNEDISON, INC.sune-6302015xexhibit_32.htm
EX-31.2 - CFO CERTIFICATION - SUNEDISON, INC.sune-6302015xexhibit_312.htm
EX-31.1 - CEO CERTIFICATION - SUNEDISON, INC.sune-6302015xexhibit_311.htm
XML - IDEA: XBRL DOCUMENT - SUNEDISON, INC.R9999.htm
EX-10.4 - SETTLEMENT AGREEMENT - SUNEDISON, INC.exhibit104wackervssunediso.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 June 30, 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 July 31, 2015 was 315,053,025.
 




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 June 30,
 
Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Net sales
$
455

 
$
431

 
$
778

 
$
771

Cost of goods sold
352

 
426

 
641

 
728

Gross profit
103

 
5

 
137

 
43

Operating expenses:
 
 
 
 
 
 
 
Marketing and administration
259

 
108

 
457

 
201

Restructuring charges

 
7

 
53

 
14

Long-lived asset impairment charges
17

 

 
17

 

Operating loss
(173
)
 
(110
)
 
(390
)
 
(172
)
Non-operating expense (income):
 
 
 
 
 
 
 
Interest expense
146

 
93

 
302

 
160

Interest income
(12
)
 
(6
)
 
(14
)
 
(9
)
Loss on early extinguishment of debt, net
64

 

 
84

 

Loss on convertible notes derivatives, net

 
48

 

 
499

Gain on previously held equity investment

 
(146
)
 

 
(146
)
Other, net
(18
)
 
2

 
(2
)
 
10

Total non-operating expense (income)
180

 
(9
)
 
370

 
514

Loss from continuing operations before income tax benefit and equity in (loss) earnings of equity method investments
(353
)
 
(101
)
 
(760
)
 
(686
)
Income tax benefit
(105
)
 
(27
)
 
(211
)
 
(10
)
Loss from continuing operations before equity in (loss) earnings of equity method investments
(248
)
 
(74
)
 
(549
)
 
(676
)
Equity in (loss) earnings of equity method investments, net of tax
(8
)
 
9

 
(12
)
 
10

Loss from continuing operations
(256
)
 
(65
)
 
(561
)
 
(666
)
Income (loss) from discontinued operations, net of tax

 
14

 
(119
)
 
(1
)
Net loss
(256
)
 
(51
)
 
(680
)
 
(667
)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests
(7
)
 
10

 
45

 
12

Net loss attributable to SunEdison stockholders
$
(263
)
 
$
(41
)
 
$
(635
)
 
$
(655
)
 
 
 
 
 


 


Amounts attributable to SunEdison stockholders:
 
 
 
 


 


Loss from continuing operations
$
(263
)
 
$
(55
)
 
$
(514
)
 
$
(654
)
Income (loss) from discontinued operations

 
14

 
(121
)
 
(1
)
Net loss attributable to SunEdison stockholders
$
(263
)
 
$
(41
)
 
$
(635
)
 
$
(655
)
 
 
 
 
 
 
 
 
Basic (loss) earnings per share (see Note 14):


 


 
 
 
 
Continuing operations
$
(0.89
)
 
$
(0.21
)
 
$
(1.81
)
 
$
(2.46
)
Discontinued operations

 
0.05

 
(0.43
)
 

Total basic loss per share
$
(0.89
)
 
$
(0.16
)
 
$
(2.24
)
 
$
(2.46
)



 


 
 
 
 
Diluted (loss) earnings per share (see Note 14):


 


 
 
 
 
Continuing operations
$
(0.89
)
 
$
(0.21
)
 
$
(1.81
)
 
$
(2.46
)
Discontinued operations

 
0.05

 
(0.43
)
 

Total diluted loss per share
$
(0.89
)
 
$
(0.16
)
 
$
(2.24
)
 
$
(2.46
)
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 June 30,
 
Six Months Ended June 30,
 
2015

2014
 
2015
 
2014
Net loss
$
(256
)

$
(51
)
 
$
(680
)
 
$
(667
)
Other comprehensive (loss) income, net of tax:



 
 
 
 
Net foreign currency translation adjustments
(1
)

10

 
32

 
11

Net (loss) gain on hedging instruments
(16
)

(2
)
 
(16
)
 
7

Net adjustments for benefit plans


(1
)
 
44

 
1

Other comprehensive (loss) income, net of tax
(17
)

7

 
60


19

Total comprehensive loss
(273
)

(44
)
 
(620
)

(648
)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests
(7
)

10

 
45

 
12

Net other comprehensive loss attributable to noncontrolling interests and redeemable noncontrolling interests
5



 
16

 

Comprehensive loss attributable to SunEdison stockholders
$
(275
)

$
(34
)
 
$
(559
)

$
(636
)
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)
 
June 30, 2015
 
December 31, 2014
Assets

 

Current assets:

 

Cash and cash equivalents
$
1,294

 
$
856

Cash committed for construction projects, including consolidated variable interest entities of $20 and $32 in 2015 and 2014, respectively
704

 
131

Current portion of restricted cash
291

 
156

Accounts receivable, net
361

 
373

Prepaid and other current assets
954

 
909

Current assets of discontinued operations

 
365

Total current assets
3,604


2,790

Investments
332

 
149

Property, plant and equipment, net:

 

Renewable energy systems, including consolidated variable interest entities of $3,172 and $2,312 in 2015 and 2014, respectively, net of accumulated depreciation of $328 and $334 in 2015 and 2014, respectively
9,250

 
5,336

Other property, plant and equipment, net of accumulated depreciation of $239 and $238 in 2015 and 2014, respectively
1,214

 
1,140

Restricted cash
121

 
115

Goodwill
425

 
73

Other intangible assets
1,713

 
586

Other assets
898

 
626

Non-current assets of discontinued operations

 
685

Total assets
$
17,557


$
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 $170 and $423 in 2015 and 2014, respectively
$
1,551

 
$
1,078

Accounts payable
852

 
1,098

Accrued and other current liabilities
930

 
660

Current portion of deferred revenue
77

 
92

Current portion of contingent consideration liabilities
446

 
26

Current liabilities of discontinued operations

 
192

Total current liabilities
3,856


3,146

Long-term debt, less current portion, including consolidated variable interest entities of $1,440 and $1,169 in 2015 and 2014, respectively
9,171

 
5,915

Deferred revenue, less current portion
601

 
204

Contingent consideration liabilities, less current portion
85

 
17

Other liabilities
536

 
442

Non-current liabilities of discontinued operations

 
291

Total liabilities
14,249


10,015

 
 
 
 
Redeemable noncontrolling interests
39

 

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

 

Common stock, $.01 par value, 700.0 shares authorized, 314.6 and 272.5 shares issued in 2015 and 2014, respectively
3

 
3

Additional paid-in capital
2,721

 
1,698

Accumulated deficit
(1,983
)
 
(1,348
)
Accumulated other comprehensive loss
(34
)
 
(111
)
Treasury stock, 2.8 and 0.4 shares in 2015 and 2014, respectively
(75
)
 
(9
)
Total SunEdison stockholders’ equity
632

 
233

Noncontrolling interests
2,637

 
1,252

Total stockholders’ equity
3,269

 
1,485

Total liabilities, redeemable noncontrolling interests and stockholders’ equity
$
17,557

 
$
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)
 
Six Months Ended June 30,
2015
 
2014
Cash flows from operating activities:
 
 
 
Net loss
$
(680
)
 
$
(667
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
206

 
154

Stock-based compensation
37

 
14

Deferred tax benefit
(219
)
 
(42
)
Deferred revenue
(39
)
 
(140
)
Restructuring charges
53

 

Long-lived asset impairment charges
17

 

Loss on sale of equity interest in SSL
123

 

Loss on convertible notes derivatives, net

 
499

Loss on early extinguishment of debt, net
84

 

Gain on previously held equity investment

 
(146
)
Other non-cash
21

 
13

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
96

 
43

Prepaid and other current assets
(142
)
 
(104
)
Accounts payable
(380
)
 
(106
)
Deferred revenue for renewable energy systems
36

 
159

Accrued liabilities
125

 
38

Other assets and liabilities
(267
)
 
(9
)
Net cash used in operating activities
(929
)
 
(294
)
Cash flows from investing activities:
 
 
 
Capital expenditures
(127
)
 
(95
)
Construction of renewable energy systems
(869
)
 
(652
)
Proceeds from sale of equity interest in SSL
188

 

Purchases of cost and equity method investments, net of proceeds
(23
)
 
(47
)
Change in restricted cash
(55
)
 
(49
)
Change in cash committed for construction projects
(576
)
 
83

Cash paid for acquisitions, net of cash acquired
(2,181
)
 
(256
)
Other
(27
)
 

Net cash used in investing activities
(3,670
)
 
(1,016
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

7



Cash flows from financing activities:
 
 
 
Proceeds from short-term and long-term debt
5,260

 
1,899

Principal payments on short-term and long-term debt
(1,537
)
 
(274
)
Payments for capped call option
(161
)
 

Proceeds from (payments for) note hedge
635

 
(174
)
(Payments for) proceeds from warrant transactions
(632
)
 
124

Proceeds from TerraForm equity offerings
1,058

 

Proceeds from SSL IPO and private placement transactions

 
185

Common stock issued and repurchased
6

 
3

Contributions from noncontrolling interests, net
669

 
24

Cash paid for contingent consideration for acquisitions
(9
)
 
(2
)
Debt financing fees
(179
)
 
(91
)
Dividends paid by TerraForm Power
(34
)
 

Other
(61
)
 
(4
)
Net cash provided by financing activities
5,015

 
1,690

Effect of exchange rate changes on cash and cash equivalents
(3
)
 
1

Net increase in cash and cash equivalents
413

 
381

Cash (used in) provided by discontinued operations (see Note 2)
(25
)
 
75

Net change in cash and cash equivalents from continuing operations
438

 
306

Cash and cash equivalents at beginning of period
856

 
533

Cash and cash equivalents at end of period
$
1,294

 
$
839

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Net debt transferred to and assumed by buyer upon sale of renewable energy systems
110

 
160

See accompanying notes to unaudited condensed consolidated financial statements.

8



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, 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, as recasted and filed under Form 8-K on June 29, 2015 to reflect changes due to the discontinued operations of SunEdison Semiconductor Ltd. ("SSL"), which contains SunEdison's audited financial statements for such year. Operating results for the three and six month periods ended June 30, 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 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. Through July 1, 2015, we retained a noncontrolling interest in SSL which was accounted for as an equity method investment. On July 1, 2015, we disposed of our remaining interest in SSL in an underwritten public offering (see Note 2). 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. In July 2015, the FASB voted to approve a one year deferral in the effective date of ASU 2014-09 while also providing for early adoption but not before the original effective date. Based on the one-year deferral, ASU 2014-09 will be effective for us beginning January

9



1, 2018. ASU 2014-09 allows for both retrospective and modified-retrospective methods of adoption. 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.
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 ASU 2014-15 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 ASU 2015-01 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 ASU 2015-02 on our consolidated financial statements.
In April 2015, the FASB issued 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 ASU 2015-03 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 of SSL at a price to the public of $15.19 per share. Net proceeds to us from the sale were $188 million. As a result of this transaction, we no longer had a controlling interest in SSL. From January 20, 2015 through June 30, 2015, we owned 10,608,904 of SSL's ordinary shares, representing a 25.6% ownership interest in SSL, which was accounted for as an equity method investment. The disposal of our controlling interest in SSL represented the disposal of a component and a strategic shift that had 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 January 20, 2015 disposal of SSL shares of $123 million within discontinued operations in the condensed consolidated statements of operations.
On July 1, 2015, we disposed of 10,608,903 ordinary shares of SSL in connection with an underwritten public offering of 15,935,828 ordinary shares of SSL at a price to the public of $18.25 per share. We received net proceeds from the disposal of $186 million. As a result of this transaction, we have effectively liquidated our investment in SSL.

10



The following table summarizes the results from the discontinued operations of SSL included in the condensed consolidated statements of operations:
 
 
Six Months Ended June 30,

 
2015
 
2014
In millions
 
 
 
 
Net sales
 
$
58

 
$
421

Cost of goods sold
 
52

 
393

        Gross profit
 
6

 
28

Operating expenses
 
9

 
44

Operating loss
 
(3
)
 
(16
)
Loss on disposal
 
123

 

Other income
 
(7
)
 
(2
)
Loss from discontinued operations before tax
 
(119
)
 
(14
)
Income tax expense
 

 
(13
)
Loss from discontinued operations, net of tax
 
(119
)
 
(1
)
Net (income) loss attributable to noncontrolling interests
 
(2
)
 

Net loss attributable to shareholders
 
$
(121
)
 
$
(1
)
The following table summarizes the cash flows of discontinued operations of SSL included in the condensed consolidated statements of cash flows:
 
Six Months Ended June 30,
 
2015
 
2014
In millions
 
 
 
Cash flows from discontinued operations:
 
 
 
Net cash used in operating activities of discontinued operations
$
(1
)
 
$
(81
)
Net cash used in investing activities of discontinued operations
(23
)
 
(39
)
Net cash provided by financing activities of discontinued operations

 
195

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

Cash (used in) provided by discontinued operations
$
(25
)
 
$
75

From January 20, 2015 through June 30, 2015, we recognized our interest in SSL's net income (loss) in equity in earnings (loss) of equity method investments, net of tax, in the condensed consolidated statement of operations. SSL continues to purchase polysilicon from us. Net sales of polysilicon to SSL were $17 million in both the three months ended June 30, 2015 and 2014. Net sales of polysilicon to SSL for the six months ended June 30, 2015 and 2014 were $34 million and $30 million, respectively. As of June 30, 2015, our net receivable balance due from SSL was $13 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 continuous Czochralski, or CCZ, diamond coated wire, fluidized bed reactor

11



polysilicon technology, or FBR, and high-pressure FBR, with such arrangements to be set forth in separate agreements as described below.
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 U.S. 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 us. 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 each service in the annexes 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.
Polysilicon Supply Agreement - On June 23, 2015, we entered into an agreement with SSL regarding granular polysilicon purchases. Under the polysilicon supply agreement, we will supply SSL's granular semiconductor grade polysilicon needs for a fixed price per kilogram for each year over the 10.5-year term of the agreement. The price for polysilicon decreases during the term of the agreement. In exchange, SSL agreed to assign its entire share of dividends and distributions from SMP, Ltd., our 52%-owned high purity polysilicon operation located in Ulsan, South Korea, to us for the duration of the agreement.
3. ACQUISITIONS
Renewable Energy Development Acquisitions
Atlantic Power
On June 26, 2015, we and TerraForm AP Acquisitions Holdings, LLC ("TerraForm AP"), a subsidiary of SunEdison, completed the acquisition of all membership interests of Atlantic Power Transmission, Inc. (“Atlantic Power”), an independent power producer with a diversified fleet of power generation assets located throughout the U.S. and Canada, pursuant to a membership interest purchase agreement. In connection with the acquisition, we have acquired interests in five operating wind power generation assets located in Oklahoma and Idaho, which generate 521 MW of renewable power in proportion to our ownership interests. The aggregate consideration paid for this acquisition was $347 million in cash.
The fair value of the assets and liabilities acquired is summarized in the Acquisition Accounting section below. The preliminary purchase accounting for the acquisition resulted in the recognition of certain amortizable intangible assets comprised of long-term power purchase agreements ("PPAs") totaling $108 million. The long-term PPAs 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 17 to 23 years. All assets acquired are reported in the Renewable Energy Development segment. The operating results relating to the four days of ownership in the second quarter were deemed immaterial to our consolidated operations.
Honiton
On May 14, 2015, TerraForm Global, Inc. ("TerraForm Global"), a subsidiary of SunEdison, completed the acquisition of three operating wind energy generation projects located in China with a combined generation capacity of 149 MW from Honiton Energy Caymans Limited. The aggregate consideration paid for this acquisition was $109 million in cash.

12



First Wind
On January 29, 2015, SunEdison and TerraForm First Wind ACQ, LLC, a subsidiary of TerraForm Power Operating, LLC (“TerraForm Operating”), as assignee of TerraForm Power, LLC ("Terra LLC") under the Purchase Agreement (as defined below), completed the 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 Operating, 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 Operating, 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 fair value of the assets and liabilities acquired is summarized in the Acquisition Accounting section below. The preliminary purchase accounting resulted in the recording of indefinite lived intangible assets using provisional amounts for power plant development arrangements totaling $965 million. Additionally, provisional amounts were used to record certain amortizable intangible assets comprised of long-term PPAs and feed-in tariffs ("FiTs") totaling $115 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. Total assets acquired are comprised of $2,510 million attributable to the Renewable Energy Development segment and $1,035 million attributable to the TerraForm Power segment.
The net sales and net loss related to the acquisition of First Wind reflected in the accompanying condensed consolidated statement of operations for the six months ended June 30, 2015 were $82 million and $9 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.
 
Six Months Ended June 30,
 
2015
 
2014
In millions
 
 
 
Net sales
$
795

 
$
837

Net loss
(690
)
 
(759
)
The unaudited pro forma net loss for the six months ended June 30, 2015 and 2014 includes non-recurring pro forma adjustments of $9 million and $53 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 six months ended June 30, 2014 is the reversal of losses totaling $103 million attributable to the results of certain First Wind operating projects that we did not acquire.
Silver Ridge Power
On July 2, 2014, we completed the acquisition of 50% of the outstanding limited liability company interests of Silver Ridge Power, LLC ("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 a Master Transaction Agreement (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 below and is excluded from the provisional accounting for the acquired interest in SRP in the table below.

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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 PPA 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's 183 MW facility, which is expected in 2016, and subject to customary closing 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 fair value of the SRP assets and liabilities acquired, excluding Mt. Signal, is summarized in the Acquisition Accounting section below. 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 project 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.
Acquisition Accounting
The estimated allocations of assets and liabilities for the above acquisitions are as follows:
 
2015 Preliminary
 
2014 Final
 
Atlantic Power
 
Honiton
 
First Wind
 
SRP
In millions
 
 
 
 
 
 
 
Cash and cash equivalents
$
11

 
$
4

 
$
99

 
$
45

Restricted cash
19

 
9

 
282

 
48

Accounts receivable
11

 
18

 
11

 
26

Investments
54

 

 

 
115

Renewable energy systems & other property, plant and equipment
606

 
156

 
1,645

 
573

Goodwill
11

 

 
338

 
27

Other intangible assets
108

 

 
1,080

 
206

Other assets
2

 
6

 
90

 
112

Total assets acquired
822

 
193

 
3,545

 
1,152

Accounts payable and accrued liabilities
6

 
15

 
48

 
295

Long-term debt
249

 
69

 
293

 
686

Deferred revenue

 

 
459

 

Other liabilities
19

 

 
197

 
82

Total liabilities assumed
274

 
84

 
997

 
1,063

Redeemable noncontrolling interests

 

 
3

 

Noncontrolling interests
201

 

 
103

 
56

Fair value of net assets acquired
$
347

 
$
109

 
$
2,442

 
$
33

The initial accounting for Atlantic Power, Honiton and First Wind business combinations is not complete because the evaluation necessary to assess the fair values of certain assets acquired and liabilities assumed 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.
The accounting for the SRP business combination is complete 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.

14



Other Acquisitions
For the six month period ended June 30, 2015, we completed the acquisitions of six additional businesses for total consideration of $45 million, resulting in the recognition of goodwill totaling $5 million.
TerraForm Acquisitions
Northern Lights
On June 30, 2015, TerraForm acquired two utility scale, ground mounted solar facilities from Invenergy Solar LLC ("Northern Lights"). The facilities are located in Ontario, Canada and have a total capacity of 25 MW. The facilities are contracted under long-term PPAs with an investment grade utility with a credit rating of Aa2, and the PPAs have a weighted average remaining life of 18 years. The aggregated consideration paid for this acquisition was $104 million in cash.

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 systems located in California, Massachusetts, New Jersey, New York, and Pennsylvania. The aggregate consideration paid for this acquisition was $258 million in cash.

Mt. Signal

Effective July 2, 2014, TerraForm acquired a 266 MW utility scale renewable energy system located in Mt. Signal, California ("Mt. Signal") in exchange for share-based consideration in TerraForm consisting of (i) 5,840,000 Class B1 units (and a corresponding number of shares of Class B1 common stock) equal in value to $146 million and (ii) 5,840,000 Class B units (and a corresponding number of shares of Class B common stock) equal in value to $146.0 million.

Acquisition Accounting
The estimated allocations of assets and liabilities for the above acquisitions are as follows:
 
2015 Preliminary
 
2014 Preliminary
 
2014 Final
 
Northern Lights
 
Capital Dynamics
 
Mt. Signal
In millions
 
 
 
 
 
Cash and cash equivalents
$
3

 
$

 
$

Restricted cash

 

 
22

Accounts receivable
1

 
3

 
12

Renewable energy systems
75

 
220

 
650

Other intangible assets
26

 
71

 
120

Other assets

 
31

 
12

Total assets acquired
105

 
325

 
816

Accounts payable and accrued liabilities

 
1

 
23

Long-term debt

 

 
413

Other liabilities
1

 
46

 
5

Total liabilities assumed
1

 
47

 
441

Redeemable noncontrolling interests

 
20

 

Noncontrolling interests

 

 
83

Fair value of net assets acquired
$
104

 
$
258

 
$
292

The purchase accounting for these acquisitions resulted in recognition of intangible assets for long-term PPAs totaling $217 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 10 to 24 years.
The initial accounting for the Capital Dynamics and Northern Lights business combinations are not complete because the evaluations necessary to assess the fair values of certain assets acquired and liabilities assumed are in process. The provisional

15



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 accounting for the Mt. Signal business combination is complete 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.
Other Acquisitions
During the six months ended June 30, 2015, TerraForm acquired 66 solar generation facilities with a combined nameplate capacity of 38 MW for aggregate consideration of $91 million, net of cash acquired, and $16 million of project-level debt assumed. The facilities are located in six states in the U.S. and Ontario, Canada. The facilities are contracted under long-term PPAs with commercial and municipal customers and the PPAs have a weighted-average remaining life of approximately 15 years.
4. INVESTMENTS
The carrying value of investments consists of the following:
 
As of June 30, 2015
 
As of December 31, 2014
In millions
 
 
 
Equity method investments:
 
 
 
SSL (see Note 2)
$
182

 
$

Other
127

 
133

Cost method and other investments
23

 
16

Total investments
$
332

 
$
149

5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
 
 
As of June 30, 2015
 
As of December 31, 2014
In millions
 
 
 
 
Land
 
$
4

 
$
7

Software
 
17

 
10

Buildings and improvements
 
100

 
98

Machinery and equipment
 
495

 
457

Renewable energy systems
 
7,785

 
4,709

Total property, plant and equipment in service, at cost
 
$
8,401

 
$
5,281

Less accumulated depreciation
 
(567
)
 
(572
)
Total property, plant and equipment in service, net
 
$
7,834

 
$
4,709

Construction in progress – renewable energy systems
 
1,792

 
956

Construction in progress – other
 
838

 
811

Total property, plant and equipment, net
 
$
10,464

 
$
6,476

During the three and six month periods ended June 30, 2015, we incurred impairment charges of $9 million for construction in progress related to certain renewable energy projects, which are reported in long-lived asset impairment charges in the condensed consolidated statements of operations.

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6. GOODWILL
The changes in the carrying amount of goodwill during the six months ended June 30, 2015 are as follows:
In millions
 
 
Balance as of December 31, 2014
 
$
73

Goodwill recognized in acquisitions (see Note 3)
 
355

Measurement period adjustments
 
(1
)
Currency translation adjustment
 
(2
)
Balance as of June 30, 2015
 
$
425

Goodwill balances referenced above relate to the Renewable Energy Development segment.
7. OTHER INTANGIBLE ASSETS
Other intangible assets consist of the following:
 
 
June 30, 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
18
$
796

 
$
(31
)
 
$
765

 
$
553

 
$
(13
)
 
$
540

Other
6
35

 
(12
)
 
23

 
29

 
(9
)
 
20

Total amortizable intangible assets
18
$
831

 
$
(43
)
 
$
788

 
$
582

 
$
(22
)
 
$
560

Indefinite lived assets:
 
 
 
 
 
 
 
 
 
 
 
 
Power plant development arrangements
Indefinite
$
951

 
$
(30
)
 
$
921

 
$
116

 
$
(93
)
 
$
23

Other
Indefinite
4

 

 
4

 
3

 

 
3

Total indefinite lived assets
 
$
955

 
$
(30
)
 
$
925

 
$
119

 
$
(93
)
 
$
26

Total other intangible assets
 
$
1,786

 
$
(73
)
 
$
1,713

 
$
701

 
$
(115
)
 
$
586

During the three and six month periods ended June 30, 2015, we incurred impairment charges of $8 million for our power plant development arrangements, which are classified in long-lived asset impairment charges in the condensed consolidated statements of operations.

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8. LONG-TERM DEBT
Debt, including consolidated variable interest entities ("VIEs"), consist of the following:

 
 
 
As of June 30, 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%
 
$
249

 
$

 
$
249

 
$
485

 
$

 
$
485

Convertible senior notes due 2020, net of discount
 
0.25%
 
445

 

 
445

 
432

 

 
432

Convertible senior notes due 2021, net of discount
 
2.75%
 
220

 

 
220

 
429

 

 
429

Convertible senior notes due 2022, net of discount
 
2.38%
 
338

 

 
338

 

 

 

Convertible senior notes due 2023, net of discount
 
2.63%
 
303

 

 
303

 

 

 

Convertible senior notes due 2025, net of discount
 
3.38%
 
281

 

 
281

 

 

 

Warehouse 1.0 term loan(a)
 
6.25%
 
466

 
5

 
461

 

 

 

TerraForm Private warehouse term loan(a)
 
5.75%
 
280

 
3

 
277

 

 

 

Margin loan due 2017(a)
 
6.25%
 
410

 

 
410

 

 

 

Exchangeable notes due 2020(a)
 
3.75%
 
328

 

 
328

 

 

 

TerraForm Global acquisition facility(a)
 
9.00%
 
460

 
5

 
455

 
150

 
2

 
148

SMP Ltd. credit facilities(a)
 
5.40%
 
370

 
55

 
315

 
355

 
107

 
248

System pre-construction, construction and term debt(b)
 
5.89%
 
2,342

 
805

 
1,537

 
1,768

 
632

 
1,136

Financing leaseback obligations(c)
 
4.59%
 
1,461

 
11

 
1,450

 
1,404

 
14

 
1,390

Other credit facilities(d)
 
2.68%
 
502

 
345

 
157

 
372

 
243

 
129

Total Renewable Energy Development segment debt
 
 
 
$
8,455

 
$
1,229

 
$
7,226


$
5,395

 
$
998

 
$
4,397

TerraForm Power segment debt(a):
 
 
 

 

 

 

 

 

Senior notes due 2023, net of discount
 
5.88%
 
$
947

 
$

 
$
947

 
$

 
$

 
$

Term loan facility
 
5.33%
 

 

 

 
574

 
6

 
568

Other system financing transactions
 
4.78%
 
1,320

 
322

 
998

 
1,024

 
74

 
950

Total TerraForm Power segment debt
 
 
 
$
2,267

 
$
322

 
$
1,945


$
1,598

 
$
80

 
$
1,518

Total debt outstanding
 
 
 
$
10,722

 
$
1,551

 
$
9,171


$
6,993

 
$
1,078

 
$
5,915

________________________
(a) Non-recourse to SunEdison
(b) Includes $8 million of debt with recourse to SunEdison as of June 30, 2015 and December 31, 2014
(c) Includes $32 million of debt with recourse to SunEdison as of December 31, 2014  
(d) Includes $266 million and $215 million of debt with recourse to SunEdison as of June 30, 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 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

18



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 second quarter of 2015, the 2018/2021 Notes were convertible as of June 30, 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 Amended and 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 our Amended and Restated Certificate 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 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 as discussed above, the 2018/2021 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.
On May 12, 2015, we entered into privately negotiated exchange agreements (the “2018/2021 Exchange Agreements”) with a limited number of holders of our outstanding 2018/2021 Notes. Pursuant to the 2018/2021 Exchange Agreements, we exchanged $600 million aggregate principal amount of outstanding 2018 Notes and 2021 Notes ($300 million of the 2018 Notes and $300 million of the 2021 Notes) for 41 million shares of common stock underlying the 2018/2021 Notes to be exchanged and $63 million in cash. We recognized a loss on the extinguishment of debt of $75 million and the write-off of the related unamortized debt issuance costs.
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.

19



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.
Upon entrance into the 2018/2021 Exchange Agreements, the parties agreed to unwind the portion of the 2018/2021 Note Hedges related to the exchanged 2018/2021 Notes for a total cash settlement of $635 million, calculated by reference to the weighted price of our common stock on the settlement date, received by us. In addition, the parties agreed to unwind the portion of the 2018/2021 Warrants related to the exchanged 2018/2021 Notes for a total cash settlement of $632 million, calculated by reference to the weighted average price of our common stock on the settlement date, paid by us. The settlement of the 2018/2021 Note Hedges and Warrants was recorded as an adjustment to additional paid in capital.
Loss on Convertible Notes Derivatives
For the three and six month periods ended June 30, 2014, we recognized a net loss of $48 million and $499 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
Three Months Ended June 30, 2014
 
Six Months Ended
June 30, 2014
Conversion Options
$
66

 
$
382

Note Hedges
(66
)
 
(366
)
Warrants
48

 
483

Total loss on convertible note derivatives, net
$
48

 
$
499


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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 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
%
 
45
%
 
45
%
 
45
%
 
42
%
 
42
%
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 June 30, 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 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 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 effectively subordinated 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

21



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.
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 purchased.
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 June 30, 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 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 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 effectively subordinated to all existing and future indebtedness (including trade payables) incurred by our subsidiaries.

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Capped Call Feature for Convertible Senior Notes Due 2022
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 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.

Convertible Senior Notes Due 2023 and 2025
On May 20, 2015, we issued $450 million in aggregate principal amount of 2.625% convertible senior notes due 2023 (the "2023 Notes") and $450 million aggregate principal amount of 3.375% convertible senior notes due 2025 (the "2025 Notes," and together with the 2023 Notes, the "2023/2025 Notes") in a private placement offering. We received net proceeds, after payment of debt financing fees, of $860 million in the offering, before the exchange of $300 million of the outstanding aggregate principal amount of the 2018 Notes and the exchange of $300 million of the outstanding aggregate principle amount of the 2021 Notes and before the net cost of the capped call feature described below.
Interest on the 2023/2025 Notes is payable on June 1 and December 1 of each year, beginning on December 1, 2015. The 2023 Notes and the 2025 Notes mature on June 1, 2023 and June 1, 2025, respectively, unless earlier converted or purchased.
The 2023/2025 Notes are convertible at any time until the close of business on the business day immediately preceding March 1, 2023 (in the case of the 2023 Notes) or March 1, 2025 (in the case of the 2025 Notes) only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending June 30, 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 2023/2025 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 2023/2025 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 2023/2025 Notes were not convertible as of June 30, 2015. On and after March 1, 2023 (in the case of the 2023 Notes) or March 1, 2025 (in the case of the 2025 Notes) and until the close of business on the second scheduled trading day immediately prior to the applicable stated maturity date, the 2023/2025 Notes are convertible regardless of the foregoing conditions based on an initial conversion price of $38.65 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 Notes are convertible 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 Notes upon a fundamental change, as defined in the indenture agreement, at 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 2023/2025 Notes will have the right to declare all amounts then outstanding due and payable. We may not redeem the 2023/2025 Notes prior to the applicable stated maturity date.
The 2023/2025 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 2023/2025 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. 
Capped Call Feature for Convertible Senior Notes Due 2023 and 2025
In connection with the issuance of the 2023/2025 Notes in May 2015, we paid $123 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 2023/2025 Notes. The capped call option agreements have a cap price of $62.12 and an initial strike price of $38.65, which is equal to the initial conversion price of the 2023/2025 Notes. The capped call options expire on June 1, 2023 on the 2023 Notes and June 1, 2025 on the 2025 Notes. The capped call option agreements are separate transactions, are not a part of the terms of the 2023/2025 Notes, and do not affect the rights of the holders of the 2023/2025 Notes. The capped call transactions are

23



expected generally to reduce the potential dilution with respect to our common stock upon conversion of the 2023/2025 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2023/2025 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.
Warehouse 1.0
On May 6, 2015, a wholly-owned subsidiary of SunEdison acquired certain equity interests ("Warehouse 1.0 Equity Purchase") in FR Warehouse II, LLC (“Warehouse 1.0”), with the remaining equity interests in Warehouse 1.0 being held by an indirect subsidiary of First Reserve Corp. (“First Reserve”). Warehouse 1.0 was established as an investment vehicle for the acquisition and construction financing of renewable energy projects. Warehouse 1.0, through its wholly-owned subsidiaries, intends to acquire renewable energy projects from SunEdison and other third parties and intends to sell such projects to TerraForm upon the completion thereof.
Concurrent with the Warehouse 1.0 Equity Purchase, we entered into an amended and restated limited liability company agreement for Warehouse 1.0 with First Reserve to set forth, among other things, our appointment as managing member and each of our respective obligations to make capital contributions and/or member loans to Warehouse 1.0. In addition, First Reserve issued an equity commitment letter to Warehouse 1.0. Under the terms of such equity commitment letter, First Reserve and its syndicate will contribute up to $500 million of equity (“FR Equity Investment”) for the acquisition and construction of renewable energy projects. The equity interests held by First Reserve and its syndicate will be eligible for preferential distributions. In support of the FR Equity Investment, we have agreed to post a letter of credit in support of the debt service reserve requirement under the Warehouse 1.0 Credit Facility (as described below), potentially compensate First Reserve should First Reserve’s equity not be fully invested in projects that can produce the desired return during the expected investment period (subject to an aggregate cap of $142 million) and, in the event that the FR Equity Investment is not fully utilized, pay fees to First Reserve in respect of any unutilized amounts (subject to an aggregate cap of $70 million).
Concurrent with the Warehouse 1.0 Equity Purchase, our wholly-owned subsidiary entered into a credit agreement with the lenders identified therein, Bank of America, N.A., as administrative agent and collateral agent, OneWest Bank, N.A., as depositary, the joint lead arrangers, joint bookrunners and other persons identified therein and party thereto from time to time (“Warehouse 1.0 Credit Facility”). The Warehouse 1.0 Credit Facility provides for a senior secured term loan credit facility in an aggregate principal amount of up to $466 million ("Warehouse 1.0 Term Loan") and a senior secured revolving credit facility in an aggregate principal amount of up to $550 million ("Warehouse 1.0 Revolver"). The Warehouse 1.0 Term Loan has a term ending May 6, 2020, and the Warehouse 1.0 Revolver has a term ending May 6, 2019. The proceeds of the Warehouse 1.0 Credit Facility and the FR Equity Investment will be used for the acquisition and construction of renewable energy projects. Subject to certain conditions, we may request that the aggregate commitments be increased in an amount not to exceed $200 million, in the case of the Warehouse 1.0 Revolver, and $500 million, in the case of the Warehouse 1.0 Term Loan. Interest under the Warehouse 1.0 Credit Facility accrues at a rate of LIBOR plus 4.25% (or base rate plus 3.25%) with respect to the Warehouse 1.0 Term Loan and at a rate of LIBOR plus 4.00% (or base rate plus 3.00%) with respect to the Warehouse 1.0 Revolver. The Warehouse 1.0 Credit Facility contains representations, covenants and events of default typical for credit arrangements of comparable size, including covenants applicable to commercial bank provided project financings.
At June 30, 2015, $466 million was outstanding under the Warehouse 1.0 Term Loan and the effective interest rate was 8.14%. We paid fees of $21 million upon entry into the Warehouse 1.0 Term Loan, which were recognized as deferred financing fees.
At June 30, 2015, we had not borrowed any amounts under the Warehouse 1.0 Revolver. As of June 30, 2015, no amounts were committed for currently funded projects, which would reduce the available capacity. Therefore, letters of credit could be issued under the Warehouse 1.0 Revolver for the remaining capacity totaling $550 million as of June 30, 2015. We paid fees of $25 million upon entry into the Warehouse 1.0 Revolver, which were recognized as deferred financing fees.
TerraForm Private Warehouse
On June 26, 2015, a wholly-owned subsidiary of SunEdison acquired certain equity interests in TerraForm Private, LLC (“TerraForm Private”), with the remaining equity interests in TerraForm Private acquired by Macquarie Sierra Investment Holdings Inc. and John Hancock Life Insurance Company (U.S.A.) (together with certain of its affiliates) (collectively known as the “TerraForm Private Investors”). We purchased an aggregate of $20 million in preferred units (the “PREPP Units”) of TerraForm Private, the TerraForm Private Investors collectively purchased an aggregate of $150 million in PREPP Units, and we separately purchased an aggregate of $75 million in common units of TerraForm Private (collectively, the “TerraForm Private Equity Purchase”).
A portion of the net proceeds from the TerraForm Private Equity Purchase, together with the net proceeds from the TerraForm Private Term Loan (as defined below), were used to fund the acquisition of all outstanding membership interests in five

24



operating wind power assets held by Atlantic Power, thus forming the project entity TerraForm AP. The remaining net proceeds will be used to retire related project debt following the closing of the Atlantic Power acquisition. TerraForm Private was formed for the primary purpose of owning, maintaining, financing and operating the Atlantic Power assets.
Concurrent with the TerraForm Private Equity Purchase, we entered into an amended and restated limited liability company agreement with the TerraForm Private Investors (together as the "Members") for TerraForm Private to set forth, among other things, our appointment as the managing member of TerraForm Private and define the respective obligations of the Members under TerraForm Private. Holders of the PREPP Units will have preference over holders of other equity securities of TerraForm Private, including the common units purchased, in respect of distributions and upon certain liquidation events. The PREPP Units will also be entitled to a cash dividend of 4.50% per annum and a pay-in-kind dividend of 5.00% per annum, in each case, on a cumulative basis and payable quarterly in arrears. In connection with the TerraForm Private Equity Purchase, TerraForm Private also granted certain rights to TerraForm (and its designated controlled affiliates) to purchase interests in the assets held by TerraForm Private pursuant to a separate agreement among Members. Any such purchases are subject to certain conditions and limitations, including the consent of holders of a requisite percentage of the PREPP Units.
Concurrent with the TerraForm Private Equity Purchase, TerraForm AP entered into a credit agreement with TerraForm Private, as guarantor, the lenders identified therein, Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, and the joint lead arrangers, joint bookrunners and other persons identified therein and party thereto from time to time (“TerraForm Private Term Loan”). The TerraForm Private Term Loan provides for a senior secured term loan credit facility in an aggregate principal amount of $280 million. The TerraForm Private Term Loan matures on June 26, 2022. As described above, the net proceeds of the TerraForm Private Term Loan were used, together with the proceeds from the TerraForm Private Equity Purchase, to fund the Atlantic Power acquisition (including the retirement of related project debt following the closing of the Atlantic Power acquisition). Interest under the TerraForm Private Term Loan accrues at a rate calculated at LIBOR plus 3.5% or base rate plus 2.5%. The TerraForm Private Term Loan contains representations, covenants and events of default typical for credit arrangements of comparable size.
At June 30, 2015, $280 million was outstanding under the TerraForm Private Term Loan, and the effective interest rate was 6.2%. We paid fees of $9 million upon entry into the TerraForm Private Term Loan, which were recognized as deferred financing fees.
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 June 30, 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 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.

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Exchangeable Notes Due 2020
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.
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 of 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 of up to $815 million for the First Wind Bridge Facility (see section entitled "First Wind Bridge Credit Facility").

26



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 of up to $410 million secured by certain equity interests in TerraForm (see section entitled "Margin Loan Agreement") and to issue up to $500 million in convertible senior notes due 2022 (see section entitled "2022 Notes"). In the second quarter of 2015, one issuer that remains party to the Credit Facility committed $25 million in additional funds, increasing the aggregate funding under the Credit Facility from $565 million to $590 million. Also in the second quarter, two additional issuers pledged $100 million in additional funds increasing the aggregate funding under the Credit Facility from $590 million to $690 million. In July 2015, one additional issuer pledged $60 million in additional funds increasing the aggregate funding under the Credit Facility from $690 million to $750 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 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 in excess of $50 million, including the 2018/2021 Notes, 2020 Notes, 2022 Notes, and 2023/2025 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 June 30, 2015, we had $657 million of outstanding third party letters of credit backed by the Credit Facility.
TerraForm Global 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 “TerraForm Global Acquisition Facility”). The TerraForm Global 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 TerraForm Global Acquisition Facility from $150 million to $450 million. In June 2015, three additional lenders became party to the TerraForm Global Acquisition Facility and committed additional funds, increasing the aggregate funding under the Acquisition Facility from $450 million to $550 million.
The TerraForm Global Acquisition Facility will mature on the earlier of December 22, 2016 and the date on which all loans under the TerraForm Global Acquisition Facility become due and payable in full, whether by acceleration or otherwise. The principal payments under the TerraForm Global Acquisition Facility are payable in consecutive semiannual installments on June 22 and December 22, in each case, in an amount equal to 0.50% 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 subscribed to the debt.

27



Loans and each guarantee under the TerraForm Global 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 (i) a base rate plus the sum of 6.5% and a spread (as defined) or (ii) 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 is initially 0.50% per annum, commencing on the five-month anniversary of the closing date, and increases by an additional 0.25% per annum every ninety days thereafter. The TerraForm Global Acquisition Facility contains customary representations, warranties, and affirmative and negative covenants, including a minimum debt service coverage ratio applicable to the subsidiary (1.15 to 1.00 starting March 31, 2015) that will be tested quarterly. The TerraForm Global Acquisition Facility loans may be prepaid in whole or in part without premium or penalty, and outstanding TerraForm Global Acquisition Facility loans must be prepaid in certain specified circumstances.
At June 30, 2015, $460 million was outstanding under the TerraForm Global Acquisition Facility and the effective interest rate was 11.08%. We paid debt issuance fees of $19 million upon entry into the TerraForm Global Acquisition Facility, which were recognized as deferred financing fees.
SMP Ltd. Credit Facilities
SMP Ltd. is party to four non-recourse term loan facilities and a 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 $423 million as of June 30, 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 June 30, 2015, a total of $370 million was outstanding under the term loan facilities.
Project Financing
Our renewable energy systems for which we have short-term and long-term debt, and finance obligations are included in separate legal entities. Of this total debt outstanding, $4,031 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 SunEdison 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 SunEdison 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 of 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 U.S. 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 June 30, 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 June 30, 2015, we had borrowed $98 million under the Construction Facility, which is classified under system pre-construction, construction and term debt. As of June 30, 2015, we had $135 million committed for currently funded projects, which reduced the available capacity. Therefore, availability under the Construction Facility was $52 million as of June 30, 2015.

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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 June 30, 2015, we had system pre-construction, construction and term debt outstanding of $2,342 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 0.4% to 14.0% and have maturities that range from 2015 to 2031. The weighted average interest rate on these construction and term debt obligations was 5.89% as of June 30, 2015.
As of June 30, 2015, $533 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 3.69% as of June 30, 2015. In the third quarter of 2014, legislation changes in Italy introduced modifications to the FiT programs that were previously guaranteed by the Italian government. As of June 30, 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 June 30, 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 June 30, 2015.
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 June 30, 2015 is $1,461 million, which includes the below mentioned transactions. The maturities range from 2021 to 2039 and are collateralized by the related renewable energy system assets with a carrying amount of $1,368 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 June 30, 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 June 30, 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 originally matured six months from the funding date unless payment was otherwise accelerated, subject to certain

29



conditions. In the second quarter of 2015, we extended the maturity of the OCBC Facility through January 2016. The principal and interest amounts outstanding under the OCBC Facility are payable in full at maturity. Interest is calculated at an amount equal to LIBOR plus an applicable margin of 1.25%. As of June 30, 2015, interest was calculated at approximately 1.6%. In conjunction with the borrowing, an immaterial amount of debt issuance cost was recognized.
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 June 30, 2015, we had $79 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 renewable 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.
Of the remaining amount classified as other credit facilities at June 30, 2015, $102 million represents the cash proceeds that we received in connection with executed renewable 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 relates to cash proceeds received in connection with 15 projects for which we have substantial continuing involvement. There are no principal or interest payments associated with these transactions.
Capitalized Interest
During the three and six month periods ended June 30, 2015 we capitalized $47 million and $75 million of interest, respectively. During the three and six month periods ended June 30, 2014 we capitalized $4 million and $15 million of interest, respectively.
TerraForm Power Segment Debt
TerraForm Credit Facilities
On July 23, 2014, Terra Operating LLC and 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). TerraForm recognized a $1 million loss on the extinguishment of debt during the six months ended June 30, 2015 as a result of this exchange.
In May 2015, TerraForm exercised its option to increase its borrowing capacity under the 2020 TerraForm Revolver by $100 million. As a result of this transaction, TerraForm now has a total borrowing capacity of $650 million under the 2020 TerraForm Revolver as of June 30, 2015. In July 2015, TerraForm obtained a commitment from a counterparty to increase its borrowing capacity under the 2020 TerraForm Revolver by $75 million. This will increase the total borrowing capacity under the 2020 TerraForm Revolver to $725 million. There were no amounts outstanding under the 2020 TerraForm Revolver as of June 30, 2015.
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 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.

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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, TerraForm's indirect subsidiary Terra Operating LLC issued $800 million of 5.875% senior notes due 2023 (the "Terra 2023 Notes") at a price of 99.214%. Terra Operating LLC used the net proceeds from this offering to fund a portion of the price of the First Wind acquisition.
On June 11, 2015, Terra Operating LLC issued an additional $150 million of 5.875% senior notes due 2023. This offering was issued at a price of 101.5% and Terra Operating LLC used the net proceeds from the offering to repay existing borrowings under the 2020 TerraForm Revolver. The Terra 2023 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 is payable on February 1 and August 1 of each year, beginning on August 1, 2015.
Senior Notes due 2025
On July 17, 2015, Terra Operating LLC issued $300 million of 6.125% senior notes due 2025 (the "Terra 2025 Notes") at a price of 100.00%. Terra Operating LLC intends to use the net proceeds from the offering to fund a portion of the purchase price of the Invenergy acquisition (see Note 19). The Terra 2025 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 is payable on June 15 and December 15 of each year, beginning December 15, 2015.
Bridge Facility
On March 31, 2015, TerraForm entered into an agreement with Morgan Stanley Senior Funding, Inc. which provided TerraForm with up to a $515 million senior unsecured bridge facility (the "Bridge Facility"). The Bridge Facility was terminated during the second quarter of 2015.
Other System Financing Obligations
Other TerraForm Power system financing obligations primarily consist of $401 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 June 30, 2015, $209 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 June 30, 2015 was 6%.

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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 June 30,
2015
 
As of December 31, 2014
Derivatives designated as hedging:
 

 

Interest rate swaps
 
Other assets
 
$
6

 
$
2

 
 
Other liabilities
 
(68
)
 
(8
)

 
Accumulated other comprehensive loss
 
39

 
5

Cross currency swaps
 
Other assets
 
72

 
76

 
 
Other liabilities
 
(46
)
 
(55
)

 
Accumulated other comprehensive income
 
(26
)
 
(21
)
Commodity derivative
 
Other liabilities
 
(14
)
 


 
Accumulated other comprehensive income
 
(8
)
 

Derivatives not designated as hedging:
 


 


Currency forward contracts
 
Other assets
 
2

 
2

 
 
Other liabilities
 
(4
)
 
(4
)
Interest rate swaps
 
Other assets
 
3

 

 
 
Other liabilities
 
(17
)
 
(61
)
Commodity derivative
 
Other assets
 
43

 

In millions
 

 
Losses (Gains)
 
Losses (Gains)
Type of Instrument
 
Statement of Operations Classification
 
Three Months Ended June 30,
2015
 
Three Months Ended June 30,
2014
 
Six Months Ended June 30,
2015
 
Six Months Ended June 30,
2014
Derivatives not designated as hedging:
 

 

 

 

Currency forward contracts
 
Other, net
 
$
3

 
$
3

 
$
(1
)
 
$
4

Interest rate swaps
 
Interest expense
 
13

 
3

 
45

 
2

Commodity derivative
 
Net sales
 
2

 

 
6

 

Note hedges
 
Gain on convertible note derivative
 

 
(66
)
 

 
(366
)
Conversion options
 
Loss on convertible note derivative
 

 
66

 

 
382

Warrants
 
Loss on convertible note derivative
 

 
48

 

 
483

Currency Forward Contracts
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 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 June 30, 2015 and December 31, 2014, these currency forward contracts had net notional amounts of $81 million and $268 million, respectively, and are accounted for as economic hedges. There were no outstanding currency forward contracts designated as cash flow hedges as of June 30, 2015 and December 31, 2014.

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Cross Currency Swap
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 June 30, 2015 was recorded to accumulated other comprehensive loss (income) in the condensed consolidated balance sheet. No amount of material ineffectiveness was recognized during the periods presented.
Interest Rate Swaps
As of June 30, 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 June 30, 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 $39 million and $5 million for the quarters ended June 30, 2015 and December 31, 2014, which was recognized in accumulated other comprehensive loss (income) in the condensed consolidated balance sheet. No amount of material ineffectiveness was recognized during the periods presented.
As of June 30, 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 June 30, 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 $14 million and $61 million as of June 30, 2015 and December 31, 2014, respectively.
Commodity Derivatives
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 June 30, 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 $14 million as of June 30, 2015.
As of June 30, 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 $43 million as of June 30, 2015.
Convertible Notes Derivatives
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 and May 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 reduce the potential dilution to holders of our common stock upon conversion of the 2022 Notes, 2023 Notes and 2025 Notes. Refer to Note 8 for additional information.

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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 June 30, 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
 
$