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EX-32 - EXHIBIT 32 - TerraForm Power NY Holdings, Inc.terraform-93015xexhibit32.htm
EX-31.2 - EXHIBIT 31.2 - TerraForm Power NY Holdings, Inc.terraform-93015xexhibit312.htm
EX-31.1 - EXHIBIT 31.1 - TerraForm Power NY Holdings, Inc.terraform-93015xexhibit311.htm
EX-10.2 - EXHIBIT 10.2 - TerraForm Power NY Holdings, Inc.terraform-93015xexhibit102.htm
EX-10.3 - EXHIBIT 10.3 - TerraForm Power NY Holdings, Inc.terraform-93015xexhibit103.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 September 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: 001-36542
 ______________________________________________________________
TerraForm Power, Inc.
(Exact name of registrant as specified in its charter)
 _____________________________________________________________________________
Delaware
 
46-4780940
(State or other jurisdiction of incorporation or organization)
 
(I. R. S. Employer Identification No.)
7550 Wisconsin Avenue, 9th Floor, Bethesda, Maryland
 
20814
(Address of principal executive offices)
 
(Zip Code)
240-762-7700
(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.
Large accelerated filer
 
o
 
Accelerated filer
 
o
Non-accelerated filer
 
x (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
As of October 31, 2015, there were 80,033,122 shares of Class A common stock outstanding and 60,364,154 shares of Class B common stock outstanding.
 



TerraForm Power, Inc. and Subsidiaries
Table of Contents
Form 10-Q
 
 
Page
 
 
 
 
Item 1.
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 



PART I - Financial Information

Item 1. Financial Statements.

TERRAFORM POWER, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Operating revenues, net
$
163,291

 
$
53,566

 
$
363,852

 
$
84,336

Operating costs and expenses:
 
 
 
 
 
 
 
Cost of operations
15,201

 
4,224

 
50,430

 
6,114

Cost of operations - affiliate
6,840

 
2,814

 
14,657

 
4,031

General and administrative
7,518

 
2,984

 
21,087

 
3,767

General and administrative - affiliate
14,636

 
5,051

 
39,411

 
8,783

Acquisition and related costs
11,294

 
1,302

 
31,680

 
2,537

Acquisition and related costs - affiliate

 
2,826

 
1,040

 
2,826

Formation and offering related fees and expenses

 
536

 

 
3,399

Depreciation, accretion and amortization
43,667

 
13,245

 
113,694

 
21,632

Total operating costs and expenses
99,156

 
32,982

 
271,999

 
53,089

Operating income
64,135

 
20,584

 
91,853

 
31,247

Other expenses:
 
 
 
 
 
 
 
Interest expense, net
48,786

 
22,906

 
121,602

 
54,552

(Gain) loss on extinguishment of debt, net

 
(9,580
)
 
8,652

 
(7,635
)
Loss on foreign currency exchange, net
9,825

 
6,240

 
9,755

 
6,914

Other, net
1,433

 
80

 
1,110

 
582

Total other expenses, net
60,044

 
19,646

 
141,119

 
54,413

Income (loss) before income tax expense (benefit)
4,091

 
938

 
(49,266
)
 
(23,166
)
Income tax expense (benefit)
1,673

 
2,806

 
2,842

 
(4,069
)
Net income (loss)
2,418

 
(1,868
)
 
(52,108
)
 
(19,097
)
Less: Pre-acquisition net (loss) income of projects acquired from SunEdison
(2,743
)
 
(347
)
 
7,892

 
(1,059
)
Less: Predecessor income (loss) prior to IPO on July 23, 2014

 
6,270

 

 
(10,357
)
Net income (loss) subsequent to IPO and excluding pre-acquisition net (loss) income of projects acquired from SunEdison
5,161

 
(7,791
)
 
(60,000
)
 
(7,681
)
Less: Net income attributable to redeemable non-controlling interests
6,949

 

 
8,576

 

Less: Net loss attributable to non-controlling interests
(968
)
 
(3,777
)
 
(46,440
)
 
(3,667
)
Net loss attributable to Class A common stockholders
$
(820
)
 
$
(4,014
)
 
$
(22,136
)
 
$
(4,014
)
 
 
 
 
 
 
 
 
Weighted average number of shares:
 
 
 
 
 
 
 
Class A common stock - Basic and diluted
77,522

 
27,066

 
61,777

 
27,066

Loss per share:
 
 
 
 
 
 
 
Class A common stock - Basic and diluted
$
(0.03
)
 
$
(0.15
)
 
$
(0.39
)
 
$
(0.15
)







See accompanying notes to unaudited condensed consolidated financial statements.

3


TERRAFORM POWER, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Net income (loss)
 
$
2,418

 
$
(1,868
)
 
$
(52,108
)
 
$
(19,097
)
Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
 
Foreign currency translation adjustments:
 
 
 
 
 
 
 
 
Net unrealized losses arising during the period
 
(3,363
)
 
(3,297
)
 
(2,786
)
 
(2,724
)
Hedging activities:
 
 
 
 
 
 
 
 
Net unrealized losses arising during the period
 
(1,135
)
 
(351
)
 
(2,955
)
 
(351
)
Reclassification of net realized losses into earnings
 
129

 

 
3,336

 

Other comprehensive loss, net of tax
 
(4,369
)
 
(3,648
)
 
(2,405
)
 
(3,075
)
Total comprehensive loss
 
(1,951
)
 
(5,516
)
 
(54,513
)
 
(22,172
)
Less: Pre-acquisition comprehensive (loss) income of projects acquired from SunEdison
 
(2,743
)
 
(347
)
 
7,892

 
(1,059
)
Less: Predecessor comprehensive income (loss) prior to IPO on July 23, 2014
 

 
5,697

 

 
(10,357
)
Comprehensive income (loss) subsequent to IPO and excluding pre-acquisition comprehensive (loss) income of projects acquired from SunEdison
 
792

 
(10,866
)
 
(62,405
)
 
(10,756
)
Less comprehensive (loss) income attributable to non-controlling interests:
 
 
 
 
 
 
 
 
Net loss attributable to non-controlling interests
 
(968
)
 
(3,777
)
 
(46,440
)
 
(3,667
)
Foreign currency translation adjustments
 
(1,447
)
 
(1,898
)
 
(1,132
)
 
(1,898
)
Hedging activities
 
(759
)
 
(244
)
 
39

 
(244
)
Comprehensive loss attributable to non-controlling interests
 
(3,174
)
 
(5,919
)
 
(47,533
)
 
(5,809
)
Comprehensive income (loss) attributable to Class A stockholders
 
$
3,966

 
$
(4,947
)
 
$
(14,872
)
 
$
(4,947
)
























See accompanying notes to unaudited condensed consolidated financial statements.

4


TERRAFORM POWER, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

ASSETS
September 30, 2015
 
December 31, 2014
Current assets:
 
 
 
Cash and cash equivalents
$
635,821

 
$
468,554

Restricted cash, including consolidated variable interest entities of $41,976 and $39,898 in 2015 and 2014, respectively
90,181

 
70,545

Accounts receivable, including consolidated variable interest entities of $48,754 and $16,921 in 2015 and 2014, respectively
117,713

 
32,036

Prepaid expenses and other current assets
47,627

 
22,637

Total current assets
891,342

 
593,772

 
 
 
 
Renewable energy facilities, net, including consolidated variable interest entities of $1,821,857 and $1,466,223 in 2015 and 2014, respectively
3,981,751

 
2,646,860

Intangible assets, net, including consolidated variable interest entities of $256,285 and $259,004 in 2015 and 2014, respectively
515,755

 
361,673

Deferred financing costs, net
56,655

 
42,741

Deferred income taxes

 
4,606

Other assets
89,009

 
29,419

Total assets
$
5,534,512

 
$
3,679,071
































See accompanying notes to unaudited condensed consolidated financial statements.

5


TERRAFORM POWER, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(CONTINUED)

LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, 2015
 
December 31, 2014
Current liabilities:
 
 
 
Current portion of long-term debt and financing lease obligations, including consolidated variable interest entities of $84,001 and $20,907 in 2015 and 2014, respectively
$
115,203

 
$
100,488

Accounts payable, accrued expenses and other current liabilities, including consolidated variable interest entities of $23,465 and $27,284 in 2015 and 2014, respectively
129,139

 
83,437

Deferred revenue
13,827

 
24,264

Due to SunEdison, net
14,522

 
193,080

Total current liabilities
272,691

 
401,269

Other liabilities:
 
 
 
Long-term debt and financing lease obligations, less current portion, including consolidated variable interest entities of $612,032 and $620,853 in 2015 and 2014, respectively
2,431,182

 
1,599,277

Deferred revenue, including consolidated variable interest entities of $67,756 and $51,943 in 2015 and 2014, respectively
76,273

 
52,214

Deferred income taxes, including consolidated variable interest entities of $38,125 and $3,012 in 2015 and 2014, respectively
39,106

 
7,877

Asset retirement obligations, including consolidated variable interest entities of $51,067 and $32,181 in 2015 and 2014, respectively
153,651

 
78,175

Other long-term liabilities
23,905

 

Total liabilities
2,996,808

 
2,138,812

 
 
 
 
Redeemable non-controlling interests
44,292

 
24,338

Stockholders' equity:
 
 
 
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued and outstanding in 2015 and 2014

 

Class A common stock, $0.01 par value per share, 850,000,000 shares authorized, 80,029,737 and 42,217,984 issued and outstanding in 2015 and 2014, respectively.
776

 
387

Class B common stock, $0.01 par value per share, 140,000,000 shares authorized, 60,364,154 and 64,526,654 issued and outstanding in 2015 and 2014, respectively.
604

 
645

Class B1 common stock, $0.01 par value per share, 260,000,000 shares authorized, zero and 5,840,000 issued and outstanding in 2015 and 2014, respectively.

 
58

Additional paid-in capital
1,260,616

 
497,556

Accumulated deficit
(39,861
)
 
(25,617
)
Accumulated other comprehensive loss
(2,949
)
 
(1,637
)
Total TerraForm Power, Inc. stockholders' equity
1,219,186

 
471,392

Non-controlling interests
1,274,226

 
1,044,529

Total non-controlling interests and stockholders' equity
2,493,412

 
1,515,921

Total liabilities, non-controlling interests and stockholders' equity
$
5,534,512

 
$
3,679,071







See accompanying notes to unaudited condensed consolidated financial statements.

6





TERRAFORM POWER, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-controlling Interests
 
 
 
Preferred Stock
 
Class A Common Stock
 
Class B Common Stock
 
Class B1 Common Stock
 
Additional Paid-in Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Loss
 
 
 
 
 
Accumulated Deficit
 
Accumulated Other Comprehensive Loss
 
 
 
Total Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Total
 
Capital
 
 
 
Total
 
Balance at December 31, 2014

 
$

 
42,218

 
$
387

 
64,526

 
$
645

 
5,840

 
$
58

 
$
497,556

 
$
(25,617
)
 
$
(1,637
)
 
$
471,392

 
$
1,092,809

 
$
(44,451
)
 
$
(3,829
)
 
$
1,044,529

 
$
1,515,921

Issuance of Class A common stock related to the public offering, net of issuance costs

 

 
31,912

 
318

 
(4,162
)
 
(41
)
 

 

 
921,333

 

 

 
921,610

 

 

 

 

 
921,610

Riverstone exchange

 

 
5,840

 
58

 

 

 
(5,840
)
 
(58
)
 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 
60

 
13

 

 

 

 

 
10,017

 

 

 
10,030

 

 

 

 

 
10,030

Net loss¹

 

 

 

 

 

 

 

 

 
(22,136
)
 

 
(22,136
)
 

 
(46,440
)
 

 
(46,440
)
 
(68,576
)
Pre-acquisition net income of projects acquired from SunEdison

 

 

 

 

 

 

 

 

 
7,892

 

 
7,892

 

 

 

 

 
7,892

Dividends

 

 

 

 

 

 

 

 
(60,707
)
 

 

 
(60,707
)
 

 

 

 

 
(60,707
)
Consolidation of non-controlling interests in acquired projects

 

 

 

 

 

 

 

 

 

 

 

 
104,546

 

 

 
104,546

 
104,546

Repurchase of non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 
(54,694
)
 

 

 
(54,694
)
 
(54,694
)
Net SunEdison investment

 

 

 

 

 

 

 

 
56,820

 

 

 
56,820

 
63,207

 

 

 
63,207

 
120,027

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 
(1,312
)
 
(1,312
)
 

 

 
(1,093
)
 
(1,093
)
 
(2,405
)
Sale of membership interests in projects

 

 

 

 

 

 

 

 

 

 

 

 
71,321

 

 

 
71,321

 
71,321

Distributions to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 
(71,553
)
 

 

 
(71,553
)
 
(71,553
)
Equity reallocation

 

 

 

 

 

 

 

 
(164,403
)
 

 

 
(164,403
)
 
164,403

 

 

 
164,403

 

Balance at September 30, 2015

 
$

 
80,030

 
$
776

 
60,364

 
$
604

 

 
$

 
$
1,260,616

 
$
(39,861
)
 
$
(2,949
)
 
$
1,219,186

 
$
1,370,039

 
$
(90,891
)
 
$
(4,922
)
 
$
1,274,226

 
$
2,493,412

———
(1)
Excludes $8,576 of net income attributable to redeemable non-controlling interests.















See accompanying notes to unaudited condensed consolidated financial statements.

7



TERRAFORM POWER, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

 
Nine Months Ended September 30,
2015
 
2014
Cash flows from operating activities:
 
 
 
Net loss
$
(52,108
)
 
$
(19,097
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Stock compensation expense
10,030

 
1,567

Depreciation, accretion and amortization
113,694

 
21,632

Amortization of favorable and unfavorable revenue contracts
1,599

 
3,558

Amortization of deferred financing costs and debt discounts
25,307

 
16,842

Recognition of deferred revenue
(5,403
)
 
(192
)
Loss (gain) on extinguishment of debt, net
8,652

 
(16,315
)
Unrealized gain on derivatives, net
(855
)
 

Unrealized loss on foreign currency exchange
11,269

 
5,037

Deferred taxes
2,769

 
(4,068
)
Changes in assets and liabilities:
 
 
 
Accounts receivable
(62,152
)
 
(32,958
)
Prepaid expenses and other current assets
6,807

 
(12,948
)
Accounts payable, accrued interest, and other current liabilities
20,604

 
28,402

Deferred revenue
19,025

 
37,473

Due to SunEdison, net
(196
)
 
(8,579
)
Other, net
6,214

 
6,424

Net cash provided by operating activities
105,256

 
26,778

Cash flows from investing activities:
 
 
 
Cash paid to third parties for renewable energy facility construction
(426,682
)
 
(766,836
)
Other investments
(10,000
)
 

Acquisitions of renewable energy facilities from third parties, net of cash acquired
(1,004,403
)
 
(355,536
)
Due to SunEdison, net
(14,872
)
 

Change in restricted cash
(23,262
)
 

Net cash used in investing activities
$
(1,479,219
)
 
$
(1,122,372
)
















See accompanying notes to unaudited condensed consolidated financial statements.

8



TERRAFORM POWER, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(CONTINUED)

 
Nine Months Ended September 30,
2015
 
2014
Cash flows from financing activities:
 
 
 
Proceeds from issuance of Class A common stock
$
921,610

 
$
433,621

Change in restricted cash for principal debt service

 
28,630

Proceeds from Senior Notes due 2023
945,962

 

Proceeds from Senior Notes due 2025
300,000

 

Proceeds from term loan

 
300,000

Proceeds from bridge loan

 
400,000

Repayment of bridge loan

 
(400,000
)
Repayment of term loan
(573,500
)
 

Proceeds from Revolver
235,000

 

Repayment of Revolver
(235,000
)
 

Borrowings of project-level long-term debt
276,915

 
198,337

Principal payments on project-level long-term debt
(148,764
)
 
(117,051
)
Due to SunEdison, net
(147,370
)
 
146,246

Contributions from non-controlling interests
82,876

 
6,312

Distributions to non-controlling interests
(21,637
)
 
(151
)
Repurchase of non-controlling interest
(54,694
)
 

Distributions to SunEdison and affiliates
(51,777
)
 

Net SunEdison investment
123,196

 
401,132

Payment of dividends
(60,707
)
 

Debt prepayment premium
(6,412
)
 

Payment of deferred financing costs
(43,088
)
 
(42,821
)
Net cash provided by financing activities
1,542,610

 
1,354,255

Net increase in cash and cash equivalents
168,647

 
258,661

Effect of exchange rate changes on cash and cash equivalents
(1,380
)
 
(342
)
Cash and cash equivalents at beginning of period
468,554

 
1,044

Cash and cash equivalents at end of period
$
635,821

 
$
259,363

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to unaudited condensed consolidated financial statements.

9



TERRAFORM POWER, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(CONTINUED)

 
Nine Months Ended September 30,
2015
 
2014
Supplemental Disclosures:
 
 
 
Cash paid for interest, net of amounts capitalized of $6,801 and $8,592, respectively
$
74,426

 
$
16,064

Cash paid for income taxes

 

Schedule of non-cash activities:
 
 
 
Additions of asset retirement obligation (ARO) assets and liabilities
$
39,976

 
$
15,302

ARO assets and obligations from acquisitions
31,361

 
17,932

Long-term debt assumed in connection with acquisitions
63,293

 
526,390

Issuance of warrant

 
6,494

Amortization of deferred financing costs included as construction in progress

 
11,892

Decrease in due to SunEdison in exchange for equity

 
72,019

Issuance of B1 common stock to Riverstone for Mt. Signal

 
145,828

Issuance of Class B common stock and Class B Terra LLC units to SunEdison for Mt. Signal acquisition

 
146,000

Non-controlling interest in Terra LLC (Class B units) issued in connection with the initial public offering

 
632,652

Write off of pre-IPO U.S. deferred tax assets and liabilities

 
3,616

Deferred purchase price for acquisitions

 
9,278


































See accompanying notes to unaudited condensed consolidated financial statements

10

TERRAFORM POWER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise noted)



1. BASIS OF PRESENTATION

TerraForm Power, Inc. and subsidiaries (the "Company") is a subsidiary of SunEdison, Inc. (together, with its consolidated subsidiaries, excluding the Company, "SunEdison"). The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the Securities and Exchange Commission’s ("SEC") regulations for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. generally accepted accounting principles ("U.S. GAAP") for complete financial statements. The financial statements should be read in conjunction with the accounting policies and other disclosures as set forth in the notes to the Company’s annual financial statements for the year ended December 31, 2014. Interim results are not necessarily indicative of results for a full year.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all material adjustments consisting of normal and recurring accruals necessary to present fairly the Company's unaudited condensed consolidated financial position as of September 30, 2015, the results of operations and comprehensive income for the three and nine months ended September 30, 2015 and 2014, and cash flows for the nine months ended September 30, 2015 and 2014.

Use of Estimates

In preparing the unaudited condensed consolidated financial statements, the Company used estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements. Such estimates also affect the reported amounts of revenues, expenses and cash flows during the reporting period. To the extent there are material differences between the estimates and actual results, the Company's future results of operations would be affected.

New Accounting Standards

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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. This ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. This standard will become effective for the Company on January 1, 2018. Early application is permitted but not before January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the effect that ASU No. 2014-09 will have on its consolidated statements of operations and related disclosures. The Company has not yet selected a transition method or determined the effect of the standard on its ongoing financial reporting.

In February 2015, the FASB issued ASU No. 2015-02 Consolidation (Topic 810) Amendments to the Consolidation Analysis, which affects the following areas of the consolidation analysis: limited partnerships and similar entities, evaluation of fees paid to a decision maker or service provider as a variable interest and in determination of the primary beneficiary, effect of related parties on the primary beneficiary determination and for certain investment funds. ASU No. 2015-02 is effective for the Company for the fiscal year ending December 31, 2016 and interim periods therein. The Company is evaluating the impact of this standard on its consolidated statements of financial position, results of operations and cash flows.

In April 2015, the FASB issued ASU No. 2015-03 Interest - Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs, which requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability. In August 2015, the FASB issued ASU No. 2015-15 Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of Credit Arrangements, in which an entity may defer and present debt issuing costs associated with line-of-credit arrangements as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-03 and ASU 2015-15 are effective on a retrospective basis for annual and interim periods beginning on or after December 15, 2015. Early adoption is permitted, but only for debt issuance costs that have not been reported in financial statements previously issued or available for issuance. The Company is currently evaluating the impact of ASU 2015-03 and ASU 2015-15 on its consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-06 Earnings Per Share, which provides guidance on the presentation of historical earnings per unit under the two-class method for transfers of net assets between entities under common control.

11


ASU No. 2015-06 is effective for the Company for the fiscal year ending December 31, 2016 and interim periods therein. The Company does not expect this standard will have an effect on its consolidated financial statements.

In September 2015, the FASB issued ASU No. 2015-16 Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, which eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. ASU No. 2015-16 is effective for the Company on a prospective basis on January 1, 2016. Early adoption is permitted for any interim and annual financial statements that have not yet been made available for issuance. The Company is currently evaluating the impact of ASU No. 2015-16 on its consolidated financial statements.

2. TRANSACTIONS BETWEEN ENTITIES UNDER COMMON CONTROL

Recast of Historical Financial Statements

The Company is required to recast historical financial statements when renewable energy facilities are acquired from SunEdison. The recast reflects the assets and liabilities and the results of operations of the acquired renewable energy facilities for the period the facilities were owned by SunEdison, which is in accordance with applicable rules over transactions between entities under common control. The Company has modified the presentation of its condensed consolidated statement of operations to separate pre-acquisition net (loss) income of projects acquired from SunEdison from net loss attributable to Class A common stockholders.

During the nine months ended September 30, 2015, the Company acquired renewable energy facilities with a combined nameplate capacity of 347.2 MW from SunEdison, which resulted in a recast of the consolidated balance sheet as of December 31, 2014, and the related consolidated statement of cash flows for the nine months ended September 30, 2015. One of these facilities was in operation in 2014, which resulted in a recast of the condensed consolidated statement of operations and condensed consolidated statement of comprehensive income (loss) for the three and nine months ended September 30, 2014.

The following table presents changes to the Company's previously reported consolidated balance sheet as of December 31, 2014 included in the Company's Current Report on Form 8-K dated September 4, 2015:
(In thousands)
Balance Sheet Caption
 
As Previously Recasted
 
Recast Adjustments
 
As Recasted
Renewable energy facilities, net
 
$
2,637,139

 
$
9,721

 
$
2,646,860

Change in total assets
 
 
 
$
9,721

 

 
 
 
 
 
 
 
Current portion of long-term debt
 
$
97,412

 
$
3,076

 
$
100,488

Due to SunEdison, net
 
186,435

 
6,645

 
193,080

Change in total liabilities
 

 
$
9,721

 



12

TERRAFORM POWER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents changes to the Company's previously reported condensed consolidated statement of cash flows for the nine months ended September 30, 2014:
(In thousands)
Statement of Cash Flows Caption
 
As Reported
 
Recast Adjustments
 
As Recasted
Cash flows from operating activities:
 
 
 
 
 
 
Depreciation, accretion and amortization
 
$
21,053

 
$
579

 
$
21,632

Changes in assets and liabilities:
 
 
 
 
 


Accounts receivable
 
(32,937
)
 
(21
)
 
(32,958
)
Accounts payable, accrued interest, and other current liabilities
 
28,738

 
(336
)
 
28,402

Other, net
 
6,376

 
48

 
6,424

Cash flows from investing activities:
 
 
 
 
 
 
Cash paid to third parties for renewable energy facility construction
 
(614,056
)
 
(152,780
)
 
(766,836
)
Cash flows from financing activities:
 
 
 
 
 
 
Borrowings of project-level long-term debt
 
191,073

 
7,264

 
198,337

Payment of deferred financing costs
 
(42,880
)
 
59

 
(42,821
)
Due to SunEdison, net
 

 
146,246

 
146,246

Net increase in cash and cash equivalents
 
258,661

 

 
258,661

Effect of exchange rate changes on cash and cash equivalents
 
(342
)
 

 
(342
)
Cash and cash equivalents at end of period
 
259,363

 

 
259,363


The following table presents changes to the Company's previously reported condensed consolidated statement of operations for the three and nine months ended September 30, 2014:
 
Three Months Ended September 30, 2014
 
Nine Months Ended September 30, 2014
(In thousands)
Statement of Operations Caption
As Reported
 
Recast Adjustments
 
As Recasted
 
As Reported
 
Recast Adjustments
 
As Recasted
Operating revenues, net
$
53,221

 
$
345

 
$
53,566

 
$
83,298

 
$
1,038

 
$
84,336

Change in total operating revenues
 
 
$
345

 
 
 
 
 
$
1,038

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of operations
$
4,205

 
$
19

 
$
4,224

 
$
6,051

 
$
63

 
$
6,114

Cost of operations - affiliate
2,774

 
40

 
2,814

 
3,911

 
120

 
4,031

Depreciation, accretion and amortization
13,052

 
193

 
13,245

 
21,053

 
579

 
21,632

Interest expense, net
22,466

 
440

 
22,906

 
53,217

 
1,335

 
54,552

Change in costs and expenses
 
 
692

 
 
 
 
 
2,097

 
 
Change in net loss
 
 
$
(347
)
 


 
 
 
$
(1,059
)
 
 

Acquisitions of Renewable Energy Facilities from SunEdison

The assets and liabilities transferred to the Company for the acquisitions of renewable energy facilities relate to interests under common control with SunEdison, and accordingly, have been recorded at historical cost. The difference between the cash purchase price and historical cost of the net assets acquired has been recorded as a distribution to SunEdison, which reduced the balance of its non-controlling interest in the Company.


13

TERRAFORM POWER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the renewable energy facilities acquired by the Company from SunEdison through a series of transactions:
 
 
 
 
 
 
Nine Months Ended September 30, 2015
 
As of September 30, 2015
Facility Size
 
Type
 
Location
 
Nameplate Capacity (MW)
 
Number of Sites
 
Initial Cash Paid
 
Estimated Cash Due to SunEdison1
 
Debt Assumed2
 
Debt Transferred3
Distributed Generation
 
Solar
 
U.S.
 
71.9

 
48

 
$
116,541

 
$
15,159

 
$

 
$

Residential
 
Solar
 
U.S.
 
6.3

 
889

 
11,715

 

 

 

Utility
 
Solar
 
U.S.
 
54.7

 
9

 
17,779

 
66,464

 

 
60,903

Utility
 
Solar
 
U.K.
 
214.3

 
14

 
141,949

 
9,417

 
210,501

 

Total
 
 
 
 
 
347.2

 
960

 
$
287,984

 
$
91,040

 
$
210,501

 
$
60,903

————
(1)
Represents a commitment by the Company to SunEdison which is not recorded on the Company's balance sheet as of September 30, 2015.
(2)
Represents debt recorded on the Company's balance sheet as of September 30, 2015. This debt was assumed by the Company as of the acquisition date.
(3)
Represents debt recorded on the Company's balance sheet as of September 30, 2015. This debt will be repaid by SunEdison during the fourth quarter of 2015 using cash proceeds paid by the Company to SunEdison for the acquisition of these facilities.

During the nine months ended September 30, 2015, the Company paid $245.4 million to SunEdison for the acquisition of renewable energy facilities that had achieved commercial operations as of September 30, 2015 and recorded a distribution to SunEdison of $14.6 million. Additionally, during the nine months ended September 30, 2015, the Company paid $42.6 million to SunEdison for facilities acquired from SunEdison that had not achieved commercial operations as of September 30, 2015.

Results of Operations

The following table is a summary of the results of operations for the renewable energy facilities acquired by the Company from SunEdison during the nine months ended September 30, 2015:
(In thousands)
 
Nine Months Ended September 30, 2015
Operating revenues, net
 
$
28,880

Operating expenses
 
17,328

Operating income
 
11,552

Interest expense, net
 
6,858

Other income
 
6,160

Net income
 
$
10,854


3. ACQUISITIONS

2015 Acquisitions

Acquisition of First Wind

On January 29, 2015, the Company, through TerraForm Power, LLC ("Terra LLC"), acquired from First Wind Holdings, LLC (together with its subsidiaries, “First Wind”) 521.1 MW of operating renewable energy assets, including 500.0 MW of wind power plants and 21.1 MW of solar generation facilities (the “First Wind Acquisition”). The operating renewable energy assets the Company acquired are located in Maine, New York, Hawaii, Vermont and Massachusetts and are contracted under power purchase agreements ("PPAs") or equivalent energy hedges and certain of the projects also receive revenue from renewable energy certificates ("RECs"). The cash purchase price for this acquisition was $810.4 million, net of cash acquired.


14

TERRAFORM POWER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Acquisition of Northern Lights Solar Generation Facilities
 
On June 30, 2015, the Company acquired two utility scale, ground mounted solar generation facilities ("Northern Lights") from Invenergy Solar LLC. The facilities are located in Ontario, Canada and have a total nameplate capacity of 25.7 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 purchase price for this acquisition was 125.4 million Canadian Dollars ("CAD") (equivalent of $101.1 million), net of cash acquired, including the repayment of project-level debt and breakage fees for the termination of interest rate swaps.

Acquisition of Other Solar Generation Facilities

During the nine months ended September 30, 2015, the Company acquired 66 solar generation facilities with a combined nameplate capacity of 37.5 MW for a purchase price of $90.9 million, net of cash acquired, and $15.9 million of project-level debt assumed in a series of transactions with third parties. The facilities are located in Arizona, California, Connecticut, Massachusetts, New Jersey and Pennsylvania, as well as 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.     

Initial Accounting for the 2015 Acquisitions

The initial accounting for the 2015 acquisitions has not been completed because the evaluation necessary to assess the fair values of certain net assets acquired is still in process. The provisional amounts for these acquisitions, included in the table within the "Acquisition Accounting" section of this footnote below, are subject to revision until these evaluations are completed. The estimated fair value of assets, liabilities, and non-controlling interest pertaining to First Wind reflect the following changes from the previous period: an increase to renewable energy facilities of $9.2 million, an increase to accounts receivable of $3.1 million, an increase to intangible assets of $9.6 million, an increase to accounts payable and other-long term liabilities of $17.4 million and an increase to asset retirement obligations of $4.2 million.

The operating revenues and net income of the facilities acquired in 2015 reflected in the unaudited condensed consolidated statement of operations for the nine months ended September 30, 2015 are $107.9 million and $34.2 million, respectively.

2014 Acquisitions
    
During the year ended December 31, 2014, the Company acquired various facilities referred to as Mt. Signal, Stonehenge Operating Projects, Capital Dynamics and Hudson Energy, as well as various other renewable energy facilities. The acquisition accounting for certain of these facilities was completed during 2015, at which point the provisional fair values became final.

The final estimated fair value of assets, liabilities and non-controlling interests is included in the table within the "Acquisition Accounting" section of this footnote below and do not reflect any material changes from amounts previously reported. The initial accounting for the acquisitions of Capital Dynamics and Hudson Energy are not complete because the evaluations necessary to assess the fair values of certain net assets acquired are still in process.

The estimated fair value of assets, liabilities, and non-controlling interest pertaining to Capital Dynamics reflect the following changes from the previous period: an increase of $2.1 million in accounts receivable, prepaid expenses, and other current assets, an increase of $31.7 million in renewable energy facilities, an increase of $26.8 million in deferred tax liabilities, and an increase of $6.3 million in other long-term liabilities. The provisional amounts for the Capital Dynamics and Hudson Energy acquisitions, included in the table within the "Acquisition Accounting" section of this footnote below, are subject to revision until these evaluations are completed. The acquisition accounting for Mt. Signal, Stonehenge Operating Projects and various other 2014 acquisitions were finalized in previous periods.


15

TERRAFORM POWER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Unaudited Pro Forma Supplementary Data

The unaudited pro forma supplementary data presented in the table below gives effect to the material 2015 acquisitions, First Wind and Northern Lights, as if those transactions had each occurred on January 1, 2014. The unaudited pro forma supplementary data is provided for informational purposes only and should not be construed to be indicative of the Company’s results of operations had the acquisitions been consummated on the date assumed or of the Company’s results of operations for any future date.
 
Nine Months Ended September 30,
(In thousands)
2015
 
2014
Total operating revenues, net
$
380,567

 
$
182,130

Net loss
30,265

 
11,152


Acquisition costs incurred by the Company related to third party acquisitions were $11.3 million and $32.7 million for the three and nine months ended September 30, 2015, respectively, as compared to $4.1 million and $5.4 million for the same periods the prior year. These costs are reflected as acquisition and related costs and acquisition and related costs - affiliate in the unaudited condensed consolidated statements of operations.

Acquisition Accounting

The estimated fair values of assets, liabilities and non-controlling interests pertaining to business combinations as of September 30, 2015, are as follows:
 
 
2015 Preliminary
 
2014 Preliminary
 
2014 Final
(In thousands)
 
First Wind
 
Northern Lights
 
Other
 
Capital Dynamics
 
Other
 
Mt. Signal
 
Other
Renewable energy assets
 
$
793,424

 
$
75,218

 
$
80,939

 
$
251,694

 
$
43,515

 
$
649,570

 
$
211,796

Accounts receivable
 
11,772

 
1,388

 
2,881

 
8,331

 
4,505

 
11,687

 
5,400

Intangible assets
 
124,800

 
25,773

 
31,284

 
74,319

 
14,549

 
119,767

 
107,676

Deferred income taxes
 

 

 

 
23,137

 

 

 

Restricted cash
 
6,630

 

 
827

 
15

 
3,019

 
22,165

 
11,700

Derivative assets
 
44,755

 

 

 

 

 

 

Other assets
 
23,180

 
11

 
331

 
348

 
4,557

 
12,621

 
4,495

Total assets acquired
 
1,004,561

 
102,390

 
116,262

 
357,844

 
70,145

 
815,810


341,067

Accounts payable, accrued expenses and other current liabilities
 
(9,854
)
 
(440
)
 
(409
)
 
(1,478
)
 
(1,475
)
 
(22,725
)
 
(1,540
)
Long-term debt, including current portion
 
(47,400
)
 

 
(15,893
)
 

 
(24,546
)
 
(413,464
)
 
(111,610
)
Deferred income taxes
 

 

 

 
(59,315
)
 

 

 
(927
)
Asset retirement obligations
 
(19,571
)
 
(818
)
 
(5,332
)
 
(13,073
)
 
(3,269
)
 
(4,656
)
 
(14,105
)
Other long-term liabilities
 
(17,562
)
 

 

 
(6,300
)
 
(4,742
)
 

 

Total liabilities assumed
 
(94,387
)
 
(1,258
)
 
(21,634
)
 
(80,166
)
 
(34,032
)
 
(440,845
)

(128,182
)
Redeemable non-controlling interest
 
(3,300
)
 

 

 
(20,496
)
 
(2,250
)
 

 

Non-controlling interest
 
(96,439
)
 

 
(3,762
)
 

 
(600
)
 
(83,310
)
 
(1,400
)
Purchase price, net of cash acquired
 
$
810,435

 
$
101,132

 
$
90,866

 
$
257,182

 
$
33,263

 
$
291,655

 
$
211,485


The acquired renewable energy facilities' non-financial assets represent estimates of the fair value of acquired PPAs and RECs based on significant inputs that are not observable in the market and thus represent a Level 3 measurement (as defined in Note 10. Fair Value Measurements). The estimated fair values were determined based on an income approach and the estimated useful lives of the intangible assets range from 1 to 25 years. See Note 5. Intangibles for additional disclosures related to the acquired intangible assets.

16

TERRAFORM POWER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


Pending Acquisitions

Acquisition of Invenergy Wind Power Plants

On June 30, 2015, the Company entered into a definitive agreement to acquire net ownership of 930.0 MW of operating wind power plants from Invenergy Wind Global LLC (together with its subsidiaries, “Invenergy Wind”) for approximately $1.1 billion in cash and the assumption of approximately $818.0 million of project-level indebtedness. The Company has obtained commitments for a senior unsecured bridge facility of up to $860.0 million to fund the acquisition of these wind power plants (see Note 7. Long-term debt).

The Company is pursuing funding for the portfolio using a combination of cash on hand, assumption of debt, revolver draws and through structured financing arrangements with third party investors in which SunEdison is no longer expected to participate. The Company expects that any such financing arrangements would be structured similarly to warehouse transactions previously consummated by SunEdison and would involve debt and/or preferred security investments by third parties into one or more of the Company's subsidiaries holding these assets.

The wind power plants that the Company will acquire from Invenergy Wind have contracted PPAs with a weighted average remaining contract life of 19 years and an average counterparty credit rating of AA. Invenergy Wind will retain a 9.9% stake in the U.S. that the Company will acquire and will provide certain operation and maintenance services for such assets. Final closing of this acquisition is expected in the fourth quarter of 2015.

Acquisition of Vivint Solar Assets from SunEdison
    
On July 20, 2015, SunEdison and Vivint Solar, Inc. ("Vivint Solar") signed a definitive merger agreement (the “SunEdison/Vivint Merger Agreement”) pursuant to which SunEdison will acquire Vivint Solar for total consideration currently estimated at $1.6 billion, payable in a combination of cash, shares of SunEdison common stock and SunEdison convertible notes. The SunEdison acquisition of Vivint Solar is expected to close in the fourth quarter of 2015 or the first quarter of 2016.

In connection with SunEdison's pending acquisition of Vivint Solar, the Company entered into a definitive purchase agreement (the “Vivint Purchase Agreement”) with SunEdison to acquire Vivint Solar's residential solar generation facilities (the “Vivint Operating Assets”) and an interim agreement (the “Vivint Interim Agreement”) relating to, among other items, the Company’s purchase of additional completed residential and small commercial solar systems for a five year period from the acquired business and the provision of operation and maintenance services by SunEdison for the Vivint Operating Assets.

The Vivint Purchase Agreement provides for, at the closing of the Vivint acquisition by SunEdison, the acquisition of solar systems with an expected nameplate capacity of up to 522.8 MW as of December 31, 2015, which would be valued at up to $922.0 million. In the event the value of the Vivint Operating Assets delivered is less than $922.0 million, the agreement provides that a portion of the purchase price representing the value of the shortfall will be an advance payment (in the form of an interest-bearing, short-term note) for future acquisition of residential systems or other renewable energy facilities from SunEdison. The Company intends to finance this acquisition with existing cash, availability under the Revolver and the assumption or incurrence of project-level debt or other corporate debt. Additionally, on July 20, 2015, the Company obtained commitments for a senior unsecured bridge facility (see Note 7. Long-term debt) which provides the Company with up to $960.0 million to fund the acquisition of the Vivint Operating Assets, including related acquisition costs, if the intended financing plan above cannot be achieved.


17

TERRAFORM POWER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. RENEWABLE ENERGY FACILITIES

Renewable energy facilities, net consists of the following: 
(In thousands)
 
September 30, 2015
 
December 31, 2014
Renewable energy facilities in service, at cost
 
$
4,016,414

 
$
2,241,728

Less accumulated depreciation - renewable energy facilities
 
(146,522
)
 
(52,981
)
Renewable energy facilities in service, net
 
3,869,892

 
2,188,747

Construction in progress - renewable energy facilities
 
111,859

 
458,113

Total renewable energy facilities, net
 
$
3,981,751

 
$
2,646,860


Depreciation expense related to renewable energy facilities was $35.7 million and $93.5 million for the three and nine months ended September 30, 2015, respectively, as compared to $12.3 million and $20.0 million for the same periods in the prior year.

Construction in progress represents $111.9 million of costs incurred to complete the construction of the facilities in the Company's current portfolio that were either contributed by or acquired from SunEdison. When projects are contributed or sold to the Company after completion by SunEdison, the Company retroactively recasts its historical financial statements to present the construction activity as if it consolidated the facility at inception of the construction. All construction in progress costs are stated at SunEdison's historical cost. These costs include capitalized interest costs and amortization of deferred financing costs incurred during the asset's construction period, which totaled $2.0 million and $6.8 million for the three and nine months ended September 30, 2015, respectively, and as compared to $12.3 million and $20.5 million for the same periods in the prior year.

5. INTANGIBLES

The following table presents the gross carrying amount and accumulated amortization of intangibles as of September 30, 2015:
(In thousands, except weighted average amortization period)
 
Weighted Average Amortization Period
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Book Value
Favorable rate revenue contracts
 
14 years
 
$
79,081

 
$
(4,481
)
 
$
74,600

In-place value of market rate revenue contracts
 
18 years
 
446,061

 
(19,601
)
 
441,760

Favorable rate land leases
 
19 years
 
15,300

 
(605
)
 
14,695

Total intangible assets, net
 
 
 
$
540,442

 
$
(24,687
)
 
$
531,055

 
 
 
 
 
 
 
 
 
Unfavorable rate revenue contracts
 
6 years
 
$
23,500

 
$
(2,647
)
 
$
20,853

    
The following table presents the gross carrying amount and accumulated amortization of intangibles as of December 31, 2014:
(In thousands, except weighted average amortization period)
 
Weighted Average Amortization Period
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Book Value
Favorable rate revenue contracts
 
21 years
 
$
367,813

 
$
(6,140
)
 
$
361,673

    
As of September 30, 2015 and December 31, 2014, the Company had intangible assets related to revenue contracts, representing long-term PPAs and REC agreements, and land leases that were obtained through acquisitions (see Note 3. Acquisitions). The revenue contract intangible assets are comprised of favorable rate PPAs and REC agreements and the in-place value of market rate PPAs and REC agreements. As of September 30, 2015, the Company also had intangible liabilities related to unfavorable rate REC agreements, which are classified as other long-term liabilities in the unaudited condensed consolidated balance sheet. These intangible assets and liabilities are amortized on a straight-line basis over the remaining lives of the agreements, which range from 1 to 25 years as of September 30, 2015.

18

TERRAFORM POWER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


Amortization expense related to favorable rate revenue contracts is reflected in the unaudited condensed consolidated statements of operations as a reduction of operating revenues, net. Amortization expense related to unfavorable rate revenue contracts is reflected in the unaudited condensed consolidated statements of operations as an increase to operating revenues, net. During the three and nine months ended September 30, 2015, amortization expense related to favorable and unfavorable rate revenue contracts resulted in a decrease to operating revenues, net of $3.4 million and an increase to operating revenues, net of $1.6 million, respectively. Amortization expense was $2.8 million and 3.6 million during the three and nine months ended September 30, 2014, respectively, and resulted in an increase in operating revenues, net.

Amortization expense related to the in-place value of market rate revenue contracts and favorable rate land leases is reflected in the unaudited condensed consolidated statements of operations as depreciation, accretion and amortization. During the three and nine months ended September 30, 2015, amortization expense related to the in-place value of market rate revenue contracts and favorable rate land leases were $6.0 million and $15.1 million, respectively. There was no amortization expense related to the in-place value of market rate revenue contracts and favorable rate land leases during the three and nine months ended September 30, 2014.

6. VARIABLE INTEREST ENTITIES

The Company is the primary beneficiary of 14 variable interest entities ("VIEs") in renewable energy facilities that were consolidated as of September 30, 2015, nine of which existed and were consolidated as of December 31, 2014. The VIEs own and operate renewable energy facilities in order to generate contracted cash flows. The VIEs were funded through a combination of equity contributions from the owners and non-recourse, project-level debt. No VIEs were deconsolidated during the nine months ended September 30, 2015 and 2014.

The carrying amounts and classification of the consolidated VIEs’ assets and liabilities included in the Company's unaudited condensed consolidated balance sheet are as follows:
(In thousands)
 
September 30, 2015
 
December 31, 2014
Current assets
 
$
107,841

 
$
69,955

Non-current assets
 
2,107,300

 
1,756,276

Total assets
 
$
2,215,141

 
$
1,826,231

Current liabilities
 
$
127,533

 
$
64,324

Non-current liabilities
 
783,320

 
707,989

Total liabilities
 
$
910,853

 
$
772,313


The amounts shown above in the table exclude any potential VIEs under the First Wind Acquisition as the Company has not completed the initial acquisition accounting related to this business combination. All of the assets in the table above are restricted for settlement of the VIE obligations, and all of the liabilities in the table above can only be settled by using VIE resources.


19

TERRAFORM POWER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

7. LONG-TERM DEBT
    
Long-term debt consists of the following: 
(In thousands, except rates)
Description:
 
September 30, 2015
 
December 31, 2014
 
Interest Type
 
Current Interest Rate (%)
 
Financing Type
Corporate-level long-term debt:
 
 
 
 
 
 
 
 
 
 
Term Loan
 
$

 
$
573,500

 
Variable
 
5.33¹
 
Term debt
Senior Notes due 2023
 
950,000

 

 
Fixed
 
5.88
 
Senior notes
Senior Notes due 2025
 
300,000

 

 
Fixed
 
6.13
 
Senior notes
Project-level long-term debt:
 
 
 
 
 
 
 
 
 
 
Permanent financing
 
829,759

 
824,167

 
Blended2
 
6.0³
 
Term debt / Senior notes
Construction financing
 
331,690

 
174,458

 
Variable
 
3.8³
 
Construction debt
Financing lease obligations
 
137,394

 
126,167

 
Imputed
 
6.4³
 
Financing lease obligations
Total principal due for long-term debt and financing lease obligations
 
2,548,843

 
1,698,292

 
 
 
6.2³
 
 
Less current maturities
 
(115,203
)
 
(100,488
)
 
 
 
 
 
 
Net unamortized (discount) premium
 
(2,458
)
 
1,473

 
 
 
 
 
 
Long-term debt and financing lease obligations, less current portion
 
$
2,431,182

 
$
1,599,277

 
 
 
 
 
 
———
(1)
The Company entered into an interest rate swap agreement fixing the interest rate at 5.33%. The swap agreement was terminated upon repayment of the Term Loan.
(2)
Includes variable rate debt and fixed rate debt. As of September 30, 2015, 67% of this balance had a fixed interest rate and the remaining 33% of this balance had a variable interest rate. The Company has entered into interest rate swap agreements to fix the interest rates of all variable rate permanent financing project-level debt (see Note 9. Derivatives).
(3)
Represents the weighted average effective interest rate as of September 30, 2015.

Corporate-level Long-term Debt

Term Loan
    
On January 28, 2015, the Company repaid the remaining outstanding principal balance on the term loan facility (the "Term Loan") of $573.5 million. The Company recognized a $12.0 million loss on the extinguishment of debt during the nine months ended September 30, 2015 as a result of this repayment.

Revolving Credit Facilities

On January 28, 2015, the Company's indirect subsidiary, TerraForm Power Operating, LLC ("Terra Operating LLC") replaced its existing revolver with a new $550.0 million revolving credit facility (the "Revolver"). The Revolver consists of a revolving credit facility in an amount of at least $550.0 million available for revolving loans and letters of credit. The Company recognized a $1.3 million loss on the extinguishment of debt during the nine months ended September 30, 2015 as a result of the revolver exchange.

On May 1, 2015, Terra Operating LLC exercised its option to increase its borrowing capacity under the Revolver by $100.0 million. On August 11, 2015, Terra Operating LLC exercised its option to further increase its borrowing capacity under the Revolver by $75.0 million. As a result of these transactions, the Company had a total borrowing capacity of $725.0 million under the Revolver as of September 30, 2015. Terra Operating LLC is permitted to further increase the borrowing capacity under the Revolver to up to $1.0 billion in the aggregate. There were no revolving loan amounts outstanding under the Revolver as of September 30, 2015 or December 31, 2014.

The Revolver matures on January 28, 2020. Each of Terra Operating LLC's existing and subsequently acquired or organized domestic restricted subsidiaries (excluding non-recourse subsidiaries) and Terra LLC are or will become guarantors under the Revolver.

20

TERRAFORM POWER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


At Terra Operating LLC’s option, all outstanding amounts under the Revolver 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. As of September 30, 2015, the applicable base rate and Eurodollar rate margins were 1.25% and 2.25%, respectively.

The 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 Revolver by Terra Operating LLC or its restricted subsidiaries.

The Revolver, each guaranty and any interest rate, currency hedging or hedging of REC obligations of Terra Operating LLC or any guarantor owed to the administrative agent, any arranger or any lender under the 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 Terra Operating LLC and each of its domestic restricted subsidiaries and 65% of the capital stock of each of Terra Operating LLC’s foreign restricted subsidiaries, and (iii) all intercompany debt. Notwithstanding the foregoing, collateral under the Revolver excludes the capital stock and assets of non-recourse subsidiaries.

Senior Notes due 2023

On January 28, 2015, Terra Operating LLC issued $800.0 million of 5.875% senior notes due 2023 at an offering price of 99.214% of the principal amount. Terra Operating LLC used the net proceeds from this offering to fund a portion of the purchase price payable in the First Wind Acquisition.

On June 11, 2015, Terra Operating LLC issued an additional $150.0 million of 5.875% senior notes due 2023 (collectively, with the $800.0 million initially issued, the "Senior Notes due 2023"). The offering price of the additional $150.0 million of notes was 101.5% of the principal amount and Terra Operating LLC used the net proceeds from the offering to repay existing borrowings under the Revolver. The Senior Notes due 2023 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.

Senior Notes due 2025

On July 17, 2015, Terra Operating LLC issued $300.0 million of 6.125% senior notes due 2025 at an offering price of 100% of the principal amount (the "Senior Notes due 2025"). Terra Operating LLC intends to use the net proceeds from the offering to fund a portion of the purchase price of the acquisition of the wind power plants from Invenergy Wind or to finance other renewable energy facility acquisitions. The Senior Notes due 2025 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.

Invenergy Bridge Facility

On July 1, 2015, the Company obtained commitments for a senior unsecured bridge facility which provides the Company with up to $1,160.0 million to fund the acquisition of the wind power plants from Invenergy Wind. On July 17, 2015, the Company terminated $300.0 million of the bridge facility commitment upon the issuance of the Company's Senior Notes due 2025. Amortization of deferred financing costs recorded as interest expense related to this bridge facility was $5.1 million during the three and nine months ended September 30, 2015.

Vivint Solar Bridge Facility

On July 20, 2015, the Company obtained commitments for a senior unsecured bridge facility which provides the Company with up to $960.0 million to fund certain operating assets the Company expects to acquire from SunEdison in connection with its pending acquisition of Vivint Solar. Amortization of deferred financing costs recorded as interest expense related to this bridge facility was $4.8 million during the three and nine months ended September 30, 2015.


21

TERRAFORM POWER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Project-level Long-term Debt

The Company's renewable energy facilities have long-term debt obligations in separate legal entities. The Company typically finances its renewable energy facilities through project entity specific debt secured by the renewable energy facility's assets (mainly the renewable energy facility) with no recourse to the Company. Typically, these financing arrangements provide for a construction loan, which upon completion may or may not be converted into a term loan.

SunE Perpetual Lindsay

A construction term loan to finance and develop the construction of the SunE Perpetual Lindsay utility-scale solar power plant was entered into during 2014. During the nine months ended September 30, 2015, SunEdison repaid the remaining outstanding principal balance of CAD 47.7 million (equivalent of $38.6 million) due on the SunE Perpetual Lindsay construction term loan on the Company's behalf which was recorded as a capital contribution from SunEdison on the statement of equity.

Financing Lease Obligations

In certain transactions, the Company accounts for the proceeds of sale leasebacks as financings, which are typically secured by the renewable energy facility asset and its future cash flows from energy sales, and without recourse to the Company under the terms of the arrangement.

As a result of the First Wind Acquisition, the Company acquired approximately $47.4 million of financing lease obligations. The financing lease obligations assumed by the Company include those pursuant to a sale-leaseback agreement, entered into by First Wind on November 21, 2012, whereby First Wind sold substantially all of the property, plant and equipment of the related wind power plant to a financial institution and simultaneously entered into a long-term lease with that financial institution for the use of the assets. Under the terms of the agreement, the Company will continue to operate the wind facility and has the option to extend the lease or repurchase the assets sold at the end of the lease term.

Debt Extinguishments

The Company repaid certain long-term indebtedness for the renewable energy facilities acquired as part of the First Wind Acquisition. The Company recognized a loss on the extinguishment of debt of $6.4 million during the nine months ended September 30, 2015 as a result of this repayment.

On May 22, 2015, SunEdison acquired the lessor interest in an operating solar generation facility referred to as the Duke Energy operating facility and concurrently sold the facility to the Company. Upon acquisition of this operating facility, the Company recognized a net gain on the extinguishment of debt of $11.4 million&#