TerraForm Power, Inc. (TERP)

FORM 10-K | Annual Report
TerraForm Power, Inc. (Form: 10-K, Received: 12/05/2016 06:15:41)

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _____________________________________________________________________________
FORM 10-K
 _____________________________________________________________________________
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 2015
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 001-36542
 ______________________________________________________________
IMAGE0A07.JPGClick to enlarge
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)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Exchange on Which Registered
Common Stock, Class A, par value $0.01
 
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None
 ______________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.     o   Yes     x   No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     o   Yes     x   No
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.     o   Yes     x   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   o     No   x
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   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
 
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
As of June 30, 2016, the last business day of the registrant's most recently completed second fiscal quarter, the aggregate market value of the voting and non-voting common equity of the registrant, held by non-affiliates of the registrant (based upon the closing sale price of shares of Class A common stock of the registrant on the Nasdaq Global Select Market on such date), was approximately $1.0 billion .
As of November 30, 2016, there were  91,349,263  shares of Class A common stock outstanding and 48,202,310 shares of Class B common stock outstanding.
 



TerraForm Power, Inc. and Subsidiaries
Table of Contents
Form 10-K
 
 
Page
 
 
 
 
 
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
 
 
 
 
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
 
 
 
 
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
 
 
 
Item 15.




CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. These statements involve estimates, expectations, projections, goals, assumptions, known and unknown risks, and uncertainties and typically include words or variations of words such as “expect,” “anticipate,” “believe,” “intend,” “plan,” “seek,” “estimate,” “predict,” “project,” “goal,” “guidance,” “outlook,” “objective,” “forecast,” “target,” “potential,” “continue,” “would,” “will,” “should,” “could,” or “may” or other comparable terms and phrases. All statements that address operating performance, events, or developments that the Company expects or anticipates will occur in the future are forward-looking statements. They may include estimates of expected cash available for distribution, earnings, revenues, capital expenditures, liquidity, capital structure, future growth, financing arrangements and other financial performance items (including future dividends per share), descriptions of management’s plans or objectives for future operations, products, or services, or descriptions of assumptions underlying any of the above. Forward-looking statements provide the Company’s current expectations or predictions of future conditions, events, or results and speak only as of the date they are made. Although the Company believes its expectations and assumptions are reasonable, it can give no assurance that these expectations and assumptions will prove to have been correct and actual results may vary materially.

Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are listed below and further disclosed under the section entitled Item 1A. Risk Factors:

risks related to our relationship with SunEdison;
risks related to the SunEdison Bankruptcy, including our transition away from reliance on SunEdison for management, corporate and accounting services, employees, critical systems and information technology infrastructure, and the operation, maintenance and asset management of our renewable energy facilities;
risks related to events of default and potential events of default arising under (i) our revolving credit facility (the “Revolver”), (ii) the indentures governing our Senior Notes due 2023 and 2025 (the "Indentures"), and/or (iii)
project-level financings and other agreements related to the SunEdison Bankruptcy, our failure to obtain corporate and/or project level audits, SunEdison’s failure to perform its obligations under project level agreements, and/or related adverse effects on our business and operations (including the delay in our SEC filings) and other factors;
risks related to failure to satisfy the requirements of the Nasdaq, which could result in delisting of our common stock;
risks related to our exploration and potential execution of strategic alternatives;
our ability to integrate the renewable energy facilities we acquire from third parties or otherwise and realize the anticipated benefits from such acquisitions;
the willingness and ability of the counterparties to our offtake agreements to fulfill their obligations under such agreements;
price fluctuations, termination provisions and buyout provisions related to our offtake agreements;
our ability to enter into contracts to sell power on acceptable terms as our offtake agreements expire;
our ability to successfully identify, evaluate and consummate acquisitions;
government regulation, including compliance with regulatory and permit requirements and changes in market rules, rates, tariffs, environmental laws and policies affecting renewable energy, particularly any such changes that may be implemented following the recent elections in the U.S.;
operating and financial restrictions placed on us and our subsidiaries related to agreements governing our indebtedness and other agreements of certain of our subsidiaries and project-level subsidiaries generally and in our Revolver and the Indentures;
the condition of the debt and equity capital markets and our ability to borrow additional funds and access capital markets, as well as our substantial indebtedness and the possibility that we may incur additional indebtedness going forward;
our ability to compete against traditional and renewable energy companies;
hazards customary to the power production industry and power generation operations such as unusual weather conditions, catastrophic weather-related or other damage to facilities, unscheduled generation outages, maintenance or repairs, interconnection problems or other developments, environmental incidents, or electric transmission constraints and curtailment and the possibility that we may not have adequate insurance to cover losses as a result of such hazards;
the variability of wind and solar resources, which may result in lower than expected output of our renewable energy facilities;
our ability to expand into new business segments or new geographies;
departure of some or all of the employees providing services to us, particularly executive officers or key employees and operations and maintenance or asset management personnel;



pending and future litigation;
our ability to operate our business efficiently, to operate and maintain our information technology, technical, accounting and generation monitoring systems, to manage capital expenditures and costs tightly, to manage risks related to international operations such as currency exposure and to generate earnings and cash flows from our asset-based businesses in relation to our debt and other obligations, including in light of the SunEdison Bankruptcy and the ongoing process to establish separate information technology and other systems; and
potential conflicts of interests or distraction due to the fact that most of our directors and executive officers are also directors and executive officers of TerraForm Global, Inc.

The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data, or methods, future events, or other changes, except as required by law. The foregoing list of factors that might cause results to differ materially from those contemplated in the forward-looking statements should be considered in connection with information regarding risks and uncertainties, which are described in this annual report, as well as additional factors we may describe from time to time in other filings with the SEC. You should understand that it is not possible to predict or identify all such factors and, consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.



GLOSSARY OF TERMS

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below:
CAFD
 
Cash available for distribution is defined as net cash provided by operating activities of Terra LLC as adjusted for certain other cash flow items that we associate with our operations. It is a non-GAAP measure of our ability to generate cash to service our dividends. CAFD represents net cash provided by (used in) operating activities of Terra LLC (i) plus or minus changes in assets and liabilities as reflected on our statements of cash flows, (ii) minus deposits into (or plus withdrawals from) restricted cash accounts required by project financing arrangements to the extent they decrease (or increase) cash provided by operating activities, (iii) minus cash distributions paid to non-controlling interests in our renewable energy facilities, if any, (iv) minus scheduled project-level and other debt service payments and repayments in accordance with the related borrowing arrangements, to the extent they are paid from operating cash flows during a period, (v) minus non-expansionary capital expenditures, if any, to the extent they are paid from operating cash flows during a period, (vi) plus cash contributions from SunEdison pursuant to the Interest Payment Agreement and the Amended Interest Payment Agreement, (vii) plus operating costs and expenses paid by SunEdison pursuant to the MSA to the extent such costs or expenses exceed the fee payable by us pursuant to such agreement but otherwise reduce our net cash provided by operating activities and (viii) plus or minus operating items as necessary to present the cash flows we deem representative of our core business operations, with the approval of the audit committee.
Call Right Projects
 
Qualifying projects from SunEdison's development pipeline required to be offered to us by SunEdison under the Support Agreement and the Intercompany Agreement, as applicable
GWh
 
Gigawatt hours
ITC
 
Investment tax credit
MWh
 
Megawatt hours
Minimum Quarterly Distribution

 
Class A units and Class B1 units are entitled to receive quarterly distributions in an amount equal to $0.2257 per unit, plus any arrearages in the payment of the Minimum Quarterly Distribution from prior quarters, before any distributions may be made on the Class B units
Nameplate capacity
 
Nameplate capacity for solar generation facilities represents the maximum generating capacity at standard test conditions of a facility (in direct current, "DC") multiplied by our percentage ownership of that facility (disregarding any equity interests held by any non-controlling member or lessor under any sale-leaseback financing or any non-controlling interests in a partnership). Nameplate capacity for wind power plants represents the manufacturer’s maximum nameplate generating capacity of each turbine (in alternating current, "AC") multiplied by the number of turbines at a facility multiplied by our anticipated percentage ownership of that facility (disregarding any equity interests held by any tax equity investor or lessor under any sale-leaseback financing or any non-controlling interests in a partnership).
PPA
 
As applicable, Power Purchase Agreement, energy hedge contract and/or REC or SREC contract
Projected FTM
 
Projected future twelve months
PTC
 
Production tax credit
QF
 
Qualifying small power production facility
REC
 
Renewable energy certificate or SREC
Renewable energy facilities
 
Solar generation facilities and wind power plants
SREC
 
Solar renewable energy certificate



Subordination Period
 
The period from July 23, 2014 until each of the following tests has been met, which will be a minimum three-year period ending no earlier than the beginning of the period for which a distribution is paid for the third quarter of 2017:
 
• distributions of CAFD on each of the outstanding Class A units, Class B units and Class B1 units equaled or exceeded $0.9028 per unit (the annualized Minimum Quarterly Distribution) for each of three non-overlapping, four-quarter periods immediately preceding that date;
 
• the CAFD generated during each of three non-overlapping, four-quarter periods immediately preceding that date equaled or exceeded the sum of $0.9028 per unit (the annualized Minimum Quarterly Distribution) on all of the outstanding Class A units, Class B units and Class B1 units during those periods on a fully diluted basis; and
 
• there are no arrearages in payment of the Minimum Quarterly Distribution on the Class A units or Class B1 units.




PART I

Item 1. Business.

Overview

TerraForm Power, Inc. ("TerraForm Power") and its subsidiaries (the "Company") is a dividend growth-oriented company formed to own and operate contracted clean power generation assets. The Company's business objective is to acquire assets with high-quality contracted cash flows, primarily from owning clean power generation assets serving utility, commercial and residential customers. The Company's portfolio consists of renewable energy facilities located in the United States, Canada, the United Kingdom, and Chile with a combined nameplate capacity of 2,986.9 MW as of October 31, 2016.

TerraForm Power is a holding company and its sole asset is an equity interest in TerraForm Power, LLC, or "Terra LLC." TerraForm Power is the managing member of Terra LLC, and operates, controls and consolidates the business affairs of Terra LLC. Unless otherwise indicated or otherwise required by the context, references to "we," "our," "us," or the "Company" refer to TerraForm Power, Inc. and its consolidated subsidiaries.

Our principal executive offices are located at 7550 Wisconsin Avenue, 9th Floor, Bethesda, Maryland 20814, and our telephone number is (240) 762-7700. Our website address is www.terraformpower.com.



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The diagram below is a summary depiction of our organizational structure as of October 31, 2016:

ORGCHART12216.JPGClick to enlarge
—————
(1)
Both SunEdison, Inc. and SunEdison Holdings Corporation are debtors in the SunEdison Bankruptcy (as defined below). SunEdison’s economic interest is subject to certain limitations on distributions to holders of Class B units during the Subordination Period.
(2)
The economic interest of holders of Class A units, Class B units, and, in turn, holders of shares of Class A common stock, is subject to the right of holders of the incentive distribution rights, or "IDRs," to receive a portion of distributions after certain distribution thresholds are met . On January 22, 2016 , 12,161,844 Class B shares held by SunEdison were converted to 12,161,844 Class A shares and were sold to unaffiliated third parties by SunEdison. After giving effect to the conversion, SunEdison indirectly owns 48,202,310 Class B shares of the Company, holds 84.1% of the voting interest in the Company and owns 34.5% of the economic interests of Terra LLC. SunEdison Holdings Corporation ("Holdings"), which is a wholly owned and controlled subsidiary of SunEdison, owns its Class B common stock, Class B units and Incentive Distribution Rights directly and indirectly through a wholly owned and controlled subsidiary, SunE ML 1, LLC, which is also a debtor in the SunEdison Bankruptcy.
(3)
IDRs represent a variable interest in distributions by Terra LLC and therefore cannot be expressed as a fixed percentage ownership interest in Terra LLC. All of our IDRs are currently issued to Holdings or its direct or indirect, wholly owned subsidiary, SunE ML 1, LLC. In connection with a reset of the target distribution levels, holders of IDRs will be entitled to receive newly issued Class B1 units of Terra LLC and shares of our Class B1 common stock. In the future, we may also elect to issue Class B1 units and Class B1 common stock in connection with acquisitions.
(4)
Represents total borrowing capacity as of December 1, 2016, with availability of $1.9 million as of such date.


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Our Business Strategy

Our primary business strategy is to own and operate a portfolio of renewable energy assets and to pay cash dividends to our stockholders. We also intend to grow our portfolio over time through acquisitions in order to increase the cash dividends we pay to our stockholders.

We have acquired a portfolio of long-term contracted clean power generation assets from SunEdison and unaffiliated third parties that have proven technologies, creditworthy counterparties, low operating risks and stable cash flows. We have focused on the solar and wind energy segments because we believe they are currently the fastest growing segments of the clean energy industry. Solar and wind assets are also attractive because there is no associated fuel cost risk, the technologies have become highly reliable and assets have an estimated expected life of 20 to 30 years.
    
On April 21, 2016, SunEdison Inc. and certain of its domestic and international subsidiaries (the "SunEdison Debtors") voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code (the "SunEdison Bankruptcy"). As a result of the SunEdison Bankruptcy, current limitations on our ability to access the capital markets for our debt and equity securities, and other risks that we face, we have adjusted our focus to executing on our near-term plans and priorities. These near-term business objectives include:

focusing on the performance and efficiency of our existing portfolio of renewable energy facilities;
mitigating, to the extent possible, the adverse impacts resulting from the SunEdison Bankruptcy, including ensuring the continuity of operation, maintenance and asset management of our renewable energy facilities and seeking proposals from and engaging operation and maintenance and asset management services from third party providers to replace SunEdison and its affiliates;
creating a separate stand-alone corporate organization, including, among other things, directly hiring employees and establishing our own accounting, information technology, human resources and other critical systems and infrastructure;
working with project-level lenders and financing parties to cure, or obtain waivers or forbearance of, defaults that have arisen under most of our project-level debt financings as a result of the SunEdison Bankruptcy and delays in delivering project-level audited financial statements, among other things; and
seeking to optimize our portfolio and capital structure by reducing corporate-level indebtedness, financing or refinancing certain renewable energy facilities at the project level, exiting certain markets or selling certain assets if we believe the opportunity would improve stockholder value.

While we remain focused on executing our near-term objectives, we also continue to pursue our long-term business strategy, which is to own, operate and grow our portfolio with assets that have proven technologies, creditworthy counterparties, lower operating risks and stable cash flows in markets with attractive long-term power pricing dynamics and predictable regulatory environments. In addition, in connection with this long-term strategy and the SunEdison Bankruptcy, our Board of Directors (the "Board") has initiated a process to explore and evaluate strategic alternatives to maximize stockholder value, which may include a merger or sale of our entire business or other business combination or sponsorship arrangement.

Recent Developments

Business Update

As of October 31, 2016, our renewable energy generation fleet stands at 2,986.9 MW, over three times the size of our initial portfolio in July 2014. Our fleet is contracted for a weighted average (based on MW) remaining period of 15 years as of October 31, 2016 with creditworthy counterparties and provides significant ongoing cash flow.

SunEdison Bankruptcy

We are not a part of the SunEdison Bankruptcy and have no plans to file for bankruptcy. We do not rely substantially on SunEdison for funding or liquidity and believe that we will have sufficient liquidity to support our ongoing operations. We believe that our equity interests in our renewable energy facilities that are legally owned by our subsidiaries are not available to satisfy the claims of the creditors of the SunEdison Bankruptcy.

As discussed in “Business,” "Risk Factors," “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other sections of this annual report, including our audited consolidated financial statements and the notes thereto contained in this annual report, we currently depend significantly on SunEdison for operational, systems and


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staffing support, among other things. While we continue to evaluate SunEdison's bankruptcy filings and will continue to monitor the conduct of the bankruptcy proceedings and work to assert and enforce any claims that we may have against SunEdison through those proceedings, the SunEdison Bankruptcy may have a material adverse effect on the Company given our reliance on SunEdison as discussed in this Form 10-K. No assurance can be given on the outcome of the SunEdison Bankruptcy. Our Corporate Governance and Conflicts Committee is responsible for oversight and approval of the business and affairs of the Company relating to or involving SunEdison and any of its affiliates (other than the Company), including in connection with the SunEdison Bankruptcy. The matters described in this section entitled “SunEdison Bankruptcy” and other matters that presented conflict of interest issues between the Company and SunEdison have been approved and authorized pursuant to this authority by those members of the Committee in place at the time of making the applicable decision.

During the SunEdison Bankruptcy, SunEdison has not performed substantially as obligated under its agreements with us, including under the sponsorship arrangements consisting of the various corporate-level agreements put in place at the time of the Company's IPO (collectively the "Sponsorship Arrangement") and certain operation and maintenance ("O&M") and asset management arrangements. SunEdison's failure to perform substantially as obligated under its agreements with us, including under the Sponsor Arrangement, project-level O&M and asset management agreements and other support agreements, may have a material adverse effect on the Company. Despite these adverse effects, we expect that we will be able to operate our business without the support of SunEdison pursuant to the plans for transitioning away from reliance on SunEdison that we are in the process of implementing. These plans include, among other things, establishing stand-alone information technology, accounting and other critical systems and infrastructure, directly hiring our employees, and retaining backup or replacement operation and maintenance and asset management services for our wind and solar facilities from other providers. In addition to the one-time costs of implementing a stand-alone organization, our business will be negatively impacted to the extent we are unsuccessful in implementing relevant plans or the resulting ongoing long-term costs are higher than the costs we were expecting to incur with SunEdison as our sponsor.

On September 25, 2016, we filed our initial proof of claim in the SunEdison Bankruptcy case, which was amended on October 7, 2016. As set forth in the proofs of claim, we have unsecured claims against SunEdison that we estimate to be in excess of $1.0 billion. These claims include, without limitation, claims for damages relating to breach of SunEdison's obligations under the sponsorship arrangement between us and SunEdison and other agreements; contribution and indemnification claims arising from litigation; claims relating to SunEdison's breach of fiduciary, agency and other duties; and claims for interference with and the disruption of our business, including the loss of business opportunities, loss of business records, failure to provide timely audited financial statements, and the increased cost of financing and commercial arrangements. Many of these claims are contingent, unliquidated and/or disputed by SunEdison and other parties in interest in the SunEdison Bankruptcy Case, and the estimated amounts of these claims may change substantially as circumstances develop and damages are determined. In addition, recoveries on unsecured claims in the SunEdison Bankruptcy Case are expected to be significantly impaired. On December 1, 2016, the official committee of unsecured creditors of the SunEdison Bankruptcy filed an omnibus objection to the proofs of claim that we filed.

In addition, we believe that we may have claims entitled to administrative priority against SunEdison, including, without limitation, claims with respect to certain expenses that we have incurred after the commencement of the SunEdison Bankruptcy Case; however, we expect SunEdison and other parties in interest in the SunEdison Bankruptcy Case to dispute both the amount of these claims and whether or not these claims are entitled to administrative priority over other claims against SunEdison.

On November 7, 2016, the official committee of unsecured creditors of the SunEdison Bankruptcy filed a notice of motion of leave, standing and authority to commence an action for, and settlement authority with respect to, avoidance claims against us arising intercompany transactions between SunEdison and us. We filed an objection to the standing motion on November 29, 2016. A hearing on the motion is scheduled for December 6, 2016. In addition, in the future, we believe that SunEdison may assert, or other parties with interest in the SunEdison Bankruptcy may seek to assert on SunEdison's behalf, certain claims against us. We intend to vigorously contest any avoidance claims asserted against us in the SunEdison Bankruptcy Case, including to the extent any such claims are brought by the official committee of unsecured creditors if it is successful in its standing motion.

We are currently engaged in settlement discussions with SunEdison to resolve, among other issues, intercompany claims and defenses, including the claims described in the preceding three paragraphs. While these settlement discussions remain ongoing and there can be no guarantee that a settlement will be reached, we believe that a successful settlement will facilitate our exploration of strategic alternatives. Any settlement would be subject to the approval of the bankruptcy court in the SunEdison Bankruptcy.

In most of our debt-financed projects, SunEdison Debtors are a party to a material project agreement or guarantor


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thereof, such as being a party to or guarantor of an asset management or O&M contract. As a result of the SunEdison Bankruptcy and delays in delivery of audited financial statements for certain project-level subsidiaries, among other things, we have experienced defaults under most of our non-recourse financing agreements; however, these defaults are generally curable. We are currently working with our project lenders and finance parties to obtain waivers and/or forbearance agreements as we seek to cure such defaults. To date none of the non-recourse financings has been accelerated and no project-level lender has notified us of such lenders election to enforce project security interests. While we have obtained waivers or temporary forbearances with respect to certain of these project-level defaults, no assurances can be given that we will obtain waivers and/or permanent forbearance agreements for the remaining projects, or that none of the financings will be accelerated. We are continuing to monitor the situation and are developing and implementing plans to obtain operation and maintenance and asset management services for our renewable energy facilities from third parties. Our Revolver and Indentures do not include an event of default provision directly triggered by the SunEdison Bankruptcy.

To date, we have not identified any significant power purchase agreement that includes a provision that would currently permit the offtake counterparty to terminate the agreement due to the event of the SunEdison Bankruptcy. However, to date we have identified one PPA that contains an event of default that can be triggered if the related project-level credit agreement is accelerated. This project-level credit agreement is currently in default because of (i) the SunEdison Bankruptcy, which resulted in the bankruptcy of certain project counterparties, and (ii) our failure to deliver project-level audited financial statements. This project is expected to provide approximately $11.2 million of project-level cash available for distribution for 2016. We are working to obtain waivers or forbearance agreements from our project level lenders with respect to this project that would avoid triggering this default under the power purchase agreement. Given the importance of maintaining the power purchase agreement for this project, we believe our lenders for this project will likely be incentivized to take steps to avoid defaults under the power purchase agreement.

Our relationship with SunEdison, the ongoing SunEdison Bankruptcy, the delay of this Form 10-K for the year ended December 31, 2015, our delayed Forms 10-Q for the quarter ended March 31, 2016, the quarter ended June 30, 2016 and for the quarter ended September 30, 2016 (as discussed below) and the conditions in the capital markets for our corporate-level debt and equity securities, have increased uncertainty and heightened some of the risks we face. Other aspects of the markets relevant to our business have remained relatively stable, including the expected performance of our renewable energy facilities, long-term offtake agreements, and the credit quality of our offtakers. We have adjusted our plans and priorities in light of these developments. While we remain focused on executing our near term objectives, we will continue to monitor market developments and consider further adjustments to our plans and priorities if required.

Nasdaq Listing Requirements

On March 15, 2016, we received a notification letter from a Director of Nasdaq Listing Qualifications. The notification letter stated that because we had not yet filed our Form 10-K for the year ended December 31, 2015, we were no longer in compliance with Nasdaq Listing Rule 5250(c)(1), which requires timely filing of periodic reports with the SEC. On May 12, 2016, we received an additional notification letter from a Director of Nasdaq Listing Qualifications. The notification letter stated that because we had not yet filed our Form 10-Q for the quarter ended March 31, 2016, and because we remained delinquent in filing our Form 10-K for the year ended December 31, 2015, we were not in compliance with Nasdaq Listing Rule 5250(c)(1). On May 16, 2016, in compliance with the deadline specified in the notification letters, we submitted a plan to Nasdaq as to how we plan to regain compliance with Nasdaq’s continued listing requirements. On May 20, 2016, we received a letter from a Director of Nasdaq Listing Qualifications granting us an exception of 180 calendar days from the due date of the Form 10-K for the year ended December 31, 2015, or until September 12, 2016, to regain compliance with Nasdaq’s continued listing requirements. On August 15, 2016, we received a notification letter from a Director of Nasdaq Listing Qualifications. The notification letter stated that because we had not yet filed our Form 10-Q for the quarter ended June 30, 2016, we were not in compliance with Nasdaq Listing Rule 5250(c)(1). As requested in the notification letter, we submitted an update to our compliance plan describing how we plan to regain compliance with Nasdaq's continued listing requirements.

On September 8, 2016, we received an additional notification letter from a Director of Nasdaq Listing Qualifications. The notification letter stated that due to non-compliance with Nasdaq Listing Rule 5250(c)(1), we would be delisted from The Nasdaq Global Select Market at the opening of business on September 19, 2016 unless we requested a hearing on the determination by 4:00 p.m. Eastern Time on September 15, 2016. On September 9, 2016, we requested a hearing and also requested a stay of the delisting pending the hearing. On September 12, 2016, we received a response from a Nasdaq hearings advisor setting a hearing date of November 3, 2016. On September 19, 2016, we received a letter from Nasdaq granting our request to extend the stay of delisting until the hearings panel makes a decision after the hearing scheduled for November 3, 2016. At the hearing on November 3, 2016, we requested from Nasdaq an extension until March 10, 2017 to regain compliance with Nasdaq’s continued listing requirements with respect to our delayed Form 10-K for the year ended December 31, 2015 and delayed Forms 10-Q for the periods ended March 31, 2016 and June 30, 2016. On November 15, 2016, we received a


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notification letter from a hearings advisor from the Nasdaq Office of General Counsel informing us that the hearings panel granted our request for an extension until March 10, 2017 with respect to these delayed filings. The hearings panel granted us the maximum possible extension until the expiration of the panel’s discretion to allow continued listing while we remain out of compliance with Nasdaq’s continued listing requirements. The hearings panel reserved the right to reconsider the terms of the extension and the Nasdaq Listing and Hearing Review Council may determine to review the hearing panel’s decision.

In addition, on November 15, 2016, we received a notification letter from a Senior Director of Nasdaq Listing Qualifications. The notification letter stated that because we have not yet filed our Form 10-Q for the quarter ended September 30, 2016 and because we remain delinquent in filing our Form 10-K for the year ended December 31, 2015 and Forms 10-Q for the quarters ended March 31, 2016 and June 30, 2016, we are not in compliance with Nasdaq Listing Rule 5250(c)(1), which requires timely filing of periodic reports with the Securities and Exchange Commission. Based on discussions with the hearing panel’s staff, the extension granted by the hearing panel also covers our non-compliance with Nasdaq Listing Rule 5250(c)(1) caused by our failure to timely file our Form 10-Q for the quarter ended September 30, 2016.

Delayed Filing of Forms 10-Q

We have not yet filed our Form 10-Q for the quarter ended March 31, 2016. On May 17, 2016, we filed a Form
12b-25, Notification of Late Filing, with the SEC regarding our delayed Form 10-Q for the quarter ended March 31, 2016 principally due to the need to complete all steps and tasks necessary to finalize our annual financial statements and other disclosures.

We have not yet filed our Form 10-Q for the quarter ended June 30, 2016. On August 10, 2016, we filed a Form
12b-25, Notification of Late Filing, with the SEC regarding our delayed Form 10-Q for the quarter ended June 30, 2016 principally due to the need to complete all steps and tasks necessary to finalize our annual financial statements and other disclosures.

We have not yet filed our Form 10-Q for the quarter ended September 30, 2016. On November 10, 2016, we filed a Form 12b-25, Notification of Late Filing, with the SEC regarding our delayed Form 10-Q for the quarter ended September 30, 2016 principally due to the need to complete all steps and tasks necessary to finalize our annual financial statements and other disclosures.

Governance and management changes

On November 20, 2015, SunEdison exercised its right to designate Mr. Peter Blackmore and Mr. John F. Stark to the Company's Board. Subsequent to such designations, the Board approved an increase in the size of the Board to twelve persons and appointed Mr. Christopher A. Compton to fill the vacancy. The Board also approved the following actions, effective as of November 20, 2015:

Mr. Blackmore was appointed as the new Chairman of the Board following the resignation as Chairman of the Board by Mr. Ahmad R. Chatila;
Mr. Blackmore, Mr. Stark and Mr. Compton were appointed as the sole members of the Corporate Governance and Conflicts Committee of the Board and, as a result, Mr. Mark Lerdal and Mr. Hanif "Wally" Dahya were removed from the Corporate Governance and Conflicts Committee;
Mr. Carlos Domenech Zornoza was removed as President and Chief Executive Officer of the Company and Mr. Brian Wuebbels was appointed to serve as the new President and Chief Executive Officer of the Company on a permanent basis; and
Mr. Alejandro Hernandez was removed as Executive Vice President and Chief Financial Officer of the Company and Mr. Manavendra Sial was appointed to serve as interim Chief Financial Officer of the Company.

Shortly after a recess and prior to removal of Mr. Domenech Zornoza and Mr. Hernandez, Mr. Steven Tesoriere resigned from the Board effective immediately and departed before the continuation of the meeting. On, about or shortly after the conclusion of the meeting of the Board at which the foregoing actions were taken and, in any event after all the foregoing actions were taken, Mr. Francisco “Pancho” Perez Gundin, Mr. Mark Florian and Mr. Lerdal notified the Company of their resignation from the Board, effective immediately. In addition, as a result of and effective upon the termination of Mr. Domenech Zornoza from his position as an employee of SunEdison, Mr. Domenech Zornoza was removed as a member of the Board. Immediately prior to such meeting of the Board, Mr. Lerdal was the chairperson of the Corporate Governance and Conflicts Committee and a member of the Audit Committee of the Board, and Mr. Tesoriere was a member of the Audit Committee of the Board. The resignations of Messrs. Gundin, Florian and Lerdal were the result of their disagreement with the actions described above.


13



On November 22, 2015, Ms. Rebecca Cranna was appointed to serve as Executive Vice President and Chief Financial Officer of the Company on a permanent basis, and Mr. Sial correspondingly stepped down as interim Chief Financial Officer of the Company.

On March 30, 2016, Mr. Wuebbels resigned as President and Chief Executive Officer of the Company and resigned as a member of the Company’s Board. Following Mr. Wuebbels resignation, at the proposal of SunEdison, Mr. Ilan Daskal, the Chief Financial Officer Designee and Executive Vice President of SunEdison, was appointed to be a member of the Company's Board.

In connection with Mr. Wuebbels' resignation, the Board delegated all of the powers, authority and duties
vested in the President and Chief Executive Officer to the Chairman of the Board, Mr. Blackmore. From March 30, 2016 until
April 21, 2016, Mr. Blackmore served as the chairman of the Office of the Chairman. On April 21, 2016, the Board dissolved the Office of the Chairman and Mr. Blackmore was appointed as Interim Chief Executive Officer in addition to his role as Chairman of the Board.

In connection with this appointment, Mr. Blackmore ceased to be a member of the Conflicts Committee. Mr. Stark was appointed as the Chairman of the Conflicts Committee and Mr. Dahya was designated as a member of this committee.

On May 25, 2016, at the proposal of SunEdison, the Board appointed Mr. David Ringhofer to be a member of the Board effective upon the resignation of Mr. Ahmad Chatila. Pursuant to an agreement entered into with SunEdison on May 26, 2016, the Company has undertaken to include Mr. Ringhofer as a nominee to the Board on the slate of directors to be elected at the next annual meeting of stockholders of the Company, unless Mr. Ringhofer resigns or is otherwise unable to serve as a director. 
    
On May 26, 2016, Mr. Ahmad Chatila resigned from his position as a director of the Board. The resignation was contingent upon, and effective immediately prior to, the appointment of Mr. David Ringhofer as a member of the Board.

    
On June 24, 2016, Mr. Daskal resigned from his position as a director of the Board. The resignation was contingent upon, and effective immediately prior to, the appointment of Mr. Gregory Scallen as an observer of the Board. The resignation did not alter Mr. Daskal’s prior approval by written consent to the appointment of Mr. Scallen to the Board as observer or director, as described below.
On June 24, 2016, at the proposal of SunEdison, the Board appointed Mr. Gregory Scallen as an observer of the Board, effective upon the resignation of Mr. Daskal and continuing until July 24, 2016, or until his earlier death, resignation or removal. Mr. Scallen became a director on the Board on July 24, 2016. 

On June 30, 2016, the Board appointed Mr. Thomas Studebaker as Chief Operating Officer of the Company and Mr. David Rawden as Interim Chief Accounting Officer, which became effective on July 7, 2016.

On August 30, 2016, Mr. Martin Truong resigned from his position as a director of the Board. The resignation was contingent upon, and effective immediately prior to, the appointment of Mr. David Springer to the Board as director. Also on August 30, 2016, the Board executed a unanimous written consent that appointed Mr. Springer to the Board as director.

On November 21, 2016, the Board decided to increase the size of the Board to ten members, and elected Ms. Kerri L. Fox, Mr. Edward "Ned" Hall, and Mr. Marc S. Rosenberg to become independent members of the Company's Board effective immediately. In contrast to all our other directors, Ms. Fox and Messrs. Hall and Rosenberg are not also members of the board of directors of TerraForm Global, Inc.

Creation of LLC Conflicts Committee

On June 1, 2016, TerraForm Power, acting in its capacity as sole managing member of Terra LLC, adopted an amendment (the “Holdings LLC Agreement Amendment”) to the Amended and Restated Limited Liability Company Agreement of Terra LLC, dated as of July 23, 2014 (as amended from time to time, the “Holdings LLC Agreement”). Pursuant to the Holdings LLC Agreement Amendment, until the first annual meeting of TerraForm Power’s stockholders held after December 31, 2016, TerraForm Power delegated to the Conflicts Committee the exclusive power to exercise all of its rights, powers and authority as the sole managing member of Terra LLC to manage and control the business and affairs of Terra LLC and its controlled affiliates relating to or involving SunEdison and any of its affiliates (other than Terra LLC and its controlled affiliates).


14


        
The Holdings LLC Agreement Amendment was approved and authorized by our Corporate Governance and Conflicts Committee, pursuant to the power and authority delegated to it by resolutions of the Board dated March 25, 2016 authorizing the Conflicts Committee, in anticipation of and in connection with a bankruptcy filing by SunEdison, to evaluate and act affirmatively with respect to matters involving or substantially relating to SunEdison, including actions to protect the Company’s contractual and other rights and otherwise to preserve the value of the Company and its assets. On June 1, 2016, the Board reaffirmed the power and authority delegated to the Conflicts Committee by ratifying the adoption of the Holdings LLC Agreement Amendment.

Stockholder Protection Rights Agreement

On July 24, 2016, the Board adopted a Stockholder Protection Rights Agreement (the “Rights Agreement”) and declared a dividend of one Right on each outstanding share of the Company’s Class A common stock. The record date to determine which stockholders are entitled to receive the Rights is August 4, 2016. The Rights Agreement was adopted in response to the potential sale of a significant equity stake in TerraForm Power by SunEdison and the announced accumulation of TerraForm Power Class A shares by entities affiliated with Brookfield Asset Management. 

Dividends

We have not declared or paid a dividend for the fourth quarter of 2015 or the first, second or third quarter of 2016. As a result of the SunEdison Bankruptcy, the limitations on our ability to access the capital markets for our corporate debt and equity securities, and other risks that we face as detailed in this annual report on Form 10-K, we believe it is prudent to defer any decisions on paying dividends to our shareholders for the time being. Further, we cannot give any assurance that there will not be a substantial reduction in any dividends that we pay in the future on an annualized basis in comparison to the annualized dividends that we have paid in the past.

Exploration of Strategic Alternatives

On September 19, 2016, the Company announced that, at the recommendation of our Corporate Governance and Conflicts Committee, our Board has initiated a process to explore and evaluate potential strategic alternatives to maximize stockholder value, including a merger or sale of our entire business or other business combinations or sponsorship arrangements. We have entered into confidentiality arrangements with SunEdison and representatives of certain of its stakeholders to allow us to share confidential information about strategic alternatives and other matters. Certain strategic alternatives for us may require stockholder approval. Since SunEdison is operating under Chapter 11 bankruptcy protection, many decisions made by SunEdison, such as how to vote its shares in TerraForm Power to approve a merger or sale of substantially all of TerraForm Power’s assets, may require the approval of the U.S. Bankruptcy Court for the Southern District of New York.

We also notified SunEdison that our Corporate Governance and Conflicts Committee is prepared to enter into discussions with SunEdison and/or its stakeholders to settle intercompany claims and defenses between the Company and SunEdison on a schedule that is consistent with our pursuit of strategic alternatives.

Our exploration of strategic alternatives involves certain risks and uncertainties, which may, among other things, disrupt our business or adversely impact our revenue, operating results and financial condition. See “Risks Related to our Business" within Item 1A. Risk Factors for additional information. There can be no assurance that our exploration of strategic alternatives will result in any transaction being consummated, and speculation and uncertainty regarding the outcome of our exploration of strategic alternatives may adversely impact our business.

Commitments to acquire renewable energy facilities from SunEdison

Over the course of 2016, we have focused on acquiring, terminating or resolving our commitments to acquire renewable energy facilities from SunEdison in order to align our future commitments with current market conditions. As of September 30, 2015 , we had open commitments of $1.4 billion in the aggregate to acquire renewable energy facilities with a combined nameplate capacity of 1,080.7 MW from SunEdison. During the fourth quarter of 2015 and first ten months of 2016, all outstanding commitments expired or were extinguished through termination or project acquisitions, except as described below with respect to the Invenergy Wind option agreements. The reduction in our commitment amount from September 30, 2015 to October 31, 2016 is detailed in the table below:


15


 
 
 
 
 
 
 
 
 
 
Cash Committed
Description
 
Facility Category
 
Facility Type
 
Location
 
MW
 
(in thousands)
As of September 30, 2015
 
 
 
 
 
 
 
1,080.7

 
$
1,359,803

Acquired
 
Distributed Generation
 
Solar
 
U.S.
 
(19.6
)
 
(32,277
)
Acquired
 
Residential
 
Solar
 
U.S.
 
(10.6
)
 
(18,878
)
Acquired 1
 
Utility
 
Wind
 
U.S.
 
(200.0
)
 
(155,015
)
Terminated 2
 
Distributed Generation
 
Solar
 
U.S.
 
(20.5
)
 
(39,571
)
Terminated 3
 
Utility
 
Wind
 
U.S.
 
(632.4
)
 
(779,553
)
Amended 4
 
Utility
 
Solar
 
U.S.
 

 
(93,015
)
Amended
 
Residential
 
Solar
 
U.S.
 
(2.1
)
 
(598
)
As of December 31, 2015 5
 
 
 
 
 
 
 
195.5

 
$
240,896

Acquired 6
 
Distributed Generation
 
Solar
 
U.S.
 
(1.2
)
 
(3,085
)
Acquired 7
 
Utility
 
Solar
 
U.S.
 
(18.0
)
 
(36,591
)
Terminated
 
Utility
 
Solar
 
U.S.
 
(159.8
)
 
(168,396
)
Terminated
 
Residential
 
Solar
 
U.S.
 

 
(3,808
)
Expired
 
Distributed Generation
 
Solar
 
U.S.
 
(16.5
)
 
(29,016
)
As of October 31, 2016
 
 
 
 
 
 
 

 
$

————
(1)
The preliminary purchase price for this wind facility was reduced from $155.0 million to $127.0 million at closing pursuant to the terms of the relevant agreement.
(2)
Represents the termination of our commitment and our call right option to acquire these facilities.
(3)
Represents the termination of our purchase agreements for Bingham, Oakfield and South Plains II.
(4)
Represents amended purchase prices due to the changes in the tax equity partnership of these facilities.
(5)
Excludes the estimated commitment of $814.8 million to acquire 479.3 MW of residential solar generation facilities that were expected to be acquired from SunEdison upon SunEdison's merger with Vivint Solar Inc. due to the merger being terminated on March 7, 2016 . As a result of the termination of the merger, our obligation to purchase these assets was also terminated. Excludes the cash of $16.9 million due to SunEdison for the second installment of purchase prices for renewable energy facilities that were acquired from SunEdison during the year ended December 31, 2015 .
(6)
The preliminary purchase prices for these distributed generation facilities were reduced from $3.1 million to $2.8 million pursuant to the terms of the relevant agreements.
(7)
The preliminary purchase price for this solar facility was reduced from $36.6 million to $36.2 million pursuant to the terms of the relevant agreements.

In connection with the Invenergy Wind Acquisition as discussed in " Acquisition Transactions - Acquisition of Invenergy wind power plants " below, Sun Edison LLC, a wholly owned subsidiary of SunEdison, acting as intermediary, entered into certain option arrangements with Invenergy Wind for its remaining 9.9% interest in the acquired companies. Simultaneously, Terra LLC entered into a back to back option agreement with Sun Edison LLC on substantially identical terms. Sun Edison LLC is a debtor in the SunEdison Bankruptcy. As such, Sun Edison LLC may assert that it is entitled to assume, assume and assign or reject its option agreement. If Sun Edison LLC rejects its option agreement, we would not expect to be obligated to perform on our option agreement, although we cannot assure that result. Amounts related to our option agreement are not included in the commitment amounts discussed above. Refer to " Acquisition Transactions - Acquisition of Invenergy wind power plants " for further discussion of these agreements.

Commitments to acquire renewable energy facilities from unaffiliated third parties

As of December 31, 2015 , the Company had committed $62.8 million in cash to acquire renewable energy facilities from third parties with a combined nameplate capacity of 99.3 MW. Of this, we acquired solar generation facilities with a combined nameplate capacity of 0.7 MW during the first quarter of 2016 for $4.1 million . The remaining $58.7 million was committed to acquire two wind power plants with a combined nameplate capacity of 98.6 MW from Invenergy Wind. This commitment expired on July 1, 2016. As a result, while the purchase agreement remains in force, Invenergy Wind and the Company now have the right to terminate the purchase agreement with respect to these two additional facilities at any time and may determine not to consummate the acquisition. If the purchase agreement is terminated by either party, the Company will not purchase these facilities.



16


U.K. Portfolio Sale

We are currently exploring a sale of substantially all of our portfolio of solar power plants located in the United Kingdom through a broad based sales process. We have entered into negotiations with a preferred bidder. However, we cannot give any assurance as to when or if we will complete any such sale.

Financing Transactions

January 2015 public offering

On January 22, 2015 , we sold 13,800,000 shares of our Class A common stock to the public in a registered offering including 1,800,000 shares sold pursuant to the underwriters' overallotment option. We received net proceeds of $390.6 million , which were used to purchase 13,800,000 Class A units of Terra LLC. Terra LLC used $50.9 million to repurchase 1,800,000 Class B units from SunEdison. Concurrent with this transaction, 1,800,000 shares of our Class B common stock were canceled. Terra LLC used the remaining proceeds from the sale of its Class A units to pay, among other things, for part of the purchase price of the First Wind Acquisition and to repay remaining amounts outstanding under the corporate-level term loan facility in place at the time (the "Term Loan").

Term Loan and Revolver

On January 28, 2015 , Terra Operating LLC repaid the Term Loan in full and replaced its existing revolving credit facility with the new $550.0 million Revolver. The Revolver consists of a revolving credit facility of at least $550.0 million (available for revolving loans and letters of credit). 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.

On May 1, 2015 and August 11, 2015 , Terra Operating LLC exercised its option to increase its borrowing capacity under the Revolver by $100.0 million and $75.0 million , respectively. As a result of these transactions, Terra Operating LLC had a total borrowing capacity of $725.0 million under the Revolver as of December 31, 2015 . There were $655.0 million of revolving loans outstanding under the Revolver as of December 31, 2015 and $652.0 million of revolving loans outstanding under the Revolver as of October 31, 2016. The Company had outstanding letters of credit under the Revolver of $67.4 million as of December 31, 2015 and $71.4 million as of October 31, 2016. In connection with the consent agreement and ninth amendment to the terms of the Revolver and the waiver agreement under the Revolver (each as discussed below), Terra Operating LLC repaid $70.0 million and $30.0 million of revolving loans outstanding under the Revolver on November 10, 2016 and on December 1, 2016, respectively, and permanently reduced the revolving commitments and borrowing capacity by such amounts. As a result of these two commitment reductions, the total borrowing capacity under our Revolver has been reduced to $625.0 million as of December 1, 2016.
    
On December 9, 2015 , Terra Operating LLC entered into a third amendment to the Revolver which amends the Leverage Ratio (as defined therein) from 5:00:1:00 (subject to certain increases if certain acquisitions are consummated), to as follows:

6:00:1:00 for any fiscal quarter occurring after September 30, 2015, but ending on or before December 31, 2016;
5.75:1:00 for any fiscal quarter occurring after December 31, 2016, but ending on or before December 31, 2017; and
5:00:1:00 for any fiscal quarter ending after December 31, 2017 (subject to certain increases if certain acquisitions are consummated).

At Terra Operating LLC’s option, all outstanding amounts under the Revolver initially bore interest 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% . Beginning July 1, 2015 , the base rate margin ranges between 1.25% and 1.75% and the Eurodollar rate margin ranges between 2.25% and 2.75% , as determined by reference to a leverage-based grid. As of December 31, 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.



17


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. Although the Revolver collateral generally excludes the capital stock and assets of non-recourse subsidiaries, in connection with the seventh amendment to the Revolver (as discussed below), we agreed to cause certain project-level subsidiaries to guarantee the obligations under the Revolver and to provide certain collateral to the lenders and other secured parties under the Revolver, in each case, to the extent such subsidiaries are permitted to do so under any applicable project-level financing or debt agreements or other project-level agreements. These guarantees and the collateral will be automatically released to the extent such subsidiaries incur any project-level financings that would not permit such guarantees or collateral and that are otherwise permitted under the Revolver.

The terms of the Revolver require us to provide audited annual financial statements within 90 days after the end of the fiscal year, with a 10 -business day cure period. From March 30, 2016 to May 6, 2016, Terra Operating LLC entered into a series of amendments (fourth, fifth and sixth) to the terms of the Revolver, which provided that the date on which we must deliver to the Administrative Agent and other parties to the Revolver our annual financial statements and accompanying audit report with respect to fiscal year 2015 shall be extended up to May 28, 2016. Under the sixth amendment, the interest rate on loans made under the Revolver and commitment fees paid on undrawn Revolver commitments will be calculated using the highest applicable margin and commitment fee percentage under the Revolver until the first business day of the first quarter following the delivery of 2015 financial statements and the accompanying audit report. On May 27, 2016, Terra Operating LLC entered into a seventh amendment to the Revolver, which further extended the due date for delivery of our 2015 financial statements and the accompanying audit report to the earlier of (a) the tenth business day prior to the date on which the failure to deliver such financial statements would constitute an event of default under Terra Operating LLC's Indenture, dated January 28, 2015, with respect to its senior notes due 2023 (the "2023 Indenture") and (b) March 30, 2017. Under the seventh amendment, Terra Operating LLC was also required to request a waiver of any default or event of default under the 2023 Indenture with respect to our obligation to make available audited financial statements for fiscal year 2015. As described below, Terra Operating LLC obtained a waiver extending the deadline to comply with the reporting covenants in the 2023 Indenture to December 6, 2016.

In addition to granting the additional collateral described above, the seventh amendment also amends the conditions under which Terra LLC and Terra Operating LLC are permitted to make distributions in respect of their equity, including by adding a requirement that Terra LLC and Terra Operating LLC satisfy a minimum Total Liquidity (as defined therein) at the time of making any such distribution. Although TerraForm Power is not a party to, or guarantor of Terra Operating LLC's obligations under, the Revolver, these conditions will also effectively apply to the payment of dividends by TerraForm Power on its Class A common stock.

The seventh amendment also extended the date by which we must deliver unaudited quarterly financial statements for the fiscal quarter ending March 31, 2016 to June 30, 2016 and with respect to the fiscal quarters ending June 30, 2016 and September 30, 2016 to the date that is 75 days after the end of each fiscal quarter. We provided our unaudited quarterly financial statements for the fiscal quarters ending March 31, 2016 and June 30, 2016 to the Administrative Agent and other parties to the Revolver by the respective deadlines.

Consistent with its obligations under the seventh amendment, Terra Operating LLC entered into an eighth amendment to the terms of the Revolver on September 9, 2016, which increased the interest rate under the Revolver at all applicable margin levels by 50% of the increase in the interest rate on the Senior Notes due 2023 agreed to as part of the consent solicitation process described below. This amendment will result in an increase in the current interest rate payable under the Revolver by 1.75% for the period from September 6, 2016 to December 6, 2016 and, thereafter, an increase from the current interest rate by 0.25%.

On September 27, 2016, Terra Operating LLC entered into a consent agreement and ninth amendment to the terms of the Revolver. The ninth amendment modified the definition of Total Liquidity in the Revolver to include voluntary or mandatory permanent reductions in Revolving Commitments in the calculation of Total Liquidity. The consent agreement also provided consent for the cross-collateralization of certain utility scale assets located in Canada owned by subsidiaries of the Company as further described below in the " Canada project-level financing " section. In addition, in conjunction with this consent, the agreement provided that Terra Operating LLC would prepay $70.0 million of revolving loans outstanding under the Revolver and permanently reduce the revolving commitments and borrowing capacity by such amount. This amount was repaid by Terra Operating LLC on November 10, 2016, which permanently reduced the borrowing capacity under the Revolver by that amount.



18


On November 25, 2016, Terra Operating LLC entered into a waiver agreement with the requisite lenders under the Revolver. The waiver agreement waived Terra Operating LLC’s obligation to comply with the debt service coverage ratio and leverage ratio financial covenants of the Revolver with respect to the third quarter of 2016 and the requirement to certify compliance with those covenants. In connection with this waiver, Terra Operating LLC made a prepayment of the revolving loans outstanding under the Revolver in an aggregate amount equal to $30.0 million and permanently reduced the revolving commitments and borrowing capacity under the Revolver by that amount. The waiver also extended to January 1, 2017, the deadline for delivery of certain financial information with respect to the third quarter of 2016. If Terra Operating LLC fails to deliver that financial information with respect to the third quarter of 2016 and certain other related information by January 1, 2017, the waiver will expire and an event of default will have occurred under the Revolver. Failure to deliver certain summary financial information with respect to the third quarter of 2016 by December 21, 2016 would also result in an event of default under the Revolver.

Senior Notes due 2023 and Senior Notes due 2025

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 the 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.

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 used 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. 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.

The Indentures governing the Senior Notes due 2023 and the Senior Notes due 2025 require us to timely file with the SEC, or make publicly available, audited annual financial statements for the fiscal year 2015 and unaudited quarterly financial statements for the fiscal year 2016 no later than 60 days following the date required by the SEC's rules and regulations (including extensions thereof). We have a 90 -day grace period from the date a notice of default is deemed to be duly given to Terra Operating LLC in accordance with the Senior Notes due 2023 and the Senior Notes due 2025. On May 31, 2016, Terra Operating LLC received a notice from the trustee of an event of default for failure to deliver 2015 audited annual financial statements.

On June 24, 2016, we announced the commencement by Terra Operating LLC of a consent solicitation from holders of record as of 5:00 p.m., New York City time, on June 23, 2016 of its Senior Notes due 2023 and its Senior Notes due 2025 to obtain waivers relating to certain reporting covenants under the 2023 Indenture and the indenture dated as of July 17, 2015 (as supplemented) with respect to the Senior Notes due 2025 (the "2025 Indenture"), in each case, through December 31, 2016, in exchange for payment of a consent fee and monthly waiver extension fees beginning on August 29, 2016. The consent solicitation was set to expire on June 30, 2016 but was extended to August 19, 2016.

On August 19, 2016, we announced the commencement by Terra Operating LLC of an amended and restated solicitation of consents from holders of record as of 5:00 p.m., New York city time, on August 16, 2016 of its Senior Notes due 2023 and its Senior Notes due 2025 to obtain waivers relating to certain reporting covenants under the 2023 Indenture and the 2025 Indenture and to effectuate certain amendments to the respective indentures. The consent solicitation was set to expire on August 26, 2016.

On August 30, 2016, we announced the successful completion of the amended and restated solicitation of consents. Terra Operating LLC received validly delivered and unrevoked consents by August 26, 2016 from the holders of a majority of the aggregate principal amount of each series of the notes outstanding as of the record date and paid a consent fee to each consenting holder of $5.00 for each $1,000 principal amount of such series of the notes for which such holder delivered its consent. Under the terms of the waivers obtained, the deadline to comply with the reporting covenants in the indentures relating to the filing of our Form 10-K for 2015 and Form 10-Q for the first quarter of 2016 was extended to December 6, 2016. If the Form 10-Q for the second quarter of 2016 is not filed by December 6, 2016, the period within which we must deliver such


19


Form 10-Q would recommence, and consequently no event of default is expected to occur with respect to the Form 10-Q for the second quarter of 2016 unless such Form 10-Q were not filed by early 2017.

Following receipt of the requisite consents required to approve the amendments to the respective indentures, Terra Operating LLC entered into a fourth supplemental indenture to the 2023 Indenture and a third supplemental indenture to the 2025 Indenture on August 29, 2016. Effective as of September 6, 2016, the fourth and third supplemental indentures respectively permanently increase the interest rate payable on the Senior Notes due 2023 from 5.875% per annum to 6.375% per annum and the interest rate payable on the Senior Notes due 2025 from 6.125% per annum to 6.625% per annum. In addition, beginning on September 6, 2016 through and including December 6, 2016, special interest will accrue on the Senior Notes due 2023 and the Senior Notes due 2025 at a rate equal to 3.0% per annum, which shall be payable in the same manner as regular interest payments on the first interest payment date following December 6, 2016, which is February 1, 2017 and December 15, 2016, for the Senior Notes due 2023 and the Senior Notes due 2025, respectively. The fourth and third supplemental indentures also require us, upon the consummation of any transaction resulting in any person becoming the beneficial owner of 33.3% or more but less than or equal to 50% of the voting stock of the Company, to make an offer to each holder of the Senior Notes due 2023 and the Senior Notes due 2025, respectively, to repurchase all or any part of that holder's notes at a purchase price in cash equal to 101% of the aggregate principal amount of such notes repurchased. In lieu of making such an offer under either the 2023 Indenture or the 2025 Indenture, the applicable supplemental indenture also provides that Terra Operating LLC may elect to deliver a notice to the trustee under the 2023 Indenture or the 2025 Indenture, as applicable, to permanently increase the interest rates payable on the Senior Notes due 2023 from 6.375% per annum to 7.375% per annum or the interest rate on the Senior Notes due 2025 from 6.625% per annum to 7.625% per annum, respectively.

On November 15, 2016, we announced the commencement by Terra Operating LLC of a consent solicitation from holders of record as of 5:00 p.m., New York City time, on November 14, 2016 of its Senior Notes due 2023 and its Senior Notes due 2025 to obtain additional waivers relating to certain reporting covenants under the 2023 Indenture and the 2025 Indenture. The proposed waiver would waive any and all defaults or events of default existing as of December 6, 2016 as a result of the expiration of the waivers obtained and discussed above, and the consequences thereof, from December 6, 2016 until January 6, 2017, in exchange for payment of consent fees. The consent solicitation expired on December 2, 2016, with no waiver obtained.

June 2015 public offering

On June 24, 2015 , we sold 18,112,500 shares of our Class A common stock to the public in a registered offering including 2,362,500 shares sold pursuant to the underwriters' overallotment option. We received net proceeds of $667.6 million , which was used to purchase 18,112,500 Class A units of Terra LLC. Terra LLC used $87.1 million to repurchase 2,362,500 Class B units from SunEdison. Concurrent with this transaction, 2,362,500 shares of our Class B common stock were canceled. Terra LLC used the remaining proceeds from the sale of its Class A units, along with the net proceeds of its recently completed offering of  $150.0 million  of its senior notes due 2023, to (a) repay amounts outstanding on its revolving credit facility, which amounts were used to fund the acquisitions of certain Canadian solar generation facilities and certain solar generation facilities from Integrys Energy Group, Inc., and (b) for general corporate purposes.

Invenergy acquisition financing

On July 1, 2015 , we obtained commitments for a senior unsecured bridge facility to provide us with up to $1.16 billion to fund the acquisition of the wind power plants from Invenergy Wind. On July 17, 2015 , we terminated $300.0 million of this bridge facility commitment upon the issuance of our Senior Notes due 2025. This bridge facility commitment was amended and restated on December 4, 2015 to provide for a commitment to fund a $500.0 million non-recourse portfolio term loan (the "new term loan facility") entered into among a wholly owned subsidiary of Terra LLC, Citibank, N.A., as administrative agent and collateral agent, and the other lenders specified therein. The new term loan facility is secured by pledges of equity of certain of our subsidiaries, and has a term ending January 15, 2019 , to the extent we exercise our extension options. The new term loan facility was funded December 15, 2015 , and the proceeds were primarily used to acquire the wind power plants from Invenergy. On December 15, 2015 , upon the closing of the acquisition of Bishop Hill Energy, LLC, from Invenergy, a wholly owned subsidiary of Terra LLC entered into a $273.3 million non-recourse term loan facility. The proceeds from this term loan were used to repay Bishop Hill Energy, LLC's existing project-level indebtedness. The term loan matures on December 15, 2022 . For discussion of the acquisition of the Invenergy Wind power plants, see below under “ Acquisition Transactions - Acquisition of Invenergy wind power plants .”



20


Vivint Solar bridge facility

On July 20, 2015 , we obtained commitments for a senior unsecured bridge facility to provide the Company with up to $960.0 million to fund certain operating assets the Company expected to acquire from SunEdison in connection with SunEdison's pending acquisition of Vivint Solar described further below.

On December 9, 2015 , in connection with the amendment to the relevant purchase agreement, we entered into a second amended and restated debt commitment letter which amended the senior unsecured bridge facility to provide the Company with up to $795.0 million to fund the acquisition of certain operating assets the Company expected to acquire from SunEdison in connection with SunEdison's then-pending acquisition of Vivint Solar. The commitment was subsequently reduced to $459.3 million due to other available sources of funds.

On March 7, 2016 , Vivint Solar terminated the SunEdison/Vivint Solar Merger Agreement. As a result of Vivint Solar’s notice of termination of the SunEdison/Vivint Solar Merger Agreement, our obligation to acquire the relevant operating assets and the second amended and restated debt commitment letter automatically terminated.

United Kingdom project-level debt refinancing
 
On November 6, 2015 , certain of our subsidiaries entered into definitive agreements to refinance 178.6 million British Pounds ("GBP") (equivalent of $270.8 million on the closing date) of existing non-recourse indebtedness by entering into a new GBP 313.5 million (equivalent of $475.2 million on the closing date) facility (the “New U.K. Facility”). The New U.K. Facility matures in 2022 and is comprised of Tranche A for GBP 87.0 million (equivalent of $131.9 million ) which is fully amortizing over the seven -year term, and Tranche B for GBP 226.5 million (equivalent of $343.3 million ), which is payable at maturity. The New U.K. Facility is secured by all of the solar generation facilities of our subsidiaries located in the U.K. except for the Norrington facility and is non-recourse to Terra LLC and Terra Operating LLC.

Canada project-level financing

On November 2, 2016, certain of our subsidiaries entered into a new non-recourse loan financing in an aggregate principal amount of $120.0 million Canadian dollars (“CAD”) (including a CAD $6.9 million letter of credit) secured by approximately 40MWac of utility scale solar power plants located in Canada that are owned by our subsidiaries. This new non-recourse loan has a seven-year maturity and amortizes on a 17-year sculpted amortization schedule. The loan agreement also permits our subsidiaries to increase the principal amount of the credit facility by up to an additional CAD $123.0 million subject to the satisfaction of certain conditions, including the absence of defaults or events of default, pro forma compliance with debt service coverage ratios and other customary conditions. This new loan facility is non-recourse to Terra LLC and Terra Operating LLC. The proceeds of this financing were used to pay down the Revolver by $70.0 million as described above. Any additional proceeds are also expected to be used for general corporate purposes.

Acquisition Transactions

Acquisition of First Wind

On January 29, 2015 , we acquired from First Wind Holdings, LLC (together with its subsidiaries, “First Wind”) 521.1 MW of operating renewable energy facilities, including 500.0 MW of wind power plants and 21.1 MW of solar generation facilities (the “First Wind Acquisition”). The operating renewable energy facilities we acquired are located in Maine, New York, Hawaii, Vermont and Massachusetts. The purchase price for this acquisition was $811.6 million , net of cash acquired.

Acquisition of Northern Lights solar generation facilities

On June 30, 2015 , we acquired two utility-scale, ground mounted solar generation facilities ("Northern Lights") from Invenergy Solar LLC. The facilities are located in Ontario, Canada and have a combined nameplate capacity of 25.4 MW. The facilities are contracted under long-term PPAs with an investment grade utility having a credit rating of Aa2. The purchase price for this acquisition was CAD 125.4 million (equivalent of $101.1 million as of the closing date), net of cash acquired, including the repayment of project-level debt and settlement for the termination of interest rate swaps.

Acquisition of Invenergy wind power plants

On December 15, 2015 , we acquired 753.5 MW (net) of wind power plants located in the United States from Invenergy Wind Global LLC (‘‘Invenergy Wind’’) consisting of 90.1% of the outstanding equity interests in Bishop Hill Class


21


B Holdings, LLC, California Ridge Class B Holdings LLC, Prairie Breeze Holdings LLC and Rattlesnake Wind I Class B Holdings LLC (collectively, the “Acquired Companies”) and 100% of the equity interests in a 78.0 MW wind power plant located in Ontario, Canada from Invenergy Wind Canada Green Holdings ULC, Invenergy Wind, Marubeni Corporation and Caisse de Dépôt Placement du Québec (collectively the “First Invenergy Acquisition’’). The First Invenergy Acquisition collectively consists of 831.5 MW (net) of operating wind power plants.

Additionally, we agreed to acquire two additional wind power plants in a second closing, Prairie Breeze II and Prairie Breeze III, which represent 98.6 MW (net) of combined nameplate capacity. The second closing has not occurred and the purchase agreement contained a July 1, 2016 expiration date. As a result, while the purchase agreement remains in force, Invenergy Wind and the Company now have the right to terminate the purchase agreement with respect to these two additional facilities at any time. These two wind facilities would be acquired through the acquisition of a 90.1% equity interest in Prairie Breeze Expansion Class B Holdings LLC (the “Second Invenergy Acquisition”). However, both the Company or Invenergy Wind may determine not to consummate the acquisition. If the purchase agreement is terminated by either party, we will not purchase these facilities.

We paid $1.3 billion in cash and assumed $531.2 million of non-recourse indebtedness from subsidiaries of Invenergy Wind to complete the First Invenergy Acquisition, using cash on hand, the proceeds of the Senior Notes due 2025, and $273.3 million of cash received from a non-recourse term loan. The purchase price for the Second Invenergy Acquisition is expected to be $58.7 million if completed, for which we would expect to pay using cash on hand.

In connection with the First Invenergy Acquisition, Sun Edison LLC, a wholly owned subsidiary of SunEdison, acting as intermediary, entered into certain option arrangements with Invenergy Wind for its remaining 9.9% interest in the Acquired Companies (the ‘‘Invenergy Wind Interest’’). Simultaneously, Terra LLC entered into a back to back option agreement with Sun Edison LLC on substantially identical terms (collectively the "Option Agreements"). The Option Agreements effectively permit (i) Terra LLC to exercise a call option to purchase the Invenergy Wind Interest over a 180-day period beginning on September 30, 2019, and (ii) Invenergy Wind to exercise a put option with respect to the Invenergy Wind Interest over a 180-day period beginning on September 30, 2018. The exercise prices of the put and call options described above would be based on the determination of the fair market value of the Invenergy Wind Interest at the time the relevant option is exercised, subject to certain minimum and maximum thresholds set forth in the Option Agreements. Sun Edison LLC is a debtor in the SunEdison Bankruptcy. As such, Sun Edison LLC may assume, assume and assign or reject its Option Agreement. If Sun Edison LLC rejects its Option Agreement, we would not expect to be obligated to perform on our Option Agreement, although we cannot assure that result.

Termination of Obligation to Acquire 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 would acquire Vivint Solar for approximately $1.3 billion .

In connection with SunEdison’s then-pending acquisition of Vivint Solar, we entered into a definitive purchase agreement with SunEdison on July 20, 2015, as amended on December 9, 2015 , (the "Amended Purchase Agreement") to acquire Vivint Solar’s residential solar generation facilities (the “Vivint Operating Assets”). We also entered into an interim agreement (the "Vivint Interim Agreement") on July 20, 2015, as amended on December 9, 2015 , relating to, among other items, our purchase of additional completed residential and small commercial solar generation facilities for a five year period from the acquired business and the provision of operation and maintenance services by SunEdison for the Vivint Operating Assets. We also entered a letter agreement with SunEdison, dated as of December 9, 2015 (the “Letter Agreement”), to provide the parties thereto with additional rights in connection with the Amended Purchase Agreement and the Vivint Interim Agreement.

As a result of Vivint Solar’s notice of termination of the SunEdison/Vivint Merger Agreement, dated as of March 7, 2016 , each of the Amended Purchase Agreement and the Vivint Interim Agreement, and all other agreements related thereto, including the Letter Agreement, and all of our obligations pursuant thereto, terminated on March 7, 2016 .



22


Acquisitions of renewable energy facilities from SunEdison

During the year ended December 31, 2015 , we acquired renewable energy facilities with a combined nameplate capacity of 573.5 MW from SunEdison as summarized in the table below:
 
 
 
 
 
 
Year Ended December 31, 2015
 
As of December 31, 2015
Facility Category
 
Type
 
Location
 
Nameplate Capacity (MW)
 
Number of Sites
 
Initial Cash Paid 1
 
Cash Due to SunEdison 2
 
Debt Assumed 3
 
Debt Transferred 4
Distributed Generation
 
Solar
 
U.S.
 
91.5

 
74

 
$
155,573

 
$
2,600

 
$

 
$

Residential
 
Solar
 
U.S.
 
12.9

 
1,806

 
25,053

 

 

 

Utility
 
Solar
 
U.S.
 
54.8

 
9

 
69,868

 
14,341

 

 
14,475

Utility
 
Solar
 
U.K.
 
214.3

 
14

 
150,595

 

 
205,587

 

Utility
 
Wind
 
U.S.
 
200.0

 
1

 
127,000

 

 

 

Total
 
 
 
 
 
573.5

 
1,904

 
$
528,089

 
$
16,941

 
$
205,587


$
14,475

————
(1)
Represents the amount paid to SunEdison on the date of acquisition of renewable energy facilities from SunEdison. Excludes aggregated tax equity partner payments of $363.6 million to SunEdison.
(2)
Represents commitments by us to SunEdison for the amount required for SunEdison to complete the construction of renewable energy facilities acquired from SunEdison, which was paid to SunEdison during the first quarter of 2016. This commitment is not recorded on the Company's balance sheet as of December 31, 2015 and excludes tax equity partner payments of $9.2 million due to SunEdison.
(3)
Represents debt that was assumed by us as of the acquisition date which was subsequently refinanced on November 6, 2015 .
(4)
Represents debt recorded on our balance sheet as of December 31, 2015 . This debt was repaid by SunEdison during the first quarter of 2016 using cash proceeds paid by us and the tax equity partner to SunEdison for the acquisition of these facilities.

During the ten months ended October 31, 2016, we acquired renewable energy facilities with a combined nameplate capacity of 19.2 MW from SunEdison as summarized in the table below:
 
 
 
 
 
 
Ten Months Ended October 31, 2016
 
As of October 31, 2016
Facility Category
 
Type
 
Location
 
Nameplate Capacity (MW)
 
Number of Sites
 
Cash Paid 1
 
Cash Due to SunEdison 2
 
Debt Assumed
 
Debt Transferred 3
Distributed Generation
 
Solar
 
U.S.
 
1.2

 
3

 
$
2,750

 
$

 
$

 
$

Utility
 
Solar
 
U.S.
 
18.0

 
1

 
36,231

 

 

 

Total
 
 
 
 
 
19.2

 
4

 
$
38,981

 
$

 
$

 
$

————
(1)
Represents the total amount paid to SunEdison. Excludes aggregated tax equity partner payments of $1.6 million to SunEdison.
(2)
All amounts have been paid to SunEdison for these renewable energy facilities as of October 31, 2016.
(3)
$16.7 million of construction debt existed for one of the renewable energy facilities as of the acquisition date. This debt was fully repaid by SunEdison during the third quarter of 2016 using cash proceeds paid by us to SunEdison for the acquisition of the facility.

Reduction in SunEdison’s ownership of Class B shares

As publicly disclosed by SunEdison on December 30, 2015, SunEdison announced the sale of certain development stage renewable energy facilities and of an amount of the Company’s Class A shares, subject to certain conditions precedent, to affiliates of the D.E. Shaw group, Madison Dearborn Capital Partners IV, L.P. and Northwestern University in exchange for the extinguishment of a portion of $336 million aggregate principal amount of SunEdison's exchangeable notes and modification of the terms of certain earnout obligations payable by SunEdison in connection with its acquisition of First Wind Holdings. The Class A shares of common stock that were transferred in this transaction on January 22, 2016 were issued upon conversion of 12,161,844 Class B shares of the Company’s common stock held by SunEdison. After giving effect to the conversion, SunEdison indirectly owns 48,202,310 Class B shares of the Company.



23


Growth of Our Portfolio

The following table provides an overview of the growth of our portfolio from December 31, 2014 through December 31, 2015 and October 31, 2016:
 
 
 
 
 
 
Net Nameplate Capacity (MW) ¹
 
 
 
Weighted Average Remaining Duration of PPA (Years)²
 
 
 
 
Facility Type
 
 
 Number of Sites
 
Description
 
Source
 
 
 
Portfolio as of December 31, 2014
 
 
 
 
 
979.7

 
1,061

 
18

Acquisition of Invenergy operating facilities
 
Third Party
 
Wind
 
831.5

 
5

 
17

Acquisition of First Wind operating facilities
 
Third Party
 
Wind / Solar
 
521.1

 
16

 
9

Acquisition of U.K. Utility Solar Portfolio
 
SunEdison
 
Solar
 
214.3

 
14

 
14

Acquisition of South Plains I
 
SunEdison
 
Wind
 
200.0

 
1

 
12

Acquisition of Blackhawk Solar Portfolio
 
SunEdison
 
Solar
 
54.8

 
9

 
23

Additions to DG 2015 Portfolio 2
 
SunEdison
 
Solar
 
45.6

 
28

 
20

Acquisition of TEG solar operating facilities
 
Third Party
 
Solar
 
32.0

 
56

 
13

Acquisition of Northern Lights operating facilities
 
Third Party
 
Solar
 
25.4

 
2

 
18

Additions to DG 2014 Portfolio 1
 
SunEdison
 
Solar
 
21.0

 
27

 
18

Acquisition of Residential 2015 Portfolio 1
 
SunEdison
 
Solar
 
12.9

 
1,806

 
20

Acquisition of SUNE XVIII
 
SunEdison
 
Solar
 
14.9

 
18

 
20

Acquisition of Duke Energy operating facility
 
SunEdison
 
Solar
 
10.0

 
1

 
15

Acquisition of MPI operating solar facilities
 
Third Party
 
Solar
 
3.8

 
10

 
19

Changes to existing facilities 3
 
N/A
 
N/A
 
0.1

 

 
N/A

Total Portfolio as of December 31, 2015 4
 
 
 
 
 
2,966.9

 
3,054

 
16

Additions to the Blackhawk Solar portfolio
 
SunEdison
 
Solar
 
18.0

 
1

 
20

Additions to the SUNE XVIII portfolio
 
SunEdison
 
Solar
 
1.2

 
3

 
20

Additions to the MPI portfolio
 
Third Party
 
Solar
 
0.7

 
3

 
17

Total Portfolio as of October 31, 2016 5
 
 
 
 
 
2,986.9

 
3,061

 
15

——————
(1)
Net nameplate capacity represents the maximum generating capacity at standard test conditions of a facility multiplied by the Company's
percentage of economic ownership of that facility after taking into account any redeemable preference shares and stockholder loans the
Company holds. Our percentage of economic ownership is subject to change in future periods for certain facilities. Further note total amounts within the table above do not foot due to rounding.
(2)
Calculated as of December 31, 2014, December 31, 2015 and October 31, 2016, respectively.
(3)
Represents modifications to the nameplate capacity upon facilities achieving commercial operation.
(4)
Includes 36.1 MW of solar generation facilities that were under construction as of December 31, 2015 .
(5)
All facilities were in operation as of October 31, 2016.

Our Portfolio

Our current portfolio consists of renewable energy facilities located in the United States (including Puerto Rico), Canada, the United Kingdom and Chile with a combined nameplate capacity of 2,986.9 MW as of October 31, 2016. These renewable energy facilities generally have long-term PPAs with creditworthy counterparties. Our PPAs have a weighted average (based on MW) remaining life of 15 years as of October 31, 2016.



24


The following table lists the renewable energy facilities that comprise our portfolio as of October 31, 2016:
Facility Category / Portfolio
 
Location
 
Nameplate Capacity (MW)
 
Net Nameplate Capacity (MW) ¹
 
Number of Sites
 
Weighted Average Remaining Duration of PPA (Years)²
 
Counterparty Credit Rating 3
Solar Distributed Generation:
 
 
 
 
 
 
 
 
 
 
 
 
CD DG Portfolio
 
U.S.
 
77.8

 
77.8

 
42

 
16

 
 A / Aa3
DG 2015 Portfolio 2
 
U.S.
 
48.1

 
48.1

 
30

 
19

 
 AA- / Aa3
U.S. Projects 2014
 
U.S.
 
45.4

 
45.4

 
41

 
18

 
 AA- / Aa3
DG 2014 Portfolio 1
 
U.S.
 
44.0

 
44.0

 
46

 
18

 
 AA / Aa2
TEG
 
U.S.
 
33.8

 
32.0

 
56

 
13

 
 AA / Aa1
HES
 
U.S.
 
25.2

 
25.2

 
67

 
13

 
 AA / Aa2
MA Solar
 
U.S.
 
21.1

 
21.1

 
4

 
25

 
 AA / Aaa
Summit Solar Projects
 
U.S.
 
19.6

 
19.6

 
50

 
11

 
 AA+ / Aa1
U.S. Projects 2009-2013
 
U.S.
 
15.2

 
15.2

 
73

 
14

 
 A / A2
SUNE XVIII
 
U.S.
 
16.1

 
16.1

 
21

 
20

 
 AAA / Aaa
California Public Institutions
 
U.S.
 
13.5

 
7.0

 
5

 
17

 
 AA- / Aa3
Enfinity
 
U.S.
 
13.2

 
13.2

 
15

 
15

 
 A- / A2
MA Operating
 
U.S.
 
12.2

 
12.2

 
4

 
17

 
 AA+ / Aa2
Duke Operating
 
U.S.
 
10.0

 
10.0

 
1

 
14

 
 A / Aa2
SunE Solar Fund X
 
U.S.
 
8.8

 
8.8

 
12

 
14

 
 AA+ / Aa1
Summit Solar Projects
 
Canada
 
3.8

 
3.8

 
7

 
15

 
 NR / Aa2
MPI
 
Canada
 
4.5

 
4.5

 
13

 
18

 
 NR / Aa2
Resi 2015 Portfolio 1
 
U.S.
 
12.9

 
12.9

 
1,806

 
19

 
 NR / NR
Resi 2014 Portfolio 1
 
U.S.
 
2.8

 
2.8

 
700

 
16

 
 NR / NR
Total Solar Distributed Generation
 
428.1

 
419.7

 
2,993

 
17

 
 AA- / Aa2
 
 
 
 
 
 
 
 
 
 
 
 
 
Solar Utility:
 
 
 
 
 
 
 
 
 
 
 
 
Mt. Signal
 
U.S.
 
265.8

 
265.8

 
1

 
23

 
 A+ / Aa2
Regulus Solar
 
U.S.
 
81.6

 
81.6

 
1

 
18

 
 BBB+ / A2
Blackhawk Solar Portfolio
 
U.S.
 
72.8

 
72.8

 
10

 
21

 
 AA+ / Aa2
North Carolina Portfolio
 
U.S.
 
26.4

 
26.4

 
4

 
13

 
 A / Aa2
Atwell Island
 
U.S.
 
23.5

 
23.5

 
1

 
21

 
 BBB / A3
Nellis
 
U.S.
 
14.0

 
14.0

 
1

 
11

 
 NR / NR
Alamosa
 
U.S.
 
8.2

 
8.2

 
1

 
11

 
BBB+ / A3
CalRENEW-1
 
U.S.
 
6.3

 
6.3

 
1

 
14

 
 BBB / A3
Northern Lights
 
Canada
 
25.4

 
25.4

 
2

 
17

 
 NR / Aa2
Marsh Hill
 
Canada
 
18.5

 
18.5

 
1

 
18

 
 NR / Aa2
SunE Perpetual Lindsay
 
Canada
 
15.5

 
15.5

 
1

 
18

 
 NR / Aa2
U.K. Utility Solar Portfolio
 
U.K
 
208.4

 
208.4

 
14

 
13

 
 A- / Baa1
Fairwinds & Crundale
 
U.K
 
55.9

 
55.9

 
2

 
13

 
 A- / Baa1
Stonehenge Q1
 
U.K
 
41.2

 
41.2

 
3

 
13

 
 A- / Baa1
Stonehenge Operating
 
U.K
 
23.6

 
23.6

 
3

 
11

 
 A+ / Aa3
Says Court
 
U.K
 
19.8

 
19.8

 
1

 
13

 
 A- / Baa1
Crucis Farm
 
U.K
 
16.1

 
16.1

 
1

 
13

 
 A- / Baa1
Norrington
 
U.K
 
11.1

 
11.1

 
1

 
13

 
 A- / Baa1
CAP
 
Chile
 
101.6

 
101.6

 
1

 
17

 
 BB / NR
Total Solar Utility
 
 
 
1,035.7

 
1,035.7

 
50

 
17

 
 A- / A1
 
 
 
 
 
 
 
 
 
 
 
 
 


25


Facility Category / Portfolio
 
Location
 
Nameplate Capacity (MW)
 
Net Nameplate Capacity (MW) ¹
 
Number of Sites
 
Weighted Average Remaining Duration of PPA (Years)²
 
Counterparty Credit Rating 3
Wind Utility:
 
 
 
 
 
 
 
 
 
 
 
 
South Plains I
 
U.S.
 
200.0

 
200.0

 
1

 
12

 
 BBB+ / A3
California Ridge
 
U.S.
 
217.1

 
195.6

 
1

 
16

 
 AA+ / Aaa
Bishop Hill
 
U.S.
 
211.4

 
190.5

 
1

 
16

 
 AA+ / Aaa
Rattlesnake
 
U.S.
 
207.2

 
186.7

 
1

 
11

 
 BBB+ / Baa1
Prairie Breeze
 
U.S.
 
200.6

 
180.7

 
1

 
23

 
 AA / Aa2
Cohocton
 
U.S.
 
125.0

 
125.0

 
1

 
3

 
 BBB+ / Baa1
Stetson I & II
 
U.S.
 
82.5

 
82.5

 
2

 
3

 
 BBB / Baa2
Rollins
 
U.S.
 
60.0

 
60.0

 
1

 
15

 
A- / A2
Mars Hill
 
U.S.
 
42.0

 
42.0

 
1

 
1

 
A+ / Aa2
Sheffield
 
U.S.
 
40.0

 
40.0

 
1

 
11

 
 A+ / NR
Bull Hill
 
U.S.
 
34.5

 
34.5

 
1

 
10

 
 A / A2
Kaheawa Wind Power I
 
U.S.
 
30.0

 
30.0

 
1

 
10

 
 BBB- / NR
Kahuku
 
U.S.
 
30.0

 
30.0

 
1

 
14

 
 BBB- / Baa2
Kaheawa Wind Power II
 
U.S.
 
21.0

 
21.0

 
1

 
16

 
 BBB- / NR
Steel Winds I & II
 
U.S.
 
35.0

 
35.0

 
2

 
3

 
 BBB+ / A3
Raleigh
 
Canada
 
78.0

 
78.0

 
1

 
14

 
 NR / Aa2
Total Wind Utility
 
 
 
1,614.3

 
1,531.5

 
18

 
13

 
 A / A1
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Renewable Energy Facilities 4
 
3,078.1

 
2,986.9

 
3,061

 
15

 
 A / A1
———
(1)
Net nameplate capacity represents the maximum generating capacity at standard test conditions of a facility multiplied by the Company's
percentage of economic ownership of that facility after taking into account any redeemable preference shares and stockholder loans the
Company holds. Our percentage of economic ownership is subject to change in future periods for certain facilities.
(2)
Calculated as of October 31, 2016.
(3)
Represents counterparty credit rating issued by S&P and/or Moody's as of October 31, 2016. The percentage of counterparties based on MW that are rated by S&P and/or Moody's for our distributed generation portfolios with multiple counterparties is as follows:
CD DG Portfolio : 88%
DG 2014 Portfolio 1 : 49%
DG 2015 Portfolio 2 : 69%
Enfinity : 8%
HES : 44%
TEG : 76%
MA Solar : 47%
Summit Solar Projects (U.S.): 72%
SunE Solar Fund X : 64%
SUNE XVIII : 38%
U.S. Projects 2009-2013 : 58%
U.S. Projects 2014 : 92%
(4)
All facilities were in operation as of October 31, 2016.

Call Right Projects

We entered into the Support Agreement with SunEdison in connection with our IPO, which requires SunEdison to offer us additional qualifying projects from its development pipeline that represented at least $175.0 million of cash available for distribution. In addition, we entered into an Intercompany Agreement with SunEdison, pursuant to which we have been granted additional call rights with respect to certain projects in the First Wind pipeline. As a result of the SunEdison Bankruptcy, we do not expect that we will be able to acquire from SunEdison any additional Call Right Projects and add such projects to our operating fleet. As our long-term growth strategy is the acquisition of new renewable energy facilities, including under the Support Agreement and Intercompany Agreement, losing our ability to acquire Call Right Projects may negatively impact our ability to grow our portfolio and we may be required to seek such growth primarily from third party acquisitions.

On September 25, 2016, we filed our initial proof of claim in the SunEdison Bankruptcy case, which was amended on October 7, 2016. This proof of claim asserted claims based on, among other things, SunEdison's breach of the sponsorship


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arrangement between us and SunEdison which included the Support Agreement and Intercompany Agreement.

In addition to our Call Right Projects under the Support Agreement and Intercompany Agreement, our Call Right Projects also include 0.5 GW (net) of operating wind power plants owned by a SunEdison warehouse (the "AP Warehouse"). The legal entities that comprise the AP Warehouse have not filed for bankruptcy. We are currently exploring acquiring a ten to twenty percent interest in the Call Right Projects in the AP Warehouse.

Seasonality and Resource Availability

The amount of electricity produced and revenues generated by our solar generation facilities is dependent in part on the amount of sunlight, or irradiation, where the assets are located. As shorter daylight hours in winter months results in less irradiation, the electricity generated by these facilities will vary depending on the season. Irradiation can also be variable at a particular location from period to period due to weather or other meteorological patterns, which can affect operating results. As the great majority of our solar power plants are located in the Northern hemisphere, our solar portfolio’s power generation will be at its lowest during the fourth quarter of each year. Therefore, we expect our fourth quarter solar revenue generation to be lower than other quarters.

Similarly, the electricity produced and revenues generated by our wind power plants depend heavily on wind conditions, which are variable and difficult to predict. Operating results for wind power plants vary significantly from period to period depending on the wind conditions during the periods in question. As our wind power plants are located in geographies with different profiles, there is some flattening of the seasonal variability associated with each individual wind power plant’s generation, and we expect that as the fleet expands the effect of such wind resource variability may be favorably impacted, although we cannot guarantee that we will purchase wind power facilities that will achieve such results in part or at all. Historically, our wind production is greater in the first and fourth quarters which can partially offset the lower solar revenue expected to be generated in the fourth quarter.

We do not expect seasonality to have a material effect on the amount of our quarterly dividends. Although we are currently deferring a decision on making dividend payments in the prudent conduct of our business, we intend to revert to a situation where we reserve a portion of our cash available for distribution and maintain sufficient liquidity, including cash on hand in order to, among other things, facilitate the payment of dividends to our stockholders.

Competition

Power generation is a capital-intensive business with numerous industry participants. We compete to acquire new renewable energy facilities with renewable energy developers who retain renewable energy asset ownership, independent power producers, financial investors and certain utilities. We compete to supply energy to our potential customers with utilities and other providers of distributed generation. We compete with other renewable energy developers, independent power producers and financial investors based on our cost of capital, development expertise, pipeline, global footprint and brand reputation. To the extent we re-contract renewable energy facilities upon termination of a PPA or sell electricity into the merchant power market, we compete with traditional utilities primarily based on low cost of capital, generation located at customer sites, operations and management expertise, price (including predictability of price), green attributes (such as RECs and tax incentives) of renewable power, the ease by which customers can switch to electricity generated by our renewable energy facilities and our open architecture approach to working within the industry, which facilitates collaboration and renewable energy asset acquisitions.

Environmental Matters

We are subject to environmental laws and regulations in the jurisdictions in which we own and operate renewable energy facilities. These laws and regulations generally require that governmental permits and approvals be obtained and maintained both before construction and during operation of these renewable energy generation assets. We incur costs in the ordinary course of business to comply with these laws, regulations and permit requirements. While we do not expect that the costs of compliance would generally have a material impact on our business, financial condition or results of operations, it is possible that as the size of our portfolio grows we may become subject to new or modified regulatory regimes that may impose unanticipated requirements on our business as a whole that were not anticipated with respect to any individual renewable energy facility. We also do not anticipate material capital expenditures for environmental compliance for our renewable energy facilities in the next several years. These laws and regulations frequently change and often become more stringent, or subject to more stringent interpretation or enforcement, and therefore future changes could require us to incur materially higher costs which could have a material negative impact on our financial performance or results of operations.



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Regulatory Matters

All of the renewable energy facilities located in the United States that the Company owns are QFs as defined under the Public Utilities Regulatory Policies Act of 1978, as amended ("PURPA") or Exempt Wholesale Generators ("EWGs"). As a result, they are exempt from the books and records access provisions of the Public Utilities Holding Company Act of 2005, as amended ("PUHCA"), and most are exempt from state organizational and financial regulation of electric utilities. Depending upon the power production capacity of the renewable energy generation asset in question, our QFs and their immediate project company owners may be entitled to various exemptions from ratemaking and certain other regulatory provisions of the Federal Power Act, as amended ("FPA").

All of the renewable energy facility companies that we own outside of the United States are Foreign Utility Companies, as defined in PUHCA. They are exempt from state organizational and financial regulation of electric utilities and from most provisions of PUHCA and FPA.

The Company owns a number of renewable energy facilities in the United States with a net power production capacity greater than 20 MW (AC). Each project company that owns such a facility that is subject to the jurisdiction of the Federal Energy Regulatory Commission ("FERC"), under the FPA has obtained “market based rate authorization” and associated blanket authorizations and waivers, which allows it to sell electricity, capacity and ancillary services at wholesale or negotiated market based rates, instead of cost-of-service rates, as well as waivers of, and blanket authorizations under, certain FERC regulations that are commonly granted to market based rate sellers. FERC requires market based rate holders to make additional filings upon certain triggering events in order to maintain market based rate authority. The failure to make timely filings can result in suspension of market based rate authority, refunds of revenues previously collected, and the imposition of civil penalties.

Under Section 203 of the FPA (“FPA Section 203”), prior authorization by FERC is generally required for any direct or indirect acquisition of control over, or merger or consolidation with, a “public utility” or in certain circumstances an “electric utility company,” as such terms are used for purposes of FPA Section 203. FERC generally presumes that the acquisition of direct or indirect voting power of 10% or more in an entity results in a change in control of such entity. Violation of FPA Section 203 can result in civil or criminal liability under the FPA, including civil penalties, and the possible imposition of other sanctions by FERC, including the potential voiding of an acquisition made without prior authorization under FPA Section 203. Depending upon the circumstances, liability for violation of FPA Section 203 may attach to a public utility, the parent holding company of a public utility or an electric utility company, or to an acquirer of the voting securities of such holding company or its public utility or electric utility company subsidiaries.

The Company’s renewable energy facilities are also subject to compliance with the mandatory Reliability Standards developed by the North American Electric Reliability Corporation ("NERC") and approved by FERC. In the United Kingdom, Canada and Chile, the Company is also generally subject to the regulations of the relevant energy regulatory agencies applicable to all producers of electricity under the relevant feed-in tariff or other governmental incentive (collectively "FIT") regulations (including the FIT rates); however it is generally not subject to regulation as a traditional public utility, i.e., regulation of our financial organization and rates other than FIT rates.

As the size of our portfolio grows, it may become subject to new or modified regulatory regimes that may impose unanticipated requirements on its business as a whole that were not anticipated with respect to any individual renewable energy facility. For example, the NERC rules approved by FERC impose fleetwide cyber security requirements regarding electronic and physical access to generating facilities in order to protect system reliability; such requirements expand in scope after the point at which a single owner has more than 1,500 MW of reliability assets under its control in a single connection and expand again once the owner has more than 3,000 MW under construction. Such future changes in our regulatory status or the makeup of our fleet could require it to incur materially higher costs which could have a material adverse impact on its financial performance or results of operations.

Government Incentives

Each of the United States, Canada, the United Kingdom and Chile has established various incentives and financial mechanisms to reduce the cost of renewable energy and to accelerate the adoption of solar and wind energy. These incentives include tax credits, cash grants, tax abatements, rebates and RECs or green certificates and net energy metering programs. These incentives help catalyze private sector investments in renewable energy and efficiency measures. Changes in the government incentives in each of these jurisdictions could have a material impact on our financial performance.



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While we are currently subject to lighter regulation than a traditional utility under United States federal or state law and regulations or the laws and regulations of our foreign markets, we could become more highly regulated in the future.

As the owner of renewable energy facilities in the United States, each of which is either a QF or an EWG, we currently are subject to fewer federal and state standards, restrictions and regulatory requirements than would otherwise be applicable to United States utility companies. As our utility-scale business grows, certain facilities may no longer be eligible for exemption under PURPA from the rate-making or other provisions of the FPA, which would require increased compliance with public utility regulations. Similarly, although we are not currently subject to regulation as an electric utility in the foreign markets in which we provide our renewable energy services, our regulatory position in these markets could change in the future. Any local, state, federal or international regulations could place significant restrictions on our ability to operate our business and execute our business plan by prohibiting or otherwise restricting the sale of electricity by us. If we were deemed to be subject to the same state, federal or foreign regulatory authorities as traditional utility companies, or if new regulatory bodies were established to oversee the renewable energy industry in the United States or in our foreign markets, our operating costs could materially increase, adversely affecting our results of operations.

United States

Federal government support for renewable energy

The federal government provides an uncapped investment tax credit, or “Federal ITC,” that allows a taxpayer to claim a credit of 30% of qualified expenditures for a residential or commercial solar generation facility, for which construction begins by the end of 2019. This investment tax credit is currently scheduled to gradually be reduced to 10% for solar generation facilities commencing construction before December 31, 2022 with permanence thereafter. The U.S. Congress could reduce the ITC to below 30% prior to the end of 2019, reduce the ITC to below 10% for periods after 2022 or replace the expected 10% ITC with an untested production tax credit of an unknown amount. PTCs, which are federal income tax credits related to the quantity of renewable energy produced and sold during a taxable year, or ITCs in lieu of PTCs, are available only for wind power plants that began construction on or prior to December 31, 2019. The Wind PTC and ITC are extended to 2019 but reduced 20% in 2017, 40% in 2018, and 60% in 2019 before expiring in 2020. PTCs and accelerated tax depreciation benefits generated by operating renewable energy facilities can be monetized by entering into tax equity financing agreements with investors that can utilize the tax benefits, which have been a key financing tool for wind power plants. The federal government also provides accelerated depreciation for eligible renewable energy facilities. Based on our portfolio of assets, we will benefit from Federal ITC, Federal PTC and an accelerated tax depreciation schedule, and we will rely on financing structures that monetize a substantial portion of these benefits and provide financing for our solar generation facilities at the lowest cost of capital.

State government support for renewable energy
    
Many states offer a personal and/or corporate investment or production tax credit for renewable energy facilities, which is additive to the Federal ITC. Further, more than half of the states, and many local jurisdictions, have established property tax incentives for renewable energy facilities that include exemptions, exclusions, abatements and credits. Certain of our renewable energy facilities in the U.S. have been financed with a tax equity financing structure, whereby the tax equity investor is a member holding equity in the limited liability company that directly or indirectly owns the solar generation facility or wind power plant and receives the benefits of various tax credits.

Many state governments, utilities, municipal utilities and co-operative utilities offer a rebate or other cash incentive for the installation and operation of a renewable energy facility for energy efficiency measures. Capital costs or “up-front” rebates provide funds to solar customers based on the cost, size or expected production of a customer’s renewable energy facility. Performance-based incentives provide cash payments to a system owner based on the energy generated by their renewable energy facility during a pre-determined period, and they are paid over that time period. Some states also have established FIT programs that are a type of performance-based incentive where the system owner-producer is paid a set rate for the electricity their system generates over a set period of time.

There are 43 states that have a regulatory policy known as net metering. Net metering typically allows our customers to interconnect their on-site solar generation facilities to the utility grid and offset their utility electricity purchases by receiving a bill credit at the utility’s retail rate for energy generated by their solar generation facility in excess of electric load that is exported to the grid. At the end of the billing period, the customer simply pays for the net energy used or receives a credit at the retail rate if more energy is produced than consumed. Some states require utilities to provide net metering to their customers until the total generating capacity of net metered systems exceeds a set percentage of the utilities’ aggregate customer peak demand.


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Some of our solar generation facilities in Massachusetts participate in what is known as Virtual Net Metering. Virtual Net Metering in Massachusetts enables solar generation facilities to be sited remotely from the customer’s meter and still receive a credit against their monthly electricity bill. We bill the customer at a fixed rate or for a percentage of the credit they received which is derived from the G-1 electricity tariff. In addition, multiple customers may be designated as credit recipients from a renewable energy facility, provided they are all within the same Local Distribution Company service territory and load zone. The Virtual Net Metering structure provides a material electricity offtaker credit enhancement for our solar generation facilities by creating the ability to sell to hundreds of entities that are located remotely from the renewable energy facility location within the required area. The authority for Virtual Net Metering in Massachusetts was established by the Green Communities Act of 2008 and would require a change in law to repeal the program.

Many states also have adopted procurement requirements for renewable energy production. There are 29 states that have adopted a renewable portfolio standard that requires regulated utilities to procure a specified percentage of total electricity delivered to customers in the state from eligible renewable energy sources, such as solar and wind power generation facilities, by a specified date. To prove compliance with such mandates, utilities must surrender RECs. System owners often are able to sell RECs to utilities directly or in REC markets.

Renewables portfolio standard ("RPS") programs and targets have been a key driver of the expansion of solar and wind power and will continue to drive solar and wind power installations in many areas of the United States. In addition to the 37 states with RPS programs, ten other states have non-binding goals supporting renewable energy.

Canada
 
Federal government support for renewable energy

While provincial governments have jurisdiction over their respective intra-provincial electricity markets, from 2007 to 2011 the Canadian federal government supported the development of renewable energy through its ecoENERGY for Renewable Power program, which resulted in a total of 104 renewable energy facilities qualifying for funds, and will represent cash incentives of approximately CAD 1.4 billion over 14 years and encouraged an aggregate of approximately 4,500 MW of new renewable energy generating capacity. The program is now fully subscribed, and the Canadian federal government has not signaled an intention to renew it.

Provincial government support for renewable energy

Provincial governments have been active in promoting renewable energy in general and solar power in particular through RPS as well as through requests for proposal ("RFPs") and FIT programs for renewable energy. Several provinces are currently preparing new RFPs for renewable energy. Current provincial targets for renewable energy in those provinces with stated targets are outlined below.

Ontario. In 2009, the Green Energy and Green Economy Act, 2009 was passed into law and the Ontario Power Authority (which was merged with and continued as the Independent Electricity System Operator or “IESO”, effective January 1, 2015) launched its FIT program, which offers stable prices under long-term contracts for electricity generation from renewable energy. In November 2010, the Ontario Ministry of Energy released the draft Supply Mix Directive and Long Term Energy Plan. Ontario, one of our markets, has been a leader in supporting the development of renewable energy through the Long Term Energy Plan, which calls for 10,700 MW of renewable energy generating capacity (excluding small-scale hydroelectricity power) by 2018. Ontario was also the first jurisdiction in North America to introduce a FIT program, which has resulted in contracts being executed for approximately 4,655 MW of electricity generating capacity as of September 30, 2015.

In April and July of 2012, the Ontario Ministry of Energy implemented version 2.0 of the FIT program, which, among other things, reduced contract prices for new solar generation facilities, limited the acceptance of applications to specific application windows, and prioritized projects based upon project type (community participation, Aboriginal participation, public infrastructure participation), municipal and Aboriginal support, project readiness and electricity system benefit. The revisions to the FIT program do not affect FIT contracts issued prior to October 31, 2011. Prices under the FIT program will be reviewed annually, with prices established in November that will take effect January 1 of the following year. Such price changes do not affect previously issued FIT contracts but, rather, only FIT contracts to be entered into subsequent to the price change. The revisions may, however, make renewable energy facility economics less attractive (because of the PPA price reduction) and by granting priority points or status to certain types of renewable energy facilities, may make it more difficult to obtain PPAs in the future.



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The FIT program was further renewed by the Ontario Ministry of Energy for FIT 3 (123.5 MW) awarded in the summer of 2014, FIT 3 Extension (100 MW) awarded in December 2014 and FIT 4 (241.4 MW) awarded in the summer of 2016. On April 5, 2016, the Ontario Ministry of Energy directed the IESO to commence a further renewal (FIT 5) with a total capacity, to be published in December 2016, calculated based on a base target of up to 150 MW plus additional contract capacity that has become available from contract terminations under prior SmallFIT and microFIT procurements. The application period for the FIT 5 program closed on November 28, 2016. The FIT program is committed to one further round of contracts (150 MW) in 2017. For 2014-2017 the program is “SmallFIT” meaning renewable energy facilities from 10 kW to 500 kWac. There is also a “microFIT” program for renewable energy facilities under 10 kW. The SmallFIT program still offers 20 year Power Purchase Agreements with the IESO. SmallFIT contracted rates ($/kWh) are set for the 20 year period. There are different prices for different renewable energy facility sizes and technologies (ex. ground mounted solar and rooftop solar have different rates, and within certain technologies renewable energy facilities under 100 kWac have a higher rate than renewable energy facilities from 100- 500kWac). Post 2017 the Ontario Ministry of Energy directed the IESO to cease accepting applications under the microFIT program by December 31, 2017, given this transition. In August 2016, the Ministry of Energy posted for public comment proposed updates to the existing net metering regulation to effect the transition to a net-metering program. FIT rate reductions and any modification to program rules are transparent and occur after stakeholder consultation.

On June 12, 2013, December 16, 2013, March 31, 2014, and November 7, 2014, the Ontario Ministry of Energy directed the Ontario Power Authority (now the IESO) to develop a new competitive process for the procurement of renewable energy facilities larger than 500 kW. On March 10, 2015 (as amended on June 12, 2015 and July 31, 2015), IESO issued a Request for Proposals for Procurement of up to 565 MW of New Large Renewable Energy Projects, or “LRP I RFP”. The LRP I RFP process concluded in April 2016, with the execution of approximately 455 MW of new wind, solar and water power contracts. On July 29,2016, the IESO issued a Request for Qualifications for further Large Renewable Procurement ("LRP II RFQ"). The LRP II RFQ process was cancelled by the IESO on September 27, 2016, as directed by the Ontario Ministry of Energy.

Other Provinces . Provincial support for renewable energy in other provinces includes the following objectives:

Alberta: To generate 30% of electricity from renewable sources by 2030.
British Columbia: To achieve energy self-sufficiency by 2016 with at least 93% of net electricity generation from clean or renewable sources.
New Brunswick: To meet 40% of provincial electricity demand with renewable sources by 2020.
Nova Scotia: To generate 25% and 40% of net electricity generation from new (post-2001) sources of renewable energy by 2015 and 2020, respectively.
Saskatchewan: To achieve 50% renewables-sourced electricity generation by Crown utility company, SaskPower, by 2030.

United Kingdom

Renewables Obligation

In the United Kingdom, a RPS based on the Renewables Obligation Order 2015, or "RO," supports renewable electricity generation by placing an obligation on licensed electricity suppliers to submit renewables obligation certificates, or "ROCs," each year or else pay a buyout price (or a combination of the two). The program closes to new generating stations on March 31, 2017 (subject to any applicable grace period). Suppliers source ROCs from renewable electricity generators. The program is designed to minimize the risk of oversupply of ROCs in the market and to provide stable prices. The Office of Gas and Electricity Markets administers the program and issues ROCs to the owners/operators of generating facilities according to each generating facility’s metered output. A generator is awarded different quantities of ROCs for each MWh of generation depending on the technology used and the date the relevant facility was commissioned and accredited under the RO. ROCs are tradable commodities whose price is agreed by selling ROCs through online auctions or by the generator and its offtaker in the relevant power purchase or offtake agreement.

The U.K. government has a policy not to modify the ROC banding levels for facilities after they are accredited, for the lifetime of their 20 year support under the RO. This is referred to as ‘grandfathering’. Under the current legislation, the ground-mounted solar photovoltaic, or "PV," banding level applicable for facilities connected during the fiscal year ending March 31, 2014, 2015, 2016 and 2017 is 1.6 ROCs per MWh, 1.4 ROCs per MWh, 1.3 ROCs per MWh and 1.2 ROCs per MWh, respectively. This is however subject to the caveats outlined below.

The RO across Great Britain was closed to new solar PV capacity above 5 MW with effect from April 1, 2015 and at or below 5 MW with effect from April 1, 2016, in each case in relation to both new stations and to additional capacity (subject


31


to certain “grace periods”). The government has also removed "grandfathering" for solar PV projects in England and Wales with a capacity at 5 MW or below where that capacity is accredited after July 23, 2015, with an exception for capacity which meets the significant financial commitment grace period test. For projects not benefiting from grandfathering, the ROC banding level will reduce to 0.8 ROCs from June 1, 2016 with no protection from future banding reductions.

The historic twelve month grace period in relation to new solar PV capacity above 5 MW expired on March 31, 2016, but there is now a twelve month grace period available for new solar PV capacity below 5 MW (until March 31, 2017) where such capacity received preliminary accreditation or in respect of which a significant financial commitment had been made, in each case, on or before July 22, 2015. A grace period is additionally available for projects affected by grid delay, subject to certain conditions.

Solar PV installations above 5 MW in size may potentially be eligible to apply for support under the Contracts for Difference program and facilities of 5 MW or below may be eligible for support under the small-scale FIT program, as discussed below. However, both of these regimes have been the subject of significant recent political pressure amidst an overspend within the Levy Control Framework ("LCF").
 
Contracts for difference

Contracts for Difference are the new regulatory regime for supporting low-carbon generation as part of the U.K. government’s Electricity Market Reform program. Facilities need to compete in an auction process for a Contract for Difference against those facilities and technology types within the same budgetary group. A Contract for Difference is a contract with a U.K. government-owned company to pay or be paid the difference between the prevailing market reference price for electricity and an agreed "strike price". The strike price is set by auction and there is a prescribed budget available in each annual allocation round. For the first allocation round, solar PV competed with the other “established technologies”. However, in the next Contracts for Difference auction round, due to take place in April 2017, solar PV is not eligible to participate.

Feed-in Tariffs

FITs are an alternative subsidy program which support renewable energy generation by requiring certain licensed electricity suppliers to make generation and export payments in respect of certain kinds of renewable energy facilities of up to 5 MW in size. Generation payments are a fixed payment by the relevant electricity supplier to the FIT generator for every kWh generated by the facility. Export payments are a fixed payment by the relevant electricity supplier to the FIT generator for every kWh exported to the local or national grid (although electricity can alternatively be sold into the market). FITs for newly accredited solar PV generating stations are granted for 20 years. The policy of “grandfathering” ensures that solar generating facilities should continue to receive the FIT generation tariff for which they were first accredited for the duration of their FIT support (indexed). Prior to accreditation, the FIT generation payment is subject to degression, which is a mechanism to control FITs costs. Significant changes to the FIT were introduced in early 2016, including significantly lower tariffs. The FIT will remain open with a budget cap for new installations of GBP 100 million per annum up to April 2019, with quarterly deployment caps for all technologies to control spending.

Levy Exemption Certificates

Certain renewable generators, including solar facilities, prior to 2015 were also eligible to receive levy exemption certificates ("LECs"), in respect of the Climate Change Levy, a tax on U.K. business energy use. In a surprise move by the U.K. Government during 2015, changes were introduced so that renewable generators ceased to be eligible to receive LECs.

Long-term visibility of support

While ROC and FIT support levels decrease over time for new facilities due to anticipated reductions in the cost of installations, an objective from the U.K. Government historically has been to seek to create stability in the market for investors and to create a long-term sustainable regulatory framework. This is illustrated by the policy of grandfathering, the long duration of ROC and FIT support levels and mechanisms such as banding reviews, degression and the LCF (i.e. the U.K. spending cap on levy-funded energy policies), which are designed to ensure that levels of support for renewables are sustainable. However, in the current climate there is currently significant uncertainty as to whether, and, how, new large-scale U.K. solar PV projects will be incentivized in the coming years following the closure of the RO and exclusion of solar PV from the next Contracts for Differences auction process.



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Chile
    
Chile currently has two major electricity grids, the Central Interconnected System (“SIC”) and the Greater Northern Interconnected System (“SING”). A project to inter-connect and unite the SIC and the SING, thus creating a single major electricity grid in the country, is currently under construction. According to recent reports, this project at this time is approximately, 60% complete, and is expected to be operational by the end of 2017.

As of this date, each of these two main grids has its own independent system operator and market administrator, a Centro de Despacho Económico de Carga, or “CDEC,” and is subject to the oversight of the Comisión Nacional de Energía. However, pursuant to law No. 20.936, published on July 20, 2016, the two CDECs will be replaced with a single system operator, the Independent Coordinator of the National Electric System, starting on January 1, 2017. The main functions of the CDECs (and thus of the Independent Coordinator) include, among others, ensuring an adequate supply of electricity into the system, directing the dispatch of energy from the different facilities to assure an efficient, secure and economic operations and ensuring that the most efficient electricity generation available is dispatched to meet customer demand. Additionally, the Independent Coordinator will also be in charge of monitoring market competition and payments in the system and elaborating reports regarding the use of energy from renewable sources, among other new responsibilities.
              
In 2013, the Chilean government enacted law No. 20.698, which in turn amended law No. 20.257, the Non-Conventional Renewable Energy Law, which promotes the use of non-conventional renewable energy, or "NCRE," sources and defines the different types of technologies qualified as NCRE sources as wind, solar, biomass, geothermal and small (<20MW) hydroelectric technology. The law requires that a minimum of a generation company’s electricity supply be generated from NCRE sources.

The current legislation requires generation companies to supply at least 8% of their total contractual obligations entered into after July 1, 2013 from NCRE sources by 2016. That requirement will increase by 1% annually until 2020, to reach 12%, and later on with more substantial annual increases so as to reach 20% in 2025. A generation company can meet this requirement by developing its own NCRE generation capacity, purchasing from other generators generating NCREs in excess of their legal requirements during the preceding year, or paying the applicable fines for non-compliance.
 
The current penalty for non-compliance (at the current applicable exchange rate) is approximately (i) US$27 per MWh of deficit with respect to such generator’s NCRE generation obligation, as certified as of March 1 of the following year, and (ii) US$41 per MWh of deficit with respect to such generator’s NCRE generation obligation, if within the following three year period after the non-compliance referred in (i) above, such generator still does not comply with its NCRE generation obligations under the law.
 
Law No. 20.571 of 2012 and Decree 71 of September 6, 2014, established net metering regulations that allow systems of up to 100 kW to connect to the grid and inject their generation surplus and sell it to the system. Residential customers in the Central Interconnected System already pay approximately $0.20 per kWh, and with generation from PV systems not subject to the country’s value-added tax, renewable energy facility economics are favorable for early adopters. As of this date, the generated surplus is sold at a price of approximately 60% of what residential customers pay to the utilities.

Financial Information about Segments

The Company has two reportable segments: Solar and Wind. These segments comprise the Company's entire portfolio of renewable energy assets and are determined based on the management approach. This approach designates the internal reporting used by management for making decisions and assessing performance as the source of the reportable segments. The Company’s operating segments consist of Distributed Generation, North America Utility, and International Utility that are aggregated into the Solar reportable segment and Northeast Wind, Central Wind, and Hawaii Wind that are aggregated into the Wind reportable segment. The operating segments have been aggregated as they have similar economic characteristics and meet all of the aggregation criteria. Corporate expenses include general and administrative expenses, acquisition costs, formation and offering related fees and expenses, interest expense on corporate indebtedness, stock-based compensation and depreciation, accretion and amortization expense. All net operating revenues for the years ended December 31, 2015 and 2014 were earned by the Company's reportable segments from external customers in the United States (including Puerto Rico), Canada, the United Kingdom and Chile. All net operating revenues for the year ended December 31, 2013 were earned from external customers in the United States (including Puerto Rico).



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Customer Concentration

For the year ended December 31, 2015 , San Diego Gas & Electric accounted for 14% of our consolidated operating revenues, net.

Employees

Historically, the Company has not had any employees. The personnel that manage our operations (other than our Chairman and Interim Chief Executive Officer Peter Blackmore, our Chief Operating Officer, Tom Studebaker, and our Interim Chief Accounting Officer, David Rawden) have been employees of SunEdison and their services have been provided to the Company under the MSA or project-level asset management, and Operation and Maintenance ("O&M") services agreements. In a number of cases, the personnel that have been providing services to us have in the past simultaneously provided services to SunEdison and/or TerraForm Global. Following the SunEdison Bankruptcy, as part of our efforts to create a stand-alone corporate organization, we have identified and established a retention program for key employees. In November of 2016,
we issued offers of employment with the Company to such employees to ensure continuity of corporate and project level operations. While a number of our executive officers, including our Interim Chief Executive Officer, Peter Blackmore, our Executive Vice President and Chief Financial Officer, Rebecca Cranna, our Chief Operating Officer, Tom Studebaker, and our Interim Chief Accounting Officer, David Rawden, continue to serve in the same functions for TerraForm Global for the time being, all other officers and non-officer personnel will continue to provide services exclusively to the Company. For more information regarding our executive officers also serving in the same roles for TerraForm Global, please refer to the risk factor entitled “ We may have conflicts of interest with TerraForm Global .” within Item 1A. Risk Factors.
    
Geographic Information

The following table reflects operating revenues, net for the years ended December 31, 2015 , 2014 and 2013 by geographic location:
 
 
Year Ended December 31,
(In thousands)
 
2015
 
2014
 
2013
United States (including Puerto Rico)
 
$
368,117

 
$
87,502

 
$
18,716

Chile
 
27,148

 
23,130

 

United Kingdom
 
55,542

 
15,890

 

Canada
 
18,699

 
634

 

Total operating revenues, net
 
$
469,506

 
$
127,156

 
$
18,716

    
Long-lived assets, net consist of renewable energy facilities, intangible assets and goodwill. The following table is a summary of long-lived assets, net by geographic area:
(In thousands)
 
December 31, 2015
 
December 31, 2014
United States (including Puerto Rico)
 
$
5,844,992

 
$
2,147,877

Chile
 
181,756

 
189,221

United Kingdom
 
659,176

 
545,848

Canada
 
418,494

 
126,939

Total long-lived assets, net
 
7,104,418

 
3,009,885

Current assets
 
954,367

 
593,772

Other non-current assets
 
169,438

 
76,766

Total assets
 
$
8,228,223

 
$
3,680,423


Available Information

We make available free of charge through our website (http://www.terraformpower.com) the reports we file with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains an


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internet site containing these reports and proxy and information statements at http://www.sec.gov. Any materials we file can be read and copied online at that site or at the SEC's Public Reference Room at 100 F Street, NE, Washington DC 20549, on official business days during the hours of 10:00 am and 3:00 pm. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.

The following corporate governance documents are posted on our website at www.terraformpower.com:
The TerraForm Power, Inc. Corporate Governance Guidelines;
The TerraForm Power, Inc. Code of Business Conduct;
The TerraForm Power, Inc. Conflict of Interests Policy;
The TerraForm Power, Inc. Audit Committee Charter; and
The TerraForm Power, Inc. Corporate Governance and Conflicts Committee Charter.
    
If you would like a printed copy of any of these corporate governance documents, please send your request to 7550 Wisconsin Avenue, 9th Floor, Bethesda, Maryland 20814.

The information on our website is not incorporated by reference into this annual report on Form 10-K.


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Item 1A. Risk Factors.

The following pages discuss the principal risks we face. These include, but are not limited to, risks arising from the bankruptcy of our controlling shareholder, SunEdison. Any of these risk factors could have a significant or material adverse effect on our businesses, results of operations, financial condition or liquidity. They could also cause significant fluctuations and volatility in the trading price of our securities. Readers should not consider any descriptions of these factors to be a complete set of all potential risks and uncertainties that could affect us. These factors should be considered carefully together with the other information contained in this annual report and the other reports and materials filed by us with the SEC. Furthermore, many of these risks are interrelated, and the occurrence of certain of them may in turn cause the emergence or exacerbate the effect of others. Such a combination could materially increase the severity of the impact of these risks on our businesses, results of operations, financial condition and liquidity.

Risks Related to our Delayed Exchange Act Filings

Continued delays in the filing of our reports with the SEC, as well as further delays in the preparation of audited financial statements at the project level, could have a material adverse effect.

We have experienced significant delays in the filing of our Form 10-K for the fiscal year ended December 31, 2015 and our Forms 10-Q for the fiscal quarter ended March 31, 2016, the fiscal quarter ended June 30, 2016 and the fiscal quarter ended September 30, 2016, in each case principally due to the need to complete all steps and tasks necessary to finalize our financial statements and other disclosures required to be in the filing. Future Form 10-K and 10-Q filings by the Company could be delayed for similar reasons.

On March 15, 2016, we received a notification letter from a Director of Nasdaq Listing Qualifications. The notification letter stated that because we had not yet filed our Form 10-K for the year ended December 31, 2015, we were no longer in compliance with Nasdaq Listing Rule 5250(c)(1), which requires timely filing of periodic reports with the SEC. On May 12, 2016, we received an additional notification letter from a Director of Nasdaq Listing Qualifications. The notification letter stated that because we had not yet filed our Form 10-Q for the quarter ended March 31, 2016, and because we remained delinquent in filing our Form 10-K for the year ended December 31, 2015, we were not in compliance with Nasdaq Listing Rule 5250(c)(1). On May 16, 2016, in compliance with the deadline specified in the notification letters, we submitted a plan to Nasdaq as to how we planned to regain compliance with Nasdaq’s continued listing requirements. On May 20, 2016, we received a letter from a Director of Nasdaq Listing Qualifications granting us an exception of 180 calendar days from the due date of the Form 10-K for the year ended December 31, 2015, or until September 12, 2016, to regain compliance with Nasdaq’s continued listing requirements. On August 15, 2016, we received a notification letter from a Director of Nasdaq Listing Qualifications. The notification letter stated that because we had not yet filed our Form 10-Q for the quarter ended June 30, 2016, we were not in compliance with Nasdaq Listing Rule 5250(c)(1). As requested in the notification letter, we submitted an update to its compliance plan describing how we planned to regain compliance with Nasdaq's continued listing requirements.

On September 8, 2016, we received an additional notification letter from a Director of Nasdaq Listing Qualifications. The notification letter stated that due to non-compliance with Nasdaq Listing Rule 5250(c)(1), we would be delisted from The Nasdaq Global Select Market at the opening of business on September 19, 2016 unless we requested a hearing on the determination by 4:00 p.m. Eastern Time on September 15, 2016. On September 9, 2016, we requested a hearing and also requested a stay of the delisting pending the hearing. On September 12, 2016, we received a response from a Nasdaq hearings advisor setting a hearing date of November 3, 2016. On September 19, 2016, we received a letter from Nasdaq granting our request to extend the stay of delisting until the hearings panel makes a decision after the hearing scheduled for November 3, 2016. At the hearing on November 3, 2016, we requested from Nasdaq an extension until March 10, 2017 to regain compliance with Nasdaq’s continued listing requirements with respect to our delayed Form 10-K for the year ended December 31, 2015 and delayed Forms 10-Q for the periods ended March 31, 2016 and June 30, 2016. On November 15, 2016, we received a notification letter from a hearings advisor from the Nasdaq Office of General Counsel informing us that the hearings panel granted our request for an extension until March 10, 2017 with respect to these delayed filings. The hearings panel granted us the maximum possible extension until the expiration of the panel’s discretion to allow continued listing while we remain out of compliance with Nasdaq’s continued listing requirements. The hearings panel reserved the right to reconsider the terms of the extension and the Nasdaq Listing and Hearing Review Council may determine to review the hearing panel’s decision.

In addition, on November 15, 2016, we received a notification letter from a Senior Director of Nasdaq Listing Qualifications. The notification letter stated that because we have not yet filed our Form 10-Q for the quarter ended September 30, 2016 and because we remain delinquent in filing our Form 10-K for the year ended December 31, 2015 and Forms 10-Q for the quarters ended March 31, 2016 and June 30, 2016, we are not in compliance with Nasdaq Listing Rule 5250(c)(1), which requires timely filing of periodic reports with the Securities and Exchange Commission. Based on discussions with the hearing


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panel’s staff, the extension granted by the panel also covers our non-compliance with Nasdaq Listing Rule 5250(c)(1) caused by our failure to timely file our Form 10-Q for the quarter ended September 30, 2016.

In accordance with the applicable terms of our Revolver, we delivered to the lenders thereunder unaudited financial statements for the fiscal quarter ended March 31, 2016 by June 30, 2016 and for the fiscal quarter ended June 30, 2016 by September 13, 2016. The Revolver (as modified by the waiver agreement entered into on November 25, 2016) also requires us to deliver summary unaudited financial statements for the fiscal quarter ended September 30, 2016 by December 21, 2016 and a narrative report, financial statement notes, financial officer certifications and other quarterly deliverables by January 1, 2017. If we are unable to provide such quarterly statements or such other information before the end of the required periods or to obtain an additional waiver or forbearance, the lenders could accelerate the maturity of this facility, which would result in an event of default under our Senior Notes due 2023 and Senior Notes due 2025.

The indentures governing the Senior Notes due 2023 and Senior Notes due 2025 require the Company to deliver a quarterly report for the fiscal quarter ended March 31, 2016 and the fiscal quarter ended June 30, 2016 no later than 60 days following the date required by the SEC's rules and regulations (including extensions thereof), with a 90 day grace period upon providing written notice in accordance with the indentures governing the Senior Notes due 2023 and Senior Notes due 2025. On August 30, 2016, Terra Operating LLC obtained sufficient consents from holders of the Senior Notes due 2023 and Senior Notes due 2025 to waive certain reporting covenants under the indentures governing the Senior Notes due 2023 and Senior Notes due 2025 and to make certain amendments to the indentures. The waivers extended the deadline for the filing of the Company’s Form 10-K for 2015 and Form 10-Q for the first quarter of 2016 to December 6, 2016. If the Form 10-Q for the first quarter of 2016 is not filed by December 6, 2016, an Event of Default will occur under the indentures governing the Senior Notes due 2023 and Senior Notes due 2025. If the Form 10-Q for the second quarter of 2016 is not filed by December 6, 2016, the time period within which we are required to deliver such Form 10-Q will recommence. Consequently no event of default is expected to occur with respect to the second quarter Form 10-Q unless such Form 10-Q were not filed by early 2017. See "Recent Developments - Senior Notes due 2023 and Senior Notes due 2025 ” and "Recent Developments - Term Loan and Revolver ” within Item 1. Business above for additional information on the waivers obtained by Terra Operating LLC in August 2016 from holders of the Senior Notes due 2023 and Senior Notes due 2025 relating to certain reporting covenants under the indentures governing the Senior Notes due 2023 and Senior Notes due 2025 and on the related amendments to the Revolver and the indentures governing the Senior Notes due 2023 and Senior Notes due 2025. If an Event of Default occurs under the indentures governing the Senior Notes due 2023 and Senior Notes due 2025, the trustee or the holders of at least 25% in aggregate principal amount of notes outstanding could accelerate the notes under the indenture, which would also result in a cross default under the Revolver that would permit the lenders holding more than 50% of the aggregate exposure under the Revolver to accelerate the outstanding principal amount of loans and terminate the outstanding commitments under our Revolver.

The delay in filing our Form 10-K and Forms 10-Q may impair our ability to obtain financing and access the capital markets. For example, as a result of the delayed filing of our periodic reports with the SEC, we will not be eligible to register the offer and sale of our securities using a short-form registration statement on Form S-3 until we have timely filed all periodic reports required under the Securities Exchange Act of 1934, as amended, for one year. Should we wish to register the offer and sale of our securities to the public prior to the time that we regain eligibility to use Form S-3, our transaction costs and the amount of time required to complete financing transactions could increase. An inability to obtaining financing may have a material adverse effect on our ability to grow our business, acquire assets through acquisitions or optimize our portfolio and capital structure. Additionally, the delay in audited financial statements may reduce the comfort of our board of directors (the "Board") with approving the payment of dividends.

Audited financial statements at the project-level have also been delayed. This delay has created defaults under most of our non-recourse financing agreements, which, if not cured or waived may restrict the ability of the project-level subsidiaries to make distributions to us or entitle the related lenders to demand repayment or enforce their security interests, which could have a material adverse effect on our business, results of operations, financial condition and ability to pay dividends. Such defaults may also restrict the ability of the project companies to make distributions to us.

Risks Related to our Relationship with SunEdison and the SunEdison Bankruptcy

We continue to depend on SunEdison for many important services and the SunEdison Bankruptcy creates numerous risks and uncertainties for us .

We have historically depended significantly on SunEdison for important corporate, project and other services, including many management services under the MSA (such as management, secretarial, accounting, banking, treasury, administrative, regulatory and reporting functions; developing and implementing business strategy; maintenance of books and


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records; calculation and payment of taxes; and preparation of audited and unaudited financial statements), as well as asset management and O&M for most of our projects. Because of this dependence on SunEdison, the SunEdison Bankruptcy may have a material adverse effect on our business, results of operations and financial condition and these risks and uncertainties could increase the impact of the SunEdison Bankruptcy. Although the SunEdison Bankruptcy poses risks to our financial condition due to the potential resulting costs and diminished revenues, the Company does not rely substantially on SunEdison for funding or liquidity and believes that the Company continues to have sufficient liquidity to support its ongoing operations.

As we transition away from utilization of SunEdison for these corporate, project and other services, we face new risks associated with replacing SunEdison with new contract providers, internal systems, staff and operations.

Risks and uncertainties resulting from our existing utilization of SunEdison relate to:

SunEdison’s decisions during bankruptcy, including what contracts it seeks to assume, assume and assign or reject or what dispositions it chooses to make, potential opposition to such decisions from SunEdison’s creditors and other parties in interest and the requirement that the bankruptcy court approve many of SunEdison’s decisions during bankruptcy, including the assumption, assumption and assignment or rejection of contracts by SunEdison and any transactions entered into by SunEdison outside the ordinary course of business;
SunEdison’s ability to confirm and consummate a plan of reorganization;
SunEdison’s ability to maintain or obtain sufficient financing sources for its operations during the pendency of the
bankruptcy or to obtain sufficient exit financing;
The bankruptcy court’s rulings (including rulings on issues related to our pursuit of strategic alternatives, such as a merger or sale of substantially all of our assets, or any other alternative that would require stockholder approval), which, as a result of the bankruptcy court’s equitable powers, are difficult to predict with any certainty;
Potential increased difficulty in retaining and motivating SunEdison’s key employees through the process of reorganization, and increased difficulty in attracting new employees;
The actions and decisions of SunEdison’s stakeholders, including creditors, regulators and other third parties; and
The resolution of intercompany claims between us and SunEdison, including avoidance actions that may be brought against us by SunEdison or stakeholders acting on its behalf.

The SunEdison Bankruptcy could result in a liquidation of SunEdison, which may, in some circumstances, have a material adverse effect on our business, results of operations and financial condition in light of our ongoing utilization of SunEdison for business and operational services and projects. A disorganized liquidation would increase the risk of a material adverse effect on our business.

We are transitioning away from our historical dependence on SunEdison for important corporate, project and other services, which involves management challenges and poses risks that may materially adversely affect our business, results of operations and financial condition.

Since the SunEdison Bankruptcy, we have been engaged in efforts to transition away from our historical dependence on SunEdison for corporate, project and other services, by seeking to identify alternative service providers and to establish and manage new relationships, as well as develop our own capabilities and resources in these areas. These efforts include creating a separate stand-alone corporate organization, including, among other things, directly hiring employees and establishing our own accounting, information technology, human resources and other critical systems and infrastructure, and also include transitioning the project-level operation and maintenance and asset management services to third party service providers. However, our efforts in this regard, although designed to mitigate risks posed by the SunEdison Bankruptcy, involve a number of new risks and challenges that may materially adversely affect our business, results of operations and financial condition.

We may be unable to replicate the corporate and project-level services provided by SunEdison, either through outsourcing or performing those services ourselves on terms or at costs similar to those provided by SunEdison or at all. The fees of substitute service providers or the costs of performing all or a portion of the services ourselves are likely to be substantially more than the fees that we would pay under the MSA, which are equal to 2.5% of the Company’s cash available for distribution to shareholders in 2016 and 2017 (not to exceed $7.0 million in 2016 or $9.0 million in 2017 ). In addition, in light of SunEdison’s familiarity with our assets, a substitute service provider may not be able to provide the same level of service.

We may also be unable to perform the services ourselves, through hiring employees and migrating or establishing separate systems. Implementing any changes in connection with such transition may take longer than we expect, cost more than we expect, and divert management’s attention from other aspects of our business. We may also incur substantial legal and compliance costs in many of the jurisdictions where we operate. In addition, as we have limited experience in developing our


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own capabilities and resources, there is no assurance that we would ultimately be successful in our efforts in each of these areas, if at all, which could result in delays or disruptions in our business and operations.
 
The SunEdison Bankruptcy could result in a material adverse effect on many of our projects because SunEdison is a party to a material project agreement or a guarantor thereof, or because SunEdison was the original owner of the project.

In most of our debt-financed projects, SunEdison is a party to one or more material project agreements, including asset management or O&M agreements in its capacity as our O&M provider or asset manager, or is a guarantor of the obligations of those service providers or has provided other guarantees for the benefit of the projects and/or our financing parties. Many of our project-debt financing agreements contain covenants or defaults relating to such agreements or guarantees. As a result, the SunEdison Bankruptcy has resulted in defaults under many of our project-debt financing agreements, which are generally curable. We are currently working with our project lenders and finance parties to obtain waivers and/or forbearance agreements as we seek to cure such defaults, however, no assurances can be given that such waivers and/or forbearance agreements will be obtained. Similarly, in most of our tax equity-financed projects, SunEdison is a party to one or more material project agreements, including asset management or O&M contract agreements, or is a guarantor thereof or has provided other guarantees for the benefit of the projects and/or our financing parties. Many of our tax equity financed project agreements contain provisions related to, or that could be impacted by, such agreements. As a result, the SunEdison Bankruptcy could result in adverse consequences to us under many of our tax equity-financed projects. Several of our tax-equity projects are structured as master lease arrangements, under which the SunEdison Bankruptcy may trigger termination rights of the applicable tax investors.

Such defaults in our debt-financed projects and adverse consequences to us in tax equity-financed projects, if not cured or waived, may restrict the ability of the project-level subsidiaries to make distributions to us. These defaults may also entitle the related lenders to demand repayment, or enforce their security interests, which could have a material adverse effect on our business, results of operations and financial condition. These defaults may also permit the financing parties in our master lease arrangements to terminate the applicable leases, seek damages for contractual breaches or sweep or net project cash flows to the extent of any damages they may have incurred. If we are unable to make distributions from our project-level subsidiaries, it would likely have a material adverse effect on our ability to meet corporate-level debt service obligations, as well as pay dividends to holders of our Class A common stock.

To date, we have not identified any significant PPAs that include a provision that would directly permit the offtake counterparty to terminate the agreement due to the event of the SunEdison Bankruptcy. However, to date we have identified one PPA that contains an event of default that can be triggered if the related project-level credit agreement is accelerated. This project-level credit agreement is currently in default because of (a) the SunEdison Bankruptcy, which resulted from the bankruptcy of certain project counterparties and (b) our failure to deliver project-level audited financial statements. This project is expected to provide approximately $11.2 million of project-level cash available for distribution for 2016. We are working to obtain waivers or forbearance agreements from our project level lenders to this project that would avoid triggering this default under this PPA. Although we believe these lenders will likely be incentivized to take steps to avoid defaults under this PPA given the importance of maintaining this PPA, we cannot be certain that we will be permitted to replace the debtor parties during the pendency of the SunEdison Bankruptcy.

Historically, SunEdison has provided asset management services and operation and maintenance services under project-level asset management and O&M agreements. Although SunEdison has not formally rejected these agreements, it has failed to perform under these agreements and we are in the process of transitioning away from SunEdison as our asset manager and O&M provider. Depending on the nature of our projects, we may manage the projects ourselves or outsource our asset management and/or O&M functions. We may not be able to adequately perform on the projects that we manage in house or be able to identify a qualified third-party service provider that is willing to perform such services on equal or better terms than the existing contracts or at the same or lower prices for a given scope of services. If we are unable to adequately manage the projects or secure third-party service providers, it could lead to defaults under the terms of project-level debt contracts, hedging agreements, and tax equity agreements, as well as adverse consequences for our unlevered projects. An inability to successfully manage these projects or secure third-party service providers, and the resulting defaults and other consequences, or managing them at an excessively burdensome cost or securing third-party service providers on less favorable terms or at higher costs than our existing contracts, could have a material adverse effect on our business, results of operations and financial condition. The transition process to outsourced asset management and/or O&M functions is complex and time-consuming, which may divert management’s time and attention.

SunEdison was the construction contractor or module supplier for many of our projects, and it is unlikely that we will be able to recover on any claims under those contracts or related warranties.



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SunEdison served as the prime construction contractor pursuant to engineering, procurement and construction contracts with our subsidiaries for most of our renewable energy facilities acquired from SunEdison. These contracts are generally fixed price, turn-key construction contracts that include workmanship and other warranties with respect to the design and construction of the facilities that survive for a period of time after the completion of construction. These contracts or related contracts (including operation and maintenance agreements) also often include production or availability guarantees with respect to the output or availability of the facility that survive completion of construction. Moreover, we also generally obtained solar module warranties from SunEdison, including module workmanship warranties and output guarantees, for those solar facilities that we acquired from SunEdison that utilized SunEdison modules. Because of these relationships, we have existing warranty or contract claims and will likely in the future have such claims. The SunEdison Bankruptcy will likely reduce or eliminate our recoveries on claims under these agreements and warranties, which may have a material adverse effect on our business, results of operation and financial condition.

SunEdison is a party to important agreements at the corporate and project levels, which may be adversely affected by the SunEdison Bankruptcy.

As detailed in other risk factors under “Risks Related to our Relationship with SunEdison and the SunEdison Bankruptcy,” we have a number of important agreements with SunEdison at the corporate and project levels and for acquisitions, including the sponsorship arrangement. For instance, SunEdison has cash payment obligations to us under the Amended Interest Payment Agreement, which are expected to be an additional $8.0 million during the remainder of 2016 ($8.0 million was paid in the first quarter of 2016) and $16.0 million in 2017 and in conjunction with the First Wind acquisition has committed to reimburse the Company for capital expenditures and operations and maintenance and labor fees in excess of budgeted amount (not to exceed $53.9 million through 2019) for certain of its wind power plants.

The SunEdison Bankruptcy could adversely affect these agreements in a number of respects. For example, on July 29, 2016, SunEdison delivered a notice purporting to terminate the Amended Interest Payment Agreement. The notice alleges that SunEdison's bankruptcy permits termination as of right without following the bankruptcy procedures for rejection of executory contracts.  Although we do not expect SunEdison to perform under the Amended Interest Payment Agreement going forward, we intend to contest the validity of the termination notice. In addition, the protection of the automatic stay, which arises upon the commencement of a bankruptcy case, prohibits us from terminating a contract with any of the debtor entities (which includes SunEdison, Inc.) without the approval of the bankruptcy court in the SunEdison Bankruptcy. Similarly, the Bankruptcy Code invalidates certain clauses that permit a party to terminate an executory contract (a contract where both parties have performance remaining) based on the counterparty’s financial condition, insolvency or commencement of bankruptcy proceedings. Legal proceedings to obtain relief from the automatic stay, to terminate agreements or to enforce rights under agreements can be time consuming, costly and uncertain as to outcome. SunEdison may require bankruptcy court approval in order to continue performing under certain agreements. Agreements with entities that are debtors may not be enforceable until SunEdison seeks (and receives) bankruptcy court approval to assume (accept) those contracts. SunEdison has discretion on whether to seek to assume, assume and assign (in certain cases) or reject executory contracts and we do not control this decision. Approval of the bankruptcy court is required for such assumption, assumption and assignment or rejection and parties in interest have the right to object to such assumption, assumption and assignment or rejection. Although assumption, assumption and assignment or rejection generally must be of the entire agreement, SunEdison could alternatively seek to renegotiate such contracts with us. SunEdison has agreed and could agree in the future to provisions in its DIP financing that limit its ability to perform under agreements with us and that give the DIP lenders significant power over such performance.

On September 25, 2016, the Company filed its initial proof of claim in the SunEdison Bankruptcy case, which was amended on October 7, 2016. This proof of claim asserted claims based on, among other things, SunEdison's breach of the sponsorship arrangement between the Company and SunEdison, which includes the Amended Interest Payment Agreement and other corporate and project-level agreements. We expect that SunEdison and other stakeholders of SunEdison will contest the validity and amount of these claims. On December 1, 2016, the official committee of unsecured creditors of the SunEdison Bankruptcy filed an omnibus objection to the proofs of claim that we filed. Moreover, our ability to recover for breach, failure to perform or rejection of contracts (particularly for prepetition claims) is likely to be limited, and may be eliminated, depending on the recoveries generally for SunEdison’s unsecured creditors, due to competing claims with higher priority and the limited financial resources of SunEdison.

These effects of the SunEdison Bankruptcy on our agreements with SunEdison could also have a material adverse effect on our business, results of operations and financial condition.

Our audited financial statements for the year ended December 31, 2015 include a going concern explanatory note because of the risk that our assets and liabilities could be consolidated with those of SunEdison in the SunEdison Bankruptcy in addition to risks related to project-level defaults.


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We believe that we have observed formalities and operating procedures to maintain our separate existence from SunEdison, that our assets and liabilities can be readily identified as distinct from those of SunEdison and that we do not rely substantially on SunEdison for funding or liquidity and will have sufficient liquidity to support our ongoing operations. Our contingency planning with respect to the SunEdison Bankruptcy has included and will include, among other things, establishing stand-alone information technology, accounting and other critical systems and infrastructure, establishing separate human resources systems and employee retention efforts, seeking proposals for backup operation and maintenance and asset management services for our power plants from other providers and the pursuit of strategic alternatives.

However, there is a risk that an interested party in the SunEdison Bankruptcy could request that the assets and liabilities of the Company be substantively consolidated with SunEdison and that the Company and/or its assets and liabilities be included in the SunEdison Bankruptcy. Substantive consolidation is an equitable remedy in bankruptcy that results in the pooling of assets and liabilities of the debtor and one or more of its affiliates solely for purposes of the bankruptcy case, including for purposes of distributions to creditors and voting on and treatment under a reorganization plan. While it has not been requested to date and we believe there is no basis for substantive consolidation in our circumstances, we cannot provide assurance that substantive consolidation will not be requested in the future or that the bankruptcy court would not consider it.

To the extent the bankruptcy court were to determine that substantive consolidation was appropriate under the facts and circumstances, then the assets and liabilities of any entity that was subject to the substantive consolidation order could be available to help satisfy the debt or contractual obligations of other entities. Bankruptcy courts have broad equitable powers, and as a result, outcomes in bankruptcy proceedings are inherently difficult to predict. Due to the significant liabilities of SunEdison, substantive consolidation of the Company with SunEdison and inclusion in the SunEdison Bankruptcy would impede our ability to satisfy our liabilities in the normal course of business and otherwise restrict our operations and capacity to function as a standalone enterprise. As a result of the foregoing, our financial statements for the year ended December 31, 2015 and the related audit report include an explanatory note regarding the Company’s ability to continue as a going concern.

We have expended and may continue to expend significant resources in connection with the SunEdison Bankruptcy.

We have expended significant resources on contingency planning and other matters resulting from the SunEdison Bankruptcy. Our additional expenses include legal fees, consultant and financial advisor fees and related expenses, and it is likely that such expenses will continue during the duration of the SunEdison Bankruptcy. We have also dedicated, and anticipate that we will continue to dedicate, significant internal resources and management time to contingency planning and to addressing the consequences of the SunEdison Bankruptcy. This could reduce the internal time and resources available for other areas of our business and substantially increase our operating expenses.

The SunEdison Bankruptcy has subjected us to increased litigation risk, including claims seeking to avoid payments SunEdison made to us or transactions that we consummated with SunEdison in the period prior to the SunEdison Bankruptcy.

The SunEdison Bankruptcy has increased the risk that we will be subject to litigation and could increase our potential
exposure to litigation costs and could divert substantial time and resources of our management. In particular, there is a risk that SunEdison or creditors acting on its behalf may bring actions against us to avoid payments made to us by SunEdison or transactions that we consummated with SunEdison. On November 7, 2016, the official committee of unsecured creditors of SunEdison filed a motion requesting standing and leave to file a complaint against us (with settlement authority) with respect to such avoidance actions. In the future, SunEdison itself may pursue similar avoidance actions against us. We also face increased risks of liability and litigation to the extent that the SunEdison Bankruptcy results in SunEdison becoming unable to fulfill its contractual commitments in circumstances where the Company has a financial interest.

Additionally, because our directors’ and officers’ insurance policies through the period of July 15, 2016, including a number of policies under which SunEdison is the named insured, are shared with SunEdison and TerraForm Global, the SunEdison Bankruptcy will limit our ability to utilize such insurance to cover the liability of, and our indemnification obligations to, our directors and officers. If we are required to make indemnification payments to our officers or directors, our business, financial condition and results of operations may be negatively impacted. Subsequent to July 15, 2016, our directors' and officers' insurance policies are independent of SunEdison and TerraForm Global.

Our growth strategy has been substantially dependent on SunEdison and the SunEdison Bankruptcy has had a material adverse effect on our future growth .



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Our business, including our growth strategy, has been substantially dependent on SunEdison, including its ability to obtain financing and generate sufficient cash to adequately fund its operations and on SunEdison’s ability to fund the construction and development of Call Right Projects under the Support Agreement and the Intercompany Agreement. SunEdison has breached the Support Agreement, Intercompany Agreement or other agreements with respect to the Call Rights Projects. As a result of the SunEdison Bankruptcy we no longer expect to receive any Call Rights Projects under the Support Agreement or the Intercompany Agreement. In addition, even if SunEdison were willing to satisfy some of its obligations to us under the Support Agreement, Intercompany Agreement or other agreements with respect to the Call Rights Projects, we do not expect that SunEdison would be able to fund the development and completion of projects to be transferred thereunder. As a result, our growth prospects, including our ability to grow our dividend per share, have been materially and adversely affected.

The SunEdison Bankruptcy may adversely affect our relationships with current or potential counterparties .

We have important counterparties at every level of operations, including offtakers under the PPAs, corporate and project-level lenders, suppliers and service providers. The SunEdison Bankruptcy may damage our relationship with our counterparties due to concerns about the SunEdison Bankruptcy and its impact on our business. These concerns may cause counterparties to be less willing to grant waivers or forbearances if needed for other matters and more likely to enforce contractual provisions or reduce utilization of our services (or the provision of supplies or services) where the counterparty has flexibility in volume or duration. These concerns may also cause our existing or potential new counterparties to be less likely to enter into new agreements or to demand more expensive or onerous terms, credit support, security or other conditions. Damage to our existing or potential future counterparty relationships may materially and adversely affect our business, financial condition and results of operations, including our growth strategy.

SunEdison is our controlling stockholder and exercises substantial influence over TerraForm Power; it may take actions that conflict with the interests of our other stockholders.

SunEdison beneficially owns all of our outstanding Class B common stock. Each share of our outstanding Class B common stock entitles SunEdison to 10 votes on all matters presented to our stockholders. As a result of its ownership of our Class B common stock, SunEdison possesses approximately 84.0% of the combined voting power of our stockholders even though SunEdison only owns approximately 34.5% of total shares outstanding (inclusive of Class A common stock and Class B common stock). As a result of this ownership, SunEdison has a substantial influence on our affairs and its voting power will constitute a large percentage of any quorum of our stockholders voting on any matter requiring the approval of our stockholders. Such matters include the election of directors, the adoption of amendments to our amended and restated certificate of incorporation and bylaws and approval of mergers or sale of all or substantially all of our assets. This concentration of ownership may also have the effect of delaying or preventing a change in control of our company or discouraging others from making tender offers for our shares, which could depress the price per share a bidder might otherwise be willing to pay. In addition, SunEdison, for so long as it and its controlled affiliates possess a majority of the combined voting power, has the power, directly or indirectly, to appoint or remove all of our directors, including the members of our Corporate Governance and Conflicts Committee (the “Conflicts Committee”) and all of our executive officers. SunEdison also has a right to specifically designate up to two directors to our Board until such time as SunEdison and its controlled affiliates cease to own shares representing a majority voting power in us. On November 20, 2015, SunEdison designated two directors to our board. SunEdison has the right to remove and replace these directors at any time and for any reason. SunEdison may take actions that conflict with the interests of our other stockholders (including holders of our Class A common stock).

In connection with the SunEdison Bankruptcy, SunEdison has received final approval from the bankruptcy court for its DIP financing and related credit agreement. We expect SunEdison's DIP lenders will have significant influence over SunEdison’s interactions with us during the SunEdison Bankruptcy due to the covenants in the DIP credit agreement, although we expect SunEdison to act as a fiduciary for all of its stakeholders, including unsecured creditors. The DIP credit agreement also gives substantial authority, on behalf of management of SunEdison, over the restructuring and the relationship between SunEdison and us to the chief restructuring officer of SunEdison, who has been appointed the chief executive officer of SunEdison. In connection with the SunEdison Bankruptcy, SunEdison will also be required to seek approval of the bankruptcy court prior to engaging in activities or transactions outside of the ordinary course of business, which activities or transactions could be challenged by parties in interest, including SunEdison's unsecured creditors. The covenants in the DIP credit agreement, the interests of other SunEdison stakeholders, or developments in the bankruptcy may lead SunEdison to take actions that conflict with the interests of our Class A common stock.

Our organizational and ownership structure may create significant conflicts of interest that may be resolved in a manner that is not in our best interests or the best interests of holders of our Class A common stock and that may have a material adverse effect on our business, financial condition, results of operations and cash flows.



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Our organizational and ownership structure involves a number of relationships that may give rise to certain conflicts of interest between us and holders of our Class A common stock, on the one hand, and SunEdison, on the other hand. Historically, the personnel that manage our operations (other than our Chairman and Interim Chief Executive Officer, Peter Blackmore, our Chief Operating Officer, Tom Studebaker, and our Interim Chief Accounting Officer, David Rawden) have been employees of SunEdison and their services have been provided to the Company under the MSA or project-level asset management, and Operation and Maintenance("O&M") services agreements. SunEdison is a related party under the applicable securities laws governing related party transactions and may have interests which differ from our interests or those of holders of our Class A common stock, including with respect to the types of acquisitions made, the timing and amount of dividends by TerraForm Power, the reinvestment of returns generated by our operations, the use of leverage when making acquisitions and the appointment of outside advisers and service providers. We have a Conflicts Committee to assist us in addressing conflicts of interest as they arise. SunEdison, for so long as it and its controlled affiliates possess a majority of our combined voting power, has the power, directly or indirectly, to appoint or remove all of our directors and committee members, including the members of our Conflicts Committee, and our executive officers. These powers have affected and may in the future affect the functioning of our Conflicts Committee. On November 20, 2015, the members of our Conflicts Committee were removed by the Board from that committee and two of the three members subsequently resigned from our Board. In their resignation letters, these two independent directors stated that they did not believe they would be able to protect the interests of the shareholders going forward, and therefore resigned. In addition, contemporaneously, our Chief Executive Officer was removed as an officer and director and our Chief Financial Officer was removed as an officer. Our next Chief Executive Officer, who resigned on March 30, 2016, served as both the Chief Financial Officer of SunEdison and as the Chief Executive Officer of TerraForm Global, which may have created conflicts of interest during this period. These management changes have resulted in considerable negative publicity. While certain of our officers and all of our non-officer employees provide services exclusively to the Company, our Interim Chief Executive Officer, Peter Blackmore, our Executive Vice President and Chief Financial Officer, Rebecca Cranna, our Chief Operating Officer, Tom Studebaker, and our Interim Chief Accounting Officer, David Rawden, continue to serve in the same functions for TerraForm Global for the time being.

On June 1, 2016, the Company adopted an amendment to the Terra LLC Agreement creating an LLC Conflicts Committee, which is granted the exclusive power to exercise all of its rights, powers and authority as the sole managing member of Terra LLC to manage and control the business and affairs of Terra LLC and its controlled affiliates relating to or involving SunEdison and any of its affiliates (other than the Company and its controlled affiliates) until the first annual meeting of the Company’s stockholders after December 31, 2016. There is a risk that this delegation will be revoked, or that the members of the LLC Conflicts Committee will be removed, each of which are permissible by a written instrument signed by the Company, acting in its capacity as managing member of Terra LLC, with either (i) the written consent of a majority of the LLC Conflicts Committee members then in office, or (ii) the prior approval of the holders (other than, directly or indirectly, SunEdison or its affiliates) of a majority of the outstanding shares of Class A common stock.

Any material transaction between us and SunEdison (including the waiver of rights with respect to the Call Right Projects and any ROFO Projects, any transactions that potentially could arise out of our exploration of strategic alternatives, and any settlements of claims in connection with the SunEdison Bankruptcy case) are subject to our related party transaction policy, which will require prior approval of such transaction by our Conflicts Committee . There are inherent limitations in the ability of our Conflicts Committee to help us manage conflicts of interest or perceived conflicts of interest and the various measures we have taken to address conflicts of interest, including our Conflicts Committee and our related party transaction approval policy, have not prevented shareholders from instituting shareholder derivative claims related to conflicts of interest. Regardless of the merits of these claims, we may be required to expend significant management time and financial resources in the defense of these proceedings. Additionally, to the extent we fail to appropriately deal with conflicts of interest, or are perceived to have failed to deal appropriately with any such conflicts, it could negatively impact our reputation and ability to raise additional funds and the willingness of counterparties to do business with us, all of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our organizational and ownership structure is complex and has been, and continues to be, subject to increased scrutiny and negative publicity, particularly relating to changes in our senior management and board of directors, which may have a material adverse effect on, among other things, the value of our securities and our ability to conduct our business, as well as subject us to increased litigation risk.

Our organizational and ownership structure is complex and has recently been subject to increased scrutiny, including inquiries from our stakeholders, litigation from activist shareholders and negative publicity. In particular, there has been considerable negative publicity in the media relating to the resignations and removals of certain members of our Board, including members of our Conflicts Committee, as well as the replacement of our Chief Executive Officer and Chief Financial Officer in November 2015. Negative publicity has also included allegations of breaches of fiduciary duty by our Board and our executive officers, perceived conflicts of interest among us, our executive officers and our affiliates and criticism of our and our


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affiliates’ business strategies. Our reputation may be closely related to that of SunEdison, and the reputation and public image of SunEdison has suffered as a result of its financial condition and the SunEdison Bankruptcy. Such negative publicity may materially adversely impact our business in a number of ways, including, among other things:

causing the trading value of our outstanding securities to diminish;
damaging our reputation and adversely affecting the willingness of counterparties to do business with us, including obtaining consents and approvals from counterparties;
subjecting us and our affiliates to increased risks of future litigation or affecting the course of our current litigation;
disrupting our ability to execute our and our affiliates’ business plans, including in respect of potential transactions with our affiliates, and potentially reducing our cash available for distribution; and
limiting our ability to raise capital and refinance existing obligations.

SunEdison has pledged the shares of Class B common stock, Class B units and IDRs that it owns to its lenders under its credit facilities. If the lenders foreclose on these shares, the market price of our shares of Class A common stock could be materially adversely affected.

SunEdison has pledged all of the shares of Class B common stock, and a corresponding amount of the Class B units of Terra LLC, as well as our IDRs, that SunEdison owns to SunEdison’s lenders as security under its DIP financing and its first and second lien credit facilities and outstanding second lien secured notes. Foreclosure by the lenders under the first and second lien credit facilities and outstanding second lien secured notes likely will be stayed during the pendency of the SunEdison Bankruptcy. However, if SunEdison breaches certain covenants and obligations in its DIP financing, an event of default or maturity of the DIP financing could result and the lenders could exercise their right to accelerate all the debt under the DIP financing and foreclose on the pledged shares, units and IDRs. In addition, in the course of exploring restructuring alternatives in the SunEdison Bankruptcy, SunEdison could seek to sell all or a portion of its shares of Class B common stock and Class B units or IDRs. Foreclosures or transfers are subject to certain limitations in our governing documents, including that SunEdison (together with its controlled affiliates) must continue to own a number of Class B units equal to 25% of the units held by SunEdison upon completion of our IPO until the earlier of (i) three years from the completion of the IPO and (ii) the date that Terra LLC has made cash distributions in excess of the Third Target Distribution (as defined in Terra LLC’s amended and restated operation agreement) for four quarters (“Class B Share Lock Up”). However, such limitations may not be enforceable against foreclosures or transfers occurring in connection with the SunEdison Bankruptcy, including foreclosures by the lenders under SunEdison’s DIP financing.

Any future sale of the shares of Class A common stock received that have been converted from Class B common stock upon foreclosure of the pledged securities or upon the sale or other disposition of SunEdison’s Class B common stock could cause the market price of our Class A common stock to decline. SunEdison, through wholly owned subsidiaries, owns 48,202,310 Class B units of Terra LLC, which are exchangeable (together with shares of our Class B common stock) for shares of our Class A common stock, subject to certain conditions. Moreover, subject to the Class B Share Lock Up and certain other restrictions, we may have limited ability to consent to or otherwise influence or control the ultimate purchaser or purchasers of the Class A common stock sold by SunEdison. A foreclosure on or sale of the shares of our Class B common stock and of Class B units of Terra LLC’s units held by SunEdison may result in a change of control. Among other potential implications, a change of control that results in a subsequent holder or holders of our stock gaining control of the Company without the consent of our Revolver lenders would constitute an event of default under our Revolver and would require Terra Operating to offer to repurchase its Senior Notes due 2023 and its Senior Notes due 2025 at 101% of the applicable principal amount, plus accrued and unpaid interest and additional interest, if any, to the repurchase date. I n addition, if such foreclosure or sale resulted in a subsequent holder or holders holding more than 33.33% but less than 50% of voting power of the Company, Terra Operating would be required (i) to offer to repurchase the Senior Notes due 2023 and the Senior Notes due 2025 at 101% of the aggregate principal amount of the Senior Notes due 2023 or Senior Notes due 2025 repurchased or (ii) to deliver a notice to the holders of such notes permanently increasing the interest rate on Senior Notes due 2023 and the Senior Notes due 2025, as applicable, by 1.00%. Any such change of control could have a material adverse effect on our business, financial condition, results of operation and cash flows.

A sale of SunEdison or a sale of SunEdison’s ownership interest in us, may have a material adverse effect on our business, financial condition, results of operations and cash flows.
    
SunEdison could sell or transfer all or a portion of its ownership interests in us to an unaffiliated third party, including in a merger or consolidation or in a transfer of all or substantially all of its assets, and such sales or transfers may occur during the SunEdison Bankruptcy subject to the approval of the bankruptcy court. Previously, in connection with the extinguishment of certain of its outstanding indebtedness, SunEdison has sold a portion of its ownership of the Company’s Class B shares,


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which upon transfer were converted into Class A shares of the Company, and could sell additional shares in the future in order to reduce indebtedness or raise capital, or in connection with its reorganization or liquidation in bankruptcy. If a new owner were to acquire ownership of SunEdison or acquire ownership of SunEdison’s ownership interests in us, including in connection with the reorganization or liquidation of SunEdison in bankruptcy, and appoint new directors or officers of its own choosing, the new owner would be able to exercise substantial influence over our policies and procedures and exercise substantial influence over our management and the types of acquisitions we make. Such changes could result in our capital being used to make acquisitions that are substantially different from our targeted acquisitions and otherwise effect a significant change in our current business strategy. Additionally, we cannot predict with any certainty the effect that any transfer of ownership would have on the trading price of our Class A common stock or our ability to raise capital or make investments in the future, because such matters would depend to a large extent on the identity of the new owner and the new owner’s intentions with regard to us. Subject to the Class B Share Lock Up and certain other restrictions, we may have limited ability to consent to or otherwise influence or control the ultimate purchaser or purchasers of the Class A common stock sold by SunEdison. The enforceability of such restrictions is described above in the risk factor “SunEdison has pledged the shares of Class B common stock that it owns to its lenders under its credit facilities. If the lenders foreclose on these shares, the market price of our shares of Class A common stock could be materially adversely affected.”

Such changes could also result in further breach or termination of any agreements under which SunEdison provides operation and maintenance or asset management services to us. The risks of such breach and termination are described above under Risks Related to our Relationship with SunEdison and the SunEdison Bankruptcy. A change of control that results in a subsequent holder or holders of our stock gaining control of the Company without the consent of our Revolver lenders would also constitute an event of default under our Revolver and would require Terra Operating to offer to repurchase its Senior Notes due 2023 and our Senior Notes due 2025 at 101% of the applicable principal amount, plus accrued and unpaid interest and additional interest, if any, to the repurchase date. SunEdison can enter into these transactions without needing the approval of our Class A common stockholders, but sales or transfers of SunEdison’s ownership interests are subject to certain restrictions under our governing documents, including the Class B Share Lock Up.

Any such change of control may have a material adverse effect on our business, financial condition, results of operation and cash flows.

Certain of our PPAs and non-recourse financing arrangements include provisions that would permit the counterparty to terminate the contract or accelerate maturity in the event SunEdison ceases, directly or indirectly, to control or own a certain percentage of our company .

A limited number of our PPAs and certain of our non-recourse financing arrangements may contain change in control provisions that in certain circumstances provide the counterparty with a termination right or the ability to accelerate maturity in the event of a change of control related to SunEdison without the counterparty’s consent. These provisions are triggered in the event SunEdison ceases to own, directly or indirectly, capital stock representing more than 50% of the voting power, which is equal to an approximately 9% economic interest ownership, of all of our capital stock outstanding on such date and in certain circumstances the transferee of such control does not meet certain qualifying requirements. As a result, if SunEdison ceases to control us whether as a result of a sale, foreclosure, reorganization, restructuring or other similar circumstance, in connection with the SunEdison Bankruptcy or otherwise, if appropriate consents or waivers are not obtained, the counterparties could terminate such contracts or accelerate the maturity of such financing arrangements. SunEdison could enter into a transaction that could result in the triggering of a change of control, including a sale of SunEdison’s entire ownership position in us, without a vote of our Class A common stockholders. The termination of any of our PPAs or the acceleration of the maturity of any of our non-recourse financing could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The holder or holders of our IDRs may elect to cause Terra LLC to issue Class B1 units to it or them in connection with a resetting of target distribution levels related to the IDRs, without the approval of our Conflicts Committee or the holders of Terra LLC’s units, us as manager of Terra LLC, or our board of directors (or any committee thereof). This could result in lower distributions to holders of our Class A common stock.

The holder or holders of a majority of the IDRs (currently SunEdison through one or more wholly owned subsidiaries) have the right, if the Subordination Period has expired and if we have made cash distributions in excess of the then-applicable Third Target Distribution for each of the prior four consecutive fiscal quarters, to reset the initial target distribution levels at higher levels based on Terra LLC’s cash distribution levels at the time of the exercise of the reset election. The right to reset the target distribution levels may be exercised without the approval of the holders of Terra LLC’s units, us, as manager of Terra LLC, or our Board (or any committee thereof). Following a reset election, a baseline distribution amount will be calculated as an amount equal to the average cash distribution per Class A unit, Class B1 unit and Class B unit for the two consecutive fiscal


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quarters immediately preceding the reset election (such amount is referred to as the “Reset Minimum Quarterly Distribution”), and the target distribution levels will be reset to correspondingly higher levels based on percentage increases above the Reset Minimum Quarterly Distribution.

In connection with the reset election, the holders of the IDRs will receive Terra LLC Class B1 units and shares of our Class B1 common stock. Therefore, the reset of the IDRs will dilute existing stockholders’ ownership. This dilution of ownership may cause dilution of future distributions per share as a higher percentage of distributions per share would go to SunEdison or a future owner of the IDRs if the IDRs are sold.

We anticipate that SunEdison (or any subsequent holder of the IDRs) would exercise this reset right in order to facilitate acquisitions or internal growth projects that would not be sufficiently accretive to cash distributions without such conversion. However, it is possible that SunEdison (or another holder) could exercise this reset election at a time when Terra LLC is experiencing declines in aggregate cash distributions or is expected to experience declines in its aggregate cash distributions. In such situations, the holder of the IDRs may desire to be issued Class B1 units rather than retain the right to receive incentive distributions based on the initial target distribution levels. As a result, a reset election may cause the Company (which holds all of Terra LLC’s Class A units), and, in turn, holders of our Class A common stock to experience a reduction in the amount of cash distributions that they would have otherwise received had Terra LLC not issued new Class B1 units to the holders of the IDRs in connection with resetting the target distribution levels.

The IDRs may be transferred to an unaffiliated third party without the consent of holders of Terra LLC’s units, us, as manager of Terra LLC, or the consent of our board of directors (or any committee thereof).
    
SunEdison may not sell, transfer, exchange, pledge (other than as collateral under its credit facilities) or otherwise dispose of the IDRs to any unaffiliated third party (other than its controlled affiliates) until after it has satisfied its $175.0 million aggregate Projected FTM CAFD commitment to us in accordance with the Support Agreement, and during the pendency of the SunEdison Bankruptcy, subject to the approval of the bankruptcy court. SunEdison has pledged the IDRs as collateral under its DIP facility and its existing first and second lien credit agreements, and second lien secured notes but our constituent documents prohibit transfer of the IDRs upon foreclosure until after SunEdison has satisfied its Projected FTM CAFD commitment to us. These prohibitions may not be enforceable against foreclosures occurring in connection with the SunEdison Bankruptcy, including foreclosures by the lenders under SunEdison’s DIP financing. After that period, SunEdison may transfer the IDRs to an unaffiliated third party at any time without the consent of the holders of Terra LLC’s units, us, as manager of Terra LLC, or our Board (or any committee thereof). However, Terra LLC has been granted in the Terra LLC limited liability company agreement a right of first refusal with respect to any proposed sale of IDRs to an unaffiliated third party (other than its controlled affiliates), under which we may exercise to purchase the IDRs proposed to be sold on the same terms offered to such third party at any time within 30 days after we receive written notice of the proposed sale and its terms. This right of first refusal may not be enforceable with respect to sales occurring in connection with the SunEdison Bankruptcy. If SunEdison transfers the IDRs to an unaffiliated third party, including as part of the SunEdison Bankruptcy process, SunEdison would not have the same incentive to grow our business and increase quarterly distributions to holders of Class A common stock over time.

If we incur material tax liabilities, distributions to holders of our Class A common stock may be reduced without any corresponding reduction in the amount of distributions paid to SunEdison or other holders of the IDRs, Class B units and Class B1 units.

We are entirely dependent upon distributions we receive from Terra LLC in respect of the Class A units held by us for payment of our expenses and other liabilities. We must make provisions for the payment of our income tax liabilities, if any, before we can use the cash distributions we receive from Terra LLC to make distributions to our Class A common stockholders. If we incur material tax liabilities, our distributions to holders of our Class A common stock may be reduced. However, the cash available to make distributions to the holders of the Class B units and IDRs issued by Terra LLC (all of which are currently held by SunEdison), or to the holders of any Class B1 units that may be issued by Terra LLC in connection with an IDR reset or otherwise, will not be reduced by the amount of our tax liabilities. As a result, if we incur material tax liabilities, distributions to holders of our Class A common stock may be reduced, without any corresponding reduction in the amount of distributions paid to SunEdison or other holders of the IDRs, Class B units and Class B1 units of Terra LLC.

Our ability to terminate the MSA early may be limited.

The MSA provides that we may terminate the agreement upon 30 days prior written notice to SunEdison upon the occurrence of any of the following: (i) SunEdison defaults in the performance or observance of any material term, condition or covenant contained therein in a manner that results in material harm to us and the default continues unremedied for a period of


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30 days after written notice thereof is given to SunEdison; (ii) SunEdison engages in any act of fraud, misappropriation of funds or embezzlement that results in material harm to us; (iii) SunEdison is grossly negligent in the performance of its duties under the agreement and such negligence results in material harm to us; (iv) upon the happening of certain events relating to the bankruptcy or insolvency of SunEdison; (v) upon the earlier to occur of the five-year anniversary of the date of the agreement and the end of any 12-month period ending on the last day of a calendar quarter during which we generated cash available for distribution in excess of $350.0 million; (vi) on such date as SunEdison and its affiliates no longer beneficially hold more than 50% of the voting power of our capital stock; and (vii) upon the date that SunEdison experiences a change in control. Furthermore, if we request an amendment to the scope of services provided by SunEdison under the MSA and we are not able to agree with SunEdison as to a change to the service fee resulting from a change in the scope of services within 180 days of the request, we will be able to terminate the agreement upon 30 days’ prior notice to SunEdison.

We will not be able to terminate the agreement for any other reason, and the agreement continues in perpetuity until terminated in accordance with its terms. SunEdison has breached its obligations under the MSA, in particular with respect to financial reporting and internal control matters. However, the termination provisions upon a bankruptcy or insolvency of SunEdison are likely not enforceable, and during the pendency of the SunEdison Bankruptcy, the automatic stay may prevent us from terminating the agreement in accordance with its terms without authorization from the bankruptcy court. The MSA also includes non-compete provisions that prohibit us from engaging in certain activities competitive with SunEdison’s power project development and construction business. The agreement provides that these non-compete provisions survive termination indefinitely. If SunEdison's performance does not meet the expectations of investors, the market price of our Class A common stock could suffer.

As described under the risk factor “ SunEdison is a party to important agreements at the corporate and project levels, which may be adversely affected by the SunEdison Bankruptcy ,” as part of the SunEdison Bankruptcy, SunEdison could also seek to reject or renegotiate the Management Services Agreement and any new terms or replacement agreement could be materially less favorable.

We do not expect that we will be able to obtain additional Call Right Projects identified in the Support Agreement or projects in the Intercompany Agreement.

We entered into the Support Agreement with SunEdison in connection with our IPO, which requires SunEdison to offer us additional qualifying projects from its development pipeline that are projected to generate an aggregate of at least $175.0 million of cash available for distribution during the first 12 months following the qualifying project’s respective commercial operations date.

In light of the SunEdison Bankruptcy, we do not expect that we will be able to acquire from SunEdison any of the Call Right Projects or ROFO Projects under the Support Agreement and Intercompany Agreement and add such projects to our operating fleet. SunEdison may seek to reject the Support Agreement, Intercompany Agreement or other agreements with respect to the Call Rights Projects or ROFO Projects or may be limited in its ability to perform under the Support Agreement by the bankruptcy court or by the terms of the SunEdison bankruptcy financing. As our long-term growth strategy is the acquisition of new renewable energy facilities, losing our ability to acquire Call Right Projects (or delays or the reduced quality of Call Right Projects) could materially and adversely affect our growth and, ultimately, our forecasted cash available for distribution, business, financial condition and results of operations.

The liability of SunEdison is limited under our arrangements with it and we have agreed to indemnify SunEdison against claims that it may face in connection with such arrangements, which may lead it to assume greater risks when making decisions relating to us than it otherwise would if acting solely for its own account.

Under the MSA, SunEdison will not assume any responsibility other than to provide or arrange for the provision of the services described in the MSA in good faith. In addition, under the MSA, the liability of SunEdison and its affiliates will be limited to the fullest extent permitted by law to conduct involving bad faith, fraud, willful misconduct or gross negligence or, in the case of a criminal matter, action that was known to have been unlawful. In addition, we have agreed to indemnify SunEdison to the fullest extent permitted by law from and against any claims, liabilities, losses, damages, costs or expenses incurred by an indemnified person or threatened in connection with our operations, investments and activities or in respect of or arising from the MSA or the services provided by SunEdison, except to the extent that the claims, liabilities, losses, damages, costs or expenses are determined to have resulted from the conduct in respect of which such persons have liability as described above. These protections may result in SunEdison tolerating greater risks when making decisions than otherwise would be the case. The indemnification arrangements in favor of SunEdison may also give rise to legal claims by SunEdison for indemnification from us that are adverse to us or holders of our Class A common stock.



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We may have conflicts of interest with TerraForm Global.
  
Actual, perceived and potential conflicts of interest may arise between us and TerraForm Global in a number of areas arising from, among other sources, current and potential shared systems, assets and services and common business opportunities, and may receive increased scrutiny as a result of overlaps among members of our management teams and boards of directors as well as the controlling interests in both companies of SunEdison.

Until recently we and TerraForm Global generally had common boards of directors, and historically we and TerraForm Global shared common management with limited exceptions, principally as a result of the control of both companies by SunEdison. Seven of the 10 members of our Board currently serve on the 9-person board of directors of TerraForm Global. Currently the members of our Corporate Governance and Conflicts Committee and our Audit Committee also serve in the same capacities on the same committees of TerraForm Global. In addition, some of our executive officers serve as executive officers of TerraForm Global, including Peter Blackmore, our and TerraForm Global’s Chairman and Interim Chief Executive Officer, and Rebecca Cranna, our and TerraForm Global’s Chief Financial Officer. Our directors and executive officers that overlap with those of TerraForm Global owe fiduciary duties to both companies.

Although conflicts between TerraForm Global and us were not expected to be significant when the companies were formed, as a result of various developments, including the SunEdison Bankruptcy, we now expect that we will be presented with business decisions, including decisions regarding business opportunities, that will involve material interests of both companies. These decisions may relate to (i) business transactions in which both companies may have an interest, including the sharing of joint resources and service providers between the companies, (ii) the exploration of strategic alternatives that may involve both companies, (iii) the prosecution and settlement of the companies’ claims against SunEdison and other third parties, and (iv) other actions we may take or not take in connection with the SunEdison Bankruptcy. In such circumstances the allocations of expected costs and benefits between us and TerraForm Global will necessarily give rise to conflicts. Due to the overlapping nature of the management and boards of directors of the Company and TerraForm Global, effectively managing these actual, perceived and potential conflicts will require substantial attention, and we can provide no assurance that we will identify all relevant actual, perceived or potential conflicts or adequately address such conflicts. Further, while we will endeavor to appropriately identify and manage such conflicts, the Company, as well as its directors and executive officers, will be subject to increased risk of conflict of interest claims.

In addition, certain of our directors and executive officers own stock, options or restricted stock units in both companies, and these ownership interests could create actual, perceived or potential conflicts of interest when our common directors and officers are faced with decisions that could have different implications for us and TerraForm Global.

Risks Related to our Business

Our failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act as a public company could have a material adverse effect on our business and share price .

Prior to completion of our IPO on July 23, 2014, we had not operated as a public company and did not have to independently comply with Section 404(a) of the Sarbanes-Oxley Act. We are required to meet these standards in the course of preparing our financial statements as of and for the year ended December 31, 2015, and our management is required to report on the effectiveness of our internal control over financial reporting for such year. Additionally, as we are no longer an emerging growth company, as defined by the JOBS Act, our independent registered public accounting firm is required pursuant to Section 404(b) of the Sarbanes-Oxley Act to attest to the effectiveness of our internal control over financial reporting on an annual basis. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected on a timely basis. The existence of any material weakness would require management to devote significant time and incur significant expense to remediate any such material weaknesses and management may not be able to remediate any such material weaknesses in a timely manner.

As of December 31, 2015, we did not maintain an effective control environment attributable to certain identified material weaknesses. Refer to Item 9A. Controls and Procedures for discussion regarding these material weaknesses.


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These control deficiencies did not result in any material misstatements, however they create a reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis, and therefore we concluded that the deficiencies represent material weaknesses in the Company’s internal control over financial reporting and our internal control over financial reporting was not effective as of December 31, 2015. We are working to remediate these issues as promptly as practicable.

The existence of these or other material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause stockholders to lose confidence in our reported financial information, all of which could materially and adversely affect our business and stock price.

Current market conditions have increased certain of the risks we face, including risks that are particular to the Company.

Conditions in the capital markets for growth, income and energy companies, including renewable energy companies, generally declined in the third and fourth quarters of 2015. We have been affected by this general decline as well as limitations on our ability to access the capital markets for reasons that are particular to the Company, including the SunEdison Bankruptcy and other risks that we face. In some cases, these developments have affected the plans and perspectives of various market participants, including operating entities, consumers and financing providers, and have contributed to increased uncertainty and heightened some of the risks we face that are particular to the Company. While we remain focused on executing our near term objectives, we will continue to monitor market developments and consider further adjustments to our plans and priorities if required, which could result in further significant changes to our business strategy. As a result of the negative impact on our business from these developments, we no longer expect to achieve the growth rate in our dividend per Class A common share that we had been targeting.

Risks that have increased as a result of these developments include, but are not limited to, risks related to access to capital and liquidity and risks related to the performance and prospects of third parties, including SunEdison as described under “ Risks Related to our Relationship with SunEdison and the SunEdison Bankruptcy ,” which may reduce our ability to access the capital markets. Additionally, and as described above, in light of current market conditions, we have terminated certain of our commitments to acquire assets from SunEdison and waived our option to purchase certain assets from SunEdison.

Furthermore, any significant disruption to our ability to access the capital markets, or a significant increase in interest rates, could make it difficult for us to successfully acquire attractive renewable energy facilities and may also limit our ability to obtain debt or equity financing to complete such acquisitions. If we are unable to raise adequate proceeds when needed to fund such acquisitions, the ability to grow our renewable energy facility portfolio may be limited, which could have a material adverse effect on our ability to implement our growth strategy and, ultimately, our projected cash available for distribution, business, financial condition, results of operations and cash flows.

We are involved in costly and time-consuming litigation and other regulatory proceedings, including the SunEdison Bankruptcy proceedings, which require significant attention from our management and involve a greater exposure to legal liability.

We have and continue to be involved in legal proceedings, administrative proceedings, claims and other litigation that arise in the ordinary course of business, including due to failed or terminated transactions. In addition, we are named as defendants from time to time in other lawsuits and regulatory actions relating to our business, some of which may claim significant damages. SunEdison’s controlling interests in TerraForm Power and the position of certain of our executive officers on the board of directors and in senior management of TerraForm Power have resulted in, and may increase the possibility of future claims of breaches of fiduciary duties including claims of conflicts of interest related to TerraForm Power. In particular, SunEdison, TerraForm Power and certain officers and directors of TerraForm Power have been named as defendants in certain stockholder derivative complaints for breaches of fiduciary duties and claims of conflicts of interest related to SunEdison’s then-pending acquisition of certain residential rooftop solar assets of Vivint Solar. The remedies sought include damages. Although the Vivint Solar acquisition has been terminated and a settlement hearing has been scheduled, the settlement may not be approved by the court and these proceedings may continue. We have also been subject to claims arising out of our acquisition activities with respect to the certain payments in connection with the acquisition of First Wind by SunEdison. We also may be subject to litigation arising out of the SunEdison Bankruptcy, including actions to avoid payments made to us by SunEdison or transactions that we consummated with SunEdison including transactions relating to our initial public offering and the acquisition by us of renewable energy projects from SunEdison. For more information regarding our outstanding legal proceedings and related matters, see Note 18 to our consolidated financial statements included in this Annual Report on Form 10-K.


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Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. Unfavorable outcomes or developments relating to these proceedings, or new proceeding involving similar allegations or otherwise, such as monetary damages or equitable remedies, could have a material adverse impact on our business and financial position, results of operations or cash flows or limit our ability to engage in certain of our business activities. Settlement of claims could adversely affect our financial condition and results of operations. In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings are often expensive, lengthy and disruptive to normal business operations and require significant attention from our management. We are currently, and may be subject in the future, to claims, lawsuits or arbitration proceedings related to matters in tort or under contracts, employment matters, securities class action lawsuits, shareholder derivative actions, breaches of fiduciary duty, conflicts of interest, tax authority examinations or other lawsuits, regulatory actions or government inquiries and investigations.

In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We have become the target of such securities litigation (see Note 18. Commitments and Contingencies to our consolidated financial statements) and we may become the target of additional securities litigation in the future, which could result in substantial costs and divert our management’s attention from other business concerns, which could have a material adverse effect on our business.

Current or future litigation or administrative proceedings relating to the operation of our renewable energy facilities could have a material adverse effect on our business, financial condition and results of operations.

We have and continue to be involved in legal proceedings, administrative proceedings, claims and other litigation relating to the operation of our renewable energy facilities that arises in the ordinary course of business. Individuals and interest groups may sue to challenge the issuance of a permit for a renewable energy facility. A renewable energy facility may also be subject to legal proceedings or claims contesting the operation of the facility. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. Unfavorable outcomes or developments relating to these proceedings, such as judgments for monetary damages, injunctions or denial or revocation of permits, could have a material adverse effect on our business, financial condition and results of operations. Settlement of claims could adversely affect our financial condition and results of operations. In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings are often expensive, lengthy and disruptive to normal business operations and require significant attention from our management. As described in the risk factor “The SunEdison Bankruptcy has subjected
us to increased litigation risk,” the SunEdison bankruptcy also increases our risks in certain of these proceedings and in future
litigation.

There can be no assurance that our exploration of strategic alternatives will result in any transaction being consummated, and speculation and uncertainty regarding the outcome of our exploration of strategic alternatives may adversely impact our business.
On September 19, 2016, we announced that, at the recommendation of our Corporate Governance and Conflicts Committee, our Board of Directors has initiated a process to explore and evaluate potential strategic alternatives to maximize stockholder value, including a merger or sale of our entire business. There can be no assurance that this process will result in the pursuit or consummation of any strategic transaction or that there will be a formal cessation of the process. Even if a deal is reached, there is the risk that we would not obtain necessary third-party approvals and overcome other obstacles to closing, including government and regulatory approvals and, to the extent required, consents from our lenders under the Revolver.
In addition, this process will involve the dedication of significant resources and the incurrence of significant costs and expenses. Certain strategic alternatives for us may require stockholder approval. Since SunEdison is operating under Chapter 11 bankruptcy protection, many decisions made by SunEdison, such as how to vote its shares in TerraForm Power to approve a merger or sale of substantially all of TerraForm Power’s assets, may require the approval of the U.S. Bankruptcy Court for the Southern District of New York. In addition, speculation and uncertainty regarding our exploration of strategic alternatives may cause or result in the disruption of our business; diversion of significant resources of our management and staff; difficulty in recruiting, hiring, motivating and retaining talented and skilled personnel; difficulty in maintaining or negotiating and consummating new, business or strategic relationships or transactions; disruption of our relationships with customers, business partners and service providers; inability to respond effectively to competitive pressures, industry developments and future opportunities; and increased stock price volatility.
If we are unable to mitigate these or other potential risks related to the uncertainty caused by our exploration of strategic alternatives, it may disrupt our business or adversely impact our revenue, operating results and financial condition. In


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addition, the market price of our stock may be volatile as we consider strategic alternatives, and volatility may persist or be increased if and when a decision to pursue a particular alternative (or no alternative) is announced.
Furthermore, even if this process results in the pursuit of any proposed strategic transaction, there is no assurance that such strategic transaction will be consummated. We may be unable to obtain any regulatory or third-party approvals or consents (including any applicable approvals or consents related to our projects) that may be required to complete such strategic transaction, and we may be unable to satisfy other closing conditions for such strategic transaction, in the anticipated timeframe or at all. Any condition, to the extent imposed, for obtaining any necessary approvals or consents could delay the completion of such strategic transaction for a significant period of time or prevent it from occurring at all.  Our failure to complete such strategic transaction could materially adversely affect our business and prospects.
The removal of our President and Chief Executive Officer, the appointment of our Chairman and Interim Chief Executive Officer, the search for, and any appointment of, a permanent President and Chief Executive Officer and board and management changes could have a material adverse impact on our business.

Since November 2015, as a result of personnel decisions by SunEdison, the SunEdison Bankruptcy and related developments, we have experienced a series of significant changes in the Board and our senior management, including, among other things, the removal of our President and Chief Executive Officer, the appointment of our Chairman and Interim Chief Executive Officer, the removal and appointment of our Chief Financial Officer and a substantial change in the composition of the Board. For additional information, see “Recent Developments - Governance and management changes within Item 1. Business .

As a result of these changes, we have experienced, and may continue to experience, disruption or difficulty in maintaining or developing our business. Further, any search for, and hiring of, a permanent chief executive officer may also cause disruption or result in difficulty in maintaining or developing our business. The marketplace for experienced senior executive officers is competitive and we may experience challenges and significant expenses in hiring a permanent chief executive officer. Our performance is influenced by the performance of our senior management. These changes in management could adversely affect our senior management team’s ability to quickly and efficiently respond to problems and effectively manage our business.

In addition, as a significant number of the members of the Board and our senior management have served in such capacity for only a short time, we face the risks that they may have limited familiarity with our business and operations, lack experience in communicating effectively within the management team and with our other staff or lack an established track record in managing and executing our business strategy. Although we endeavor to implement any director and management transition in as non-disruptive a manner as possible, leadership changes can be inherently difficult to manage and may cause significant disruption to our business and give rise to uncertainty among our customers, business partners, service providers, staff, investors and other third parties concerning our future direction and performance. This could, in turn, impair our ability to execute our business strategy successfully and adversely affect our business and results of operations.

Integrating the Invenergy Wind power plants we acquired may be more difficult, costly or time-consuming than expected, the anticipated benefits of the Invenergy Wind power plant acquisition may not be realized and additional acquisitions of Invenergy Wind power plants may not be completed.

The success of the Invenergy Wind power plant acquisitions, including anticipated benefits, will depend, in part, on our ability to successfully integrate the assets we acquired or acquire with our existing operations. Any difficulties we have in integrating the Invenergy Wind power plants could materially and adversely affect our business, financial condition, results of operations and cash flows.

Additionally, at the time the Company entered into the purchase agreements for the other Invenergy Wind power plants, the Company agreed to acquire in a second closing two additional wind facilities from Invenergy Wind subject to satisfaction of closing conditions. The facilities have a combined nameplate capacity of 98.6 MW (net), are located in Nebraska and are currently in operation. The second closing has not occurred and the purchase agreement contained a July 1, 2016 outside date. This commitment expired on July 1, 2016. As a result, while the purchase agreement remains in force, Invenergy Wind and the Company now have the right to terminate the purchase agreement with respect to these two additional facilities at any time and may determine not to consummate the acquisition. If the purchase agreement is terminated by either party, the Company will not purchase these facilities.



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A significant portion of our assets consists of intangible assets, the value of which may be reduced if we determine that those assets are impaired.

Intangible assets and goodwill are evaluated for impairment annually or more frequently if circumstances indicate impairment may have occurred. Impairment assessment requires that we consider, among other factors, differences between the current book value and estimated fair value of our net assets. Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible and identifiable intangible assets acquired. As of December 31, 2015, the net carrying value of intangible assets and goodwill represented $ 1,302.0 million , or  16% , of our total assets.

Based on our annual impairment testing conducted as of December 1, 2015, and a review of any potential indicators of impairment, we concluded that the carrying value of intangible assets and goodwill were not impaired. If intangible assets or goodwill are impaired based on a future impairment test, we could be required to record non-cash impairment charges to our operating income. Such non-cash impairment charges, if significant, could materially and adversely affect our results of operations in the period recognized.

Counterparties to our PPAs may not fulfill their obligations or may seek to terminate the PPA early, which could result in a material adverse impact on our business, financial condition, results of operations and cash flows.

All but a minor portion of the electricity generated by our current portfolio of renewable energy facilities is sold under long-term PPAs, including power purchase agreements with public utilities or commercial, industrial or government end-users or hedge agreements with investment banks and creditworthy counterparties. Certain of the PPAs associated with renewable energy facilities in our portfolio allow the offtake purchaser to terminate the PPA in the event certain operating thresholds or performance measures are not achieved within specified time periods or, in certain instances, by payment of an early termination fee. If a PPA was terminated or if, for any reason, any purchaser of power under these contracts is unable or unwilling to fulfill their related contractual obligations or refuses to accept delivery of power delivered thereunder, and if we are unable to enter a new PPA on acceptable terms in a timely fashion or at all, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. The risks factors “The SunEdison Bankruptcy may adversely affect our relationships with current or potential counterparties” and “Because SunEdison is a party to a material project agreement or a guarantor thereof, the SunEdison Bankruptcy may result in a material adverse effect on many of our projects” describe additional risks with respect to our counterparty relationships and PPAs due to the SunEdison Bankruptcy.

A portion of the revenues under the PPAs for our U.K. solar generation facilities are subject to price adjustments after a period of time. If we do not sell these facilities and if the market price of electricity decreases and we are otherwise unable to negotiate more favorable pricing terms, our business, financial condition, results of operations and cash flows may be materially and adversely affected.

The PPAs for the U.K. solar generation facilities in our portfolio have fixed electricity prices for a specified period of time (typically four years), after which such electricity prices are subject to an adjustment based on the market price at the time of the adjustment. While the PPAs with price adjustments specify a minimum price, the minimum price is significantly below the initial fixed price. A decrease in the market price of electricity, including due to lower prices for traditional fossil fuels, could result in a decrease in the pricing under such contracts if the fixed-price period has expired, unless we are able to negotiate more favorable pricing terms. If we do not sell these facilities as we are currently exploring, a decrease in the price payable to us under our PPAs could materially and adversely affect our business, financial condition, results of operations and cash flows.

Certain of our PPAs allow the offtake purchaser to buy out a portion of the renewable energy facility upon the occurrence of certain events, in which case we will need to find suitable replacement renewable energy facilities to invest in.

Certain of the PPAs for renewable energy facilities in our portfolio or that we may acquire in the future allow the offtake purchaser to purchase all or a portion of the applicable renewable energy facility from us. If the offtake purchaser exercises its right to purchase all or a portion of the renewable energy facility, we would need to reinvest the proceeds from the sale in one or more renewable energy facilities with similar economic attributes in order to maintain our cash available for distribution. If we were unable to locate and acquire suitable replacement renewable energy facilities in a timely fashion it could have a material adverse effect on our results of operations and cash available for distribution.

Most of our PPAs do not include inflation-based price increases.

In general, our PPAs do not contain inflation-based price increase provisions. To the extent that the countries in which


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we conduct our business experience high rates of inflation, thereby increasing our operating costs in those countries, we may not be able to generate sufficient revenues to offset the effects of inflation, which could materially and adversely affect our business, financial condition, results of operations and cash flows.

A material drop in the retail price of utility-generated electricity or electricity from other sources could increase competition for new PPAs, limiting our ability to attract new customers and adversely affecting our growth.

Decreases in the retail prices of electricity supplied by utilities or other clean energy sources would harm our ability to offer competitive pricing and could harm our ability to sign PPAs with new customers. The price of electricity from utilities could decrease for a number of reasons, including:

the construction of a significant number of new power generation plants, including nuclear, coal, natural gas or renewable energy facilities;
the construction of additional electric transmission and distribution lines;
a reduction in the price of natural gas, including as a result of new drilling techniques or a relaxation of associated regulatory standards;
energy conservation technologies and public initiatives to reduce electricity consumption; and
the development of new clean energy technologies that provide less expensive energy.

A shift in the timing of peak rates for utility-supplied electricity to a time of day when solar energy generation is less efficient could make solar energy less competitive and reduce demand. If the retail price of energy available from utilities were to decrease, we would be at a competitive disadvantage in negotiating new PPAs and therefore we may be unable to attract new customers and our growth would be limited.

We may not be able to replace expiring PPAs with contracts on similar terms. If we are unable to replace an expired distributed generation PPA with an acceptable new contract, we may be required to remove the renewable energy facility from the site or, alternatively, we may sell the assets to the site host.

We may not be able to replace an expiring PPA with a contract on equivalent terms and conditions, including at prices that permit operation of the related facility on a profitable basis. If we are unable to replace an expiring PPA with an acceptable new revenue contract, the affected site may temporarily or permanently cease operations. In the case of a distributed generation solar facility that ceases operations, the PPA terms generally require that we remove the assets, including fixing or reimbursing the site owner for any damages caused by the assets or the removal of such assets. The cost of removing a significant number of distributed generation solar facilities could be material. Alternatively, we may agree to sell the assets to the site owner, but the terms and conditions, including price, that we would receive in any sale, and the sale price may not be sufficient to replace the revenue previously generated by the solar generation facility.

Our renewable energy facilities are exposed to curtailment risks, which may reduce the return to us on those investments and adversely impact our business, financial condition, and results of operations.

Certain of our renewable energy facilities’ generation of electricity may be curtailed without compensation due to transmission limitations or limitations on the electricity grid’s ability to accommodate intermittent electricity generating sources, reducing our revenues and impairing our ability to capitalize fully on a particular assets potential.

For example, our Stetson and Rollins wind power plants have experienced significant curtailment starting in February 2012 due to a combination of construction on the Maine Power Reliability Project (“MPRP”) a large transmission upgrade project affecting generation and transmission throughout Maine and adjoining areas, and transmission export limits at the Keene Road interface. These wind power plants in the aggregate have had curtailment of 40 GWh for 2015 and averaged 58 GWh in 2014 and 2013, respectively, attributable in the aggregate to the MPRP construction and the Keene Road interface limits. The elements of the MPRP that affect Stetson and Rollins were completed in 2015. We are also currently pursuing several different solutions that may help to eliminate the Keene Road issue.

We are also experiencing curtailment with respect to other of our solar and wind power plants. Solutions to ameliorate or eliminate curtailment with respect to our power plants, including the Keene Road and other curtailment issues, may not be available or may not be effective or may be cost prohibitive to undertake and implement. Curtailment at levels above our expectations could have a material adverse effect on our business, financial condition and results of operations and cash flows and our ability to pay dividends to holders of our Class A common stock.



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The growth of our business depends on locating and acquiring interests in attractive renewable energy facilities at favorable prices and with favorable financing terms. Additionally, even if we consummate such acquisitions and financings on terms that we believe are favorable, such acquisitions may in fact result in a decrease in cash available for distribution per Class A common share.

Our primary business strategy is to acquire renewable energy facilities that are operational at the time of acquisition. We may also, in limited circumstances, acquire renewable energy facilities that are pre-operational. We have not changed our long-term strategy which is to pursue opportunities to acquire renewable energy facilities and grow our portfolio. The following factors, among others, could affect the availability of attractive renewable energy facilities to grow our business and dividend per Class A common share:

competing bids for a renewable energy facility, including from companies that may have substantially greater capital and other resources than we do;
fewer third party acquisition opportunities than we expect, which could result from, among other things, available renewable energy facilities having less desirable economic returns or higher risk profiles than we believe suitable for our business plan and investment strategy;
the SunEdison Bankruptcy and uncertainties regarding the bankruptcy and its outcome;
the expected absence of any future projects to be acquired from SunEdison under the Project Support Agreement and the Intercompany Agreement; and