TerraForm Power, Inc. (TERP)

FORM 10-Q | Quarterly Report
TerraForm Power, Inc. (Form: 10-Q, Received: 12/06/2016 06:05:08)
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _____________________________________________________________________________
FORM 10-Q
 _____________________________________________________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2016
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)
 _________________________________________________
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 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 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-Q


 
 
Page
 
 
 
 
Item 1.
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 





PART I - Financial Information

Item 1. Financial Statements.

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

 
Three Months Ended March 31,
 
2016
 
2015
Operating revenues, net
$
153,917

 
$
70,515

Operating costs and expenses:
 
 
 
Cost of operations
30,196

 
16,820

Cost of operations - affiliate
6,846

 
3,643

General and administrative expenses
17,183

 
9,939

General and administrative expenses - affiliate
5,437

 
6,027

Acquisition and related costs
2,743

 
13,722

Acquisition and related costs - affiliate

 
436

Depreciation, accretion and amortization expense
59,007

 
31,891

Total operating costs and expenses
121,412

 
82,478

Operating income (loss)
32,505

 
(11,963
)
Other expenses:
 
 
 
Interest expense, net
68,994

 
36,855

Loss on extinguishment of debt, net

 
20,038

(Gain) loss on foreign currency exchange, net
(4,493
)
 
14,369

Loss on receivables - affiliate
845

 

Other expenses, net
567

 
480

Total other expenses, net
65,913

 
71,742

Loss before income tax expense (benefit)
(33,408
)
 
(83,705
)
Income tax expense (benefit)
97

 
(45
)
Net loss
(33,505
)
 
(83,660
)
Less: Net income (loss) attributable to redeemable non-controlling interests
2,545

 
(169
)
Less: Net loss attributable to non-controlling interests
(35,569
)
 
(55,375
)
Net loss attributable to Class A common stockholders
$
(481
)
 
$
(28,116
)
 
 
 
 
Weighted average number of shares:
 
 
 
Class A common stock - Basic and diluted
87,833

 
49,694

Loss per share:
 
 
 
Class A common stock - Basic and diluted
$
(0.01
)
 
$
(0.57
)


See accompanying notes to unaudited condensed consolidated financial statements.
3



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

 
Three Months Ended March 31,
 
2016
 
2015
Net loss
$
(33,505
)
 
$
(83,660
)
Other comprehensive income (loss), net of tax:
 
 
 
Foreign currency translation adjustments:
 
 
 
Net unrealized gain (loss) arising during the period
6,573

 
(3,275
)
Hedging activities:
 
 
 
Net unrealized (loss) gain arising during the period, net of tax
(32,965
)
 
10,252

Reclassification of net realized loss into earnings, net of tax
369

 
2,857

Other comprehensive (loss) income, net of tax
(26,023
)
 
9,834

Total comprehensive loss
(59,528
)
 
(73,826
)
Less: Pre-acquisition other comprehensive income of renewable energy facilities acquired from SunEdison

 
12,500

Comprehensive loss excluding pre-acquisition other comprehensive income of renewable energy facilities acquired from SunEdison
(59,528
)
 
(86,326
)
Less comprehensive income (loss) attributable to non-controlling interests:
 
 
 
Net income (loss) attributable to redeemable non-controlling interests
2,545

 
(169
)
Net loss attributable to non-controlling interests
(35,569
)
 
(55,375
)
Foreign currency translation adjustments
2,524

 
(1,862
)
Hedging activities
(11,833
)
 
168

Comprehensive loss attributable to non-controlling interests
(42,333
)
 
(57,238
)
Comprehensive loss attributable to Class A common stockholders
$
(17,195
)
 
$
(29,088
)


See accompanying notes to unaudited condensed consolidated financial statements.
4



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


 
March 31, 2016
 
December 31, 2015
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
603,461

 
$
626,595

Restricted cash
117,366

 
152,586

Accounts receivable, net
111,312

 
103,811

Prepaid expenses and other current assets
59,221

 
53,769

Assets held for sale
55,725

 

Total current assets
947,085

 
936,761

 
 
 
 
Renewable energy facilities, net, including consolidated VIEs of $3,586,863 and $3,558,041 in 2016 and 2015, respectively
5,208,372

 
5,834,234

Intangible assets, net, including consolidated VIEs of $916,741 and $929,580 in 2016 and 2015, respectively
1,237,190

 
1,246,164

Goodwill
55,874

 
55,874

Deferred financing costs, net
9,595

 
10,181

Other assets
104,162

 
120,343

Restricted cash
20,071

 
13,852

Non-current assets held for sale
617,204

 

Total assets
$
8,199,553

 
$
8,217,409

 
 
 
 

See accompanying notes to unaudited condensed consolidated financial statements.
5



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


 
March 31, 2016
 
December 31, 2015
Liabilities, Non-controlling Interests and Stockholders' Equity
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt and financing lease obligations, including consolidated VIEs of $978,026 and $980,069 in 2016 and 2015, respectively
$
1,575,383

 
$
2,037,919

Accounts payable, accrued expenses and other current liabilities, including consolidated VIEs of $63,282 and $48,359 in 2016 and 2015, respectively
165,257

 
153,046

Deferred revenue
18,081

 
15,460

Due to SunEdison, net
28,695

 
26,598

Liabilities related to assets held for sale
451,262

 

Total current liabilities
2,238,678

 
2,233,023

Long-term debt and financing lease obligations, less current portion, including consolidated VIEs of $59,418 and $59,706 in 2016 and 2015, respectively
2,531,470

 
2,524,730

Deferred revenue, less current portion
64,913

 
70,492

Deferred income taxes
26,692

 
26,630

Asset retirement obligations, including consolidated VIEs of $105,259 and $101,532 in 2016 and 2015, respectively
177,199

 
215,146

Other long-term liabilities
29,921

 
31,408

Non-current liabilities related to assets held for sale
44,563

 

Total liabilities
5,113,436

 
5,101,429

 
 
 
 
Redeemable non-controlling interests
177,744

 
175,711

Stockholders' equity:
 
 
 
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued and outstanding in 2016 and 2015, respectively

 

Class A common stock, $0.01 par value per share, 850,000,000 shares authorized, 91,464,486 and 79,734,265 shares issued in 2016 and 2015, respectively, and 91,324,447 and 79,612,533 shares outstanding in 2016 and 2015, respectively
909

 
784

Class B common stock, $0.01 par value per share, 140,000,000 shares authorized, 48,202,310 and 60,364,154 shares issued and outstanding in 2016 and 2015, respectively
482

 
604

Class B1 common stock, $0.01 par value per share, 260,000,000 shares authorized, none issued and outstanding in 2016 and 2015, respectively

 

Additional paid-in capital
1,459,923

 
1,267,484

Accumulated deficit
(105,074
)
 
(104,593
)
Accumulated other comprehensive income
6,186

 
22,900

Treasury stock, 140,039 and 121,732 shares in 2016 and 2015, respectively
(2,620
)
 
(2,436
)
Total TerraForm Power, Inc. stockholders' equity
1,359,806

 
1,184,743

Non-controlling interests
1,548,567

 
1,755,526

Total non-controlling interests and stockholders' equity
2,908,373

 
2,940,269

Total liabilities, non-controlling interests and stockholders' equity
$
8,199,553

 
$
8,217,409



See accompanying notes to unaudited condensed consolidated financial statements.
6




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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-controlling Interests
 
 
 
Class A Common Stock Issued
 
Class B Common Stock Issued
 
Additional Paid-in Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Income
 
Common Stock Held in Treasury
 
 
 
 
 
Accumulated Deficit
 
Accumulated Other Comprehensive Loss
 
 
 
Total Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
Total
 
Capital
 
 
 
Total
 
Balance as of December 31, 2015
79,734

 
$
784

 
60,364

 
$
604

 
$
1,267,484

 
$
(104,593
)
 
$
22,900

 
(122
)
 
$
(2,436
)
 
$
1,184,743

 
$
1,953,584

 
$
(182,822
)
 
$
(15,236
)
 
$
1,755,526

 
$
2,940,269

SunEdison exchange
12,162

 
122

 
(12,162
)
 
(122
)
 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation
(432
)
 
3

 

 

 
491

 

 

 
(18
)
 
(184
)
 
310

 

 

 

 

 
310

Net loss¹

 

 

 

 

 
(481
)
 

 

 

 
(481
)
 

 
(35,569
)
 

 
(35,569
)
 
(36,050
)
Net SunEdison investment

 

 

 

 
12,804

 

 

 

 

 
12,804

 
7,111

 

 

 
7,111

 
19,915

Other comprehensive loss

 

 

 

 

 

 
(16,714
)
 

 

 
(16,714
)
 

 

 
(9,309
)
 
(9,309
)
 
(26,023
)
Sale of membership interests in renewable energy facilities

 

 

 

 

 

 

 

 

 

 
15,612

 

 

 
15,612

 
15,612

Distributions to non-controlling interests

 

 

 

 

 

 

 

 

 

 
(5,660
)
 

 

 
(5,660
)
 
(5,660
)
Equity reallocation

 

 

 

 
179,144

 

 

 

 

 
179,144

 
(179,144
)
 

 

 
(179,144
)
 

Balance as of March 31, 2016
91,464

 
$
909

 
48,202

 
$
482

 
$
1,459,923

 
$
(105,074
)
 
$
6,186

 
(140
)
 
$
(2,620
)
 
$
1,359,806

 
$
1,791,503

 
$
(218,391
)
 
$
(24,545
)
 
$
1,548,567

 
$
2,908,373

———
(1)
Excludes $2,545 of net income attributable to redeemable non-controlling interests.

See accompanying notes to unaudited condensed consolidated financial statements.
7



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


 
Three Months Ended March 31,
2016
 
2015
Cash flows from operating activities:
 
 
 
Net loss
$
(33,505
)
 
$
(83,660
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Stock-based compensation expense
1,023

 
5,144

Depreciation, accretion and amortization expense
59,007

 
31,891

Amortization of favorable and unfavorable rate revenue contracts, net
10,503

 
(336
)
Amortization of deferred financing costs and debt discounts
8,754

 
7,709

Recognition of deferred revenue
(2,322
)
 
(73
)
Loss on extinguishment of debt, net

 
20,038

Unrealized (gain) loss on derivatives, net
(352
)
 
4,302

Unrealized (gain) loss on foreign currency exchange, net
(3,166
)
 
14,369

Loss on receivables - affiliate
845

 

Deferred taxes
62

 

Other, net
552

 
551

Changes in assets and liabilities:
 
 
 
Accounts receivable
(14,495
)
 
(20,985
)
Prepaid expenses and other current assets
(2,552
)
 
4,420

Accounts payable, accrued expenses and other current liabilities
7,366

 
417

Deferred revenue
(636
)
 
6,658

Other, net
4,190

 

Due to SunEdison, net

 
(390
)
Restricted cash from operating activities

 
(664
)
Net cash provided by (used in) operating activities
35,274

 
(10,609
)
Cash flows from investing activities:
 
 
 
Cash paid to third parties for renewable energy facility construction
(31,711
)
 
(182,365
)
Other investments

 
(10,000
)
Acquisitions of renewable energy facilities from third parties, net of cash acquired
(4,064
)
 
(997,968
)
Due to SunEdison, net

 
(15,079
)
Change in restricted cash
5,638

 
(2,050
)
Net cash used in investing activities
$
(30,137
)
 
$
(1,207,462
)

See accompanying notes to unaudited condensed consolidated financial statements.
8




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

 
Three Months Ended March 31,
2016
 
2015
Cash flows from financing activities:
 
 
 
Proceeds from issuance of Class A common stock
$

 
$
342,192

Proceeds from Senior Notes due 2023

 
793,712

Repayment of term loan

 
(573,500
)
Borrowings of non-recourse long-term debt

 
336,438

Principal payments on non-recourse long-term debt
(29,712
)
 
(15,894
)
Due to SunEdison, net
(11,614
)
 
93,516

Contributions from non-controlling interests
15,612

 
10,497

Distributions to non-controlling interests
(6,172
)
 
(12,884
)
Repurchase of non-controlling interest

 
(54,694
)
Distributions to SunEdison

 
(16,659
)
Net SunEdison investment
29,747

 
53,020

Payment of dividends

 
(15,125
)
Debt prepayment premium

 
(6,429
)
Debt financing fees
(4,500
)
 
(30,667
)
Net cash (used in) provided by financing activities
(6,639
)
 
903,523

Net decrease in cash and cash equivalents
(1,502
)
 
(314,548
)
Reclassification of cash and cash equivalents to assets held for sale
(21,697
)
 

Effect of exchange rate changes on cash and cash equivalents
65

 
(583
)
Cash and cash equivalents at beginning of period
626,595

 
468,554

Cash and cash equivalents at end of period
$
603,461

 
$
153,423

 
 
 
 
Supplemental Disclosures:
 
 
 
Cash paid for interest, net of amounts capitalized of $303 and $641, respectively
$
61,099

 
$
12,497

Cash paid for income taxes
$

 
$

Schedule of non-cash activities:
 
 
 
Additions of asset retirement obligation (ARO) assets and liabilities
$
4,125

 
$
23,815

ARO assets and obligations from acquisitions
$
136

 
$
17,705

Long-term debt assumed in connection with acquisitions
$

 
$
132,697

 
 
 
 








See accompanying notes to unaudited condensed consolidated financial statements.
9







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

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Nature of Operations

TerraForm Power, Inc. ("TerraForm Power") and its subsidiaries (the "Company") is a controlled affiliate of SunEdison, Inc. (together, with its consolidated subsidiaries excluding the Company, "SunEdison"). TerraForm Power is a holding company and its sole asset is an equity interest in TerraForm Power, LLC ("Terra LLC"), an owner of renewable energy facilities that have long-term contractual arrangements to sell the electricity generated by these facilities to third parties. The related green energy certificates, ancillary services and other environmental attributes generated by these facilities are also sold to third parties. TerraForm Power is the managing member of Terra LLC, and operates, controls and consolidates the business affairs of Terra LLC.

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"). The Company is not a part of the SunEdison Bankruptcy ancd has no plans to file for bankruptcy itself. The Company does not rely substantially on SunEdison for funding or liquidity and believes that the Company will have sufficient liquidity to support its ongoing operations. The Company believes its equity interests in its renewable energy facilities that are legally owned by the Company’s subsidiaries are not available to satisfy the claims of the creditors of the SunEdison Bankruptcy.

While the Company continues 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 it may have against SunEdison through those proceedings, the SunEdison Bankruptcy may have a material adverse effect on the Company given its reliance on SunEdison.

During the SunEdison Bankruptcy, SunEdison has not performed substantially as obligated under its agreements with the Company, 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 the Company, 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, the Company expects that it will be able to operate its business without the support of SunEdison pursuant to the plans for transitioning away from reliance on SunEdison that it is 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 employees, and retaining backup or replacement operation and maintenance and asset management services for the Company's wind and solar facilities from other providers. The Company's business will be negatively impacted to the extent it is unsuccessful in implementing the relevant plans or the resulting ongoing long-term costs are higher than the costs the Company expected to incur with SunEdison as a sponsor.

On September 25, 2016, the Company filed its initial proof of claim in the SunEdison Bankruptcy, which was amended on October 7, 2016. As set forth in the proofs of claim, the Company has unsecured claims against SunEdison that are estimated 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 the Company 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 the business of the Company, including the loss of business opportunities, loss of business records, failure to provide timely audited financials, 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, 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 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 filed by the Company.

In addition, the Company believes that it may have claims entitled to administrative priority against SunEdison, including, without limitation, claims with respect to certain expenses that it has incurred after the commencement of the SunEdison Bankruptcy; however, the Company expects SunEdison and other parties in interest in the SunEdison Bankr

10




uptcy 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 the Company arising intercompany transactions between the Company and SunEdison. The Company 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, the Company believes that SunEdison may assert, or other parties with interest in the SunEdison Bankruptcy may seek to assert on SunEdison's behalf, certain claims against the Company. The Company intends to vigorously contest any avoidance claims asserted against it in the SunEdison Bankruptcy, including to the extent any such claims are brought by the official committee of unsecured creditors if it is successful in its standing motion.

The Company is 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, the Company believes that a successful settlement could facilitate the Company’s exploration of strategic alternatives. Any settlement would be subject to the approval of the bankruptcy court in the SunEdison Bankruptcy.

In most of the Company's debt-financed projects, the SunEdison Debtors are a party to a material project agreement or guarantor thereof, such as being a party or guarantor to 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, the Company has experienced defaults under most of its non-recourse financing agreements; however, these defaults are generally curable. To date none of the non-recourse financings has been accelerated and no project-level lender has notified the Company of such lenders election to enforce project security interests. While the Company has obtained waivers or temporary forbearances with respect to certain of these project-level defaults, no assurances can be given that the Company will obtain waivers and/or permanent forbearance agreements for the remaining projects, or that none of the financings will be accelerated. The Company is continuing to monitor the situation and is developing and implementing plans to obtain operation and maintenance and asset management services for its renewable energy facilities from third parties. The Company's corporate-level Revolver and Indentures do not include an event of default provision directly triggered by the occurrence of the SunEdison Bankruptcy.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

Our sponsor, SunEdison, Inc., and certain of its affiliates filed for bankruptcy on April 21, 2016. We believe that we have observed formalities and operating procedures to maintain our separate existence, 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 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, and retaining backup or replacement operation and maintenance and asset management services for our power plants from other providers.

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. While it has not been requested to date and we believe there is no basis for substantive consolidation in our circumstances, we cannot assure you that substantive consolidation will not be requested in the future or that the bankruptcy court would not consider it. 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. Bankruptcy courts have broad equitable powers, and as a result, outcomes in bankruptcy proceedings are inherently difficult to predict.


11




To the extent the bankruptcy court were to determine that substantive consolidation was appropriate under the Company's facts and circumstances, then the assets and liabilities of the Company could be made available to help satisfy the debt or contractual obligations of SunEdison.

Additionally, there have been covenant defaults under a number of our financing arrangements, mainly because of delays in the delivery of project-level audited financial statements and the delay in the filing of the Company’s audited annual financial statements for 2015 on Form 10-K. In addition, in a number of cases the SunEdison Bankruptcy resulted in defaults because SunEdison Debtors have been serving as operation and maintenance and asset management services providers or as guarantors under relevant contracts. We have been working diligently with our lenders to cure or waive instances of default, including through the completion of project-level audits and the retention of replacement service providers. However, there can be no assurance that all remaining defaults will be cured or waived. If the remaining defaults are not cured or waived, this would restrict the ability of the project-level subsidiaries to make distributions to us, which may affect our ability to meet certain covenants related to our revolving credit facility at the corporate level, 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.

The risk of substantive consolidation of the Company with SunEdison and inclusion in the SunEdison Bankruptcy as well as the existing covenant defaults and risks of future covenant defaults under a number of our financing agreements, raise substantial doubt about the Company's ability to continue as a going concern.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the Securities and Exchange Commission’s ("SEC") regulations for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. generally accepted accounting principles ("U.S. GAAP") for complete financial statements. The financial statements should be read in conjunction with the accounting policies and other disclosures as set forth in the notes to the Company’s annual financial statements for the year ended December 31, 2015. Interim results are not necessarily indicative of results for a full year.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all material adjustments consisting of normal and recurring accruals necessary to present fairly the Company's unaudited condensed consolidated financial position as of March 31, 2016, the results of operations and comprehensive loss for the three months ended March 31, 2016 and 2015, and cash flows for the three months ended March 31, 2016 and 2015.

The Company is required to recast historical financial statements when renewable energy facilities are acquired from SunEdison. The recast reflects the assets and liabilities and the results of operations of the acquired renewable energy facilities for the period the facilities were owned by SunEdison, which is in accordance with applicable rules governing transactions between entities under common control.

Use of Estimates

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

Assets Held for Sale

The Company records assets held for sale at the lower of the carrying value or fair value less costs to sell. The following criteria are used to determine if property is held for sale: (i) management has the authority and commits to a plan to sell the property; (ii) the property is available for immediate sale in its present condition; (iii) there is an active program to locate a buyer and the plan to sell the property has been initiated; (iv) the sale of the property is probable within one year; (v) the property is being actively marketed at a reasonable price relative to its current fair value; and (vi) it is unlikely that the plan to sell will be withdrawn or that significant changes to the plan will be made.


12




In determining the fair value of the assets less cost to sell, the Company considers factors including current sales prices for comparable assets in the region, recent market analysis studies, appraisals and any recent legitimate offers. If the estimated fair value less cost to sell of an asset is less than its current carrying value, the asset is written down to its estimated fair value less cost to sell. Due to uncertainties in the estimation process, it is reasonably possible that actual results could differ from the estimates used in the Company's historical analysis. The Company's assumptions about project sales prices require significant judgment because the current market is highly sensitive to changes in economic conditions. The Company estimated the fair values of assets held for sale based on current market conditions and assumptions made by management, which may differ from actual results and may result in additional impairments if market conditions deteriorate.

New Accounting Standards

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09,  Revenue from Contracts with Customers , which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. ASU No. 2014-09 will become effective for the Company on January 1, 2018. Early application is permitted but not before January 1, 2017. ASU No. 2014-09 permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the effect that ASU No. 2014-09 will have on its consolidated statements of operations and related disclosures. The Company has not yet selected a transition method or determined the effect of ASU No. 2014-09 on its ongoing financial reporting.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810) Amendments to the Consolidation Analysis , which affects the following areas of the consolidation analysis: limited partnerships and similar entities, evaluation of fees paid to a decision maker or service provider as a variable interest and in determination of the primary beneficiary, effect of related parties on the primary beneficiary determination and for certain investment funds. ASU No. 2015-02 is effective on a retrospective basis for the Company for the fiscal year ending December 31, 2016 and interim periods therein. The Company adopted ASU No. 2015-02 as of January 1, 2016, which resulted in certain of our consolidated subsidiaries to be considered variable interest entities. No unconsolidated investments were consolidated and no consolidated subsidiaries were deconsolidated as a result of implementing this standard.

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs , which requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability. In August 2015, the FASB issued ASU No. 2015-15 Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements , in which an entity may defer and present debt issuing costs associated with line-of-credit arrangements as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU No. 2015-03 and ASU No. 2015-15 are effective on a retrospective basis for annual and interim periods beginning on or after December 15, 2015. The Company adopted ASU No. 2015-03 and ASU No. 2015-15 as of January 1, 2016, resulting in a reclassification of $39.8 million and $43.1 million from deferred financing costs, net to long-term debt and financing lease obligations, including current portion, as of March 31, 2016 and December 31, 2015, respectively.

In February 2016, the FASB issued ASU No. 2016-02,  Leases (Topic 842) , which primarily changes the lessee's accounting for operating leases by requiring recognition of lease right-of-use assets and lease liabilities. This standard is effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect of ASU No. 2016-02 on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718) . This update was issued as part of the FASB's simplification initiative and affects all entities that issue share-based payment awards to their employees. The amendments in this update cover such areas as the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows. This update is effective for annual and interim periods beginning after December 31, 2016, which will require the Company to adopt these provisions in the first quarter of fiscal 2018. This guidance will be applied either prospectively, retrospectively or using a modified retrospective transition method, depending on the area covered in this update. Early adoption is permitted. The Company has not yet selected a transition date nor has it determined the effect of the standard on its ongoing financial reporting.

13





In March 2016, the FASB issued ASU No. 2016-07,  Investments - Equity Method and Joint Ventures (Topic 323) . The amendments of ASU No. 2016-07 eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held interest and adopt the equity method of accounting with no retroactive adjustment to the investment. In addition, ASU No. 2016-07 requires that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The guidance in ASU No. 2016-07 is effective for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. The adoption of ASU No. 2016-07 is required to be applied prospectively and early adoption is permitted. The Company does not expect the standard to have a material impact on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15,  Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments . The amendments of ASU No. 2016-15 were issued to address eight specific cash flow issues for which stakeholders have indicated to the FASB that a diversity in practice existed in how entities were presenting and classifying these items in the statement of cash flows. The issues addressed by ASU No. 2016-15 include but are not limited to the classification of debt prepayment and debt extinguishment costs, payments made for contingent consideration for a business combination, proceeds from the settlement of insurance proceeds, distributions received from equity method investees and separately identifiable cash flows and the application of the predominance principle. The amendments of ASU No. 2016-15 are effective for public entities for fiscal years beginning after December 15, 2017 and interim periods in those fiscal years. Early adoption is permitted, including adoption in an interim fiscal period with all amendments adopted in the same period. The adoption of ASU No. 2016-15 is required to be applied retrospectively. The Company is currently evaluating the impact of the standard on its consolidated statements of cash flows.

In October 2016, the FASB issued ASU No. 2016-16,  Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory . The amendments of ASU No. 2016-16 were issued to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party which has resulted in diversity in practice and increased complexity within financial reporting. The amendments of ASU No. 2016-16 would require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and do not require new disclosure requirements. The amendments of ASU No. 2016-16 are effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted and the adoption of ASU No. 2016-16 should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company is currently evaluating the impact of the standard on its consolidated financial statements.

2. TRANSACTIONS BETWEEN ENTITIES UNDER COMMON CONTROL

Recast of Historical Financial Statements

During the three months ended March 31, 2016 , the Company acquired renewable energy facilities with a combined nameplate capacity of 19.2 MW from SunEdison, which resulted in a recast of the consolidated balance sheet as of December 31, 2015 . The facilities acquired from SunEdison during the three months ended March 31, 2016 were not in operation in 2015 and there was no impact to the unaudited condensed consolidated statement of operations, unaudited condensed consolidated statement of comprehensive loss or unaudited condensed consolidated statement of cash flows for the three months ended March 31, 2015 as a result of these acquisitions.


14




The following table presents changes to previously reported amounts of the Company's consolidated balance sheet as of December 31, 2015 included in the Company's Annual Report on Form 10-K:
(In thousands)
Balance Sheet Caption
 
As Reported
 
Recast Adjustments
 
As Recasted
Renewable energy facilities, net
 
$
5,802,380

 
$
31,854

 
$
5,834,234

Other assets
 
119,960

 
383

 
120,343

Change in total assets
 
 
 
$
32,237

 
 
 
 
 
 
 
 
 
Current portion of long-term debt and financing lease obligations
 
$
2,014,331

 
$
23,588

 
$
2,037,919

Accounts payable, accrued expenses and other current liabilities
 
150,721

 
2,325

 
153,046

Due to SunEdison, net
 
20,274

 
6,324

 
26,598

Change in total liabilities
 

 
$
32,237

 


As a result of the Company's acquisition of renewable energy facilities from SunEdison during the last nine months of 2015, the following table presents changes to the Company's previously reported unaudited condensed consolidated statement of comprehensive loss for the three months ended March 31, 2015 included in the Company's Quarterly Report on Form 10-Q dated May 7, 2015. These adjustments are required to reflect the activity of the renewable energy facilities for the period owned by SunEdison in accordance with rules applicable to transactions between entities under common control.
(In thousands)
Statement of Comprehensive Loss
 
As Reported
 
Recast Adjustments
 
As Recasted
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
Hedging activities:
 
 
 
 
 
 
Net unrealized (loss) gain arising during the period, net of tax
 
$
(2,248
)
 
$
12,500

 
$
10,252

Change in total comprehensive loss
 
 
 
12,500

 


Less: Pre-acquisition other comprehensive income of renewable energy facilities acquired from SunEdison
 
$

 
12,500

 
$
12,500

Change in comprehensive loss attributable to Class A common stockholders
 
 
 
$

 
 


15




As a result of the Company's acquisition of renewable energy facilities from SunEdison during the last nine months of 2015, the following table presents changes to the Company's previously reported unaudited condensed consolidated statement of cash flows for the three months ended March 31, 2015 included in the Company's Quarterly Report on Form 10-Q dated May 7, 2015. These adjustments are required to reflect the activity of the renewable energy facilities for the period owned by SunEdison in accordance with rules applicable to transactions between entities under common control.
(In thousands)
Statement of Cash Flows Caption
 
As Reported
 
Recast Adjustments
 
As Recasted
Cash flows from investing activities:
 
 
 
 
 
 
Cash paid to third parties for renewable energy facility construction
 
$
(82,758
)
 
$
(99,607
)
 
$
(182,365
)
Acquisitions of renewable energy facilities from third parties, net of cash acquired
 
(810,720
)
 
(187,248
)
 
(997,968
)
Change in restricted cash
 
494

 
(2,544
)
 
(2,050
)
Change in net cash used in investing activities
 


 
(289,399
)
 


 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
Borrowings of non-recourse long-term debt
 
275,987

 
60,451

 
336,438

Principal payments on non-recourse long-term debt
 
(2,910
)
 
(12,984
)
 
(15,894
)
Due to SunEdison, net
 
(148,998
)
 
242,514

 
93,516

Change in net cash provided by financing activities
 


 
289,981

 


 
 
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(315,130
)
 
582

 
(314,548
)
Effect of exchange rate changes on cash and cash equivalents
 
(1
)
 
(582
)
 
(583
)
Cash and cash equivalents at beginning of period
 
468,554

 

 
468,554

Cash and cash equivalents at end of period
 
$
153,423

 
$

 
$
153,423


Acquisitions of Renewable Energy Facilities from SunEdison

The assets and liabilities transferred to the Company for the acquisitions of renewable energy facilities relate to interests under common control with SunEdison, and accordingly, have been recorded at historical cost. The difference between the cash purchase price and historical cost of the net assets acquired has been recorded as a contribution from SunEdison.

The following table summarizes the renewable energy facilities acquired by the Company from SunEdison through a series of transactions:
 
 
 
 
 
 
Three Months Ended March 31, 2016
 
As of March 31, 2016
Facility Category
 
Type
 
Location
 
Nameplate Capacity (MW)
 
Number of Sites
 
Initial Cash Paid 1
 
Cash Due to SunEdison 2
 
Debt Transferred 3
Distributed Generation
 
Solar
 
U.S.
 
1.2

 
3

 
$
2,750

 
$

 
$

Utility
 
Solar
 
U.S.
 
18.0

 
1

 
6,954

 
29,277

 
16,703

Total
 
 
 
 
 
19.2

 
4

 
$
9,704

 
$
29,277

 
$
16,703

————
(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 $1.6 million to SunEdison.
(2)
Represents commitments by the Company 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 third quarter of 2016. This commitment is not recorded on the Company's balance sheet as of March 31, 2016 (see Note 17. Related Parties).
(3)
Represents debt recorded on the Company's balance sheet as of March 31, 2016. This debt was repaid by SunEdison during the third quarter of 2016 using cash proceeds paid by the Company for the acquisition of these facilities.


16




During the three months ended March 31, 2016 , the Company paid $7.7 million to SunEdison for the acquisition of renewable energy facilities that had achieved commercial operations as of March 31, 2016 . Additionally, during the three months ended March 31, 2016 , the Company paid $2.0 million to SunEdison for facilities acquired from SunEdison that had not achieved commercial operations as of March 31, 2016 .

3. ASSETS HELD FOR SALE

The Company commenced a sale of substantially all of its portfolio of solar power plants located in the United Kingdom (the "U.K.") through a broad based sales process pursuant to a plan approved by management, and it is probable that the sale of this portfolio will occur within one year from the balance sheet date. As a result, the Company classified $672.9 million of assets and $495.8 million of liabilities as held for sale and measured each at the lower of carrying value or fair value less cost to sell. The Company's analysis indicated that the fair value less costs to sell exceeded the carrying value of the assets and no impairment losses were recognized during the three months ended March 31, 2016 . As of the financial statement issuance date, the Company had entered negotiations with a preferred bidder.

The following table summarizes the major classes of assets and liabilities which are classified as held for sale on the Company's unaudited condensed consolidated balance sheet as of March 31, 2016 :
(In thousands)
 
March 31, 2016
Assets held for sale:
 
 
Cash and cash equivalents
 
$
21,697

Restricted cash
 
22,930

Accounts receivable, net
 
7,251

Prepaid expenses and other current assets
 
3,847

Total current assets held for sale
 
55,725

Renewable energy facilities, net
 
615,052

Intangible assets, net
 
1,733

Other assets
 
419

Total non-current assets held for sale
 
617,204

Total assets held for sale
 
$
672,929

 
 
 
Liabilities related to assets held for sale:
 
 
Current portion of long-term debt
 
$
425,301

Accounts payable, accrued expenses and other current liabilities
 
25,021

Due to SunEdison, net
 
940

Total current liabilities related to assets held for sale
 
451,262

Asset retirement obligations
 
44,563

Total non-current liabilities related to assets held for sale
 
44,563

Total liabilities related to assets held for sale
 
$
495,825



17




4 . ACQUISITIONS

2015 Acquisitions

Acquisition of Invenergy Wind Power Plants

On December 15, 2015 , the Company acquired operating wind power plants with a combined nameplate capacity of 831.5 MW (net) from Invenergy Wind Global LLC (together with its subsidiaries, “Invenergy Wind”) for $1.3 billion in cash and the assumption of $531.2 million of non-recourse indebtedness. The wind power plants that the Company acquired from Invenergy Wind have contracted PPAs with a weighted-average remaining contract life of 17 years and an average counterparty credit rating of AA . Invenergy Wind will retain a 9.9% non-controlling interest in wind power plants located in the U.S. that the Company acquired and will provide certain operation and maintenance services for such assets.

Initial Accounting for Invenergy Wind

The initial accounting for the Invenergy Wind acquisition has not been completed because the evaluation necessary to assess the fair values of certain net assets acquired is still in process. The provisional amounts for these acquisitions, included in the table within the " Acquisition Accounting " section of this footnote below, are subject to revision until these evaluations are completed. There were no measurement period adjustments recognized during the three months ended March 31, 2016 .

The operating revenues and net income of Invenergy Wind acquired in 2015 reflected in the consolidated statements of operations for the three months ended March 31, 2016 are $41.4 million and $16.3 million , respectively.

Valuation of Non-controlling Interest

Invenergy Wind

The fair value of the non-controlling interest for Invenergy Wind was determined using a discounted cash flow approach. The redeemable non-controlling interest represents the fair value of 9.9% sponsor equity held by Invenergy Wind. SunEdison 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 wind power plants located in the U.S. (the ‘‘Invenergy Wind Interest’’). Simultaneously, Terra LLC entered into a back to back option agreement with SunEdison 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. SunEdison LLC is a debtor in the SunEdison Bankruptcy. As such, SunEdison LLC may assume, assume and assign or reject its Option Agreement. If SunEdison LLC rejects its Option Agreement, we would not expect to be obligated to perform on our Option Agreement, although we cannot assure that result.

Unaudited Pro Forma Supplementary Data

The unaudited pro forma supplementary data presented in the table below gives effect to the material 2015 acquisitions, Invenergy Wind, First Wind and Northern Lights, as if those transactions had each occurred on January 1, 2015. The unaudited pro forma supplementary data is provided for informational purposes only and should not be construed to be indicative of the Company’s results of operations had the acquisitions been consummated on the date assumed or of the Company’s results of operations for any future date.
 
 
Three Months Ended March 31,
(In thousands)
 
2015
Total operating revenues, net
 
$
112,947

Net loss
 
(61,807
)


18




Acquisition costs incurred by the Company related to third party acquisitions were $2.7 million and $14.2 million for the three months ended March 31, 2016 and 2015 . These costs are reflected as acquisition and related costs and acquisition and related costs - affiliate in the consolidated statements of operations.

Acquisition Accounting

The estimated acquisition-date fair values of assets, liabilities and non-controlling interests pertaining to the Invenergy Wind business combination as of March 31, 2016 , are as follows:
(In thousands)
Invenergy Wind
Renewable energy facilities
$
1,486,746

Accounts receivable
25,811

Intangible assets
748,300

Restricted cash
31,247

Derivative assets
32,311

Other assets
12,070

Total assets acquired
2,336,485

Accounts payable, accrued expenses and other current liabilities
23,195

Long-term debt, including current portion
531,221

Deferred income taxes
242

Asset retirement obligations
47,346

Other long-term liabilities
6,004

Total liabilities assumed
608,008

Redeemable non-controlling interest
141,415

Non-controlling interest
308,000

Purchase price, net of cash acquired
$
1,279,062

    
The acquired renewable energy facilities' non-financial assets represent estimates of the fair value of acquired PPA and REC contracts based on significant inputs that are not observable in the market and thus represent a Level 3 measurement (as defined in Note 11 . Fair Value Measurements ). The estimated fair values were determined based on an income approach and the estimated useful lives of the intangible assets range from 5 to 23 years. See Note 6 . Intangibles for additional disclosures related to the acquired intangible assets.

Pending Acquisitions

Acquisition of Wind Power Plants from Invenergy Wind

At the time the Company entered into an acquisition agreement for the Invenergy assets acquired on December 15, 2015, the Company also agreed to purchase two additional wind facilities from Invenergy Wind in a second closing, subject to customary closing conditions, including the consent of the tax equity finance parties for the wind power plants. The facilities have a combined nameplate capacity of 98.6 MW (net) and are located in Nebraska. The second closing has not occurred and the purchase agreement contains a July 1, 2016 expiration date. As a result, while the purchase agreement remains in force, Invenergy and the Company 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 for an estimated purchase price of $58.7 million which would be expected to be paid using cash on hand. However, both the Company or Invenergy Wind may determine not to consummate the acquisition. If the purchase agreement is terminated by either party, the Company will not purchase these facilities.

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, the Company entered into a definitive

19




purchase agreement with SunEdison, as amended on December 9, 2015 , (the "Amended Purchase Agreement") to acquire Vivint Solar’s residential solar generation facilities (the “Vivint Operating Assets”). The purchase price for the Vivint acquisition was expected to be approximately $814.8 million based on approximately 479.3 of installed MW expected to be acquired at the closing of the Amended Purchase Agreement. In connection with the purchase, the Company also obtained a commitment for a senior unsecured bridge facility in July of 2015 to fund the acquisition of Vivint Operating Assets, including related acquisition costs. See Note 8 . Long-term debt for additional disclosures of this bridge facility. The Company entered into an interim agreement (the "Vivint Interim Agreement"), as amended on December 9, 2015 , relating to, among other items, the Company's 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. The Company 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 the Company's obligations pursuant thereto, terminated on March 7, 2016. The commitment for the bridge facility, as amended and restated, also automatically terminated as of the same date. The Company, SunEdison, certain other parties and individuals have been named as defendants in several putative shareholder class actions that challenged the Vivint Solar and SunEdison merger (see Note 16. Commitments and Contingencies for additional disclosures over this litigation) .

5. RENEWABLE ENERGY FACILITIES

Renewable energy facilities, net consists of the following:  
(In thousands)
 
March 31, 2016
 
December 31, 2015
Renewable energy facilities in service, at cost
 
$
5,389,246

 
$
5,906,154

Less accumulated depreciation - renewable energy facilities
 
(206,940
)
 
(187,874
)
Renewable energy facilities in service, net
 
5,182,306

 
5,718,280

Construction in progress - renewable energy facilities
 
26,066

 
115,954

Total renewable energy facilities, net
 
$
5,208,372

 
$
5,834,234


Depreciation expense related to renewable energy facilities was $49.2 million and $25.1 million for the three months ended March 31, 2016 and 2015 , respectively.

Construction in progress represents $26.1 million of costs incurred to complete the construction of the facilities in the Company's current portfolio that were acquired from SunEdison. When renewable energy facilities are sold to the Company after completion by SunEdison, the Company retroactively recasts its historical financial statements to present the construction activity as if it consolidated the facility at inception of the construction (see Note 2. Transactions Between Entities Under Common Control) . All construction in progress costs are stated at SunEdison's historical cost. These costs include capitalized interest costs and amortization of deferred financing costs incurred during the asset's construction period, which totaled $0.3 million and $0.6 million for the three months ended March 31, 2016 and 2015 , respectively.

As of March 31, 2016, the Company reclassified $615.1 million from renewable energy facilities, net to non-current assets held for sale in the unaudited condensed consolidated balance sheet (see Note 3. Assets Held for Sale ). No amount was reclassified as assets held for sale as of December 31, 2015.


20




6 . INTANGIBLES

The following table presents the gross carrying amount and accumulated amortization of intangibles as of March 31, 2016 :
(In thousands, except weighted-average amortization period)
 
Weighted Average Amortization Period
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Book Value
Favorable rate revenue contracts
 
17 years
 
$
719,660

 
$
(23,993
)
 
$
695,667

In-place value of market rate revenue contracts
 
20 years
 
555,717

 
(29,062
)
 
526,655

Favorable rate land leases
 
19 years
 
15,800

 
(932
)
 
14,868

Total intangible assets, net
 
 
 
$
1,291,177

 
$
(53,987
)
 
$
1,237,190

 
 
 
 
 
 
 
 
 
Unfavorable rate revenue contracts
 
8 years
 
$
35,086

 
$
(6,420
)
 
$
28,666

Unfavorable rate land lease
 
17 years
 
1,000

 
(65
)
 
935

Total intangible liabilities, net
 
 
 
$
36,086

 
$
(6,485
)
 
$
29,601

    
The following table presents the gross carrying amount and accumulated amortization of intangibles as of December 31, 2015 :
(In thousands, except weighted-average amortization period)
 
Weighted Average Amortization Period
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Book Value
Favorable rate revenue contracts
 
17 years
 
$
714,137

 
$
(12,024
)
 
$
702,113

In-place value of market rate revenue contracts
 
20 years
 
551,226

 
(22,229
)
 
528,997

Favorable rate land leases
 
19 years
 
15,800

 
(746
)
 
15,054

Total intangible assets, net
 
 
 
$
1,281,163

 
$
(34,999
)
 
$
1,246,164

 
 
 
 
 
 
 
 
 
Unfavorable rate revenue contracts
 
8 years
 
$
35,086

 
$
(4,951
)
 
$
30,135

Unfavorable rate land lease
 
17 years
 
1,000

 
(51
)
 
949

Total intangible liabilities, net
 
 
 
$
36,086

 
$
(5,002
)
 
$
31,084

    
As of March 31, 2016 and December 31, 2015 , the Company had intangible assets related to revenue contracts, representing long-term PPAs and REC agreements, and favorable rate land leases that were obtained through acquisitions (see Note 4 . Acquisitions ). The revenue contract intangible assets are comprised of favorable rate PPAs and REC agreements and the in-place value of market rate PPAs. The Company also had intangible liabilities related to unfavorable rate PPAs and REC agreements and an unfavorable rate land lease, which are classified within other long-term liabilities in the unaudited condensed consolidated balance sheet. These intangible assets and liabilities are amortized on a straight-line basis over the remaining lives of the agreements, which range from 1 to 29 years as of March 31, 2016 .

Amortization expense related to favorable rate revenue contracts is reflected in the unaudited condensed consolidated statements of operations as a reduction of operating revenues, net. Amortization related to unfavorable rate revenue contracts is reflected in the unaudited condensed consolidated statements of operations as an increase to operating revenues, net. During the three months ended March 31, 2016 and 2015 , amortization expense related to favorable and unfavorable rate revenue contracts resulted in a $10.5 million decrease and $0.3 million increase in operating revenues, net, respectively.

Amortization expense related to the in-place value of market rate revenue contracts is reflected in the unaudited condensed consolidated statements of operations within depreciation, accretion and amortization expense. During the three months ended March 31, 2016 and 2015 , amortization expense related to the in-place value of market rate revenue contracts was $6.8 million and $5.7 million , respectively.


21




Amortization expense related to favorable rate land leases is reflected in the unaudited condensed consolidated statements of operations within cost of operations. Amortization related to the unfavorable rate land lease is reflected in the unaudited condensed consolidated statements of operations as a reduction of cost of operations. During the three months ended March 31, 2016 , net amortization expense related to favorable and unfavorable rate land leases was $0.2 million . There was no amortization expense related to favorable and unfavorable rate land leases during the three months ended March 31, 2015 .

7. VARIABLE INTEREST ENTITIES

The Company consolidates variable interest entities ("VIEs") in renewable energy facilities when the Company is the primary beneficiary. The VIEs own and operate renewable energy facilities in order to generate contracted cash flows. The VIEs were funded through a combination of equity contributions from the owners and non-recourse project-level debt. No VIEs were deconsolidated during the three months ended March 31, 2016 and 2015 .

The carrying amounts and classification of the consolidated VIEs’ assets and liabilities included in the Company's unaudited condensed consolidated balance sheets are as follows:
(In thousands)
 
March 31, 2016
 
December 31, 2015
Current assets
 
$
191,507

 
$
180,287

Non-current assets
 
4,596,080

 
4,584,886

Total assets
 
$
4,787,587

 
$
4,765,173

Current liabilities
 
$
1,062,052

 
$
1,043,892

Non-current liabilities
 
205,551

 
202,629

Total liabilities
 
$
1,267,603

 
$
1,246,521


The amounts shown in the table above exclude intercompany balances which are eliminated upon consolidation. All of the assets in the table above are restricted for settlement of the VIE obligations, and all of the liabilities in the table above can only be settled by using VIE resources.

8 . LONG-TERM DEBT
    
Long-term debt consists of the following:  
(In thousands, except rates)
Description:
 
March 31, 2016
 
December 31, 2015
 
Interest Type
 
Current Interest Rate (%)
 
Financing Type
Corporate-level long-term debt 1 :
 
 
 
 
 
 
 
 
 
 
Senior Notes due 2023
 
$
950,000

 
$
950,000

 
Fixed
 
5.88
 
Senior notes
Senior Notes due 2025
 
300,000

 
300,000

 
Fixed
 
6.13
 
Senior notes
Revolver
 
655,000

 
655,000

 
Variable
 
4.29
 
Revolving loan
Non-recourse long-term debt 2 :
 
 
 
 
 
 
 
 
 
 
Permanent financing
 
2,102,104

 
2,546,864

 
Blended 3
 
6.04 4
 
Term debt / Senior notes
Construction financing
 
16,703

 
38,063

 
Variable
 
6.00
 
Construction debt
Financing lease obligations
 
133,710

 
136,594

 
Imputed
 
5.67 4
 
Financing lease obligations
Total principal due for long-term debt and financing lease obligations
 
4,157,517

 
4,626,521

 
 
 
5.72
 
 
Unamortized discount, net
 
(10,849
)
 
(20,821
)
 
 
 
 
 
 
Deferred financing costs, net 5
 
(39,815
)
 
(43,051
)
 
 
 
 
 
 
Less current portion of long-term debt and financing lease obligations
 
(1,575,383
)
 
(2,037,919
)
 
 
 
 
 
 
Long-term debt and financing lease obligations, less current portion
 
$
2,531,470

 
$
2,524,730

 
 
 
 
 
 

22




———
(1)
Corporate-level debt represents debt issued by Terra Operating LLC and guaranteed by Terra LLC and certain subsidiaries of Terra Operating LLC other than non-recourse subsidiaries as defined in the relevant debt agreements.
(2)
Non-recourse debt represents debt issued by subsidiaries with no recourse to Terra LLC, Terra Operating LLC, or guarantors of the Company's corporate-level debt, other than limited or capped contingent support obligations, which in aggregate are not considered to be material to the Company's business and financial condition.
(3)
Includes variable rate debt and fixed rate debt. As of March 31, 2016 , 60% of this balance had a variable interest rate and the remaining 40% of this balance had a fixed interest rate. The Company has entered into interest rate swap agreements to fix the interest rates of certain variable rate permanent financing non-recourse debt (see Note 10 . Derivatives ).
(4)
Represents the weighted average interest rate as of March 31, 2016 .
(5)
Total net long-term debt and financing lease obligations, including current portion, reflects the reclassification of deferred financing costs to reduce long-term debt as further described in Note 1. Nature of Operations and Basis of Presentation .

Corporate-level Long-term Debt

Senior Notes due 2023 and Senior Notes due 2025

The Senior Notes due 2023 and the Senior Notes due 2025 require the Company 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). The Company has 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, the Company 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 indenture dated as of January 28, 2015 (as supplemented) with respect to the Senior Notes due 2023 (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, the Company 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, the Company 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 the Company's 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, which we do not expect to occur, a grace period for delivery of such form would still apply, and consequently no event of default would occur 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

23




December 15, 2016, for the Senior Notes due 2023 and the Senior Notes due 2025 , respectively. The fourth and third supplemental indentures also require the Company, 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, the Company 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.

Revolving Credit Facility

The terms of the Revolver require the Company 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 the Company must deliver to the Administrative Agent and other parties to the Revolver its 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 the Company's 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 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 the Company's obligation to make available audited financial statements for fiscal year 2015. As described above, Terra Operating LLC obtained a waiver that extended the deadline to comply with the reporting covenants in the 2023 Indenture to December 6, 2016.

The seventh amendment also requires Terra LLC and Terra Operating LLC 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 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 the Company must deliver its 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. The Company provided its 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 above. This amendment will result in an

24




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 in the " Canada project-level financing " section below. 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 such amount.

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. This amount was classified as current within the unaudited condensed consolidated balance sheet as of March 31, 2016 and December 31, 2015. 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.

Vivint Solar Bridge Facility

As of December 31, 2015 , the Company had a commitment for a senior unsecured bridge facility to provide the Company with up to $525.9 million to fund certain operating assets the Company expected to acquire from SunEdison in connection with SunEdison's then-pending acquisition of Vivint Solar. As a result of Vivint Solar’s notice of termination of the SunEdison/Vivint Solar Merger Agreement on March 7, 2016, the commitment automatically terminated.

Non-recourse Long-term Debt

Indirect subsidiaries of the Company have incurred long-term debt obligations with respect to the renewable energy facilities that those subsidiaries own directly or indirectly. This indebtedness of these subsidiaries is typically secured by the renewable energy facility's assets (mainly the renewable energy facility) or equity interests in such renewable energy facilities with no recourse to Terra LLC or Terra Operating LLC other than limited or capped contingent support obligations, which in aggregate are not considered to be material to the Company's business and financial condition. In connection with these financings and in the ordinary course of its business, the Company and its subsidiaries observe formalities and operating procedures to maintain each of their separate existence and can readily identify each of their separate assets and liabilities as separate and distinct from each other. As a result, these subsidiaries are legal entities that are separate and distinct from the Company, Terra LLC and Terra Operating LLC and the guarantors under the Revolver, the Senior Notes due 2023 and Senior Notes due 2025.

Non-recourse Debt Defaults

SunEdison is a party to or guarantor of a material project agreement, such as asset management or O&M contracts, for most of the Company's non-recourse financing arrangements. As a result of the SunEdison Bankruptcy and delays in delivery of 2015 audited financial statements for certain project-level subsidiaries, among other things, the Company has experienced defaults under most of its non-recourse financing agreements. Any corresponding contractual grace periods for the instruments in default have already expired as of the financial statement issuance date or the Company cannot assert at this time that it is probable that the violation will be cured within any remaining grace periods, will be cured for a period of more than twelve months or are not likely to recur. While the Company is actively negotiating with the lenders to obtain waivers, the lenders have not currently waived or subsequently lost the right to demand repayment for more than one year from the balance sheet date

25




with respect to these debt instruments. As these defaults occurred prior to the issuance of the financial statements for both the three months ended March 31, 2016 and for the year ended December 31, 2015, $1.9 billion of the Company's non-recourse long-term indebtedness, net of unamortized debt discounts and deferred financing costs, has been reclassified to current in the unaudited condensed consolidated balance sheet at both periods as the Company accounts for debt in default as of the date the financial statements are issued in the same manner as if the default existed as of the balance sheet date. $425.3 million of the March 31, 2016 reclassification amount was reclassified from current portion of long-term debt and financing lease obligations to current liabilities related to assets held for sale as discussed below.

As a result of these defaults, the Company also reclassified $82.8 million and $ 61.1 million of long-term restricted cash to current as of March 31, 2016 and December 31, 2015, respectively, consistent with the corresponding debt classification, as the restrictions that required the cash balances to be classified as long-term restricted cash were driven by the financing agreements. $11.4 million of the March 31, 2016 reclassification amount was reclassified from current restricted cash to current assets held for sale. Refer to Note 10 . Derivatives for discussion of corresponding interest rate swap reclassifications to current as a result of these defaults.

Debt Classified as Liabilities Related to Assets Held for Sale

As of March 31, 2016, the Company reclassified $425.3 million from current portion of long-term debt and financing lease obligations to current liabilities related to assets held for sale (see Note 3. Assets Held for Sale ) in the unaudited condensed consolidated balance sheet, which represents non-recourse debt collateralized by project assets for substantially all of the Company's portfolio of solar power plants located in the U.K. No amount of debt was classified as liabilities related to assets held for sale as of December 31, 2015.

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 40 MWac 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.

Maturities

The aggregate contractual payments of long-term debt due after March 31, 2016 , including financing lease obligations and excluding amortization of debt discounts and premiums, as stated in the financing agreements, are as follows:
(In thousands)
Remainder of 2016 1
 
2017
 
2018
 
2019
 
2020
 
Thereafter
 
Total
Maturities of long-term debt as of March 31, 2016 2
$
129,028

 
$
90,251

 
$
112,092

 
$
562,692

 
$
717,817

 
$
2,545,637

 
$
4,157,517

———
(1)
Includes $16.7 million of construction debt for the utility-scale renewable energy facility located in the U.S. acquired in 2016 from SunEdison. This debt was repaid by SunEdison during the third quarter of 2016 upon completion of the acquisition and the Company's payment of the second installment of the purchase price (see Note 2. Transactions Between Entities Under Common Control) . Also includes $30.0 million of Revolver indebtedness that was paid during the fourth quarter of 2016 as discussed above.
(2)
Represents the contractual principal payment due dates for our long-term debt and does not reflect the reclassification of $1.5 billion of long-term debt to current as a result of debt defaults under most of our non-recourse financing arrangements.


26




9. INCOME TAXES

The income tax provision consisted of the following:

 
Three Months Ended March 31,
(In thousands, except effective tax rate)
 
2016
 
2015
Income (loss) before income tax (benefit) expense
 
(33,408
)
 
(83,705
)
Income tax expense (benefit)
 
97

 
(45
)
Effective tax rate
 
(0.3
)%
 
0.1
%

As of March 31, 2016 , TerraForm Power, Inc. owns  65.5%  of Terra LLC and consolidates the results of Terra LLC through its controlling interest. The Company records SunEdison's  34.5%  ownership of Terra LLC as a non-controlling interest in the financial statements. Terra LLC is treated as a partnership for income tax purposes. As such, the Company records income tax on its  65.5%  of Terra LLC's taxable income and SunEdison records income tax on its  34.5%  share of Terra LLC's taxable income.

For the three months ended March 31, 2016 , and the three months ended March 31, 2015 , the overall effective tax rate was different than the statutory rate of 35%  primarily due to the recording of a valuation allowance on certain tax benefits attributed to the Company. As of March 31, 2016 , most jurisdictions are in a net deferred tax asset position. A valuation allowance is recorded against the deferred tax assets primarily because of the history of losses in those jurisdictions.

10 . DERIVATIVES

As part of the Company’s risk management strategy, the Company has entered into derivative instruments which include interest rate swaps, foreign currency contracts and commodity contracts to mitigate interest rate, foreign currency and commodity price exposure. If the Company elects to do so and if the instrument meets the criteria specified in ASC 815,  Derivatives and Hedging , the Company designates its derivative instruments as cash flow hedges. The Company enters into interest rate swap agreements in order to hedge the variability of expected future cash interest payments. Foreign currency contracts are used to reduce risks arising from the change in fair value of certain foreign currency denominated assets and liabilities. The objective of these practices is to minimize the impact of foreign currency fluctuations on operating results. The Company also enters into commodity contracts to hedge price variability inherent in electricity sales arrangements. The objectives of the commodity contracts are to minimize the impact of variability in spot electricity prices and stabilize estimated revenue streams. The Company does not use derivative instruments for speculative or trading purposes.


27




As of March 31, 2016 and December 31, 2015 , fair values of the following derivative instruments were included in the balance sheet captions indicated below:
 
 
Fair Value of Derivative Instruments
 
 
 
 
 
 
 
 
Hedging Contracts
 
Derivatives Not Designated as Hedges
 
 
 
 
 
 
(In thousands)
 
Interest Rate Swaps
 
Commodity Contracts
 
Interest Rate Swaps
 
Foreign Currency Contracts
 
Commodity Contracts
 
Gross Amounts of Assets/Liabilities Recognized
 
Gross Amounts Offset in Consolidated Balance Sheets
 
Net Amounts in Consolidated Balance Sheets
As of March 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prepaid expenses and other current assets
 
$

 
$
11,611

 
$

 
$
3,556

 
$
13,815

 
$
28,982

 
$
(2,104
)
 
$
26,878

Other assets
 

 
45,519

 

 
2,788

 
32,067

 
80,374

 
(102
)
 
80,272

Total assets
 
$

 
$
57,130

 
$

 
$
6,344

 
$
45,882

 
$
109,356

 
$
(2,206
)
 
$
107,150

Accounts payable and other current liabilities
 
$
27,723

 
$

 
$
1,529

 
$
5,241

 
$

 
$
34,493

 
$
(2,104
)
 
$
32,389

Liabilities related to assets held for sale
 
19,609

 

 

 

 

 
19,609

 

 
19,609

Other long-term liabilities
 

 

 

 
102

 

 
102

 
(102
)
 

Total liabilities
 
$
47,332

 
$

 
$
1,529

 
$
5,343

 
$

 
$
54,204

 
$
(2,206
)
 
$
51,998

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prepaid expenses and other current assets
 
$

 
$
11,455

 
$

 
$
3,875

 
$
12,542

 
$
27,872

 
$
(1,451
)
 
$
26,421

Other assets
 
$
487

 
$
51,699

 
$

 
$
2,836

 
$
30,799

 
$
85,821

 
$
(70
)
 
$
85,751

Total assets
 
$
487

 
$
63,154

 
$

 
$
6,711

 
$
43,341

 
$
113,693

 
$
(1,521
)
 
$
112,172

Accounts payable and other current liabilities
 
$
19,081

 
$

 
$
1,104

 
$
3,777

 
$

 
$
23,962

 
$
(1,451
)
 
$
22,511

Other long-term liabilities
 

 

 

 
70

 

 
70

 
(70
)
 

Total liabilities
 
$
19,081

 
$

 
$
1,104

 
$
3,847

 
$

 
$
24,032

 
$
(1,521
)
 
$
22,511


As of March 31, 2016 and December 31, 2015 , notional amounts for derivative instruments consisted of the following:
(In thousands)
 
March 31, 2016
 
December 31, 2015
Derivatives designated as hedges:
 
 
 
 
Interest rate swaps (USD)
 
460,792

 
468,067

Interest rate swaps (GBP)
 
222,018

 
222,018

Commodity contracts (MWhs)
 
18,401

 
18,401

Derivatives not designated as hedges:
 
 
 
 
Interest rate swaps (USD)
 
15,779

 
15,794

Foreign currency contracts (GBP)
 
102,320

 
112,168

Foreign currency contracts (CAD)