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SEC Filings
10-K
TERRAFORM POWER, INC. filed this Form 10-K on 07/21/2017
Entire Document
 


The sensitivity of the Company's fair value measurements to increases (decreases) in the significant unobservable inputs is as follows:
Significant Unobservable Input
 
Position
 
Impact on Fair Value Measurement
Increase (decrease) in forward price
 
Forward sale
 
Decrease (increase)
Increase (decrease) in implied volatilities
 
Purchase option
 
Increase (decrease)

The Company measures the sensitivity of the fair value of its Level 3 commodity contracts to potential changes in commodity prices using a mark-to-market analysis based on the current forward commodity prices and estimates of the price volatility. An increase in power forward prices will produce a mark-to-market loss, while a decrease in prices will result in a mark-to-market gain.

Fair Value of Debt

The carrying amount and estimated fair value of the Company's long-term debt as of December 31, 2016 and 2015 is as follows:
 
 
As of December 31, 2016
 
As of December 31, 2015
(In thousands)
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Long-term debt, including current portion
 
$
3,950,914

 
$
4,080,397

 
$
4,562,649

 
$
4,357,322


The fair value of the Company's long-term debt, except the senior notes was determined using inputs classified as Level 2 and a discounted cash flow approach using market rates for similar debt instruments. The fair value of the senior notes is based on market price information which is classified as a Level 1 input. They are measured using the last available trades at the end of each respective fiscal year. The fair value of the Senior Notes due 2023 and Senior Notes due 2025 were 101.38% and 103.75% of face value as of December 31, 2016, respectively, and 83.13% and 80.75% of face value as of December 31, 2015, respectively. The fair value is not indicative of the amount that the Company would have to pay to redeem these notes as they are not callable at this time.

Nonrecurring Fair Value Measurements

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to renewable energy facilities, goodwill and intangibles, which are remeasured when the derived fair value is below carrying value on the Company's consolidated balance sheet. For these assets, the Company does not periodically adjust carrying value to fair value except in the event of impairment. When the impairment has occurred, the Company measures the impairment and adjusts the carrying value as discussed in Note 2. Summary of Significant Accounting Policies.

During the fourth quarter of 2016, certain long-lived assets met the criteria to be classified as held for sale (as discussed in Note 4. Assets Held for Sale). The fair value of these long-lived assets was measured, resulting in expected disposal losses of $15.7 million. The long-lived asset fair value amount of $19.5 million was measured by obtaining multiple bids from prospective buyers. The Company did not engage third-party appraisers. The fair value measurement was categorized as Level 2, as significant observable inputs were used in the valuation. The expected disposal losses, which represented the difference between the fair value less costs to sell and the carrying amount of the assets and liabilities held for sale, were recognized in impairment of renewable energy facilities within the consolidated statement of operations for the year ended December 31, 2016.

As discussed in Note 8. Goodwill, the Company performed its annual impairment test of the carrying value of its goodwill as of December 1, 2016 and concluded that the goodwill amount of $55.9 million was fully impaired. The inputs used to measure the estimated fair value of goodwill are classified as a Level 3 fair value measurement due to the significance of unobservable inputs using company-specific information.



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