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

Gains and losses recognized related to interest rate swaps and commodity contracts designated as cash flow hedges for the years ended December 31, 2016, 2015 and 2014 consisted of the following:
 
 
Year Ended December 31,
 
 
Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion) net of taxes1
 
Location of Loss Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)
 
Amount of Loss (Gain) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)
 
Amount of Loss (Gain) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
(In thousands)
 
2016
 
2015
 
2014
 
 
2016
 
2015
 
2014
 
2016
 
2015
 
2014
Interest rate swaps
 
$
(20,360
)
 
$
(11,482
)
 
$
(1,925
)
 
Interest expense, net
 
$
11,618

 
$
4,663

 
$

 
$

 
$

 
$

Commodity contracts
 
20,274

 
38,395

 

 
Operating revenues, net
 
(12,572
)
 

 

 
5,121

 

 

Total
 
$
(86
)
 
$
26,913

 
$
(1,925
)
 
 
 
$
(954
)
 
$
4,663

 
$

 
$
5,121

 
$

 
$

————
(1)
Net of taxes of $0.4 million and $14.6 million attributed to commodity contracts during the years ended December 31, 2016 and 2015, respectively. There were no taxes attributed to interest rate swaps during the years ended December 31, 2016, 2015 and 2014.

As of both December 31, 2016 and 2015, the Company has posted letters of credit in the amount of $18.0 million, as collateral related to certain commodity contracts. Certain derivative contracts contain provisions providing the counterparties a lien on specific assets as collateral. There was no cash collateral received or pledged as of December 31, 2016 and 2015 related to the Company's derivative transactions.

Derivatives Designated as Hedges

Interest Rate Swaps

The Company has interest rate swap agreements to hedge variable rate non-recourse debt. These interest rate swaps qualify for hedge accounting and were designated as cash flow hedges. Under the interest rate swap agreements, the renewable energy facilities pay a fixed rate and the counterparties to the agreements pay a variable interest rate. The amounts deferred in other comprehensive income and reclassified into earnings during the years ended December 31, 2016, 2015 and 2014 related to the interest rate swaps are provided in the tables above. The loss expected to be reclassified into earnings over the next twelve months is approximately $5.7 million. The maximum term of outstanding interest rate swaps designated as hedges is 18 years.

As discussed in Note 11. Long-term Debt, the Company experienced defaults under certain of its non-recourse financing agreements prior to the issuance of the financial statements for the years December 31, 2016 and 2015. As the Company's interest rate swap agreements contain cross-default provisions, $4.8 million and $7.6 million, respectively, of related liabilities have been reclassified to current as of December 31, 2016 and 2015. The Company is actively working with the counterparties to cure these defaults and obtain waivers as necessary. The Company does not currently expect any changes to the underlying cash flows as a result of these defaults and thus has determined that there is no impact to the swaps' qualification for hedge accounting and designation as cash flow hedges.

Commodity Contracts

The Company has long-dated physically delivered commodity contracts that hedge variability in cash flows associated with the sales of power from certain renewable energy facilities located in Texas. These commodity contracts qualify for hedge accounting and are designated as cash flow hedges. Accordingly, the effective portions of the change in fair value of these derivatives are reported in accumulated other comprehensive income and subsequently reclassified to earnings in the periods when the hedged transactions affect earnings. Any ineffective portions of the derivatives’ change in fair value are recognized currently in earnings. The amounts deferred in other comprehensive income and reclassified into earnings during the years ended December 31, 2016, 2015 and 2014, related to the commodity contracts are provided in the tables above. The gain expected to be reclassified into earnings over the next twelve months is approximately $2.2 million. The maximum term of outstanding commodity contracts designated as hedges is 13 years.


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