Print Page  Close Window

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

subsidiaries, it would likely have a material adverse effect on our ability to meet corporate-level debt service obligations, as well as pay dividends to holders of our Class A common stock.

To date, we have not identified any significant PPAs that include a provision that would directly permit the offtake counterparty to terminate the agreement due to the event of the SunEdison Bankruptcy. However, to date we have identified one PPA that contains an event of default that can be triggered if the related project-level credit agreement is accelerated. This project-level credit agreement is currently in default because of our failure to deliver project-level audited financial statements for 2016 but is still within the contractual grace period for failure to deliver which extends to the end of July 2017. This project is expected to provide approximately $8.0 million of project-level cash available for distribution for 2017. We are working to obtain waivers or forbearance agreements from the project-level lenders with respect to this project that would avoid triggering this default under the PPA. Given the importance of maintaining PPAs, we believe our lenders for this project will likely be incentivized to take steps to avoid defaults under the PPA if we fail to cure the default, but we cannot assure that result.

Historically, SunEdison has provided asset management services and O&M services under project-level asset management and O&M agreements. We are in the process of transitioning away from SunEdison as our asset manager and O&M provider. We manage certain of our projects ourselves and, in some instances, we outsource our asset management and/or O&M functions. We may not be able to adequately perform on the projects that we manage in house or secure third-party service providers which may lead to defaults under the terms of project-level debt contracts, hedging agreements, and tax equity agreements, as well as adverse consequences for our unlevered projects. An inability to successfully manage these projects or secure third-party service providers, and the resulting defaults and other consequences, or managing them at an excessively burdensome cost, could have a material adverse effect on our business, results of operations and financial condition.

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

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

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

As detailed in other risk factors under “Risks Related to our Relationship with SunEdison and the SunEdison Bankruptcy,” we had a number of important agreements with SunEdison at the corporate and project levels and for acquisitions, including the sponsorship arrangement. For instance, SunEdison has cash payment obligations to us under the Amended Interest Payment Agreement, which were expected to be an additional $8.0 million in 2016 ($8.0 million was paid in the first quarter of 2016) and $16.0 million in 2017 and in conjunction with the First Wind acquisition had committed to reimburse the Company for capital expenditures and operations and maintenance and labor fees in excess of budgeted amount (not to exceed $53.9 million through 2019) for certain of its wind power plants. The Settlement Agreement would provide for the termination of these agreements. Although we did not expect SunEdison to perform under these agreements going forward, the Settlement Agreement will result in the settlement of our intercompany claims against SunEdison in connection with such agreements.

Our audited financial statements for the year ended December 31, 2016 include a going concern explanatory note because of the risk that our assets and liabilities could be consolidated with those of SunEdison in the SunEdison Bankruptcy, in addition to risks related to project-level defaults.

We believe that we have observed formalities and operating procedures to maintain our separate existence from SunEdison, that our assets and liabilities can be readily identified as distinct from those of SunEdison and that we do not rely substantially on SunEdison for funding or liquidity and will have sufficient liquidity to support our ongoing operations. Our initiatives with respect to the SunEdison Bankruptcy have included and will include, among other things, establishing stand-alone information technology, accounting and other systems and infrastructure, establishing separate human resources systems