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SEC Filings
10-Q
TERRAFORM POWER, INC. filed this Form 10-Q on 11/09/2018
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cash and cash equivalents and $0.8 million of restricted cash in the nine months of 2017. The Company recorded an impairment charge in the fourth quarter of 2016 when it was determined that these assets met the criteria for held for sale classification, and there was no additional loss recognized during 2017 as a result of these sales.

5. RENEWABLE ENERGY FACILITIES

Renewable energy facilities, net consists of the following:
(In thousands)
 
September 30,
2018
 
December 31,
2017
Renewable energy facilities in service, at cost1
 
$
7,309,599

 
$
5,378,462

Less: accumulated depreciation - renewable energy facilities
 
(763,154
)
 
(578,474
)
Renewable energy facilities in service, net
 
6,546,445

 
4,799,988

Construction in progress - renewable energy facilities
 
9,391

 
1,937

Total renewable energy facilities, net
 
$
6,555,836

 
$
4,801,925

———
(1) The increase in renewable energy facilities is primarily due to the acquisition of Saeta. See Note 4. Acquisitions and Dispositions.

Depreciation expense related to renewable energy facilities was $79.2 million and $194.2 million for the three and nine months respectively ended September 30, 2018, as compared to $53.4 million and $160.0 million for the same periods in the prior year.

For the periods presented above, construction in progress primarily represents initial costs incurred for the construction of a new battery energy storage system for one of the Company’s wind power plants, for which construction began in the fourth quarter of 2017.

Impairment Charges

The Company reviews long-lived assets that are held and used for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company has a REC sales agreement with a customer expiring December 31, 2021 that is significant to an operating project within the Enfinity solar distributed generation portfolio, and on March 31, 2018, this customer filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The potential replacement of this contract would likely result in a significant decrease in expected revenues for this operating project. The Company’s analysis indicated that the bankruptcy filing was a triggering event to perform an impairment evaluation, and the carrying amount of $19.5 million as of March 31, 2018 was no longer considered recoverable based on an undiscounted cash flow forecast. The Company estimated the fair value of the operating project at $4.3 million as of March 31, 2018 and recognized an impairment charge of $15.2 million equal to the difference between the carrying amount and the estimated fair value, which is reflected within impairment of renewable energy facilities in the unaudited condensed consolidated statement of operations for the nine months ended September 30, 2018. The Company used an income approach methodology of valuation to determine fair value by applying a discounted cash flow method to the forecasted cash flows of the operating project, which was categorized as a Level 3 fair value measurement due to the significance of unobservable inputs. Key estimates used in the income approach included forecasted power and incentive prices, customer renewal rates, operating and maintenance costs and the discount rate.

During the third quarter of 2017, the Company sold its remaining 0.3 MW of residential assets. These assets did not meet the criteria for held for sale classification in the second quarter of 2017, but the Company determined that certain impairment indicators were present and as a result recognized an impairment charge of $1.4 million, which is reflected within impairment of renewable energy facilities in the unaudited condensed consolidated statement of operations for the nine months ended September 30, 2017.
    


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