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EX-99.1 - EX-99.1 - Clearway Energy, Inc.a15-19281_1ex99d1.htm
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Exhibit 99.2

 

Desert Sunlight Investment Holdings, LLC and Subsidiaries

Condensed Consolidated Balance Sheets

(Dollars in thousands)

(Unaudited)

 

 

 

June 30,

 

December 31,

 

 

 

2015

 

2014

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

82,629

 

$

20,913

 

Accounts receivable

 

237,793

 

578,147

 

Prepaid expenses and other current assets

 

1,986

 

2,102

 

Restricted investments

 

67,927

 

104,836

 

Total current assets

 

390,335

 

705,998

 

NON-CURRENT ASSETS

 

 

 

 

 

Property, plant and equipment, net

 

1,452,130

 

1,476,951

 

Deferred financing costs, net

 

29,661

 

31,545

 

Other non-current assets

 

9,836

 

10,012

 

Total non-current assets

 

1,491,627

 

1,518,508

 

TOTAL ASSETS

 

$

1,881,962

 

$

2,224,506

 

 

 

 

 

 

 

LIABILITIES AND MEMBER’S EQUITY

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

Accounts payable and accrued expenses

 

$

14,763

 

$

21,722

 

Accrued interest

 

8,169

 

13,731

 

Current maturities of long-term debt

 

42,687

 

393,722

 

Due to related parties

 

585

 

933

 

Derivative liabilities

 

9,164

 

5,967

 

Total current liabilities

 

75,368

 

436,075

 

NON-CURRENT LIABILITIES

 

 

 

 

 

Long-term debt

 

1,106,748

 

1,116,114

 

Derivative liabilities

 

14,367

 

17,495

 

Asset retirement obligations

 

19,073

 

18,582

 

Other non-current liabilities

 

340

 

301

 

Total non-current liabilities

 

1,140,528

 

1,152,492

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

1,215,896

 

1,588,567

 

 

 

 

 

 

 

TOTAL MEMBER’S EQUITY

 

666,066

 

635,939

 

 

 

 

 

 

 

TOTAL LIABILITIES AND MEMBER’S EQUITY

 

$

1,881,962

 

$

2,224,506

 

 

The accompanying notes are an integral part of these financial statements.

 



 

Desert Sunlight Investment Holdings, LLC and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

For the six months ended June 30, 2015 and 2014

(Dollars in thousands)

(Unaudited)

 

 

 

For the six months ended
June 30,

 

 

 

2015

 

2014

 

OPERATING REVENUES

 

$

97,188

 

$

53,816

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

Operations and maintenance

 

13,868

 

11,113

 

Depreciation and amortization

 

25,814

 

17,076

 

Taxes other than income taxes and other

 

357

 

245

 

Total operating expenses

 

40,039

 

28,434

 

 

 

 

 

 

 

OPERATING INCOME

 

57,149

 

25,382

 

 

 

 

 

 

 

OTHER DEDUCTIONS

 

 

 

 

 

Interest expense

 

25,796

 

20,618

 

Total other deductions

 

25,796

 

20,618

 

 

 

 

 

 

 

NET INCOME

 

$

31,353

 

$

4,764

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS)

 

 

 

 

 

Net unrealized gains / losses on cash flow hedges:

 

 

 

 

 

Effective portion of net unrealized gain (loss)

 

(2,079

)

(15,666

)

Reclassification from accumulated other comprehensive income to net income

 

4,195

 

1,350

 

Total other comprehensive income (loss)

 

2,116

 

(14,316

)

 

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS)

 

$

33,469

 

$

(9,552

)

 

The accompanying notes are an integral part of these financial statements.

 



 

Desert Sunlight Investment Holdings, LLC and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2015 and 2014

(Dollars in thousands)

(Unaudited)

 

 

 

For the six
months ended
June 30, 2015

 

For the six
months ended
June 30, 2014

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net income

 

$

31,353

 

$

4,764

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Amortization of debt issuance costs

 

1,884

 

5,430

 

Depreciation and amortization

 

25,814

 

17,076

 

Mark to market for derivatives and amortization of derivatives Changes in assets:

 

2,186

 

984

 

Accounts receivable

 

(20,234

)

(15,675

)

Prepaid expenses and other current assets

 

116

 

736

 

Other non-current assets

 

 

(435

)

Changes in liabilities:

 

 

 

 

 

Accounts payable and accrued liabilities

 

2,322

 

4,526

 

Accrued interest

 

(5,562

)

9,681

 

Due to related parties

 

(348

)

(718

)

Other non-current liabilities

 

39

 

42

 

NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES

 

37,570

 

26,411

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Capital expenditures

 

(9,488

)

(344,120

)

Receipt of CITC grant proceeds

 

360,468

 

 

Restricted investments

 

36,909

 

(10,353

)

NET CASH FLOW PROVIDED BY (USED IN) INVESTING ACTIVITIES

 

387,889

 

(354,473

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Debt issuance

 

 

221,800

 

Debt repayment

 

(360,401

)

 

Member contributions

 

 

119,520

 

Member distributions

 

(3,342

)

 

Financing costs

 

 

(661

)

NET CASH FLOW PROVIDED BY (USED IN) FINANCING ACTIVITIES

 

(363,743

)

340,659

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

61,716

 

12,597

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, Beginning of Period

 

20,913

 

5,226

 

CASH AND CASH EQUIVALENTS, End of Period

 

$

82,629

 

$

17,823

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF OTHER CASH FLOW INFORMATION

 

 

 

 

 

Cash paid for interest, net of capitalized interest

 

$

25,384

 

$

6,470

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:

 

 

 

 

 

Plant, property and equipment, net, included in accounts payable and accrued expenses

 

$

 

$

29,445

 

Reductions to property, plant, and equipment, net, via accounts receivable for convertible investment tax credits (“CITC”) / test revenues

 

$

 

$

73,359

 

Increase to deferred financing costs from accounts payable and accrued expenses

 

$

 

$

414

 

Additions to property, plant and equipment, net for ARO

 

$

 

$

4,730

 

 

The accompanying notes are an integral part of these financial statements.

 



 

Desert Sunlight Investment Holdings, LLC

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the periods ended June 30, 2015 and 2014

 

1                                         Organization

 

Desert Sunlight Investment Holdings, LLC (the “Company”), a Delaware limited liability company, was formed on September 8, 2011 for the purpose of holding a 100% interest in Desert Sunlight Holdings, LLC (“Holdings”), a Delaware limited liability company which was formed on December 15, 2009 for the purpose of holding a 100% interest in Desert Sunlight 250, LLC (“Sunlight 250”) and Desert Sunlight 300, LLC (“Sunlight 300”), (collectively the “Projects”). The Company, Holdings, Sunlight 250, and Sunlight 300 are collectively referred to as the “Company and its subsidiaries.”  Holdings and the Projects were created to develop, finance, construct, own and operate 550 megawatts (“MW”) of alternating current (“AC”) solar photovoltaic (“PV”) electric generating facilities, including an approximately 12-mile long generation-tie line, certain monitoring and maintenance infrastructure and other ancillary facilities (the “Shared Facilities”) located on approximately 4,000 acres of land in the Chuckwalla Valley, which is approximately six miles north of Desert Center, California.  The Projects consist of two solar electric generating facilities, with a nominal net output of 250 MW and 300 MW, respectively.

 

NextEra Desert Sunlight Holdings, LLC, a Delaware limited liability company (the “NextEra Member”), is the initial Class A Member and the initial Managing Member, and EFS Desert Sun, LLC, a Delaware limited liability company (the “GECC Member”) is the initial Class B Member of Holdings.  First Solar Development, Inc., NextEra Member and GECC Member are parties to a Membership Interest Purchase and Sale Agreement, dated September 29, 2011 (the “MIPSA”) pursuant to which NextEra and GECC Members each separately agreed, among other things, to purchase from First Solar Development, Inc. fifty percent of the membership interests in Holdings.  NextEra and GECC Members each contributed their fifty percent share of the membership interests in Holdings to the Company in exchange for a fifty percent share of the membership interests in the Company for which NextEra and GECC Members have equal rights. On September 27, 2012, the GECC member sold 50% of its Class B shares (25% of total equity) to Sumitomo Corporation of America (the “Sumitomo Sponsor”) and Sumitomo Solar Desert Sunlight, LLC, a Delaware limited liability company (the “Sumitomo Member”).  On June 29, 2015, the GECC member sold its remaining 50% of its Class B shares (25% of total equity) to NRG Yield Operating LLC (the “NRG Yield Member”). As a result, NextEra, NRG Yield and Sumitomo Members are collectively the “Members” of the Company.

 

The NextEra Member is an affiliate of ESI Energy, LLC which is a wholly-owned subsidiary of NextEra Energy Resources, LLC (“NextEra”), which is a wholly-owned subsidiary of NextEra Energy, Inc., a New York Stock Exchange company.  The NRG Yield Member is an affiliate of NRG Yield, Inc., a New York Stock Exchange company, which is also an affiliate of NRG Energy, Inc., a New York Stock Exchange company. The Sumitomo Member is an affiliate of the Sumitomo Sponsor, which is an indirect subsidiary of the Sumitomo Corporation of Japan, a Tokyo Stock Exchange company.

 

The Projects employ AC PV technology and utilizes First Solar Inc.’s (“First Solar”) PV modules, which are a technology currently in commercial use in numerous utility-scale and other projects located in multiple countries.  These modules convert sunlight to electricity.  The direct current electricity generated by the modules are converted to alternating current using inverters.  The Projects were constructed and are operated by an affiliate of First Solar.

 

During December of 2013, the Projects achieved partial commercial operations, including turnover of 10 of its approximately 20 blocks, generation of initial operating revenues, and placing its shared facilities in service.  All remaining capacity was placed in service in 2014, with the final Blocks achieving their commercial operation dates (“COD”) in the fourth quarter of 2014.

 

The Members share profits and losses and cash flows in proportion to their ownership percentage interests.

 

The accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, the interim financial information reflects all adjustments of a normal recurring nature, necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. The following notes 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.  Interim results are not necessarily indicative of results for a full year.

 



 

2                                         Significant Accounting Policies

 

Basis of Presentation — The accompanying consolidated financial statements of the Company include the accounts of the Company and its subsidiaries.  All material intercompany balances and transactions have been eliminated in consolidation.

 

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Accounts Receivable — Accounts receivable includes Convertible Investment Tax Credits (“CITC”) in connection with renewable energy grants. As of December 31, 2014, accounts receivable at the Company arising from CITCs were $570.0 million.  On May 1, 2015, the Company received $360.4 million in renewable energy grant proceeds leaving a remaining balance of $209.6 million of accounts receivable arising from CITCs. On July 2, 2015, the Desert Sunlight project companies filed a lawsuit in the U.S. District Court for the District of Columbia seeking a judicial order mandating immediate payment of the remaining balance of grant proceeds sought by the Company. The lawsuit is pending.

 

Subsequent Events — The Company has performed an evaluation of subsequent events through September 15, 2015, which is the date the financial statements were available to be issued.

 

3                                         Long-term Debt

 

The Projects’ approximately $2.3 billion capital cost was funded with a combination of Member equity contributions and debt.  Prior to the completion of the Projects, the costs were being funded pro-rata by debt and equity proceeds in order to maintain the target debt capitalization ratio of approximately 65%.  The Company and its subsidiaries entered into three distinct tranches of debt.  Any member contributions, revenues, or property of Sunlight 300 or Sunlight 250 may be treated as collateral security for loan obligations.

 

The Company applied for approximately $570.0 million in CITC grant receivables from the Treasury.  These cash grant proceeds have been applied for in various applications through December 2014.  On May 4, 2015 the Company received $360.4 million in proceeds from these cash grant applications.  The proceeds were primarily utilized to repay the entire outstanding principal of the Company’s A-3 Loans $292.0 million and Lock Loans $58.2 million on May 29, 2015.

 

4                                         Fair Value Measurements

 

The Company and its subsidiaries use several valuation techniques to measure the fair value of assets and liabilities, relying primarily on the income approach of using prices and other market information for identical and/or comparable assets and liabilities for those assets and liabilities that are measured on a recurring basis.  Certain derivatives and financial instruments may be valued by taking into consideration multiple inputs, including interest rate swap and LIBO rates and treasury yields, as well as counterparty credit ratings and credit enhancements.  Additionally, when observable market data is not sufficient, valuation models are developed that incorporate the Company’s proprietary views of market factors and conditions. The Company’s assessment of the significance of any particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

 

Cash Equivalents — The fair value of money market funds is calculated using current market prices.

 

Interest Rate Swaps — The Company estimates the fair value of its derivatives using a discounted cash flows valuation technique based on the net amount of estimated future cash inflows and outflows related to the swap agreements.  The primary inputs used in the fair value measurements include the contractual terms of the derivative agreements, current interest rates and credit spreads.  The significant inputs for the resulting fair value measurement are market-observable inputs and the measurements are reported as Level 2 in the fair value hierarchy.

 

The interest rate swap assets (liabilities) and the money market funds held at the Company are reported at fair value on a recurring basis.  Fair values by hierarchy level are as follows (in thousands):

 



 

 

 

As of June 30, 2015

 

 

 

Quoted Prices in

 

 

 

 

 

 

 

 

 

Active Markets for

 

 

 

Significant

 

 

 

 

 

Identical Assets or

 

Significant

 

Unobservable

 

 

 

 

 

Liabilities

 

Observable Inputs

 

Inputs

 

 

 

 

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Total

 

 

 

 

 

 

 

 

 

 

 

Derivitive liabilities:

 

 

 

 

 

 

 

 

 

Interest Rate Swaps

 

$

 

$

(23,531

)

$

 

$

(23,531

)

 

 

 

 

 

 

 

 

 

 

Cash Equivalents

 

 

 

 

 

 

 

 

 

Money Market Funds

 

79,869

 

 

 

79,869

 

 

 

 

 

 

 

 

 

 

 

Restricted Investments

 

 

 

 

 

 

 

 

 

Money Market Funds

 

67,927

 

 

 

67,927

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

147,796

 

$

(23,531

)

$

 

$

124,265

 

 

 

 

As of December 31, 2014

 

 

 

Quoted Prices in

 

 

 

 

 

 

 

 

 

Active Markets for

 

 

 

Significant

 

 

 

 

 

Identical Assets or

 

Significant

 

Unobservable

 

 

 

 

 

Liabilities

 

Observable Inputs

 

Inputs

 

 

 

 

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Total

 

 

 

 

 

 

 

 

 

 

 

Derivitive liabilities:

 

 

 

 

 

 

 

 

 

Interest Rate Swaps

 

$

 

$

(23,462

)

$

 

$

(23,462

)

 

 

 

 

 

 

 

 

 

 

Cash Equivalents

 

 

 

 

 

 

 

 

 

Money Market Funds

 

17,348

 

 

 

17,348

 

 

 

 

 

 

 

 

 

 

 

Restricted Investments

 

 

 

 

 

 

 

 

 

Money Market Funds

 

104,836

 

 

 

104,836

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

122,184

 

$

(23,462

)

$

 

$

98,722

 

 

5                                         Derivative Instruments and Hedging Activity

 

Treasury Lock and Interest Rate Swap Agreements

 

In October of 2011, the Company entered into the Locks to fix the treasury component of coupons associated with the future fixed rate borrowings on the A-1 Loans, and interest rate swap agreements to fix the LIBO rate component of the interest rate of the future borrowings of the A-2 and A-3 loans, which were drawn, as needed, for certain expenditures incurred during construction.  The combined Lock notional amounts were $435.0 million.  In February and August 2012, the Locks settled for $58.2 million and the Company entered into the Lock Loans for the settlement amount.

 

The interest rate swaps have effective dates that started in July 2013.  The last of these swaps will mature in October 2026.  The notional amount of the Company’s interest rate swaps at June 30, 2015 and December 31, 2014 was $382.5 million and $211.1 million, respectively.

 

The interest rate swap agreements are derivatives and qualify for hedge accounting.  The fair value of the Company’s derivative instruments are included in its consolidated balance sheets as follows (in thousands):

 



 

 

 

As of June 30,

 

As of December 31,

 

 

 

2015

 

2014

 

 

 

Derivative

 

Derivative

 

 

 

Liabilities

 

Liabilities

 

 

 

 

 

 

 

Interest rate swaps:

 

 

 

 

 

Current liabilities

 

$

(9,164

)

$

(5,967

)

Non-current liabilities

 

(14,367

)

(17,495

)

 

 

 

 

 

 

Total derivative liabilities

 

$

(23,531

)

$

(23,462

)

 

Gains (losses) related to the Company’s cash flow hedges are recoded in its statements of comprehensive income as follows (in thousands):

 

 

 

For the six months

 

 

 

ended June 30,

 

 

 

2015

 

2014

 

 

 

Derivative

 

Derivative

 

 

 

Balances

 

Balances

 

 

 

 

 

 

 

Losses recognized in OCI

 

$

(2,079

)

$

(15,666

)

Losses reclassified from AOCI to net income (a)

 

(4,195

)

(1,350

)

 


(a) included in interest expense