Discontinued Operations Held for Sale - Schneider Power

Our Renewable Energy segment consists solely of the business operations of Schneider Power. Schneider Power, headquartered in Toronto, Ontario, Canada, is an independent power producer, developer of renewable energy projects and is a licensed electricity generator and wholesaler.

On August 9, 2012, we committed to a formal plan to sell the Schneider Power business and initiated steps to locate a buyer. As a result of these actions and our expectations for a completion of a sale of the business over the next year, the historical activities and balances of Schneider Power, are reported as discontinued operations held for sale in the accompanying condensed consolidated financial statements for all periods presented. Depreciation of property and equipment and amortization of intangible assets ceased effective as of August 9, 2012, the date we committed to the plan to sell Schneider Power.

On May 14, 2013, we announced that Schneider Power had closed on the sale of its 1.6 Megawatt (MW) Providence Bay operational wind farm for a purchase price of CAD 406,000 and the assumption of approximately CAD 1,066,826 of bank debt and certain other project related liabilities (Note 14).

The unaudited historical operating results of Schneider Power, classified as discontinued operations, are as follows:



	Three months ended March 31,
	2012			2013
Revenue:
Net product sales	$	88,552		$	857,958
Costs and expenses:
Cost of product sales	28,940			168,967
Research and development	45,268			16,872
Selling, general and administrative	273,490			271,807
Amortization of intangible assets	37,046			—
Impairment of goodwill and intangible assets of discontinued operations (1)	—			1,736,208
Total costs and expenses	384,744			2,193,854
Operating loss	(296,192		)	(1,335,896		)
Interest expense, net	(127,096		)	(372,267		)
Loss from discontinued operations	$	(423,288	)	$	(1,708,163	)

(1)

We measure each disposal group of Schneider Power at the lower of its carrying amount or fair value less costs to sell. The fair value measurements are based on Level 3 inputs such as market conditions and pending agreements to sell the assets. Based on an assessment that we updated as of March 31, 2013, we determined that the fair value of goodwill and intangible assets of certain disposal groups were above their fair values, net of selling costs. As a result, we recognized impairment charges of $1.7 million during the first quarter of 2013, of which $1.0 million is related to goodwill and $0.7 million is related to intangible assets.

The unaudited balance sheets of Schneider Power, classified as discontinued operations held for sale, are as follows:



	December 31, 2012		March 31, 2013
Current Assets:
Cash and cash equivalents	$	578,080	$	32,503
Accounts receivable, net	454,088		613,811
Prepaids and other current assets	670,794		400,718
Total current assets	$	1,702,962	$	1,047,032
Non-Current Assets:
Property and equipment, net (1)	$	25,959,563	$	25,378,293
Intangible asset, net (2)	3,924,327		3,128,907
Goodwill (3)	2,308,383		1,228,036
Deposits and other assets	331,223		325,790
Total non-current assets	$	32,523,496	$	30,061,026
Current Liabilities:
Accounts payable	$	933,377	$	703,846
Accrued payroll obligations	33,390		14,837
Other accrued liablities	316,314		82,602
Current portion of debt obligations (4)	2,227,668		1,197,716
Total current liabilities	$	3,510,749	$	1,999,001
Non-Current Liabilities:
Debt obligations, net of current portion (4)	$	23,251,117	$	23,935,866
Deferred income taxes	146,847		143,559
Total non-current liabilities	$	23,397,964	$	24,079,425


(1)	Consists mainly of wind turbine assets of the 10 megawatt Zephyr Wind Farm acquired in April 2012 and the 1.6 megawatt Providence Bay Wind Farm acquired in April 2010.


(2)	Consists of project assets acquired with our acquisition of Schneider Power in April 2010 associated with Schneider Power's renewable energy portfolio and power purchase agreements associated with Schneider Power's acquisition of the Zephyr Wind Farm in April 2012 and reflects impairments of $0.7 million recognized as of March 31, 2013.


(3)	Represents goodwill ascribed to the Zephyr Wind Farm acquisition in April 2012 and reflects $1.0 million impairment recognized as of March 31, 2013.


(4)	Consists of obligations to secured project lenders as follows:

Zephyr Wind Farm - Samsung Debt

In connection with the Schneider Power's acquisition of the Zephyr Wind Farm on April 20, 2012, Schneider Power assumed a credit facility owed to Samsung Heavy Industries Co. Ltd (Samsung) related to the project (the Samsung Debt). The term loan had a total principal and interest amount of Canadian Dollar (CAD) $23.2 million as of the date of the acquisition. Pursuant to the terms of the original credit facility, Zephyr Farms Limited (Zephyr) was to make regularly scheduled semi-annual principal and interest payments, accruing at a rate of 6.5% per annum, for a period of ten years.

On March 19, 2013, Schneider Power and Zephyr entered into a Master Amending Agreement with Samsung to resolve certain issues with respect to the performance of wind turbines purchased by Zephyr from Samsung pursuant to which the parties agreed to, among other things, (i) extend the grace period to January 31, 2013 and extend the wind turbine delivery date to February 1, 2013 under a turbine supply agreement; thus, allowing additional time for Samsung to optimize the wind turbines before the “Availability Guarantee Period” would begin, (ii) waive all obligations under an operations and maintenance agreement that would have been payable to Samsung through January 31, 2013, and (iii) waive a portion of the interest component that would have been payable to Samsung through January 31, 2013 and restructure the repayment terms of the principal obligations owed by Zephyr to Samsung under the credit facility.

Under the original repayment terms, Zephyr was to repay the Samsung Debt, together with interest at a rate of 6.5% per year, over a 10 year period as follows: (1) eighteen semi-annual payments of principal and interest in the approximately amount of CAD $1.05 million commencing nine months following the date that the Zephyr wind farm achieved commercial operations (which event occurred in May 2012) , (ii) a principal balloon payment in year five in the approximate amount of CAD $5.3 million and (iii) a final payment in year ten in the approximate amount of CAD $9.6 million.

Pursuant to the terms of the Master Amending Agreement, Zephyr is now obligated to repay the Samsung Debt, together with interest at a rate of 6.5% per year, over a ten year period as follows: (i) an interest payment of CAD $100,000 that was made before March 31, 2013, (ii) an interest only payment in the approximate amount of CAD $1.3 million on July 31, 2013, (iii) nineteen semi-annual payments of principal and interest in the approximate amount of CAD $1.10 million commencing on January 31, 2014, (iv) a principal balloon payment in the approximate amount of CAD $2.15 on each of January 31, 2018 and July 31, 2018, (v) a principal balloon payment in the approximate amount of CAD $4.9 million on July 31, 2022 and (vi) a final payment in the approximate amount of CAD $5.1 million on January 31, 2023. Based on the present value of the cash flows of the amended Samsung Debt, we determined that the modified terms were not substantially different from the original payment terms.

As of March 31, 2013, the total amount of the Samsung Debt was CAD $24.5 million, which consisted of CAD $22.7 million of principal, CAD $0.9 million of unamortized premium and CAD $0.9 million of accrued interest.

In connection with the execution of the Master Amending Agreement, Zephyr and Samsung also executed an Amended and Restated Credit Agreement. Except for the modifications to the repayment terms of the principal and interest obligations owed under the Credit Agreement, no other material amendments were made to the Credit Agreement. The Samsung Debt is secured by substantially all of Zephyr's assets.

Pursuant to the Master Amending Agreement, the parties also agreed to establish February 1, 2013 as the deemed delivery date for the wind turbines. As a result of establishing a new delivery date for the wind turbines, (i) Zephyr waived any rights it had to claim liquidated damages from Samsung up through January 31, 2013 related to the performance of the wind turbines and (ii) Samsung agreed to waive (a) all obligations owed by Zephyr through January 31, 2013 owing under an operations and maintenance agreement applicable to the wind turbines and (b) its right to receive any interest on the TSA portion of the Samsung Debt up through January 31, 2013.

The conversion rate of one CAD to one US Dollar was 1.005 to 1.0 as of December 31, 2012 and 0.982 to 1.0 as of March 31, 2013.

Bank Term Loan - Providence Bay Wind Farm

In connection with our acquisition of Schneider Power on April 16, 2010, we assumed a bank term loan (Bank Term Loan) that had an original principal amount of CAD $1.5 million upon its inception on April 3, 2007. The Bank Term Loan was executed by our wholly-owned tier-three subsidiary, Schneider Power Providence Bay Inc. (SPI Providence Bay), and is secured by certain of SPI Providence Bay’s power generation machinery, equipment and other assets.

The significant terms of the Bank Term Loan as last amended in April 10, 2012 are as follows: (i) scheduled maturity date of April 10, 2017, (ii) interest at 6.0% per annum, and (iii) required fixed cash payments of CAD $12,899 per month through April 10, 2017, with the remaining principal amount of CAD $667,422 due on the maturity date.

As of March 31, 2013, the total amount of principal and interest due under the Bank Term Loan was $1.1 million.