Note 9 - Investment in Affiliates

6 Months Ended

Jun. 30, 2014

Investments in and Advances to Affiliates, Schedule of Investments [Abstract]

Investments in and Advances to Affiliates, Schedule of Investments [Text Block]

9. Investment in Affiliates

In April 2012, the Company entered into an EPC agreement with KDC to construct a 5.4 MW photovoltaic solar electricity project located in Mountain Creek, New Jersey (the “Mountain Creek Project”). In December 2013, the Company entered into an exchange and release agreement with KDC and agreed to exchange its $15.0 million note receivable due to the Company from KDC under the EPC agreement for construction of the Mountain Creek Project in exchange for a 64.50% limited ownership interest in KDC Solar Mountain Creek Parent LLC (the “LLC”).The LLC holds all of the assets of the Mountain Creek Project. The construction of the Mountain Creek Project was approximately 25% complete at June 30, 2014 and December 31, 2013.The LLC needs to obtain $10.0 million in additional financing to continue construction of the Mountain Creek Project. KDC is the managing member and held a 35.5% managing member interest in the LLC at December 31, 2013.In April, 2014, the Company entered into a first amendment and restated exchange and release agreement with KDC to reduce its limited ownership in the LLC from 64.5% to 20.0%. In exchange, KDC agreed to pay the Company 55.62% of all cash distributions received by KDC from its 80.0% managing member interest in the LLC.KDC has the power to control and manage the business and affairs of the LLC and is the only member that has the authority to bind the LLC. The Company holds protective rights with respect to approving (1) a sale or transfer of the Project; (2) the acquisition of real estate not related to the Project; (3) a merger of the LLC with another entity; (4) the alteration of the primary purpose of the LLC; and (5) the addition of new members. The Company does not have the substantive ability to dissolve (liquidate) the LLC or otherwise remove the managing member. As a result, the Company does not have a controlling financial interest in the LLC. The Company accounts for its investment in the LLC using the equity method of accounting. The Company determined the fair value of its investment in the LLC was $7.5 million based on the discounted future cash flows of the LLC and recorded a $7.5 million impairment charge in the Consolidated Statement of Operations during the year ended December 31, 2013.There were no earnings or losses of the investee included in the Company’s Consolidated Statement of Operations during the six months ended June 30, 2014.

In July, 2014, the Company and KDC entered into an agreement in which KDC transferred all of its rights, title and interest in the LLC to the Company. Simultaneous with the transfer of interest, KDC withdrew from the LLC and ceased to be a member of the LLC.

The Company determines whether any of the joint ventures in which it has made investments is a variable interest entity (VIE) at the start of each new venture and if a reconsideration event has occurred. At this time, the Company also considers whether it must consolidate a VIE and/or disclose information about its involvement in a VIE. A reporting entity must consolidate a VIE if that reporting entity has a variable interest (or combination of variable interests) that will absorb a majority of the VIE’s expected losses, receive a majority of the VIE’s expected residual returns, or both. A reporting entity must consider the rights and obligations conveyed by its variable interests and the relationship of its variable interests with variable interests held by other parties to determine whether its variable interests will absorb a majority of a VIE’s expected losses, receive a majority of the VIE’s expected residual returns, or both. The reporting entity that is the primary beneficiary of that VIE is required to consolidate that VIE.

During the three months ended June 30, 2014, the Company entered into an agreement with Solar Hub and HPL in which the Company and HPL each received a 50% membership interest in Calwaii. Pursuant to a Solar Development Agreement, as Solar Hub obtains consent from the applicable utility company it transfers each solar project to Calwaii.

As Calwaii does not have enough equity at risk to finance its activities without additional subordinated financial support, the Company determined this joint venture is a VIE. Because all rights and obligations are equally absorbed by both parties within the joint venture, the Company determined that it is not the primary beneficiary of the VIE and, therefore, has accounted for this entity under the equity method. Under the equity method the Company’s $1.4 million investment was recorded as an investment in the member units of the investee at cost. This variable interest in the VIE is classified in the Company’s balance sheet as an investment in affiliate. The Company has provided financial support through capital contributions to the VIE of $0.6 million during the six months ended June 30, 2014. The primary reason for providing support to the VIE is to monetize its note receivable held by the VIE. The VIE is financed through loans and capital contributions from the Company and HPL. Although the Company has no commitment to fund additional contributions to the VIE, the Company is considering additional contributions to the VIE to maximize the market value of the project assets.

The table below provides a comparison of the carrying amount of the Company’s assets that relate to the Company’s variable interest in the VIE compared to the Company’s maximum exposure to loss at June 30, 2014 (in thousands):

Company’s Variable Interest in Entity
Investment in affiliate	$	1,376
Total	$	1,376
Company’s maximum exposure to loss
Investment in affiliate	$	1,376
Note receivable, noncurrent, related party		8,450
Other assets, noncurrent, related party		998
Total	$	10,824