NOTE

— VARIABLE INTEREST ENTITIES

The Company’s overall methodology for evaluating transactions and relationships under the variable interest entity (“VIE”) accounting and disclosure requirements includes the following

two

steps: (i) determining whether the entity meets the criteria to qualify as a VIE; and (ii) determining whether the Company is the primary beneficiary of the VIE.

In performing the

first

step, the significant factors and judgments that the Company considers in making the determination as to whether an entity is a VIE include:

•

The design of the entity, including the nature of its risks and the purpose for which the entity was created, to determine the variability that the entity was designed to create and distribute to its interest holders;

•

The nature of the Company’s involvement with the entity;

•

Whether control of the entity

may

be achieved through arrangements that do

not

involve voting equity;

•

Whether there is sufficient equity investment at risk to finance the activities of the entity; and

•

Whether parties other than the equity holders have the obligation to absorb expected losses or the right to receive residual returns.

If the Company identifies a VIE based on the above considerations, it then performs the

second

step and evaluates whether it is the primary beneficiary of the VIE by considering the following significant factors and judgments:

•

Whether the Company has the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and

•

Whether the Company has the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE.

The Company’s VIEs include certain of its wholly owned subsidiaries that own

one

or more power plants with long-term PPAs. In most cases, the PPAs require the utility to purchase substantially all of the plant’s electrical output over a significant portion of its estimated useful life. Most of the VIEs have associated project financing debt that is non-recourse to the general creditors of the Company, is collateralized by substantially all of the assets of the VIE and those of its wholly owned subsidiaries (also VIEs) and is fully and unconditionally guaranteed by such subsidiaries. The Company has concluded that such entities are VIEs primarily because the entities do

not

have sufficient equity at risk and/or subordinated financial support is provided through the long-term PPAs. The Company has evaluated each of its VIEs to determine the primary beneficiary by considering the party that has the power to direct the most significant activities of the entity. Such activities include, among others, construction of the power plant, operations and maintenance, dispatch of electricity, financing and strategy. Except for power plants that it acquired, the Company is responsible for the construction of its power plants and generally provides operation and maintenance services. Primarily due to its involvement in these and other activities, the Company has concluded that it directs the most significant activities at each of its VIEs and, therefore, is considered the primary beneficiary. The Company performs an ongoing reassessment of the VIEs to determine the primary beneficiary and

may

be required to deconsolidate certain of its VIEs in the future. The Company has aggregated its consolidated VIEs into the following categories: (i) wholly owned subsidiaries with project debt; and (ii) wholly owned subsidiaries with PPAs.

The tables below detail the assets and liabilities (excluding intercompany balances which are eliminated in consolidation) for the Company’s VIEs, combined by VIE classifications, that were included in the consolidated balance sheets as of

December 31, 2018

and

2017:

	December 31, 2018
	Project Debt		PPAs
	(Dollars in thousands)
Assets:
Restricted cash and cash equivalents	$	76,019	$	2,304
Other current assets		213,007		9,698
Property, plant and equipment, net		1,552,408		306,820
Construction-in-process		90,812		13,273
Other long-term assets		177,723		9,104
Total assets	$	2,109,969	$	341,199

Liabilities:
Accounts payable and accrued expenses	$	24,245	$	2,651
Long-term debt		805,850		—
Other long-term liabilities		125,769		12,483
Total liabilities	$	955,864	$	15,134

	December 31, 2017
	Project Debt		PPAs
	(Dollars in thousands)
Assets:
Restricted cash, cash equivalents and marketable securities	$	48,676	$	—
Other current assets		124,322		18,010
Property, plant and equipment, net		1,252,623		379,277
Construction-in-process		129,832		12,885
Other long-term assets		63,667		276
Total assets	$	1,619,120	$	410,448

Liabilities:
Accounts payable and accrued expenses	$	24,887	$	6,863
Long-term debt		658,726		—
Other long-term liabilities		93,682		6,757
Total liabilities	$	777,295	$	13,620