NOTE

— BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Business

The Company is primarily engaged in the geothermal and recovered energy business, including the supply of equipment that is manufactured by the Company and the design and construction of power plants for projects owned by the Company or for

third

parties. The Company owns and operates geothermal and recovered energy-based power plants in various countries, including the U.S., Kenya, Guatemala, Guadeloupe and Honduras. The Company’s equipment manufacturing operations are located in Israel.

Most of the Company’s domestic power plant facilities are Qualifying Facilities under the PURPA. The PPAs for certain of such facilities are dependent upon their maintaining Qualifying Facility status. Management believes that all of the facilities located in the U.S. were in compliance with Qualifying Facility status requirements as of

December 31, 2018.

Cash dividends

During the years ended

December 31, 2018,

2017,

and

2016,

the Company’s Board of Directors (the “Board”) declared, approved, and authorized the payment of cash dividends in the aggregate amount of

$26.8

million (

$0.53

per share),

$20.5

million (

$0.41

per share), and

$25.7

million (

$0.52

per share), respectively. Such dividends were paid in the years declared.

Rounding

Dollar amounts, except per share data, in the notes to these financial statements are rounded to the closest

$1,000,

unless otherwise indicated.

Basis of presentation

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of the Company and of all majority-owned subsidiaries in which the Company exercises control over operating and financial policies, and variable interest entities in which the Company has an interest and is the primary beneficiary. Intercompany accounts and transactions have been eliminated in consolidation.

Investments in less-than-majority-owned entities or other entities in which the Company exercises significant influence over operating and financial policies are accounted for using the equity method of accounting or consolidated if they are a variable interest entity in which the Company has an interest and is the primary beneficiary. Under the equity method, original investments are recorded at cost and adjusted by the Company’s share of undistributed earnings or losses of such companies. The Company’s earnings or losses in investments accounted for under the equity method have been reflected as “equity in earnings (losses) of investees, net” on the Company’s consolidated statements of operations and comprehensive income (loss).

Cash and cash equivalents

The Company considers all highly liquid instruments, with an original maturity of

three

months or less, to be cash equivalents.

Restricted cash, cash equivalents, and marketable securities

Under the terms of certain long-term debt agreements, the Company is required to maintain certain debt service reserves, cash collateral and operating fund accounts that have been classified as restricted cash and cash equivalents. Funds that will be used to satisfy obligations due during the next

twelve

months are classified as current restricted cash and cash equivalents, with the remainder classified as non-current restricted cash and cash equivalents. Such amounts were invested primarily in money market accounts and commercial paper with a minimum investment grade of “AA”.

Reconciliation of Cash and cash equivalents and Restricted cash and cash equivalents

The following table provides a reconciliation of Cash and cash equivalents and Restricted cash and cash equivalents reported on the balance sheet that sum to the total of the same amounts shown on the statement of cash flows:

	December 31,
	2018		2017		2016
	(Dollars in thousands)
Cash and cash equivalents	$	98,802	$	47,818	$	230,214
Restricted cash and cash equivalents		78,693		48,825		34,262
Total Cash and cash equivalents and restricted cash and cash equivalents	$	177,495	$	96,643	$	264,476

Concentration of credit risk

Financial instruments which potentially subject the Company to concentration of credit risk consist principally of temporary cash investments and accounts receivable.

The Company places its temporary cash investments with high credit quality financial institutions located in the U.S. and in foreign countries. At

December 31, 2018

and

2017,

the Company had deposits totaling

$31.3

million and

$21.2

million, respectively, in

ten

U.S. financial institutions (

seven

such banks in the prior year) that were federally insured up to

$250,000

per account. At

December 31, 2018

and

2017,

the Company’s deposits in foreign countries of approximately

$93.9

million and

$32.8

million, respectively, were

not

insured.

December 31, 2018

and

2017,

accounts receivable related to operations in foreign countries amounted to approximately

$102.0

million and

$78.1

million, respectively. At

December 31, 2018,

and

2017,

accounts receivable from the Company’s major customers (see Note

) amounted to approximately

56%

and

57%,

respectively, of the Company’s accounts receivable.

The Company has historically been able to collect on substantially all of its receivable balances and believes it will continue to be able to collect all amounts due. Accordingly,

provision for doubtful accounts has been made.

Additionally,

one

of our off-takers, PG&E, which accounts for approximately

1.9%

of our total revenues, filed for reorganization under Chapter

bankruptcy. We are closely monitoring our PG&E account to ensure cash receipts are received timely each month and the payments due in

January 2019

were received and PG&E’s account is current. However, we cannot estimate at this stage what the future impact of PG&E current situation

may

have on us.

Inventories

Inventories consist primarily of raw material parts and sub-assemblies for power units and are stated at the lower of cost or net realizable value, using the weighted-average cost method. Inventories are reduced by a provision for slow-moving and obsolete inventories. This provision was

not

material at

December 31, 2018

and

2017.

Deposits and other

Deposits and other consist primarily of performance bonds for construction projects, long-term insurance contract and receivables, and derivative instruments.

Deferred charges

Deferred charges represent prepaid income taxes on intercompany sales. Such amounts were amortized using the straight-line method and included in income tax provision over the life of the related property, plant and equipment. The Company adopted Accounting Standards Update

2016

16,

Income Taxes on Intercompany Transfers in its consolidated financial statements for the

first

quarter of

2018

using the modified retrospective approach. As a result, there was an adjustment to deferred charges with a corresponding adjustment to deferred income taxes of

$49.8

million with an immaterial amount recorded to retained earnings. For additional information on the new accounting standard related to tax effects associated with intra-company transfers of assets please see "New accounting pronouncements effective in the year ended

December 31, 2018"

below.

Property, plant and equipment, net

Property, plant and equipment are stated at cost. All costs associated with the acquisition, development and construction of power plants operated by the Company are capitalized. Major improvements are capitalized and repairs and maintenance (including major maintenance) costs are expensed. Power plants operated by the Company, which include geothermal wells and exploration and resource development costs, are depreciated using the straight-line method over their estimated useful lives, which range from

years. The other assets are depreciated using the straight-line method over the following estimated useful lives of the assets:

Buildings (in years)		25
Leasehold improvements (in years)	15	-	20
Machinery and equipment — manufacturing and drilling (in years)		10
Machinery and equipment — computers (in years)	3	-	5
Office equipment — furniture and fixtures (in years)	5	-	15
Office equipment — other (in years)	5	-	10
Automobiles (in years)	5	-	7

The cost and accumulated depreciation of items sold or retired are removed from the accounts. Any resulting gain or loss is recognized currently and recorded in the accompanying statements of operations.

The Company capitalizes interest costs as part of constructing power plant facilities. Such capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life. Capitalized interest costs amounted to

$3.7

million,

$7.2

million, and

$3.3

million for the years ended

December 31, 2018,

2017,

and

2016,

respectively.

Exploration and development costs

The Company capitalizes costs incurred in connection with the exploration and development of geothermal resources once it acquires land rights to the potential geothermal resource. Prior to acquiring land rights, the Company makes an initial assessment that an economically feasible geothermal reservoir is probable on that land. The Company determines the economic feasibility of potential geothermal resources internally, with all available data and external assessments vetted through the exploration department and occasionally using outside service providers. Costs associated with the initial assessment are expensed and included in cost of electricity revenues in the consolidated statements of operations and comprehensive income (loss). Such costs were immaterial during the years ended

December 31, 2018,

2017

and

2016.

It normally takes

two

three

years from the time active exploration of a particular geothermal resource begins to the time a production well is in operation, assuming the resource is commercially viable. However, in certain sites the process

may

take longer due to permitting delays, transmission constraints or any other commercial milestones that are required to be reached in order to pursue the development process.

In most cases, the Company obtains the right to conduct the geothermal development and operations on land owned by the BLM, various states or with private parties. In consideration for certain of these leases, the Company

may

pay an up-front bonus payment which is a component of the competitive lease process. The up-front bonus payments and other related costs, such as legal fees, are capitalized and included in construction-in-process. The annual land lease payments made during the exploration, development and construction phase are expensed as incurred and included in “electricity cost of revenues” in the consolidated statements of operations and comprehensive income (loss). Upon commencement of power generation on the leased land, the Company begins to pay to the lessor’s long-term royalty payments based on the utilization of the geothermal resources as defined in the respective agreements. Such payments are expensed when the related revenues are earned and included in “electricity cost of revenues” in the consolidated statements of operations and comprehensive income (loss).

Following the acquisition of land rights to the potential geothermal resource, the Company conducts further studies and surveys, including water and soil analyses among others, and augments its database with the results of these studies. The Company then initiates a suite of geophysical surveys to assess the resource and determine drilling locations. If the results of these activities support the initial assessment of the feasibility of the geothermal resource, the Company then proceeds to exploratory drilling and other related activities which

may

include drilling of temperature gradient holes, drilling of slim holes, building access roads to drilling locations, drilling full size production and/or injection wells and flow tests. If the slim hole supports a conclusion that the geothermal resource will support a commercially viable power plant, it

may

be converted to a full-size commercial well, used either for extraction or re-injection of geothermal fluids, or be used as an observation well to monitor and define the geothermal resource. Costs associated with these activities and other directly attributable costs, including interest once physical exploration activities begin and permitting costs are capitalized and included in “construction-in-process”. If the Company concludes that a geothermal resource will

not

support commercial operations, capitalized costs are expensed in the period such determination is made.

When deciding whether to continue holding lease rights and/or to pursue exploration activity, we diligently prioritize our prospective investments, taking into account resource and probability assessments in order to make informed decisions about whether a particular project will support commercial operation. As a result, write-off of unsuccessful activities for the year ended

December 31, 2018,

2017

and

2016

was

$0.1

million,

$1.8

million, and

$3.0

million. In

2017,

the write-offs included exploration costs related to the Company’s exploration activities in Oregon, and in

2016,

the write-offs included the exploration costs related to the Company’s exploration activities in Nevada and Chile, after which the Company determined that the applicable sites would

longer support commercial operation.

Grants received from the U.S. DOE are offset against the related exploration and development costs. There were

such grants for the years ended

December 31, 2018

and

2017.

The amount of such grants for the year ended

December 31, 2016

was

$0.3

million.

All exploration and development costs that are being capitalized, including the up-front bonus payments made to secure land leases, will be depreciated over their estimated useful lives when the related geothermal power plant is substantially complete and ready for use. A geothermal power plant is substantially complete and ready for use when electricity generation commences.

Asset retirement obligation

The Company records the fair value of a legal liability for an asset retirement obligation in the period in which it is incurred. The Company’s legal liabilities include plugging wells and post-closure costs of power producing sites. When a new liability for asset retirement obligations is recorded, the Company capitalizes the costs of the liability by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. The Company periodically reassess the assumptions used to estimate the expected cash flows required to settle the asset retirement obligation, including changes in estimated probabilities, amounts, and timing of the settlement of the asset retirement obligation, as well as changes in the legal requirements of an obligation and revises the previously recorded asset retirement obligation accordingly. At retirement, the obligation is settled for its recorded amount at a gain or loss.

Deferred financing and lease transaction costs

Deferred financing costs are amortized over the term of the related obligation using the effective interest method. Amortization of deferred financing costs is presented as interest expense in the consolidated statements of operations and comprehensive income (loss). Accumulated amortization related to deferred financing costs amounted to

$21.8

million and

$31.0

million at

December 31, 2018

and

2017,

respectively. Amortization expense for the years ended

December 31, 2018,

2017,

and

2016

amounted to

$4.6

million,

$5.7

million, and

$6.9

million, respectively. During the years ended

December 31, 2018,

2017

and

2016,

amounts of

$0.0

million,

$0.6

million and

$0.1

million, respectively, were written-off as a result of the extinguishment of liability.

Deferred transaction costs relating to the Puna operating lease (see Note

) in the amount of

$4.2

million are amortized using the straight-line method over the

-year term of the lease. Amortization of deferred transaction costs is presented in cost of revenues in the consolidated statements of operations and comprehensive income (loss). Accumulated amortization related to deferred lease costs amounted to

$2.5

million and

$2.3

million at

December 31, 2018

and

2017,

respectively. Amortization expense for each of the years ended

December 31, 2018,

2017,

and

2016

amounted to

$0.2

million.

Goodwill

Goodwill represents the excess of the fair value of consideration transferred in the business combination transactions of Guadeloupe, Viridity and USG over the fair value of tangible and intangible assets acquired, net of the fair value of liabilities assumed and the fair value of any noncontrolling interest in the acquisitions. Goodwill is

not

amortized but rather subject to a periodic impairment testing on an annual basis (on

December 31

of each year) or if an event occurs or circumstances change that would more likely than

not

reduce the fair value of the reporting unit below its carrying amount. Additionally, an entity is permitted to

first

assess qualitative factors to determine whether a quantitative goodwill impairment test is necessary. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than

not

that a reporting unit’s fair value is less than its carrying amount. Otherwise,

further impairment testing is required. An entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to step

one

of the quantitative goodwill impairment test. This would

not

preclude the entity from performing the qualitative assessment in any subsequent period. The

first

step compares the fair value of the reporting unit to its carrying value, including goodwill. In

January 2017,

the FASB issued ASU

2017

04,

Intangibles – Goodwill and Other (Topic

350

), which was early adopted by the Company in

2018,

under which step

two

of the goodwill impairment test is eliminated. Step

two

measured a goodwill impairment test by comparing the implied fair value of reporting unit’s goodwill with the carrying amount of that goodwill. For additional information on this new accounting standard please see "New accounting pronouncements effective in the year ended

December 31, 2018"

below. Under ASU

2017

04,

Intangibles – Goodwill and Other, an entity should recognize an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value as calculated under step

one

described above. However, the loss recognized should

not

exceed the total amount of goodwill allocated to that reporting unit. For further information relating to goodwill see Note

- Intangible assets and goodwill to the consolidated financial statements.

Intangible assets

Intangible assets consist of allocated acquisition costs of PPAs, which are amortized using the straight-line method over the

-year terms of the agreements (see Note

) as well as acquisition cost allocation related to Viridity’s storage activities that are amortized over a weighted average amortization period of

years. Intangible assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount

may

not

be recoverable. In case there is

such events or change in circumstances, there is

need to perform the impairment testing. The recoverability is tested by comparing the net carrying value of the intangible assets to the undiscounted net cash flows to be generated from the use and eventual disposition of that asset. If the carrying amount of a long-lived asset (or asset group) is

not

recoverable, the fair value of the asset (asset group) is measured and if the carrying amount exceeds the fair value, an impairment loss is recognized.

Impairment of long-lived assets and long-lived assets to be disposed of

The Company evaluates long-lived assets, such as property, plant and equipment and construction-in-process for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not

be recoverable. Factors which could trigger an impairment include, among others, significant underperformance relative to historical or projected future operating results, significant changes in the Company’s use of assets or its overall business strategy, negative industry or economic trends, a determination that an exploration project will

not

support commercial operations, a determination that a suspended project is

not

likely to be completed, a significant increase in costs necessary to complete a project, legal factors relating to its business or when it concludes that it is more likely than

not

that an asset will be disposed of or sold.

The Company tests its operating plants that are operated together as a complex for impairment at the complex level because the cash flows of such plants result from significant shared operating activities. For example, the operating power plants in a complex are managed under a combined operation management generally with

one

central control room that controls all of the power plants in a complex and

one

maintenance group that services all of the power plants in a complex. As a result, the cash flows from individual plants within a complex are

not

largely independent of the cash flows of other plants within the complex. The Company tests for impairment its operating plants which are

not

operated as a complex as well as its projects under exploration, development or construction that are

not

part of an existing complex at the plant or project level. To the extent an operating plant becomes part of a complex, the Company will test for impairment at the complex level.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated future net undiscounted cash flows expected to be generated by the asset. The significant assumptions that the Company uses in estimating its undiscounted future cash flows include: (i) projected generating capacity of the complex or power plant and rates to be received under the respective PPA(s) and expected market rates thereafter and (ii) projected operating expenses of the relevant complex or power plant. Estimates of future cash flows used to test recoverability of a long-lived asset under development also include cash flows associated with all future expenditures necessary to develop the asset.

If the assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Management believes that

impairment exists for long-lived assets; however, estimates as to the recoverability of such assets

may

change based on revised circumstances. If actual cash flows differ significantly from the Company’s current estimates, a material impairment charge

may

be required in the future.

Derivative instruments

Derivative instruments (including certain derivative instruments embedded in other contracts) are measured at their fair value and recorded as either assets or liabilities unless exempted from derivative treatment as a normal purchase and sale. All changes in the fair value of derivatives are recognized in earnings unless specific hedge criteria are met, which requires a company to formally document, designate and assess the effectiveness of transactions that receive hedge accounting.

The Company maintains a risk management strategy that

may

incorporates the use of swap contracts and put options on oil and natural gas prices, forward exchange contracts, interest rate swaps, and interest rate caps to minimize significant fluctuation in cash flows and/or earnings that are caused by oil and natural gas prices, exchange rate or interest rate volatility. Gains or losses on contracts that initially qualify for cash flow hedge accounting, net of related taxes, are included as a component of other comprehensive income or loss and accumulated other comprehensive income or loss are subsequently reclassified into earnings when the hedged forecasted transaction affects earnings. Gains or losses on contracts that are

not

designated as a cash flow hedge are included currently in earnings.

Foreign currency translation

The U.S. dollar is the functional currency for all of the Company’s consolidated operations and those of its equity affiliates except for the Guadeloupe power plant. For those entities, all gains and losses from currency translations are included within the line item “Derivatives and foreign currency transaction gains (losses)” within the consolidated statements of operations and comprehensive income (loss). The Euro is the functional currency of the Guadeloupe power plant and thus gains and losses from currency translation adjustments related to Guadeloupe are included as currency translation adjustments in accumulated other comprehensive income in the consolidated statements of equity and in comprehensive income. The accumulated currency translation adjustments amounted to

$0.0

million and

$1.4

million as of

December 31, 2018

and

2017,

respectively.

Comprehensive income (loss) reporting

Comprehensive income (loss) includes net income or loss plus other comprehensive income (loss), which for the Company consists of changes in unrealized gains or losses in respect of the Company’s share in derivatives instruments of unconsolidated investment, foreign currency translation adjustments and amortization of unrealized gains in respect of derivative instruments designated as a cash flow hedge. The changes in foreign currency translation adjustments, amortization of unrealized gains and loss in respect of derivative instruments designated as a cash flow hedge during the years ended

December 31, 2018,

2017

and

2016

were immaterial. The change in the Company’s share in derivative instruments of unconsolidated investment is disclosed under Note

– Investment in unconsolidated companies to the consolidated financial statements.

Revenues and cost of revenues

Revenues are primarily related to: (i) sale of electricity from geothermal and recovered energy-based power plants owned and operated by the Company; (ii) geothermal and recovered energy-based power plant equipment engineering, sale, construction and installation, and operating services and (iii) energy storage, demand-response and energy management services.

Electricity segment revenues

: Revenues related to the sale of electricity from geothermal and recovered energy-based power plants and capacity payments are recorded based upon output delivered and capacity provided at rates specified under relevant contract terms. For PPAs agreed to, modified, or acquired in business combinations on or after

July 1, 2003,

the Company determines whether such PPAs contain a lease element requiring lease accounting. Revenue from such PPAs are accounted for in electricity revenues. The lease element of the PPAs is also assessed in accordance with the revenue arrangements with multiple deliverables guidance, which requires that revenues be allocated to the separate earnings processes based on their relative fair value. PPAs with minimum lease rentals which vary over time are generally recognized on the straight-line basis over the term of the PPAs. PPAs with contingent rentals are recognized when earned. In the electricity segment, revenues for all but

four

power plants are accounted for under ASC

840

(Leases) as operating leases, and therefore equipment related to geothermal and recovered energy generation power plants as described in Note

is considered held for leasing. For power plants in the scope of ASC

606,

the Company identified electricity as a separate performance obligation. Performance obligations identified were evaluated and determined to be satisfied over time and qualified for the invoicing practical expedient since the invoiced amounts reasonably represented the value to customers of performance obligations fulfilled to date. The transaction price is determined based on the price per actual mega-watt output or available capacity as agreed to in the respective PPA. Customers are generally billed on a monthly basis and payment is typically due within

days after the issuance of the invoice.

Product segment revenues

: Revenues from engineering, operating services, and parts and product sales are recorded upon providing the service or delivery of the products and parts and when collectability is reasonably assured. Revenues from the supply and/or construction of geothermal and recovered energy-based power plant equipment and other equipment to

third

parties are recognized over time since control is transferred continuously to our customers. The majority of our contracts include a single performance obligation which is essentially the promise to transfer the individual goods or services that are

not

separately identifiable from other promises in the contracts and therefore deemed as

not

distinct. Performance obligations are satisfied over-time if the customer receives the benefits as we perform work, if the customer controls the asset as it is being constructed, or if the product being produced for the customer has

alternative use and we have a contractual right to payment. In our Product segment, revenues are spread over a period of

one

two

years and are recognized over time based on the cost incurred to date in ratio to total estimated costs which represents the input method that best depicts the transfer of control over the performance obligation to the customer. Costs include direct material, labor, and indirect costs. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.

In contracts for which we determine that control is

not

transferred continuously to the customer, we recognized revenues at the point in time when the customer obtains control of the asset. Revenues for such contracts are recorded upon delivery and acceptance by the customer. This generally is the case for the sale of spare parts, generators or similar products.

Accounting for product contracts that are satisfied over time includes use of several estimates such as variable consideration related to bonuses and penalties and total estimated cost for completing the contract. The estimated amount of variable consideration will be included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will

not

occur when the uncertainty associated with the variable consideration is subsequently resolved. These estimates are based on historical experience, anticipated performance and our best judgment at the time.

The nature of our product contracts give rise to several modifications or change requests by our customers. Substantially all of the modifications are treated as cumulative catch-ups to revenues since the additional goods are

not

distinct from those already provided. We include the additional revenues related to the modifications in our transaction price when both parties to the contract approved the modification. As a significant change in

one

or more of these estimates could affect the profitability of our contracts, we review and update our contract-related estimates regularly. We recognize adjustments in Product revenues on contracts under the cumulative catch-up method. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the period in which it is identified.

Other segment revenues

: Energy storage, demand-response and energy management related services revenues are recorded based on energy management of load curtailment capacity delivered or service provided at rates specified under the relevant contract terms. The Company determined that such revenues are in the scope of ASC

606

and identified energy management as a separate performance obligation. Performance obligations are satisfied once the Company provides verification to the electric power grid operator or utility of its ability to meet the committed capacity or power curtailment requirements and thus entitled to cash proceeds. Such verification

may

be provided by the Company bi-weekly, monthly or under any other frequency as set by the related program and are typically followed by a payment shortly after. Performance obligations identified were evaluated and determined to be satisfied over time and qualified for the invoicing practical expedient since the amounts included in the verification document reasonably represent the value of performance obligations fulfilled to date. The transaction price is determined based on mechanisms specified in the contract with the customer.

For additional information please see “Revenues from Contracts with Customers” under “New accounting pronouncement” section below.

Our accounting policy for revenues included under the comparative periods were accounted under the previous accounting standard as follows:

Revenues related to the sale of electricity from geothermal and recovered energy-based power plants and capacity payments are recorded based upon output delivered and capacity provided at rates specified under relevant contract terms. For PPAs agreed to, modified, or acquired in business combinations on or after

July 1, 2003,

two

power plants are accounted for under ASC

840

(Leases) as operating leases, and therefore equipment related to geothermal and recovered energy generation power plants as described in Note

is considered held for leasing.

Revenues from engineering, operating services, and parts and product sales are recorded upon providing the service or delivery of the products and parts and when collectability is reasonably assured. Revenues from the supply and/or construction of geothermal and recovered energy-based power plant equipment and other equipment to

third

parties are recognized using the percentage-of-completion method. Revenue is recognized based on the percentage relationship that incurred costs bear to total estimated costs. Costs include direct material, labor, and indirect costs. Selling, marketing, general, and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions and final contract settlements,

may

result in revisions to costs and revenues and are recognized in the period in which the revisions are determined.

In specific instances where there is a lack of dependable estimates or inherent risks cause forecast to be doubtful, then the completed-contract method is followed. Revenue is recognized when the contract is substantially complete and when collectability is reasonably assured. Costs that are closely associated with the project are deferred as contract costs and recognized similarly to the associated revenues.

Termination fee

Fees to terminate PPAs are recognized in the period incurred as selling and marketing expenses. During

2018,

the Company signed a termination agreement with NV Energy, Inc. for the Galena

PPA under which it agreed to pay a termination fee of approximately

million which were recorded under Selling and marketing expenses in

2018.

2017

and

2016,

termination fees were incurred.

Warranty on products sold

The Company generally provides a

one

two

years warranty against defects in workmanship and materials related to the sale of products for electricity generation. The Company considered the warranty as an assurance type warranty since the warranty provides the customer the assurance that the product complies with agreed-upon specifications. Estimated future warranty obligations are included in operating expenses in the period in which the related revenue is recognized. Such charges are immaterial for the years ended

December 31, 2018,

2017,

and

2016.

Research and development

Research and development costs incurred by the Company for the development of existing and new geothermal, recovered energy and remote power technologies are expensed as incurred. Grants received from the DOE are offset against the related research and development expenses. There were

such grants for the years ended

December 31, 2018,

2017,

and

2016.

Stock-based compensation

The Company accounts for stock-based compensation using the fair value method whereby compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite employee service period (generally the vesting period of the grant). Starting in

2016,

the Company uses the Exercise Multiple-Based Lattice SAR-Pricing Model to value the stock-based compensation awards to reflect accumulated historic data retained of behavioral parameters. Prior to

2016,

the Company used the Black-Scholes formula to estimate the fair value of the stock-based compensation.

Tax monetization Transactions

The Company has

two

tax monetization transactions, Opal Geo and Tungsten as further described under Note

– tax monetization transactions to the consolidated financial statements. The OPC and ORTP tax monetization transactions closed during

2017

upon the Company’s partners reaching their target after-tax yield on their investment, as further described in Note

13.

The purpose of these transactions is to form tax partnerships, whereby investors provide cash in exchange for equity interests that provide the holder a right to the majority of tax benefits associated with a renewable energy project. We account for a portion of the proceeds from the transaction as debt under ASC

470.

Given that a portion of these transactions is structured as a purchase of an equity interest we also classify a portion as noncontrolling interest consistent with guidance in ASC

810.

The portion recorded to noncontrolling interest is initially measured as the fair value of the discounted Tax Attributes and cash distributions which represents the partner's residual economic interest. The residual proceeds are recognized as the initial carrying value of the debt which is classified as a liability associated with sale tax benefits. We apply the effective interest rate method to the liability associated with the tax monetization transaction component as described by ASC

835

and CON

The tax benefits and cash distributions realized by the partner each period are treated as the debt servicing amounts, giving rise to income attributable to the sale of tax benefits. The deferred transaction costs have been capitalized and amortized using the effective interest method.

Income taxes

Income taxes are accounted for using the asset and liability approach, which requires the recognition of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. The measurement of current and deferred tax assets and liabilities are based on provisions of the enacted tax law. On

December 22, 2017,

the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Act. The Tax Act makes broad and complex changes to the U.S. tax code, including, but

not

limited to, (

) reducing the U.S. federal corporate tax rate from

percent to

percent; (

) requiring companies to include in taxable income an amount on certain repatriated earnings of foreign subsidiaries; (

) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (

) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations (GILTI); (

) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (

) creating BEAT, a new minimum tax; (

) creating a new limitation on deductible interest expense; and (

) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after

December 31, 2017.

See Note

to the consolidated financial statements for further details regarding the Company's income tax provision and the Tax Act. The Company accounts for investment tax credits and production tax credits as a reduction to income taxes in the year in which the credit arises. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are more likely than

not

expected to be realized. A partial valuation allowance has been established to offset the Company’s U.S. deferred tax assets. Tax benefits from uncertain tax positions are recognized only if it is more likely than

not

that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. Interest and penalties assessed by taxing authorities on an underpayment of income taxes are included as a component of income tax provision in the consolidated statements of operations and comprehensive income.

Earnings per share

Basic earnings per share attributable to the Company’s stockholders (“earnings per share”) is computed by dividing net income or loss attributable to the Company’s stockholders by the weighted average number of shares of common stock outstanding for the period. The Company does

not

have any equity instruments that are dilutive, except for stock-based awards.

The table below shows the reconciliation of the number of shares used in the computation of basic and diluted earnings per share:

	Year Ended December 31,
	2018		2017		2016
	(In thousands)
Weighted average number of shares used in computation of basic earnings per share		50,643		50,110		49,469
Add:
Additional shares from the assumed exercise of employee stock options		326		659		671

Weighted average number of shares used in computation of diluted earnings per share		50,969		50,769		50,140

The number of stock-based awards that could potentially dilute future earnings per share and were

not

included in the computation of diluted earnings per share because to do so would have been anti-dilutive was

176.4

thousand,

42.9

thousand, and

102.8

thousand, respectively, for the years ended

December 31, 2018,

2017,

and

2016.

Use of estimates in preparation of financial statements

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of such financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The most significant estimates with regard to the Company’s consolidated financial statements relate to the useful lives of property, plant and equipment, impairment of goodwill and long-lived assets, including intangible assets, revenue recognition of product sales using the percentage of completion method, asset retirement obligations, and the provision for income taxes.

Puna Power Plant

May 3, 2018,

the Kilauea volcano located in close proximity to our Puna

MW geothermal power plant in the Puna district of Hawaii's Big Island erupted following a significant increase in seismic activity in the area. Before it recently stopped flowing, the lava covered the wellheads of

three

geothermal wells, monitoring wells and the substation of the Puna complex and an adjacent warehouse that stored a drilling rig that was also consumed by the lava. The insurance policy coverage for property and business interruption is provided by a consortium of insurers. All the insurers accepted and started paying for the costs to rebuild the destroyed substation, and as of

December 31, 2018

we received

$3.3

million. However only some of the insurers accepted that the business interruption coverage started in

May 2018

and as of

December 31, 2018

we recorded

$12.1

million of such proceeds. The Company is still in discussions to reach an understanding with all insurers to start paying for the business interruption as of

May 2018.

The Company is still assessing the damages in the Puna facilities and continue to coordinate with HELCO and local authorities to bring the power plant back to operation. The Company continues to assess the accounting implications of this event on the assets and liabilities on its balance sheet and whether an impairment will be required. Any significant physical damage to the geothermal resource or continued shut-down following the recent stop of the lava of the Puna facilities could have an adverse impact on the power plant's electricity generation and availability, which in turn could have a material adverse impact on our business and results of operations.

New Accounting Pronouncements

New accounting pronouncements effective in the year ended

December 31, 2018

Income Taxes

March 2018,

the Financial Accounting Standards Board ("FASB") issued ASU

2018

05,

Income Taxes (Topic

740

). The amendments in this update add several SEC paragraphs pursuant to the issuance of the SEC Staff Accounting Bulletin

No.

118,

Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB

118”

) in

December 2017.

The amendments in this update are effective immediately. For additional information, see in Note

to our consolidated financial statements set forth in Item

of this annual report.

Revenues from Contracts with Customers

May 2014,

the FASB issued ASU

2014

09,

Revenues from Contracts with Customers, Topic

606,

which was a joint project of the FASB and the International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards. The update provides that an entity should recognize revenue in connection with the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, an entity is required to apply each of the following steps: (

) identify the contract(s) with the customer; (

) identify the performance obligations in the contracts; (

) determine the transaction price; (

) allocate the transaction price to the performance obligation in the contract; and (

) recognize revenue when (or as) the entity satisfies a performance obligation. ASU

2014

also prescribes additional financial presentations and disclosures. In

March 2016,

the FASB issued ASU

2016

08,

Principal versus Agent Considerations. This update did

not

change the core principles of the guidance and was intended to clarify the implementation guidance on principal versus agent considerations. When another entity is involved in providing goods or services to a customer, an entity is required to determine if the nature of its promise is to provide the specific good or service itself (that is, the entity is a principal) or to arrange for that good or service to be provided by the other party (that is, the entity is an agent). The guidance included indicators to assist an entity in determining whether it acts as a principal or agent in a specified transaction.

The Company adopted this update effectively as of

January 1, 2018

using the modified retrospective approach with a

one

-time cumulative adjustment to the opening balance of retained earnings as further described below and applied the

five

-step model described above on identified outstanding contracts at the date of adoption, under which revenues are generated. Under ASC

606,

an entity must identify the performance obligations in a contract, determine the transaction price and allocate the price to specific performance obligations and recognize the revenue when the obligation is completed. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The standard also requires disclosure of sufficient information to allow users to understand the nature, amount, timing and uncertainty of revenue and cash flow arising from contracts.

The adoption of ASC

606,

Revenues from Contracts with Customers, as described above, did

not

have an impact on our Electricity, Product and Other segment revenues in

2018,

however, the adoption did have an impact on our accounting for our investment in an unconsolidated company as further described in the following table and in the disclosure under the heading "Investment in an unconsolidated company" within this note below. Additionally, the following table below summarizes the impact of the adoption of ASC

606

on the Company’s consolidated financial statements as of

January 1, 2018,

followed by further information for each of the line items in the table:

	(Dollars in millions)
Electricity segment revenues	$	–
Product segment revenues		–
Other segment revenues		–
Investment in an unconsolidated company as of January 1, 2018		24.0

For a detailed description of our Electricity, Products and Other revenues, please see “Revenues and cost of revenues” caption above.

Contract Assets and Liabilities related to our Product segment: Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. We receive payments from customers based on the terms established in our contracts. Total contract assets and contract liabilities as of

December 31, 2018

and

December 31, 2017

are as follows:

	December 31,			December 31,
	2018			2017
	(Dollars in thousands)
Contract assets (*)	$	42,130		$	40,945
Contract liabilities (*)		(18,402	)		(20,241	)
Contract assets, net	$	23,728		$	20,704

(*) Contract assets and contract liabilities are presented as "Costs and estimated earnings in excess of billings on uncompleted contracts" and "Billings in excess of costs and estimated earnings on uncompleted contracts", respectively, on the consolidated balance sheet.

The following table presents the significant changes in the contract assets and contract liabilities for the year ended

December 31, 2018:

	Contract assets			Contract liabilities
	(Dollars in thousands)
Recognition of contract liabilities as revenue as a result of performance obligations satisfied	$	-		$	33,349
Cash received in advance for which revenues have not yet recognized, net expenditures made		-			(38,162	)
Reduction of contract assets as a result of rights to consideration becoming unconditional		(128,659	)		-
Contract assets recognized, net of recognized receivables		136,496			-
Net change in contract assets and contract liabilities		7,837			(4,813	)

The timing of revenue recognition, billings and cash collections results in accounts receivable, contract assets and contract liabilities on the consolidated balance sheet. In our Products segment, amounts are billed as work progresses in accordance with agreed-upon contractual terms, or upon achievement of contractual milestones. Generally, billing occurs subsequent to the recognition of revenue, resulting in contract assets. However, we sometimes receive advances or deposits from our customers before revenue can be recognized, resulting in contract liabilities. These assets and liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. The timing of billing our customers and receiving advance payments vary from contract to contract. The majority of payments are received

later than the completion of the project and satisfaction of our performance obligation.

December 31, 2018,

we had approximately

$188.1

million of remaining performance obligations

not

yet satisfied or partly satisfied related to our Product segment. We expect to recognize approximately

100%

of this amount as Product revenues during the next

months.

The following schedule reconciles revenues accounted for under ASC

840,

Leases, and ASC

606,

Revenues from Contracts with Customers, to total consolidated revenues for the year ended

December 31, 2018:

	Year Ended December 31, 2018
	(Dollars in thousands)
Electricity Revenues accounted under ASC 840, Leases	$	481,619
Electricity, Product and Other revenues accounted under ASC 606		237,648
Total consolidated revenues	$	719,267

Disaggregated revenues from contracts with customers for the year ended

December 31, 2018

are disclosed under Note

– Business Segments, to the consolidated financial statements.

Investment in an unconsolidated company

: The Company also reviewed the impact of the adoption of ASC

606

on its investment in an unconsolidated company. As a result of the adoption, the Company recorded a

one-

time cumulative credit adjustment to the opening balance of retained earnings of approximately

$24.0

million as of

January 1, 2018.

This impact is a result of the unconsolidated company’s variable consideration related to the construction of its power plant for which, under the new guidance, is probable that a significant reversal in the amount of cumulative revenue recognized will

not

occur when the uncertainty is resolved. As such, the comparative information will

not

be restated and shall continue to be reported under the accounting standards in effect for those periods.

The following schedule quantifies the impact of adopting ASC

606

on the statement of operations for the year ended

December 31, 2018:

	Year ended December 31, 2018 under previous standard		Effect of the New Revenue Standard		As reported for the year ended December 31, 2018
	(Dollars in thousands)
Equity in earnings (losses) of investees, net	$	5,615	$	2,048	$	7,663
Income from continuing operations		108,063		2,048		110,111
Net income attributable to the Company’s stockholders		95,918		2,048		97,966
Retained earnings as of the end of the period		420,174		2,048		422,222

Compensation - Stock Compensation

May 2017,

the FASB issued ASU

2017

09,

Compensation—Stock Compensation (Topic

718

). The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic

718.

The amendments in this update require that an entity should account for the effects of a modification unless all of the following are met: (

) The fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified; (

) The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; (

) The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements under Topic

718

apply regardless of whether an entity is required to apply modification accounting under the amendments in this update. The amendments in this update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after

December 15, 2017.

The amendments in this update should be applied prospectively to an award modified on or after the adoption date. The adoption of this guidance did

not

have a material impact on the Company’s consolidated financial statements.

Business Combinations

January 2017,

the FASB issued ASU

2017

01,

Business Combinations (Topic

805

). The update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this update primarily provide a screen to determine when a set of assets and activities is

not

a business and by that reduces the number of transactions that need to be further evaluated. The amendments in this update should be applied prospectively and are effective for financial statements issued for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years. The adoption of this guidance did

not

have an impact on the Company’s condensed consolidated financial statements.

Statement of Cash Flow

November 2016,

the FASB issued ASU

2016

18,

Statement of Cash Flows (Topic

230

) – Restricted Cash. The amendments in this update require that a statement of cash flows explain the changes during the period in total cash, cash equivalents, and the amounts generally described as restricted cash or cash equivalents. Therefore, amounts of restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this update should be applied retrospectively for each period presented and are effective for financial statements issued for fiscal years beginning after

December 15, 2017

and interim periods within those fiscal years. The Company adopted this guidance retrospectively in its consolidated financial statements for the year ended

December 31, 2018

and adjusted its disclosure accordingly.

Intra-Entity Transfers of Assets Other than Inventory

October 2016,

the FASB issued ASU

2016

16,

Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. The amendments in this update require that the entity would recognize the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. The new guidance does

not

apply to intra-entity transfers on inventory. The amendments in this update should be applied for each period presented and are effective for financial statements issued for fiscal years beginning after

December 15, 2017

and interim periods within those fiscal years. The modified retrospective approach is required for transition to the new guidance, with cumulative-effect adjustment recorded in retained earnings as of the beginning of the period of adoption. The Company adopted this guidance in its consolidated financial statements for the year ended

December 31, 2018

using the modified retrospective approach. As a result, there was an adjustment to deferred charges with a corresponding adjustment to deferred income taxes of

$49.8

million with an immaterial amount recorded to retained earnings.

Statement of Cash Flows: Classification of Certain Cash Receipts and Cash payments (Topic

230

)

August 2016,

the FASB issued ASU

2016

15,

Statement of Cash-Flows (Topic

230

). This update addresses

eight

specific cash flow classification issues with the objective of reducing diversity in practice. One of the issues addressed in this update is debt prepayment or debt extinguishment costs which under the new guidance should be classified as cash outflows for financing activities. Additionally, the update addressed contingent consideration payments made after a business combination. Such cash payments made soon after the acquisition date to settle a contingent consideration liability should be classified as cash outflows for investing activities. Payments made thereafter should be classified as cash outflows for financing activities up to the amount of the original contingent consideration liability. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows for operating activities. The amendments in this update are effective for fiscal years beginning after

December 15, 2017

and interim periods within those fiscal years. The amendments in this update should be applied using a retrospective transition method to each period presented. The Company adopted this guidance in the year ended

December 31, 2018

and accordingly reclassified approximately

$8.0

million of cash paid for achievement of certain production thresholds in Guadeloupe during the

fourth

quarter of

2017

from cash outflows from investing activities to cash outflows from financing activities as required by this update.

Recognition and Measurement of Financial Assets and Financial Liabilities

January 2016,

the FASB issued ASU

2016

01,

Recognition and Measurement of Financial Assets and Financial Liabilities. The update primarily requires that an entity present separately, in other comprehensive income, the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The application of this update should be by means of cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments in this update are effective for financial statements issued for fiscal years beginning after

December 15, 2017

and interim periods within those fiscal years. The adoption of this update did

not

have a material impact on the Company’s consolidated financial statements.

Intangibles –Goodwill and Other

January 2017,

the FASB issued ASU

2017

04,

Intangibles – Goodwill and Other (Topic

350

). The amendments in this Update require the entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, however, the loss recognized should

not

exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider the income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. This update, eliminated Step

from the goodwill impairment test under the current guidance. Step

measures a goodwill impairment loss by comparing the implied fair value of reporting unit’s goodwill with the carrying amount of that goodwill. The amendments in this Update should be applied on a prospective basis. An entity is also required to disclose the nature of and the reason for the change in accounting principal upon transition. That disclosure should be provided in the

first

annual period and the interim period within the

first

annual period when the entity initially adopts the amendments in this Update. The amendments in this Update are effective for the annual or any interim goodwill impairment tests in fiscal years beginning after

December 15, 2019.

Early adoption is permitted for interim or annual impairment tests performed on testing dates after

January 1, 2017.

The Company adopted this Update in

2018

in connection with its goodwill impairment test of Viridity.

New accounting pronouncements effective in future periods

Derivatives and Hedging

August 2017,

the FASB issued ASU

2017

12,

Targeted Improvements to Accounting for Hedging Activities. The amendments in this Update better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To meet that objective, the amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The amendments in this Update are effective for fiscal years beginning after

December 15, 2018,

and interim periods within those fiscal years. Early application is permitted in any interim period after issuance of the Update. The Company is currently evaluating the potential impact, if any, of the adoption of these amendments on its consolidated financial statements.

Leases

February 2016,

the FASB issued ASU

2016

02,

Leases (Topic

842

). This update introduces a number of changes and simplifies previous guidance, primarily the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. The update retains the distinction between finance leases and operating leases and the classification criteria between the

two

types remains substantially similar. Also, lessor accounting remains largely unchanged from previous guidance. However, key aspects of the update were aligned with the revenue recognition guidance in Topic

606.

Additionally, the update defines a lease as a contract, or part of a contract, that conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control over the use of the identified asset means that the customer has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset. This update requires the modified retrospective transition approach, which requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented. The modified retrospective approach includes a number of optional practical expedients related to identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commenced before the effective date in accordance with the previous generally accepted accounting principles in the United States unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous generally accepted accounting principles in the United States. Since the issuance of the update in

February 2016,

the FASB issues several additional updates and amendments including ASU

2018

11,

Leases, which was issued in

July 2018

and provided an additional optional transition method for the adoption of the standard as well as additional codification improvements. Under this new transition method, an entity initially applies the new lease standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, the comparative periods presented in the financial statements in which the standard is adopted will continue to be in accordance with the current GAAP. The amendments in this update are effective for annual reporting periods beginning after

December 15, 2018,

including interim periods within those reporting periods.

The Company performed an evaluation of the impact from adopting the standard on its financial statements which included, among others, utilization of internal resources to lead the implementation efforts and supplement them with external resources and accounting professionals, review of the Company’s existing lease portfolio and assess the impact to its business processes and internal control over financial reporting. The Company will adopt this update on

January 1, 2019,

using the modified retrospective approach at the effective date with

adjustment to the comparative periods which will continue to be presented in accordance with the current GAAP. Additionally, the Company expects to elect the above-mentioned practical expedients as provided by the new standard and consequently will

not

recognize right-of-use assets and lease liabilities for arrangements with a term of less than

one

year and

not

separate lease and non-lease components for all classes of underlying assets other than real estate assets. The Company also expects to apply the portfolio approach under the update, primarily with respect to determination of incremental borrowing rate.

The Company has substantially completed its assessment of the potential impact that the implementation of this update will have on its consolidated financial statements and continues to finalize its efforts relative to the adoption of this update as of

January 1, 2019.

While our current evaluation and conclusions are subject to changes as our assessment has

not

yet been completed, the Company expects there will be an increase to assets and liabilities related to the recognition of a right-of-use asset and a lease liability on its existing lease portfolio in the amount within a range between approximately

$27.0

million and

$30.0

million, however, it does

not

expect the adoption of the update to have a material impact on its consolidated statement of operations and comprehensive income and consolidated statements of cash flows.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive income

February 2018,

the FASB issued ASU

2018

02,

Income Statement – Reporting Comprehensive Income (Topic

220

). The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting for the Tax Act. The guidance is effective for the fiscal years beginning after

December 15, 2018,

and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the potential impact of the adoption of these amendments on its consolidated financial statements, however, such impact, if any, is

not

expected to be material.

NOTE

(a) -

Retrospective adjustments as a result of adoption of accounting policies and change in segments

As described above in Note

the Company adopted ASU

2016

15,

Classification of Certain Cash Receipts and Cash Payments and ASU

2016

18,

Statement of Cash Flow that required retrospective adjustments to the years ended

December 31, 2017

and

2016

to the Statement of Cash Flows. Further, as described in Note

19,

2018,

the Company started disclosing its energy storage and power load management business activity under the Other segment as such operations met the reportable segment criteria of ASC

280,

Segment Reporting. This separate reportable segment required retrospective adjustment for comparative purposes for the year ended

December 31, 2017.