XML 38 R14.htm IDEA: XBRL DOCUMENT

Note 7 - Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 7— FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value measurement guidance clarifies that fair value is an exit price, representing the amount that would be received upon selling an asset or paid upon transferring a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under the fair value measurement guidance are described below:

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

Level 2 — Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The following table sets forth certain fair value information at December 31, 2019 and 2018 for financial assets and liabilities measured at fair value by level within the fair value hierarchy, as well as cost or amortized cost. As required by the fair value measurement guidance, assets and liabilities are classified in their entirety based on the lowest level of inputs that is significant to the fair value measurement.

December 31, 2019

Fair Value

Carrying Value at December 31, 2019

Total

Level 1

Level 2

Level 3

(Dollars in thousands)

Assets:

Current assets:

Cash equivalents (including restricted cash accounts)
$ 28,316 $ 28,316 $ 28,316 $ — $ —

Derivatives:

Contingent receivable ⁽¹⁾
102 102 — — 102

Currency forward contracts ⁽²⁾
362 362 — 362 —

Liabilities:

Current liabilities:

Derivatives:

Contingent payables ⁽¹⁾
(3,359
)
(3,359
)
— — (3,359
)

$ 25,421 $ 25,421 $ 28,316 $ 362 $ (3,257
)

December 31, 2018

Fair Value

Carrying Value at December 31, 2018

Total

Level 1

Level 2

Level 3

(Dollars in thousands)

Assets

Current assets:

Cash equivalents (including restricted cash accounts)
$ 18,787 $ 18,787 $ 18,787 $ — $ —

Derivatives:

Contingent receivable ⁽¹⁾
104 104 — — 104

Liabilities:

Current liabilities:

Derivatives:

Contingent payables ⁽¹⁾
(3,424
)
(3,424
)
— — (3,424
)

Currency forward contracts ⁽²⁾
(1,040
)
(1,040
)
— (1,040
)
—

$ 14,427 $ 14,427 $ 18,787 $ (1,040
)
$ (3,320
)

⁽¹⁾These amounts relate to contingent receivables and payables and warrants pertaining to the Guadeloupe power plant purchase transaction, valued primarily based on unobservable inputs and are included within "Prepaid expenses and other", "Accounts payable and accrued expenses" and "Other long-term liabilities" on December 31, 2019 and 2018 in the consolidated balance sheets with the corresponding gain or loss being recognized within "Derivatives and foreign currency transaction gains (losses)" in the consolidated statement of operations and comprehensive income.

⁽²⁾These amounts relate to currency forward contracts valued primarily based on observable inputs, including forward and spot prices for currencies, net of contracted rates and then multiplied by notional amounts, and are included within "Receivables, other" and "Accounts payable and accrued expenses", as applicable, on December 31, 2019 and December 31, 2018, in the consolidated balance sheet with the corresponding gain or loss being recognized within "Derivatives and foreign currency transaction gains (losses)" in the consolidated statement of operations and comprehensive income.

The amounts set forth in the tables above include investments in debt instruments and money market funds (which are included in cash equivalents). Those securities and deposits are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in an active market.

The following table presents the amounts of gain (loss) recognized in the consolidated statements of operations and comprehensive income (loss) on derivative instruments not designated as hedges:

Derivatives not designated as

hedging instruments

Location of recognized gain (loss)

Amount of recognized gain (loss)

2019

2018

2017

(Dollars in thousands)

Put options on natural gas price

Derivative and foreign currency transaction gains (losses)
$ — $ — $ (350
)

Contingent considerations

Derivative and foreign currency transaction gains (losses)
— 170 (129
)

Contingent considerations

General and administrative expenses
— 10,322 2,048

Currency forward contracts

Derivative and foreign currency transaction gains (losses)
2,556 (3,081
)
3,699

$ 2,556 $ 7,411 $ 5,268

In January 2017, the Company entered into Henry Hub Natural Gas Future contracts under which it has bought a number of put options covering a notional quantity of approximately 4.1 million British Thermal Units (“MMBtu”) with exercise prices of $3 and expiration dates ranging from January 26, 2017 until November 27, 2017 in order to reduce its exposure to fluctuations in natural gas prices under its PPAs with Southern California Edison. The Company paid an aggregate amount of approximately $0.7 million for these put options. The put option contracts have monthly expiration dates at which the options can be called and the transaction would be settled on a net cash basis.

The foregoing forward and put options transactions have not been designated as hedge transactions and are marked to market with the corresponding gains or losses recognized within “Derivatives and foreign currency transaction gains (losses)” in the consolidated statements of operations and comprehensive income.

There were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 during the year ended December 31, 2019.

The fair value of the Company’s long-term debt approximates its fair value, except for the following:

Fair Value

Carrying Amount

2019

2018

2019

2018

(Dollars in millions)

(Dollars in millions)

Olkaria III Loan - OPIC
$ 202.1 $ 211.8 $ 192.6 $ 210.6

Olkaria III plant 4 Loan - DEG 2
43.8 47.2 42.5 47.5

Olkaria III plant 1 Loan - DEG 3
38.8 — 37.1 —

Platanares Loan - OPIC
115.3 119.1 104.5 112.7

Amatitlan Loan
26.4 29.9 26.3 29.8

Senior Secured Notes:

OrCal Geothermal Inc. ("OrCal")
— 19.0 — 18.7

OFC 2 LLC ("OFC 2")
210.9 214.5 203.0 217.8

Don A. Campbell 1 ("DAC 1")
78.5 78.8 78.2 83.3

USG Prudential - NV
30.6 29.4 28.4 27.8

USG Prudential - ID
18.6 18.6 19.6 18.9

USG DOE
45.0 48.3 40.8 51.4

Senior Unsecured Bonds
205.7 199.4 204.3 204.3

Senior Unsecured Loan
161.3 102.2 150.0 100.0

Plumstriker
21.7 — 21.6 —

Other long-term debt
16.3 5.4 17.4 6.2

The fair value of the long-term debt is determined by a valuation model, which is based on a conventional discounted cash flow methodology and utilizes assumptions of current borrowing rates.The fair value of revolving lines of credit is determined using a comparison of market-based price sources that are reflective of similar credit ratings to those of the Company.

The carrying value of other financial instruments, such as revolving lines of credit, commercial paper and deposits approximates fair value.

The following table presents the fair value of financial instruments as of December 31, 2019:

Level 1

Level 2

Level 3

Total

(Dollars in millions)

Olkaria III - OPIC
$ — $ — $ 202.1 $ 202.1

Olkaria III plant 4 - DEG 2
— — 43.8 43.8

Olkaria III plant 1 - DEG 3
— — 38.8 38.8

Platanares Loan - OPIC
— — 115.3 115.3

Amatitlan Loan
— 26.4 — 26.4

Senior Secured Notes:

OFC 2 Senior Secured Notes
— — 210.9 210.9

DAC 1 Senior Secured Notes
— — 78.5 78.5

USG Prudential - NV
— — 30.6 30.6

USG Prudential - ID
— — 18.6 18.6

USG DOE
— — 45.0 45.0

Senior Unsecured Bonds
— — 205.7 205.7

Senior Unsecured Loan
— — 161.3 161.3

Plumstriker
— 21.7 — 21.7

Other long-term debt
— — 16.3 16.3

Commercial paper
— 50.0 — 50.0

Revolving lines of credit
— 40.6 — 40.6

Deposits
12.2 — — 12.2

The following table presents the fair value of financial instruments as of December 31, 2018:

Level 1

Level 2

Level 3

Total

(Dollars in millions)

Olkaria III Loan - OPIC
$ — $ — $ 211.8 $ 211.8

Olkaria III plant 4 - DEG 2
— — 47.2 47.2

Platanares Loan - OPIC
— — 119.1 119.1

Amatitlan Loan
— 29.9 — 29.9

Senior Secured Notes:

OrCal Senior Secured Notes
— — 19.0 19.0

OFC 2 Senior Secured Notes
— — 214.5 214.5

DAC 1 Senior Secured Notes
— — 78.8 78.8

USG Prudential - NV
— — 29.4 29.4

USG Prudential - ID
— — 18.6 18.6

USG DOE
— — 48.3 48.3

Senior Unsecured Bonds
— — 199.4 199.4

Senior Unsecured Loan
— — 102.2 102.2

Other long-term debt
— — 5.4 5.4

Revolving lines of credit
— 159.0 — 159.0

Deposits
12.0 — — 12.0

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details