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Note 2 - Business Acquisitions

12 Months Ended

Dec. 31, 2021

Business Combination Disclosure [Text Block]

NOTE 2 —BUSINESS ACQUISITIONS

Business combination - geothermal assets purchase transaction

On July 13, 2021, the Company closed a transaction with TG Geothermal Portfolio, LLC (a subsidiary of Terra-Gen, LLC) (the "Seller") to acquire two contracted geothermal assets in Nevada with a total net generating capacity of 67.5 MW, a greenfield development asset adjacent to one of the plants, and an underutilized transmission line (the "Terra-Gen Transaction"). The Company paid approximately $171.0 million in cash (excluding working capital adjustment of approximately $10.8 million) for 100% of the equity interests in the entities holding those assets and assumed a financing obligation with a fair value at acquisition date of approximately $258.4 million. The two contracted geothermal assets include the Dixie Valley and Beowawe geothermal power plants which sell power under existing power purchase agreements with Southern California Edison under a long term Power Purchase Agreement ("PPA") expiring in 2038 and with NV Power, Inc. under a PPA expiring in December 2025, respectively.

As a result of the acquisition, the Company expanded its overall generation capacity and expects to improve the profitability of the purchased assets through cost reduction and synergies. The Company accounted for the transaction in accordance with Accounting Standard Codification ("ASC") 805, Business Combinations. Following the transaction, the Company consolidates the Dixie Valley and Beowawe power plants as well as the other geothermal assets included in the transaction in accordance with ASC 810, Consolidation. In 2021, the Company incurred approximately $4.7 million of acquisition-related costs included under "General and administrative expenses" in the consolidated statements of operations and comprehensive income for the year ended December 31, 2021. Accounting guidance provides that the allocation of the purchase price may be modified for up to one year from the date of the acquisition to the extent that additional information is obtained about the facts and circumstances that existed as of the acquisition date. The primary area of the purchase price allocation that is not yet finalized is related to certain tax matters and the related impact on goodwill.

The following table summarizes the purchase price allocation to the fair value of the assets acquired and liabilities assumed (in millions):

Cash and cash equivalents and restricted cash	$	10.9
Trade receivables and others ⁽¹⁾		8.6
Deferred income taxes		23.6
Property, plant and equipment and construction-in-process		152.0
Intangible assets ⁽²⁾		191.6
Goodwill ⁽³⁾		65.4
Total assets acquired	$	452.1

Accounts payable, accrued expenses and others	$	6.6
Financing liability ⁽⁴⁾		258.4
Asset retirement obligation		5.3
Total liabilities assumed	$	270.3

Total assets acquired, and liabilities assumed, net	$	181.8

⁽¹⁾ The gross amount of receivables due under the Dixie Valley and Beowawe PPAs is $7.8 million. These receivables were fully collected during the third quarter of 2021.

⁽²⁾ Intangible assets are related to the long-term electricity PPAs described above and are amortized over the term of those PPAs.

⁽³⁾ Goodwill is primarily related to the expected synergies and potential cost savings in operations as a result of the purchase transaction. The goodwill is allocated to the Electricity segment and is deductible for tax purposes pending the exercise of the financial lease buy-out option as described below.

⁽⁴⁾ Financing liability is related to a sale and leaseback transaction entered into by the Seller in September 2015 under which it sold and leased back the undivided interests in the Dixie Valley power plant asset through June 2038. The lease transaction was accounted for by the Seller as a finance lease due to the Seller's continued involvement and management of the power plant and the existence of an early buy-out option in September 2024, which continues to be applicable to the Company. As per the accounting guidance, the Company retained the Seller's accounting of a "failed" sale and leaseback transaction and accordingly accounted for the liability as a financing liability. This financing liability, as well as the related power plant asset, were measured at their acquisition-date fair value.

For the period starting from the acquisition date, July 13, 2021, to December 31, 2021, the acquired geothermal power plants contributed Electricity revenues of $26.2 million and earnings of $5.5 million, net of related tax and finance liability interest expense costs of $4.9 million, which were included in the Company’s consolidated statements of operations and comprehensive income for the year ended December 31, 2021.

The following unaudited pro forma summary presents condensed consolidated information of the Company as if the business combination had occurred on January 1, 2020. The pro forma results below include the impact of certain adjustments related to the depreciation of property, plant and equipment, amortization of intangible assets, transaction-related costs incurred as of the acquisition date, and interest expense on related borrowings, and in each case, the related income tax effects, as well as certain other post-acquisition adjustments. This pro forma presentation does not include any impact from transaction synergies.

	Pro forma for the Year Ended December 31,
	2021		2020
	(Dollars in millions)
Electricity revenues	$	613.3	$	596.6
Total revenues	$	690.6	$	760.6
Net income attributable to the Company's stockholders	$	69.6	$	84.3

Energy storage assets portfolio purchase transaction

On July 20, 2020, the Company completed the acquisition of 100% of the 20MW/80MWh Pomona Energy Storage ("Pomona") facility in California from Alta Gas Power Holdings (U.S.) Inc. for a total consideration of $43.4 million. The Pomona facility has been in commercial operation since December 2016 under a 10-year energy storage resource agreement with Southern California Edison Company. The Pomona facility is the Company's first battery storage asset in California. The purchase increased the Company's operating portfolio and added to its other battery storage assets located in New Jersey, New England and Texas. The Company accounted for the transaction in accordance with ASC 805, Business Combinations and following the transaction close date, consolidated the results of Pomona in accordance with ASC 810, Consolidation in its consolidated financial statements.

The following table summarizes the purchase price allocation to the fair value of the assets acquired and liabilities assumed (in millions):

Trade and other receivables	$	1.0
Property, plant and equipment, net	20.1
Intangible assets ⁽¹⁾	20.4
Goodwill ⁽²⁾		4.1
Total assets acquired	$	45.6

Liabilities assumed	$	(2.2	)

Total assets acquired and liabilities assumed, net	$	43.4

⁽¹⁾ Intangible assets of $18.0 million are related to a long-term energy storage resource adequacy agreement with Southern California Edison and are depreciated over a period of approximately 6.5 years. The remaining $2.4 million is related to certain other contract rights.

⁽²⁾ Goodwill is primarily related to certain potential future economic benefits arising from assets acquired. Goodwill is allocated to the Energy Storage segment and is deductible for tax purposes.

The amounts of revenues and earnings related to Pomona that are included in the Company's consolidated statements of operations and comprehensive income for the year ended December 31, 2021 are $9.4 million and $2.9 million respectively. The amounts of revenues and earnings related to Pomona that are included in the Company's consolidated statements of operations and comprehensive income for the year ended December 31, 2020 since the acquisition date are $4.8 million and $1.2 million respectively. Unaudited pro forma information is not included as the Company deemed the transaction to not qualify as a significant business combination.