Note 2 - Business Acquisitions

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

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 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 December 30, 2021.

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		22.8
Property, plant and equipment and construction-in-process		152.0
Intangible assets (2)		191.6
Goodwill (3)		66.2
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 synergies and 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. 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.

During the year ended December 31, 2022, the acquired geothermal power plants contributed $48.0 million to the Company Electricity revenues, $3.3 million to earnings, net of $7.4 million related to tax and interest expense in respect of the related finance liability. During the year ended 31, 2021, starting from acquisition date, the acquired geothermal power plants contributed $26.2 million to the Company Electricity revenues, $5.5 million to earnings, net of $4.9 million related to tax and interest expense in respect of the related finance liability.

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