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Note 8 - Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 8— FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value measurement guidance clarifies that fair value represents the amount that would be received upon selling an asset or paid upon transferring a liability in an orderly transaction between market participants at the measurement date. 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 observable inputs that reflect quoted prices for identical assets or liabilities in active markets;

Level 2 — inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly;

Level 3 — unobservable inputs.

The following table sets forth certain fair value information at December 31, 2022 and 2021 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, 2022
						Fair Value
		Carrying Value at December 31, 2022				Total				Level 1				Level 2				Level 3
		(Dollars in thousands)
Assets:
Current assets:
Cash equivalents (including restricted cash accounts)		$	34,832			$	34,832			$	34,832			$	—			$	—
Marketable securities (including cash equivalents)			136				136				136				—				—
Derivatives:
Long-term assets:
Cross currency swap ⁽³⁾			3,029				3,029				—				3,029				—
Liabilities:
Current liabilities:
Derivatives:
Currency forward contracts ⁽²⁾			(800	)			(800	)			—				(800	)			—
Cross currency swap ⁽³⁾			(2,777	)			(2,777	)			—				(2,777	)			—
		$	34,420			$	34,420			$	34,968			$	(548	)		$	—

						December 31, 2021
						Fair Value
		Carrying Value at December 31, 2021				Total				Level 1				Level 2				Level 3
		(Dollars in thousands)
Assets
Current assets:
Cash equivalents (including restricted cash accounts)		$	31,675			$	31,675			$	31,675			$	—			$	—
Marketable securities			47,029				47,029				47,029				—				—
Derivatives:
Cross currency swap ⁽³⁾			1,461				1,461				—				1,461				—
Currency forward contracts ⁽²⁾			813				813				—				813				—
Long-term assets:
Cross currency swap ⁽³⁾			37,883				37,883				—				37,883				—
Liabilities:
Long-term liabilities:
Contingent payables ⁽¹⁾			(2,425	)			(2,425	)			—				—				(2,425	)
		$	116,436			$	116,436			$	78,704			$	40,157			$	(2,425	)

⁽¹⁾ These amounts relate to contingent payables pertaining to the Guadeloupe power plant purchase transaction, valued primarily based on unobservable inputs and are included within "Other long-term liabilities" on December 31, 2022 and 2021 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" on December 31, 2022 and December 31, 2021, as applicable, 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.

⁽³⁾These amounts relate to cross currency swap contracts valued primarily based on the present value of the Cross Currency Swap future settlement prices for USD and NIS zero yield curves and the applicable exchange rate as of December 31, 2022. These amounts are included within “Deposits and other” and "Accounts payable and accrued expenses" on December 31, 2022 and within "Prepaid expenses and other" and “Deposits and other” on December 31, 2021 in the consolidated balance sheets. There are no cash collateral deposits on December 31, 2022.

The following table presents the amounts of gain (loss) recognized in the consolidated statements of operations and comprehensive income (loss):

Derivatives not designated as hedging instruments		Location of recognized gain (loss)		Amount of recognized gain (loss)
				2022				2021				2020
				(Dollars in thousands)
Swap transaction on RRS prices ⁽¹⁾		Derivative and foreign currency transaction gains (losses)		$	—			$	(14,540	)		$	—
Currency forward contracts ⁽¹⁾		Derivative and foreign currency transaction gains (losses)			(5,466	)			1,368				5,175
				$	(5,466	)		$	(13,172	)		$	5,175

Derivatives designated as cash flow hedging instruments

Cross currency swap ⁽²⁾		Derivative and foreign currency transaction gains (losses)		$	(36,803	)		$	10,501			$	21,187

⁽¹⁾ The foregoing currency forward and price swap transactions were not designated as hedge transactions and were 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. The price swap transaction was related to a hedging agreement with a third party that was effective January 1, 2021 under which the Company fixed the price per MWh on a portion of RRS provided by its Rabbit Hill storage facility, as described under Note 1 to the consolidated financial statements. The price swap transaction was terminated effective April 1, 2021.

⁽²⁾ The foregoing cross currency swap transactions were designated as a cash flow hedge as further described under Note 1 to the consolidated financial statements. The changes in the cross currency swap fair value are initially recorded in "Other comprehensive income (loss)" and a corresponding amount is reclassified out of "Accumulated other comprehensive income (loss)" to "Derivatives and foreign currency transaction gains (losses)" to offset the remeasurement of the underlying hedged transaction which also impacts the same line item 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, 2022.

The following table presents the effect of derivative instruments designated as cash flow hedges on the consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2022, 2021 and 2020 :

		Year Ended December 31,
		2022				2021				2020
		(Dollars in thousands)
Cross currency swap cash flow hedge:
Balance in Other comprehensive income (loss) beginning of period		$	5,745			$	3,366			$	—
Gain or (loss) recognized in Other comprehensive income (loss) ⁽¹⁾			(38,628	)			12,880				24,553
Amount reclassified from Other comprehensive income (loss) into earnings			36,803				(10,501	)			(21,187	)
Balance in Other comprehensive income (loss) end of period		$	3,920			$	5,745			$	3,366

⁽¹⁾ The amount of gain or (loss) recognized in Other comprehensive income (loss) for the years ended December 31, 2022, 2021 and 2020 is net of tax of $0.5 million, $0.8 million and $1.1 million, respectively.

The estimated net amount of existing gain (loss) that is reported in "Accumulated other comprehensive income (loss)" as of December 31, 2022 that is expected to be reclassified into earnings within the next 12 months is immaterial. The maximum length of time over which the Company is hedging its exposure to the variability in future cash flow is from the transaction commencement date through June 2031.

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

		Fair Value								Carrying Amount
		2022				2021				2022				2021
		(Dollars in millions)								(Dollars in millions)
Mizrahi Loan		$	71.4			$	—			$	70.3			$	—
Convertible Senior Notes			505.3				—				431.3				—
HSBC Loan			40.3				50.4				42.9				50.0
Hapoalim Loan			91.1				117.8				98.2				116.1
Discount Loan			81.1				100.2				87.5				100.0
Financing Liability - Dixie Valley			219.8				248.4				242.0				252.9
Olkaria III Loan - DFC			134.2				166.5				138.7				156.7
Olkaria III plant 4 Loan - DEG 2			26.5				34.1				27.5				32.5
Olkaria III plant 1 Loan - DEG 3			23.3				30.1				24.0				28.4
Platanares Loan - DFC			80.2				98.2				79.9				88.1
Amatitlan Loan			14.7				19.8				15.8				19.3
OFC 2 LLC Senior Secured Notes ("OFC 2")			149.8				183.3				158.0				173.3
Don A. Campbell 1 Senior Secured Notes ("DAC 1")			57.4				69.8				62.7				67.9
USG Prudential - NV			23.7				28.9				25.0				26.3
USG Prudential - ID Refinancing (prior year: USG Prudential - ID)			56.8				17.3				61.6				17.3
USG DOE			32.8				39.9				32.8				35.5
Senior Unsecured Bonds			235.1				578.9				255.8				539.6
Senior Unsecured Loan			166.4				204.3				174.8				191.6
Plumstriker			11.2				14.8				11.4				14.7
Other long-term debt			9.2				13.3				10.4				13.6

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, except for the fair value of the Convertible Senior Notes for which the fair value was estimated based on a quoted bid price of the Notes in an over-the-counter market on the last trading day of the reporting period. A hypothetical change in the quoted bid price will result in a corresponding change in the estimated fair value of the Notes.

As disclosed above under Note 1 to the consolidated financial statements, the outbreak of the COVID-19 pandemic caused a global economic downturn and market volatility that may continue to have an impact on the estimated fair value of the Company's long-term debt and financing liability. Additionally, other components of the Company's borrowing rates may increase as the global economic situation evolves which may have a direct impact on the fair value of the Company's long-term debt.

The carrying value of the deposits approximates fair value.

The following table presents the fair value of financial instruments as of December 31, 2022:

		Level 1				Level 2				Level 3				Total
		(Dollars in millions)
Mizrahi Loan		$	—			$	—			$	71.4			$	71.4
Convertible Senior Notes			—				505.3				—				505.3
HSBC Loan			—				—				40.3				40.3
Hapoalim Loan			—				—				91.1				91.1
Discount Loan			—				—				81.1				81.1
Financing Liability - Dixie Valley			—				—				219.8				219.8
Olkaria III - DFC			—				—				134.2				134.2
Olkaria III plant 4 - DEG 2			—				—				26.5				26.5
Olkaria III plant 1 - DEG 3			—				—				23.3				23.3
Platanares Loan - DFC			—				—				80.2				80.2
Amatitlan Loan			—				14.7				—				14.7
OFC 2 Senior Secured Notes			—				—				149.8				149.8
DAC 1 Senior Secured Notes			—				—				57.4				57.4
USG Prudential - NV			—				—				23.7				23.7
USG Prudential - ID			—				—				56.8				56.8
USG DOE			—				—				32.8				32.8
Senior Unsecured Bonds			—				—				235.1				235.1
Senior Unsecured Loan			—				—				166.4				166.4
Plumstriker			—				11.2				—				11.2
Other long-term debt			—				—				9.2				9.2
Deposits			13.9				—				—				13.9

The following table presents the fair value of financial instruments as of December 31, 2021:

		Level 1				Level 2				Level 3				Total
		(Dollars in millions)
HSBC Loan		$	—			$	—			$	50.4			$	50.4
Hapoalim Loan			—				—				117.8				117.8
Discount Loan			—				—				100.2				100.2
Financing Liability - Dixie Valley			—				—				248.4				248.4
Olkaria III Loan - DFC			—				—				166.5				166.5
Olkaria III plant 4 - DEG 2			—				—				34.1				34.1
Olkaria III plant 1 - DEG 3			—				—				30.1				30.1
Platanares Loan - DFC			—				—				98.2				98.2
Amatitlan Loan			—				19.8				—				19.8
Senior Secured Notes:
OFC 2 Senior Secured Notes			—				—				183.3				183.3
DAC 1 Senior Secured Notes			—				—				69.8				69.8
USG Prudential - NV			—				—				28.9				28.9
USG Prudential - ID			—				—				17.3				17.3
USG DOE			—				—				39.9				39.9
Senior Unsecured Bonds			—				—				578.9				578.9
Senior Unsecured Loan			—				—				204.3				204.3
Plumstriker			—				14.8				—				14.8
Other long-term debt			—				—				13.3				13.3
Deposits			17.1				—				—				17.1

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.

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