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Note 4 - Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 4— 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 March 31, 2023 and December 31, 2022 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.

						March 31, 2023
						Fair Value
		Carrying Value at March 31, 2023					Total				Level 1				Level 2				Level 3
		(Dollars in thousands)
Assets:
Current assets:
Cash equivalents (including restricted cash accounts)		$	40,401			$	40,401			$	40,401			$	—			$	—
Marketable securities ⁽³⁾			138				138				138				—				—
Long-term Assets:
Cross currency swap ⁽²⁾			9				9				—				9				—
Liabilities:
Current liabilities:
Derivatives:
Cross currency swap ⁽²⁾			(4,043	)			(4,043	)			—				(4,043	)			—
Currency forward contracts ⁽¹⁾			(1,793	)			(1,793	)			—				(1,793	)			—
Long term liabilities:
Cross currency swap ⁽²⁾			(8,067	)			(8,067	)			—				(8,067	)			—
		$	26,644			$	26,644			$	40,539			$	(13,894	)		$	—

						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 ⁽³⁾			136				136				136				—				—
Derivatives:
Long-term assets:
Cross currency swap ⁽²⁾			3,029				3,029				—				3,029				—
Liabilities:
Current liabilities:
Derivatives:
Currency forward contracts (1)			(800	)			(800	)			—				(800	)			—
Cross currency swap ⁽²⁾			(2,777	)			(2,777	)			—				(2,777	)			—

		$	34,420			$	34,420			$	34,968			$	(548	)		$	—

1.

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” or “Accounts payable and accrued expenses”, as applicable, in the condensed consolidated balance sheets on March 31, 2023 and December 31, 2022, with the corresponding gain or loss being recognized within “Derivatives and foreign currency transaction gains (losses)” in the condensed consolidated statements of operations and comprehensive income.

2.

These amounts relate to cross currency swap contracts valued primarily based on the present value of the cross currency swap future settlement prices for U.S. Dollar (“USD”) and New Israeli Shekel (“NIS”) zero yield curves and the applicable exchange rate as of March 31, 2023 and December 31, 2022, as applicable. These amounts are included within “Prepaid expenses and other”, “Deposits and other”, "Accounts payable and accrued expenses", or “Other long-term liabilities”, as applicable, in the condensed consolidated balance sheets on March 31, 2023 and December 31, 2022. There are no cash collateral deposits on March 31, 2023 and December 31, 2022.

3.

Presented under “Cash and cash equivalents” in the condensed consolidated balance sheets.

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

				Amount of recognized
				gain (loss)
Derivatives not designated as		*Location of recognized gain*		*Three Months Ended*
hedging instruments		*(loss)*		*March 31,*
				2023				2022
				(Dollars in thousands)
Currency forward contracts ⁽¹⁾		Derivative and foreign currency transaction gains (losses)		$	(1,656	)		$	(208	)

Derivatives designated as cash flow hedging instruments

Cross currency swap ⁽²⁾		Derivative and foreign currency transaction gains (losses)		$	(6,792	)		$	(6,682	)

⁽¹⁾ The foregoing currency forward 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 condensed consolidated statements of operations and comprehensive income.

⁽²⁾ The foregoing cross currency swap transactions were designated as a cash flow hedge as further described under Note 1 to the condensed 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 condensed 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 three months ended March 31, 2023 and 2022.

The following table presents the effect of derivative instruments designated as cash flow hedges on the condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2023 and 2022:

		Three Months Ended March 31,
		2023				2022
		(Dollars in thousands)
Cross currency swap cash flow hedge:
Balance in Accumulated other comprehensive income (loss) beginning of period		$	3,920			$	5,745
Gain or (loss) recognized in Other comprehensive income (loss)			1,389				(8,587	)
Amount reclassified from Other comprehensive income (loss) into earnings			(6,792	)			6,682
Balance in Accumulated other comprehensive income (loss) end of period		$	(1,483	)		$	3,840

The estimated net amount of existing gain (loss) that is reported in "Accumulated other comprehensive income (loss)" as of March 31, 2023 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 carrying amount, except for the following:

		Fair Value								Carrying Amount *^()**
		March 31,				December 31,				March 31,				December 31,
		2023				2022				2023				2022
		(Dollars in millions)								(Dollars in millions)
Mizrahi Loan		$	71.4			$	71.4			$	70.3			$	70.3
Convertible Senior Notes			485.4				505.3				431.3				431.3
HSBC Loan			36.6				40.3				39.3				42.9
Hapoalim Loan			92.4				91.1				98.2				98.2
Hapoalim Loan 2023			100.0				—				100.0				—
Discount Loan			74.5				81.1				81.3				87.5
Finance liability - Dixie Valley			213.3				219.8				236.1				242.0
Olkaria III Loan - DFC			129.7				134.2				134.2				138.7
Olkaria III plant 4 Loan - DEG 2			26.9				26.5				27.5				27.5
Olkaria III plant 1 Loan - DEG 3			23.7				23.3				24.0				24.0
Platanares Loan - DFC			78.0				80.2				77.8				79.9
Amatitlan Loan			13.8				14.7				14.9				15.8
OFC 2 LLC ("OFC 2")			145.0				149.8				153.3				158.0
Don A. Campbell 1 ("DAC 1")			55.8				57.4				61.1				62.7
USG Prudential - NV			23.5				23.7				24.8				25.0
USG Prudential - ID			54.6				56.8				59.8				61.6
USG DOE			31.1				32.8				31.4				32.8
Senior Unsecured Bonds			232.1				235.1				249.0				255.8
Senior Unsecured Loan			156.1				166.4				166.4				174.8
Plumstriker			10.9				11.2				11.1				11.4
Other long-term debt			8.8				9.2				9.4				10.4

^(*) Carrying amount value excludes the related deferred financing costs.

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.

The carrying value of cash and cash equivalents, receivables, deposits and accounts payable (included in the condensed consolidated balance sheets) approximates their fair value.

The following table presents the fair value of financial instruments as of March 31, 2023:

		Level 1				Level 2				Level 3				Total
		(Dollars in millions)
Mizrahi Loan		$	—			$	—			$	71.4			$	71.4
Convertible Senior Notes			—				485.4				—				485.4
HSBC Loan			—				—				36.6				36.6
Hapoalim Loan			—				—				92.4				92.4
Hapoalim Loan 2023			—				—				100.0				100.0
Discount Loan			—				—				74.5				74.5
Finance liability - Dixie Valley			—				—				213.3				213.3
Olkaria III Loan - DFC			—				—				129.7				129.7
Olkaria III plant 4 Loan - DEG 2			—				—				26.9				26.9
Olkaria III plant 1 Loan - DEG 3			—				—				23.7				23.7
Platanares Loan - DFC			—				—				78.0				78.0
Amatitlan Loan			—				13.8				—				13.8
OFC 2 Senior Secured Notes			—				—				145.0				145.0
DAC 1 Senior Secured Notes			—				—				55.8				55.8
USG Prudential - NV			—				—				23.5				23.5
USG Prudential - ID			—				—				54.6				54.6
USG DOE			—				—				31.1				31.1
Senior Unsecured Bonds			—				—				232.1				232.1
Senior Unsecured Loan			—				—				156.1				156.1
Plumstriker			—				10.9				—				10.9
Other long-term debt			—				—				8.8				8.8
Deposits			13.9				—				—				13.9

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 Loan - DFC			—				—				134.2				134.2
Olkaria IV - DEG 2			—				—				26.5				26.5
Olkaria IV - 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 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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