12. VIE Arrangements

The Company has entered into various arrangements with investors to facilitate funding and monetization of solar energy systems. These arrangements include those described in this Note 12, VIE Arrangements, as well as those described in Note 13, Lease Pass-Through Financing Obligation, Note 14, Sale-Leaseback Arrangements, and Note 15, Sale-Leaseback Financing Obligation.

Fund Arrangements

Wholly owned subsidiaries of the Company and fund investors formed and contributed cash or assets to various solar financing funds and entered into related agreements. Additionally, the Company acquired the assets of a fund through a business combination in September 2013 and assumed the related contractual arrangements. The following table shows the number of funds by investor classification, carrying value of the solar energy systems in the funds, total investor contributions received and undrawn investor contributions as of December 31, 2015 (in thousands, except for number of funds, and unaudited):

			Total				Carrying
			Investor		Undrawn		Value of
Investor	Number		Contributions		Investor		Solar Energy
Classification	of Funds		Received		Contributions		Systems
Financial institutions		22	$	1,492,790	$	146,662	$	1,752,262
Corporations		6		753,386		70,996		781,062
Utilities		4		255,869		58,051		242,826
Other investors		1		1,788		—		3,213
Total		33	$	2,503,833	$	275,709	$	2,779,363

The Company has determined that the funds are VIEs and it is the primary beneficiary of these VIEs by reference to the power and benefits criterion under ASC 810, Consolidation. The Company has considered the provisions within the contractual agreements, which grant it power to manage and make decisions that affect the operation of these VIEs, including determining the solar energy systems and associated customer contracts to be sold or contributed to these VIEs and the redeployment of solar energy systems. The Company considers that the rights granted to the fund investors under the contractual agreements are more protective in nature rather than participating.

As the primary beneficiary of these VIEs, the Company consolidates in its financial statements the financial position, results of operations and cash flows of these VIEs, and all intercompany balances and transactions between the Company and these VIEs are eliminated in the consolidated financial statements.

Cash distributions of income and other receipts by a fund, net of agreed upon expenses, estimated expenses, tax benefits and detriments of income and loss and tax credits, are allocated to the fund investor and the Company’s subsidiary as specified in contractual agreements.

Generally, the Company’s subsidiary has the option to acquire the fund investor’s interest in the fund for an amount based on the market value of the fund or the formula specified in the contractual agreements.

On March 31, 2014, the Company acquired a fund investor’s interest in one fund for total consideration of $0.5 million.

As of December 31, 2015 and 2014, the Company was contractually required to make payments to a fund investor in order to ensure the investor is projected to achieve a specified minimum return annually. The amounts of any potential future payments under this guarantee are dependent on the amounts and timing of future distributions to the investor from the fund, the tax benefits that accrue to the investor from the fund’s activities and the amount and timing of the Company’s purchase of the investor’s interest in the fund or the amount and timing of the distributions to the investor upon liquidation of the fund. Due to uncertainties associated with estimating the amount and timing of distributions to the investor and the possibility and timing of the liquidation of the fund, the Company is unable to determine the potential maximum future payments that it would have to make under this guarantee.

Upon the sale or liquidation of a fund, distributions would occur in the order and priority specified in the contractual agreements.

Pursuant to management services, maintenance and warranty arrangements, the Company has been contracted to provide services to the funds, such as operations and maintenance support, accounting, lease servicing and performance reporting. In some instances, the Company has guaranteed payments to the investors as specified in the contractual agreements. A fund’s creditors have no recourse to the general credit of the Company or to that of other funds. None of the assets of the funds had been pledged as collateral for their obligations.

The Company presents the solar energy systems in the VIEs under solar energy systems, leased and to be leased – net in the consolidated balance sheets. The aggregate carrying values of the VIEs’ assets and liabilities, after elimination of intercompany transactions and balances, in the consolidated balance sheets were as follows (in thousands):

	December 31, 2015		December 31, 2014
Assets
Current assets:
Cash and cash equivalents	$	32,105	$	26,419
Restricted cash		44		106
Accounts receivable - net		10,116		6,769
Rebates receivable		6,220		25,397
Prepaid expenses and other current assets		1,740		615
Total current assets		50,225		59,306
Solar energy systems, leased and to be leased - net		2,779,363		1,581,459
Other assets		11,204		4,080
Total assets	$	2,840,792	$	1,644,845
Liabilities
Current liabilities:
Distributions payable to noncontrolling interests and redeemable noncontrolling interests	$	26,769	$	8,552
Current portion of deferred U.S. Treasury grant income		6,506		6,502
Accrued and other current liabilities		598		336
Customer deposits		2,928		6,405
Current portion of deferred revenue		24,794		16,746
Total current liabilities		61,595		38,541
Deferred revenue, net of current portion		308,798		256,200
Deferred U.S. Treasury grant income, net of current portion		164,191		170,548
Other liabilities and deferred credits		28,460		10,825
Total liabilities	$	563,044	$	476,114

The Company is contractually obligated to make certain fund investors whole for losses that they may suffer in certain limited circumstances resulting from the disallowance or recapture of ITCs or U.S. Treasury grants, including in the event that the U.S. Treasury Department awards ITCs or U.S. Treasury grants for the solar energy systems in the funds that are less than the amounts initially anticipated. The Company accounts for distributions due to the fund investors arising from a reduction of anticipated ITCs or U.S. Treasury grants received under distributions payable to noncontrolling interests and redeemable noncontrolling interests in the consolidated balance sheets. As of December 31, 2015, the Company had accrued $2.7 million for this obligation.

Silevo’s Joint Venture in China

The Company, through its subsidiary, Silevo, operates a joint venture, Silevo China Company Limited, or the JV, with three other Chinese legal entities, or the JV Partners, to develop, manufacture and market high performance solar cells. As of December 31, 2015, Silevo owned approximately 65.7% of the outstanding capital of the JV, and the JV Partners owned the remaining interests. Silevo has a Manufacturing Services and Technology Licensing Agreement with the JV to acquire solar cells on a “cost-plus” basis. The JV is required to obtain Silevo’s consent to sell products to any third-party. The agreement had an initial term of one year and automatically renews for successive one-year periods.

The Company has determined that the JV is a VIE and that Silevo is the primary beneficiary of the JV since the variable interests held by Silevo empower it to direct the activities that most significantly impact the joint venture’s economic performance. In reaching this determination, the Company considered the significant control exercised by Silevo over the JV’s board of directors, management and daily operations.

Silevo had the right to acquire the JV Partners’ interests in the JV at any time before August 2016. The JV Partners had the right to sell all or part of their interests in the JV to Silevo if the JV did not meet certain conditions set out in the JV contract, which included meeting set production targets within a specified time frame. The JV did not meet some of those targets, and as such, the option became exercisable. The amount that the Company would pay the JV Partners upon the exercise of either option is equal to the JV Partners’ accumulated capital contributions plus interest at specified rates. As of December 31, 2015, this amount was $13.8 million. During the quarter ended June 30, 2015, the JV Partners informed the Company of their intention to exercise their put option. The Company has initiated the process of settling the amounts payable to the JV partners and transferring the JV Partners’ shares to the Company, and expects to finalize the settlement process and transfer of the shares prior to March 31, 2016. The JV is not allowed to make a profit distribution to investors prior to the full exit of the JV Partners from their investments in the JV.

Since Silevo has been determined to be the primary beneficiary of the JV, the JV’s assets, liabilities and results of operations are included in the Company’s consolidated financial statements. The JV Partners’ interests in the JV are reflected in redeemable noncontrolling interests on the consolidated balance sheets. The JV Partners’ interests in the JV is recorded at fair value, which was equal to the value of the JV Partners’ put option to sell their interests in the JV to Silevo (see above).

The aggregate carrying values of the JV’s assets and liabilities in the consolidated balance sheets were as follows (in thousands):

	December 31, 2015		December 31, 2014
Assets
Current assets:
Cash and cash equivalents	$	1,432	$	1,401
Restricted cash		478		—
Accounts receivable, net		151		—
Inventories		1,000		614
Prepaid expenses and other current assets		973		1,224
Total current assets		4,034		3,239
Property, plant and equipment - net		21,960		24,286
Other assets		96		—
Total assets	$	26,090	$	27,525
Liabilities
Current liabilities:
Accounts payable		1,954	$	2,748
Accrued and other current liabilities		1,226		633
Current portion of long-term debt		—		9,134
Total current liabilities		3,180		12,515
Total liabilities	$	3,180	$	12,515