Sale-Leaseback Financing Obligation

12 Months Ended

Dec. 31, 2015

Sale Leaseback Transaction [Line Items]

14. Sale-Leaseback Arrangements

In 2010, the Company executed a sale-leaseback arrangement with an existing investor, under which a wholly owned subsidiary of the Company entered into a 15-year master leaseback arrangement. The assets sold to the investor were valued at $25.2 million. The Company’s subsidiary leased the solar energy systems to end-user customers. The obligations of the Company’s subsidiary to the investor are guaranteed by the Company and supported by a $0.25 million restricted cash escrow. Under this arrangement, the Company’s subsidiary is responsible for services such as warranty support, accounting, lease servicing and performance reporting.

As of December 31, 2015 and 2014, the Company had contributed assets with a cost of $44.6 million to its wholly owned subsidiary that in turn sold the assets to a new investor and then executed a 15-year master leaseback agreement with the investor. Under this arrangement, the tax benefits from ITCs or Treasury grants in lieu of tax credits inure to the investor as the owner of the assets.

The Company has committed to make investors that have executed sale-leaseback arrangements with the Company whole for any reductions in the tax credit or U.S. Treasury awards resulting from changes in the tax basis submitted. The Company accrues any such payments due to these investors. As of December 31, 2015, no such amounts were due to these investors.

The Company has accounted for these sale-leaseback arrangements in accordance with the Company’s accounting policy as described in Note 2, Summary of Significant Accounting Policies and Procedures.

Sale-Leaseback Financing Obligation [Member]

Sale Leaseback Transaction [Line Items]

Sale-Leaseback Arrangements

15. Sale-Leaseback Financing Obligation

In November 2009, the Company entered into an arrangement with an investor to finance the development, construction and installation of a ground mounted solar energy system that was leased to a customer. The Company also entered into an agreement to sell the system to the investor for a cash consideration of $27.2 million, of which $23.7 million has been received as of December 31, 2015 and the balance of $3.5 million is receivable at the end of the lease period and accrues interest at an annual rate of 4.37%. Concurrent with the sale, a subsidiary of the Company entered into an agreement with the investor to lease back the solar energy system from the investor with lease payments being made on a quarterly basis. The Company’s subsidiary has the option to purchase the system at the end of the lease term of 10 years for a price which is the greater of the fair market value or a predetermined agreed upon value. Additionally, the investor has the option to put its interest in the solar energy system to the Company within two years following the expiry of six years after placement in service of the system, for the amount that is the greater of the fair value of the system or the predetermined agreed upon value. As a result of these put and call options, the Company has concluded that it has a continuing involvement with the solar energy system.

The Company has determined that the ground mounted solar energy system qualifies as integral equipment and therefore as a real estate transaction under ASC 360-20, Real Estate Sales, and has been accounted for as a financing. Under the financing method, the receipts from the investor are reflected as a sale-leaseback financing obligation on the consolidated balance sheets, and the Company retains the solar energy system asset on the consolidated balance sheets within solar energy systems and depreciates the solar energy system over its estimated useful life of 30 years. The Company also continues to report all of the results of the operations of the system, with the revenue and expenses from the system operations being presented on the consolidated statements of operations on a “gross” basis. As of December 31, 2015, the balance of the sale-leaseback financing obligation outstanding was $13.9 million, of which $0.5 million has been classified as current and the balance of $13.4 million has been classified as noncurrent. As of December 31, 2014, the balance of the sale-leaseback financing obligation outstanding was $14.3 million, of which $0.4 million has been classified as current and the balance of $13.9 million has been classified as noncurrent.

As of December 31, 2015, future minimum annual rentals to be received from the customer for each of the next five years and thereafter are as follows (in thousands):

2016		485
2017		494
2018		504
2019		514
2020		524
Thereafter		2,204
Total	$	4,725

The amounts in the table above are also included as part of the noncancelable operating lease payments from customers disclosed in Note 5, Noncancelable Operating Lease Payments Receivable.

As of December 31, 2015, future minimum annual payments to be paid to the investor under the financing arrangement for each of the next five years and thereafter are as follows (in thousands):

2016		1,264
2017		1,270
2018		1,277
2019		1,284
2020		—
Thereafter		—
Total	$	5,095

The obligations of the Company’s subsidiary to the investor are guaranteed by the Company and supported by a $0.25 million restricted cash escrow.