2.	Related Party Transactions

SDTS is party to several lease agreements with Sharyland, through which the Company leases its T&D assets to Sharyland. Under the leases the Company has agreed to fund capital expenditures for footprint projects. The leases define “footprint projects” to be transmission or distribution projects primarily situated within the Company’s distribution service territory, or that physically hang from the Company’s existing transmission assets.

The Company earned lease revenues under these agreements of $151.2 million, $134.4 million and $73.2 million from Sharyland during the years ended December 31, 2015, 2014 and 2013, respectively. In connection with the Company’s leases with Sharyland, the Company recorded a deferred rent liability of $11.5 million and $5.0 million as of December 31, 2015 and 2014, respectively, which is included in accounts payable and accrued liabilities on the Consolidated Balance Sheets.

In addition to rent payments that Sharyland makes to the Company, the Company and Sharyland also make payments to each other under the leases that primarily consist of payments to reimburse Sharyland for the costs of gross plant and equipment added to the Company’s T&D assets. For the years ended December 31, 2015 and 2014, the net amount of the payments the Company made to Sharyland was $245.1 million and $189.3 million, respectively.

As of December 31, 2015 and 2014, accounts payable and accrued liabilities on the Consolidated Balance Sheets included $9.2 million and $16.1 million, respectively, related to amounts owed to Sharyland. As of December 31, 2015 and 2014, amounts due from affiliates on the Consolidated Balance Sheets included $31.2 million and $27.8 million, respectively, related to amounts owed by Sharyland associated with the Company’s leases.

The Company’s management fee paid to Hunt Manager for the years ended December 31, 2015 and 2014 was $12.3 million and $10.0 million, respectively. As of December 31, 2015 and 2014, there were no prepaid or accrued amounts associated with management fees on the Consolidated Balance Sheets. Additionally, during the years ended December 31, 2015 and 2014, the Company paid Hunt Manager $0.5 million and $0.2 million, respectively, for reimbursement of annual software license and maintenance fees and other expenses in accordance with the Company’s management agreement.

The Company’s current management agreement with Hunt Manager, which was effective February 4, 2015, provided for an annual base fee, or management fee, of $10.0 million through April 1, 2015. Effective as of April 1, 2015, the annual base fee was adjusted to $13.1 million annually through March 31, 2016. Effective as of April 1, 2016, the annual base fee will be adjusted to $14.0 million annually through March 31, 2017. The base fee for each twelve month period beginning April 1 thereafter will equal 1.50% of the Company’s total equity as of December 31 of the immediately preceding year, subject to a $30.0 million cap. The term of the management agreement expires December 31, 2019, and will automatically renew for successive five year terms unless a majority of the Company’s independent directors decides to terminate the agreement.

In connection with the organization of InfraREIT, L.L.C. in November 2010, the Operating Partnership agreed to issue deemed capital credits and Class A OP Units to Hunt-InfraREIT with respect to certain development projects. The amount of the capital account credits the Operating Partnership was required to issue equaled 5% of the Company’s capital expenditures on these projects, including AFUDC. The number of Class A OP Units the Operating Partnership was required to issue equaled the amount of the capital account credit divided by $10.65. During the year ended December 31, 2014, the Operating Partnership issued approximately 104,763 Class A OP Units, and on January 1, 2015, the Operating Partnership issued an additional 17,600 Class A OP Units to Hunt-InfraREIT. Following the consummation of the IPO, the Operating Partnership no longer has the obligation to issue deemed capital credits and related equity to Hunt-InfraREIT. The Company recorded these capital account credits as asset acquisition costs included as part of the capital project in the CWIP balance.

InfraREIT LP also issued deemed capital and equity in connection with its CREZ Project. For further information, see Note 11, Contingent Consideration.

Prior to the IPO, the Company and one of its stockholders were parties to a secondee agreement under which employees of the stockholder provided services to the Company for a secondment fee. The Company incurred costs associated with secondment fees of less than $0.1 million and $0.2 million during the years ended December 31, 2014 and 2013, respectively. These fees are included in general and administrative expense in the Consolidated Statements of Operations. The Company did not incur any fees associated with this agreement in 2015. As of December 31, 2015 and 2014, there were no amounts owed to the member included in accounts payable and accrued liabilities on the Consolidated Balance Sheets related to the secondee agreement. As a result of the IPO, the secondee agreement terminated.

In connection with the IPO, Reorganization and related transactions, the Company incurred an aggregate of $5.0 million of legal fees, a portion of which was paid to reimburse HCI and its subsidiaries (collectively, Hunt), the founding investors and independent directors for legal expenses they incurred in connection with such transactions. This legal expense reimbursement relates to the fees and expenses of outside counsel incurred by those parties and was negotiated separately from the reorganization advisory fee that the Company paid to Hunt-InfraREIT in connection with the reorganization advisory services provided in connection with the IPO. For further information on additional related party transactions the Company entered into as a result of the Reorganization, see the caption Initial Public Offering and Reorganization included in Note 1, Description of Business and Summary of Significant Accounting Policies.

On November 20, 2014, InfraREIT, Inc. borrowed $1.0 million from HCI pursuant to a promissory note. The note accrued interest at 2.5% per year and was due on November 1, 2015. This note and accrued interest were repaid in February 2015 with proceeds from the IPO for a total of $1.0 million.

Effective January 15, 2015, the Company sold all the assets related to the Cross Valley transmission line (Cross Valley Project) to a newly formed development company owned by Hunt and certain of the Company’s founding investors for cash of $34.2 million. Also effective January 15, 2015, the Company sold all the assets related to the Golden Spread Electric Coop (GSEC) interconnection (Golden Spread Project) to Hunt for cash of $7.0 million. For further information, see Note 3, Assets Held for Sale. These projects constitute identified projects being developed by Hunt and its affiliates under the Company’s development agreement with Hunt Transmission Services, L.L.C., also known as Hunt Developer.

In November 2015, the Conflicts Committee of the Company’s board of directors received an offer for the purchase of the Golden Spread Project. Negotiations are in progress regarding such purchase.