Note 6. Commitments and Contingencies

Land Use Commitments

The Partnership is a party to various agreements that provide for payments to landowners for the right to use the land upon which projects under PPAs are located. Total lease and easement expense was $0.1 million and $1.1 million in the three and eight months ended August 31, 2015, respectively, and $0.5 million and $1.0 million in the three and nine months ended September 28, 2014, respectively, and is classified as SG&A expenses when the projects are in the construction phase and as costs of operations when the projects have commenced operations in the Partnership’s accompanying condensed consolidated statements of operations.

The total minimum lease and easement commitments at August 31, 2015 under these land use agreements are as follows:

(in thousands)

2015 (remaining

three months)

2016

2017

2018

2019

Thereafter

Total

Land use payments

—

1,096

1,131

1,167

1,524

46,379

51,297

Product Warranties

The following table summarizes accrued warranty activity for the three and eight months ended August 31, 2015 and the three and nine months ended September 28, 2014:

	Three Months Ended					Eight Months Ended			Nine Months Ended
	August 31,			September 28,		August 31,			September 28,
(in thousands)	2015			2014		2015			2014
Balance at the beginning of the period	$	817		$	817	$	818		$	817
Settlements and adjustments during the period		(817	)		—		(818	)		—
Balance at the end of the period	$	—		$	817	$	—		$	817

The product warranties included in the Predecessor’s combined balance sheets represent the estimate of the expected costs that could result from these warranties provided in connection with the sales-type leases. Due to the pass-through nature of the warranty from SunPower as the original equipment manufacturer, warranty reserves on sale-type leases that had been allocated to the Predecessor on a carve-out basis are no longer reflected on the Partnership’s financial statements as they are an obligation of SunPower.

Solar Energy System Performance Warranty

Lease agreements require the Partnership to undertake a system output performance warranty. The Partnership has recorded in “Accounts payable and other current liabilities” amounts related to these system output performance warranties totaling $0.3 million and $0.5 million as of August 31, 2015 and December 28, 2014, respectively. The Partnership has also recorded in “Other current assets” amounts of $0.3 million and zero as of August 31, 2015 and December 28, 2014, respectively, relating to anticipated performance warranty reimbursements from the O&M provider.

The following table summarizes accrued solar energy systems warranty activity for the three and eight months ended August 31, 2015 and three and nine months ended September 28, 2014:

	Three Months Ended						Eight Months Ended			Nine Months Ended
	August 31,			September 28,			August 31,			September 28,
(in thousands)	2015			2014			2015			2014
Balance at the beginning of the period	$	420		$	39		$	525		$	—
Settlements and adjustments during the period		(145	)		(10	)		(250	)		29
Balance at the end of the period	$	275		$	29		$	275		$	29

Asset Retirement Obligations

The Partnership’s AROs are based on estimated third-party costs associated with the decommissioning of the applicable project assets. These costs may increase or decrease in the future as a result of changes in regulations, engineering designs and technology, permit modifications, inflation, or other factors. Decommissioning activities generally are made over a period of time commencing at the end of the system’s life.

The following table summarizes ARO activity for the three and eight months ended August 31, 2015 and the three and nine months ended September 28, 2014, respectively:

	Three Months Ended				Eight Months Ended		Nine Months Ended
	August 31,		September 28,		August 31,		September 28,
(in thousands)	2015		2014		2015		2014
Balance at the beginning of the period	$	3,868	$	—	$	—	$	—
ARO assumed in acquisition		2,130		—		2,130		—
Liabilities incurred during period		2,452		—		6,320		—
Balance at the end of the period	$	8,450	$	—	$	8,450	$	—

Legal Proceedings

In the normal course of business, the Partnership may be notified of possible claims or assessments. The Partnership will record a provision for these claims when it is both probable that a liability has been incurred and the amount of the loss, or a range of the potential loss, can be reasonably estimated. These provisions are reviewed regularly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information or events pertaining to a particular case.

Although the Partnership may, from time to time, be involved in litigation and claims arising out of its operations in the ordinary course of business, the Partnership is not a party to any litigation or governmental or other proceeding that the Partnership believes will have a material adverse impact on its financial position, results of operations, or liquidity.

Environmental Contingencies

The Partnership reviews its obligations as they relate to compliance with environmental laws, including site restoration and remediation. During the three and eight months ended August 31, 2015 and the three and nine months ended September 28, 2014, there were no known environmental contingencies that required the Partnership to recognize a liability.