Description of Business

The Partnership

8point3 Energy Partners LP (together with its subsidiaries, the “Partnership”) is a limited partnership formed on March 3, 2015 under a master formation agreement by SunPower Corporation (“SunPower”) and First Solar, Inc. (“First Solar” and, together with SunPower, the “Sponsors”) to own, operate and acquire solar energy generation systems. The Partnership’s IPO was completed on June 24, 2015. 8point3 General Partner, LLC (the “General Partner”), the Partnership’s general partner, is a wholly owned subsidiary of 8point3 Holding Company, LLC, an entity owned by SunPower and First Solar (“Holdings”). As of November 30, 2017, 8point3 Energy Partners LP owned a controlling non-economic managing member interest in 8point3 Operating Company, LLC (“OpCo”) and a 35.5% limited liability company interest in OpCo and the Sponsors collectively owned a noncontrolling 64.5% limited liability company interest in OpCo.

On February 5, 2018, the Partnership, its general partner, OpCo and Holdings entered into the Merger Agreement with certain affiliates of Capital Dynamics. Please read “—Note 17—Subsequent Events” for further details.

The following table provides an overview of the assets that comprise the Portfolio as of November 30, 2017:

Project

Location

Commercial Operation Date(1)

MW(ac) (2)

Counterparty

Remaining Term of Offtake Agreement (in years)(3)

Utility

Maryland Solar

Maryland

February 2014

FirstEnergy
Solutions

15.3

Solar Gen 2

California

November 2014

150

San Diego Gas &
Electric

22.0

Lost Hills Blackwell

California

April 2015

City of
Roseville/Pacific
Gas and Electric

26.1

(4)

North Star

California

June 2015

Pacific Gas and
Electric

17.6

RPU

California

September 2015

City of Riverside

22.8

Quinto

California

November 2015

108

Southern California
Edison

18.0

Hooper

Colorado

December 2015

Public Service
Company of Colorado

18.1

Kingbird

California

April 2016

Southern California
Public Power Authority(5)

18.4

Henrietta

California

October 2016

102

Pacific Gas and
Electric

18.8

Stateline

California

August 2016

300

Southern California
Edison

18.8

Commercial & Industrial

UC Davis

California

September 2015

University of
California

17.8

Macy's California

California

October 2015

Macy's Corporate
Services

17.9

Macy’s Maryland

Maryland

December 2016

Macy's Corporate
Services

19.1

Kern(6)

California

September 2017

Kern High School District

19.2

(7)

Residential Portfolio

U.S. – Various

June 2014

Approx. 5,800
homeowners(8)

14.8

(9)

Total

946

(1)

For the Macy’s California Project, the Macy’s Maryland Project and the Kern Project, COD represents the first date on which all of the solar generation systems within each of the Macy’s California Project, the Macy’s Maryland Project and the Kern Project, respectively, achieved COD. For the Residential Portfolio, COD represents the first date on which all of the residential systems within the Residential Portfolio achieved COD.


(2)	The MW for the projects in which the Partnership owns less than a 100% interest or in which the Partnership is the lessor under any sale-leaseback financing are shown on a gross basis.


(3)	Remaining term of offtake agreement is measured from November 30, 2017.


(4)	Remaining term comprised of 1.1 years on a PPA with the City of Roseville, California, followed by a 25-year PPA with PG&E starting in 2019.


(5)	The Kingbird Project is subject to two separate PPAs with member cities of the Southern California Public Power Authority.

(6)

OpCo’s acquisition of the Kern Project was effectuated in phases, with the closing of the first phase, reflecting a nameplate capacity of approximately 3 MW, having occurred on January 26, 2016, the closing of the second phase, reflecting a nameplate capacity of approximately 5 MW, having occurred on September 9, 2016, the closing of the third phase, reflecting a nameplate capacity of approximately 5 MW, having occurred on November 30, 2016, the closing of the fourth phase, reflecting a nameplate capacity of approximately 3 MW, having closed on February 24, 2017, and the closing of the fifth phase, reflecting a nameplate capacity of approximately 2 MW, having closed on June 9, 2017.


(7)	Remaining term is the weighted average duration of the five phases of the Kern Project.


(8)	Comprised of the approximately 5,800 solar installations located at homes in Arizona, California, Colorado, Hawaii, Massachusetts, New Jersey, New York, Pennsylvania and Vermont, that are held by the Residential Portfolio Project Entity and have an aggregate nameplate capacity of 38 MW.


(9)	Remaining term is the weighted average duration of all of the residential leases, in each case measured from November 30, 2017.

Basis of Presentation and Preparation

The direct and indirect contributions of the IPO Project Entities by the Sponsors to OpCo in connection with the IPO resulted in a business combination for accounting purposes with the IPO SunPower Project Entities being considered the acquirer of the interests contributed by First Solar in the IPO First Solar Project Entities. Therefore, the IPO SunPower Project Entities constitute the “Predecessor.” As used herein, the term “IPO Project Entities” refers to:


•	the IPO SunPower Project Entities, including:


•	the Macy’s California Project Entities, which hold the Macy’s California Project;


•	the Quinto Project Entity, which holds the Quinto Project;


•	the RPU Project Entity, which holds the RPU Project;


•	the UC Davis Project Entity, which holds the UC Davis Project; and


•	the Residential Portfolio Project Entity, which holds the Residential Portfolio Project; and


•	the IPO First Solar Project Entities, including:


•	the Lost Hills Blackwell Project, which holds the Lost Hills Project and the Blackwell Project;


•	the Maryland Solar Project Entity, which holds the Maryland Solar Project;


•	the North Star Project Entity, which holds the North Star Project; and


•	the Solar Gen 2 Project Entity, which holds the Solar Gen 2 Project.

In connection with the IPO, SunPower contributed a nearly 100% interest in each of the IPO SunPower Project Entities to OpCo, subject, in the case of the Quinto Project, the RPU Project, the UC Davis Project and the Macy’s California Project, to the tax equity investor’s right to a varying portion of the cash flows from the projects. In connection with the IPO, First Solar directly contributed to OpCo a 100% interest in the Maryland Solar Project Entity and indirectly contributed to OpCo a 49% economic interest in each of the Lost Hills Blackwell Project, the North Star Project and the Solar Gen 2 Project.

Since November 30, 2015, the partnership completed six acquisitions from its Sponsors, four from SunPower and two from First Solar.

Four of the acquisitions are treated as business combinations:


•	the Kern Project Entity, which holds the Kern Project;


•	the Kingbird Project Entities, which holds the Kingbird Project;


•	the Hooper Project Entity, which holds the Hooper Project; and


•	the Macy’s Maryland Project Entity, which holds the Macy’s Maryland Project.

Two of the acquisitions are accounted for as equity method investments:


•	the Henrietta Project Entity, which holds the Henrietta Project. OpCo owns a 49% economic interest in the Henrietta Project Entity; and


•	the Stateline Project Entity, which holds the Stateline Project. OpCo owns a 34% economic interest in the Stateline Project Entity.

Principles of Consolidation

The consolidated financial statements are prepared in accordance with U.S. GAAP, and include the accounts of the Partnership, and all of its subsidiaries, as appropriate under consolidation accounting guidelines. Investments in unconsolidated affiliates in which the Partnership has less than a controlling interest are accounted for using the equity method of accounting. Inter-entity accounts and transactions have been eliminated in consolidation. In the opinion of management, the accompanying consolidated financial statements include all adjustments (consisting of normal, recurring items) necessary to state fairly its financial position, results of operations and cash flows for the periods presented.

For all periods prior to the IPO, the accompanying consolidated financial statements and the notes thereto represent the results of the combined carve-out statements of the Predecessor and were prepared using SunPower’s historical basis in assets and liabilities. For all periods subsequent to the IPO, the accompanying consolidated financial statements and the notes thereto represent the results of 8point3 Energy Partners LP which consolidates OpCo through its controlling interest.

Throughout the periods presented in the Predecessor’s combined carve-out financial statements, the Predecessor did not exist as a separate, legally constituted entity. The Predecessor’s combined carve-out financial statements were therefore derived from SunPower’s consolidated financial statements to represent the financial position and performance of the Predecessor on a stand-alone basis during those periods in accordance with U.S. GAAP. The Predecessor’s management made allocations to approximate operating activities and cash flows as well as allocations of certain corporate expenses and believes the assumptions and methodology underlying the allocations are reasonable.

Out-of-Period Adjustments

During the fourth quarter of 2017, the Partnership corrected certain errors related to prior period income taxes that understated net income by $1.7 million, understated income attributable to noncontrolling interests and redeemable noncontrolling interests by $2.8 million and overstated net income attributable to 8Point3 Energy Partners LP Class A shares by $1.1 million. The Partnership determined that the errors and correction did not have a material effect on current or prior periods.

Fiscal Years

On June 24, 2015, in connection with the closing of the IPO, the Partnership amended its partnership agreement to include a change in the fiscal year to November 30. The Predecessor had a 52-to-53 week fiscal year that ended on the Sunday closest to December 31. The accompanying consolidated financial statements cover the period from December 1, 2016 through November 30, 2017 (“fiscal 2017”), representing the entire twelve-month period of the Partnership’s 2017 fiscal year. The prior year’s comparable periods cover the period from December 1, 2015 to November 30, 2016 (“fiscal 2016”), representing the entire twelve-month period of the Partnership’s 2016 fiscal year, and the period from December 29, 2014 through November 30, 2015 (“fiscal 2015”), representing the eleven-month period of the Partnership’s adopted 2015 fiscal year.

As a result of the change in the Partnership’s fiscal year end, the annual and quarterly periods of its newly adopted fiscal year do not coincide with the historical quarterly periods previously reported by its Predecessor. Financial information for the period from December 1, 2014 to November 30, 2015 has not been included in this Form 10-K for the following reasons: (i) the eleven months ended November 30, 2015 provides as meaningful a comparison to the years ended November 30, 2017 and November 30, 2016 as would the year ended November 30, 2015; (ii) the Partnership believes that there are no significant factors, seasonal or other, that would impact the comparability of information if the results for the year ended November 30, 2015 was presented in lieu of results for the eleven months ended November 30, 2015; and (iii) it was not practicable or cost justified to prepare this information.

Management Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates in these consolidated financial statements include the assumptions and methodology underlying the allocations of expenses incurred on the Predecessor’s behalf that were recorded in the Predecessor’s carve-out financial statements, as well as: allowances for doubtful accounts related to accounts receivable and financing receivables; estimates of future cash flows and economic useful lives of property and equipment; the fair value and residual value of leased solar power systems; fair value of financial instruments; fair value of acquired assets and liabilities; valuation of certain accrued liabilities such as accrued system output performance warranty and AROs; and income taxes including the related valuation allowance. Actual results could materially differ from those estimates.

Costs Related to IPO

Direct costs related to the IPO that were incurred by the Predecessor were deferred and capitalized as part of prepaid expense and other assets on the consolidated balance sheets prior to June 24, 2015. These costs include legal and accounting fees as well as other costs directly related to the IPO. These deferred costs have subsequently been accounted for as a reduction in the proceeds of the IPO and a reduction in the balance under the Partnership’s term loan entered into in connection with the IPO as capitalized financing costs. Other formation and offering related fees that were not directly related to the IPO were expensed as incurred in the Predecessor’s financial statements. For fiscal 2015, $2.5 million costs has been capitalized and $1.6 million costs has been expensed as part of SG&A expenses.