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Debt
 12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
Debt
Note 7. Purchase of Convertible Note
In July 2021, the Company made an investment of $3.0 million into eNow, a developer of solar and battery power systems that is developing fully-electric transport refrigeration units (“eTRUs”) for commercial trailers. In exchange for the investment, eNow issued to the Company a convertible debenture (the “eNow Convertible Note”) in the original principal amount of $3.0 million, at the rate of 8% per annum and due on December 31, 2022. Pursuant to the terms of the eNow Convertible Note agreement, the Company had the right to acquire eNow at a pre-determined valuation and had a right of first refusal with respect to competing offers to acquire eNow. In addition, the Company entered into a Development and Supply Agreement (the “Development and Supply Agreement”) with eNow, whereby the Company was made the exclusive provider of high voltage batteries and associated power systems for use in eNow eTRUs.
In the fourth quarter of 2021, after reviewing the status of eNow’s financial condition, the Company determined that the investment in the eNow Convertible Note was fully impaired and recorded an impairment charge of $3.0 million. In addition, the Company notified eNow that it would not exercise its option to purchase eNow, which expired unexercised on December 31, 2021.

In the first quarter of 2022, due to the ongoing supply chain issues and concerns about the financial viability of eNow, the Company notified eNow of its intention to terminate the Development and Supply Agreement. The arrangement was terminated in the second quarter of 2022. As part of the termination of the arrangement, the Company agreed to the conversion of the eNow Convertible Note into common shares of eNow at a rate of $1.1658 per share. These shares have no book value as the investment in the eNow Convertible Note was fully impaired in the fourth quarter of 2021.
Note 10. Debt
Scheduled payments on long-term debt as of December 31, 2022 are as follows (in thousands):
SVB Credit AgreementSecond SVB Credit AgreementKeyBank Credit AgreementSecond KeyBank Credit AgreementTotal
For The Years Ending December 31,
2023$15,467 $5,261 $4,586 $— $25,314 
202416,650 5,423 4,622 — 26,695 
202517,455 5,585 4,238 — 27,278 
2026183,214 5,142 4,157 — 192,513 
2027— 48,903 46,578 — 95,481 
Thereafter— — — 165,887 165,887 
Total principal payments232,786 70,314 64,181 165,887 533,168 
Less: Current portion of long-term debt(15,467)(5,261)(4,586)— (25,314)
$217,319 $65,053 $59,595 $165,887 507,854 
Less: Unamortized fair value adjustment(33,413)
Long-term debt, net of current portion$474,441 
In connection with the acquisition of Legacy Spruce Power, the Company assumed certain long-term debt instruments as of September 9, 2022, the acquisition date of Legacy Spruce Power. In connection with accounting for the business combination, the Company adjusted the carrying value of this long-term debt to its fair value as of the acquisition date. This fair value adjustment resulted in a reduction of the carrying value of the debt by $35.2 million. This adjustment to fair
value will be amortized to interest expense over the life of the related debt instruments using the effective interest method. Amortization expense for the fair value adjustment for the year ended December 31, 2022 was $1.8 million.
SVB Credit Agreement

In April 2019, Spruce Power 1, LLC ("Spruce Power 1", formerly known as Kilowatt Systems, LLC), Volta Owner I LLC, and Volta MH Owner II LLC entered into a Credit Agreement with Silicon Valley Bank ("SVB Credit Agreement") as Co-Borrowers with a total principal balance of $194.1 million. In October 2019, Spruce Power amended and restated the credit facility (the “A&R SVB Credit Agreement”). The additional term loan amount under the A&R SVB Credit Agreement was $34.2 million. Under the A&R SVB Credit Agreement, the Co-Borrowers to the debt facility were Greenday Finance I, LLC, Volta MH Owner II, LLC, and Spruce Kismet, LLC (collectively, with Spruce Power 1, the "Co-Borrowers"). The A&R SVB Credit Agreement is collateralized with all of the assets and property of, and equity interest in, each Co-Borrower and certain related parties of the Company. The A&R SVB Credit Agreement consists of a term loan commitment and a Debt Service Reserve letter of credit commitment.

The term loan bears interest at the 3-month LIBOR plus the applicable margin. The applicable margin is 2.25% per annum for the first three years, 2.375% per annum from the third anniversary through the sixth anniversary and 2.5% per annum starting on the sixth anniversary. The interest rate on the A&R SVB Credit Agreement as of December 31, 2022 was 5.19%.

In March 2020, Spruce Power 1, along with the other Co-Borrowers, entered into an Omnibus Amendment and Consent (the "Omnibus") related to the A&R SVB Credit Agreement to provide for additional term loan commitments totaling $53.8 million and additional letter of credit commitments of $2.9 million.

The A&R SVB Credit Agreement provides that the lenders agree to issue letters of credit at any time during the letter of credit availability period, further defined in the A&R SVB Credit Agreement, provided that the purpose of the letter of credit is to satisfy the Debt Service Reserve (“DSR LC”). As of December 31, 2022, the DSR LC has a total capacity of $17.1 million and a total of $15.6 million in letters of credit outstanding with no amounts drawn. Amounts outstanding under the DSR LC bear interest of 2.25% per annum and unused amounts bear interest at 0.50% per annum.

The A&R SVB Credit Agreement requires Spruce Power 1 to be in compliance with various covenants including debt service coverage ratios. The refinancing also provides that the Co-Borrowers may not make distributions unless it has satisfied various provisions relating to debt service, events of default and financial ratios. As of December 31, 2022, Spruce Power 1 was in compliance with the covenants contained in the A&R SVB Credit Agreement.

The term loan component of the A&R SVB Credit Agreement requires quarterly principal payments, paid a month in arrears, beginning December 31, 2019 with the remaining balance due in a single payment in April 2026.

Second SVB Credit Agreement

In May 2020, Spruce Power 2, LLC ("Spruce Power 2", formerly known as Spruce Juniper, LLC) entered into a Credit Agreement with Silicon Valley Bank (“Second SVB Credit Agreement”). The Second SVB Credit Agreement consisted of a term loan of $60.0 million, which was used directly to fund the acquisition of RPV Holdco 1 and a letter of credit (the "Second DSR LC") for $3.1 million. The Second SVB Credit Agreement is collateralized with all of the assets and property of, and equity interest in, Spruce Power 2 and its subsidiaries.

The term loan bears interest at the 3-month LIBOR plus the applicable margin. The applicable margin is 2.30% per annum for the first three years, 2.425% per annum from the third anniversary through the sixth anniversary and 2.55% per annum starting on the sixth anniversary. The interest rate on the Second SVB Credit Agreement as of December 31, 2022 was 5.11%.

As of December 31, 2022, the Second DSR LC has a total capacity of $4.3 million and a total of 3.3 million in letters of credit outstanding with no amounts drawn. Amounts outstanding under the Second DSR LC bear interest of 2.30% per annum and unused amounts bear interest at 0.50% per annum.
The Second SVB Credit Agreement requires Spruce Power 2 to be in compliance with various covenants including debt service coverage ratios. As of December 31, 2022, Spruce Power 2 was in compliance with the covenants contained in the Second SVB Credit Agreement.

The Second SVB Credit Agreement requires quarterly principal payments and matures in May 2027.

KeyBank Credit Agreement

In November 2020, Spruce Power 3, LLC ("Spruce Power 3") entered into a Credit Agreement with KeyBank National Association (“KeyBank Credit Agreement”). The KeyBank Credit Agreement consisted of a term loan of $74.8 million, which was used directly to fund the acquisitions of residential solar energy systems owned by WPS Power Development, LLC and NRG Residential Solar Solutions LLC, and a letter of credit (the "KeyBank DSR LC") for $4.1 million. The KeyBank Credit Agreement is collateralized with all of the assets and property of, and equity interest in, Spruce Power 3 and its subsidiaries.

The term loan bears interest at the 3-month LIBOR plus the applicable margin. The applicable margin is 3.00% per annum for the first three years, 3.125% per annum from the third anniversary through the fifth anniversary and 3.25% per annum starting on the fifth anniversary. The interest rate on the KeyBank Credit Agreement as of December 31, 2022 was 5.81%.

As of December 31, 2022, the KeyBank DSR LC has a total capacity of $4.1 million and a total of $4.1 million in letters of credit outstanding with no amounts drawn. Amounts outstanding under the KeyBank DSR LC bear interest of 3.00% per annum.

The KeyBank Credit Agreement requires Spruce Power 3 to be in compliance with various covenants including debt service coverage ratios. As of December 31, 2022, Spruce Power 3 was in compliance with the covenants contained in the KeyBank Credit Agreement.

The KeyBank Credit Agreement requires quarterly principal payments and matures in November 2027.

Second KeyBank Credit Agreement

In April 2020, KWS Solar Term Parent 1 LLC, KWS Solar Term Parent 2 LLC, and KWS Solar Term Parent 3 LLC, as Co-Borrowers entered into a Credit Agreement with KeyBank National Association (“Second KeyBank Credit Agreement”) as the Administrative Agent and various funds managed by Sequoia Investment Management Co LTD and Vantage Infrastructure Holdings Ltd. as lenders, which consisted of a term loan of $124.0 million with the option to pay-in-kind interest expense up to $8.0 million (“PIK Loan Commitment”) until April 30, 2026, whereby the PIK Loan Commitment shall reduce by $1.5 million for each subsequent year until April 30, 2029.

In March 2021, Spruce Power amended and restated the credit facility (“A&R Second KeyBank Credit Agreement”) to include Spruce Power 3 HoldCo, LLC as an additional Co-Borrower and an additional term loan amount of $25.0 million. The A&R Second KeyBank Credit Agreement is collateralized with all of the assets and property of, and equity interest in, each Co-Borrower and certain subsidiaries of Spruce Power.

The term loan bears interest at 8.25% per annum and is collateralized with all of the assets and property of, and equity interest in, each Co-Borrower and certain subsidiaries of Spruce Power.

The A&R Second KeyBank Credit Agreement requires quarterly payments based on the Net Available Amount of all proceeds in cash and cash equivalents and matures in April 2030.

Vehicle financing agreements: The Company had entered into several vehicle financing agreements with various lenders with scheduled maturities ranging from 2020 to 2025. Interest rates on these agreements range from 2.95% to 10.00%. Each agreement is collateralized by the equipment purchased. With the exit of the Drivetrain business, the Company terminated all vehicle leases and no balance remained outstanding as of December 31, 2022.
New Markets Tax Credit Financing: In March 2015, the Company entered into a financing transaction with U.S. Bancorp Community Development Corporation ("U.S. Bank") under a qualified New Markets Tax Credit (“NMTC”) program related to the operation of the Company’s facility in Quincy, Illinois. The NMTC program was provided for in the Community Renewal Tax Relief Act of 2000 (the "Act") and was intended to encourage capital investment in qualified lower income communities. The Act permits taxpayers to claim credits against their Federal income taxes for up to 39% of qualified investments in the equity of community development entities ("CDEs"). CDEs are privately managed investment institutions that are certified to make qualified low-income community investments.
In connection with the financing, the Company made two loans totaling $10.5 million to federal ($6.5 million at 1.51%) and state ($4.0 million at 1.53%) NMTC investment funds (the "Investment Funds"). Simultaneously, U.S. Bank made an equity investment of $5.0 million to the Investment Funds and, by virtue of such contribution, was entitled to substantially all of the tax benefits derived from the NMTC. For compliance with the NMTC rules, principal payments on the loan would not begin until June 10, 2025 (the NMTC rules prohibit principal payments during the 7-year term of the NMTC arrangement). The maturity date on the loans would have been December 31, 2044.
The Investment Funds then contributed the loan proceeds to a CDE, which, in turn, loaned combined funds of $15.0 million, net of debt issuance costs of $0.5 million, to XL Hybrid Quincy, LLC, a wholly-owned subsidiary of the Company, at an interest rate of 1.15% per year with a maturity date of March 4, 2045. These loans are secured by the leasehold improvements and equipment at the facility in Quincy, Illinois. Repayment of the loans would have commenced March 10, 2025. The proceeds from the loans from the CDE were used to partially fund the build-out of the facility in Quincy, Illinois.
The transaction included a put/call feature whereby, at the end of the seven-year NMTC compliance period, the Company may have been obligated or entitled to repurchase U.S. Bank’s equity interest in the Investment Funds. U.S Bank exercised the put option in January 2022 the end of the recapture period. The value attributable to the put/call was nominal. The NMTC is subject to 100% recapture for a period of seven years as provided in the Internal Revenue Code. The Company is required to be in compliance with various regulations and contractual provisions that apply to the NMTC arrangement. Non-compliance with applicable requirements could have resulted in US Bank’s projected tax benefits not being realized and, therefore, could have required the Company to indemnify US Bank for any loss or recapture of NMTCs related to the financing. The Company has determined that no credit recapture was required in connection with this financing arrangement.
The Company determined that the financing arrangement with the Investment Fund and CDEs contained a VIE and that it was the primary beneficiary of the VIE and consolidated the Investment Fund. The VIE was terminated upon the exercise of the put option.
In January 2022, the NMTC financing arrangement was terminated and settled, with the note receivable of $15.0 million (owed by XL Hybrid Quincy LLC) being transferred to XL Hybrids LL LLC in payment of the $10.5 million note receivable. Both notes were retired resulting in the recognition of a gain on forgiveness of debt, net of unamortized debt issuance costs, of $4.5 million.
During the years ended December 31, 2022 and 2021, the Company amortized debt issuance costs related to the NMTC of approximately $20,000 and $72,000, respectively.