XML 95 R22.htm IDEA: XBRL DOCUMENT

LEASES

3 Months Ended

Dec. 31, 2019

12. LEASES

Lessee Accounting

The Company determines if an arrangement is a lease at inception based on whether the Company has the right to control the use of an identified asset, the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset and accounts for leases in accordance with ASC 842, Leases. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term, including payments at commencement that depend on an index or rate. Most leases in which the Company is the lessee do not have a readily determinable implicit rate, so an incremental borrowing rate, based on the information available at the lease commencement date, is utilized to determine the present value of lease payments. When a secured borrowing rate is not readily available, unsecured borrowing rates are adjusted for the effects of collateral to determine the incremental borrowing rate. The Company uses the implicit rate for agreements in which it is a lessor. The Company has not entered into any material agreements in which it is a lessor. Lease expense and lease income are recognized on a straight-line basis over the lease term for operating leases. For more information on the adoption of ASC 842, Leases, see Note 2. Summary of Significant Accounting Policies.

The Company’s lease agreements primarily consist of commercial solar land leases, storage and capacity leases, equipment and real property, including land and office facilities, office equipment and the sale-leaseback of its natural gas meters.

Certain leases contain escalation provisions for inflation metrics. The storage leases contain a variable payment component that relates to the change in the inflation metrics that are not known past the current payment period. These variable components of these lease payments are excluded from the lease payments that are used to determine the related right-of-use lease asset and liability. These variable portion of these leases are recognized as leasing expenses when they are incurred. The capacity lease payments are fully variable and based on the amount of gas stored in the storage caverns.

Generally, the Company’s solar land leases terms are between 15 and 25 years and include options to extend the terms for multiple additional 5 to 10 year terms each. The Company’s office leases vary in duration, ranging from 1 to 25 years and may or may not include extension options. The majority of the Company’s meter leases are for terms of 7 years with purchase options available prior to the end of the 7 year term. Equipment leases include general office equipment that also vary in duration, most are for a term of 5 years. The Company's storage and capacity leases have assumed terms of 50 years to coincide with the expected useful lives of the cavern assets which the leases are associated with. The Company's lease terms may include options to extend or terminate a lease and they are included in the lease liability calculation when it is reasonably certain that those options will be exercised. The Company has elected an accounting policy that exempts leases with an original term of one year or less from the recognition requirements of ASC 842, Leases.

The Company has lease agreements with lease and non-lease components and has elected the practical expedient to combine lease and non-lease components for certain classes of leases, such as office buildings, solar land leases and office equipment. Variable payments are not significant to the Company. The Company’s lease agreements do not contain any material residual value guarantees, material restrictions or material covenants. There are no material lease transactions with related parties.

The following table presents the Company's lease costs included in the Unaudited Condensed Consolidated Statements of Operations:



		Three Months Ended
		December 31,
(Thousands)	Income Statement Location	2019
Finance lease cost
Amortization of right-of-use assets	Depreciation and amortization	$	1,161
Interest on lease liabilities	Interest expense, net of capitalized interest	247
Total finance lease cost		1,408
Operating lease cost	Operation and maintenance, net of capitalized costs	$	1,392
Short-term lease cost	Operation and maintenance	454
Variable lease cost	Operation and maintenance	707
Total lease cost		$	3,961

The following table presents supplemental cash flow information related to leases:



	Three Months Ended
	December 31,
(Thousands)	2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,562
Operating cash flows from finance leases	$	443
Financing cash flows from finance leases	$	2,623

Assets obtained in exchange for operating and finance lease liabilities during the three months ended December 31, 2019, was $21.6 million and $4 million, respectively.

The following table presents the balance and classifications of our right of use assets and lease liabilities included in the Unaudited Condensed Consolidated Balance Sheets:



(Thousands)	Balance Sheet Location	December 31, 2019
Assets
Noncurrent
Operating lease assets	Operating lease assets	$	87,793
Finance lease assets	Utility plant	29,220
Total lease assets		$	117,013
Liabilities
Current
Operating lease liabilities	Operating lease liabilities	$	3,805
Finance lease liabilities	Current maturities of long-term debt	10,714
Noncurrent
Operating lease liabilities	Operating lease liabilities	82,909
Finance lease liabilities	Long-term debt	25,846
Total lease liabilities		$	123,274

As of December 31, 2019, the weighted average remaining lease term for the operating and finance leases is 28.1 and 4.5 years, respectively. The weighted average discount rate used in the valuation of the operating and finance lease liabilities and right-of-use assets over the remaining lease term is 3.10 percent and 4.02 percent, respectively.

As of December 31, 2019, the Company has entered into four leases, which have not yet commenced, that would entitle the Company to significant rights or create additional obligations. The leases are expected to commence when construction of the assets are completed during fiscal 2020. Total estimated payments over the life of these leases are approximately $27.8 million. There are options to extend the term of these leases for two additional five-year periods. One of the leases has variable payment terms based upon the capacity of the solar facility and it is therefore excluded from the total estimated payments.

The following table presents the Company's maturities of lease liabilities as of December 31, 2019:



(Thousands)	Operating Leases			Finance Leases
Remainder of fiscal 2020	$	4,429		$	9,111
2021	5,672			9,347
2022	5,591			6,004
2023	5,564			4,622
2024	5,178			5,279
Thereafter	107,798			5,720
Total future minimum lease payments	134,232			40,083
Less: Interest component	(47,518		)	(3,523		)
Total lease liability	$	86,714		$	36,560

The following table reflects the Company's future minimum lease payments due under non-cancelable operating leases for continuing operations as of September 30, 2019, under ASC 840 and is being presented for comparative purposes. These commitments relate principally to commercial solar land leases, equipment and real property leases, including land and office facility leases, gas meters and office equipment.



(Thousands)	Operating Leases		Capital Leases
2020	$	4,411	$	11,707
2021	$	4,698	$	6,603
2022	$	4,609	$	7,494
2023	$	4,579	$	3,995
2024	$	4,199	$	4,652
Thereafter	$	54,405	$	4,173

LEASES