10-Q 1 suned-930201510q.htm 10-Q Exhibit
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ______________________________________________________________
FORM 10-Q
 ______________________________________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to             
Commission File Number: 001-13828
 ______________________________________________________________
SunEdison, Inc.
(Exact name of registrant as specified in its charter)
 ______________________________________________________________
Delaware
 
56-1505767
(State or other jurisdiction of
incorporation or organization)
 
(I. R. S. Employer
Identification No.)
 
 
 
13736 Riverport Drive, Suite 180
Maryland Heights, Missouri
 
63043
(Address of principal executive offices)
 
(Zip Code)
(314) 770-7300
(Registrant’s telephone number, including area code)
 ______________________________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    o  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
x
  
Accelerated filer
 
o
 
 
 
 
Non-accelerated filer
 
o (Do not check if a smaller reporting company)
  
Smaller reporting company
 
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o     No  x
The number of shares of the registrant’s common stock outstanding at November 2, 2015 was 316,721,372.
 




Table of Contents


1


PART I—FINANCIAL INFORMATION

Item 1.
Financial Statements.

SUNEDISON, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net sales
$
476

 
$
469

 
$
1,254

 
$
1,241

Cost of goods sold
365

 
428

 
1,006

 
1,157

Gross profit
111

 
41

 
248

 
84

Operating expenses:
 
 
 
 
 
 
 
General and administrative
296

 
126

 
753

 
327

Restructuring charges
27

 

 
80

 
14

Long-lived asset impairment charges
38

 
42

 
55

 
42

Operating loss
(250
)
 
(127
)
 
(640
)
 
(299
)
Non-operating expense (income):
 
 
 
 
 
 
 
Interest expense
214

 
107

 
516

 
267

Interest income
(2
)
 
(3
)
 
(16
)
 
(12
)
Loss on early extinguishment of debt, net
1

 

 
85

 

Loss on convertible notes derivatives, net

 

 

 
499

Gain on previously held equity investments
(45
)
 

 
(45
)
 
(146
)
Other, net
(51
)
 
9

 
(53
)
 
19

Total non-operating expense
117

 
113


487

 
627

Loss from continuing operations before income tax benefit and equity in earnings (loss) of equity method investments
(367
)
 
(240
)
 
(1,127
)
 
(926
)
Income tax benefit
(35
)
 
(2
)
 
(246
)
 
(12
)
Loss from continuing operations before equity in earnings (loss) of equity method investments
(332
)
 
(238
)
 
(881
)
 
(914
)
Equity in earnings (loss) of equity method investments, net of tax
1

 

 
(11
)
 
10

Loss from continuing operations
(331
)
 
(238
)
 
(892
)
 
(904
)
Income (loss) from discontinued operations, net of tax
3

 
(79
)
 
(116
)
 
(81
)
Net loss
(328
)
 
(317
)
 
(1,008
)
 
(985
)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests
44

 
34

 
89

 
46

Net loss attributable to SunEdison stockholders
$
(284
)
 
$
(283
)
 
$
(919
)
 
$
(939
)
 
 
 
 
 
 
 
 
Amounts attributable to SunEdison stockholders:
 
 
 
 


 


Loss from continuing operations
$
(287
)
 
$
(204
)
 
$
(801
)
 
$
(858
)
Income (loss) from discontinued operations
3

 
(79
)
 
(118
)
 
(81
)
Net loss attributable to SunEdison stockholders
$
(284
)
 
$
(283
)
 
$
(919
)
 
$
(939
)
 
 
 
 
 
 
 
 
Basic and diluted (loss) income per share (see Note 14):


 


 
 
 
 
Continuing operations
$
(0.92
)
 
$
(0.77
)
 
$
(2.73
)
 
$
(3.21
)
Discontinued operations
0.01

 
(0.29
)
 
(0.40
)
 
(0.30
)
Total loss per share
$
(0.91
)
 
$
(1.06
)
 
$
(3.13
)
 
$
(3.51
)
See accompanying notes to unaudited condensed consolidated financial statements.

2



SUNEDISON, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In millions)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015

2014
 
2015
 
2014
Net loss
$
(328
)

$
(317
)
 
$
(1,008
)
 
$
(985
)
Other comprehensive (loss) income, net of tax:



 
 
 
 
Net foreign currency translation adjustments
(23
)

(54
)
 
9

 
(43
)
Net gain (loss) on hedging instruments
7


(5
)
 
(9
)
 
2

Net adjustments for benefit plans



 
44

 

Other comprehensive (loss) income, net of tax
(16
)

(59
)
 
44


(41
)
Total comprehensive loss
(344
)

(376
)
 
(964
)

(1,026
)
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests
44


34

 
89

 
46

Net other comprehensive loss attributable to noncontrolling interests and redeemable noncontrolling interests
2


15

 
18

 
16

Comprehensive loss attributable to SunEdison stockholders
$
(298
)

$
(327
)
 
$
(857
)

$
(964
)
See accompanying notes to unaudited condensed consolidated financial statements.

3



SUNEDISON, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
 
September 30, 2015
 
December 31, 2014
Assets

 

Current assets:

 

Cash and cash equivalents
$
2,393

 
$
856

Cash committed for construction projects, including consolidated variable interest entities of $443 and $32 in 2015 and 2014, respectively
697

 
131

Current portion of restricted cash
367

 
156

Accounts receivable, net
448

 
373

Prepaid and other current assets
1,080

 
908

Current assets held for sale
800

 

Current assets of discontinued operations

 
364

Total current assets
5,785


2,788

Investments
156

 
149

Property, plant and equipment, net:

 

Renewable energy systems, including consolidated variable interest entities of $3,497 and $2,312 in 2015 and 2014, respectively, net of accumulated depreciation of $358 and $334 in 2015 and 2014, respectively
10,201

 
5,336

Other property, plant and equipment, net of accumulated depreciation of $266 and $238 in 2015 and 2014, respectively
1,158

 
1,140

Restricted cash
265

 
115

Goodwill
511

 
73

Other intangible assets
1,490

 
586

Other assets
1,148

 
627

Non-current assets of discontinued operations

 
686

Total assets
$
20,714


$
11,500

Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt and short-term borrowings, including consolidated variable interest entities of $309 and $423 in 2015 and 2014, respectively
$
1,905

 
$
1,078

Accounts payable
1,105

 
1,098

Accrued and other current liabilities
950

 
660

Current portion of deferred revenue
69

 
92

Current portion of contingent consideration liabilities
449

 
26

Current liabilities held for sale
652

 

Current liabilities of discontinued operations

 
192

Total current liabilities
5,130


3,146

Long-term debt, less current portion, including consolidated variable interest entities of $2,274 and $1,169 in 2015 and 2014, respectively
9,767

 
5,915

Deferred revenue, less current portion
603

 
204

Contingent consideration liabilities, less current portion
86

 
17

Other liabilities
555

 
442

Non-current liabilities of discontinued operations

 
291

Total liabilities
16,141


10,015

Redeemable noncontrolling interests
69

 

Stockholders’ equity:
 
 
 
Preferred stock, $.01 par value, 50.0 shares authorized, 0.7 and no shares issued in 2015 and 2014, respectively

 

Common stock, $.01 par value, 700.0 shares authorized, 319.5 and 272.5 shares issued in 2015 and 2014, respectively
3

 
3

Additional paid-in capital
3,792

 
1,698

Accumulated deficit
(2,267
)
 
(1,348
)
Accumulated other comprehensive loss
(48
)
 
(111
)
Treasury stock, 2.9 and 0.4 shares in 2015 and 2014, respectively
(78
)
 
(9
)
Total SunEdison stockholders’ equity
1,402

 
233

Noncontrolling interests
3,102

 
1,252

Total stockholders’ equity
4,504

 
1,485

Total liabilities, redeemable noncontrolling interests and stockholders’ equity
$
20,714

 
$
11,500

See accompanying notes to unaudited condensed consolidated financial statements.

4



SUNEDISON, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 
Nine Months Ended September 30,
2015
 
2014
Cash flows from operating activities:
 
 
 
Net loss
$
(1,008
)
 
$
(985
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
331

 
261

Stock-based compensation
62

 
28

Deferred tax benefit
(217
)
 
(41
)
Deferred revenue
(47
)
 
(142
)
Restructuring charges
80

 

Long-lived asset impairment charges
55

 
100

Loss on sale of equity interests in SSL
120

 

Loss on convertible notes derivatives, net

 
499

Loss on early extinguishment of debt, net
85

 

Gain on previously held equity investment

 
(146
)
Other non-cash
9

 
(13
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
16

 
22

Prepaid and other current assets
(108
)
 
(167
)
Accounts payable
(182
)
 
(165
)
Deferred revenue for renewable energy systems
66

 
180

Accrued liabilities
34

 
114

Other assets and liabilities
(432
)
 
(115
)
Net cash used in operating activities
(1,136
)
 
(570
)
Cash flows from investing activities:
 
 
 
Capital expenditures
(193
)
 
(182
)
Construction of renewable energy systems
(1,619
)
 
(1,028
)
Proceeds from sale of equity interests in SSL
372

 

Purchases of cost and equity method investments, net of proceeds
22

 
(41
)
Change in restricted cash
(122
)
 
(46
)
Change in cash committed for construction projects
(570
)
 
142

Cash paid for acquisitions, net of cash acquired
(2,356
)
 
(415
)
Other
(166
)
 
(3
)
Net cash used in investing activities
(4,632
)
 
(1,573
)
Cash flows from financing activities:
 
 
 
Proceeds from short-term and long-term debt
7,303

 
2,618

Principal payments on short-term and long-term debt
(2,435
)
 
(832
)
Payments for capped call option
(161
)
 

Proceeds from (payments for) note hedge
635

 
(174
)
(Payments for) proceeds from warrant transactions
(632
)
 
124

Proceeds from TerraForm Power and TerraForm Global equity offerings
1,715

 
592

Proceeds from SSL IPO and private placement transactions

 
185

Proceeds from preferred stock offering
626

 

Contributions from noncontrolling interests, net
769

 
33

Cash paid for contingent consideration for acquisitions
(13
)
 
(4
)
Debt financing fees
(249
)
 
(122
)
Change in restricted cash
(152
)
 

Dividends paid by TerraForm Power
(61
)
 

Other
(57
)
 
1

Net cash provided by financing activities
7,288

 
2,421

Effect of exchange rate changes on cash and cash equivalents
(8
)
 
(11
)
Net increase in cash and cash equivalents
1,512

 
267


5



Cash (used in) provided by discontinued operations (see Note 2)
(25
)
 
62

Net change in cash and cash equivalents from continuing operations
1,537

 
205

Cash and cash equivalents at beginning of period
856

 
533

Cash and cash equivalents at end of period
$
2,393

 
$
738

 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
Net debt transferred to and assumed by buyer upon sale of renewable energy systems
110

 
395

See accompanying notes to unaudited condensed consolidated financial statements.

6



Notes to Unaudited Condensed Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of SunEdison, Inc. and subsidiaries ("SunEdison"), in our opinion, include all adjustments (consisting of normal, recurring items) necessary to present fairly our financial position, results of operations and cash flows for the periods presented. SunEdison has presented the unaudited condensed consolidated financial statements in accordance with the requirements of the Securities and Exchange Commission (the "SEC") for Form 10-Q and Article 10 of Regulation S-X and consequently, these financial statements do not include all disclosures required by U.S. generally accepted accounting principles ("U.S. GAAP"). These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2014, as recast and filed on SunEdison’s Form 8-K on June 29, 2015, as amended by the Form 8-K/A on July 7, 2015, to reflect changes due to the discontinued operations of SunEdison Semiconductor Ltd. ("SSL"), which contains SunEdison's audited financial statements for such year. Operating results for the three and nine month periods ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.
The accompanying unaudited condensed consolidated financial statements of SunEdison include the consolidated results of TerraForm Power, Inc. ("TerraForm Power" or "TERP") and TerraForm Global, Inc. ("TerraForm Global" or "GLBL"), which are separate SEC registrants. The operating results of TERP and GLBL are reported as our TerraForm Power and TerraForm Global reportable segments, respectively, as described in Note 17. References to "SunEdison", "we", "our" or "us" within the accompanying unaudited condensed consolidated financial statements refer to the consolidated reporting entity.
On January 20, 2015, we disposed of our controlling interest in SSL in an underwritten public offering (see Note 2). The results of SSL, a separate SEC registrant, were previously reported as our Semiconductor Materials reportable segment. As a result of this transaction, SSL was deconsolidated from our consolidated financial statements and SSL's historical results of operations and financial position are reported as discontinued operations for all periods presented. Additionally, we no longer report Semiconductor Materials as a reportable segment. Through July 1, 2015, we retained a noncontrolling interest in SSL which was accounted for as an equity method investment. On July 1, 2015, we effectively disposed of our remaining interest in SSL in an underwritten public offering (see Note 2). Unless indicated otherwise, the information in the accompanying notes to the unaudited condensed consolidated financial statements relates to our continuing operations.
Use of Estimates
In preparing our unaudited condensed consolidated financial statements, we use estimates and assumptions that may affect reported amounts and disclosures. Estimates are used when accounting for investments; depreciation; amortization; leases; asset impairments; accrued liabilities, including restructuring, warranties, and employee benefits; derivatives, including the embedded conversion options, note hedges, and warrants associated with our outstanding senior convertible notes; stock-based compensation; income taxes; renewable energy system installation and related costs; percentage-of-completion on long-term construction contracts; the fair value of assets and liabilities recorded in connection with business combinations; and asset valuations, including allowances, among others. These estimates and assumptions are based on current facts, historical experience and various other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources. To the extent there are material differences between the estimates and actual results, our future results of operations would be affected.
New Accounting Standards
In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 limits the requirement to report discontinued operations to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. ASU 2014-08 also requires expanded disclosures concerning discontinued operations, disclosures of certain financial results attributable to a disposal of a significant component of an entity that does not qualify for discontinued operations reporting and expanded disclosures for long-lived assets classified as disposed of or held for sale. The adoption of ASU 2014-08 effective as of January 1, 2015 did not have a material impact on our consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In July 2015, the FASB voted to approve a one year deferral in the effective date of ASU 2014-09 while also providing for early adoption but

7



not before the original effective date. Based on the one-year deferral, ASU 2014-09 will be effective for us beginning January 1, 2018. ASU 2014-09 allows for both retrospective and modified-retrospective methods of adoption. We have not determined which transition method we will adopt, and we are currently evaluating the impact that ASU 2014-09 will have on our consolidated financial statements and related disclosures upon adoption.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued and to provide related disclosures. ASU 2014-15 is effective for us for our fiscal year ending December 31, 2016 and for interim periods thereafter. We are currently evaluating the impact of ASU 2014-15 on our consolidated financial statements.
In January 2015, the FASB issued ASU No. 2015-01, Income Statement — Extraordinary and Unusual Items (Subtopic 225-20), which eliminates the concept of reporting for extraordinary items. ASU 2015-01 is effective for us for our fiscal year ending December 31, 2016 and for interim periods thereafter. We are currently evaluating the impact of ASU 2015-01 on our consolidated financial statements.
In February 2015, the FASB issued ASU No. 2015-02, Consolidation, which reduces the number of consolidation models and simplifies the current standard. Entities may no longer need to consolidate a legal entity in certain circumstances based solely on its fee arrangements when certain criteria are met. ASU 2015-02 reduces the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity. ASU 2015-02 is effective for us for our fiscal year ending December 31, 2016. We are currently evaluating the impact of ASU 2015-02 on our consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. In August 2015, the FASB issued ASU No. 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of Credit Arrangements. ASU 2015-15 indicates that an entity may defer and present debt issuance costs associated with line-of-credit arrangements as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-03 and ASU 2015-15 are effective on a retrospective basis for annual and interim periods beginning on or after December 15, 2015. Early adoption is permitted, but only for debt issuance costs that have not been reported in financial statements previously issued or available for issuance. We are currently evaluating the impact of ASU 2015-03 and ASU 2015-15 on our consolidated financial statements.
In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, to specify that inventory should be subsequently measured at the lower of cost or net realizable value, which is the ordinary selling price less any completion, transportation and disposal costs. However, the ASU does not apply to inventory measured using the last-in-first-out or retail methods. ASU 2015-11 is effective for us, on a prospective basis, for our fiscal year ending December 31, 2016 and for interim periods thereafter. We are currently evaluating the impact of ASU 2015-11 on our consolidated financial statements.
In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, that eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. ASU 2015-16 is effective for us on a prospective basis on January 1, 2016. Early adoption is permitted for any interim and annual financial statements that have not yet been made available for issuance. We are currently evaluating the impact of ASU 2015-16 on our consolidated financial statements.
2. DISCONTINUED OPERATIONS, ASSETS HELD FOR SALE AND RESTRUCTURING CHARGES
Discontinued Operations
On January 20, 2015, we disposed of 12,951,347 ordinary shares of SSL in connection with an underwritten public offering of 17,250,000 ordinary shares of SSL at a price to the public of $15.19 per share. Net proceeds to us from the sale were $188 million. As a result of this transaction, we no longer had a controlling interest in SSL. From January 20, 2015 through June 30, 2015, we owned 10,608,904 of SSL's ordinary shares, representing a 25.6% ownership interest in SSL, which was accounted for as an equity method investment. The disposal of our controlling interest in SSL represented the disposal of a component and a strategic shift that had a major effect on our operations and financial results, and thus we have reported the historical results

8



of operations and financial position of SSL as discontinued operations in the condensed consolidated financial statements for all periods presented.
We recognized a loss associated with the January 20, 2015 disposal of SSL shares of $123 million within discontinued operations in the condensed consolidated statements of operations.
On July 1, 2015, we disposed of 10,608,903 ordinary shares of SSL in connection with an underwritten public offering of 15,935,828 ordinary shares of SSL at a price to the public of $18.25 per share. We received net proceeds from the disposal of $184 million. As a result of this transaction, we recorded a $3 million gain within discontinued operations. Upon this disposal, we have effectively liquidated our investment in SSL which resulted in a reduction of our previously reported full time equivalent headcount by approximately 4,400 employees.
The following table summarizes the results from the discontinued operations of SSL included in the condensed consolidated statements of operations:
 
 
Nine Months Ended September 30,

 
2015
 
2014
In millions
 
 
 
 
Net sales
 
$
58

 
$
633

Cost of goods sold
 
52

 
579

        Gross profit
 
6

 
54

Operating expenses
 
9

 
133

Operating loss
 
(3
)
 
(79
)
Loss on disposal
 
120

 

Other (income) expense
 
(7
)
 
5

Loss from discontinued operations before tax
 
(116
)
 
(84
)
Income tax benefit
 

 
(3
)
Loss from discontinued operations, net of tax
 
(116
)
 
(81
)
Net (income) loss attributable to noncontrolling interests
 
(2
)
 

Net loss attributable to shareholders
 
$
(118
)
 
$
(81
)
The following table summarizes the cash flows of discontinued operations of SSL included in the condensed consolidated statements of cash flows:
 
Nine Months Ended September 30,
 
2015
 
2014
In millions
 
 
 
Cash flows from discontinued operations:
 
 
 
Net cash used in operating activities of discontinued operations
$
(1
)
 
$
(59
)
Net cash used in investing activities of discontinued operations
(23
)
 
(71
)
Net cash provided by financing activities of discontinued operations

 
194

Effect of exchange rate changes on cash and cash equivalents
(1
)
 
(2
)
Cash (used in) provided by discontinued operations
$
(25
)
 
$
62

SSL continues to purchase polysilicon from us. Net sales of polysilicon to SSL were $16 million and $19 million in the three months ended September 30, 2015 and 2014, respectively. Net sales of polysilicon to SSL for the nine months ended September 30, 2015 and 2014 were $50 million and $49 million, respectively.
One of our board members serves on the board of directors of SSL. Additionally, we and SSL have entered into the following agreements that effected the separation of SSL’s business from ours and provide a framework for our ongoing relationship with SSL:
Separation Agreement - The separation agreement governs certain pre-offering transactions between SSL and us, as well as aspects of the relationship between SSL and us following SSL’s Initial Public Offering ("SSL's IPO") and related transactions, which are not otherwise governed by the other agreements set forth below. The separation agreement provides further assurances and covenants between SSL and us to ensure that the separation of SSL’s business from SunEdison was the intent of SSL and that commercially reasonable efforts will be taken to do all things

9



reasonably necessary to consummate and make effective the transactions. The separation agreement provides for mutually agreed exchange of information, confidentiality, dispute resolution methods and limitations of liability.
Patent and Technology Cross-License Agreement - Under the patent and technology cross-license agreement, SSL agreed to license to us substantially all of its patents, patent applications, software, trade secrets, know-how and other intellectual property that have application in our solar energy business, and we licensed to SSL substantially all of our patents, patent applications, software, trade secrets, know-how and other intellectual property that have application in its semiconductor wafer business. The intellectual property licensed by us to SSL under the agreement excludes all intellectual property related to continuous Czochralski, or CCZ, diamond coated wire, fluidized bed reactor polysilicon technology, or FBR, and high-pressure FBR, with such arrangements to be set forth in separate agreements as described below.
CCZ and Diamond Coated Wire License Agreement - Under the CCZ and diamond coated wire license agreement, we licensed to SSL and certain of its subsidiaries in the U.S. and Italy our U.S. and foreign patents and patent applications and technology (including discoveries, conceptions, ideas, improvements, enhancements and inventions and data) relating to CCZ silicon crystal growth and diamond coated wire technology, provided that SSL’s use of such licensed intellectual property is limited to the semiconductor industry and the production of semiconductor wafers. The agreement prohibits SSL from using the licensed intellectual property for the manufacture of polysilicon, the manufacture of materials used in the solar photovoltaic industry, or for balance of system hardware or software used in solar systems. Additionally, the agreement prohibits us from licensing the applicable intellectual property to any third party for use in the production of semiconductor wafers and similar uses in the semiconductor industry.
Technology Joint Development Agreement - The technology joint development agreement provides a framework for joint development and other collaborative activities between SSL and us. Under the agreement, the parties may agree to conduct one or more joint development programs, the specific terms and conditions of which will be set forth in a separate statement of work for each joint development program.
Trademark License Agreement - We granted to SSL a royalty-free license to use certain of our trademarks for a period of time following the completion of SSL's IPO.
Transition Services Agreement - Under the transition services agreement, we and SSL agreed to mutually provide each other certain corporate, general and administrative services following the completion of SSL’s IPO for the term set forth for each service in the annexes to the agreement.
Tax Matters Agreement - The tax matters agreement governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes.
Polysilicon Supply Agreement - On June 23, 2015, we entered into an agreement with SSL regarding granular polysilicon purchases. Under the polysilicon supply agreement, we will supply SSL's granular semiconductor grade polysilicon needs for a fixed price per kilogram for each year over the 10.5-year term of the agreement. The price for polysilicon decreases during the term of the agreement. In exchange, SSL agreed to assign its entire share of dividends and distributions from SMP, Ltd., our 54%-owned high purity polysilicon operation located in Ulsan, South Korea, to us for the duration of the agreement. There were no dividends or distributions from SMP, Ltd. during the three or nine month periods ended September 30, 2015.
Omnibus Agreement - On September 30, 2015, we entered into an agreement with SSL to purchase 841,400 shares of SMP, Ltd., currently owned by SSL. We agreed to purchase this additional 8.9% interest for $35 million which was advanced to SSL during the quarter as an earnest money deposit upon entering into the transaction. Such amount is reported in other current assets in the unaudited consolidated condensed balance sheet as of September 30, 2015. In addition, the agreement settled certain other outstanding commercial and separation matters between us and SSL related to the separation which resulted in the receipt of an immaterial amount from SSL which did not have a significant impact on our results of operations for the three months ended September 30, 2015. The transaction is subject to certain consents and approvals and is expected to close within one year. The transaction will result in an increase in our ownership interest in SMP, Ltd. to approximately 63%.
Assets Held for Sale
Pursuant to a plan of sale approved by management, we have received offers to purchase our interests in solar power plant operating projects in France, Italy, Greece, Bulgaria and India, originally acquired in the Silver Ridge Power, LLC (“SRP”) acquisition (see Note 3). It is probable that the sale of these projects will occur within one year. As a result, we have classified

10



the relevant asset and liability balances as held for sale and measured each at the lower of carrying value or fair value less cost to sell. Our analysis indicated that the carrying value exceeded fair value less costs to sell by $8 million for operating projects in Bulgaria, which was recognized as a long-lived asset impairment charge during the third quarter of 2015 and reported as a component of other non-operating expense in the condensed consolidated statement of operations. Assets held for sale primarily consists of cash of $40 million, plant, property, and equipment of $416 million and intangible assets of $156 million. Liabilities held for sale primarily consists of $507 million of total long-term debt and $70 million of accrued and other liabilities. Similarly, in October 2015, we sold the Mark Group Limited (“Mark Group”) to its management group (see Note 3). As a result of this transaction, Mark Group's assets and liabilities were reclassified to held for sale in the unaudited condensed consolidated balance sheet.
Restructuring Charges
2015 Restructuring Activities
On September 29, 2015, SunEdison's Board of Directors approved management’s recommendation for a restructuring intended to optimize business operations in alignment with current and future market opportunities, and accelerate cash flow positive operations. The restructuring provides for a workforce reduction of approximately 15% of our global workforce in response to current and expected market conditions and in order to remove duplicative activities created as a result of merger and acquisition activities and business growth.
In connection with the restructuring, we expect to incur total charges of approximately $30 million to $40 million which will be recognized through the first quarter of 2016. These charges primarily consist of severance and other benefits to terminated employees, most of which are expected to be paid in cash by the end of the fourth quarter of 2016. Restructuring charges of $27 million were recognized during the three months ended September 30, 2015.
Previous Restructuring Activities
An additional $53 million of restructuring costs were recognized during the three months ended March 31, 2015 relating to the settlement of a contract termination dispute arising due to actions taken as a result of a restructuring plan undertaken during 2011. On May 7, 2015, we entered into a settlement and release agreement with the vendor to settle all claims and disputes relating to the previous agreements. Under the settlement and release agreement, the vendor retained certain deposits which we previously paid under the agreements in the amount of 24 million euro. In addition, we agreed to pay the vendor a total of 54 million euro in three equal quarterly installments beginning in June 2015, two payments of which have been made through September 30, 2015, and we made an additional payment in June 2015 of 23 million euro for the payment of outstanding invoices.
3. ACQUISITIONS
Renewable Energy Development Acquisitions
Atlantic Power
On June 26, 2015, we and TerraForm AP Acquisitions Holdings, LLC (“TerraForm AP”), a subsidiary of SunEdison, completed the acquisition of all membership interests of Atlantic Power Transmission, Inc. (“Atlantic Power”), an independent power producer with a diversified fleet of power generation assets located throughout the U.S. and Canada, pursuant to a membership interest purchase agreement. In connection with the acquisition, we acquired interests in five operating wind power generation assets located in Oklahoma and Idaho, which have a net capacity (total capacity adjusted for our economic ownership interest) of 521 megawatts ("MW") of renewable power. The aggregate consideration paid for this acquisition was $347 million in cash.
The fair value of the assets and liabilities acquired is summarized in the Acquisition Accounting section below. The preliminary purchase accounting for the acquisition resulted in the recognition of certain amortizable intangible assets comprised of long-term power purchase agreements (“PPAs”) totaling $19 million. The long-term PPAs are subject to amortization with no residual value. The estimated fair values were determined based on an income approach and the estimated useful lives of the intangible assets range from 17 to 23 years. All assets acquired are reported in the Renewable Energy Development segment.
First Wind
On January 29, 2015, SunEdison and TerraForm First Wind ACQ, LLC, a subsidiary of TerraForm Power Operating, LLC (“TerraForm Operating”), as assignee of TerraForm Power, LLC (“Terra LLC”) under the Purchase Agreement (as defined below), completed the acquisition of First Wind Holdings, LLC (“Parent,” together with its subsidiaries, “First Wind”), pursuant to a purchase and sale agreement, dated as of November 17, 2014, as amended by the First Amendment to the Purchase and Sale Agreement, dated as of January 28, 2015 (together, the “Purchase Agreement”), among SunEdison,

11



TerraForm Operating, Terra LLC, First Wind, the members of First Wind and certain other persons party thereto (the “Acquisition”). In the Acquisition, TerraForm First Wind ACQ, LLC purchased from First Wind 500 MW of operating wind power assets and 21 MW of operating solar power assets, and SunEdison purchased all of the equity interests of Parent and all of the outstanding equity interests in certain subsidiaries of Parent that own, directly or indirectly, 306 MW of operating wind power assets, wind and solar development projects representing 1.6 GW of pipeline and backlog and development opportunities representing more than 6.4 GW of wind and solar projects.
Pursuant to the terms of the Purchase Agreement, SunEdison and TerraForm Operating paid total consideration of $2,442 million, which was comprised of cash consideration of $762 million paid by SunEdison and $864 million paid by TerraForm Operating, the issuance of $336 million in aggregate principal amount of 3.75% Guaranteed Exchangeable Senior Secured Notes due 2020 (see Note 8), and contingent consideration measured at fair value of $480 million. The maximum undiscounted potential payout of contingent consideration is $510 million over the three year period following the date of acquisition, and we believe it is probable the maximum amount will be paid.
The fair value of the assets and liabilities acquired is summarized in the Acquisition Accounting section below. The preliminary purchase accounting resulted in the recording of indefinite lived intangible assets using provisional amounts for power plant development arrangements totaling $891 million. Additionally, provisional amounts were used to record certain amortizable intangible assets comprised of long-term PPAs and feed-in tariffs (“FiTs”) totaling $125 million. The long-term PPAs and FiTs are subject to amortization with no residual value. The preliminary estimated fair values were determined based on an income approach and the estimated useful lives of the intangible assets range from 11 to 17 years. Total assets acquired are comprised of $2,444 million attributable to the Renewable Energy Development segment and $1,057 million attributable to the TerraForm Power segment.
The net sales and net loss related to the acquisition of First Wind reflected in the accompanying condensed consolidated statement of operations for the nine months ended September 30, 2015 were $129 million and $44 million, respectively. The unaudited pro forma supplementary data presented in the table below gives effect to the First Wind acquisition as if the transaction occurred on January 1, 2014. The pro forma supplementary data is provided for informational purposes only and should not be construed to be indicative of our results of operations had the First Wind acquisition been consummated on the date assumed or of our results of operations for any future date.
 
Nine Months Ended September 30,
 
2015
 
2014
In millions
 
 
 
Net sales
$
1,272

 
$
1,336

Net loss
977

 
1,087

The unaudited pro forma net loss for the nine months ended September 30, 2015 and 2014 includes non-recurring pro forma adjustments of $9 million and $53 million, respectively, for interest expense and amortization of deferred financing costs associated with debt incurred for the acquisition of First Wind. Also reflected in the pro forma net loss for the nine months ended September 30, 2014 is the reversal of losses totaling $82 million attributable to the results of certain First Wind operating projects that we did not acquire.
Silver Ridge Power
On July 2, 2014, we completed the acquisition of 50% of the outstanding limited liability company interests of SRP from AES Solar, LLC (“AES Solar”) for total cash consideration of $179 million ($134 million, net of cash acquired). The remaining 50% of the outstanding limited liability company interests of SRP will continue to be held by R/C US Solar Investment Partnership, L.P. (“Riverstone”). SRP’s solar power plant operating projects included the Mt. Signal solar project. Concurrent with the acquisition, we also entered into a Master Transaction Agreement (the "MTA”) with Riverstone. Pursuant to the MTA, concurrently with the closing of the TERP Initial Public Offering (“TERP IPO”), SRP contributed Mt. Signal to the operating entity of TERP in exchange for total consideration valued at $292 million. Consequently, Mt. Signal is consolidated by TERP as discussed below and is excluded from the provisional accounting for the acquired interest in SRP in the table below.
Through our acquisition of this interest in SRP, we acquired 50% of (i) 336 MW of solar power plant operating projects and (ii) a 40% interest in CSOLAR IV West, LLC (“CSolar”), which is currently developing a 183 MW solar power facility with an executed PPA in place with a high-credit utility off-taker. Pursuant to the MTA, concurrently with the closing of the TERP IPO, the parties also entered into a purchase and sale agreement with respect to CSolar. The purchase and sale agreement provides that, following completion of CSolar’s 183 MW facility, which is expected in 2016, and subject to customary closing conditions and receipt of regulatory approvals, we will acquire Riverstone’s share of SRP’s interest in CSolar. Thereafter, we intend to contribute 100% of SRP’s 40% interest in CSolar to TERP.

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The fair value of the SRP assets and liabilities acquired, excluding Mt. Signal, is summarized in the Acquisition Accounting section below. The fair value of assets and liabilities acquired related to Mt. Signal is included in the TerraForm Power Acquisitions section below. The purchase accounting resulted in the recording of long-term PPAs and FiTs totaling $206 million. The long-term PPAs and FiTs are intangible assets subject to amortization with no residual value. The estimated fair values were determined based on an income approach and the estimated useful lives of the intangible assets range from 17 to 19 years. As part of the original purchase accounting for the SRP purchase, we also recorded liabilities for mandatorily redeemable financial instruments at management’s best estimate of fair value for the remaining 50% interests in the French and Italian projects. During the three month period ended September 30, 2015, we recognized a benefit of $45 million due to the change in fair value of these instruments which is reported in other non-operating expense (income) in the condensed consolidated statement of operations.
In addition we obtained a right, but not an obligation, to acquire AES Solar’s 50% interest in a portfolio of projects located in Italy as part of the SRP acquisition. We exercised this option on October 1, 2015 for a purchase price of $42 million.
As of September 30, 2015, certain of the SRP assets and liabilities met the criteria to be reported as held for sale pursuant to a plan of sale approved by management (see Note 2).
Acquisition Accounting
The estimated allocations of assets and liabilities for the above acquisitions are as follows:
 
2015 Preliminary
 
2014 Final
 
Atlantic Power
 
First Wind
 
SRP
In millions
 
 
 
 
 
Cash and cash equivalents
$
13

 
$
99

 
$
45

Restricted cash
19

 
62

 
48

Accounts receivable
12

 
14

 
26

Investments
20

 

 
115

Renewable energy systems & other property, plant and equipment
725

 
1,568

 
573

Goodwill

 
437

 
27

Other intangible assets
19

 
1,016

 
206

Other assets
5

 
305

 
112

Total assets acquired
813

 
3,501

 
1,152

Accounts payable and accrued liabilities
8

 
56

 
295

Long-term debt
249

 
289

 
686

Deferred revenue

 
459

 

Other liabilities
37

 
148

 
82

Total liabilities assumed
294

 
952

 
1,063

Redeemable noncontrolling interests

 
4

 

Noncontrolling interests
172

 
103

 
56

Fair value of net assets acquired
$
347

 
$
2,442

 
$
33

The initial accounting for the Atlantic Power and First Wind business combinations is not complete because the evaluation necessary to assess the fair values of certain assets acquired and liabilities assumed is in process. The provisional amounts are subject to revision until the evaluations are completed to the extent that any additional information is obtained about the facts and circumstances that existed as of the acquisition date.
The accounting for the SRP business combination is complete and any future adjustments due to changes to the assumptions used to calculate the fair value of acquisition related assets and liabilities will be reflected in the condensed consolidated statements of operations.
Mark Group
On July 15, 2015, we completed the acquisition of Mark Group, a U.K. based solar panel installer, for a purchase price of $24 million in cash, plus deferred consideration of $14 million. As a result of this acquisition, we recognized $38 million in goodwill. On August 27, 2015, the British Parliament announced proposed changes to the U.K. feed-in-tariff program, which would negatively impact the U.K. rooftop solar photovoltaic market and make our long-term plan with respect to this

13



acquisition unviable. In response to these developments and in connection with our strategic decision to optimize business operations in alignment with current and future market opportunities we sold Mark Group in October 2015 to its management group for an immaterial amount of consideration and will exit the residential operations in the U.K. market. Based on the sales price in this subsequent transaction, we determined that the goodwill recognized upon acquisition was impaired, and thus we recognized an impairment charge of $38 million during the three months ended September 30, 2015 which is reported in long-lived asset impairment charges on the unaudited condensed consolidated statement of operations.
Other Acquisitions
For the nine month period ended September 30, 2015, we completed the acquisitions of six additional businesses for total consideration of $49 million, resulting in the recognition of goodwill totaling $7 million.
Renewable Energy Development Pending Acquisitions
Vivint Solar
On July 20, 2015, SunEdison and Vivint Solar, Inc. ("Vivint Solar") entered into an Agreement and Plan of Merger, dated as of July 20, 2015 (as it may be amended from time to time, the "Merger Agreement"), by and among SunEdison, SEV Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of SunEdison ("Merger Sub"), and Vivint Solar, pursuant to which SunEdison will acquire Vivint Solar for total consideration currently estimated at approximately $1.6 billion, payable in a combination of cash, shares of SunEdison common stock and SunEdison convertible notes to be issued in connection with the Merger. Final closing of this acquisition, which is subject to approval by Vivint Solar's shareholders, is expected by the fourth quarter of 2015 or the first quarter of 2016.
In addition, on July 20, 2015, in connection with its entry into the Merger Agreement, SunEdison entered into a purchase agreement (the "TERP Purchase Agreement") with a subsidiary of TERP, pursuant to which SunEdison will sell to TERP (the "TERP Acquisition") certain renewable assets constituting Vivint Solar's rooftop solar portfolio (the "Vivint Operating Assets"), consisting of up to 523 MW as of December 31, 2015, which would be valued at up to $922 million in cash including an advance for projects expected to be acquired from SunEdison following the consummation of the TERP Acquisition (in the form of an interest-bearing, short-term note). We intend to fund the cash portion of the merger consideration primarily from the proceeds of a new $500 million secured debt facility and the completion of the TERP Acquisition. We have entered into a commitment letter with Goldman Sachs Bank USA for a $500 million secured term loan facility. The funding of the term facility is subject to the negotiation of definitive documentation and other customary closing conditions.
Since the announcement of the signing of the Merger Agreement, SunEdison, Merger Sub, Vivint Solar, 313 Acquisition LLC (“313”), a majority holder of the voting power of Vivint Solar common stock, TerraForm Power and Vivint Solar’s directors have been named as defendants in several putative shareholder class actions challenging the proposed Merger and may be named as defendants in future such litigations. For further information see “Risk Factors—Completion of the Vivint Solar acquisition is subject to conditions and if satisfaction of these conditions is delayed or these conditions are not satisfied or waived, the acquisition may be delayed or may not be completed at all.
Renova Transactions
On July 15, 2015, we entered into a securities purchase agreement with Light Energia S.A. in which we agreed to acquire all of Light Energia's ownership interest, approximately 16%, in Renova for $250 million. The purchase price is payable in shares of SunEdison common stock. This transaction has not yet closed and is subject to customary closing conditions. GLBL entered into an additional agreement on July 15, 2015 with Renova (the "Backlog Agreement") to acquire certain development-stage projects between 2017 and 2020 provided significant conditions and contingencies are met. GLBL subsequently assigned its rights and obligations under the Backlog Agreement to SunEdison. The Backlog Agreement covers twelve wind and hydro-electric projects in Brazil which represent an aggregate capacity of approximately 2.5 GW. These projects are in various stages of planning and development, and this commitment is subject to significant conditions, along with satisfactory due diligence, regulatory approvals and certain third party consents, and each project must also meet certain technical and operational requirements. If the significant conditions and other contingencies described above are met and all 12 projects are acquired, the aggregate consideration for these projects is currently projected at approximately $4 billion.
TerraForm Global Acquisitions
Honiton
On May 14, 2015, GLBL completed the acquisition of 100% of the outstanding shares of Honiton Energy XIL Holdings Limited (“Honiton XIL”) and Honiton Energy BAV Holdings Limited (“Honiton BAV”, and together with Honiton XIL “Honiton”) from Honiton Energy Caymans Limited. Honiton operates three wind energy generation projects located in China

14



with a combined generation capacity of 149 MW. The aggregate cash consideration paid for this acquisition was $109 million. The preliminary fair value of the Honiton assets and liabilities acquired is summarized in the Acquisition Accounting section below.
Witkop/Soutpan
On August 6, 2015, SunEdison completed the acquisition of an additional 41.3% equity interest in the solar projects Witkop and Soutpan located in South Africa with a combined generation capacity of 33 MW from a subsidiary of Chint Solar (Zhejiang) Co., Ltd. The aggregate consideration paid for the 41.3% interests was $39 million in cash. Prior to this purchase, SunEdison held a 9.7% interest in each of these projects which were accounted for as equity method investments. We transferred the fair value ($47 million) of our resulting 51.0% controlling interest in each of these projects to GLBL and recognized a $28 million gain on the remeasurement of our previously held interest in our investments in these projects which is reported in other income in the unaudited condensed consolidated statement of operations for the three and nine month periods ended September 30, 2015. The preliminary fair value of the aggregate Witkop/Soutpan assets and liabilities acquired is summarized in the Acquisition Accounting section below.
Renova Operating Projects
On July 15, 2015, GLBL executed agreements with Renova Energia S.A. (“Renova”) to acquire two wind projects and one hydro-electric project in Brazil that have a combined generation capacity of approximately 336 MW. The aggregate consideration is expected to be $175 million in cash and 20,327,499 shares of GLBL's Class A common stock (see Note 18).
On September 18, 2015, GLBL completed the acquisition of the two Renova operating wind energy projects located in Brazil (Salvador and Bahia) that represent 294 MW of combined generation capacity (the “Renova Transaction”). The fair value of consideration given for these two projects was $321 million, comprised of $117 million in cash funded with the proceeds of GLBL's Senior Notes offering (see Note 8), 20,327,499 shares of GLBL’s Class A common stock valued at $184 million based on the value on September 18, 2015 of $9.03 per share, and a put/call arrangement with a fair value of $20 million (see Note 9). GLBL repaid all of the project-level indebtedness of these projects shortly following the completion of the Renova Transaction.
GLBL expects to acquire the hydro-electric energy project during the fourth quarter for approximately $33 million in cash (after foreign translation effects from the Brazilian Real).
Acquisition Accounting
The preliminary estimated allocations of assets and liabilities for the above acquisitions are as follows:
 
2015 Preliminary
 
Honiton
 
Witkop/Soutpan
 
Renova
In millions
 
 
 
 
 
Cash and cash equivalents
$
4

 
$
1

 
$
5

Restricted cash
9

 
24

 
42

Accounts receivable
18

 
5

 
12

Renewable energy systems & other property, plant and equipment
156

 
211

 
484

Other intangible assets

 
81

 

Other assets
6

 
4

 
1

Total assets acquired
193

 
326

 
544

Accounts payable and accrued liabilities
15

 
13

 
5

Long-term debt
69

 
182

 
215

Other liabilities

 
38

 
3

Total liabilities assumed
84

 
233

 
223

Noncontrolling interests

 
46

 

Fair value of net assets acquired
$
109

 
$
47

 
$
321

The initial accounting for Honiton, Witkop/Soutpan, and Renova business combinations is not complete because the evaluation necessary to assess the fair values of certain assets acquired and liabilities assumed is in process. The provisional amounts are subject to revision until the evaluations are completed to the extent that any additional information is obtained about the facts and circumstances that existed as of the acquisition date.

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Other Acquisitions
For the nine month period ended September 30, 2015, GLBL completed the acquisition of an additional business for total consideration of $9 million.
TerraForm Global Subsequent Events
FERSA Transaction
On October 7, 2015, GLBL completed the acquisition of three Indian wind projects, Bhakrani, Gadag and Hanumanhatti, which represent 102 MW of combined generation capacity, from Fersa Energias Renovables, S.A. (“FERSA”), a Spanish wind developer (the “FERSA Transaction”). The aggregate consideration for the FERSA Transaction was approximately $33 million in cash funded with proceeds of the offering of the Senior Notes. The cash consideration was held in an escrow account at September 30, 2015 and was released to FERSA upon completion of the acquisition. The cash consideration that was held in escrow is reflected as restricted cash on the accompanying condensed consolidated balance sheet. In addition, GLBL repaid $39 million of the project-level indebtedness of these projects in connection with the completion of the FERSA Transaction. The debt settlement payment is reflected within other assets on the accompanying condensed consolidated balance sheet.
LAP Transaction
On May 19, 2015, SunEdison Holdings Corporation (“Holdings”), a wholly owned subsidiary of SunEdison and the immediate parent of TERP and GLBL, entered into an Amended and Restated Share Purchase Agreement (the “Share Purchase Agreement”) with the shareholders of Latin America Power Holding, B.V. (“LAP”) to acquire the shares of LAP (the “LAP Transaction”). SunEdison guaranteed the payment obligations of Holdings under the Share Purchase Agreement. TERP guaranteed the part of the consideration payable by Holdings under the Share Purchase Agreement for two renewable energy projects in Chile, for which TERP would receive a purchase option following the closing of the LAP Transaction. The LAP Transaction included, among other things, Holdings acquiring six operating hydro-electric projects located in Peru with a combined generation capacity of 73 MW (the “Peru Projects”). Holdings intended to transfer the Peru Projects to GLBL after the closing of the acquisition. Holdings’ obligation to complete the acquisition contemplated by the Share Purchase Agreement was subject to the satisfaction of various closing conditions. In addition, the Share Purchase Agreement provided that subject to certain conditions each party could terminate the agreement if the closing did not occur on or prior to September 30, 2015.
On October 1, 2015, Holdings received a notice from the sellers purporting to terminate the Share Purchase Agreement. Following receipt of such notice, Holdings exercised its right under the Share Purchase Agreement to terminate the agreement based on the failure by the sellers to satisfy certain conditions precedent to closing and the transaction not closing prior to September 30, 2015. As a result of such termination, Holdings will not acquire the Peru projects.
On November 6, 2015, Holdings received a request for arbitration naming SunEdison, Holdings and TERP as respondents. In the request for arbitration, the claimants request, among other things, damages in an amount not less than $150 million. SunEdison and TERP believe their positions are well-founded and intend to defend themselves vigorously. However, SunEdison and TERP are in the preliminary stages of reviewing the request for arbitration and, as a result, are unable to provide reasonable estimates as to any potential liability (see Note 12).
TerraForm Global Pending Acquisitions
BioTherm Transaction
On April 24, 2015, GLBL entered into a purchase and sale agreement to acquire a controlling interest in certain operating renewable energy generation assets located in South Africa with a combined generation capacity of 33 MW from BTSA Netherlands Cooperatie U.A. (“BioTherm”). The aggregate consideration payable for these three projects is approximately $63 million, comprised of approximately $55 million in cash and 544,055 shares of GLBL’s Class A common stock, which is contractually determined. In addition to the foregoing, GLBL has agreed to pay BioTherm approximately $20.5 million in additional cash consideration for certain rights and services.
On August 13, 2015, GLBL placed $20.3 million and 544,055 shares of GLBL Class A common stock into an escrow account to be used as purchase consideration for the two solar projects (Aries and Konkoonsies) and paid the full purchase price of $27 million in cash for the purchase of the wind project (Klipheuwel). The cash held in escrow and cash paid for Klipheuwel is reported within other assets on the unaudited condensed consolidated balance sheet as of September 30, 2015 and the related GLBL Class A common stock is reported as issued. The completion of the BioTherm transaction remains subject to obtaining consents from the South African Department of Energy and project lenders and is expected to occur before the end of the first quarter in 2016.

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Solarpack Transaction
In April 2015, GLBL entered into a share purchase agreement to acquire certain operating renewable energy generation assets located in Uruguay with a combined generation capacity of 26 MW from Solarpack Corporación Tecnológica, S.L. (“Solarpack”). The aggregate consideration that will be paid for this acquisition is $35 million in cash. The Solarpack transaction is expected to close by the end of 2015 upon the projects' achievement of commercial operation.
GME
In June 2015, GLBL signed an agreement with the shareholders of Globeleq Mesoamérica Energy (Wind) Limited (“GME”) to acquire four wind projects and a solar operating project in Honduras, Costa Rica and Nicaragua representing a combined generation capacity of 326 MW (the “GME Projects”), as well as GME’s wind and solar development platform. The consummation of the transaction is subject to various conditions, including obtaining consents from the project lenders.  GLBL is working with GME, SunEdison, the project lenders and others to satisfy the closing conditions and currently anticipate that the transaction will close by the end of 2015. However, various of the closing conditions are beyond our control and the transaction may not close at the time and on the terms anticipated.  The aggregate consideration payable by GLBL to GME is comprised of $340 million in cash and 701,754 shares of GLBL’s Class A common stock, plus interest of 15% per annum on the purchase price accruing from October 1, 2015.
TerraForm Power Acquisitions
Northern Lights
On June 30, 2015, TERP acquired two utility scale, ground mounted solar facilities from Invenergy Solar LLC (“Northern Lights”). The facilities are located in Ontario, Canada and have a total capacity of 25 MW. The facilities are contracted under long-term PPAs with an investment grade utility with a credit rating of Aa2, and the PPAs have a weighted average remaining life of 18 years. The aggregated consideration paid for this acquisition was $104 million in cash. The preliminary fair value of the Northern Light assets and liabilities acquired are summarized in the Acquisition Accounting section below.
Capital Dynamics
On December 18, 2014, TERP acquired 78 MW of distributed generation renewable energy systems in the U.S. from Capital Dynamics U.S. Solar Energy Fund, L.P., a closed-end private equity fund. This portfolio consists of 42 solar energy systems located in California, Massachusetts, New Jersey, New York, and Pennsylvania. The aggregate consideration paid for this acquisition was $258 million in cash. The preliminary fair value of the Capital Dynamics assets and liabilities acquired are summarized in the Acquisition Accounting section below.
Mt. Signal
Effective July 2, 2014, TERP acquired a 266 MW utility scale renewable energy system located in Mt. Signal, California (“Mt. Signal”) in exchange for share-based consideration in TERP consisting of (i) 5,840,000 Class B1 units (and a corresponding number of shares of Class B1 common stock) equal in value to $146 million and (ii) 5,840,000 Class B units (and a corresponding number of shares of Class B common stock) equal in value to $146 million. The fair value of the Mt. Signal assets and liabilities acquired are summarized in the Acquisition Accounting section below.

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Acquisition Accounting
The estimated allocations of assets and liabilities for the above acquisitions are as follows:
 
2015 Preliminary
 
2014 Preliminary
 
2014 Final
 
Northern Lights
 
Capital Dynamics
 
Mt. Signal
In millions
 
 
 
 
 
Cash and cash equivalents
$
3

 
$

 
$

Restricted cash

 

 
22

Accounts receivable
1

 
8

 
12

Renewable energy systems
75

 
252

 
650

Other intangible assets
26

 
75

 
120

Other assets

 
23

 
12

Total assets acquired
105

 
358

 
816

Accounts payable and accrued liabilities

 
1

 
23

Long-term debt

 

 
413

Other liabilities
1

 
79

 
5

Total liabilities assumed
1

 
80

 
441

Redeemable noncontrolling interests

 
20

 

Noncontrolling interests

 

 
83

Fair value of net assets acquired
$
104

 
$
258

 
$
292

The purchase accounting for these acquisitions resulted in recognition of intangible assets for long-term PPAs totaling $221 million. These intangible assets are subject to amortization with no residual value. The estimated fair values were determined based on an income approach, and the estimated useful lives of these intangible assets range from 10 to 24 years.
The initial accounting for Capital Dynamics and Northern Lights business combinations are not complete because the evaluations necessary to assess the fair values of certain assets acquired and liabilities assumed are in process. The provisional amounts are subject to revision until the evaluations are completed to the extent that any additional information is obtained about the facts and circumstances that existed as of the acquisition dates.
The accounting for Mt. Signal business combinations is complete and any future adjustments due to changes of the assumptions used to calculate the fair value of acquisition related assets and liabilities will be reflected in the consolidated statements of operations.
Other Acquisitions
During the nine months ended September 30, 2015, TERP acquired 66 solar generation facilities with a combined nameplate capacity of 38 MW for aggregate consideration of $91 million, net of cash acquired, and $16 million of project-level debt assumed. The facilities are located in six states in the U.S. and Ontario, Canada. The facilities are contracted under long-term PPAs with commercial and municipal customers and the PPAs have a weighted-average remaining life of approximately 15 years.
TerraForm Power Pending Acquisitions
Invenergy
On June 30, 2015, TERP entered into a definitive agreement to acquire net ownership of 930 MW of operating and under construction wind power plants from Invenergy Wind Global LLC (together with its subsidiaries, “Invenergy”) for approximately $1.1 billion in cash and the assumption of approximately $818 million of project-level indebtedness. TERP has obtained commitments for a senior unsecured bridge facility of up to $860 million to fund the acquisition of these wind power plants (see Note 8).
Vivint Solar Assets
In connection with SunEdison's pending acquisition of Vivint Solar, TERP entered into the TERP Purchase Agreement with SunEdison to acquire the Vivint Operating Assets and an interim agreement (the “Vivint Interim Agreement”) relating to, among other items, TERP’s purchase at fair market value, subject to downward price adjustment to achieve certain minimum

18



returns, of additional completed residential and small commercial solar systems for a five year period from the acquired business, including up to 450 MW in 2016 and up to 500 MW per year thereafter, and the provision of operation and maintenance services by SunEdison for the Vivint Operating Assets, including potential repairs and retrofits. The arrangements under the Vivint Interim Agreement are subject to definitive documentation.
The TERP Purchase Agreement provides for, at the closing of the Merger, the acquisition of solar systems with an expected nameplate capacity of up to 523 MW as of December 31, 2015, which would be valued at up to $922 million. In the event the value of the Vivint Operating Assets delivered is less than $922 million, the agreement provides that a portion of the purchase price representing the value of the shortfall will be an advance payment (in the form of an interest-bearing, short-term note) for future acquisition of residential systems or other renewable energy facilities from SunEdison. TERP intends to finance the TERP Acquisition with existing cash, availability under TERP’s revolving credit facility and the assumption or incurrence of project-level debt. Additionally, on July 20, 2015, TERP obtained commitments for a senior unsecured bridge facility which provides TERP with up to $960 million to fund the acquisition of the Vivint Operating Assets, including related acquisition costs, if the intended financing plan above cannot be achieved.
4. INVESTMENTS
The carrying value of investments consists of the following:
 
As of September 30, 2015
 
As of December 31, 2014
In millions
 
 
 
Equity method investments
$
134

 
$
133

Cost method and other investments
22

 
16

Total investments
$
156

 
$
149

NexTracker
In September 2015, we sold our equity method investment in NexTracker, Inc. ("NexTracker") in connection with the acquisition of NexTracker by an unrelated third party. We received $51 million in upfront cash consideration in the transaction, which resulted in the recognition of a gain in other income of $45 million during the three months ended September 30, 2015. We are entitled to additional consideration of $8 million which is currently held in escrow subject to NexTracker's payment of its outstanding contingencies over the next 18 months. Additionally, we are entitled to incremental consideration of up to $12 million and $6 million, respectively, contingent upon NexTracker’s achievement of specified revenue targets over the next one- and two-year periods. The escrow and contingent consideration amounts will be recognized as incremental gains as and when received.
Four Brothers
During the second quarter of 2015, we established a joint venture with Dominion Solar Projects III, Inc. ("Dominion") for Four Brothers, a 420 MW solar energy project located in Utah (the “Dominion Joint Venture”). The Four Brothers project is contracted under long-term PPAs for 20 years with PacifiCorp, a subsidiary of Berkshire Hathaway Energy. The project is now under construction and fully financed with an expected commercial operation date of mid-2016. We have accounted for our interest in Four Brothers as an equity method investment. The carrying value of our investment in Four Brothers as of September 30, 2015 was $31 million.
Three Cedars
During the third quarter of 2015, we expanded the Dominion Joint Venture to include Three Cedars, a 263 MW solar energy project located in Utah. The project is contracted under long-term PPAs for 20 years with PacifiCorp. The project is now under construction and fully financed with an expected commercial operation date of mid-2016. Prior to the sale of a controlling interest to Dominion, we held 100% ownership of the Three Cedars project. Following the sale to Dominion, we deconsolidated Three Cedars and recognized a gain of approximately $57 million on the sale of our investment, which is reported in other income in our unaudited condensed consolidated statement of operations for the three months ended September 30, 2015. We have accounted for our remaining interest in Three Cedars as an equity method investment. The carrying value of our investment in Three Cedars as of September 30, 2015 was $21 million.

19



Dominion Investment
In September 2015, DSP Acquisition Holdings, LLC, an indirect subsidiary of SunEdison, entered into a Purchase and Sale Agreement ("PSA") with subsidiaries of Dominion for the acquisition of a 33% interest in a 424 MW portfolio of solar energy projects. Each solar energy project is expected to be operational at closing of the PSA. The purchase price for the 33% interest is expected to be $297 million, subject to certain specified purchase price adjustments. This transaction is expected to close during the fourth quarter of 2015, subject to certain closing conditions, and we plan to fund this investment with equity and committed project debt financing (see the J.P. Morgan Asset Management Strategic Equity Partnership discussion in Note 8 for additional details).
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
 
 
As of September 30, 2015
 
As of December 31, 2014
In millions
 
 
 
 
Land
 
$
5

 
$
7

Software
 
17

 
10

Buildings and improvements
 
101

 
98

Machinery and equipment
 
496

 
457

Renewable energy systems
 
8,438

 
4,709

Total property, plant and equipment in service, at cost
 
$
9,057

 
$
5,281

Less accumulated depreciation
 
(624
)
 
(572
)
Total property, plant and equipment in service, net
 
$
8,433

 
$
4,709

Construction in progress – renewable energy systems
 
2,121

 
956

Construction in progress – other
 
805

 
811

Total property, plant and equipment, net
 
$
11,359

 
$
6,476

During the nine month period ended September 30, 2015, we incurred impairment charges of $9 million for construction in progress related to certain renewable energy projects, which are reported in long-lived asset impairment charges in the condensed consolidated statements of operations.
6. GOODWILL
The changes in the carrying amount of goodwill during the nine months ended September 30, 2015 are as follows:
In millions
 
 
Balance as of December 31, 2014
 
$
73

Goodwill recognized in acquisitions (see Note 3)
 
480

Impairment of goodwill related to Mark Group Ltd. (see Note 3)
 
(38
)
Measurement period adjustments
 
(1
)
Currency translation adjustment
 
(3
)
Balance as of September 30, 2015
 
$
511

Goodwill balances referenced above relate to the Renewable Energy Development segment.

20



7. OTHER INTANGIBLE ASSETS
Other intangible assets consist of the following:
 
 
September 30, 2015
 
December 31, 2014
 
Weighted
Average
Amortization
Period (years)
Gross Carrying Amount
 
Accumulated Amortization
Allocated to Renewable Energy
Systems
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
Allocated to Renewable Energy
Systems
 
Net Carrying Amount
In millions
 
 
 
 
 
 
 
 
 
 
 
 
Amortizable intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
PPAs and FiTs
20
$
621

 
$
(28
)
 
$
593

 
$
553

 
$
(13
)
 
$
540

Other
4
57

 
(24
)
 
33

 
29

 
(9
)
 
20

Total amortizable intangible assets
19
$
678

 
$
(52
)
 
$
626

 
$
582

 
$
(22
)
 
$
560

Indefinite lived assets:
 
 
 
 
 
 
 
 
 
 
 
 
Power plant development arrangements
Indefinite
$
890

 
$
(30
)
 
$
860

 
$
116

 
$
(93
)
 
$
23

Other
Indefinite
4

 

 
4

 
3

 

 
3

Total indefinite lived assets
 
$
894

 
$
(30
)
 
$
864

 
$
119

 
$
(93
)
 
$
26

Total other intangible assets
 
$
1,572

 
$
(82
)
 
$
1,490

 
$
701

 
$
(115
)
 
$
586

During the nine month period ended September 30, 2015, we incurred impairment charges of $8 million for our power plant development arrangements, which are classified in long-lived asset impairment charges in the condensed consolidated statements of operations.

21



8. LONG-TERM DEBT AND OTHER FINANCING TRANSACTIONS
Debt, including consolidated variable interest entities ("VIEs"), consists of the following:
 
 
 
 
As of September 30, 2015
 
As of December 31, 2014
In millions
 
Weighted Average Annual Interest Rate
 
Total
 
Current and Short-Term
 
Long-Term
 
Total
 
Current and Short-Term
 
Long-Term
Renewable Energy Development segment debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Convertible senior notes, net of discounts
 
2.05%
 
$
1,862

 
$

 
$
1,862

 
$
1,346

 
$

 
$
1,346

Margin loan
 
6.25%
 
404

 

 
404

 

 

 

Exchangeable notes
 
3.75%
 
336

 

 
336

 

 

 

SMP Ltd. credit facilities(a)
 
5.40%
 
334

 
70

 
264

 
355

 
107

 
248

First Reserve warehouse term loan(a)
 
5.25%
 
465

 
5

 
460

 

 

 

TerraForm Private warehouse term loan(a)
 
5.00%
 
280

 
1

 
279

 

 

 

System pre-construction, construction and term debt(b)
 
4.67%
 
2,065

 
1,114

 
951

 
1,360

 
573

 
787

Financing leaseback obligations(c)
 
4.59%
 
1,468

 
11

 
1,457

 
1,404

 
14

 
1,390

Other credit facilities(d)
 
4.47%
 
670

 
507

 
163

 
364

 
235

 
129

Total Renewable Energy Development segment debt
 
 
 
7,884


1,708


6,176


4,829


929


3,900

TerraForm Power segment debt(a):
 
 
 
 
 
 
 
 
 
 
 
 
 

Senior notes, net of discounts
 
5.94%
 
1,250

 

 
1,250

 

 

 

Term loan facility
 
—%
 

 

 

 
574

 
6

 
568

Other system financing transactions
 
5.22%
 
1,298

 
117

 
1,181

 
1,024

 
74

 
950

Total TerraForm Power segment debt
 
 
 
2,548


117


2,431


1,598


80


1,518

TerraForm Global segment debt(a):
 
 
 

 
 
 
 
 

 
 
 
 
GLBL acquisition facility
 
—%
 

 

 

 
150

 
2

 
148

Senior notes
 
9.75%
 
800

 

 
800

 

 

 

Other system financing transactions
 
12.15%
 
440

 
80

 
360

 
416

 
67

 
349

Total TerraForm Global segment debt
 
 
 
1,240


80


1,160


566


69


497

Total debt outstanding
 
 
 
$
11,672


$
1,905


$
9,767


$
6,993


$
1,078


$
5,915

________________________
(a) Non-recourse to SunEdison
(b) Includes $54 million and $8 million of debt with recourse to SunEdison as of September 30, 2015 and December 31, 2014, respectively
(c) Includes $32 million of debt with recourse to SunEdison as of December 31, 2014  
(d) Includes $388 million and $215 million of debt with recourse to SunEdison as of September 30, 2015 and December 31, 2014, respectively
Renewable Energy Development Segment Debt
Convertible Senior Notes Due 2018 and 2021
On December 20, 2013, we issued $600 million in aggregate principal amount of 2.00% convertible senior notes due 2018 (the "2018 Notes") and $600 million aggregate principal amount of 2.75% convertible senior notes due 2021 (the "2021 Notes", and together with the 2018 Notes, the "2018/2021 Notes") in a private placement offering. We received net proceeds, after payment of debt financing fees, of $1,167 million in the offering, before payment of the net cost of the call spread overlay described below.
Interest on the 2018 Notes is payable on April 1 and October 1 of each year, beginning on April 1, 2014. Interest on the 2021 Notes is payable on January 1 and July 1 of each year, beginning on July 1, 2014. The 2018 Notes and the 2021 Notes mature on October 1, 2018 and January 1, 2021, respectively, unless earlier converted or purchased.

22



The 2018/2021 Notes are convertible at any time until the close of business on the business day immediately preceding July 1, 2018 (in the case of the 2018 Notes) or October 1, 2020 (in the case of the 2021 Notes) only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending March 31, 2014, if the closing sale price of our common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than 120% of the conversion price of the 2018/2021 Notes in effect on each applicable trading day; (2) during the five consecutive business day period following any 10 consecutive trading-day period in which the trading price for the 2018/2021 Notes for each such trading day is less than 98% of the closing sale price of our common stock on such trading day multiplied by the applicable conversion rate on such trading day; or (3) upon the occurrence of specified corporate events. The 2018/2021 Notes were not convertible as of September 30, 2015. On and after July 1, 2018 (in the case of the 2018 Notes) or October 1, 2020 (in the case of the 2021 Notes) and until the close of business on the second scheduled trading day immediately prior to the applicable stated maturity date, the 2018/2021 Notes are convertible regardless of the foregoing conditions based on an initial conversion price of $14.62 per share of our common stock.
The conversion price will be subject to adjustment in certain events, such as distributions of dividends or stock splits. The 2018/2021 Notes are convertible only into cash, shares of our common stock or a combination thereof at our election. However, we were required to settle conversions solely in cash until we obtained the requisite approvals from our stockholders to (i) amend our Amended and Restated Certificate of Incorporation to sufficiently increase the number of authorized but unissued shares of our common stock to permit the conversion and settlement of the 2018/2021 Notes into shares of our common stock, and (ii) authorize the issuance of the maximum numbers of shares described above in accordance with the continued listing standards of the New York Stock Exchange. At our annual stockholders meeting on May 29, 2014, the requisite majority of the outstanding shares of our common stock approved these measures, and we subsequently filed a related amendment to our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. Holders may also require us to repurchase all or a portion of the 2018/2021 Notes upon a fundamental change, as defined in the indenture agreement, at cash repurchase price equal to 100% of the principal amount plus accrued and unpaid interest. In the event of certain events of default, such as our failure to make certain payments, pay debts as they become due or perform or observe certain obligations thereunder, the trustee or holders of a specified amount of then outstanding 2018/2021 Notes will have the right to declare all amounts then outstanding due and payable. We may not redeem the 2018/2021 Notes prior to the applicable stated maturity date.
The 2018/2021 Notes are general unsecured obligations and rank senior in right of payment to any of our future indebtedness that is expressly subordinated in right of payment to the 2018/2021 Notes; equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated; effectively subordinated in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and effectively subordinated to all existing and future indebtedness (including trade payables) incurred by our subsidiaries.
From December 20, 2013 through May 29, 2014, the period in which we would have been required to settle conversions in cash if exercised, the embedded conversion options (the "2018/2021 Conversion Options") within the 2018/2021 Notes were separated from the 2018/2021 Notes and accounted for separately as derivative instruments (derivative liabilities) with changes in fair value reported in the consolidated statements of operations, as further discussed in the Loss on Convertible Notes Derivatives section below. Upon obtaining the requisite approvals from our stockholders as discussed above, the 2018/2021 Conversion Options were considered equity instruments. Thus, as of May 29, 2014, the 2018/2021 Conversion Options were remeasured at fair value, or $888 million, with the change in fair value reported in the consolidated statement of operations, and the resulting fair value of the 2018/2021 Conversion Options was reclassified to Stockholders' Equity. Changes in fair value subsequent to May 29, 2014 are not recognized in the consolidated statement of operations as long as the instruments continue to qualify to be classified as equity.
On May 12, 2015, we entered into privately negotiated exchange agreements (the “2018/2021 Exchange Agreements”) with a limited number of holders of our outstanding 2018/2021 Notes. Pursuant to the 2018/2021 Exchange Agreements, we exchanged $600 million aggregate principal amount of outstanding 2018 Notes and 2021 Notes ($300 million of the 2018 Notes and $300 million of the 2021 Notes) for 41 million shares of common stock underlying the 2018/2021 Notes to be exchanged and $63 million in cash. We recognized a loss on the extinguishment of debt of $75 million which included the write-off of the related unamortized debt issuance costs.

23



Call Spread Overlay for Convertible Senior Notes Due 2018 and 2021
Concurrent with the issuance of the 2018/2021 Notes, we entered into privately negotiated convertible note hedge transactions (collectively, the "2018/2021 Note Hedges") and warrant transactions (collectively, the "2018/2021 Warrants" and together with the 2018/2021 Note Hedges, the “2018/2021 Call Spread Overlay”), with certain of the initial purchasers of the 2018/2021 Notes or their affiliates. Assuming full performance by the counterparties, the 2018/2021 Call Spread Overlay is designed to effectively reduce our potential payout over the principal amount on the 2018/2021 Notes upon conversion.
Under the terms of the 2018/2021 Note Hedges, we purchased from affiliates of certain of the initial purchasers of the 2018/2021 Notes options to acquire, at an exercise price of $14.62 per share, subject to anti-dilution adjustments, up to 82 million shares of our common stock. Each 2018/2021 Note Hedge is a separate transaction, entered into by us with each option counterparty, and is not part of the terms of the 2018/2021 Notes. Each 2018/2021 Note Hedge is exercisable upon the conversion of the 2018/2021 Notes and expires on the corresponding maturity dates of the 2018/2021 Notes. The option counterparties are generally obligated to settle their obligations to us upon exercise of the 2018/2021 Note Hedges in the same manner as we satisfy our obligations to holders of the 2018/2021 Notes.
Under the terms of the 2018/2021 Warrants, we sold to affiliates of certain of the initial purchasers of the 2018/2021 Notes warrants to acquire, on the stated expiration date of each 2018/2021 Warrant, up to 82 million shares of our common stock at an exercise price of $18.35 and $18.93 per share, for the 2018 warrants and 2021 warrants, respectively, subject to anti-dilution adjustments. Each 2018/2021 Warrant transaction is a separate transaction, entered into by us with each option counterparty, and is not part of the terms of the 2018/2021 Notes.
From December 20, 2013 through May 29, 2014, the period in which we would have been required to settle the 2018/2021 Note Hedges and 2018/2021 Warrants in cash if exercised, these instruments were required to be accounted for as derivative instruments with changes in fair value reported in the consolidated statements of operations, as further discussed in the Loss on Convertible Notes Derivatives section below. Upon obtaining the requisite approvals from our stockholders discussed above, the 2018/2021 Note Hedges and 2018/2021 Warrants were considered equity instruments. Thus, as of May 29, 2014, the 2018/2021 Note Hedges and 2018/2021 Warrants were remeasured at fair value (asset of $880 million and liability of $753 million respectively), with the changes in fair value reported in the consolidated statement of operations, and the resulting fair values of the 2018/2021 Note Hedges and 2018/2021 Warrants were reclassified to Stockholders' Equity. Changes in fair value subsequent to May 29, 2014 will not be recognized in the consolidated statement of operations as long as the instruments continue to qualify to be classified as equity.
Upon entrance into the 2018/2021 Exchange Agreements, the parties agreed to unwind the portion of the 2018/2021 Note Hedges related to the exchanged 2018/2021 Notes for a total cash settlement of $635 million, calculated by reference to the weighted price of our common stock on the settlement date, received by us. In addition, the parties agreed to unwind the portion of the 2018/2021 Warrants related to the exchanged 2018/2021 Notes for a total cash settlement of $632 million, calculated by reference to the weighted average price of our common stock on the settlement date, paid by us. The settlement of this portion of the 2018/2021 Call Spread Overlay was recorded as an adjustment to additional paid in capital.
Loss on Convertible Notes Derivatives
For the nine month period ended September 30, 2014, we recognized a net loss of $499 million related to the change in the fair value of the 2018/2021 Conversion Options, the 2018/2021 Note Hedges and 2018/2021 Warrants (the "2018/2021 Convertible Notes Derivatives") prior to the reclassification of these instruments to Stockholders' Equity as discussed above, which is reported in loss on convertible notes derivatives, net in the consolidated statement of operations, as follows:
In millions
Nine Months Ended September 30, 2014
Conversion Options
$
382

Note Hedges
(366
)
Warrants
483

Total loss on convertible note derivatives, net
$
499


24



The 2018/2021 Convertible Notes Derivatives were measured at fair value using a Black-Scholes valuation model as these instruments are not traded on an open market. Significant inputs to the valuation model, which have been identified as Level 2 inputs, were as follows:
 
Conversion Options
 
Note Hedges
 
Warrants
 
Due 2018
 
Due 2021
 
Due 2018
 
Due 2021
 
Due 2018
 
Due 2021
Stock price
$
20.50

 
$
20.50

 
$
20.50

 
$
20.50

 
$
20.50

 
$
20.50

Exercise price
$
14.62

 
$
14.62

 
$
14.62

 
$
14.62

 
$
18.35

 
$
18.93

Risk-free rate
1.34
%
 
1.95
%
 
1.30
%
 
1.93
%
 
1.45
%
 
2.30
%
Volatility
45
%
 
45
%
 
45
%
 
45
%
 
42
%
 
42
%
Dividend yield
%
 
%
 
%
 
%
 
%
 
%
Maturity
2018

 
2021

 
2018

 
2021

 
2018

 
2021

Further details of the inputs above are as follows:
Stock price - The closing price of our common stock on May 29, 2014
Exercise price - The exercise (or conversion) price of the derivative instrument
Risk-free rate - The Treasury Strip rate associated with the life of the derivative instrument
Volatility - The volatility of our common stock over the life of the derivative instrument
Convertible Senior Notes Due 2020
On June 10, 2014, we issued $600 million in aggregate principal amount of 0.25% convertible senior notes due 2020 (the "2020 Notes") in a private placement offering. We received net proceeds, after payment of debt financing fees, of $585 million in the offering, before payment of the net cost of the call spread overlay described below.
Interest on the 2020 Notes is payable on July 15 and January 15 of each year, beginning on January 15, 2015. The 2020 Notes mature on January 15, 2020, unless earlier converted or purchased.
The 2020 Notes are convertible at any time until the close of business on the business day immediately preceding October 15, 2019 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending September 30, 2014, if the closing sale price of our common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than 130% of the conversion price of the 2020 Notes in effect on each applicable trading day; (2) during the five consecutive business day period following any 10 consecutive trading-day period in which the trading price for the 2020 Notes for each such trading day is less than 98% of the closing sale price of our common stock on such trading day multiplied by the applicable conversion rate on such trading day; or (3) upon the occurrence of specified corporate events. The 2020 Notes were not convertible as of September 30, 2015. On and after October 15, 2019 and until the close of business on the second scheduled trading day immediately prior to the applicable stated maturity date, the 2020 Notes are convertible regardless of the foregoing conditions based on an initial conversion price of $26.87 per share of our common stock.
The conversion price will be subject to adjustment in certain events, such as distributions of dividends or stock splits. The 2020 Notes are convertible into cash, shares of our common stock or a combination thereof at our election. Holders may also require us to repurchase all or a portion of the 2020 Notes upon a fundamental change, as defined in the indenture agreement, at cash repurchase price equal to 100% of the principal amount plus accrued and unpaid interest. In the event of certain events of default, such as our failure to make certain payments or perform or observe certain obligations thereunder, the trustee or holders of a specified amount of then outstanding 2020 Notes will have the right to declare all amounts then outstanding due and payable. We may not redeem the 2020 Notes prior to the applicable stated maturity date.
The 2020 Notes are general unsecured obligations and rank senior in right of payment to any of our future indebtedness that is expressly subordinated in right of payment to the 2020 Notes; equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated; effectively subordinated in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and effectively subordinated to all existing and future indebtedness (including trade payables) incurred by our subsidiaries.

25



The embedded conversion options within the 2020 Notes are indexed to our common stock and thus were classified as equity instruments upon issuance of the 2020 Notes. The initial fair value of the embedded conversion options was recognized as a reduction in the carrying value of the 2020 Notes in the consolidated balance sheet and such discount will be amortized and recognized as interest expense over the term of the 2020 Notes. Subsequent changes in fair value are not recognized as long as the instruments continue to qualify to be classified as equity.
Call Spread Overlay for Convertible Senior Notes Due 2020
Concurrent with the issuance of the 2020 Notes, we entered into privately negotiated convertible note hedge transactions (collectively, the "2020 Note Hedges") and warrant transactions (collectively, the "2020 Warrants" and together with the 2020 Note Hedges, the “2020 Call Spread Overlay”), with certain of the initial purchasers of the 2020 Notes or their affiliates. Assuming full performance by the counterparties, the 2020 Call Spread Overlay is meant to effectively reduce our potential payout over the principal amount on the 2020 Notes upon conversion of the 2020 Notes.
Under the terms of the 2020 Note Hedges, we purchased from affiliates of certain of the initial purchasers of the 2020 Notes options to acquire, at an exercise price of $26.87 per share, subject to anti-dilution adjustments, up to 22 million shares of our common stock. Each 2020 Note Hedge is a separate transaction, entered into by us with each option counterparty, and is not part of the terms of the 2020 Notes. Each 2020 Note Hedge is exercisable upon the conversion of the 2020 Notes and expires on the corresponding maturity dates of the 2020 Notes.
Under the terms of the 2020 Warrants, we sold to affiliates of certain of the initial purchasers of the 2020 Notes warrants to acquire, on the stated expiration date of each 2020 Warrant, up to 22 million shares of our common stock at an exercise price of $37.21 per share, subject to anti-dilution adjustments. Each 2020 Warrant transaction is a separate transaction, entered into by us with each option counterparty, and is not part of the terms of the 2020 Notes.
The 2020 Note Hedges and 2020 Warrants are indexed to our common stock and thus were classified as equity instruments upon issuance and recognized at fair value based on the negotiated transaction prices. Subsequent changes in fair value are not recognized as long as the instruments continue to qualify to be classified as equity.
Convertible Senior Notes Due 2022
On January 27, 2015, we issued $460 million in aggregate principal amount of 2.375% convertible senior notes due 2022 (the "2022 Notes") in a private placement offering. We received net proceeds, after payment of debt financing fees, of $448 million in the offering, before payment of the net cost of the capped call feature described below.
Interest on the 2022 Notes is payable semiannually on April 15 and October 15 of each year, beginning on October 15, 2015. The 2022 Notes mature on April 15, 2022, unless earlier converted or purchased.
The 2022 Notes are convertible at any time until the close of business on the business day immediately preceding April 15, 2022 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending March 31, 2015, if the closing sale price of our common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than 130% of the conversion price of the 2022 Notes in effect on each applicable trading day; (2) during the five consecutive business day period following any 10 consecutive trading-day period in which the trading price for the 2022 Notes for each such trading day is less than 98% of the closing sale price of our common stock on such trading day multiplied by the applicable conversion rate on such trading day; or (3) upon the occurrence of specified corporate events. The 2022 Notes were not convertible as of September 30, 2015. On and after January 15, 2022 and until the close of business on the second scheduled trading day immediately prior to the applicable stated maturity date, the 2022 Notes are convertible regardless of the foregoing conditions based on an initial conversion price of $25.25 per share of our common stock.
The conversion price will be subject to adjustment in certain events, such as distributions of dividends or stock splits. The 2022 Notes are convertible into cash, shares of our common stock or a combination thereof at our election. Holders may also require us to repurchase all or a portion of the 2022 Notes upon a fundamental change, as defined in the indenture agreement, at cash repurchase price equal to 100% of the principal amount plus accrued and unpaid interest. In the event of certain events of default, such as our failure to make certain payments or perform or observe certain obligations thereunder, the trustee or holders of a specified amount of then outstanding 2022 Notes will have the right to declare all amounts then outstanding due and payable. We may not redeem the 2022 Notes prior to the applicable stated maturity date.

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The 2022 Notes are general unsecured obligations and rank senior in right of payment to any of our future indebtedness that is expressly subordinated in right of payment to the 2022 Notes; equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated; effectively subordinated in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and effectively subordinated to all existing and future indebtedness (including trade payables) incurred by our subsidiaries.
Capped Call Feature for Convertible Senior Notes Due 2022
In connection with the issuance of the 2022 Notes in January 2015, we paid $38 million to enter into privately negotiated capped call option agreements to reduce the potential dilution to holders of our common stock upon conversion of the 2022 Notes. The capped call options have a cap price of $32.72 and an initial strike price of $25.25, which is equal to the initial conversion price of the 2022 Notes. The capped call options expire on April 15, 2022. The capped call option agreements are separate transactions, are not a part of the terms of the 2022 Notes, and do not affect the rights of the holders of the 2022 Notes. The capped call options are expected generally to reduce the potential dilution with respect to our common stock upon conversion of the 2022 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2022 Notes in the event that the market price of our common stock is greater than the strike price of the capped call options, with such reduction of potential dilution or offset of cash payments subject to a cap based on the cap price of the capped call options.
Convertible Senior Notes Due 2023 and 2025
On May 20, 2015, we issued $450 million in aggregate principal amount of 2.625% convertible senior notes due 2023 (the "2023 Notes") and $450 million aggregate principal amount of 3.375% convertible senior notes due 2025 (the "2025 Notes," and together with the 2023 Notes, the "2023/2025 Notes") in a private placement offering. We received net proceeds, after payment of debt financing fees, of $860 million in the offering, before the exchange of $300 million of the outstanding aggregate principal amount of the 2018 Notes and the exchange of $300 million of the outstanding aggregate principal amount of the 2021 Notes and before payment of the net cost of the capped call feature described below.
Interest on the 2023/2025 Notes is payable on June 1 and December 1 of each year, beginning on December 1, 2015. The 2023 Notes and the 2025 Notes mature on June 1, 2023 and June 1, 2025, respectively, unless earlier converted or purchased.
The 2023/2025 Notes are convertible at any time until the close of business on the business day immediately preceding March 1, 2023 (in the case of the 2023 Notes) or March 1, 2025 (in the case of the 2025 Notes) only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending June 30, 2015, if the closing sale price of our common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than 130% of the conversion price of the 2023/2025 Notes in effect on each applicable trading day; (2) during the five consecutive business day period following any 10 consecutive trading-day period in which the trading price for the 2023/2025 Notes for each such trading day is less than 98% of the closing sale price of our common stock on such trading day multiplied by the applicable conversion rate on such trading day; or (3) upon the occurrence of specified corporate events. The 2023/2025 Notes were not convertible as of September 30, 2015. On and after March 1, 2023 (in the case of the 2023 Notes) or March 1, 2025 (in the case of the 2025 Notes) and until the close of business on the second scheduled trading day immediately prior to the applicable stated maturity date, the 2023/2025 Notes are convertible regardless of the foregoing conditions based on an initial conversion price of $38.65 per share of our common stock.
The conversion price will be subject to adjustment in certain events, such as distributions of dividends or stock splits. The 2023/2025 Notes are convertible into cash, shares of our common stock or a combination thereof at our election. Holders may also require us to repurchase all or a portion of the 2023/2025 Notes upon a fundamental change, as defined in the indenture agreement, at cash repurchase price equal to 100% of the principal amount plus accrued and unpaid interest. In the event of certain events of default, such as our failure to make certain payments or perform or observe certain obligations thereunder, the trustee or holders of a specified amount of then outstanding 2023/2025 Notes will have the right to declare all amounts then outstanding due and payable. We may not redeem the 2023/2025 Notes prior to the applicable stated maturity date.
The 2023/2025 Notes are general unsecured obligations and rank senior in right of payment to any of our future indebtedness that is expressly subordinated in right of payment to the 2023/2025 Notes; equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated; effectively subordinated in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and effectively subordinated to all existing and future indebtedness (including trade payables) incurred by our subsidiaries. 

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Capped Call Feature for Convertible Senior Notes Due 2023 and 2025
In connection with the issuance of the 2023/2025 Notes in May 2015, we paid $123 million to enter into privately negotiated capped call option agreements to reduce the potential dilution to holders of our common stock upon conversion of the 2023/2025 Notes. The capped call options have a cap price of $62.12 and an initial strike price of $38.65, which is equal to the initial conversion price of the 2023/2025 Notes. The capped call options expire on June 1, 2023 on the 2023 Notes and June 1, 2025 on the 2025 Notes. The capped call option agreements are separate transactions, are not a part of the terms of the 2023/2025 Notes, and do not affect the rights of the holders of the 2023/2025 Notes. The capped call options are expected generally to reduce the potential dilution with respect to our common stock upon conversion of the 2023/2025 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2023/2025 Notes in the event that the market price of our common stock is greater than the strike price of the capped call options, with such reduction of potential dilution or offset of cash payments subject to a cap based on the cap price of the capped call options.
Margin Loan
On January 29, 2015, a wholly-owned subsidiary of SunEdison entered into a margin loan agreement with the lenders party thereto (each, a “Lender”) and Deutsche Bank AG, as the administrative agent and the calculation agent thereunder, and SunEdison concurrently entered into a guaranty agreement in favor of the administrative agent for the benefit of each of the Lenders, pursuant to which SunEdison guaranteed all of the subsidiary’s obligations under the margin loan agreement. The margin loan agreement was subsequently amended in September 2015 (as amended, the "Margin Loan Agreement"). Under the Margin Loan Agreement, the subsidiary borrowed $410 million in term loans. The net proceeds of the term loans, less certain expenses, were made available to SunEdison to fund the acquisition of First Wind. The term loans mature on January 29, 2017. All outstanding amounts under the Margin Loan Agreement bear interest at a rate per annum equal to a three-month Eurodollar rate plus an applicable margin, and interest is payable quarterly. As of September 30, 2015, the applicable interest rate was 6.25%. We paid fees of $11 million upon entry into the Margin Loan Agreement, and fees of $4 million upon entry into the margin loan amendment, which were both recognized as deferred financing costs.
The Margin Loan Agreement requires the subsidiary to maintain a loan to value ratio not to exceed 40% (based on the value of the TERP Class A Common Stock, which certain of the collateral may be exchanged for). In the event that this ratio is not maintained, the subsidiary must post additional cash collateral under the Margin Loan Agreement and/or elect to repay a portion of the term loans thereunder. During the third quarter of 2015, we were required under the agreement to deposit $152 million into an escrow account as additional collateral. This amount is reported in non-current restricted cash on the condensed consolidated balance sheet as of September 30, 2015. In October 2015, we were required to deposit an additional $91 million in cash collateral. In addition, the Margin Loan Agreement requires the repayment of all or a portion of the term loans made thereunder upon the occurrence of certain events customary for financings of this nature, including other events relating to the price, liquidity or value of TERP Class A Common Stock, certain events or extraordinary transactions related to TERP and certain events related to SunEdison.
The subsidiary’s obligations under the Margin Loan Agreement are secured by a first priority lien on shares of Class B common stock in TERP, and Class B units and incentive distribution rights in Terra LLC, in each case, that are owned by the subsidiary. The Margin Loan Agreement contains customary representations and warranties, covenants and events of default for financings of this nature. Upon the occurrence and during the continuance of an event of default, any Lender may declare the term loans due and payable, exercise remedies with respect to the collateral and demand payment from SunEdison of the obligations under the Margin Loan Agreement then due and payable. TERP has agreed to certain obligations in connection with the Margin Loan Agreement relating to its equity securities.
Exchangeable Notes Due 2020
On January 29, 2015, a wholly-owned subsidiary of SunEdison issued $337 million aggregate principal amount of 3.75% Guaranteed Exchangeable Senior Secured Notes due 2020 (the “Exchangeable Notes”) in a private placement pursuant to an indenture agreement (the “Exchangeable Notes Indenture”) among the subsidiary, SunEdison, as guarantor, and Wilmington Trust, N.A., as exchange agent, registrar, paying agent and collateral agent (the “Exchangeable Notes Trustee”). In connection with the issuance of the Exchangeable Notes, the subsidiary also entered into a pledge agreement with the Exchangeable Notes Trustee, in its capacity as collateral agent, providing for the pledge of shares of TERP Class B common stock and Terra LLC’s Class B units held by the subsidiary (the “Class B Securities”) as described below.
The proceeds of the Exchangeable Notes made up a portion of SunEdison’s upfront consideration for the acquisition of First Wind. The Exchangeable Notes bear interest at a rate of 3.75% per annum and mature on January 15, 2020. Interest on the Exchangeable Notes is payable semiannually in arrears to holders of record at the close of business on January 1 or July 1 immediately preceding the interest payment date on January 15 and July 15 of each year, commencing on July 15, 2015.

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The Exchangeable Notes are secured by a first priority lien on the Class B Securities, which were transferred by SunEdison to the subsidiary upon issuance of the Exchangeable Notes, equal to the number of shares of TERP Class A Common Stock initially issuable upon exchange of the Exchangeable Notes, including the maximum number of shares of TERP Class A Common Stock to be issued upon exchange in connection with a make-whole fundamental change. SunEdison will transfer to the subsidiary, and the subsidiary will pledge, on a first priority basis, additional shares of the Class B Securities in connection with any adjustment to the exchange rate, so that, at all times, the Class B Securities equal to the full number of shares of TERP Class A Common Stock issuable upon exchange of the Exchangeable Notes shall be held by the subsidiary and subject to such first priority lien. The Exchangeable Notes are fully and unconditionally guaranteed by SunEdison. The Exchangeable Notes and the guarantees are pari passu in right of payment to the SunEdison’s obligations under its outstanding convertible debt.
Holders of the Exchangeable Notes may exchange their Exchangeable Notes at their option on or after January 29, 2016 at any time prior to the close of business on the business day immediately preceding the maturity date. Upon exchange, the subsidiary will deliver shares of TERP Class A Common Stock, based upon the applicable exchange rate (together with a cash payment in lieu of delivering any fractional share). The initial exchange rate is 28.9140 shares of TERP Class A Common Stock per $1,000 principal amount of Exchangeable Notes, equivalent to an initial exchange price of approximately $34.58 per share of TERP Class A Common Stock. The exchange rate is subject to adjustment for certain events but will not be adjusted for accrued interest.
The subsidiary may not redeem the relevant Exchangeable Note prior to the maturity date, and no “sinking fund” is provided for the Exchangeable Notes. Upon the occurrence of a “Fundamental Change” (as defined in the Exchangeable Notes Indenture), holders of the Exchangeable Notes may require the subsidiary to repurchase for cash the Exchangeable Notes at a price equal to 100% of the principal amount of the Exchangeable Notes being repurchased plus any accrued and unpaid interest up to, but excluding, the repurchase date; provided, however, that if the repurchase date is after a regular record date and on or prior to the interest payment date to which it relates, the subsidiary will instead pay interest accrued to the interest payment date to the holder of record of the Exchangeable Note as of the close of business on the regular record date, and the Fundamental Change purchase price shall then be equal to 100% of the principal amount of the note subject to purchase and will not include any accrued and unpaid interest. In addition, following certain events that constitute “Make-Whole Fundamental Changes” (as defined in the Exchangeable Notes Indenture), the subsidiary will increase the exchange rate for holders who elect to exchange Exchangeable Notes in connection with such events in certain circumstances.
SMP Ltd. Credit Facilities
SMP Ltd. is party to four non-recourse term loan facilities and a working capital revolving credit facility. The term loan facilities provide for a maximum credit amount of 475 billion South Korean Won in aggregate, which translates to $398 million as of September 30, 2015. The term loan facilities hold maturity dates ranging from March 2019 to May 2019. Principal and interest on the term loan facilities is paid quarterly, with annual fixed interest rates ranging from 5.25% to 5.50%. As of September 30, 2015, a total of $334 million was outstanding under the term loan facilities.
First Reserve Warehouse
On May 6, 2015, a wholly-owned subsidiary of SunEdison acquired certain equity interests ("First Reserve Warehouse Equity Purchase") in FR Warehouse II, LLC (the “First Reserve Warehouse”), with the remaining equity interests in First Reserve Warehouse being held by an indirect subsidiary of First Reserve Corp. (“First Reserve”). The First Reserve Warehouse was established as an investment vehicle for the acquisition and construction financing of renewable energy projects. The First Reserve Warehouse, through its wholly-owned subsidiaries, intends to acquire renewable energy projects from SunEdison and other third parties and intends to sell such projects to TERP or other third parties upon the completion thereof.
Concurrent with the First Reserve Warehouse Equity Purchase, we entered into an amended and restated limited liability company agreement for First Reserve Warehouse with First Reserve to set forth, among other things, our appointment as managing member and each of our respective obligations to make capital contributions and/or member loans to the First Reserve Warehouse. In addition, First Reserve issued an equity commitment letter to the First Reserve Warehouse. Under the terms of such equity commitment letter, First Reserve and its syndicate will contribute up to $500 million of equity (“FR Equity Investment”) for the acquisition and construction of renewable energy projects. The equity interests held by First Reserve and its syndicate are eligible for preferential distributions. In support of the FR Equity Investment, we have agreed to post a letter of credit in support of the debt service reserve requirement under the First Reserve Warehouse Credit Facility (as described below), to potentially compensate First Reserve should First Reserve’s equity not be fully invested in projects that can produce the desired return during the expected investment period (subject to an aggregate cap of $142 million). We have posted a letter of credit in the amount of $55 million as of September 30, 2015 related to this requirement. Also, in the event that the FR Equity Investment is not fully utilized, pay fees to First Reserve in respect of any unutilized amounts (subject to an aggregate cap of $70 million).

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Concurrent with the First Reserve Warehouse Equity Purchase, our wholly-owned subsidiary entered into a credit agreement with the lenders identified therein, Bank of America, N.A., as administrative agent and collateral agent, OneWest Bank, N.A., as depositary, and the joint lead arrangers, joint bookrunners and other persons identified therein and party thereto from time to time (“First Reserve Warehouse Credit Facility”). The First Reserve Warehouse Credit Facility provides for a senior secured term loan credit facility in an aggregate principal amount of up to $466 million ("First Reserve Warehouse Term Loan") and a senior secured revolving credit facility in an aggregate principal amount of up to $550 million ("First Reserve Warehouse Revolver"). The First Reserve Warehouse Term Loan has a term ending May 6, 2020, and the First Reserve Warehouse Revolver has a term ending May 6, 2019. The proceeds of the First Reserve Warehouse Credit Facility and the FR Equity Investment will be used for the acquisition and construction of renewable energy projects. The First Reserve Warehouse is currently financing the construction of Comanche, a 120 MW solar project located in Colorado. Subject to certain conditions, we may request that the aggregate commitments be increased in an amount not to exceed $200 million, in the case of the First Reserve Warehouse Revolver, and $500 million, in the case of the First Reserve Warehouse Term Loan. Interest accrues at a rate of LIBOR plus 4.25% (or base rate plus 3.25%) with respect to the First Reserve Warehouse Term Loan and at a rate of LIBOR plus 4.00% (or base rate plus 3.00%) with respect to the First Reserve Warehouse Revolver. The First Reserve Warehouse Credit Facility contains representations, covenants and events of default typical for credit arrangements of comparable size, including covenants applicable to commercial bank provided project financings.
As of September 30, 2015, $465 million was outstanding under the First Reserve Warehouse Term Loan for use in asset construction. We paid fees of $21 million upon entry into the First Reserve Warehouse Term Loan, which were recognized as deferred financing fees.
As of September 30, 2015, we had not borrowed any amounts under the First Reserve Warehouse Revolver. As of September 30, 2015, no amounts were committed for currently funded projects, which would reduce the available capacity. Therefore, letters of credit could be issued under the First Reserve Warehouse Revolver for the remaining capacity totaling $550 million as of September 30, 2015. We paid fees of $25 million upon entry into the First Reserve Warehouse Revolver, which were recognized as deferred financing fees.
TerraForm Private Warehouse
On June 26, 2015, a wholly-owned subsidiary of SunEdison acquired certain equity interests in TerraForm Private, LLC (“TerraForm Private”), with the remaining equity interests in TerraForm Private acquired by Macquarie Sierra Investment Holdings Inc. and John Hancock Life Insurance Company (U.S.A.) (together with certain of its affiliates) (collectively known as the “TerraForm Private Investors”). We purchased an aggregate of $20 million in preferred units (the “PREPP Units”) of TerraForm Private and the TerraForm Private Investors collectively purchased an aggregate of $150 million in PREPP Units. We separately purchased an aggregate of $75 million in common units of TerraForm Private (with the PREPP Units, the “TerraForm Private Equity Purchase”).
A portion of the net proceeds from the TerraForm Private Equity Purchase, together with the net proceeds from the TerraForm Private Term Loan (as defined below), were used to fund the acquisition of all outstanding membership interests in five operating wind power assets held by Atlantic Power, thus forming the project entity TerraForm AP. The remaining net proceeds were used to retire related project debt following the closing of the Atlantic Power acquisition. TerraForm Private was formed for the primary purpose of owning, maintaining, financing and operating the Atlantic Power assets.
Concurrent with the TerraForm Private Equity Purchase, we entered into an amended and restated limited liability company agreement with the TerraForm Private Investors (together as the "Members") for TerraForm Private to set forth, among other things, our appointment as the managing member of TerraForm Private and define the respective obligations of the Members under TerraForm Private. Holders of the PREPP Units will have preference over holders of other equity securities of TerraForm Private, including the common units purchased, in respect of distributions and upon certain liquidation events. The PREPP Units will also be entitled to a cash dividend of 4.50% per annum and a pay-in-kind dividend of 5.00% per annum, in each case, on a cumulative basis and payable quarterly in arrears. In connection with the TerraForm Private Equity Purchase, TerraForm Private also granted certain rights to TERP (and its designated controlled affiliates) to purchase interests in the assets held by TerraForm Private pursuant to a separate agreement among Members. Any such purchases are subject to certain conditions and limitations, including the consent of holders of a requisite percentage of the PREPP Units.

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Concurrent with the TerraForm Private Equity Purchase, TerraForm AP entered into a credit agreement with TerraForm Private, as guarantor, the lenders identified therein, Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent, and the joint lead arrangers, joint bookrunners and other persons identified therein and party thereto from time to time (“TerraForm Private Term Loan”). The TerraForm Private Term Loan provides for a senior secured term loan credit facility in an aggregate principal amount of $280 million. The TerraForm Private Term Loan matures on June 26, 2022. As described above, the net proceeds of the TerraForm Private Term Loan were used, together with the proceeds from the TerraForm Private Equity Purchase, to fund the Atlantic Power acquisition (including the retirement of related project debt following the closing of the Atlantic Power acquisition). Interest under the TerraForm Private Term Loan accrues at a rate calculated at LIBOR plus 3.5% or base rate plus 2.5%. The TerraForm Private Term Loan contains representations, covenants and events of default typical for credit arrangements of comparable size.
As of September 30, 2015, $280 million was outstanding under the TerraForm Private Term Loan. We paid fees of $9 million upon entry into the TerraForm Private Term Loan, which were recognized as deferred financing fees.
West Street Infrastructure Partners Warehouse
On August 17, 2015, SunEdison entered into an equity commitment letter with West Street Global Infrastructure Partners III, L.P., West Street International Infrastructure Partners III, L.P., West Street European Infrastructure Partners III, L.P. and Broad Street Principal Investments, L.L.C. (the “Funds”) and a debt commitment letter with a syndicate of banks to create a $1.0 billion warehouse investment vehicle (“West Street Infrastructure Partners Warehouse”) for the acquisition, construction financing and placement into operation of utility scale solar and wind projects (“Renewable Energy Projects”). SunEdison intends for West Street Infrastructure Partners Warehouse to acquire Renewable Energy Projects from SunEdison and other third parties and to ultimately sell such projects to TERP. In connection therewith, West Street Infrastructure Partners Warehouse has up to $300 million of equity committed to be provided by the Funds and $700 million of debt committed to be provided by a syndicate of banks including Bank of America, N.A., Morgan Stanley Senior Funding, Inc., and Deutsche Bank Securities Inc.
J.P. Morgan Asset Management Strategic Equity Partnership
On October 26, 2015, a subsidiary of J.P. Morgan entered into an equity commitment letter (“Equity Commitment”) to provide for a maximum aggregate capacity of $650 million of equity to a partnership which is predominately owned by an investment fund managed by J.P. Morgan Asset Management (the “Partnership”). The Partnership will fund projects acquired or developed by SunEdison. Proceeds from the Partnership are expected to provide for payment of an agreed upfront development margin. These assets will be held indefinitely, until TERP exercises its call rights for SunEdison’s partnership interest or until the assets are sold to a third party. The closing of the Partnership is currently expected to occur in the fourth quarter of 2015.
Concurrent with the execution of the Equity Commitment, three of our subsidiaries entered into a master purchase and sale agreement with the Partnership. Pursuant to this master purchase and sale agreement, the Partnership has agreed to purchase, subject to customary closing conditions, including receipt of federal regulatory approvals, three utility scale renewable energy projects which have an aggregate nameplate capacity of 633 MW. The closing of the master purchase and sale agreement is expected to close simultaneously with the closing of the Partnership. The Partnership is also expected to acquire a 33% interest in a 425 MW portfolio of solar assets owned by Dominion (see Note 4). Both KeyBank N.A. and Santander Bank, N.A. have committed to provide project debt financing, subject to certain conditions. The Partnership also contemplates the acquisition of new development projects into mid-2016.

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Renewable Energy Letter of Credit Facility
On February 28, 2014, we entered into a credit agreement with the lenders identified therein, Wells Fargo Bank, N. A., as administrative agent, Goldman Sachs and Deutsche Bank Securities Inc., as joint lead arrangers and joint syndication agents, and Goldman Sachs, Deutsche Bank Securities Inc., Wells Fargo Securities, LLC and Macquarie Capital (USA) Inc., as joint bookrunners (the “Credit Facility”). The Credit Facility provided for a senior secured letter of credit facility in an aggregate principal amount of up to $265 million and has a term ending February 28, 2017. In the second quarter 2014, the parties added additional issuers to the Credit Facility to increase the funds available from $265 million to $315 million. Also in the second quarter of 2014, all related parties executed an amendment allowing us to increase aggregate funds committed up to $800 million ($400 million prior to amendment), subject to certain conditions. In the fourth quarter of 2014, the parties added additional issuers to the Credit Facility to increase the funds available from $315 million to $540 million. Also in the fourth quarter of 2014, all parties executed an amendment permitting us to secure additional financing in an amount of up to $815 million in connection with the First Wind acquisition. In the first quarter of 2015, an issuer that remains party to the facility committed $25 million in additional funds, increasing the aggregate funding under the Credit Facility from $540 million to $565 million. In addition, the parties executed an amendment permitting us to secure additional financing in an amount of up to $410 million secured by certain equity interests in TERP (see section entitled "Margin Loan Agreement") and to issue up to $500 million in convertible senior notes due 2022 (see section entitled "Convertible Senior Notes due 2022"). In the second quarter of 2015, one issuer that remains party to the Credit Facility committed $25 million in additional funds, increasing the aggregate funding under the Credit Facility from $565 million to $590 million. Also in the second quarter of 2015, two additional issuers pledged $100 million in additional funds increasing the aggregate funding under the Credit Facility from $590 million to $690 million. In July 2015, one additional issuer pledged $60 million in additional funds increasing the aggregate funding under the Credit Facility from $690 million to $750 million. In addition, the parties executed two amendments to the Credit Facility permitting certain capital market transactions and amending several covenants and representations.
The Credit Facility will be used to backstop outstanding letters of credit issued by Bank of America, N.A. under our former revolving credit facility until they expire, as well as for general corporate purposes. In addition, the amendment to the Credit Facility will permit investments in (i) a subsidiary formed for the purpose of owning subsidiaries that own and operate Alternative Fuel Energy Systems (as defined in the Credit Facility) and (ii) wind, biomass, natural gas, hydroelectric, geothermal or other clean energy generation installations or hybrid energy generation installations. We paid fees of $6 million upon entry into the Credit Facility, which were recognized as deferred financing fees.
Our obligations under the Credit Facility are guaranteed by certain of our domestic subsidiaries. Our obligations and the guaranty obligations of our subsidiaries are secured by first priority liens on, and security interests in, substantially all present and future assets of SunEdison and the subsidiary guarantors, including a pledge of the capital stock of certain of our domestic and foreign subsidiaries.
Interest under the Credit Facility accrues on the daily amount available to be drawn under outstanding letters of credit or bankers' acceptances, at an annual rate of 3.75%. Interest is due and payable in arrears at the end of each fiscal quarter and on the maturity date of the Credit Facility. Drawn amounts on letters of credit are due within seven business days, and interest accrues on drawn amounts at a base rate plus 2.75%.
The Credit Facility, as amended, contains representations, covenants and events of default typical for credit arrangements of comparable size, including maintaining a consolidated leverage ratio of 3.0 to 1.0 which excludes the 2018/2021 Notes, 2020 Notes, 2022 Notes and 2023/2025 Notes (measurement commencing with the last day of the fiscal quarter ending December 31, 2014), and a minimum liquidity amount (measurement commencing with the last day of the fiscal quarter ending June 30, 2014) of the lesser of (i) $400 million and (ii) the sum of (x) $300 million plus (y) the amount, if any, by which the aggregate commitments exceed $300 million at such time. The Credit Facility also contains a customary material adverse effects clause and a cross default clause. The cross default clause is applicable to defaults on other indebtedness of SunEdison in excess of $50 million, including the 2018/2021 Notes, 2020 Notes, 2022 Notes, and 2023/2025 Notes but excluding our non-recourse indebtedness.
The Credit Facility also contains mandatory prepayment and/or cash collateralization provisions applicable to specified asset sale transactions as well as our receipt of proceeds from certain insurance or condemnation events and the incurrence of additional indebtedness.
As of September 30, 2015, we had $716 million of outstanding third party letters of credit backed by the Credit Facility.

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System Pre-Construction, Construction and Term Debt
Our renewable energy systems, and the related short term and long term debt and financing obligations, are included in separate legal entities. This debt has recourse to those separate legal entities but no recourse to SunEdison under the terms of the applicable agreements. These finance obligations are fully collateralized by the related renewable energy system assets and may also include limited guarantees by SunEdison related to operations, maintenance and certain indemnities. Typically, financing arrangements provide for a construction loan, which upon completion will be converted into a term loan, and generally do not restrict the future sale of the project entity to a third party buyer. As of September 30, 2015, we had system pre-construction, construction and term debt outstanding of $2,065 million, which is comprised of a combination of fixed and variable rate debt. The variable rate debt has interest rates tied to the LIBOR, the Euro Interbank Offer Rate, the Canadian Dollar Offered Rate, the Johannesburg Interbank Acceptance Rate, and the Prime Rate. The variable interest rates have primarily been hedged by our outstanding interest rate swaps as discussed in Note 9. The interest rates on these obligations range from 1.7% to 14.0% and have maturities that range from 2015 to 2031. 
On March 26, 2014, we entered into a financing agreement with certain lenders; Wilmington Trust, N. A., as administrative agent; Deutsche Bank Trust Company Americas, as collateral agent and loan paying agent; and Deutsche Bank Securities Inc., as lead arranger, bookrunner, structuring bank and documentation agent (the “Construction Facility”). The Construction Facility originally provided for a senior secured revolving credit facility in an amount of up to $150 million and has a term ending March 26, 2017. During the third quarter of 2014, the parties agreed to increase the amount available under the Construction Facility to $285 million. The Construction Facility is used to support the development and acquisition of new projects in the U.S. and Canada. Subject to certain conditions, we may request that the aggregate commitments be increased to an amount not to exceed $300 million. We paid fees of $8 million upon entry into the Construction Facility, which were recognized as deferred financing fees.
Loans under the Construction Facility are non-recourse debt to SunEdison and other entities outside of the project company legal entities that subscribe to the debt and are secured by a pledge of collateral of the project company, including the project contracts and equipment. Interest on loans under the Construction Facility is based on our election of either LIBOR plus an applicable margin of 3.5%, or a defined prime rate plus an applicable margin of 2.5%. As of September 30, 2015, the interest rate under the Construction Facility was 5.75%.
The Construction Facility contains customary representations, warranties, and affirmative and negative covenants, including a material adverse effects clause whereby a breach may disallow a future draw but not acceleration of payment and a cross default clause whose remedy, among other rights, includes the right to restrict future loans as well as the right to accelerate principal and interest payments. Covenants primarily relate to the collateral amounts and transfer of right restrictions.
As of September 30, 2015, $163 million of the Construction Facility was committed for currently funded projects, which reduced the available capacity under the Construction Facility. Therefore, availability under the Construction Facility was $122 million as of September 30, 2015. As of September 30, 2015, $124 million was considered outstanding and classified under system pre-construction, construction and term debt.
Financing Leaseback Obligations
For certain transactions we account for the proceeds of sale-leasebacks as financings, which are typically secured by the renewable energy system asset and its future cash flows from energy sales, but without recourse to us under the terms of the arrangement. The structure of the repayment terms under the lease results in negative amortization throughout the financing period, and we therefore recognize the lease payments as interest expense. The balance outstanding for sale-leaseback transactions accounted for as financings as of September 30, 2015 is $1,468 million, which includes the below mentioned transactions. The maturities range from 2021 to 2039 and are collateralized by the related renewable energy system assets with a carrying amount of $1,356 million.
Other Credit Facilities
On December 19, 2014, a subsidiary entered into a credit and guaranty agreement with the Oversea-Chinese Banking Corporation Limited ("OCBC") as sole lead arranger and lender (the “OCBC Facility"). The OCBC Facility provides for a draft loan credit facility in an amount up to $120 million. On December 30, 2014, the subsidiary borrowed $119 million under the OCBC Facility to fund a portion of the purchase price for certain tax credit qualified turbines. The borrowings under the OCBC Facility originally matured six months from the funding date unless payment was otherwise accelerated, subject to certain conditions. In the second quarter of 2015, we extended the maturity of the OCBC Facility through January 2016. The principal and interest amounts outstanding under the OCBC Facility are payable in full at maturity. Interest is calculated at an amount equal to LIBOR plus an applicable margin of 1.25%. As of September 30, 2015, interest was calculated at approximately 1.6%. In conjunction with the borrowing, an immaterial amount of debt issuance cost was recognized.

33



On August 11, 2015, we entered into a Second Lien Credit Agreement ("Second Lien Term Loan") with Goldman Sachs Bank USA ("Goldman Sachs"), providing for a term loan maturing on August 11, 2016, in an aggregate principal amount of $169 million. As of September 30, 2015, the current interest rate on the Term Loan is 9.25%. The Second Lien Term Loan contains customary representations and warranties, covenants and events of default for financings of this nature. Upon the occurrence and during the continuance of an event of default, Goldman Sachs may declare the Second Lien Term Loan due and payable, exercise remedies with respect to the collateral and demand payment from SunEdison of the obligations under the Second Lien Term Loan agreement. These covenants are subject to a number of qualifications and limitations. Additionally, the Second Lien Term Loan has financial covenants requiring the consolidated leverage ratio to be less than 3.6 to 1.0, and the minimum liquidity amount to be greater than the lesser of (i) $320 million and (ii) the sum of (x) $240 million plus (y) the amount, if any, by which the Credit Facility aggregate commitments exceed $240 million at such time, as calculated at the end of any fiscal quarter. We paid fees of $9 million upon entry into the Second Lien Term Loan which were recognized as deferred financing costs.
We are party to master lease agreements that provide for the sale and simultaneous leaseback of certain renewable energy systems constructed by us. As of September 30, 2015, we had $79 million of capital lease obligations outstanding. Generally, this classification occurs when the term of the lease is greater than 75% of the estimated economic life of the solar energy system and the transaction is not subject to real estate accounting. The terms of the leases are typically 25 years with certain leases providing terms as low as 10 years and providing for early buyout options. The specified rental payments are based on projected cash flows that the renewable energy system will generate. We have not entered into any arrangements that have resulted in accounting for the sale-leaseback as a capital lease since November 2009.
Of the remaining amount classified as other credit facilities at September 30, 2015, $111 million represents the cash proceeds that we received in connection with 11 executed renewable energy system sales contracts that have not met the sales recognition requirements under real estate accounting and have been accounted for as a financing transaction due to our substantial continuing involvement. There are no principal or interest payments associated with these transactions.
Vivint Term Loan Commitment
On July 20, 2015, SunEdison entered into a debt commitment letter in connection with the Merger. The agreement was amended on August 5, 2015, pursuant to which, among other things, the parties have committed to provide, subject to certain terms and conditions, a $500 million secured term loan facility to a wholly owned indirect subsidiary of SunEdison. The funding of the term loan facility is subject to customary conditions, including the negotiation of definitive documentation and other customary closing conditions.
Capitalized Interest
During the three and nine month periods ended September 30, 2015 we capitalized $37 million and $112 million of interest, respectively. During the three and nine month periods ended September 30, 2014 we capitalized $10 million and $25 million of interest, respectively.
Debt Classified as Held for Sale
As of September 30, 2015, we reclassified short- and long-term debt as held for sale (see Note 2). This represents non-recourse project level debt acquired as part of the SRP acquisition. As of September 30, 2015, total debt classified as held for sale was $507 million.
TerraForm Power Segment Debt
TERP Credit Facilities
On July 23, 2014, Terra Operating LLC and Terra LLC, both wholly-owned subsidiaries of TERP, entered into a revolving credit facility (the "2017 TERP Revolver") and a term loan facility (the "2019 TERP Term Loan" and together with the 2017 TERP Revolver, the “2014 TERP Credit Facilities”).
On January 28, 2015, TERP repaid the remaining outstanding principal balance on the 2019 TERP Term Loan of $574 million in full. TERP recognized a $12 million loss on the extinguishment of debt during the nine months ended September 30, 2015 as a result of this repayment.

34



On January 28, 2015, TERP replaced the 2017 TERP Revolver with a new $550 million revolving credit facility (the "2020 TERP Revolver "). The 2020 TERP Revolver consists of a revolving credit facility in an amount of at least $550 million (available for revolving loans and letters of credit). TERP recognized a $1 million loss on the extinguishment of debt during the nine months ended September 30, 2015 as a result of this exchange. In May 2015, TERP exercised its option to increase its borrowing capacity under the 2020 TERP Revolver by $100 million.
In August 2015, TERP obtained a commitment from a counterparty to increase its borrowing capacity under the 2020 TERP Revolver by $75 million. This increased the total borrowing capacity under the 2020 TERP Revolver to $725 million as of September 30, 2015. TERP is permitted to further increase the borrowing capacity under the Revolver to up to $1.0 billion. There were no revolving loan amounts outstanding under the 2020 TERP Revolver as of September 30, 2015.
The 2020 TERP Revolver matures on January 27, 2020. Each of Terra Operating LLC's and Terra LLC’s existing and subsequently acquired or organized domestic restricted subsidiaries (excluding non-recourse subsidiaries) are or will become guarantors under the 2020 TERP Revolver.
All outstanding amounts under the 2020 TERP Revolver will bear interest initially at a rate per annum equal to either (i) a base rate plus a margin of 1.50% or (ii) a reserve adjusted Eurodollar rate plus a margin of 2.50%. After the fiscal quarter ended September 30, 2015, the base rate margin will range between 1.25% and 1.75% and the Eurodollar rate margin will range between 2.25% and 2.75% as determined by reference to a leverage-based grid.
The 2020 TERP Revolver provides for voluntary prepayments, in whole or in part, subject to notice periods, and requires Terra Operating LLC to prepay outstanding borrowings in an amount equal to 100% of the net cash proceeds received by Terra LLC or its restricted subsidiaries from the incurrence of indebtedness not permitted by the 2020 TERP Revolver by Terra Operating LLC or its restricted subsidiaries.
The 2020 TERP Revolver, each guaranty and any interest rate, currency hedging or hedging of renewable energy credits obligations of Terra Operating LLC or any guarantor owed to the administrative agent, any arranger or any lender under the 2020 TERP Revolver is secured by first priority security interests in (i) all of Terra Operating LLC's and each guarantor’s assets, (ii)100% of the capital stock of each of Terra Operating LLC’s and its domestic restricted subsidiaries and 65% of the capital stock of Terra Operating LLC’s foreign restricted subsidiaries, and (iii) all intercompany debt. Notwithstanding the foregoing, collateral under the 2020 TERP Revolver excludes the capital stock of non-recourse subsidiaries.
Senior Notes due 2023
On January 28, 2015, TERP's indirect subsidiary Terra Operating LLC issued $800 million of 5.875% senior notes due 2023 (the "Terra 2023 Notes") at a price of 99.214%. Terra Operating LLC used the net proceeds from this offering to fund a portion of the price of the First Wind acquisition.
On June 11, 2015, Terra Operating LLC issued an additional $150 million of 5.875% senior notes due 2023. This offering was issued at a price of 101.5% and Terra Operating LLC used the net proceeds from the offering to repay existing borrowings under the 2020 TERP Revolver. The Terra 2023 Notes are senior obligations of Terra Operating LLC and are guaranteed by Terra LLC and each of Terra Operating LLC's existing and future subsidiaries that guarantee its senior secured credit facility, subject to certain exceptions. Interest is payable on February 1 and August 1 of each year, beginning on August 1, 2015.
Senior Notes due 2025
On July 17, 2015, Terra Operating LLC issued $300 million of 6.125% senior notes due 2025 (the "Terra 2025 Notes") at a price of 100.00%. Terra Operating LLC intends to use the net proceeds from the offering to fund a portion of the purchase price of the Invenergy acquisition (see Note 3). The Terra 2025 Notes are senior obligations of Terra Operating LLC and are guaranteed by Terra LLC and each of Terra Operating LLC's existing and future subsidiaries that guarantee its senior secured credit facility, subject to certain exceptions. Interest is payable on June 15 and December 15 of each year, beginning December 15, 2015.
Invenergy Bridge Facility
On July 1, 2015, TERP obtained commitments for a senior unsecured bridge facility which provides TERP with up to $1,160 million to fund the acquisition of Invenergy (see Note 3). On July 17, 2015, TERP terminated $300 million of the bridge facility commitment upon the issuance of the Terra 2025 Notes. Amortization of deferred financing costs recorded as interest expense related to this bridge facility was $5 million during the three and nine months ended September 30, 2015, respectively.

35



Vivint Solar Bridge Facility
On July 20, 2015, TERP obtained commitments for a senior unsecured bridge facility which provides TERP with up to $960 million to fund the acquisition of the Vivint Solar Operating Assets (see Note 3). Amortization of deferred financing costs recorded as interest expense related to this bridge facility was $5 million during the three and nine months ended September 30, 2015.
Other System Financing Obligations
Other TERP system financing obligations primarily consist of $400 million of long-term debt assumed as a result of the acquisition of Mt. Signal. The senior secured notes bear interest at 6% and mature in 2038. Interest on the notes is payable semi-annually on June 30 and December 31 of each year, commencing on June 30, 2013. A letter of credit facility was also extended to the project company to satisfy certain security obligations under the PPA, other project agreements and the notes. The facility will terminate on the earlier of July 2, 2019 and the fifth anniversary of the Mt. Signal project’s completion date.
In addition, as of September 30, 2015, $209 million of fixed rate non-recourse debt financing arrangements used to finance the construction of a solar power plant in Chile are included in the balance of other system financing obligations. These agreements were executed in the third quarter of 2013. The weighted average interest rate on these obligations as of September 30, 2015 was 6%.
Debt Extinguishments
TERP repaid certain long-term indebtedness for the renewable energy facilities acquired as part of the First Wind Acquisition. TERP recognized a loss on the extinguishment of debt of $6 million during the nine months ended September 30, 2015 as a result of this repayment.
On May 22, 2015, SunEdison acquired the lessor interest in an operating solar generation facility referred to as the Duke Energy operating facility and concurrently sold the facility to TERP. Upon acquisition of this operating facility, TERP recognized a net gain on the extinguishment of debt of $11 million due to the termination of $32 million of financing lease obligations of the operating facility.
Subsequent Event
United Kingdom Project Debt Refinancing 
On November 6, 2015, TERP completed a refinancing of 175 million British Pounds ("GBP") (equivalent of $271 million) of existing project-level indebtedness (the “Existing U.K. Indebtedness”) by entering into a new GBP 315 million (equivalent of $488 million) facility (the “New U.K. Facility”). The New U.K. Facility is comprised of Tranche A for GBP 92 million (equivalent of $143 million) which is fully amortizing over seven year term, and Tranche B for GBP 222 million (equivalent of $345 million), which is payable at maturity. The New U.K. Facility matures in 2022 and bears interest at a rate per annum equal to LIBOR plus an applicable margin of 2.10% for Tranche A and 2.35% for Tranche B. TERP received GBP 108 million (equivalent of $168 million) of net proceeds from the New U.K. Facility (net of the amount required to repay the Existing U.K. Indebtedness, deposits into required project level reserves, including a 2016 debt service prepayment of GBP 12 million (equivalent of $19 million), and other fees and costs paid at the closing of the New U.K. Facility). The New U.K. Facility is secured by all of TERP's solar generation facilities located in the U.K. except for the Norrington facility, and is non-recourse to TERP and SunEdison. In conjunction with the refinancing, TERP has reclassified a portion of the Existing U.K. Indebtedness as of September 30, 2015 from current to long-term to reflect the amortization terms of the New U.K. Facility.
TerraForm Global Segment Debt
GLBL Bridge Facility
On December 22, 2014, GLBL entered into a credit and guaranty agreement with JPMorgan Chase Bank, N.A., as administrative agent, collateral agent, documentation agent, sole lead arranger, sole lead bookrunner, and syndication agent, which initially provided for bridge term loans in an aggregate funding amount of $150 million that was subsequently amended to increase the aggregate funding to $550 million (the “GLBL Bridge Facility”). 

36



GLBL's obligations under the bridge facility were guaranteed by certain of its domestic subsidiaries. GLBL’s obligations and the guarantee obligations of its subsidiaries were secured by first priority liens on, and security interests in, substantially all present and future assets of TerraForm Global LLC ("Global LLC") and the subsidiary guarantors. Global LLC paid debt issuance fees of $18.8 million upon entry into the GLBL Bridge Facility, which were recognized as deferred financing fees. At August 4, 2015, $459.8 million was outstanding under the GLBL Bridge Facility and the effective interest rate was 11.08%. The GLBL Bridge Facility was repaid in full and terminated on August 5, 2015, concurrent with the completion of the IPO.
Senior Notes Offering
On August 5, 2015, GLBL completed the sale of $810 million of 9.75% Senior Notes due 2022 (the "Senior Notes") issued by TerraForm Global Operating LLC ("Global Operating LLC") in a private offering. The Senior Notes bear interest at a fixed rate, which interest is payable in cash semiannually, and have a seven year term. The Senior Notes are subject to customary redemption rights for high yield debt securities.
The Senior Notes are guaranteed by Global LLC and any subsidiaries of Global Operating LLC that guarantee Global Operating LLC’s obligations under the Global Revolver (defined below). GLBL does not guarantee the Senior Notes. The terms of the Senior Notes are governed under an indenture among Global LLC, Global Operating LLC, any subsidiary guarantors and a trustee. The indenture provides that upon the occurrence of a change of control, as defined therein, Global Operating LLC must offer to repurchase the Senior Notes at 101% of the applicable principal amount, plus accrued and unpaid interest and additional interest, if any, to the repurchase date. The indenture also contains customary negative covenants, subject to a number of important exceptions and qualifications, applicable to Global LLC, Global Operating LLC and its restricted subsidiaries, including, without limitation, covenants related to: indebtedness, disqualified stock and preferred stock; dividends and distributions to stockholders and parent entities; repurchase and redemption of capital stock; investments; transactions with affiliates; liens; mergers, consolidations and transfers of substantially all assets; transfer or sale of assets, including capital stock of subsidiaries; and prepayment, redemption or repurchase of indebtedness subordinated to the Senior Notes. The indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the Senior Notes to become or to be declared due and payable.
Credit Facility
On August 5, 2015, Global Operating LLC entered into a revolving credit facility (the "Global Revolver"), which provides for a revolving line of credit of $485 million. The Global Revolver includes borrowing capacity available for letters of credit and will allow for incremental commitments of up to $265 million. Global LLC and certain of its subsidiaries are guarantors under the Global Revolver. The Global Revolver contains certain financial covenants, including a maximum borrower leverage ratio and a minimum borrower debt service coverage ratio. The Global Revolver also contains covenants that are customary for this type of financing, including limitations on indebtedness, liens, investments and restricted payments; provided, however, that each of Global Operating LLC and Global LLC will be permitted to pay distributions to unit holders out of available cash so long as no default or event of default under the Global Revolver shall have occurred and be continuing at the time of such distribution or would result therefrom and Global Operating LLC is in compliance with its financial covenants. In connection with the Global Revolver, Global LLC is required to pledge (i) 100% of the equity in Global Operating LLC and (ii) 100% of the equity in certain subsidiaries of Global Operating LLC as collateral to the lenders. The Global Revolver contains events of default that are customary for this type of financing.
Debt Extinguishments
During the three months ended September 30, 2015, GLBL repaid $324 million aggregate principal amount of project level indebtedness related to certain of its projects.
Subsequent Events
Since September 30, 2015, GLBL used approximately $45 million of IPO proceeds to repay the project level indebtedness related to certain additional projects.

37



9. DERIVATIVES AND HEDGING INSTRUMENTS
SunEdison's hedging activities consist of:
In millions
 
 
 
Assets (Liabilities or Equity) Fair Value
Type of Instrument
 
Balance Sheet Classification
 
As of September 30, 2015
 
As of December 31, 2014
Derivatives designated as hedging:
 

 

Interest rate swaps
 
Other assets
 
$
1

 
$
2

 
 
Other liabilities
 
(35
)
 
(8
)

 
Accumulated other comprehensive loss (income)
 
39

 
5

Cross currency swaps
 
Other assets
 
83

 
76

 
 
Other liabilities
 
(37
)
 
(55
)

 
Accumulated other comprehensive loss (income)
 
(47
)
 
(21
)
Commodity derivative
 
Other assets
 
49

 


 
Accumulated other comprehensive loss (income)
 
(71
)
 

Derivatives not designated as hedging:
 


 


Currency forward contracts
 
Other assets
 
20

 
2

 
 
Other liabilities
 
(34
)
 
(4
)
Interest rate swaps
 
Other assets
 
2

 

 
 
Other liabilities
 
(29
)
 
(61
)
Commodity derivative
 
Other assets
 
46

 

Put/call agreement
 
Other liabilities
 
(37
)
 

In millions
 

 
Losses (Gains)
 
Losses (Gains)
Type of Instrument
 
Statement of Operations Classification
 
Three Months Ended September 30, 2015
 
Three Months Ended September 30, 2014
 
Nine Months Ended September 30, 2015
 
Nine Months Ended September 30, 2014
Derivatives not designated as hedging:
 

 

 

 

Currency forward contracts
 
Other, net
 
$
34

 
$
6

 
$
33

 
$
10

Interest rate swaps
 
Interest expense
 
11

 
(1
)
 
56

 
2

Commodity derivative
 
Net sales
 
(3
)
 

 
(1
)
 

Put/call agreement
 
Other net
 
17

 

 
17

 

Note hedges
 
Gain on convertible note derivative
 

 

 

 
(366
)
Conversion options
 
Loss on convertible note derivative
 

 

 

 
382

Warrants
 
Loss on convertible note derivative
 

 

 

 
483

Currency Forward Contracts
To mitigate financial market risks of fluctuations in foreign currency exchange rates, we utilize currency forward contracts. We do not use derivative financial instruments for speculative or trading purposes. As of September 30, 2015 and December 31, 2014, these currency forward contracts had net notional amounts of $1,158 million and $268 million, respectively, and are accounted for as economic hedges. There were no outstanding currency forward contracts designated as cash flow hedges as of September 30, 2015 and December 31, 2014.
Cross Currency Swap
During the second quarter of 2013, we entered into a cross currency swap with a notional amount of $186 million accounted for as a cash flow hedge. The effective portion of this cash flow hedge instrument during the quarter ended September 30, 2015 was recorded to accumulated other comprehensive loss (income) in the condensed consolidated balance sheet. No amount of material ineffectiveness was recognized during the periods presented.

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Interest Rate Swaps
As of September 30, 2015, we are party to certain interest rate swap instruments that are accounted for using hedge accounting. These instruments are used to hedge floating rate debt and are accounted for as cash flow hedges. Under the interest rate swap agreements, we pay the fixed rate and the financial institution counterparties to the agreements pay us a floating interest rate. The effective portion of these cash flow hedges was a net loss of $39 million and $5 million for the quarters ended September 30, 2015 and December 31, 2014, which was recognized in accumulated other comprehensive loss (income) in the condensed consolidated balance sheet. No amount of material ineffectiveness was recognized during the periods presented.
As of September 30, 2015, we are party to certain interest rate swap instruments that are accounted for as economic hedges. These instruments are used to hedge floating rate debt and are not accounted for as cash flow hedges. Under the interest rate swap agreements, we pay the fixed rate and the financial institution counterparties to the agreements pay us a floating interest rate. Because these hedges are deemed economic hedges and not accounted for under hedge accounting, the changes in fair value are recorded to non-operating expense (income) within the consolidated statement of operations. The fair value of these hedges was a net liability of $27 million and $61 million as of September 30, 2015 and December 31, 2014, respectively.
Commodity Derivatives
Through our acquisition of First Wind, we became party to certain commodity contracts used to hedge the cash flows associated with commodity price variability inherent in electricity sales arrangements. If we sell electricity to an independent system operator market and there is no PPA available, we may enter into a commodity contract to stabilize all or a portion of our estimated revenue stream.
As of September 30, 2015, we are party to two such commodity contracts that are accounted for using hedge accounting. These commodity contracts require physical delivery of specific quantities of electricity at a fixed price, and, if actual monthly quantities produced are insufficient to make such deliveries, we are obligated to purchase the shortfall amount in the electricity market and deliver it to the counterparty. As these commodity contracts have been designated as a cash flow hedges, the change in their fair value is recognized in other comprehensive income in the condensed consolidated balance sheet. The fair value of these commodity contracts were recorded as an asset of $49 million as of September 30, 2015.
As of September 30, 2015, we are party to certain other First Wind-related commodity contracts that are accounted for as economic hedges. These price swap agreements involve periodic settlements for specific quantities of electricity based on a fixed price and are obligated to pay the counterparty market price for the same quantities of electricity. As these hedges are deemed economic hedges and not accounted for under hedge accounting, the changes in fair value are recognized in net sales in the condensed consolidated statement of operations. The fair values of these hedges were recorded as an asset totaling $46 million as of September 30, 2015.
Put/Call Agreement
On September 18, 2015, as part of the aggregate consideration transferred to the seller in connection with the Renova acquisition (see Note 3), we entered into a put/call agreement (the "Put/Call Agreement") with the seller. Under the Put/Call Agreement, during the 10 day period beginning on March 31, 2016, Renova can put up to 7 million GLBL shares to SunEdison at a purchase price of BRZ 50.48, provided, that at our sole election, we have the right to pay $15.00 per share. Additionally, during the 10 day period beginning on March 31, 2016, we can call up to 7 million GLBL shares from Renova at a purchase price of BRZ 50.48, provided, that at our sole election, we have the right to pay $15.00 per share. The fair value of the Put/Call Agreement at September 18, 2015 was a net liability of $20 million. As a result of a decrease in the per share value of GLBL stock between September 18, 2015 and September 30, 2015, the fair value of the net liability at September 30, 2015 was $37 million. As such, we recognized a loss of $17 million related to the Put/Call Agreement during the three months ended September 30, 2015, which is reported in other non-operating expense.
Convertible Notes Derivatives
In connection with the senior convertible notes issued in December 2013 and June 2014 as discussed in Note 8, we entered into privately negotiated convertible note hedge transactions and warrant transactions. Assuming full performance by the counterparties, these instruments are meant to effectively reduce our potential payout over the principal amount on the senior convertible notes upon conversion. Refer to Note 8 for additional information.
In connection with the senior convertible notes issued in January 2015 and May 2015 as discussed in Note 8, we entered into privately negotiated capped call option agreements. Assuming full performance by the counterparties, these instruments are meant to reduce the potential dilution to holders of our common stock upon conversion of the 2022 Notes, 2023 Notes and 2025 Notes. Refer to Note 8 for additional information.

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10. FAIR VALUE MEASUREMENTS
The following table summarizes the financial instruments measured at fair value on a recurring basis classified in the fair value hierarchy (Level 1, 2 or 3) based on the inputs used for valuation in the accompanying consolidated balance sheets:
 
 
As of September 30, 2015
 
As of December 31, 2014
Assets (liabilities) in millions
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Interest rate swap assets
 
$

 
$
3

 
$