Ameresco, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

At December 31, 2019 and 2018, the following table presents information about the fair value amounts of the Company’s derivative instruments:



	Derivatives as of December 31,
	2019			2018
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives Designated as Hedging Instruments:
Interest rate swap contracts	Other assets	$	15	Other assets	$	703
Interest rate swap contracts	Other liabilities	$	6,210	Other liabilities	$	3,187
Derivatives Not Designated as Hedging Instruments:
Interest rate swap contracts	Other assets	$	—	Other assets	$	30
Commodity swap contracts	Other assets	$	198	Other assets	$	33
Interest rate swap contracts	Other liabilities	$	26	Other liabilities	$	—
Commodity swap contracts	Other liabilities	$	—	Other liabilities	$	70
Interest make-whole provisions	Other liabilities	$	918	Other liabilities	$	1,808

All but three of the Company’s freestanding derivatives were designated as hedging instruments as of December 31, 2019 and all but four of the Company’s derivatives were designated as hedging instruments as of December 31, 2018.

The following tables present information about the effects of the Company’s derivative instruments on the consolidated statements of income and consolidated statements of comprehensive income:



	Location of (Gain) Loss Recognized in Net Income	Amount of (Gain) Loss Recognized in Net Income for the Year Ended December 31,
		2019			2018			2017
Derivatives Designated as Hedging Instruments:
Interest rate swap contracts	Other expenses, net	$	71		$	(196	)	$	(271	)
Derivatives Not Designated as Hedging Instruments:
Interest rate swap contracts	Other expenses, net	$	56		$	(308	)	$	—
Commodity swap contracts	Other expenses, net	$	(234	)	$	36		$	—
Interest make-whole provisions	Other expenses, net	$	(890	)	$	337		$	—



	Year Ended
	December 31, 2019
Derivatives Designated as Hedging Instruments:
Accumulated loss in AOCI at the beginning of the period	$	(1,824	)
Cumulative impact from the adoption of ASU No. 2018-02	(217		)
Unrealized loss recognized in AOCI	(2,630		)
Gain reclassified from AOCI to other expenses, net	(71		)
Accumulated loss in AOCI at the end of the period	$	(4,742	)

In March 2010, the Company entered into a fourteen-year interest rate swap contract under which the Company agreed to pay an amount equal to a specified fixed rate of interest times a notional amount, and to in turn receive an amount equal to a specified variable rate of interest times the same notional principal amount. The swap covered an initial notional amount of approximately $27,900 variable rate note at a fixed interest rate of 3.74% and expired in December 2024. This swap was designated as a hedge in March 2013. During the second quarter of 2014, this swap was de-designated and re-designated as a hedge as a result of a partial pay down of the associated hedged debt principal. As a result $566 was reclassified from accumulated other comprehensive loss and recorded as a reduction to other expenses, net in the Company’s consolidated statements of income (loss) during the second quarter of 2014. During the second quarter 2018, this swap was de-designated as a hedge as a result of the expected pay down of the associated hedged debt principal. As a result, $34 was reclassified from accumulated other comprehensive loss and recorded to other expenses, net in the Company’s consolidated statements of income during the second quarter 2018. In the third quarter of 2018, the expected pay down of the hedged debt principal occurred and the balance of the related hedge was written off. This resulted in a decrease of other liabilities of $252 in the Company’s consolidated balance sheets and a corresponding decrease in other expenses, net in the Company’s consolidated statements of income.

In the third quarter of 2018, the Company adopted ASU 2017-12 Derivatives and Hedging (Topic 815), which resulted in an increase to retained earnings of $432 and accumulated other comprehensive loss of $486 to remove the cumulative effect of hedging ineffectiveness previously recognized in earnings, as of July 1, 2018, for contracts designated as hedging instruments that were outstanding at the beginning of the third quarter 2018. Upon adoption of the ASU, the impact to reclassify the ineffectiveness of the Company’s hedge instruments in connection with prior periods was recorded. Accordingly, the Company’s consolidated statement of changes in redeemable non-controlling interests and stockholders’ equity for the years ended December 31, 2019 and 2018, reflect the adoption of ASU 2017-12.

The followings tables present a listing of all the Company’s active derivative instruments as of December 31, 2019:



Active Interest Rate Swap	Effective Date	Expiration Date	Initial Notional Amount ($)		Status
11-Year, 5.77% Fixed	October 2018	October 2029	$	9,200	Designated
15-Year, 5.24% Fixed	June 2018	June 2033	10,000		Designated
3-Year, 2.46% Fixed	March 2018	December 2020	17,100		Not Designated
10-Year, 4.74% Fixed	June 2017	December 2027	14,100		Designated
15-Year, 3.26% Fixed	February 2023	December 2038	14,084		Designated
7-Year, 2.19% Fixed	February 2016	February 2023	20,746		Designated
8-Year, 3.70% Fixed	March 2020	June 2028	14,643		Designated
8-Year, 3.70% Fixed	March 2020	June 2028	10,734		Designated
8-Year, 1.71% Fixed	October 2012	March 2020	9,665		Designated
8-Year, 1.71% Fixed	October 2012	March 2020	7,085		Designated
15-Year, 5.30% Fixed	February 2006	February 2021	3,256		Designated
15.5-Year, 5.40% Fixed	September 2008	March 2024	13,081		Designated



Active Commodity Swap	Effective Date	Expiration Date	Initial Notional Amount (Volume)	Commodity Measurement	Status
1-Year, $2.68 MMBtu Fixed	May 2019	April 2020	437,004	MMBtus	Not Designated
1-Year, $2.70 MMBtu Fixed	May 2020	April 2021	435,810	MMBtus	Not Designated



Other Derivatives	Classification	Effective Date	Expiration Date	Fair Value ($)
Interest make-whole provisions	Liability	June/August 2018	December 2038	$	918