Quarterly report pursuant to Section 13 or 15(d)

Investment Funds and Other Variable Interest Entities

v3.20.2
Investment Funds and Other Variable Interest Entities
 9 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Investment Funds and Other Variable Interest Entities INVESTMENT FUNDS AND OTHER VARIABLE INTEREST ENTITIES
Investment Funds
In each of September 2015, June 2017, June 2018, October 2018, and December 2019, the Company formed an investment fund with a different third-party investor which granted the applicable investor ownership interests in the net assets of certain of the Company’s renewable energy project subsidiaries. The Company currently has five such investment funds each with a different third-party investor.
The Company consolidates the investment funds, and all inter-company balances and transactions between the Company and the investment funds are eliminated in its condensed consolidated financial statements. The Company determined that the investment funds meet the definition of a variable interest entity (“VIE”). The Company uses a qualitative approach in assessing the consolidation requirements for VIEs that focuses on determining whether the Company has the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and whether the Company has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
The Company has considered the provisions within the contractual arrangements that grant it power to manage and make decisions that affect the operation of these VIEs, including determining the solar energy systems and associated long-term customer contracts to be sold or contributed to the VIEs, and installation, operation and maintenance of the solar energy systems. The Company considers that the rights granted to the other investors under the contractual arrangements are more protective in
nature rather than participating rights. As such, the Company has determined it is the primary beneficiary of the VIEs for all periods presented. The Company evaluates its relationships with VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary.
Under the related agreements, cash distributions of income and other receipts by the funds, net of agreed-upon expenses and estimated expenses, tax benefits and detriments of income and loss, and tax benefits of tax credits, are assigned to the funds’ investor and Company’s subsidiaries as specified in contractual arrangements. Certain of these arrangements have call and put options to acquire the investor’s equity interest as specified in the contractual agreements. See Note 13 for additional information on the call and put options.
A summary of amounts related to the investment funds in the Company’s condensed consolidated balance sheets is as follows:
September 30, December 31,
2020(1)
2019(1)
Cash and cash equivalents $ 9,179  $ 4,666 
Restricted cash 1,248  586 
Accounts receivable, net 867  532 
Costs and estimated earnings in excess of billings 2,168  1,125 
Prepaid expenses and other current assets 128  108 
Total VIE current assets 13,590  7,017 
Property and equipment, net 1,266  1,266 
Energy assets, net 145,008  142,456 
Operating lease assets 6,483  6,511 
Other assets 331  1,662 
Total VIE assets $ 166,678  $ 158,912 
Current portions of long-term debt and financing lease liabilities $ 2,243  $ 2,252 
Accounts payable 594  2,006 
Accrued expenses and other current liabilities 1,553  2,203 
Current portions of operating lease liabilities 121  102 
Total VIE current liabilities 4,511  6,563 
Long-term debt and financing lease liabilities, net of current portion and deferred financing fees 23,626  24,654 
Long-term operating lease liabilities, net of current portion 6,302  6,180 
Other liabilities 895  1,171 
Total VIE liabilities $ 35,334  $ 38,568 
(1) The amounts in the above table are reflected in Note 1 on the Company’s condensed consolidated balance sheets. See the Company’s condensed consolidated balance sheets for additional information.
Other Variable Interest Entities
The Company follows guidance on the consolidation of VIEs that requires companies to utilize a qualitative approach to determine whether it is the primary beneficiary of a VIE. The process for identifying the primary beneficiary of a VIE requires consideration of the factors that indicate a party has the power to direct the activities that most significantly impact the joint ventures economic performance, including powers granted to the joint ventures program manager, powers contained in the joint venture governing board and, to a certain extent, a company's economic interest in the joint venture. The Company analyzes its joint ventures and classifies them as either:
•a VIE that must be consolidated because the Company is the primary beneficiary or the joint venture is not a VIE and the Company holds the majority voting interest with no significant participative rights available to the other partners; or
•a VIE that does not require consolidation and is treated as an equity method investment because the Company is not the primary beneficiary or the joint venture is not a VIE and the Company does not hold the majority voting interest.
Many of the joint ventures are deemed to be VIEs because they lack sufficient equity to finance the activities of the joint venture.
Unconsolidated joint ventures are accounted for under the equity method. For those joint ventures, the Company's investment balances for the joint venture are included in other assets on the condensed consolidated balance sheets and the Company’s pro rata share of net income or loss is included in operating income. The Company’s investments in equity method joint ventures on the condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019 were a net asset of $1,370 and $1,292, respectively. During the three and nine months ended September 30, 2020, the Company recognized expense of $50 and $127, respectively, from equity method joint ventures. During the three and nine months ended September 30, 2019, the Company recognized expense of $73 and $147, respectively from equity method joint ventures.