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SEC Filings

10-K
TERRAFORM GLOBAL, INC. filed this Form 10-K on 12/21/2016
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terms less favorable to us than those in the terminated PPA, and any replacement power plant may possess economic characteristics less favorable to us than those of the power plant that was bought out. In the event a PPA is terminated, a power plant is bought out or we are required to pay liquidated damages under such provisions, it could materially and adversely affect our business, financial condition, results of operations and cash flows until we are able to obtain a replacement PPA on similar terms, reinvest in a suitable replacement power plant or the payment of such liquidated damages ceases.
Additionally, certain of the project level financing agreements for power plants in our portfolio allow the lenders or investors to accelerate the repayment of the project level debt in the event that a PPA is terminated or if certain operating thresholds or performance measures are not achieved within specified time periods. We are therefore subject to the risk of lender or investor termination based on such criteria. In the event the project level debt for one or more of our power plants is accelerated under such provisions, it could materially and adversely affect our business, financial condition, results of operations and cash flows. We cannot provide any assurance that financing agreements containing such provisions will not be terminated and repayments accelerated, or in the event of such termination or acceleration, that we will be able to enter into replacement financing arrangements on commercially reasonable terms or at all.
Certain of our PPAs do not include inflation-based price increases.
Certain of the PPAs that have been entered into for our power plants and our pending BioTherm acquisition do not contain inflation-based price increase provisions. Certain of the countries in which we have operations, or that we may expand into in the future, have in the past experienced high inflation. To the extent that the countries in which we conduct our business experience high rates of inflation, thereby increasing our operating costs in those countries, we may not be able to generate sufficient revenues to offset the effects of inflation, which could materially and adversely affect our business, financial condition, results of operations and cash flows.
Certain of our power plants depend on third-party service providers for O&M and/or asset management services, and we may not be able to control their work as effectively as if we performed these functions.
We contract with third-party service providers for O&M and/or asset management services for certain of our power plants, and we may contract with additional providers in the future to perform such services. Outsourcing these functions involves the risk that third parties may not perform to our standards, may not produce results in a timely manner or may fail to perform at all. Although we have not experienced any significant difficulties with our third-party service providers, it is possible that we could experience difficulties in the future. Certain of our power plants located in Brazil, India, South Africa and Uruguay utilize third-party service providers for O&M and/or asset management services. If these third-party service providers default on their contractual obligations to us it may: (i) cause us to default in our regulatory obligations; (ii) adversely impact the ongoing operation of our power plants; and/or (iii) temporarily reduce our capacity to generate power. Certain of our power plants may encounter difficulties in transitioning O&M and/or asset management services from the existing service provider to us or to a new third party provider, which may have a material adverse effect on the business results of our operations and performance.
Our power plants are exposed to curtailment risks, which may reduce the return to us on those investments and adversely impact our business, financial condition, and results of operations.
Certain of our power plants’ generation of electricity may be curtailed without compensation due to transmission limitations or limitations on the electricity grid’s ability to accommodate intermittent electricity generating sources, reducing our revenues and impairing our ability to capitalize fully on a particular assets potential.
For example, our Honiton wind power plants in China have experienced significant curtailment due to grid constraints, overcapacity, and falling consumer demand. Approximately 29% of potential power generation was curtailed in 2015, and approximately 40% of potential power generation was curtailed in 2016, compared to an original forecast of 21%. We expect the increased curtailment will be partially offset by enlisting eligible sites into a market trading program, which allows the power plants to sell a certain amount of power at a discounted rate. Additionally, our wind power plants in Brazil have a contracted capacity that is slightly lower than their installed capacity, as a result of which the power plants are curtailed during periods of high wind speeds in order not to surpass their contracted power. However, the loss of generation capacity due to such curtailment is generally low, and the excess of capacity generated by some turbines may be offset against the lost capacity from wind turbines that are out of service for maintenance or other reasons. There may also be extraordinary events affecting the transmission grid that may reduce the capacity of the grid, causing the curtailment of power generation. Solutions to ameliorate or eliminate curtailment with respect to our power plants may not be available or may not be effective or may be cost prohibitive to undertake and implement. Curtailment at levels above our expectations could have a material adverse effect on our business, financial condition and results of operations and cash flows and our ability to pay dividends to holders of our Class A common stock.


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