Print Page  |  Close Window

SEC Filings

10-K
TERRAFORM GLOBAL, INC. filed this Form 10-K on 12/21/2016
Entire Document
 

flows and payout ratios will reflect more variability during periods shorter than a year. While we intend to reserve a portion of our cash available for distribution and maintain a revolving credit facility in order to, among other things, facilitate the payment of dividends to its stockholders, unpredicted variability in generation could result in variability of dividend payments to the extent the Company lacks sufficient reserves and liquidity.
The Company uses reliable and proven solar panels, inverters and other equipment for each of its solar power projects and quality wind turbines and other system components for each of its wind power projects. Management believes this significantly reduces the probability of unexpected equipment failures.
Seasonality
The amount of electricity produced and revenues generated by our solar power plants is dependent in part on the amount of sunlight, or irradiation, where the assets are located. Shorter daylight hours in winter months result in less irradiation and the generation produced by these power plants will vary depending on the season. Additionally, to the extent more of our solar power plants are located in either the northern or southern hemisphere, overall generation of our entire solar asset portfolio could be further impacted by seasonality. While we expect seasonal variability to occur, we expect aggregate seasonal variability to decrease if geographic diversity of our portfolio between the northern and southern hemisphere increases. We expect our current solar portfolio’s power generation to be at its lowest during the fourth quarter of each year as our assets are geographically concentrated in the northern hemisphere. Therefore, we expect our fourth quarter solar revenue generation to be lower than other quarters.
Similarly, the electricity produced and revenues generated by our wind power plants depend heavily on wind conditions, which are variable and difficult to predict. Operating results for wind power plants vary significantly from period to period depending on the wind conditions during the periods in question. As our wind power plants are located in geographies with different profiles, there is some flattening of the seasonal variability associated with each individual wind power plant's generation, and we expect that as the fleet expands the effect of such wind resource variability may be favorably impacted, although we cannot guarantee that we will purchase wind power plants that will achieve such results in part or at all. Historically, our wind production is greater in the first and fourth quarters which can partially offset the lower solar revenue expected to be generated in the fourth quarter.
Although we are currently deferring a decision on making dividend payments in the prudent conduct of our business, over time we intend to revert to a situation where we reserve a portion of our cash available for distribution and maintain sufficient liquidity, including cash on hand, in order to, among other things, facilitate the payment of dividends to our stockholders. As a result, over time we do not expect seasonality to have a material effect on the amount of our quarterly dividends.
Location of Power Generation Assets/Tax Repatriation
While the Company is a U.S. taxpayer, substantially all of the Company’s assets are located in foreign tax jurisdictions, and management expects that the Company will acquire additional power plants in foreign tax jurisdictions in the future. Changes in tax rates and the application of foreign tax withholding requirements in foreign jurisdictions where the Company owns power plants will impact the contribution from such assets to cash available for distribution. In order to minimize withholdings at the project level, cash from profits may be maintained at the foreign entity level for future acquisitions. Intercompany loans may be structured at a level to allow for the efficient flow of cash and to fund the dividend requirements.
Cash Distribution Restrictions
In many cases, the Company obtains project level financing for its power plants. These project level financing agreements typically restrict the ability of the Company’s project companies to distribute funds unless specific financial thresholds and operating reserves are satisfied on specified dates. Additionally, the project financing agreements for most of our Indian power plants require that we obtain lender consent prior to making any distributions or paying any dividends from the project company to us regardless of whether the other conditions of the financing agreement have been satisfied, and do not permit dividend payments until the expiry of a certain number of years from commercial operation date, or until full repayment of the facility. In addition, these financing arrangements also generally limit our ability to distribute funds to the Company if defaults have occurred or would occur with the giving of notice or the lapse of time, or both. As discussed above in Recent Developments - SunEdison Bankruptcy, the project level financing agreements for our two remaining levered power plants in India and our three power plants in South Africa contain provisions that provide the lenders with the right to accelerate debt maturity due to the SunEdison Bankruptcy because SunEdison is an original sponsor of the project and/or a party to certain material project agreements, such as O&M and EPC related contracts. In addition, certain audited financial statements at the project level have been delayed, which may create or may have already created defaults at the project level for our levered


80