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SEC Filings

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to several market risks in our normal business activities. Market risk is the potential loss that may result from market changes associated with our business or with an existing or forecasted financial or commodity transaction. The types of market risks we are exposed to include interest rate risk, foreign currency risk, liquidity risk and credit risk. We do not use derivative financial instruments for speculative or trading purposes.
Interest Rate Risk
As of December 31, 2015, our corporate level debt consisted of the Senior Notes (fixed rate) and the Revolver (variable rate). The estimated fair value of our corporate level debt was approximately $743.8 million and the outstanding amount of our corporate level debt was $926.8 million. We estimate that a 100 bps, or 1%, increase or decrease in market interest rates for this debt would have decreased or increased the fair value of our long-term debt by $28 million.
As of December 31, 2015, our project level debt was at both fixed and variable rates. We have entered into interest rate derivatives to swap certain of our variable rate project level debt to a fixed rate. Although we intend to use hedging strategies to mitigate our exposure to interest rate fluctuations, we may not hedge all of our interest rate risk and, to the extent we enter into interest rate hedges, our hedges may not necessarily have the same duration as the associated indebtedness. Our exposure to interest rate fluctuations will depend on the amount of indebtedness that bears interest at variable rates, the time at which the interest rate is adjusted, the amount of the adjustment, our ability to prepay or refinance variable rate indebtedness when fixed rate debt matures and needs to be refinanced and hedging strategies we may use to reduce the impact of any increases in rates. We estimate that a hypothetical 100 bps, or 1%, increase or decrease in our variable interest rates pertaining to interest rate swaps would have decreased or increased our earnings by $1.3 million for the year ended December 31, 2015.
Foreign Currency Risk
During the years ended December 31, 2015 and 2014, all of our revenues were generated outside of the United States in Brazilian real, Chinese yuan renminbi, Indian rupee, Malaysian ringgit, South African rand and Thai baht, and were translated into the U.S. dollar, which is our reporting currency. The PPAs, operating and maintenance agreements, financing agreements and other contractual arrangements in our current portfolio are denominated in Brazilian real, Chinese yuan renminbi, Indian rupee, Malaysian ringgit, South African rand, and Thai baht.
We use currency forward contracts in certain instances to mitigate the financial market risks of fluctuations in foreign currency exchange rates. We manage our foreign currency exposures through the use of these currency forward contracts to reduce risks arising from the change in fair value of certain assets and liabilities denominated in foreign currencies. The objective of these practices is to minimize the impact of foreign currency fluctuations on our operating results. As of December 31, 2015, we have hedged our exposure to foreign-currency cash available for distribution to shareholders through June 30, 2018. Going forward, we plan to hedge our foreign currency exposure to cash forecasted to be distributed to the U.S. for a minimum of two years and maintain this position on an ongoing basis.
We estimate that a hypothetical 1% appreciation in applicable foreign exchange rates against the U.S. dollar will increase or decrease our future revenues by the following amounts:
(In thousands)
Fair Value as of December 31, 2015
Total Impact to Fair Value as of December 31, 2015 (1)
Brazilian real


Chinese yuan renminbi


Indian rupee


Malaysian ringgit


South African rand


Thai baht
Total impact


Impact on future revenues was estimated using a 1% appreciation in exchange rates.
Liquidity Risk
The Company’s principal liquidity requirements are to finance current operations, service debt and, if and when declared by the Company, to fund cash dividends to investors. Changes in operating plans, lower than anticipated electricity