Insurance Allocation Agreement
The Company, TerraForm Power, Inc., SunEdison and certain of their respective directors and officers shared $150.0 million of directors’ and officers’ liability insurance policies that covered the period from July 15, 2015 to July 14, 2016 (the “D&O Insurance”). SunEdison and the independent directors of SunEdison (the “SUNE D&O Parties”) entered into an agreement, dated March 27, 2017 and amended on June 7, 2017, with the Company, TerraForm Power, Inc. and their respective current directors and officers (the “YieldCo D&O Parties”) related to the D&O Insurance. Among other things, this agreement provides that: (i) the YieldCo D&O Parties consent to a $32.0 million payment to SunEdison from the D&O Insurance in connection with the settlement of claims proposed to be brought by the unsecured creditors’ committee in the SunEdison Bankruptcy under a motion in the SunEdison Bankruptcy case for derivative standing; (ii) for a specified period of time, the SUNE D&O Parties and the YieldCo D&O Parties agree to cooperate in trying to reach settlements of certain lawsuits pending against the YieldCo D&O Parties arising from a variety of alleged prepetition actions and transactions, including, but not limited to, the Company’s initial public offering and other securities transactions, and SunEdison agrees to consent to such proposed settlements to be funded by up to $32.0 million from the D&O Insurance; and (iii) for a specified period of time, SunEdison, its independent directors, the Company and TerraForm Power, Inc. will not assert certain payment priority provisions of the D&O Insurance. The agreement is subject to the approval of the bankruptcy court overseeing the SunEdison Bankruptcy.
Arrangements with TerraForm Power
In January 2017, the Company entered into a Use and Occupancy Agreement with TerraForm Power, pursuant to which TerraForm Power granted to the Company a license to use the office space in Bethesda, Maryland that is leased by TerraForm Power and is the shared corporate headquarters of the Company and TerraForm Power until the earlier to occur of June 30, 2018 and the termination of the underlying lease. The Company has agreed to pay TerraForm Power one-third of the rent and other amounts due to the landlord under the underlying lease, which is expected to be equal to an aggregate of $0.7 million in 2017, and certain additional service fees.
TerraForm Power has entered into service contracts with various vendors for information technology and enterprise resource planning systems. The Company is not a party to any of these contracts and has no direct contractual liability to third parties thereunder, however the Company uses these systems in cooperation with TerraForm Power, and the costs of such systems will be allocated between TerraForm Power and the Company pursuant to an agreement that is expected to be entered into between TerraForm Power and the Company. As of December 31, 2016, the Company capitalized $0.4 million of expenses related to development costs of the new enterprise resource planning systems, and the Company recognized $0.1 million as general and administrative expense related to these systems during the year ended December 31, 2016. Subject to completion of the agreement with TerraForm Power, the total estimated cost to the Company for these services is expected to be approximately $3.0 million in 2017.
In addition, certain employees of TerraForm Power provide general management services to the Company, and a portion of the costs associated with such employees is allocated to the Company. The total estimated cost to the Company for the services being provided to the Company by employees of TerraForm Power is expected to be approximately $1.1 million in 2017.
Settlement Agreement with Renova
On May 26, 2017, TerraForm Global, Inc., TerraForm Global, LLC, TerraForm Global Brazil Holding B.V. and TERP GLBL Brasil I Participacoes Ltda. entered into a Settlement Agreement and Mutual Release (the “Renova Settlement Agreement”) with Renova. The Renova Settlement Agreement resolves all disputes among the Company and Renova that are the subject of an ongoing arbitration proceeding in the Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (the “Renova Arbitration”). Pursuant to the Renova Settlement Agreement, the TerraForm Global Parties have agreed to make a one-time settlement payment in the aggregate amount of $15.0 million, in exchange for and contingent on the withdrawal with prejudice of all claims and counterclaims made in the Renova Arbitration and termination of the Renova Arbitration. In addition, 792,495 shares of TerraForm Global, Inc. Class A common stock issued to Renova and currently held in escrow pursuant to the acquisition agreements for the Salvador wind power plant acquired by a subsidiary of the Company will be returned to the Company. None of the parties to the Renova Arbitration has admitted to any wrongdoing or liability with respect to the claims asserted in the Renova Arbitration. Subject to the satisfaction of certain conditions set forth in the Renova Settlement Agreement (including the purchase of Renova’s shares of TerraForm Global, Inc. Class A common stock by an affiliate of Brookfield as described below), the parties have granted each other full releases with respect to any claims arising in connection with the previously completed acquisitions by the Company of the Salvador and Bahia wind power plants from Renova and all related transactions and any other disputes that could arise in the future among the TerraForm Global Parties and Renova concerning or related in any way to such transactions and events, which are the subject of the Renova Arbitration.