Audited financial statements at the project level have also been delayed and may be delayed in the future. These delays have caused, or may cause in the future, defaults under the non-recourse financing agreements of five of our project companies. Any such defaults that are not cured or waived may entitle the lenders to the applicable project companies to demand repayment or enforce their security interests or other remedies, which could have a material adverse effect on our business, results of operations, financial condition and ability to pay dividends. Such defaults are likely to also restrict the ability of the project companies to make distributions to us.
Risks Related to our Business
Our failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act as a public company could have a material adverse effect on our business and share price.
Prior to completion of our IPO on August 5, 2015, we had not operated as a public company and did not have to independently comply with Section 404(a) of the Sarbanes-Oxley Act. As a public company, we are required to maintain internal control over financial reporting and to report any material weakness in our internal control over financial reporting. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting and, beginning with our second annual report following our IPO (i.e., this Annual Report on Form 10-K for the year ended December 31, 2016), provide a management’s report on internal control over financial reporting. Additionally, once we are no longer an emerging growth company, as defined by the JOBS Act, our independent registered public accounting firm will be required pursuant to Section 404(b) of the Sarbanes-Oxley Act to attest to the effectiveness of our internal control over financial reporting on an annual basis. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected on a timely basis. The existence of any material weakness would require management to devote significant time and incur significant expense to remediate any such material weaknesses and management may not be able to remediate any such material weaknesses in a timely manner.
As of December 31, 2016, we did not maintain an effective control environment attributable to certain identified material weaknesses and other control deficiencies. For additional information, see Item 9A - Controls and Procedures. These control deficiencies create a reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis, and therefore we concluded that the deficiencies represent material weaknesses in our internal control over financial reporting, and our internal control over financial reporting was not effective as of December 31, 2016.
We have developed and are in the process of implementing various measures in connection with our remediation of the material weaknesses identified in our ongoing efforts to improve our internal control over financial reporting. We cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to remediate the material weakness identified or avoid potential future material weaknesses.
The existence of material weaknesses in our internal control over financial reporting could result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause stockholders to lose confidence in our reported financial information, all of which could materially and adversely affect our business and stock price.
Our ability to access the capital markets may be limited.
Our ability to access the capital markets has been limited for reasons that are particular to the Company, including the SunEdison Bankruptcy, the delay in filing our periodic reports with the SEC, events of default under certain of our project level financing arrangements and other risks that we face. As a result of the negative impact on our business from these developments, we are currently unable to borrow additional funds and access the capital markets, including the project finance market for project level debt, on attractive terms. In some cases, these developments have affected the plans and perspectives of various market participants with whom we interact, including contractors, offtakers and financing providers; have contributed to increased uncertainty and have heightened some of the risks we face, including risks related to access to capital and liquidity; and have limited our ability to acquire additional power plants. If we are unable to raise adequate proceeds when needed to fund acquisitions or for other purposes, it would have an adverse effect on our projected cash available for distribution, business, financial condition, results of operations and cash flows.