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SEC Filings

10-Q
TERRAFORM GLOBAL, INC. filed this Form 10-Q on 06/27/2017
Entire Document
 

9. DERIVATIVES
As part of the Company’s risk management strategy, the Company has entered into derivative instruments which include interest rate swaps, cross currency swaps, and foreign currency contracts to mitigate interest rate and foreign currency exposure. If the Company elects to do so and if the instrument meets the criteria specified in ASC 815, Derivatives and Hedging, the Company designates its derivative instruments as cash flow hedges. The Company enters into interest rate swap agreements in order to hedge the variability of expected future cash interest payments. Cross currency swaps are used to reduce risks arising from the change in fair value of certain foreign currency denominated assets and liabilities in order to minimize the impact of foreign currency fluctuations on operating results. Foreign currency contracts are used to mitigate the economic and financial market risks of fluctuations in foreign currency exchange rates. The Company does not use derivative instruments for speculative purposes.
Activities related to derivative instruments were reported in the line items as of and for the periods indicated, as follows:
(In thousands)
 
 
Fair Value As of
Type of Instrument
Balance Sheet Classification
 
March 31,
2017
 
December 31,
2016
Derivatives designated as hedging:
 
 
 
 
Interest rate swaps
Other liabilities, net
 
$
(3,572
)
 
$
(2,237
)
 
Accumulated other comprehensive loss
 
3,572

 
2,237

Cross currency swaps
Other assets, net
 
31,341

 
41,752

 
Accumulated other comprehensive loss
 
7,820

 
6,688

 
 
 
 
 
 
Derivatives not designated as hedging:
 


 


Interest rate swaps
Other liabilities
 
$
(858
)
 
$
(68
)
Foreign currency forward contracts
Other liabilities
 
(22,111
)
 
(13,299
)
(In thousands)
 
 
Three Months Ended March 31,
Type of Instrument
Statement of Operations Classification
 
2017
 
2016
Derivatives not designated as hedging:
 
 
 
 
Interest rate swaps
Interest expense
 
$
763

 
$
2,969

Currency forward contracts
Other expenses
 
4,446

 
18,163

Certain derivative contracts contain provisions providing the counterparties a lien on specific assets as collateral. There was no cash collateral received or pledged as of March 31, 2017 or December 31, 2016, respectively, related to the Company’s derivative transactions.    
Derivatives Designated as Hedges
Interest Rate Swaps
The Company has entered into interest rate swap agreements to hedge variable rate project level debt. These interest rate swaps qualify for hedge accounting and are designated as cash flow hedges. Under the interest rate swap agreements, the power plant pays a fixed rate and the counterparty to the agreement pays a variable interest rate. No amounts deferred in other comprehensive income were reclassified into earnings during the three months ended March 31, 2017 and 2016
Cross Currency Swaps
The Company has entered into cross currency swap agreements to hedge its exposure to foreign currency fluctuations on debt denominated in U.S. dollars. These cross currency rate swaps qualify for hedge accounting and were designated as cash flow hedges. The amounts deferred in other comprehensive income and reclassified into earnings were $4.4 million and $18.2 million during the three months ended March 31, 2017 and 2016, respectively. There was no ineffectiveness recorded for the periods presented.

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