UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K/A

 

Amendment No. 1

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): January 2, 2015

 

NRG YIELD, INC.

(Exact name of Registrant as specified in its charter)

 

Delaware
(State or other jurisdiction of
incorporation)

 

001-36002
(Commission File Number)

 

46-1777204
(IRS Employer Identification No.)

 

211 Carnegie Center, Princeton, New Jersey 08540

(Address of principal executive offices, including zip code)

 

(609) 524-4500

(Registrant’s telephone number, including area code)

 

N/A

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Introductory Note

 

As previously reported, on January 2, 2015, NRG Yield, Inc. (“NRG Yield” or the “Company”) completed its previously announced acquisition of (i) 100% of the membership interests of Mission Wind Laredo, LLC, which indirectly owns Laredo Ridge, a 81 MW wind facility located in Petersburg, Nebraska (“Laredo Ridge”), from NRG Wind LLC (“NRG Wind”), (ii) 100% of the membership interests of Tapestry Wind LLC, which indirectly owns three wind facilities totaling 204 MW, including Buffalo Bear, a 19 MW wind facility in Oklahoma, Taloga, a 130 MW wind facility in Oklahoma, and Pinnacle, a 55 MW wind facility in West Virginia (Pinnacle, together with Buffalo Bear and Taloga, “Tapestry”), from NRG Wind, and (iii) 100% of the membership interests of WCEP Holdings, LLC, which indirectly owns Walnut Creek, a 485 MW natural gas facility located in City of Industry, California (“Walnut Creek”, together with Laredo Ridge and Tapestry, the “Drop-Down Assets”), from NRG Arroyo Nogales LLC (“NRG Arroyo Nogales” and, together with NRG Wind, the “Sellers”), pursuant to those certain purchase and sale agreements with the Sellers, each of which are wholly-owned subsidiaries of NRG Energy, Inc. This Current Report on Form 8-K/A (the “Form 8-K/A”) amends the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on January 6, 2015 to include the financial statements of the Drop-Down Assets and the pro forma financial information required by Items 9.01(a) and 9.01(b), respectively, and to include the exhibits under Item 9.01(d) of this Form 8-K/A.

 

Section 9 - Financial Statements and Exhibits

 

Item 9.01                                           Financial Statements and Exhibits.

 

(a)                                 Financial Statements of Businesses Acquired.

 

The audited financial statements of Laredo Ridge Wind, LLC as of December 31, 2013 and 2012, and for each of the two years in the period ended December 31, 2013, and the unaudited financial statements of Laredo Ridge Wind, LLC as of September 30, 2014 and for the nine months ended September 30, 2014 are attached to this Form 8-K/A as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference.

 

The audited consolidated financial statements of WCEP Holdings, LLC and its subsidiaries as of December 31, 2013, and for the year ended December 31, 2013, and the unaudited consolidated financial statements of WCEP Holdings, LLC and its subsidiaries as of September 30, 2014 and for the nine months ended September 30, 2014 are attached to this Form 8-K/A as Exhibits 99.3 and 99.4, respectively, and are incorporated herein by reference.

 

The audited consolidated financial statements of Tapestry Wind, LLC and its subsidiaries as of December 31, 2013 and 2012, and for each of the two years in the period ended December 31, 2013, and the unaudited consolidated financial statements of Tapestry Wind, LLC and its subsidiaries as of September 30, 2014 and for the nine months ended September 30, 2014 are attached to this Form 8-K/A as Exhibits 99.5 and 99.6, respectively, and are incorporated herein by reference.

 

(b)                                 Pro Forma Financial Information.

 

The unaudited pro forma condensed combined consolidated financial statements and explanatory notes relating to the Company’s acquisition of the Drop-Down Assets are attached as Exhibit 99.7 to this Form 8-K/A and are incorporated herein by reference.

 

(d)                                 Exhibits.

 

The Exhibit Index attached to this Form 8-K/A is incorporated herein by reference.

 

2



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

NRG Yield, Inc.

 

 

 

By:

/s/ Brian E. Curci

 

 

Brian E. Curci

 

 

Corporate Secretary

 

Dated: January 16, 2015

 

3



 

EXHIBIT INDEX

 

Exhibit No.

 

Document

23.1

 

Consent of KPMG LLP.

23.2

 

Consent of KPMG LLP.

23.3

 

Consent of KPMG LLP.

99.1

 

Audited financial statements of Laredo Ridge Wind, LLC as of December 31, 2013 and 2012, and for each of the two years in the period ended December 31, 2013.

99.2

 

Unaudited financial statements of Laredo Ridge Wind, LLC as of September 30, 2014 and for the nine months ended September 30, 2014.

99.3

 

Audited consolidated financial statements of WCEP Holdings, LLC and its subsidiaries as of December 31, 2013, and for the year ended December 31, 2013.

99.4

 

Unaudited consolidated financial statements of WCEP Holdings, LLC and its subsidiaries as of September 30, 2014 and for the nine months ended September 30, 2014.

99.5

 

Audited consolidated financial statements of Tapestry Wind, LLC and its subsidiaries as of December 31, 2013 and 2012, and for each of the two years in the period ended December 31, 2013.

99.6

 

Unaudited consolidated financial statements of Tapestry Wind, LLC as of September 30, 2014 and for the nine months ended September 30, 2014.

99.7

 

Unaudited pro forma combined consolidated financial statements and explanatory notes for the year ended December 31, 2013 and the nine months ended September 30, 2014.

 

4


Exhibit 23.1

 

Consent of Independent Auditors

 

The Management Committee
Laredo Ridge Wind, LLC:

 

We consent to the incorporation by reference in the registration statement (No. 333-190071) on Form S-8 of NRG Yield, Inc. of our report dated March 28, 2014, with respect to the balance sheets of Laredo Ridge Wind, LLC as of December 31, 2013 and 2012, and the related statements of income, comprehensive income (loss), member’s equity and cash flows for the years ended December 31, 2013 and 2012, which report appears in the Form 8-K/A of NRG Yield, Inc. dated January 16, 2015.

 

(signed) KPMG LLP

 

Los Angeles, California
January 16, 2015

 


Exhibit 23.2

 

Consent of Independent Auditors

 

The Management Committee
WCEP Holdings, LLC:

 

We consent to the incorporation by reference in the registration statement (No. 333-190071) on Form S-8 of NRG Yield, Inc. of our report dated April 30, 2014, with respect to the consolidated balance sheet of WCEP Holdings, LLC as of December 31, 2013, and the related consolidated statements of income, comprehensive income, member’s equity and cash flows for the year ended December 31, 2013, which report appears in the Form 8-K/A of NRG Yield, Inc. dated January 16, 2015.

 

(signed) KPMG LLP

 

Los Angeles, California
January 16, 2015

 


Exhibit 23.3

 

Consent of Independent Auditors

 

The Management Committee
Tapestry Wind, LLC:

 

We consent to the incorporation by reference in the registration statement (No. 333-190071) on Form S-8 of NRG Yield, Inc. of our report dated April 23, 2014, with respect to the consolidated balance sheets of Tapestry Wind, LLC as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income (loss), member’s equity and cash flows for the years ended December 31, 2013 and 2012, which report appears in the Form 8-K/A of NRG Yield, Inc. dated January 16, 2015.

 

(signed) KPMG LLP

 

Los Angeles, California
January 16, 2015

 


Exhibit 99.1

 

LAREDO RIDGE WIND, LLC

(A Delaware Limited Liability Company)

 

Financial Statements

 

December 31, 2013 and 2012

 

(With Independent Auditors’ Report Thereon)

 



 

LAREDO RIDGE WIND, LLC

(A Delaware Limited Liability Company)

 

Table of Contents

 

 

Page(s)

 

 

Independent Auditors’ Report

1

 

 

Financial Statements:

 

 

 

Balance Sheets

2

 

 

Statements of Income

3

 

 

Statements of Comprehensive Income (Loss)

4

 

 

Statements of Member’s Equity

5

 

 

Statements of Cash Flows

6

 

 

Notes to Financial Statements

7–13

 



 

Independent Auditors’ Report

 

The Management Committee
Laredo Ridge Wind, LLC:

 

We have audited the accompanying financial statements of Laredo Ridge Wind, LLC, which comprise the balance sheets as of December 31, 2013 and 2012, and the related statements of income, comprehensive income (loss), member’s equity, and cash flows for the year then ended, and the related notes to the financial statements.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditors’ Responsibility

 

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Laredo Ridge Wind, LLC as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the year then ended in accordance with U.S. generally accepted accounting principles.

 

/s/ KPMG LLP

Los Angeles, California
March 28, 2014

 

1



 

LAREDO RIDGE WIND, LLC

(A Delaware Limited Liability Company)

Balance Sheets

December 31, 2013 and 2012

(In thousands)

 

 

 

2013

 

2012

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

2,911

 

2,735

 

Accounts receivable

 

1,436

 

1,364

 

Inventory

 

455

 

 

Prepaid expenses and other current assets

 

140

 

511

 

Total current assets

 

4,942

 

4,610

 

Noncurrent assets:

 

 

 

 

 

Wind energy generating system, net of accumulated depreciation of $27,328 and $17,956 in 2013 and 2012, respectively

 

160,012

 

169,384

 

Deferred financing costs, net

 

3,055

 

3,477

 

Long-term restricted cash

 

334

 

334

 

Inventory deposits

 

 

425

 

Total assets

 

$

168,343

 

178,230

 

Liabilities and Member’s Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

326

 

620

 

Accounts payable to related parties

 

41

 

91

 

Accrued liabilities

 

182

 

311

 

Current maturities of long-term debt

 

2,922

 

2,664

 

Interest payable

 

12

 

12

 

Total current liabilities

 

3,483

 

3,698

 

Long-term debt

 

65,729

 

68,651

 

Deferred revenue, net

 

49,939

 

52,862

 

Long-term derivative liabilities

 

3,358

 

8,972

 

Asset retirement obligation

 

5,025

 

4,729

 

Total liabilities

 

127,534

 

138,912

 

Commitments and contingencies

 

 

 

 

 

Member’s equity

 

40,809

 

39,318

 

Total liabilities and member’s equity

 

$

168,343

 

178,230

 

 

See accompanying notes to financial statements.

 

2



 

LAREDO RIDGE WIND, LLC

(A Delaware Limited Liability Company)

Statements of Income

Years ended December 31, 2013 and 2012

(In thousands)

 

 

 

2013

 

2012

 

Operating revenues:

 

 

 

 

 

Lease revenue

 

$

16,506

 

15,995

 

Grant revenue

 

2,923

 

2,923

 

Energy sales and other revenues

 

5

 

3

 

Total operating revenues

 

19,434

 

18,921

 

Operating expenses:

 

 

 

 

 

Depreciation and accretion

 

9,668

 

9,650

 

Maintenance and other operating costs

 

3,607

 

3,419

 

General and administrative

 

31

 

147

 

Total operating expenses

 

13,306

 

13,216

 

Income from operations

 

6,128

 

5,705

 

Interest expense

 

(4,919

)

(5,110

)

Net income

 

$

1,209

 

595

 

 

See accompanying notes to financial statements.

 

3



 

LAREDO RIDGE WIND, LLC

(A Delaware Limited Liability Company)

Statements of Comprehensive Income (Loss)

Years ended December 31, 2013 and 2012

(In thousands)

 

 

 

2013

 

2012

 

Net income

 

$

1,209

 

595

 

Other comprehensive income:

 

 

 

 

 

Unrealized gains (losses) on derivatives qualified as cash flow hedges:

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

5,614

 

(968

)

Other comprehensive gain (loss)

 

5,614

 

(968

)

Comprehensive income (loss)

 

$

6,823

 

(373

)

 

See accompanying notes to financial statements.

 

4



 

LAREDO RIDGE WIND, LLC

(A Delaware Limited Liability Company)

Statements of Member’s Equity

Years ended December 31, 2013 and 2012

(In thousands)

 

 

 

Mission Wind Laredo, Inc.

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

other

 

Total

 

 

 

 

 

 

 

Retained

 

comprehensive

 

member’s

 

 

 

Contributions

 

Distributions

 

deficit

 

loss

 

equity

 

Balance at December 31, 2011

 

$

132,810

 

(77,345

)

(2,750

)

(8,004

)

44,711

 

Distributions to member

 

 

(5,020

)

 

 

(5,020

)

Net income

 

 

 

595

 

 

595

 

Other comprehensive loss

 

 

 

 

(968

)

(968

)

Balance at December 31, 2012

 

132,810

 

(82,365

)

(2,155

)

(8,972

)

39,318

 

Distributions to member

 

 

(5,332

)

 

 

(5,332

)

Net income

 

 

 

1,209

 

 

1,209

 

Other comprehensive income

 

 

 

 

5,614

 

5,614

 

Balance at December 31, 2013

 

$

132,810

 

(87,697

)

(946

)

(3,358

)

40,809

 

 

See accompanying notes to financial statements.

 

5



 

LAREDO RIDGE WIND, LLC

(A Delaware Limited Liability Company)

Statements of Cash Flows

Years ended December 31, 2013 and 2012

(In thousands)

 

 

 

2013

 

2012

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

1,209

 

595

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation, amortization and accretion

 

10,090

 

10,089

 

Amortization of deferred revenue

 

(2,923

)

(2,923

)

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(72

)

134

 

Prepaid expenses and other current assets

 

371

 

(376

)

Inventory deposits

 

425

 

 

Inventory

 

(455

)

 

Accounts payable

 

(344

)

522

 

Accrued liabilities

 

(129

)

(14

)

Interest payable

 

 

(14

)

Net cash provided by operating activities

 

8,172

 

8,013

 

Cash flows from investing activities:

 

 

 

 

 

Capital expenditures

 

 

(19

)

Decrease in long-term restricted cash

 

 

83

 

Net cash provided by investing activities

 

 

64

 

Cash flows from financing activities:

 

 

 

 

 

Distributions to member

 

(5,332

)

(5,020

)

Repayment of long-term debt

 

(2,664

)

(2,610

)

Net cash used in financing activities

 

(7,996

)

(7,630

)

Net increase in cash and cash equivalents

 

176

 

447

 

Cash and cash equivalents at beginning of year

 

2,735

 

2,288

 

Cash and cash equivalents at end of year

 

$

2,911

 

2,735

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid during the year for interest

 

$

4,466

 

4,687

 

 

See accompanying notes to financial statements.

 

6



 

(1)                     The Company

 

Laredo Ridge Wind, LLC (the Company), a Delaware limited liability company, a wholly owned subsidiary of Mission Wind Laredo, Inc. (MWL), which is a wholly owned subsidiary of Edison Mission Wind, Inc. (EM Wind), in turn a wholly owned subsidiary of Edison Mission Energy (EME), was formed to construct  and operate a 79.9-megawatt (MW) wind powered electricity-generating system composed of 54 General Electric Company  1.5 MW generators, a power collection system, and power substation (the Windsystem) located in Boone County, Nebraska. Electricity generated by the Windsystem is sold under a power purchase agreement to Nebraska Public Power District. The Windsystem commenced commercial operations on February 1, 2011.

 

On December 17, 2012, EME filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division (the Bankruptcy Court). EME remains in possession of its property and continues its business operations uninterrupted as a “debtor in possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and order of the Bankruptcy Court.

 

On October 18, 2013, EME entered into an acquisition agreement with NRG Energy, Inc. (NRG), that provides for a sale of substantially all of EME’s assets to NRG including its member interests in the Company. The sale is expected to be completed by April 2014.

 

A summary of the major agreements entered into by the Company is set forth below:

 

(a)                     Nebraska Public Power District Power Purchase Agreement

 

The Company sells electricity generated by the turbines to Nebraska Public Power District (NPPD) pursuant to a power purchase agreement (PPA) with a term extending for 20 years from the commercial operation date of February 1, 2011. The terms of the agreement provide for energy rates escalating by 2.5% on an annual basis, as defined in the agreement. Due to the concentration of sales to NPPD, the Company is exposed to credit risk of potential nonperformance by NPPD, which could impact liquidity if NPPD were to experience financial difficulties. As of December 31, 2013 and 2012, NPPD’s credit and long-term senior secured issuer ratings from Standard & Poor’s were A and A+, respectively; ratings from Moody’s Investors Service were A1 and A1, respectively.

 

(b)                     Southwest Power Pool, Inc. Standard Large Generator Interconnection Agreement

 

The Company entered into an interconnection agreement with Southwest Power Pool, Inc. on March 5, 2010 with a term extending for 20 years with provisions for extension.

 

(c)                      General Electric International, Inc. Turbine Operations Support Agreement

 

The Company contracted with General Electric International, Inc. (GE) to provide certain warranty, maintenance, and repair services. The agreement, including extensions, covers a five-year period, which commenced at turbine completion in November 2010. Payments are subject to an annual escalation clause. Total fees incurred for the years ended December 31, 2013 and 2012 were $1,487,000 and $1,458,000, respectively.

 

(d)                     Windsystem Operation and Maintenance Agreement

 

The Company entered into an agreement with Edison Mission Operation & Maintenance, Inc. (EMOM), a wholly owned subsidiary of EME, to provide operation and maintenance services for the balance of plant not covered by the maintenance and service agreement with GE. The agreement has

 

(Continued)

 

7



 

an initial term of five years commencing on May 27, 2010, with provision for annual automatic extension until terminated. The Company incurred costs from EMOM for the years ended December 31, 2013 and 2012 in the amounts of $552,000 and $516,000, respectively. These costs are included in maintenance and other operating costs in the statements of income.

 

(e)                      Wind Park Leases and Easement Agreements

 

The Company has entered into various lease and easement agreements, which grant the Company nonexclusive easement rights to use the land on which the turbines, the substation, operations building, access roads, and other related equipment are located. The Company is obligated to pay easement fees of $6,750 per turbine, which are adjusted annually by 2.5%, plus any crop damage fees. The Company incurred easement fees of $438,000 and $444,000 for the years ended December 31, 2013 and 2012, respectively. These costs are included in maintenance and other operating costs in the statements of income.

 

(2)                     Significant Accounting Policies

 

(a)                     Basis of Presentation

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

(b)                     Cash and Cash Equivalents

 

The Company considers cash and cash equivalents to include cash and money market fund investments. The carrying value of cash and cash equivalents approximates fair value due to money market investments having original maturities of less than three months.

 

(c)                      Derivative Instruments

 

The Company uses interest rate swaps to manage its interest rate exposure on long-term debt. Authoritative guidance on derivatives and hedging establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts). The Company is required to record derivatives on its balance sheets as either assets or liabilities measured at fair value unless otherwise exempted from derivative treatment as a normal sale and purchase. All changes in the fair value of derivative instruments are recognized in earnings, unless specific hedge criteria are met that requires the Company to formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.

 

The accounting guidance for cash flow hedges provides that the effective portion of gains or losses on derivative instruments designated and qualifying as cash flow hedges be reported as a component of other comprehensive income and be reclassified into earnings in the same period that the hedged transaction affects earnings. The remaining gains or losses on the derivative instruments, if any, must be recognized currently in earnings. Derivative and hedging accounting policies are discussed further in note 4 — Derivative Instruments and Risk Management.

 

(Continued)

 

8



 

(d)                     Deferred Financing Costs

 

Deferred financing costs consist of legal fees and closing costs incurred by the Company in obtaining its financing. These costs are amortized using the effective interest method over the term of the financial obligation. As of December 31, 2013 and 2012, accumulated amortization totaled $2,250,000 and $1,827,000, respectively. Amortization expense was $422,000 and $439,000 in 2013 and 2012, respectively, and is included in interest expense in the statements of income.

 

(e)                      Long-Term Restricted Cash

 

Long-term restricted cash consists of debt service or collateral reserves required by the Company’s debt agreements.

 

(f)                        Wind Energy Generating System

 

Plant and equipment are stated at cost. The plant balance includes all costs associated with the acquisition, development, and construction of the Windsystem. Depreciation is recorded using the straight-line method over the Windsystem’s estimated useful life of 20 years.

 

Expenditures for maintenance, repairs, and renewals are expensed as incurred. Expenditures for additions and improvements are capitalized.

 

(g)                     Impairment of Long-Lived Assets

 

The Company reviews the Windsystem for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of the Windsystem is measured by a comparison of its carrying amount to the future undiscounted net cash flows expected to be generated plus any incremental tax credits directly attributable to the Windsystem. If the Windsystem is considered to be impaired, the impairment recognized is measured as the amount by which its carrying amount exceeds its fair value. No impairment losses were recognized during the years ended December 31, 2013 and 2012.

 

(h)                     Inventory

 

Inventory is stated at the lower of weighted average cost or market and consists of spare parts, materials, and supplies. During the year ended December 31. 2013, amounts recorded as inventory deposits, discussed in note 2(i) — Inventory Deposits, were transferred to inventory upon the expiration of the initial two year period of the agreement with GE discussed in note 1(c) — General Electric International, Inc. Turbine Operations Support Agreement.

 

(i)                        Inventory Deposits

 

Inventory deposits include spare parts purchased pursuant to the terms of the agreement with GE. Parts acquired under this agreement are to be replenished by GE as parts are used in turbine maintenance throughout the term of the agreement. These amounts are included at cost. As discussed in note 2(h) — Inventory, amounts recorded as inventory deposits in 2012 were reclassified to inventory in 2013.

 

(j)                        Revenue Recognition

 

An assessment of revenue from electricity sales was conducted to determine whether or not the PPA with NPPD contains an embedded lease. The assessment resulted in a determination that revenue earned by the Company for sale of electricity is subject to lease accounting. However, there are no

 

(Continued)

 

9



 

minimum rental payments required under this agreement and, therefore, rental income is recorded as electricity is delivered at rates defined in the PPA. The Company accounts for renewable energy credits as a bundled component of the associated electricity, with revenue also recorded as the electricity is delivered.

 

The Company accounts for grant income on the deferred method and, accordingly, recognizes operating revenues related to such income over the estimated useful life of the project. In 2011, the Company received $57,492,000 in U.S. Treasury grants (cash grants, under the American Recovery and Reinvestment Act of 2009) that was recorded as deferred revenue and is amortized to income over 20 years. Pursuant to the regulations governing U.S. Treasury Grants, there is a ratable, five-year recapture period on the grant income from the date the related property was put into service if the property ceases to be used as eligible property or is disposed of to a disqualified entity. The recapture period becomes fully vested on December 31, 2015.

 

(k)                     Income Taxes

 

The Company is a single member limited liability company and is included in the consolidated return of its ultimate parent company, along with its member, EM Wind. An enterprise is required to recognize, in its financial statements, the impact of a tax position by determining if the weight of the available evidence indicates it is more likely than not, based on the technical merits, that the position will be sustained on audit. All income tax contingencies would be immaterial if they had to be recognized by the Company. However, because the entity is a limited liability entity that is included in the tax return of its parent company and is not obligated to pay any income taxes, the Company has not reflected a hypothetical tax obligation in its financial statements. If the Company had recorded income taxes, based on a hypothetical separate company return, adjusted for the use of state tax apportionment factors of the consolidated tax group, the income statements would include income tax expense of $593,000 and $1,030,000 for the years ended December 31, 2013 and 2012, respectively.

 

(l)                        Property Taxes

 

The Company’s Windsystem is valued and property taxes are assessed pursuant to Nebraska state statutes. The Company incurred property tax expense of $285,000 and $285,000 for the years ended December 31, 2013 and 2012, respectively.

 

(m)                  Asset Retirement Obligation

 

The Company accounts for its asset retirement obligation by recording the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability was initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. Accretion expense is classified as part of depreciation and accretion in the accompanying statements of income.

 

(Continued)

 

10



 

The Company recorded a liability representing expected future costs associated with site reclamation, facilities dismantlement, and removal of environmental hazards as follows (in thousands):

 

Balance of asset retirement obligation at December 31, 2011

 

$

4,450

 

Accretion expense

 

279

 

Balance of asset retirement obligation at December 31, 2012

 

4,729

 

Accretion expense

 

296

 

Balance of asset retirement obligation at December 31, 2013

 

$

5,025

 

 

(3)                     Fair Value Measurements

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an exit price). Fair value for a liability should reflect the entity’s nonperformance risk. Fair value is determined using a hierarchy to prioritize inputs to valuation models. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are:

 

·                              Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities;

 

·                              Level 2 — Pricing inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the derivative instruments; and

 

·                              Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurements and unobservable.

 

The Company’s assets carried at fair value consist of money market funds which are classified as Level 1 as fair value is determined by observable market prices (unadjusted) in active markets. Money market funds are included in cash and cash equivalents and long-term restricted cash in the Company’s balance sheets. The Company had money market assets of $1,720,000 and $1,850,000 at December 31, 2013 and 2012, respectively.

 

The interest rate swap liability is classified as Level 2 as the fair value can be determined based on observable values of underlying interest rates. The Company had derivative liabilities related to interest rate swaps of $3,358,000 and $8,972,000 as of December 31, 2013 and 2012, respectively.

 

(4)                     Derivative Instruments and Risk Management

 

Interest Swap

 

On July 27, 2010, the Company, in conjunction with its financing, entered into 15-year amortizing interest rate swap agreements for the purpose of hedging the variability of cash flows in the interest payments due to fluctuations of the London Interbank Offered Rate (LIBOR). These interest rate swap agreements became effective on March 31, 2011 and qualify as effective cash flow hedges, whereby the hedges were reported in the Company’s balance sheets at fair value, with changes in the fair value of the hedges reflected in the statements of comprehensive income (loss). The total notional amount of the hedges was

 

(Continued)

 

11



 

$61,984,000 and $64,378,000 at December 31, 2013 and 2012, respectively. The notional amount of the interest rate swap agreements amortizes each year, such that the Company’s interest payment under the wind financing is approximately 90% hedged. The interest rate swap agreements entitle the Company to receive a floating (three-month LIBOR) rate and pay a fixed rate of 3.460%. The interest rate swap agreements expire in March 2026. The Company recognized unrealized gains (losses) of $5,614,000 and ($968,000) in other comprehensive income (loss) in 2013 and 2012, respectively.

 

The interest rate swap agreements convert the LIBOR-based rates (0.247% and 0.311% at December 31, 2013 and 2012, respectively) in the term loan to a fixed interest rate of 3.46%. Total interest expense related to the swap agreements was $2,043,000 and $2,001,000 for the years ended December 31, 2013 and 2012, respectively. These costs are included in interest expense in the accompanying statements of income.

 

(5)                     Long-Term Debt

 

On July 27, 2010, the Company entered into a credit agreement (the Agreement) with a group of banks for a combination of loans and letters of credit totaling $139,855,000. The Agreement provided for construction loans not exceeding $75,000,000, conversion of the construction loans to a term loan, a cash grant loan not exceeding $53,242,000, a working capital facility of $3,067,000, letters of credit supporting project agreements of $3,000,000 and a debt service reserve of $5,546,000.

 

On March 18, 2011, construction loans totaling $75,000,000 were converted to a 15-year term loan with a final maturity of March 31, 2026. On July 25, 2011, the Company received grant proceeds from the U.S. Department of Treasury and paid off the outstanding principal on the cash grant construction loan totaling $53,098,000. There was no borrowing under the working capital facility at December 31, 2013 and 2012.

 

Amounts outstanding under the Agreement bear interest at variable Eurodollar interest rates specified as LIBOR (0.247% and 0.311% at December 31, 2013 and 2012, respectively), as defined in the Agreement, plus a margin of 2.75% increasing 0.125% on the third, sixth, ninth, and twelfth anniversaries of the conversion date. Under the Agreement, interest expense for the years ended December 31, 2013 and 2012 was $2,155,000 and $2,382,000, respectively.

 

(Continued)

 

12



 

Distributions from the Company are subject to compliance with the terms and conditions defined in the Agreement, including a covenant to meet a required debt service coverage ratio of 1.20 to 1.0. At December 31, 2013, the Company is in compliance with the various restrictive covenants defined in the Agreement.

 

Annual maturities of long-term debt at December 31, 2013 for the next five years and thereafter are summarized as follows (in thousands):

 

Years ending:

 

 

 

2014

 

$

2,922

 

2015

 

3,387

 

2016

 

3,457

 

2017

 

4,719

 

2018

 

5,056

 

Thereafter

 

49,110

 

 

 

$

68,651

 

 

The carrying amount of the long-term debt approximates fair value at December 31, 2013 and 2012 due to frequent repricing of the LIBOR interest rates as defined in the Agreement.

 

(6)                     Related Party Transactions

 

In addition to the transactions and relationships described elsewhere in the footnotes to the financial statements, EME and subsidiaries of EME provide support services pursuant to various support agreements with the Company. These agreements provide for the payment of fixed fees that escalate annually, as defined in the agreements and for the reimbursement of certain insurance, consultant, and credit costs. The fixed fee commitments under the agreements total $140,000 plus escalation annually. For the years ended December 31, 2013 and 2012, the Company incurred costs totaling $147,000 and $144,000 under the agreements and reimbursements of $133,000 and $140,000. These costs are included on the statements of income in maintenance and other operating costs.

 

(7)                     Subsequent Events

 

The Company has performed an evaluation of subsequent events through March 28, 2014, which is the date the financial statements are available to be issued.

 

13


Exhibit 99.2

 

LAREDO RIDGE WIND, LLC

(A Delaware Limited Liability Company)

 

Financial Statements

 

(Unaudited)

 

September 30, 2014

 



 

LAREDO RIDGE WIND, LLC

(A Delaware Limited Liability Company)

 

September 30, 2014

 

Table of Contents

 

 

 

Page

 

 

 

Financial Statements:

 

 

 

 

 

Balance Sheets

 

1

 

 

 

Statements of Operations

 

2

 

 

 

Statements of Member’s Equity

 

3

 

 

 

Statements of Cash Flows

 

4

 

 

 

Notes to Financial Statements

 

5

 



 

LAREDO RIDGE WIND, LLC

(A Delaware Limited Liability Company)

Balance Sheets

(Amounts in thousands)

 

 

 

(Successor)

 

 

(Predecessor)

 

 

 

September 30, 2014

 

 

December 31, 2013

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$

1,371

 

 

2,911

 

Accounts receivable

 

1,245

 

 

1,436

 

Inventory

 

516

 

 

455

 

Prepaid expenses and other current assets

 

602

 

 

140

 

Total current assets

 

3,734

 

 

4,942

 

 

 

 

 

 

 

 

Wind energy generating system

 

116,000

 

 

187,340

 

Accumulated depreciation

 

(2,636

)

 

(27,328

)

Plant and equipment, net

 

113,364

 

 

160,012

 

 

 

 

 

 

 

 

Deferred financing costs, net

 

 

 

3,055

 

Power purchase agreement, net of accumulated amortization of $1,235

 

52,765

 

 

 

Long-term restricted cash

 

 

 

334

 

 

 

 

 

 

 

 

Total assets

 

$

169,863

 

 

168,343

 

 

 

 

 

 

 

 

Liabilities and Member’s Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

127

 

 

326

 

Accounts payable to related parties

 

68

 

 

41

 

Accrued liabilities

 

304

 

 

182

 

Derivative liability - current

 

1,836

 

 

 

Interest payable

 

12

 

 

12

 

Current maturities of long-term obligations

 

3,251

 

 

2,922

 

Total current liabilities

 

5,598

 

 

3,483

 

 

 

 

 

 

 

 

Long-term debt

 

63,456

 

 

65,729

 

Deferred revenue, net

 

 

 

49,939

 

Long-term derivative liabilities

 

2,459

 

 

3,358

 

Asset retirement obligation

 

262

 

 

5,025

 

Total liabilities

 

71,775

 

 

127,534

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Member’s equity

 

98,088

 

 

40,809

 

 

 

 

 

 

 

 

Total liabilities and member’s equity

 

$

169,863

 

 

168,343

 

 

See accompanying notes to financial statements.

 

1



 

LAREDO RIDGE WIND, LLC

(A Delaware Limited Liability Company)

Unaudited Statements of Operations and Comprehensive Income (Loss)

(Amounts in thousands)

 

 

 

(Successor)

 

 

(Predecessor)

 

(Successor)

 

 

(Predecessor)

 

 

 

Three months ended
September 30,

 

 

Three months ended
September 30,

 

Six months ended
September 30,

 

 

Three months ended
March 31,

 

Nine months ended
September 30,

 

 

 

2014

 

 

2013

 

2014

 

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease revenue

 

$

1,636

 

 

3,327

 

5,835

 

 

4,862

 

11,852

 

Grant revenue

 

 

 

730

 

 

 

731

 

2,192

 

Total operating revenues

 

1,636

 

 

4,057

 

5,835

 

 

5,593

 

14,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and accretion

 

(177

)

 

2,417

 

2,689

 

 

2,421

 

7,250

 

Maintenance and other operating costs

 

1,020

 

 

957

 

2,013

 

 

1,081

 

2,680

 

General and administrative

 

 

 

4

 

 

 

5

 

26

 

Total operating expenses

 

843

 

 

3,378

 

4,702

 

 

3,507

 

9,956

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

793

 

 

679

 

1,133

 

 

2,086

 

4,088

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(608

)

 

(1,250

)

(1,212

)

 

(1,186

)

(3,696

)

Total other expense

 

(608

)

 

(1,250

)

(1,212

)

 

(1,186

)

(3,696

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

185

 

 

(571

)

(79

)

 

900

 

392

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on derivatives

 

$

(1,295

)

 

232

 

(2,473

)

 

(1,682

)

4,504

 

Other comprehensive (loss) income

 

(1,295

)

 

232

 

(2,473

)

 

(1,682

)

4,504

 

Comprehensive income (loss)

 

$

(1,110

)

 

(339

)

(2,552

)

 

(782

)

4,896

 

 

See accompanying notes to financial statements.

 

2



 

LAREDO RIDGE WIND, LLC

(A Delaware Limited Liability Company)

Unaudited Statements of Member’s Equity

(Amounts in thousands)

 

 

 

Capital
Contributions

 

Capital
Distributions

 

Retained Deficit

 

Accumulated
Other
Comprehensive
Loss

 

Total Member’s
Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2013 (audited)

 

$

132,810

 

(87,697

)

(946

)

(3,358

)

40,809

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

900

 

 

900

 

Capital distribution

 

 

(1,700

)

 

 

(1,700

)

Other comprehensive loss

 

 

 

 

(1,682

)

(1,682

)

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2014 (a)

 

$

132,810

 

(89,397

)

(46

)

(5,040

)

38,327

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at April 1, 2014 (a)

 

$

102,857

 

 

 

 

102,857

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

(79

)

 

(79

)

Capital distribution

 

 

(3,395

)

 

 

(3,395

)

Other comprehensive loss

 

 

 

 

(1,295

)

(1,295

)

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2014

 

$

102,857

 

(3,395

)

(79

)

(1,295

)

98,088

 

 


(a) The differences in the equity balances at March 31, and April1, 2014 reflect the application of pushdown accounting as result of the EME Acquisition.

 

See accompanying notes to financial statements.

 

3



 

LAREDO RIDGE WIND, LLC

(A Delaware Limited Liability Company)

Unaudited Statements of Cash Flows

(Amounts in thousands)

 

 

 

(Successor)

 

 

(Predecessor)

 

 

 

Six months ended
September 30,

 

 

Three months ended
March 31,

 

Nine months ended
September 30,

 

 

 

2014

 

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(79

)

 

900

 

392

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation, amortization, and accretion

 

3,924

 

 

2,523

 

7,567

 

Amortization of deferred revenue

 

 

 

(731

)

(2,192

)

Changes in derivative instruments

 

(988

)

 

 

 

Changes in assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

414

 

 

(223

)

(20

)

Inventory

 

(38

)

 

(24

)

23

 

Prepaid expenses and other current assets

 

(210

)

 

(252

)

(155

)

Accounts payable

 

(82

)

 

(90

)

(508

)

Accrued liabilities

 

189

 

 

(67

)

(31

)

Interest payable

 

 

 

 

 

Net cash provided by operating activities

 

3,130

 

 

2,036

 

5,076

 

 

 

 

 

 

 

 

 

 

Cash from investing activity

 

 

 

 

 

 

 

 

Decrease in restricted cash

 

 

 

334

 

 

Net cash provided by investing activity

 

 

 

334

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Distributions to member

 

(4,595

)

 

(1,701

)

(4,033

)

Repayment of long-term debt

 

(881

)

 

(1,063

)

(1,790

)

Net cash used in financing activities

 

(5,476

)

 

(2,764

)

(5,823

)

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(2,346

)

 

(394

)

(747

)

Cash at beginning of period

 

2,517

 

 

2,911

 

2,735

 

Cash at end of period

 

$

171

 

 

2,517

 

1,988

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

2,200

 

 

1,083

 

3,308

 

 

See accompanying notes to financial statements.

 

4



 

LAREDO RIDGE WIND, LLC

(A Delaware Limited Liability Company)

 

Notes to Unaudited Financial Statements

 

September 30, 2014

 

(1)                     Nature of Business

 

Laredo Ridge Wind, LLC (the Company), a Delaware limited liability company, is a wholly owned subsidiary of Mission Wind Laredo, Inc. (MWL), a wholly owned subsidiary of NRG Wind LLC (NRG Wind), a wholly owned subsidiary of NRG Energy Gas and Wind Holdings LLC, in turn a wholly owned subsidiary of NRG Energy, Inc. (NRG or Parent).

 

The Company, along with NRG Wind, was originally a wholly owned subsidiary of Edison Mission Energy, Inc. (EME) and was formed to construct, own, and operate a 79.9-megawatt (MW) wind powered electricity-generating system composed of 54 General Electric Company (GE) 1.5 MW generators, a power collection system, and power substation (the Windsystem) located in Boone County, Nebraska. The Company sells electricity generated by the turbines to Nebraska Public Power District (NPPD) pursuant to a power purchase agreement (PPA) with a term extending for 20 years from the commercial operation date of February 1, 2011.

 

The Company contracted with General Electric International, Inc. (GE) to provide certain warranty, maintenance, and repair services. The agreement, including extensions, covers a five-year period, which commenced at turbine completion in November 2010.

 

The following notes should be read in conjunction with the accounting policies and other disclosures as set forth in the notes to the Company’s annual financial statements. Interim results are not necessarily indicative of results for a full year.

 

Predecessor and Successor Reporting

 

As further discussed in note 2, Business Acquisition, on April 1, 2014, NRG completed the acquisition of substantially all of the assets of EME, or the EME Acquisition, including its member interests in the Company. The EME Acquisition was accounted for under the acquisition method of accounting. Fair value adjustments have been pushed down to the Company, resulting in the Company’s assets and liabilities being recorded at fair value at April 1, 2014. In addition, effective with the EME Acquisition, the Company adopted the accounting policies of NRG. Therefore, the Company’s financial information prior to the EME Acquisition is not comparable to its financial information subsequent to the EME Acquisition.

 

As a result of the impact of pushdown accounting, the financial statements and certain note presentations separate the Company’s presentations into two distinct periods, the period before the consummation of the EME Acquisition (labeled predecessor) and the period after that date (labeled successor), to indicate the application of different basis of accounting between the periods presented.

 

(2)                     Business Acquisition

 

On April 1, 2014, NRG completed the acquisition of substantially all of the assets of EME. The acquisition was recorded as a business combination under ASC 805, Business Combinations, with identifiable assets acquired and liabilities assumed recorded at their estimated fair values on the acquisition date. The impact of the acquisition method of accounting was pushed down to the Company, resulting in assets and liabilities of the Company being recorded at fair value as of April 1, 2014.  The initial accounting for the business combination is not complete because the evaluation necessary to assess the fair values of certain

 

5



 

assets acquired is still in process.  The provisional amounts are subject to revision until the evaluations are completed to the extent that additional information is obtained about the facts and circumstances that exists as of the acquisition date.

 

The preliminary allocation of assets and liabilities is as follows (in thousands):

 

 

 

Acquisition Date

 

 

 

Fair Value

 

Assets

 

 

 

Current and non-current assets

 

$

5,046

 

Net plant and equipment

 

116,000

 

Power purchase agreement

 

54,000

 

Total assets acquired

 

$

175,046

 

 

 

 

 

Liabilities

 

 

 

Current and non-current liabilities

 

4,601

 

Long-term debt

 

67,588

 

Total liabilties assumed

 

$

72,189

 

 

 

 

 

Net assets acquired

 

$

102,857

 

 

Fair Value Measurements

 

The fair values of the property, plant and equipment and intangible assets at the acquisition date were measured primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in ASC 820.  Significant inputs were as follows:

 

Property, plant and equipment — The estimated fair values were determined primarily based on an income method using discounted cash flows and validated using a market approach based on recent transactions of comparable assets.  The income approach was primarily relied upon as the forecasted cash flows more appropriately incorporate differences in regional markets, plant types, age, useful life, equipment condition and environmental controls of each asset. The income approach also allows for a more accurate reflection of current and expected market dynamics such as supply and demand, commodity prices and regulatory environment as of the acquisition date.

 

Power purchase agreement — The fair value of the PPA acquired was determined utilizing a variation of the income approach where the expected future cash flows resulting from the acquired PPA was reduced by operating costs and charges for contributory assets and then discounted to present value at the weighted average cost of capital of an integrated utility peer group adjusted for project-specific financing attributes.  The values were corroborated with available market data.  The PPA will be amortized over a term of 17 years.

6



 

(3)                     Derivative Instruments and Hedging Activity

 

The Company has fixed for floating interest rate swaps for 90% of its outstanding term loan amount.  The notional amount of the swaps was approximately $60,407,000 as of September 30, 2014. The following table summarizes the effects of the swaps on the Company’s accumulated OCI balance, which reflects the change in the fair value of the swaps (amounts in thousands):

 

Accumulated OCI balance as of April 1, 2014

 

$

 

 

 

 

 

Mark-to-market of cash flow hedge accounting contracts

 

(1,295

)

 

 

 

 

Accumulated OCI balance as of September 30, 2014

 

$

(1,295

)

 

(4)                     Subsequent events

 

These financial statements and notes reflect the Company’s evaluation of events occurring subsequent to the balance sheet date through January 16, 2015, the date that the financial statements are available to be issued.

 

7


Exhibit 99.3

 

WCEP HOLDINGS, LLC

 

Financial Statements

 

December 31, 2013

 

(With Independent Auditors’ Report Thereon)

 



 

WCEP HOLDINGS, LLC

 

Table of Contents

 

 

Page(s)

 

 

Independent Auditors’ Report

1

 

 

Financial Statements:

 

 

 

Balance Sheet

2

 

 

Statement of Income

3

 

 

Statement of Comprehensive Income

4

 

 

Statement of Member’s Equity

5

 

 

Statement of Cash Flows

6

 

 

Notes to Financial Statements

7–14

 



 

Independent Auditors’ Report

 

The Management Committee
WCEP Holdings, LLC:

 

We have audited the accompanying financial statements of WCEP Holdings, LLC, which comprise the balance sheet as of December 31, 2013, and the related statement of income, member’s equity, and cash flows for the year then ended, and the related notes to the financial statements.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditors’ Responsibility

 

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of WCEP Holdings, LLC as of December 31, 2013, and the results of its operations and its cash flows for the year then ended in accordance with U.S. generally accepted accounting principles.

 

 

\s\ KPMG LLP

 

 

Los Angeles, California

 

April 30, 2014

 

 

1



 

WCEP HOLDINGS, LLC

(A Delaware Limited Liability Company)

Balance Sheet

December 31, 2013

(In thousands)

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

 

$

27,694

 

Accounts receivable

 

13,287

 

Inventory

 

2,484

 

Prepaid expenses and other

 

483

 

Total current assets

 

43,948

 

Property, plant, and equipment, net

 

540,229

 

Other assets:

 

 

 

Restricted cash

 

17,831

 

Emissions

 

24

 

Total assets

 

$

602,032

 

Liabilities and Member’s Equity

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt

 

$

35,424

 

Accounts payable and accrued liabilities

 

1,333

 

Accrued interest

 

764

 

Total current liabilities

 

37,521

 

Long-term debt, net of current portion

 

434,858

 

Long-term derivative liabilities

 

31,441

 

Asset retirement obligation

 

8,346

 

Total liabilities

 

512,166

 

Commitments and contingencies

 

 

 

Member’s equity

 

89,866

 

Total liabilities and member’s equity

 

$

602,032

 

 

See accompanying notes to financial statements.

 

2



 

WCEP HOLDINGS, LLC

(A Delaware Limited Liability Company)

Statement of Income

Year ended December 31, 2013

(In thousands)

 

Operating revenues:

 

 

 

Lease revenue

 

$

83,698

 

Energy sales and other revenues

 

5,086

 

Total operating revenues

 

88,784

 

Operating expenses:

 

 

 

Fuel

 

4,872

 

Maintenance and other operating costs

 

13,074

 

Depreciation and accretion

 

14,060

 

General and administrative

 

330

 

Total operating expenses

 

32,336

 

Income from operations

 

56,448

 

Other income (expense):

 

 

 

Interest income

 

8

 

Interest expense

 

(22,886

)

Other income (expense), net

 

30

 

Total other income (expense)

 

(22,848

)

Net income

 

$

33,600

 

 

See accompanying notes to financial statements.

 

3



 

WCEP HOLDINGS, LLC

(A Delaware Limited Liability Company)

Statement of Comprehensive Income

December 31, 2013

 

Net income

 

$

33,600

 

Other comprehensive income, net of tax:

 

 

 

Change in market value:

 

 

 

Unrealized gains on cash flow hedges:

 

 

 

Unrealized holding gains arising during period

 

23,906

 

Comprehensive income

 

$

57,506

 

 

See accompanying notes to financial statements.

 

4



 

WCEP HOLDINGS, LLC

(A Delaware Limited Liability Company)

Statement of Member’s Equity

Year ended December 31, 2013

(In thousands)

 

 

 

Edison Mission Arroyo Nogales, Inc

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

other

 

Total

 

 

 

Capital

 

Capital

 

Retained

 

comprehensive

 

member’s

 

 

 

contributions

 

distributions

 

earnings

 

income (loss)

 

equity

 

Balance at December 31, 2012

 

$

140,111

 

(1,660

)

(30,405

)

(55,347

)

52,699

 

Net income

 

 

 

33,600

 

 

33,600

 

Capital distributions

 

 

(20,339

)

 

 

(20,339

)

Other comprehensive income

 

 

 

 

23,906

 

23,906

 

Balance at December 31, 2013

 

$

140,111

 

(21,999

)

3,195

 

(31,441

)

89,866

 

 

See accompanying notes to financial statements.

 

5



 

WCEP HOLDINGS, LLC

(A Delaware Limited Liability Company)

Statement of Cash Flows

Year ended December 31, 2013

(In thousands)

 

Cash flows from operating activities:

 

 

 

Net income

 

$

33,600

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation, amortization, and accretion

 

21,556

 

Loss on sale of emission credits

 

49

 

Changes in assets and liabilities:

 

 

 

Accounts receivable

 

(13,289

)

Inventory

 

(2,484

)

Prepaid expenses and other current assets

 

(449

)

Accounts payable and accrued liabilities

 

(18,221

)

Interest payable

 

724

 

Net cash provided by operating activities

 

21,486

 

Cash flows from investing activities:

 

 

 

Capital expenditures

 

(47,554

)

Purchased emission credits

 

(57

)

Proceeds from sale of emission credits

 

13

 

Net cash used in investing activities

 

(47,598

)

Cash flows from financing activities:

 

 

 

Cash distribution to parent

 

(20,339

)

Proceeds from debt

 

88,411

 

Increase in restricted cash

 

(15,163

)

Net cash used in financing activities

 

52,909

 

Net increase in cash and cash equivalents

 

26,797

 

Cash and cash equivalents at beginning of period

 

897

 

Cash and cash equivalents at end of period

 

$

27,694

 

Supplemental disclosure of cash flow information:

 

 

 

Cash paid for interest (net of $6,671 capitalized)

 

$

18,139

 

 

See accompanying notes to financial statements.

 

6



 

(1)                     Nature of Operations

 

WCEP Holdings, LLC (WCEP), a Delaware limited liability company, is an indirect wholly owned subsidiary of Edison Mission Energy (EME). WCEP was organized under Delaware law on May 31, 2011 and has an ownership interest in one gas project. WCEP and its subsidiaries are referred to herein as the “Company.” On October 18, 2013, EME entered into an Acquisition agreement with NRG Energy, Inc. (NRG) that provides for a sale of substantially all of EME’s assets to NRG including its member interests in the Company. The sale closed on April 1, 2014 and the Company’s parent was acquired by NRG Energy Gas and Wind Holdings LLC, a wholly owned subsidiary of NRG.

 

WCEP owns 100% interest in Walnut Creek Energy, LLC, which owns a 479-megawatt (MW) gas-fired simple cycle combustion turbine generating facility located in the City of Industry, California (Walnut Creek). The Walnut Creek project achieved commercial operation in May 2013 and began selling electricity to Southern California Edison (SCE) June 1, 2013 under a Power Purchase Tolling Agreement (PPTA) with the term of 10 years.

 

A summary of the major agreements entered into by the Company is set forth below:

 

(a)                     Limited Liability Company Agreements

 

Subsidiaries of the Company are parties to limited liability company agreements in entities that own the Project. The provisions of these agreements set forth rights and obligations of the ownership entities.

 

(b)                     Southern California Edison Power Purchase Tolling Agreement (SCE PPTA)

 

Under terms of the 10-year SCE PPTA that became effective on November 1, 2010, the Company receives a shaped monthly capacity rate adjusted for availability penalties, a variable O&M charge, start-up charges, and other miscellaneous charges as described in the PPTA. During 2013, the Company recorded lease revenues of $83,698,000.

 

Due to the concentration of sales to SCE, the Company is exposed to credit risk of potential nonperformance by SCE, which could impact liquidity if SCE were to experience financial difficulties. As of December 31, 2013, SCE’s credit and long-term senior secured issuer ratings from Standard & Poor’s and Moody’s Investors Service were BBB+ and A2, respectively.

 

(c)                      Southern California Edison Company Large Generator Interconnection Agreement

 

The Company entered into an interconnection agreement (LGIA) with SCE and California Independent System Operator Corporation (CAISO) on July 20, 2011 with an initial 30-year term and automatically renewed for successive one-year periods thereafter, unless otherwise terminated.

 

(d)                     GE Packaged Power, Inc. Contractual Service Agreement

 

The Company contracted with GE Packaged Power, Inc. (GE) to provide certain warranty, maintenance, and repair services. The agreement shall terminate upon the first to occur of a) the date which all covered units have reached their respective performance end dates or b) 20 years from the contract’s effective date of December 9, 2011. Payments are subject to an annual escalation clause. Total fees incurred for the year ended December 31, 2013 were $516,000. These costs are included in the statement of income as part of maintenance and other operating costs.

 

(Continued)

 

7



 

(e)                      Operation and Maintenance Agreement

 

The Company entered into an agreement with Edison Mission Operation & Maintenance, Inc. (EMOM), a wholly owned subsidiary of EME, to provide operation and maintenance services not covered by the maintenance and service agreement with GE (described above). The agreement will continue until terminated by either party, with 90-day prior written notice. The Company incurred costs from EMOM in the amount of $2,957,000 for the year ended December 31, 2013. These costs are included in the statement of income as part of maintenance and other operating costs.

 

(2)                     Summary of Significant Accounting Policies

 

(a)                     Basis of Presentation

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

(b)                     Cash and Cash Equivalents

 

The Company considers cash and cash equivalents to include cash and money market fund investments. The carrying value of cash equivalents approximates fair value as all investments have original maturities of three months or less at the time of purchase. For further discussion of money market funds, see note 3 — Fair Value Measurements.

 

(c)                      Inventory

 

Inventory consists of spare parts, materials, and supplies to be used in the operation of the facility. Inventory is stated at the lower of weighted average cost or market.

 

(d)                     Plant and Equipment

 

Plant and equipment are stated at cost. The plant balance includes all costs associated with the development and construction of the facility. The Facility costs include interest capitalized during the construction period of approximately $29,036,000. Depreciation is computed on a straight-line basis over the Facility’s estimated useful life of 30 years, which commenced as the Company placed the turbines in service.

 

Expenditures for maintenance, repairs, and renewals are expensed as incurred. Expenditures for additions and improvements are capitalized.

 

(e)                      Impairment of Long-Lived Assets

 

Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the carrying amount of a long-lived asset exceeds the amount of the expected future undiscounted cash flows, an impairment loss is recognized for the excess of the carrying amount over fair value. No impairment losses were recognized during the year ended December 31, 2013.

 

(Continued)

 

8



 

(f)                        Derivative Instruments

 

The Company uses interest rate swaps to manage its interest rate exposure on long-term debt. Authoritative guidance on derivatives and hedging establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts). The Company is required to record derivatives on its consolidated balance sheet as either assets or liabilities measured at fair value unless otherwise exempted from derivative treatment as a normal sale and purchase. All changes in the fair value of derivative instruments are recognized currently in earnings, unless specific hedge criteria are met, which requires that the Company formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.

 

The accounting guidance for cash flow hedges provides that the effective portion of gains or losses on derivative instruments designated and qualifying as cash flow hedges be reported as a component of other comprehensive income and be reclassified into earnings in the same period during which the hedged transaction affects earnings. The remaining gains or losses on the derivative instruments, if any, must be recognized currently in earnings. Derivative and hedging accounting policies are discussed further in note 4 — Derivative Instruments and Risk Management.

 

(g)                     Deferred Financing Costs

 

Deferred financing costs consist of legal fees and closing costs incurred by the Company in obtaining its financing. These costs were being amortized using the effective interest method over the construction loan term of 23 months, which converted to a term loan effective June 21, 2013. As of December 31, 2013, accumulated amortization totaled $18,368,000. Amortization expense, net of capitalized interest, of $3,986,000 is included in interest expense on the statement of income.

 

(h)                     Financial Instruments

 

Financial instruments that potentially subject the Company to significant concentrations of credit or valuation risk consist principally of cash equivalents and accounts receivable.

 

The carrying amounts reported in the balance sheet for cash and cash equivalents and accounts receivable approximate fair value.

 

(i)                        Restricted Cash

 

Restricted cash consists of collateral reserves required by the Company’s debt agreements. At December 31, 2013, the Company’s restricted cash included $17,831,000 to support remaining construction costs and debt services.

 

(j)                        Revenue Recognition

 

An assessment of revenue from electricity sales was conducted to determine whether or not the PPTA with SCE contains an embedded lease. The assessment resulted in a determination that revenue earned by the Company for sale of electricity is subject to lease accounting. The capacity payments are considered minimum rental payments and accordingly, they are amortized over the term of the lease on a basis that is representative of the time pattern in which benefit is derived from the asset. Variable amounts are considered contingent rental income and recorded when earned.

 

(Continued)

 

9



 

(k)                     Income Taxes

 

The Company is a single member limited liability company and is included in the consolidated return of its ultimate parent company. An enterprise is required to recognize, in its consolidated financial statements, the impact of a tax position by determining if the weight of the available evidence indicates it is more likely than not, based on the technical merits, that the position will be sustained on audit. All income tax contingencies would be immaterial if they had to be recognized by the Company. However, because the entity is a limited liability entity that is included in the tax return of its parent company and is not obligated to pay any income taxes, the Company has not reflected a hypothetical tax obligation in its consolidated financial statements.

 

If the Company had recorded income taxes, based on a hypothetical separate company return, adjusted for the use of state tax apportionment factors of the consolidated tax group, the income statements would include income tax expense of $13,186,000 for the year ended December 31, 2013.

 

(l)                        Property Taxes

 

The Company’s asset is valued and property taxes are assessed pursuant to California state statute. The Company incurred property tax expense of $3,652,000 for the year ended December 31, 2013, which are included in the statement of income as part of maintenance and other operating costs.

 

(m)                  Asset Retirement Obligation

 

The Company records the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, entity cost is capitalized by increasing the carrying amount of the related long-lived asset. Over time, the liability is increased to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, the obligation will be settled and a gain or loss will be recognized for the difference between the recorded obligation and the actual cost. Accretion expense is classified as part of depreciation and accretion on the statement of income.

 

The Company recorded a liability representing expected future costs associated with site reclamation, facilities dismantlement, and removal of environmental hazards as follows (in thousands):

 

Balance of asset retirement obligation at December 31, 2012

 

$

 

New asset retirement obligation

 

8,079

 

Accretion expense

 

267

 

Balance of asset retirement obligation at December 31, 2013

 

$

8,346

 

 

(3)                     Fair Value Measurements

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an exit price). The hierarchy, established by authoritative accounting guidance, gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are:

 

·                  Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities;

 

(Continued)

 

10



 

·                  Level 2 — Pricing inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the derivative instruments; and

 

·                  Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurements and unobservable.

 

The Company’s assets and liabilities carried at fair value consist of money market funds, which are generally classified as Level 1 as fair value is determined by observable market prices (unadjusted) in active markets. Money market funds totaling $27,694,000 are included in cash and cash equivalents in the Company’s balance sheet at December 31, 2013.

 

The interest rate swap liability is classified as Level 2 as the fair value can be determined based on observable values of underlying interest rates. The Company had derivative liabilities related to interest rate swaps of $31,441,000 as of December 31, 2013. Interest payable amounts related to the swap liability are included in interest payable on the Company’s balance sheet. The Company had interest payable related to the rate swap liability of $344,000 at December 31, 2013.

 

(4)                     Derivative Instruments and Risk Management

 

Interest Swap

 

On June 30, 2013, the Company entered into 10-year amortizing interest rate swap agreements for the purpose of hedging the variability of cash flows in the interest payments due to fluctuations of the London Interbank Offered Rate (LIBOR). These interest rate swap agreements became effective on July 27, 2011 and qualify as effective cash flow hedges, whereby the hedges were reported in the Company’s balance sheet at fair value, with changes in the fair value of the hedges reflected in member’s equity. The total notional amount of the hedges was $423,254,193 at December 31, 2013. The notional amount of the interest rate swap agreements amortizes each year, such that the Company’s interest payment under the financing is approximately 90% hedged. The interest rate swap agreements entitle the Company to receive a floating (three-month LIBOR) rate and pay a fixed rate of 4.0025% for the Company and 3.5429% for the Project. The interest rate swap agreements expire in May 2023. The Company recognized unrealized gains of $23,906,000 in other comprehensive income at December 31, 2013.

 

The interest rate swap agreements convert the LIBOR-based rates (0.2375% for the Company and 0.24660% for the Project at December 31, 2013) in the term loan to a fixed interest rate of 4.0025% for the Company and 3.5429% for the Project. Total interest expense, net of amounts capitalized, related to the swap agreements was $7,808,000 for the year ended December 31, 2013. These costs are included in interest expense in the accompanying statement of income.

 

(5)                     Long-Term Debt

 

On July 27, 2011, the Companies entered into a financing agreement (the Agreement) with a group of banks for a combination of loans and letters of credit totaling $617,071,000. The Agreement provided for construction loans not exceeding $495,142,000, conversion of the construction loans to a term loan, a working capital facility of $5,000,000, letters of credit supporting project agreements of $77,910,000 and a debt service reserve of $39,019,000.

 

On June 21, 2013, construction loans totaling $495,142,000 were converted to a 10-year term loan with a final maturity of May 31, 2023. There was no borrowing under the working capital facility at December 31, 2013.

 

(Continued)

 

11



 

Amounts outstanding under the Agreement bear interest at variable Eurodollar interest rates specified as LIBOR, as defined in the Agreement, plus a margin of 2.25% for Walnut Creek Energy, LLC increasing 0.25% on the third, sixth, and ninth anniversaries of the conversion date. WCEP Holdings has a margin of 4.00%. Under the Agreement, interest expense, net of amounts capitalized for the year ended December 31, 2013 was $9,731,000.

 

Distributions from the Company are subject to compliance with the terms and conditions defined in the Agreement, including a covenant to meet a required debt service coverage ratio of 2.5 to 1.0 for WCEP Holdings, LLC and 1.20 to 1.0 for Walnut Creek Energy, LLC. At December 31, 2013, the Company is in compliance with the various restrictive covenants defined in the Agreement.

 

Annual maturities of long-term debt at December 31, 2013 for the next five years and thereafter are summarized as follows (in thousands):

 

Years ending:

 

 

 

2014

 

$

35,424

 

2015

 

37,984

 

2016

 

39,676

 

2017

 

41,716

 

2018

 

45,055

 

Thereafter

 

270,427

 

 

 

$

470,282

 

 

The carrying amount of the long-term debt approximates fair value at December 31, 2013 due to frequent repricing of the LIBOR interest rates as defined in the Agreement.

 

(6)                     Plant and Equipment

 

Plant and equipment consist of the following components at December 31, 2013 (in thousands):

 

Power plant facilities

 

$

553,937

 

Rolling stock

 

85

 

 

 

554,022

 

Less accumulated depreciation

 

(13,793

)

 

 

$

540,229

 

 

The depreciable life of the operating facility exceeds the term of the related power purchase agreement (note 1). Management believes the useful life is appropriate and that the facility will continue to operate profitably subsequent to the expiration of the power purchase agreements.

 

(Continued)

 

12



 

(7)                     Related Party Transactions

 

In addition to the transactions and relationships described elsewhere in the notes to the financial statements, the Company has the following related party transactions and relationships:

 

(a)                     Other Agreements

 

The Company entered into an Asset Services Agreement effective July 1, 2011 with EME, subsequently assigned to Edison Mission Asset Services (EMAS), a wholly owned subsidiary of EME on October 29, 2012.  The agreement provides for construction, technical and administrative services. Amounts charged totaled $438,000 for the year ended December 31, 2013. These are invoiced at cost and are settled monthly in cash. Construction and technical costs were capitalized through COD, while administrative costs were expensed. Expensed costs totaled $160,000 for the year ended December 31, 2013 and are included in the statement of income as part of maintenance and other operating costs.

 

The Company reimbursed EME for certain insurance and other project costs charged to employee’s purchasing card. Reimbursements totaled $1,115,000 for the year ended December 31, 2013. These are invoiced at cost and are settled monthly in cash. These costs have been recorded as prepaid administrative costs, facility costs, or expensed as appropriate.

 

(Continued)

 

13



 

(8)                     Commitments and Contingencies

 

(a)                     Lease Commitments

 

On March 11, 2008, the Company entered into a land lease with Industry Urban-Development Agency through the initial term of May 31, 2036. The Company agreed to pay $1,000 per year ending with the year in which the Project completes its 10th year of commercial operations and $1,304,000 for each subsequent year through the end of the initial term.

 

In August 2009, the lease was amended to include an adjustment payment during the period June 1, 2013 and May 31, 2023 for property tax liability based on a percentage of the difference between the assessed value of the property and a threshold amount. A payment is due each April 1 and October 1. The Company incurred property rent of $1,849,000 for the year ended December 31, 2013.

 

Future minimum payments for operating leases as of December 31, 2013 are estimated as follows (in thousands):

 

Years ending December 31:

 

 

 

2014

 

$

2,557

 

2015

 

1,994

 

2016

 

1,084

 

2017

 

79

 

2018

 

19

 

Thereafter

 

16,847

 

 

 

$

22,580

 

 

(9)                     Subsequent Events

 

The Company has performed an evaluation of subsequent events through April 30, 2014, which is the date the financial statements are available to be issued.

 

14


Exhibit 99.4

 

WCEP HOLDINGS, LLC

 

Financial Statements

 

(Unaudited)

 

September 30, 2014

 



 

WCEP HOLDINGS, LLC

 

Table of Contents

 

 

Page(s)

 

 

Financial Statements:

 

 

 

Balance Sheets

2

 

 

Statements of Income

3

 

 

Statements of Member’s Equity

4

 

 

Statements of Cash Flows

5

 

 

Notes to Financial Statements

6—9

 

1



 

WCEP Holdings, LLC And Subsidiaries

(A Delaware Limited Liability Company)

Consolidated Balance Sheets

(in thousands)

 

 

 

Successor

 

 

Predecessor

 

 

 

As of September 30,
2014

 

 

As of December 31,
2013

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

13,256

 

 

$

27,694

 

Accounts receivable

 

21,385

 

 

13,287

 

Inventory

 

3,133

 

 

2,484

 

Prepaid expenses and other

 

192

 

 

483

 

Total current assets

 

37,966

 

 

43,948

 

 

 

 

 

 

 

 

Property, plant & equipment, net of accumulated depreciation of $9,249 and $13,658

 

515,751

 

 

540,229

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

Restricted cash

 

22,241

 

 

17,831

 

Emission credits

 

16

 

 

24

 

Other intangible assets, net of accumulated amortization of $10,000 and $0

 

170,000

 

 

 

Total assets

 

$

745,974

 

 

$

602,032

 

 

 

 

 

 

 

 

Liabilities & Member’s Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt

 

$

37,472

 

 

$

35,424

 

Accounts payable and accrued liabilities

 

5,070

 

 

1,333

 

Accrued interest

 

755

 

 

764

 

Derivative instruments

 

12,478

 

 

 

Total current liabilities

 

55,775

 

 

37,521

 

 

 

 

 

 

 

 

Long-term debt, net of current portion

 

406,574

 

 

434,858

 

Long-term derivative liabilities

 

16,455

 

 

31,441

 

Deferred revenue

 

22,608

 

 

 

Asset retirement obligation

 

8,763

 

 

8,346

 

Total liabilities

 

510,175

 

 

512,166

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Member’s equity

 

235,799

 

 

89,866

 

Total liabilities and member’s equity

 

$

745,974

 

 

$

602,032

 

 

2



 

WCEP Holdings, LLC And Subsidiaries

(A Delaware Limited Liability Company)

Consolidated Statements of Operations and Comprehensive Income/(Loss)

For the nine months ended September 30, 2014 and 2013

(Unaudited)

 

 

 

Successor

 

 

Predecessor

 

 

 

April 1, 2014
through
September 30, 2014

 

 

January 1, 2014
through
March 31, 2014

 

January 1, 2013
through
September 30, 2013

 

 

 

(In thousands)

 

 

(In thousands)

 

(In thousands)

 

Operating Revenues

 

 

 

 

 

 

 

 

Energy revenue

 

$

 

 

$

 

$

5,014

 

Lease revenue

 

74,063

 

 

9,920

 

65,017

 

Revenue levelization adjustments

 

(22,608

)

 

 

 

Other revenue

 

(10,000

)

 

 

 

Total operating revenues

 

41,455

 

 

9,920

 

70,031

 

Operating Expenses

 

 

 

 

 

 

 

 

Fuel

 

602

 

 

226

 

4,872

 

Maintenance and other operating costs

 

9,111

 

 

4,499

 

8,248

 

Depreciation, amortization and accretion

 

9,530

 

 

4,843

 

9,362

 

Total operating expenses

 

19,243

 

 

9,568

 

22,482

 

Income from operations

 

22,212

 

 

352

 

47,549

 

Other Income/(Expense)

 

 

 

 

 

 

 

 

Interest income

 

46

 

 

153

 

 

Interest expense

 

(7,451

)

 

(7,022

)

(15,570

)

Other income, net

 

 

 

 

135

 

30

 

Total other expense

 

(7,405

)

 

(6,734

)

(15,540

)

Net income/(loss)

 

14,807

 

 

(6,382

)

32,009

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss)/income:

 

 

 

 

 

 

 

 

Unrealized (loss)/gain on derivatives

 

(5,162

)

 

(775

)

17,956

 

Other comprehensive (loss)/income

 

(5,162

)