|TERRAFORM POWER, INC. filed this Form 10-K on 03/15/2019|
undiscounted cash flow forecast. The Company estimated the fair value of the operating project at $4.3 million as of March 31, 2018 and recognized an impairment charge of $15.2 million equal to the difference between the carrying amount and the estimated fair value, which is reflected within impairment of renewable energy facilities in the consolidated statements of operations for the year ended December 31, 2018. The Company used an income approach methodology of valuation to determine fair value by applying a discounted cash flow method to the forecasted cash flows of the operating project, which was categorized as a Level 3 fair value measurement due to the significance of unobservable inputs. Key estimates used in the income approach included forecasted power and incentive prices, customer renewal rates, operating and maintenance costs and the discount rate.
The Company sold its remaining 0.3 MW of residential assets (that were not classified as held for sale as of December 31, 2016) during the third quarter of 2017. These assets did not meet the criteria for held for sale classification as of June 30, 2017 but the Company determined that certain impairment indicators were present and as a result recognized an impairment charge of $1.4 million within impairment of renewable energy facilities in the consolidated statements of operations for the year ended December 31, 2017.
6. ASSET RETIREMENT OBLIGATIONS
The activity on asset retirement obligations for the years ended December 31, 2018, 2017 and 2016 was as follows:
Year Ended December 31,
Balance as of the beginning of the year
Additional obligations from renewable energy facilities achieving commercial
Revisions in estimates for current obligations1
Adjustment related to change in accretion period2,3
Assumed through acquisition
Reclassification to non-current liabilities related to assets held for sale
Currency translation adjustments
Balance as of the end of the year
Effective December 31, 2016, the Company revised its original estimates of the costs and related amount of cash flows for certain of its asset retirement obligations.
During the fourth quarter of 2016, the Company revised the accretion period for its asset retirement obligations from the term of the related PPA agreement to the remaining useful life of the corresponding renewable energy facility, consistent with the period over which depreciation expense is recorded on the corresponding asset retirement cost recognized within renewable energy facilities and with its estimate of the future timing of settlement.
During the fourth quarter of 2018, the Company revised the accretion period related to its wind projects and determined that these obligations should be accreted to expected future value over the remaining useful life of the of the corresponding components of the renewable energy facilities rather than the expected weighted-average life of the assets, consistent with the depreciation expense that is recorded on the asset retirement cost recognized within renewable energy facilities and using its estimate of the future timing of settlement. This change resulted in a $15.7 million reduction in the Company’s asset retirement obligations and corresponding renewable energy facility carrying amounts as of December 31, 2018. The Company also recorded an adjustment during the fourth quarter of 2018 to reduce previously reported accretion and depreciation expense by $6.3 million as a result of this change.
The Company did not have any assets that were legally restricted for the purpose of settling the Company's asset retirement obligations as of December 31, 2018, 2017 and 2016.
Goodwill as of December 31, 2018 was $120.6 million and represents the excess of the consideration transferred over the fair values of assets acquired and liabilities assumed from Saeta and reflects the future economic benefits arising from other