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Derivative Instruments
 3 Months Ended
Mar. 31, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments Derivative Instruments
From time to time, we enter into derivative financial instruments to manage certain cash flow risks.
Derivatives designated and qualifying as a hedge of the exposure to variability in the cash flows of a specific asset or liability that is attributable to a particular risk, such as interest rate risk, are considered cash flow hedges.
Interest Rate Swaps
Our objectives in using interest rate swaps are to reduce variability in interest expense and to manage exposure to adverse interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
As of March 31, 2021, we had interest rate swap agreements in place with an aggregate notional amount of $700 million. The forward swap agreements effectively fix the interest rate on $700 million of term loan borrowings, $225 million of swaps allocated to Term Loan A, $225 million allocated to Term Loan B and $250 million allocated to Term Loan C, through the current maturity dates of the respective term loans.
We reflect our interest rate swap agreements, which are designated as cash flow hedges, at fair value as either assets or liabilities on the consolidated balance sheets within the “Other assets, net” or “Derivative liabilities” line items, as applicable. As of March 31, 2021 and December 31, 2020, the fair value of interest rate swaps represented an aggregate liability of $32.0 million and $49.8 million, respectively.
The forward interest rate swap agreements are derivatives that currently qualify for hedge accounting whereby we record the effective portion of changes in fair value of the interest rate swaps in accumulated other comprehensive income or loss on the consolidated balance sheets and statements of comprehensive income which is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Any ineffective portion of a derivative's change in fair value is immediately recognized within net income (loss). The amount reclassified from other comprehensive income to interest expense on the consolidated statements of operations was an increase to interest expense of $3.4 million and $0.8 million for the three months ended March 31, 2021, and 2020, respectively. There was no ineffectiveness recognized for the three months ended March 31, 2021, and 2020. During the subsequent twelve months, beginning April 1, 2021, we estimate that $13.7 million will be reclassified from other comprehensive income as an increase to interest expense.
Interest rate derivatives and their fair values as of March 31, 2021 and December 31, 2020 were as follows (unaudited and in thousands):
Notional AmountFixed One Month LIBOR rate per annumFair Value
March 31, 2021December 31, 2020Effective DateExpiration DateMarch 31, 2021December 31, 2020
$25,000 $25,000 1.989 %January 2, 2018December 17, 2021$(334)$(447)
100,000 100,000 1.989 %January 2, 2018December 17, 2021(1,333)(1,788)
75,000 75,000 1.989 %January 2, 2018December 17, 2021(1,001)(1,342)
50,000 50,000 2.033 %January 2, 2018April 27, 2022(1,017)(1,248)
100,000 100,000 2.029 %January 2, 2018April 27, 2022(2,027)(2,490)
50,000 50,000 2.033 %January 2, 2018April 27, 2022(1,016)(1,248)
100,000 100,000 2.617 %January 2, 2020December 17, 2023(6,144)(7,191)
100,000 100,000 2.621 %January 2, 2020April 27, 2024(6,722)(8,000)
70,000 70,000 0.968 %March 2, 2020October 18, 2026232 (2,174)
30,000 30,000 0.973 %March 2, 2020October 18, 2026100 (938)
200,000 200,000 2.636 %December 17, 2021December 17, 2023(8,781)(9,648)
200,000 200,000 2.642 %April 27, 2022April 27, 2024(8,162)(9,500)
125,000 125,000 1.014 %December 17, 2023December 17, 2024336 (704)
100,000 100,000 1.035 %December 17, 2023December 17, 2024244 (584)
75,000 75,000 1.110 %December 17, 2023October 18, 20261,230 (866)
100,000 100,000 1.088 %April 27, 2024April 27, 2025399 (540)
125,000 125,000 1.082 %April 27, 2024April 27, 2025513 (666)
75,000 75,000 0.977 %April 27, 2024October 18, 20261,503 (422)
$(31,980)$(49,796)
Power Purchase Agreements
In March 2019, we entered into two 10-year agreements to purchase renewable energy equal to the expected electricity needs of our data centers in Chicago, Illinois and Piscataway, New Jersey. These arrangements currently qualify for hedge accounting whereby we record the changes in fair value of the instruments in “Accumulated other comprehensive income” or loss on the consolidated balance sheets and statements of comprehensive income which is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The amount reclassified from other comprehensive income to utilities expense on the consolidated statements of operations was a reduction to utilities expense of $0.1 million and an increase to utilities expense of $0.4 million for the three months ended March 31, 2021 and 2020, respectively. We currently reflect these agreements, which are designated as cash flow hedges, at fair value as liabilities on the consolidated balance sheets within the “Derivative liabilities” line item.
Power purchase agreement derivatives and their fair values as of March 31, 2021 and December 31, 2020 were as follows (unaudited and in thousands):
Fair Value
CounterpartyFacilityEffective DateExpiration DateMarch 31, 2021December 31, 2020
Calpine Energy Solutions, LLCPiscatawayMarch 8, 2019February 28, 2029$(2,534)$(2,162)
Calpine Energy Solutions, LLCChicagoMarch 8, 2019February 28, 2029(2,237)(1,764)
$(4,771)$(3,926)