Derivative Financial Instruments

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Option to Acquire a Variable Number of Shares of Class A Common Stock

In December 2021, we provided SK ecoplant with an option to acquire a variable number of shares of Class A common stock (the “Option”). We concluded that the Option is a freestanding financial instrument that should be separately recorded at fair value on the date the SPA was executed. We determined the fair value of the Option on that date to be $9.6 million. We revalued the Option to its fair value of $13.2 million as of December 31, 2021.

On August 10, 2022, pursuant to the SPA, SK ecoplant notified us of its intent to exercise its option to purchase additional shares of our Class A common stock, pursuant to a Second Tranche Exercise Notice (as defined in the SPA), and it elected to purchase 13,491,701 shares at a purchase price of $23.05 per share. Please refer to Note 17 - SK ecoplant Strategic Investment for more detail of this transaction.

Cash Flow Hedges

As of December 31, 2021, we had settled our interest rate swaps, which had been designated as cash flow hedges. There were no cash flow hedges as of December 31, 2022. The changes in fair value of the interest rate swaps designated as cash flow hedges and the amounts recognized in accumulated other comprehensive loss and in earnings were as follows during the year ended December 31, 2021 (in thousands):


	Year Ended December 31,
	2021


Beginning balance	$	15,989
Gain recognized in other comprehensive loss	(2,714)
Amounts reclassified from other comprehensive loss to earnings	(12,529)

Net gain recognized in other comprehensive loss	(15,243)
Gain recognized in earnings	(746)
Ending balance	$	—

Embedded EPP Derivatives in Sales Contracts

We estimate the fair value of the embedded EPP derivatives in certain of the contracts with our customers using a Monte Carlo simulation model, which considers various potential electricity price forward curves over the sales contracts’ terms. We use historical grid prices and available forecasts of future electricity prices to estimate future electricity prices. The grid pricing EPP guarantees that we provided in some of our sales arrangements represent an embedded derivative, with the initial value accounted for as a reduction in product revenue and any changes, reevaluated quarterly, in the fair market value of the derivative recorded in gain (loss) on revaluation of embedded derivatives.

For the years ended December 31, 2022, 2021 and 2020 we recorded the fair value of the embedded EPP derivatives with no material unrealized gains or losses recorded in either of the three years ended December 31, 2022, 2021 and 2020 in our consolidated statements of operations. The fair value of these derivatives was $5.9 million and $6.5 million as of December 31, 2022 and 2021, respectively