Derivative Financial Instruments

3 Months Ended

Mar. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Interest Rate Swaps

We use various financial instruments to minimize the impact of variable market conditions on our results of operations. We use interest rate swaps to minimize the impact of fluctuations of interest rate changes on our outstanding debt where LIBOR is applied. We do not enter into derivative contracts for trading or speculative purposes.

The fair values of the derivatives designated as cash flow hedges as of March 31, 2021 and December 31, 2020 on our condensed consolidated balance sheets are as follows (in thousands):


	March 31,		December 31,
	2021		2020





Liabilities

Accrued expenses and other current liabilities	$	11,301	$	15,989

PPA V - In July 2015, PPA V entered into nine interest rate swap agreements to convert a variable interest rate debt to a fixed rate and we designated and documented the interest rate swap arrangements as cash flow hedges. Three of these swaps matured in 2016, three will mature on December 31, 2021 and the remaining three will mature on June 30, 2031. The effective change is recorded in accumulated other comprehensive loss and is recognized as interest expense on settlement. The notional amounts of the swaps are $180.7 million and $181.4 million as of March 31, 2021 and December 31, 2020, respectively.

We measure the swaps at fair value on a recurring basis. Fair value is determined by discounting future cash flows using LIBOR rates with appropriate adjustment for credit risk. We realized immaterial gains attributable to the change in valuation during the three months ended March 31, 2021 and 2020, and these gains are included in other expense, net, in the condensed consolidated statements of operations.

The changes in fair value of the derivative contracts designated as cash flow hedges and the amounts recognized in accumulated other comprehensive loss and in earnings are as follows (in thousands):


	Three months ended March 31,
		2021		2020
Beginning balance		$	15,989	$	9,238
(Gain) loss recognized in other comprehensive loss		(4,164)		8,356
Amounts reclassified from other comprehensive loss to earnings		(489)		(142)
Net (gain) loss recognized in other comprehensive loss		(4,653)		8,214
Gain recognized in earnings		(35)		(37)
Ending balance		$	11,301	$	17,415

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. We recognized an unrealized loss of $0.5 million and a gain of $0.3 million attributable to the change in fair value for the three months ended March 31, 2021 and 2020, respectively. These gains and losses are included within loss on revaluation of embedded derivatives in the condensed consolidated statements of operations. The fair value of these derivatives $6.0 million and $5.9 million as of March 31, 2021 and 2020, respectively.