Fair Value

3 Months Ended

Mar. 31, 2022

Our accounting policy for the fair value measurement of cash equivalents, the fair value of contingent consideration related to business combinations, natural gas fixed price forward contracts, embedded Escalation Protection Plan ("EPP") derivatives and interest rate swap agreements is described in Note 2 - Significant Accounting Policies.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The tables below set forth, by level, our financial assets that are accounted for at fair value for the respective periods. The table does not include assets and liabilities that are measured at historical cost or any basis other than fair value (in thousands):


	Fair Value Measured at Reporting Date Using
March 31, 2022	Level 1		Level 2		Level 3		Total

Assets
Cash equivalents:
Money market funds	$	247,420	$	—	$	—	$	247,420


	$	247,420	$	—	$	—	$	247,420
Liabilities


Derivatives:
Option to acquire a variable number of shares of Class A Common Stock (Note 18)	$	—	$	16,198	$	—	$	16,198



Embedded EPP derivatives	—		—		5,929		5,929

	$	—	$	16,198	$	5,929	$	22,127


	Fair Value Measured at Reporting Date Using
December 31, 2021	Level 1		Level 2		Level 3		Total

Assets
Cash equivalents:
Money market funds	$	297,034	$	—	$	—	$	297,034


	$	297,034	$	—	$	—	$	297,034
Liabilities

Derivatives:
Option to acquire a variable number of shares of Class A Common Stock	$	—	$	13,200	$	—	$	13,200

Embedded EPP derivatives	—		—		6,461		6,461




	$	—	$	13,200	$	6,461	$	19,661

Money Market Funds - Money market funds are valued using quoted market prices for identical securities and are therefore classified as Level 1 financial assets.

Option to acquire a variable number of shares of Class A Common Stock - We estimated the fair value of the Option (as defined in Note 8) to acquire a variable number of shares of Class A Common Stock using a Monte Carlo simulation model using a stochastic volatility parameter, which is calibrated and considers the observable implied volatility, the stock price of our Class A Common Stock and market interest rates. As the fair value is determined based on observable inputs, the Option to acquire a variable number of shares of Class A Common Stock is classified as a Level 2 financial liability.

Embedded Escalation Protection Plan Derivative Liability in Sales Contracts - We estimate the fair value of the embedded EPP derivatives in certain sales contracts using a Monte Carlo simulation model, which considers various potential electricity price curves over the sales contracts' terms. We use historical grid prices and available forecasts of future electricity prices to estimate future electricity prices. We have classified these derivatives as a Level 3 financial liability.

For the three months ended March 31, 2022 and 2021, we recorded the fair value of the embedded EPP derivatives and recognized an unrealized gain of $0.5 million and an unrealized loss of $0.5 million, respectively, in (loss) gain on revaluation of embedded derivatives on our condensed consolidated statements of operations (in thousands in the table below).


	Embedded EPP Derivative Liability







Liabilities at December 31, 2021	$	6,461
Changes in fair value	(532)
Liabilities at March 31, 2022	$	5,929

To estimate the liabilities related to the EPP contracts an option pricing method was implemented through a Monte Carlo simulation. The unobservable inputs were simulated based on the available values for avoided cost and cost of electricity as calculated for March 31, 2022 and 2021, using an expected growth rate of 7% over the contracts' life and volatility of 20%. The estimated growth rate and volatility were estimated based on the historical tariff changes for the period 2008 to 2021. Avoided cost is the transmission and distribution cost expressed in dollars per kilowatt hours avoided in the given year of the contract, calculated using the billing rates of the effective utility tariff applied during the year to the host account for which usage is offset by the generator. If the billing rates within the utility tariff change during the measurement period, the average of the amount of charge for each rate shall be weighted by the number of effective months for each amount.

The inputs listed above would have had a direct impact on the fair values of the above derivatives if they were adjusted. Generally, an increase in natural gas prices and a decrease in electric grid prices would each result in an increase in the estimated fair value of our derivative liabilities.

Interest Rate Swap Agreements - Interest rate swap agreements are valued using quoted prices for similar contracts and are therefore classified as Level 2 financial assets. Interest rate swaps are designed as hedging instruments and are recognized at fair value on our condensed consolidated balance sheets. During the fourth quarter of 2021, we terminated our hedges.

Option - We revalued the Option to purchase Class A common stock to its fair value as of March 31, 2022, and recorded a loss of $3.0 million which is included in other income (expense), net in our condensed consolidated statements of operations. The fair value of the Option is reflected in Accrued expenses and other current liabilities in our condensed consolidated balance sheet.

Financial Assets and Liabilities and Other Items Not Measured at Fair Value on a Recurring Basis

Customer Receivables and Debt Instruments - The fair value for customer financing receivables is based on a discounted cash flow model, whereby the fair value approximates the present value of the receivables (Level 3). The senior secured notes, term loans and convertible notes are based on rates currently offered for instruments with similar maturities and terms (Level 3). The following table presents the estimated fair values and carrying values of customer receivables and debt instruments (in thousands):


	March 31, 2022				December 31, 2021
	Net Carrying Value		Fair Value		Net Carrying Value		Fair Value

Customer receivables
Customer financing receivables	$	43,880	$	36,273	$	45,269	$	38,334
Debt instruments
Recourse:





10.25% Senior Secured Notes due March 2027	69,056		70,056		68,968		72,573
2.5% Green Convertible Senior Notes due August 2025	223,355		384,330		222,863		356,822
Non-recourse:

7.5% Term Loan due September 2028	28,298		33,377		29,006		35,669

6.07% Senior Secured Notes due March 2030	72,193		78,311		73,262		83,251
3.04% Senior Secured Notes due June 2031	129,910		129,101		132,631		137,983

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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