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INVESTMENTS IN AFFILIATES
6 Months Ended
Jun. 30, 2023
Equity Method Investments and Joint Ventures [Abstract]  
INVESTMENTS IN AFFILIATES INVESTMENTS IN AFFILIATES
Investments in unconsolidated affiliates accounted for under the equity method consisted of the following:
As of
Ownership as of June 30, 2023June 30, 2023December 31, 2022
Nikola Iveco Europe GmbH— %$— $4,142 
Wabash Valley Resources LLC20 %57,289 57,674 
Nikola - TA HRS 1, LLC50 %1,000 1,000 
$58,289 $62,816 
Equity in net loss of affiliates on the consolidated statements of operations for the three and six months ended June 30, 2023 and 2022, were as follows:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Equity in net loss of affiliates:
Nikola Iveco Europe GmbH$(7,146)$(1,201)$(15,556)$(4,039)
Wabash Valley Resources LLC(471)(69)(469)(51)
Total equity in net loss of affiliates$(7,617)$(1,270)$(16,025)$(4,090)
Nikola Iveco Europe GmbH
In April 2020, the Company and Iveco S.P.A. ("Iveco") became parties to a series of agreements which established a joint venture in Europe, Nikola Iveco Europe GmbH. The operations of the joint venture are located in Ulm, Germany, and consist of manufacturing the FCEV and BEV Class 8 trucks for the European market. The agreements provided for a 50/50 ownership of the joint venture and a 50/50 allocation of the joint venture's production volumes and profits between the Company and Iveco. Nikola Iveco Europe GmbH was considered a variable interest entity ("VIE") due to insufficient equity to finance its activities without additional subordinated financial support. The Company was not considered the primary beneficiary as it did not have the power to direct the activities that most significantly impact the economic performance based on the terms of the agreements. Accordingly, the VIE was accounted for under the equity method.
On June 29, 2023 (the "Divestiture Closing"), the Company and Iveco executed the European Joint Venture Transaction Agreement (the "Transaction Agreement") whereby the Company sold its 50% equity interest in Nikola Iveco Europe GmbH to Iveco for $35.0 million. In conjunction with the Transaction Agreement, the Company issued an intellectual property license agreement (the “License Agreement”), which grants Iveco and Nikola Iveco Europe GmbH a non-exclusive, perpetual, irrevocable, fully sublicensable, transferable, and fully assignable license ("Licensed Software") to software and controls technology related to the BEV and FCEV. According to the terms of the Transaction Agreement, the Company may also receive 20.6 million shares of its own common stock from Iveco, contingent on successful due diligence ("Software Due Diligence") performed by Iveco and its consultants on the Licensed Software delivered to Iveco on the Divestiture Closing pursuant to the License Agreement. The Software Due Diligence is evaluated based on mutually agreed criteria between Iveco and the Company and will be performed starting on the June 29, 2023, and ending on August 4, 2023.
On the Divestiture Closing, the Company recognized a gain equal to the difference between the consideration received and its basis in the Nikola Iveco Europe GmbH investment, consisting of a liability balance of $11.4 million for investment in affiliates, and cumulative currency translation losses of $1.5 million. The delivery of the Licensed Software on the Divestiture Closing was determined to represent a right to use the Licensed Software and the performance obligation was satisfied upon the delivery of the Licensed Software on Divestiture Closing. The Company recognized gains related to the derecognition of its basis in Nikola Iveco Europe GmbH and delivery of the Licensed Software in gain on divestiture of affiliate on the consolidated statements of operations. During the three and six months ended June 30, 2023, the Company recognized a gain of $70.8 million in gain on divestiture of affiliates consisting of the following:
Three and Six Months Ended
June 30, 2023
Cash consideration received$35,000 
Contingent stock consideration receivable25,956 
Derecognition of investment in affiliate11,428 
Derecognition of cumulative currency translation losses(1,535)
Gain on divestiture of affiliate$70,849 
Contingent stock consideration receivable
The contingent stock consideration was accounted for as variable consideration and included in total consideration as of Divestiture Closing, as it is not probable that a significant reversal of such consideration will occur upon resolution of the contingency. The fair value of the contingent consideration was determined based on the closing price of the Company's common stock price as of the Divestiture Closing. As of June 30, 2023, the fair value of the contingent stock consideration was $28.4 million, and during the three and six months ended June 30, 2023, the Company recognized a change in fair value of $2.5 million in other income (expense), net on the consolidated statements of operations.
Wabash Valley Resources LLC
On June 22, 2021, the Company entered into a Membership Interest Purchase Agreement (the "MIPA") with WVR and the Sellers, pursuant to which, the Company purchased a 20% equity interest in WVR in exchange for $25.0 million in cash and 1,682,367 shares of the Company’s common stock. WVR is developing a clean hydrogen project in West Terre Haute, Indiana, including a hydrogen production facility. The common stock consideration was calculated based on the Company's 30-day average closing stock price, or $14.86 per share, and the Company issued 1,682,367 shares of its common stock.
The Company's interest in WVR is accounted for under the equity method and is included in investment in affiliates on the Company's consolidated balance sheets. Included in the initial carrying value was a basis difference of $55.5 million due to the difference between the cost of the investment and the Company's proportionate share of WVR's net assets. The basis difference is primarily comprised of property, plant and equipment and intangible assets.
As of June 30, 2023, the Company's maximum exposure to loss was $57.6 million, which represents the book value of the Company's equity interest and loans to WVR for $0.3 million.
Nikola - TA HRS 1, LLC
In March 2022, the Company and Travel Centers of America, Inc. ("TA") entered into a series of agreements which established a joint venture, Nikola - TA HRS 1, LLC. The operations expected to be performed by the joint venture consist of the development, operation and maintenance of a hydrogen fueling station. Operations have not commenced as of June 30, 2023.
The agreements provide for 50/50 ownership of the joint venture. Both parties are entitled to appoint an equal number of board members to the management committee of the joint venture. Pursuant to the terms of the agreements, the Company contributed $1.0 million to Nikola - TA HRS 1, LLC in 2022.
Nikola - TA HRS 1, LLC is considered a VIE due to insufficient equity to finance its activities without additional subordinated financial support. The Company is not considered the primary beneficiary as it does not have the power to direct the activities that most significantly impact the economic performance based on the terms of the agreements. Accordingly, the VIE is accounted for under the equity method.
The Company does not guarantee debt for, or have other financial support obligations to the entity and its maximum exposure to loss in connection with its continuing involvement with the entity is limited to the carrying value of the investment.