Annual report pursuant to Section 13 and 15(d)

Fair Value Measurement

v3.20.4
Fair Value Measurement
12 Months Ended
Dec. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurement Fair Value Measurement
At December 31, 2020 and 2019, the carrying value of receivables, accounts payable, accrued expenses and distributions payable to noncontrolling interests approximates fair value due to their short-term nature and falls under the Level 2 hierarchy. The carrying values and fair values of debt instruments are as follows (in thousands):
December 31, 2020 December 31, 2019
Carrying Value
Fair Value
Carrying Value
Fair Value
Recourse debt $ 230,660  $ 230,660  $ 239,485  $ 239,485 
Senior debt 1,722,730  1,733,767  625,519  626,023 
Subordinated debt 934,386  958,880  513,938  524,581 
Securitization debt 1,908,369  2,012,283  875,998  931,320 
Total
$ 4,796,145  $ 4,935,590  $ 2,254,940  $ 2,321,409 
At December 31, 2020 and 2019, the fair value of the Company’s lines of credit, and certain senior, subordinated, and SREC loans approximate their carrying values because their interest rates are variable rates that approximate rates currently available to the Company. At December 31, 2020 and 2019, the fair value of the Company’s other debt instruments are based on rates currently offered for debt with similar maturities and terms. The Company’s fair value of the debt instruments fell under the Level 2 hierarchy. These valuation approaches involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market.
At December 31, 2020 and 2019, financial instruments measured at fair value on a recurring basis, based upon the fair value hierarchy are as follows (in thousands):
December 31, 2020
Level 1
Level 2
Level 3
Total
Derivative assets:
Interest rate swaps
$ —  $ 5,218  $ —  $ 5,218 
Total
$ —  $ 5,218  $ —  $ 5,218 
Derivative liabilities:
Interest rate swaps $ —  $ 175,444  $ —  $ 175,444 
Total
$ —  $ 175,444  $ —  $ 175,444 
Contingent consideration:
Contingent consideration: $ —  $ —  $ 4,653  $ 4,653 
Total $ —  $ —  $ 4,653  $ 4,653 
December 31, 2019
Level 1
Level 2
Level 3
Total
Derivative assets:
Interest rate swaps $ —  $ 683  $ —  $ 683 
Total $ —  $ 683  $ —  $ 683 
Derivative liabilities:      
Interest rate swaps $ —  $ 64,361  $ —  $ 64,361 
Total $ —  $ 64,361  $ —  $ 64,361 
Contingent consideration:
Contingent consideration: $ —  $ —  $ 11,809  $ 11,809 
Total $ —  $ —  $ 11,809  $ 11,809 
The above balances are recorded in other assets and other liabilities, respectively, in the consolidated balance sheets, except for $0.1 million as of December 31, 2020, which is recorded in prepaid and other assets and $23.9 million as of December 31, 2020, which is recorded in accrued expenses and other liabilities.
The Company determines the fair value of its interest rate swaps using a discounted cash flow model that incorporates an assessment of the risk of non-performance by the interest rate swap counterparty and an evaluation of the Company’s credit risk in valuing derivative instruments. The valuation model uses various inputs including contractual terms, interest rate curves, credit spreads and measures of volatility.
The Company recorded contingent consideration in connection with the Omni business combination, which is dependent on the achievement of specified deployment milestones associated with the number of solar systems installed through 2022. The Company determined the fair value of the contingent consideration using a probability-weighted expected return methodology that considers the timing and probabilities of achieving these milestones and uses discount rates that reflect the appropriate cost of capital. Contingent consideration was valued with level 3 inputs. The Company reassesses the valuation assumptions each reporting period, with any changes in the fair value accounted for in the consolidated statements of operations.
The following table summarizes the activity of Level 3 contingent consideration balance in the year ended December 31, 2020 (in thousands):
Balance recorded in connection with business acquisition $ 20,800 
Gains recognized in earnings within sales and marketing expense (2,271)
Payable for solar systems that have met deployment milestones (6,720)
Balance at December 31, 2019
11,809 
Change in fair value recognized in earnings within sales and marketing expense (6,030)
Payable for solar systems that have met deployment milestones (1,126)
Balance at December 31, 2020
$ 4,653