v3.19.3.a.u2

Commitments and contingencies | 12 Months Ended
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Dec. 31, 2019
Commitments and contingencies |
Commitments and contingencies | 23. Commitments and contingencies Commitments Management Service Commitments Our Manchief project is operated by a third party under a contract that expires in April 2022. As of December 31, 2019, our commitments under this agreement are estimated as follows:
2020 |  | $ | 0.4 |
2021 |  |  | 0.4 |
2022 |  |  | 0.2 |
2023 |  |  | — |
2024 |  |  | — |
Thereafter |  |  | — |
|  | $ | 1.0 |
Fuel Supply and Transportation Commitments We have entered into long‑term contractual arrangements to procure fuel and transportation services for our projects. We have also entered into long-term arrangements for firm gas sales. The commitments listed below include only contracts for fuel contracts that are not reimbursed or passed through under the terms of the relevant PPAs and are presented net of estimated future gas sales. As of December 31, 2019, our commitments under such outstanding agreements are estimated as follows:
2020 |  | $ | 5.0 |
2021 |  |  | 5.0 |
2022 |  |  | 5.2 |
2023 |  |  | — |
2024 |  |  | — |
Thereafter |  |  | — |
|  | $ | 15.2 |
Guarantees We and our subsidiaries enter into various contracts that include indemnification and guarantee provisions as a routine part of our business activities. Examples of these contracts include asset purchases and sale agreements, joint venture agreements, operation and maintenance agreements, and other types of contractual agreements with vendors and other third parties, as well as affiliates. These contracts generally indemnify the counterparty for tax, environmental liability, litigation and other matters, as well as breaches of representations, warranties and covenants set forth in these agreements. Contingencies Fire at Cadillac project On September 22, 2019, the Cadillac project experienced a malfunction in its steam turbine that began a cascade of events, sparking a fire. The fire was contained by the local fire department and did not result in any injuries or known environmental violations. Physical Damage The biomass plant suffered significant damage to the turbine, generator and other components in that area of the plant as a result of the fire. The boiler, cooling tower, fuel pile and fuel handling equipment were not affected. Cadillac is expected to be offline for an extended period. Our insurance provides coverage for the repair or replacement of the assets that experienced loss or damage. The property damage deductible under the policies insuring the Cadillac assets is $1.0 million. Our losses have exceeded the deductible under these insurance policies. Business Interruption Our insurance policies also provide coverage for interruption to Cadillac’s business, including lost profits. The policies also reimburse for other expenses and costs it has incurred relating to the damages and loss it has suffered. The policies provide for coverage during the reconstruction period. At this time, we are unable to determine the Cadillac plant’s expected return to service date. The business interruption deductible under the policies insuring the Cadillac assets is 45 days of lost production, which had an approximate $1.4 million impact to cash flows from operations in 2019. Impact The fire resulted in a triggering event to test the Cadillac’s asset group for long-lived asset impairment. Based on our expectation of insurance recoveries and a full repair of the plant, we did not record an impairment at Cadillac because its estimated undiscounted future cash flows exceed the carrying value of the asset group at the date of the incident. Because the plant experienced significant damage and it is probable that insurance proceeds will be received in order to repair the facility, we applied accounting for gains and losses on involuntary conversions. Based on loss estimates and expenses incurred through third quarter of 2019, we recorded a $25 million write-down of Cadillac’s property, plant and equipment and a $0.3 million write-down of capital spares inventory in the three months ended September 30, 2019. This was our best estimate at the time the loss was incurred, but may be subject to future adjustments based on actual experience of replacement cost. We also recorded a corresponding insurance receivable ($24.2 million), a component of other current assets, less the $1.0 million property damage deductible, which was recorded as a charge to other project income, because we believe that it is probable we will receive insurance recoveries up to our estimated plant write-down. As the plant is repaired, any costs incurred will be capitalized to property, plant and equipment. As of December 31, 2019, we have recorded $5.1 million in capital additions related to repairs at Cadillac. Insurance proceeds in excess of the net book value of the property, plant and equipment write-down, if any, would be recorded as a gain in the period those proceeds are received. During the three months ended December 31, 2019 and for the full year 2019, we received $11.3 million of insurance proceeds with respect to the fire at Cadillac, which were applied against the September 30, 2019 insurance receivable of $24.2 million. During the three months ended December 31, 2019, we recorded a $0.6 million write-down of fuel inventory, with a corresponding increase to the insurance receivable. As of December 31, 2019, the insurance receivable balance totals $13.5 million. Additionally, we estimate anticipated insurance recoveries related to business interruption losses of $2.0 million for the three months ended December 31, 2019. Anticipated reimbursements for lost profits, or business interruption losses, are accounted for as a gain contingency because lost profits are not considered an incurred loss. Anticipated reimbursements for business interruption losses were not recorded as of December 31, 2019 as all contingencies related to these claims had not been resolved as of period end. We expect all contingencies related to business interruption losses to be resolved once final payment is received from the insurers, which is when we will recognize the reimbursements in earnings. The Cadillac biomass plant is a component of our Solid Fuel segment. General From time to time, Atlantic Power, its subsidiaries and the projects are parties to disputes and litigation that arise in the normal course of business. We assess our exposure to these matters and record estimated loss contingencies when a loss is likely and can be reasonably estimated. There are no matters pending which are expected to have a material adverse impact on our financial position or results of operations or have been reserved for as of December 31, 2019.

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- Definition The entire disclosure for commitments and contingencies. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 450 -URI http://asc.fasb.org/topic&trid=2127136 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 440 -URI http://asc.fasb.org/topic&trid=2144648 + Details
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