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Equity method investments in unconsolidated affiliates | 12 Months Ended
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Dec. 31, 2019
Equity method investments in unconsolidated affiliates |
Equity method investments in unconsolidated affiliates | 6. Equity method investments in unconsolidated affiliates The following tables summarize our equity method investments in unconsolidated affiliates:
|  | Percentage of |  | Carrying value as of |
|  | Ownership as of |  | December 31, |
Entity name |  | December 31, 2019 |  | 2019 |  | 2018 |
Frederickson(1) |  | 50.2 | % | $ | 65.2 |  | $ | 72.0 |
Orlando Cogen, LP |  | 50.0 | % |  | 3.6 |  |  | 4.5 |
Chambers Cogen, LP |  | 40.0 | % |  | 9.0 |  |  | 64.3 |
Craven County Wood Energy, LP (2) |  | 50.0 | % |  | 9.5 |  |  | — |
Grayling Generating Station, LP (2) |  | 30.0 | % |  | 9.3 |  |  | — |
Total |  |  |  | $ | 96.6 |  | $ | 140.8 |
| (1) |  | We own 50.15% of Frederickson. However, we do not have financial control of the entity. The Frederickson entity is organized under a joint ownership agreement. Under the terms of that agreement, the two owner parties have joint control of the asset and substantive participating rights through the structure of its Owner’s Committee. Each party has equal representation on this committee and unanimous consent is required over all significant decisions of the entity. These significant decisions include, but are not limited to (i) approval of the annual operating plan, annual operating budget, annual capital budget and five-year forecasts, (ii) approval of all expenditures in excess of the approved budget, (iii) adoption of procedures intended to govern the operation and conduct of the facility, and (iv) entering into, amending, supplementing or terminating any project agreement. Disputes between the owners for these significant decisions are subject to independent arbitration. Accordingly, since we do not control the project, Frederickson is accounted for under the equity method of accounting.
| (2) |  | In May 2019, we acquired the equity ownership interests held by AltaGas in Craven and Grayling. See Note 3 Acquisitions and divestments.
Deficit in earnings of equity method investments, net of distributions, was as follows:
|  | Year Ended December 31, |
Entity name |  | 2019 |  | 2018 |  | 2017 |
Frederickson |  | $ | 9.1 |  | $ | 6.9 |  | $ | (27.9) |
Orlando Cogen, LP |  |  | 33.0 |  |  | 30.1 |  |  | 25.6 |
Koma Kulshan Associates (1) |  |  | — |  |  | 0.6 |  |  | 0.7 |
Chambers Cogen, LP |  |  | (46.0) |  |  | 5.6 |  |  | (42.6) |
Selkirk Cogen Partners, LP (2) |  |  | — |  |  | — |  |  | (10.6) |
Craven County Wood Energy, LP (3) |  |  | 0.1 |  |  | — |  |  | — |
Grayling Generating Station, LP (3) |  |  | 0.8 |  |  | — |  |  | — |
Total (loss) earnings of unconsolidated affiliates |  |  | (3.0) |  |  | 43.2 |  |  | (54.8) |
Distributions from equity method investments |  |  | (59.5) |  |  | (61.6) |  |  | (47.3) |
Deficit in earnings of equity method investments, net of distributions |  | $ | (62.5) |  | $ | (18.4) |  | $ | (102.1) |
| (1) |  | In July 2018, we purchased the remaining 50% partnership interest in Koma and consolidated the project in our financial statements. See Note 3 Acquisitions and divestments.
| (2) |  | In November 2017, we sold our 17.7% interest in Selkirk.
| (3) |  | In May 2019, we acquired the equity ownership interests held by AltaGas in Craven and Grayling. See Note 3 Acquisitions and divestments.
Distributions from equity method investments exceeded (loss) earnings of equity method investments for the years ended December 31, 2019, 2018 and 2017, respectively. Distributions from our equity method investments are typically based on project-level cash flows from operations or other non-GAAP metrics, whereas equity earnings include non-cash expenses such as depreciation and amortization, investment impairments or changes in the fair value of derivative financial instruments. The following summarizes the financial position at December 31, 2019, 2018 and 2017, and operating results for the years ended December 31, 2019, 2018 and 2017, respectively, for our proportional ownership interest in equity method investments:
|  | 2019 |  | 2018 |  | 2017 |
Assets |  |  |  |  |  |  |  |  |  |
Current assets |  |  |  |  |  |  |  |  |  |
Frederickson |  | $ | 2.1 |  | $ | 2.5 |  | $ | 1.9 |
Orlando Cogen, LP |  |  | 7.8 |  |  | 7.7 |  |  | 9.2 |
Koma Kulshan Associates (1) |  |  | — |  |  | — |  |  | 0.5 |
Chambers Cogen, LP |  |  | 14.4 |  |  | 15.6 |  |  | 17.3 |
Craven County Wood Energy, LP (2) |  |  | 4.4 |  |  | — |  |  | — |
Grayling Generating Station, LP (2) |  |  | 3.3 |  |  | — |  |  | — |
Non-current assets |  |  |  |  |  |  |  |  |  |
Frederickson |  |  | 63.9 |  |  | 70.0 |  |  | 76.2 |
Orlando Cogen, LP |  |  | 6.1 |  |  | 7.1 |  |  | 8.1 |
Koma Kulshan Associates (1) |  |  | — |  |  | — |  |  | 4.7 |
Chambers Cogen, LP |  |  | 56.5 |  |  | 117.4 |  |  | 130.9 |
Craven County Wood Energy, LP (2) |  |  | 5.8 |  |  | — |  |  | — |
Grayling Generating Station, LP (2) |  |  | 6.8 |  |  | — |  |  | — |
|  | $ | 171.1 |  | $ | 220.3 |  | $ | 248.8 |
Liabilities |  |  |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |  |  |
Frederickson |  | $ | 0.3 |  | $ | — |  | $ | 0.4 |
Orlando Cogen, LP |  |  | 10.2 |  |  | 10.3 |  |  | 10.3 |
Koma Kulshan Associates (1) |  |  | — |  |  | — |  |  | 0.1 |
Chambers Cogen, LP |  |  | 13.7 |  |  | 9.2 |  |  | 3.7 |
Craven County Wood Energy, LP (2) |  |  | 0.8 |  |  | — |  |  | — |
Grayling Generating Station, LP (2) |  |  | 0.5 |  |  | — |  |  | — |
Non-current liabilities |  |  |  |  |  |  |  |  |  |
Frederickson |  |  | 0.5 |  |  | 0.5 |  |  | 0.4 |
Orlando Cogen, LP |  |  | — |  |  | — |  |  | — |
Koma Kulshan Associates (1) |  |  | — |  |  | — |  |  | 0.2 |
Chambers Cogen, LP |  |  | 48.2 |  |  | 59.5 |  |  | 70.0 |
Craven County Wood Energy, LP (2) |  |  | — |  |  | — |  |  | — |
Grayling Generating Station, LP (2) |  |  | 0.3 |  |  | — |  |  | — |
|  | $ | 74.5 |  | $ | 79.5 |  | $ | 85.1 |
| (1) |  | In July 2018, we purchased the remaining 50% partnership interest in Koma and consolidated the project in our financial statements. See Note 3 Acquisitions and divestments.
| (2) |  | In May 2019, we acquired the equity ownership interests held by AltaGas in Craven and Grayling. See Note 3 Acquisitions and divestments.
Operating results |  | 2019 |  | 2018 |  | 2017
Revenue |  |  |  |  |  |  |  |  |
Frederickson |  | $ | 36.0 |  | $ | 21.0 |  | $ | 21.6
Orlando Cogen, LP |  |  | 61.5 |  |  | 60.2 |  |  | 55.0
Koma Kulshan Associates (1) |  |  | — |  |  | 1.2 |  |  | 1.8
Chambers Cogen, LP |  |  | 39.4 |  |  | 43.3 |  |  | 43.8
Selkirk Cogen Partners, LP (2) |  |  | — |  |  | — |  |  | 1.8
Craven County Wood Energy, LP (3) |  |  | 4.9 |  |  | — |  |  | —
Grayling Generating Station, LP (3) |  |  | 2.2 |  |  | — |  |  | —
|  |  | 144.0 |  |  | 125.7 |  |  | 124.0
Project expenses |  |  |  |  |  |  |  |  |
Frederickson |  |  | 26.9 |  |  | 14.1 |  |  | 21.0
Orlando Cogen, LP |  |  | 28.5 |  |  | 30.1 |  |  | 29.4
Koma Kulshan Associates (1) |  |  | — |  |  | 0.6 |  |  | 1.1
Chambers Cogen, LP |  |  | 34.6 |  |  | 36.1 |  |  | 37.5
Selkirk Cogen Partners, LP (2) |  |  | — |  |  | — |  |  | 2.8
Craven County Wood Energy, LP (3) |  |  | 4.7 |  |  | — |  |  | —
Grayling Generating Station, LP (3) |  |  | 1.8 |  |  | — |  |  | —
|  |  | 96.5 |  |  | 80.9 |  |  | 91.8
Project other expenses |  |  |  |  |  |  |  |  |
Frederickson |  |  | — |  |  | — |  |  | (28.4)
Orlando Cogen, LP |  |  | — |  |  | — |  |  | —
Koma Kulshan Associates (1) |  |  | — |  |  | — |  |  | —
Chambers Cogen, LP |  |  | (50.9) |  |  | (1.6) |  |  | (48.9)
Selkirk Cogen Partners, LP (2) |  |  | — |  |  | — |  |  | (9.7)
Craven County Wood Energy, LP (3) |  |  | — |  |  | — |  |  | —
Grayling Generating Station, LP (3) |  |  | 0.4 |  |  | — |  |  | —
|  |  | (50.5) |  |  | (1.6) |  |  | (87.0)
Net income (loss) |  |  |  |  |  |  |  |  |
Frederickson |  |  | 9.1 |  |  | 6.9 |  |  | (27.8)
Orlando Cogen, LP |  |  | 33.0 |  |  | 30.1 |  |  | 25.6
Koma Kulshan Associates (1) |  |  | — |  |  | 0.6 |  |  | 0.7
Chambers Cogen, LP |  |  | (46.1) |  |  | 5.6 |  |  | (42.6)
Selkirk Cogen Partners, LP (2) |  |  | — |  |  | — |  |  | (10.7)
Craven County Wood Energy, LP (3) |  |  | 0.2 |  |  | — |  |  | —
Grayling Generating Station, LP (3) |  |  | 0.8 |  |  | — |  |  | —
Equity in (loss) earnings of unconsolidated affiliates |  | $ | (3.0) |  | $ | 43.2 |  | $ | (54.8)
| (1) |  | In July 2018, we purchased the remaining 50% partnership interest in Koma and consolidated the project in our financial statements. Amounts in the above table relate to the period Koma was accounted for under the equity method of accounting. See Note 3 Acquisitions and divestments.
| (2) |  | In November 2017, we sold our 17.7% interest in Selkirk.
| (3) |  | In May 2019, we acquired the equity ownership interests held by AltaGas in Craven and Grayling. See Note 3 Acquisitions and divestments.
During the year ended December 31, 2019, we recorded an investment impairment of $49.2 million at our Chambers project. We recorded investment impairments of $47.1 million, $28.3 million and $10.6 million, respectively, at our Chambers, Frederickson and Selkirk projects in the year ended December 31, 2017. These impairments are a component of the operating results in the table above. There were no impairment triggers during 2018 and accordingly no impairment tests were performed on equity method investments. 2019 – Event-driven test in the fourth quarter Chambers We own a 40% limited partner interest in Chambers Cogeneration Limited Partnership. The Chambers project operates under a PPA that expires in March 2024. Prior to our impairment analysis, Chambers was recorded as a $58.2 million component of our equity investments in unconsolidated affiliates on the consolidated balance sheets. In connection with the preparation of the long-term forecast during the fourth quarter of 2019, we performed an analysis of the post-PPA value of Chambers operating as a merchant facility. As a result, we identified a significant decrease in the long-term outlook for power prices and spark spreads in PJM, the region where Chambers operates. These forward power prices, which were obtained from a third party, including analysis of the forward prices for natural gas and coal, had a significant negative impact on the discounted cash flows of Chambers post-PPA. The estimated post-PPA value is a significant component of the project’s overall value when compared to its carrying value of $58.2 million. When determining if this decrease in estimated fair value was other than temporary, we considered the likelihood that future conditions would change such that the gas and coal prices currently observed in the forward pricing models would become more favorable over time in order for the plant to be profitable in a merchant market. While declining power prices have been observed over the past several years, given that merchant curves have declined further than what was observed in 2017, it was our assessment that future merchant pricing and spark spreads were likely to remain low and that Chambers would be unable to recover its start fuel and start operations and maintenance costs after expiration of its PPA in 2024. Based on these factors, we determined that the decline in the fair value of our investment in Chambers was other than temporary. We recorded a $49.2 million impairment in earnings (loss) from unconsolidated affiliates in the consolidated statements of operations for the year ended December 31, 2019. 2017 – Event-driven test in the fourth quarter Frederickson In the fourth quarter of 2017, we performed an impairment test of our investment in our Frederickson project. The Frederickson project operates under three PPAs that expire in August 2022. Prior to our impairment analysis, Frederickson was recorded as a $108.3 million component of our equity investments in unconsolidated affiliates on the consolidated balance sheets. We performed an analysis of the post-PPA value of Frederickson operating as a merchant facility. In our long-term forecast completed in December 2017, we identified a significant decrease in the long-term peak demand outlook for power prices in the Pacific Northwest, the region where Frederickson operates, which management determined to be an other than temporary decline in prices. These forward prices, which were obtained from a third party, had a significant negative impact on the estimated discounted cash flows of Frederickson post-PPA. The estimated post-PPA value is a significant component of the project’s overall value when compared to its pre-impairment carrying value of $108.3 million. When determining if the decrease in fair value estimated in our 2017 test was other than temporary, we considered the likelihood that future conditions would change such that the power prices currently observed in the forward pricing models would become more favorable over time. Frederickson operates in a region with large, planned coal facility retirements and strong population growth. However, it was our assessment that natural gas prices were likely to remain low when considering the current and expected future supply of shale gas and that these factors would negatively impact future merchant pricing. Based on these factors, we determined that the decline in the fair value of our equity investment in Frederickson was other than temporary. We recorded a $28.3 million impairment in earnings from unconsolidated affiliates in the consolidated statements of operations for the year ended December 31, 2017. 2017 – Event-driven test in the second quarter In the second quarter of 2017, we performed event-driven impairment tests of our investments in our Chambers and Selkirk projects, which are accounted for under the equity method of accounting. Selkirk We previously owned a 17.7% limited partner interest in Selkirk Cogen Partners, L.P. The project operated as a merchant facility since the expiration of its PPA in August 2014. Since the expiration of its PPA, we did not receive a distribution from Selkirk and recorded a cumulative $2.6 million project loss. Based on the project’s history of providing no cash distributions while operating as a merchant facility, the short-term and long-term operational forecast, as well as the likelihood that further investment would be required in order to operate the facility, we determined that our investment in Selkirk was impaired and the decline in value was other than temporary. Accordingly, we recorded a $10.6 million full impairment in earnings from unconsolidated affiliates in the consolidated statements of operations in the three months ended June 30, 2017. We sold our interest in Selkirk in November 2017 and recorded a $1 million gain on sale in the year ended December 31, 2017. The impairment charge and the gain on sale are both recorded in earnings from unconsolidated affiliates in the statement of operations for the year ended December 31, 2017. Chambers Prior to our impairment analysis, Chambers was recorded as a $124 million component of our equity investments in unconsolidated affiliates on the consolidated balance sheets. During the second quarter of 2017, we performed an analysis of the post-PPA value of Chambers operating as a merchant facility. While declining power prices had been observed over the past several years, in our long-term forecast completed in July 2017, we identified a significant decrease in the long-term outlook for power prices in PJM, which management determined to be an other than temporary decline in prices. These forward power prices, which were obtained from a third party, including analysis of the forward prices for natural gas and coal, had a significant negative impact on the DCFs of Chambers post-PPA. The estimated post-PPA value is a significant component of the project’s overall value when compared to its carrying value of $124 million. When determining if this decrease in fair value estimated in our event-driven 2017 test was other than temporary, we considered the likelihood that future conditions would change such that the gas and coal prices currently observed in the forward pricing models would become more favorable over time in order for the plant to be profitable in a merchant market. We also engaged a separate third party to provide its outlook on post-PPA value for Chambers. It was our assessment that future merchant pricing was likely to remain low due to lower natural gas prices from the current and expected future supply of shale gas. The third party provided similar conclusions to our assessment. Based on these factors, we determined that the decline in the fair value of our equity investment in Chambers was other than temporary. We recorded a $47.1 million impairment in earnings from unconsolidated affiliates in the consolidated statements of operations for the three months ended June 30, 2017.

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section S99 -Paragraph 4 -Subparagraph (SX 210.3A-04) -URI http://asc.fasb.org/extlink&oid=116822174&loc=d3e355119-122828 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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