v3.20.1

Guarantees and Contingencies | 3 Months Ended
--- | ---
Mar. 31, 2020
Guarantees and Contingencies |
Guarantees and Contingencies | 13. Guarantees and Contingencies 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 covers 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. 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 we estimate had an approximate $1.4 million impact to cash flows from operations in the year ended December 31, 2019, the period when the deductible was fulfilled. 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. During the three months ended December 31, 2019, we recorded an additional $0.6 million write-down of fuel inventory, with a corresponding increase to the insurance receivable. In the three months ended March 31, 2020, we recorded $9.7 million of capital additions related to repairs at Cadillac and cumulative additions of $14.8 million since the inception of repairs. 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 year ended December 31, 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. Additionally, in the three months ended March 31, 2020 we received $7.4 million of insurance proceeds bringing the total cumulative proceeds received to $18.6 million. As of March 31, 2020, the insurance receivable balance totals $6.1 million. Additionally, we estimated anticipated insurance recoveries related to business interruption losses of $2.0 million for the three months ended December 31, 2019 and $3.2 million for the three months ended March 31, 2020. 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 March 31, 2020 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 March 31, 2020.

X
- References No definition available. + Details
Name: | us-gaap_CommitmentsAndContingenciesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for commitments, contingencies, and guarantees. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 460 -URI http://asc.fasb.org/topic&trid=2155896 Reference 2: 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 3: 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
Name: | us-gaap_CommitmentsContingenciesAndGuaranteesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration