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LEASES | 12 Months Ended
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Sep. 30, 2020
Leases [Abstract] |
LEASES | 14. LEASES Lessee Accounting The Company determines if an arrangement is a lease at inception based on whether the Company has the right to control the use of an identified asset, the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset and accounts for leases in accordance with ASC 842, Leases. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and leased liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term, including payments at commencement that depend on an index or rate. The Company’s land leases and office equipment leases in which the Company is the lessee do not have a readily determinable implicit rate, so an incremental borrowing rate, based on the information available at the lease commencement date, is utilized to determine the present value of lease payments. When a secured borrowing rate is not readily available, unsecured borrowing rates are adjusted for the effects of collateral to determine the incremental borrowing rate. The Company uses the implicit rate for agreements in which it is a lessor. The Company has not entered into any material agreements in which it is a lessor. Lease expense and lease income are recognized on a straight-line basis over the lease term for operating leases. For more information on the adoption of ASC 842, Leases, see Note 2. Summary of Significant Accounting Policies. The Company’s lease agreements primarily consist of commercial solar land leases, storage and capacity leases, equipment and real property, including land and office facilities, office equipment and the sale leaseback of its natural gas meters. Certain leases contain escalation provisions for inflation metrics. The storage leases contain a variable payment component that relates to the change in the inflation metrics that are not known past the current payment period. These variable components of these lease payments are excluded from the lease payments that are used to determine the related right-of-use asset and lease liability. The variable portion of these leases are recognized as leasing expenses when they are incurred. The capacity lease payments are fully variable and based on the amount of natural gas stored in the storage caverns. The Company’s solar land lease terms are primarily between 15 and 35 years, which includes options to extend the terms for multiple additional 5 to 10 years each. The Company’s office leases vary in duration, ranging from 1 to 25 years and may or may not include extension or early purchase options. The majority of the Company’s meter leases are for terms of 7 years with purchase options available prior to the end of the 7 year term. Equipment leases include general office equipment that also vary in duration, most are for a term of 5 years. The Company's storage and capacity leases have assumed terms of 50 years to coincide with the expected useful lives of the cavern assets with which the leases are associated. The Company's lease terms may include options to extend, purchase the leased asset or terminate a lease and they are included in the lease liability calculation when it is reasonably certain that those options will be exercised. The expense related to the leases subject to the short-term lease recognition exemption are recognized on a straight-line basis, with such amounts disclosed in the financial statement notes below. The Company has lease agreements with lease and nonlease components and has elected the practical expedient to combine lease and nonlease components for certain classes of leases, such as office buildings, solar land leases and office equipment. Variable payments are not significant to the Company. The Company’s lease agreements do not contain any material residual value guarantees, material restrictions or material covenants. There are no material lease transactions with related parties. The following table presents the Company's lease costs included in the Consolidated Statements of Operations for the fiscal year ended September 30:
(Thousands) | Income Statement Location |  |  |  | 2020 |  |
Finance lease cost |  |  |  |  |  |  |
Amortization of right-of-use assets | Depreciation and amortization |  |  |  | $ | 5,007 |  |  |
Interest on lease liabilities | Interest expense, net of capitalized interest |  |  |  | 1,511 |  |  |
Total finance lease cost |  |  |  |  | 6,518 |  |  |
Operating lease cost | Operation and maintenance, net of capitalized costs |  |  |  | $ | 6,404 |  |  |
Short-term lease cost | Operation and maintenance |  |  |  | 1,041 |  |  |
Variable lease cost | Operation and maintenance |  |  |  | 1,025 |  |  |
Total lease cost |  |  |  |  | $ | 14,988 |  |  |
The following table presents supplemental cash flow information related to leases for the fiscal year ended September 30:
(Thousands) | 2020 |  |
Cash paid for amounts included in the measurement of lease liabilities |  |  |
Operating cash flows from operating leases | $ | 8,804 |  |  |
Operating cash flows from finance leases | $ | 1,189 |  |  |
Financing cash flows from finance leases | $ | 6,985 |  |  |
Assets obtained or modified through amendments in exchange for operating lease liabilities during fiscal 2020 were $76.6 million. Assets obtained or modified through amendments in exchange for finance lease liabilities during fiscal 2020, were $49.7 million. The following table presents the balance and classifications of our right of use assets and lease liabilities included in the Consolidated Balance Sheets for the fiscal year ended September 30:
(Thousands) | Balance Sheet Location | 2020 |
Assets |  |  |
Noncurrent |  |  |
Operating lease assets | Operating lease assets | $ | 131,769 |  |
Finance lease assets | Utility plant | 71,085 |  |
Total lease assets |  | $ | 202,854 |  |
Liabilities |  |  |
Current |  |  |
Operating lease liabilities | Operating lease liabilities | $ | 6,724 |  |
Finance lease liabilities | Current maturities of long-term debt | 10,416 |  |
Noncurrent |  |  |
Operating lease liabilities | Operating lease liabilities | 95,030 |  |
Finance lease liabilities | Long-term debt | 63,743 |  |
Total lease liabilities |  | $ | 175,913 |  |
As of September 30, 2020, the weighted average remaining lease term for the operating and finance leases is 25.5 and 11.5 years, respectively. The weighted average discount rate used in the valuation of the operating and finance lease liabilities and right-of-use assets over the remaining lease term is 3.18 percent and 2.5 percent, respectively. The following table presents the Company's maturities of lease liabilities as of September 30, 2020:
(Thousands) | Operating Leases | Finance Leases |
2021 | $ | 6,706 |  | $ | 54,992 |  |
2022 | 6,634 |  | 6,004 |  |
2023 | 6,590 |  | 4,622 |  |
2024 | 6,210 |  | 5,279 |  |
2025 | 5,646 |  | 3,396 |  |
Thereafter | 122,085 |  | 2,324 |  |
Total future lease payments | 153,871 |  | 76,617 |  |
Less: Liability accretion | (52,117) |  | (2,458) |  |
Total lease liability | $ | 101,754 |  | $ | 74,159 |  |
The following table reflects the Company's future minimum lease payments due under non-cancelable operating leases for continuing operations as of September 30, 2019, under ASC 840 and is being presented for comparative purposes. These commitments relate principally to commercial solar land leases, equipment and real property leases, including land and office facility leases, natural gas meters and office equipment.
(Thousands) | Operating Leases | Finance Leases |
2020 | $ | 4,411 |  | $ | 11,707 |  |
2021 | $ | 4,698 |  | $ | 6,603 |  |
2022 | $ | 4,609 |  | $ | 7,494 |  |
2023 | $ | 4,579 |  | $ | 3,995 |  |
2024 | $ | 4,199 |  | $ | 4,652 |  |
Thereafter | $ | 54,405 |  | $ | 4,173 |  |
On August 14, 2020, the Company entered into a partial termination agreement of its lease contracts associated with its natural gas cavern storage. As a result of the partial termination, the Company paid $28.5 million to the lease owners receiving in return a 50 year non-compete agreement. The Company treated these Leaf River lease arrangements as one combined contract and its termination was recognized as remeasurement of the remaining lease assets that will be amortized over the remaining part of the lease lives.
LEASES | 14. LEASES Lessee Accounting The Company determines if an arrangement is a lease at inception based on whether the Company has the right to control the use of an identified asset, the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset and accounts for leases in accordance with ASC 842, Leases. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and leased liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term, including payments at commencement that depend on an index or rate. The Company’s land leases and office equipment leases in which the Company is the lessee do not have a readily determinable implicit rate, so an incremental borrowing rate, based on the information available at the lease commencement date, is utilized to determine the present value of lease payments. When a secured borrowing rate is not readily available, unsecured borrowing rates are adjusted for the effects of collateral to determine the incremental borrowing rate. The Company uses the implicit rate for agreements in which it is a lessor. The Company has not entered into any material agreements in which it is a lessor. Lease expense and lease income are recognized on a straight-line basis over the lease term for operating leases. For more information on the adoption of ASC 842, Leases, see Note 2. Summary of Significant Accounting Policies. The Company’s lease agreements primarily consist of commercial solar land leases, storage and capacity leases, equipment and real property, including land and office facilities, office equipment and the sale leaseback of its natural gas meters. Certain leases contain escalation provisions for inflation metrics. The storage leases contain a variable payment component that relates to the change in the inflation metrics that are not known past the current payment period. These variable components of these lease payments are excluded from the lease payments that are used to determine the related right-of-use asset and lease liability. The variable portion of these leases are recognized as leasing expenses when they are incurred. The capacity lease payments are fully variable and based on the amount of natural gas stored in the storage caverns. The Company’s solar land lease terms are primarily between 15 and 35 years, which includes options to extend the terms for multiple additional 5 to 10 years each. The Company’s office leases vary in duration, ranging from 1 to 25 years and may or may not include extension or early purchase options. The majority of the Company’s meter leases are for terms of 7 years with purchase options available prior to the end of the 7 year term. Equipment leases include general office equipment that also vary in duration, most are for a term of 5 years. The Company's storage and capacity leases have assumed terms of 50 years to coincide with the expected useful lives of the cavern assets with which the leases are associated. The Company's lease terms may include options to extend, purchase the leased asset or terminate a lease and they are included in the lease liability calculation when it is reasonably certain that those options will be exercised. The expense related to the leases subject to the short-term lease recognition exemption are recognized on a straight-line basis, with such amounts disclosed in the financial statement notes below. The Company has lease agreements with lease and nonlease components and has elected the practical expedient to combine lease and nonlease components for certain classes of leases, such as office buildings, solar land leases and office equipment. Variable payments are not significant to the Company. The Company’s lease agreements do not contain any material residual value guarantees, material restrictions or material covenants. There are no material lease transactions with related parties. The following table presents the Company's lease costs included in the Consolidated Statements of Operations for the fiscal year ended September 30:
(Thousands) | Income Statement Location |  |  |  | 2020 |  |
Finance lease cost |  |  |  |  |  |  |
Amortization of right-of-use assets | Depreciation and amortization |  |  |  | $ | 5,007 |  |  |
Interest on lease liabilities | Interest expense, net of capitalized interest |  |  |  | 1,511 |  |  |
Total finance lease cost |  |  |  |  | 6,518 |  |  |
Operating lease cost | Operation and maintenance, net of capitalized costs |  |  |  | $ | 6,404 |  |  |
Short-term lease cost | Operation and maintenance |  |  |  | 1,041 |  |  |
Variable lease cost | Operation and maintenance |  |  |  | 1,025 |  |  |
Total lease cost |  |  |  |  | $ | 14,988 |  |  |
The following table presents supplemental cash flow information related to leases for the fiscal year ended September 30:
(Thousands) | 2020 |  |
Cash paid for amounts included in the measurement of lease liabilities |  |  |
Operating cash flows from operating leases | $ | 8,804 |  |  |
Operating cash flows from finance leases | $ | 1,189 |  |  |
Financing cash flows from finance leases | $ | 6,985 |  |  |
Assets obtained or modified through amendments in exchange for operating lease liabilities during fiscal 2020 were $76.6 million. Assets obtained or modified through amendments in exchange for finance lease liabilities during fiscal 2020, were $49.7 million. The following table presents the balance and classifications of our right of use assets and lease liabilities included in the Consolidated Balance Sheets for the fiscal year ended September 30:
(Thousands) | Balance Sheet Location | 2020 |
Assets |  |  |
Noncurrent |  |  |
Operating lease assets | Operating lease assets | $ | 131,769 |  |
Finance lease assets | Utility plant | 71,085 |  |
Total lease assets |  | $ | 202,854 |  |
Liabilities |  |  |
Current |  |  |
Operating lease liabilities | Operating lease liabilities | $ | 6,724 |  |
Finance lease liabilities | Current maturities of long-term debt | 10,416 |  |
Noncurrent |  |  |
Operating lease liabilities | Operating lease liabilities | 95,030 |  |
Finance lease liabilities | Long-term debt | 63,743 |  |
Total lease liabilities |  | $ | 175,913 |  |
As of September 30, 2020, the weighted average remaining lease term for the operating and finance leases is 25.5 and 11.5 years, respectively. The weighted average discount rate used in the valuation of the operating and finance lease liabilities and right-of-use assets over the remaining lease term is 3.18 percent and 2.5 percent, respectively. The following table presents the Company's maturities of lease liabilities as of September 30, 2020:
(Thousands) | Operating Leases | Finance Leases |
2021 | $ | 6,706 |  | $ | 54,992 |  |
2022 | 6,634 |  | 6,004 |  |
2023 | 6,590 |  | 4,622 |  |
2024 | 6,210 |  | 5,279 |  |
2025 | 5,646 |  | 3,396 |  |
Thereafter | 122,085 |  | 2,324 |  |
Total future lease payments | 153,871 |  | 76,617 |  |
Less: Liability accretion | (52,117) |  | (2,458) |  |
Total lease liability | $ | 101,754 |  | $ | 74,159 |  |
The following table reflects the Company's future minimum lease payments due under non-cancelable operating leases for continuing operations as of September 30, 2019, under ASC 840 and is being presented for comparative purposes. These commitments relate principally to commercial solar land leases, equipment and real property leases, including land and office facility leases, natural gas meters and office equipment.
(Thousands) | Operating Leases | Finance Leases |
2020 | $ | 4,411 |  | $ | 11,707 |  |
2021 | $ | 4,698 |  | $ | 6,603 |  |
2022 | $ | 4,609 |  | $ | 7,494 |  |
2023 | $ | 4,579 |  | $ | 3,995 |  |
2024 | $ | 4,199 |  | $ | 4,652 |  |
Thereafter | $ | 54,405 |  | $ | 4,173 |  |
On August 14, 2020, the Company entered into a partial termination agreement of its lease contracts associated with its natural gas cavern storage. As a result of the partial termination, the Company paid $28.5 million to the lease owners receiving in return a 50 year non-compete agreement. The Company treated these Leaf River lease arrangements as one combined contract and its termination was recognized as remeasurement of the remaining lease assets that will be amortized over the remaining part of the lease lives.

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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