Pattern Energy Group Inc. - 10-Q filing on 2017-11-09

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]



	Three months ended September 30,			Nine months ended September 30,
Contingent Consideration Liability	2017		2016	2017		2016
Balances, beginning of period	$	21,502	N/A	$	—	N/A
Purchase	—		N/A	21,284		N/A
Total loss included in other income, net	3		N/A	221		N/A
Settlement	—		N/A	—		N/A
Balances, end of period	$	21,505	N/A	$	21,505	N/A

Financial Assets and Liabilities Required Fair Value Measurement on Recurring Basis

The Company’s financial assets and liabilities which require fair value measurement on a recurring basis are classified within the fair value hierarchy as follows (in thousands):



	September 30, 2017
	Level 1		Level 2		Level 3		Total
Assets
Interest rate swaps	$	—	$	2,907	$	—	$	2,907
Energy derivative	—		—		30,782		30,782
	$	—	$	2,907	$	30,782	$	33,689
Liabilities
Interest rate swaps	$	—	$	29,479	$	—	$	29,479
Foreign currency forward contracts	—		4,595		—		4,595
Contingent consideration	—		—		21,505		21,505
	$	—	$	34,074	$	21,505	$	55,579



	December 31, 2016
	Level 1		Level 2		Level 3		Total
Assets
Interest rate swaps	$	—	$	1,828	$	—	$	1,828
Energy derivative	—		—		40,916		40,916
Foreign currency forward contracts	—		1,546		—		1,546
	$	—	$	3,374	$	40,916	$	44,290
Liabilities
Interest rate swaps	$	—	$	36,048	$	—	$	36,048
Foreign currency forward contracts	—		391		—		391
	$	—	$	36,439	$	—	$	36,439

Fair Value Measurements, Recurring Level 3, Valuation Techniques

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements were as follows (in thousands, for fair value):



September 30, 2017	Fair Value	Valuation Technique	Significant Unobservable Inputs	Range
Energy derivative	$30,782	Discounted cash flow	Forward electricity prices	$14.72 - $67.91⁽¹⁾
			Discount rate	1.33% - 1.67%

Contingent consideration	$21,505	Discounted cash flow	Discount rate	4.0% - 8.0%
			Annual energy production loss	1%

December 31, 2016	Fair Value	Valuation Technique	Significant Unobservable Inputs	Range
Energy derivative	$40,916	Discounted cash flow	Forward electricity prices	$15.83 - $81.76⁽¹⁾
			Discount rate	1.00% - 1.52%


⁽¹⁾	Represents price per MWh

Reconciliation of Energy Derivative Contract Measured at Fair Value

The following tables present a reconciliation of the energy derivative contract and contingent consideration liability measured at fair value on a recurring basis using significant unobservable inputs (in thousands):



	Three months ended September 30,						Nine months ended September 30,
Energy Derivative	2017			2016			2017			2016
Balances, beginning of period	$	33,895		$	49,531		$	40,916		$	63,683
Total gain (loss) included in electricity sales	83			2,326			4,144			1,659
Settlements	(3,196		)	(3,144		)	(14,278		)	(16,629		)
Balances, end of period	$	30,782		$	48,713		$	30,782		$	48,713

Carrying Amounts and Fair Values of Company's Financial Liabilities

The following table presents the carrying amount and fair value and the fair value hierarchy of the Company’s financial liabilities that are not measured at fair value in the consolidated balance sheets, but for which fair value is disclosed (in thousands):



			Fair Value
	As reflected on the balance sheet		Level 1		Level 2		Level 3		Total
September 30, 2017
Long-term debt, including current portion	$	2,182,820	$	—	$	2,187,346	$	—	$	2,187,346
December 31, 2016
Long-term debt, including current portion	$	1,383,672	$	—	$	1,382,038	$	—	$	1,382,038