15. Equity Method Investment in Affiliate

Strong Upwind

As described in Notes 1 and 2, on October 20, 2014, we made a $144 million investment in Strong Upwind that is jointly owned and operated with an affiliate of JPMorgan. We account for our investment using the equity method of accounting. As is consistent with the equity method of accounting, we have elected to record the financial results for U.S. GAAP one quarter in arrears to allow for the receipt of financial information. Thus, we have not recorded any income or loss from our equity method investment in 2014.

The following is a summary of the consolidated financial position and results of operations of the holding companies, accounted for using the equity method:

HA EnergySource

In December 2012, the Predecessor’s board of directors approved the distribution of our entire equity interest in HA EnergySource Holdings LLC (“HA EnergySource”) to the Predecessor’s stockholders effective December 31, 2012 along with a $3.4 million capital commitment that was paid in 2013 to HA EnergySource to be used for general corporate purposes, future investments or dividends to HA EnergySource owners. HA EnergySource’s only asset is an equity interest in EnergySource that develops and operates geothermal projects in California including Hudson Ranch Power I, LLC (“Hudson Ranch”).

In August 2012, HA EnergySource made distributions to the Predecessor’s members and redeemed all outside interests in HA EnergySource not previously owned by the Predecessor. After the redemption, HA EnergySource became a wholly owned and consolidated subsidiary of the Predecessor. As both the Predecessor and HA EnergySource were under the common control of MissionPoint HA Parallel Fund, L.P., it was determined that this was a common control transaction (i.e., the transaction did not result in a change in control at the ultimate controlling stockholder level). Accordingly, under ASC 810, the Predecessor did not account for the consolidation at fair value, but rather, accounted for the transaction at the carrying amount of the net assets consolidated (i.e., HA EnergySource’s investment in EnergySource).

Prior to the distribution and redemption transaction, based on an assessment of HA EnergySource, it was determined that HA EnergySource was a variable interest entity under ASC 810. Additionally, it was determined that the Predecessor was not the primary beneficiary of HA EnergySource as it did not have the power to direct the most important decisions related to the most significant activities of HA EnergySource and thus the Predecessor did not consolidate HA EnergySource.

The distribution and redemption transaction did not impact the determination that the Predecessor and HA EnergySource were not the primary beneficiary of EnergySource and EnergySource was not the primary beneficiary of Hudson Ranch. While both EnergySource and Hudson Ranch were determined to be variable interest entities under ASC 810, the Predecessor and HA EnergySource were not the primary beneficiaries of these entities as neither the Predecessor nor HA EnergySource had the power to direct the most important decision making related to the most significant activities of the respective entities and thus they were not consolidated

Accordingly, the Predecessor accounted for its investment in HA EnergySource under the equity method of accounting prior to it becoming a wholly owned subsidiary. HA EnergySource accounted for its investment in EnergySource under the equity method and EnergySource accounted for its investment in Hudson Ranch under the equity method.

For the year ended December 31, 2013, we did not have an equity method investment in an affiliate. For the year ended September 30, 2012, the Predecessor recognized its share in the loss from equity method investment in affiliate of $1.3 million. For the three months ended December 31, 2012, the Predecessor recorded a loss from equity method investments in affiliate of $0.5 million. During the year ended September 30, 2012, EnergySource made cash distributions of excess financing proceeds to us totaling $12.6 million and deemed distributions totaling $1.7 million. The deemed distributions were reinvested as capital contributions to EnergySource. Our investment and maximum exposure to loss in HA EnergySource as of September 30, 2012, was $0.8 million.

We provided investment banking and management services to EnergySource. In addition to the interest on our loan as described in Note 6, for the years ended December 31, 2013, and September 30, 2012, we recorded income of $0.5 million, and $8.8 million, respectively. For the three months ended December 31, 2012, we recorded income of $0.1 million. We did not record any income for services to EnergySource for the year ended December 31, 2014.