TerraForm Power NY (TERP) 10-K2019 FY Annual report

We benefit from Brookfield’s deep operational expertise in owning, operating and developing renewable assets, as well as its significant deal-sourcing capabilities and access to capital. Brookfield is a leading global alternative asset manager and has a more than 100-year history of owning and operating assets with a focus on renewable power, property, infrastructure and private equity. Brookfield has over $540 billion of assets under management of which $50 billion are renewable power assets. Brookfield’s renewable power portfolio represents approximately 19,000 MW of generation capacity in 17 countries. It also employs over 2,800 individuals with extensive operating, development and power marketing capabilities and has a demonstrated ability to deploy capital in a disciplined manner.

Our Board has established an Audit Committee and a Conflicts Committee, each consisting entirely of independent Directors. The Conflicts Committee considers, among other things, matters in which a conflict of interest exists between TerraForm Power and Brookfield. Our Board has also established a Nominating and Governance Committee, which consists of three Directors, one of whom is a Director designated by Brookfield and two of whom are independent Directors. Our Board also in December 2020 formed a Special Committee consisting entirely of independent Directors to, among other things, review, evaluate and consider the Brookfield Proposal.

All of the renewable energy facilities located in the United States that we own are qualifying small power production facilities (“QFs”) as defined under the Public Utility Regulatory Policies Act of 1978, as amended (“PURPA”) or “eligible facilities” of Exempt Wholesale Generators (“EWGs”) as defined under the Public Utility Holding Company Act of 2005, as amended (“PUHCA”). As a result, they and their upstream owners may be entitled to certain exemptions from federal and state regulation. Depending upon the power production capacity of the renewable energy facility in question, our QFs and their immediate project company owners may be entitled to various exemptions from wholesale ratemaking and certain other regulatory provisions of the Federal Power Act, as amended (“FPA”), and from state ratemaking, organizational and financial regulation of electric utilities. Our EWGs must be engaged exclusively in the business of owning and/or operating generating facilities and selling electric energy at wholesale and are subject to regulation for most purposes as “public utilities” under the FPA.

All of the renewable energy facility companies that we own outside of the United States are Foreign Utility Companies (“FUCOs”), as defined in PUHCA. They are exempt from state organizational and financial regulation of electric utilities, regulation under the FPA and from most provisions of PUHCA. The upstream owners of only QFs, EWGs, or FUCOs are exempt from the federal regulation under PUHCA.

In addition to QFs, EWGs, and FUCOs, we own certain fuel cell project companies that engage exclusively in retail energy sales. These project companies are not subject to regulation under the FPA; however, they are “electric utility companies” under PUHCA. We have obtained an exemption from federal regulation under PUHCA predicated on specific facts and representations made to FERC. In the event that we no longer qualify for such exemption, we could become subject to the federal books and access provisions of PUHCA and FERC’s record-keeping, accounting, and reporting obligations under PUHCA.

We own a number of renewable energy facility companies in the United States that are “public utilities” subject to the jurisdiction of the Federal Energy Regulatory Commission (“FERC”), and that have obtained “market-based rate authorization” and associated blanket authorizations and waivers from FERC pursuant to the FPA, which allows such companies to sell electricity, capacity and ancillary services at wholesale at negotiated market based rates, instead of cost-of-service rates. These companies have been granted waivers of, and blanket authorizations under, certain FERC regulations that are commonly granted to market-based rate sellers, including blanket authorizations to issue securities and assume liabilities. FERC generally authorizes a company to charge market-based rates as long as the company can demonstrate that it does not have, or has adequately mitigated, market power and it cannot otherwise erect barriers to market entry. Currently, none of our project companies has been found by FERC to have the potential to exercise market power in any U.S. markets. In the event that FERC’s analysis of market power changes, or if certain other conditions of market-based rate authority are not met, FERC has the authority to impose mitigation measures or withhold or rescind market-based rate authority and require sales to be made based on cost-of-service rates, which could result in a reduction in rates. FERC requires market-based rate holders to submit quarterly reports of their wholesale sales and make additional compliance filings upon certain triggering events in order to maintain market-based rate authority. The failure to make timely filings can result in revocation or suspension of market-based rate authority, refunds of revenues previously collected and the imposition of civil penalties. FERC has authority to assess substantial civil penalties (i.e. up to approximately $1.3 million per day per violation) for failure to comply with the conditions of market-based rate authority as well as other requirements of the FPA and PUHCA.

Under Section 203 of the FPA (“FPA Section 203”), prior authorization by FERC is generally required for any direct or indirect change in control over, or merger or consolidation with, a “public utility,” facilities subject to FERC’s jurisdiction, or in certain circumstances an “electric utility company” or a “transmitting utility,” as such terms are used for purposes of FPA Section 203. All of our renewable energy facility companies that sell their output at wholesale in the continental U.S. (except our Wind power plants in Texas) and our subsidiary Evergreen Gen Lead, LLC (which owns electric transmission facilities) are subject to FERC’s jurisdiction under FPA Section 203. FERC generally presumes that the transfer of a 10% or greater direct or indirect voting interest in an entity results in a change in control of such entity for purposes of FPA Section 203. Transfers of interconnection and transmission facilities associated with our electric generation facilities and transfers of existing generation facilities could also trigger the need to obtain prior approval from FERC under FPA Section 203. Violation of FPA Section 203 can result in civil or criminal liability under the FPA, including civil penalties, and the possible imposition of other sanctions by FERC. Depending upon the circumstances, liability for violation of FPA Section 203 may attach to the public utility or the upstream holding companies involved in the transaction.

Certain of our renewable energy facilities are also subject to compliance with the mandatory Reliability Standards promulgated and enforced by the North American Electric Reliability Corporation (“NERC”) and approved by FERC. Violation of such Reliability Standards can result in civil penalties or other enforcement measures to ensure compliance under the FPA assessed to the owners and/or operators of such renewable energy facilities. In the United Kingdom, Canada, Chile, Uruguay, Portugal and Spain, we are also generally subject to the regulations of the relevant energy regulatory agencies applicable to all producers of electricity under the relevant feed-in tariff or other governmental incentive programs (collectively “FIT”) (including the FIT rates); however, it is generally not subject to regulation as a traditional public utility, i.e., regulation of our financial organization and rates other than FIT rates.

As the size of our portfolio grows, or as applicable rules and regulations evolve, we may become subject to new or modified regulatory regimes that may impose unanticipated requirements on the business as a whole that were not anticipated with respect to any individual renewable energy facility. For example, the NERC Reliability Standards approved by FERC impose fleetwide cyber security requirements regarding electronic and physical access to generating facilities in order to protect system reliability. Such requirements expand in scope after the point at which a common owner has more than 1,500 MW of reliability assets under its control in a single interconnection area and expand again once the owner has more than 3,000 MW under construction. Similarly, on September 19, 2019, FERC published a notice of proposed rulemaking (“NOPR”) to revise its PURPA regulations for QFs. Of relevance to our QFs, the NOPR proposes to revise (i) the obligation of interconnected utilities to purchase power from renewable QFs under 20 MW and the terms and conditions of such purchases, (ii) the process for third-party challenges to the QF status of self-certified projects, and (iii) the rules used to aggregate and treat as a single facility (for purposes of the 80 MW QF size limit and other exemption thresholds) renewable QFs that use the same fuel source, are owned or operated by the same person or its affiliates, and are located within a certain distance of each other. Such future changes in our regulatory status or the makeup of our fleet could require us to incur materially higher costs, which could have a material adverse impact on our financial performance or results of operations. Similarly, although we are not currently subject to regulation as an electric utility in the foreign markets in which we provide our renewable energy services, our regulatory position in these markets could change in the future. Any local, state, federal or international regulations could place significant restrictions on our ability to operate our business and execute our business plan by prohibiting or otherwise restricting our ability to sell electricity. If we were deemed to be subject to the same state, federal or foreign regulatory authorities as traditional utility companies, or if new regulatory bodies were established to oversee the renewable energy industry in the United States or in our foreign markets, our operating costs could materially increase, adversely affecting our results of operations.

The principal revenues generated by our regulated wind and solar assets in Spain are received pursuant to a “regulated return” that is set by Spanish legislation. Pursuant to Royal Decree 413/2014, dated June 6, 2014 (the “Royal Decree 412/2014”), renewable electricity producers in Spain receive two principal payment streams: (i) the pool price for the power they produce; and (ii) a return on investment payment based on the standard investment cost for each type of plant (this second payment is not linked to the amount of power they produce). For certain technologies with a high operational expense (including our solar PV and CSP facilities in Spain), the return on investment is supplemented by a return on operations payment. The principle underpinning this economic regime is that the payments received by a renewable energy producer should be equivalent to the costs that they are unable to recover on the electricity pool market where they compete with non-renewable technologies. This economic regime seeks to allow a “well-run and efficient enterprise” to recover the costs of building and running a plant, plus a “reasonable return” on investment (project investment rate of return) over a regulated standard investment cost for each type of plant defined by the government.

The regulated return rate for the first six-year regulatory period, which ended on December 31, 2019, was 7.39%. In November 2019, the Spanish government issued Royal Decree-Law 17/2019, which set the reasonable return at 7.09% for the next regulatory period (January 1, 2020 through December 31, 2025) for all assets. However, Royal Decree-Law 17/2019 contained an exception for all plants (i) that were commissioned prior to July 2013 and (ii) that did not have any pending litigation against the Kingdom of Spain regarding the prior regulatory change that took place in July 2013. For these excepted assets, Royal Decree-Law 17/2019 maintained 7.39% as the reasonable return for the next two regulatory periods (January 1, 2020 through December 31, 2031). As a result, all of our assets in Spain are entitled to the more favorable regulated rate of 7.39% through December 31, 2031, except for the approximately 45 MW of solar PV assets that we acquired in December 2019 and the approximately 100 MW of CSP assets that we acquired subsequent to year end, each of which are entitled to a reasonable return rate of 7.09% through December 31, 2025.

Each of the countries in which we operate has established various incentives and financial mechanisms to reduce the cost of renewable energy and to accelerate the adoption of solar and wind energy. These incentives include tax credits, cash grants, favorable tax treatment and depreciation, rebates, RECs or green certificates, net energy metering programs, feed-in tariffs and other incentives. These incentives help catalyze private sector investments in renewable energy and efficiency measures. Changes in the government incentives in each of these jurisdictions could have a material impact on our financial performance.

The U.S. federal government provides an investment tax credit that allows a taxpayer to claim a credit of 30% of qualified expenditures for a solar generation facility. The U.S. government’s enactment of the Tax Cuts and Jobs Act (the “Tax Act”) did not make any changes to the existing laws surrounding tax credits for renewable energy. The ITC is currently scheduled to be reduced to 26% for solar generation facility construction that begins on or after January 1, 2020 and to 22% for solar generation facility construction that begins on or after January 1, 2021. A permanent 10% ITC is available for non-residential solar generation facility construction that begins on or after January 1, 2022.

Certain wind facilities are eligible for production tax credits, which are federal income tax credits based on the quantity of renewable energy produced and sold during the first ten years of production, or ITCs in lieu of PTCs. These credits are available only for wind power plants that began construction on or prior to December 31, 2020, but are reduced over time. The wind PTCs (and ITC in lieu of PTC) are 100% (of the amount otherwise available) in the case of a facility for which construction began by December 31, 2016, 80% (of the amount otherwise available) in the case of any facility for which construction began in 2017, 60% (of the amount otherwise available) in the case of a facility for which construction begins in 2018, 40% (of the amount otherwise available) in the case of a facility for which construction begins in 2019, and 60% (of the amount otherwise available) in the case of a facility for which construction begins in 2020. ITCs, PTCs and accelerated tax depreciation benefits generated by constructing and operating renewable energy facilities can be monetized by entering into tax equity financing agreements with investors that can utilize the tax benefits, which have been a key financing tool for renewable energy facilities. Based on our portfolio of assets, we will benefit from the ITC, PTC and an accelerated tax depreciation schedule, and we will rely on financing structures that monetize a substantial portion of these benefits and provide financing for our renewable energy facilities.

Many states offer a personal and/or corporate investment or production tax credit for renewable energy facilities, which is in addition to the ITC or PTCs. Additionally, more than half of the states, and many local jurisdictions, have established property tax incentives for renewable energy facilities that include exemptions, exclusions, abatements and credits. Certain of our renewable energy facilities in the U.S. have been financed with a tax equity financing structure, whereby the tax equity investor is a member holding equity in the limited liability company that directly or indirectly owns the solar generation facility or wind power plant and receives the benefits of various tax credits.

Many state governments, utilities, municipal utilities and co-operative utilities offer a rebate or other cash incentive for the installation and operation of a renewable energy facility. Capital costs or “up-front” rebates provide funds based on the cost, size or expected production of a customer’s renewable energy facility. Performance-based incentives provide cash payments to a system owner based on the energy generated by their renewable energy facility during a pre-determined period, and they are paid over that time period. Some states also have established FIT programs that are a type of performance-based incentive where the system owner-producer is paid a set rate for the electricity their system generates over a set period of time.

A majority of states have a regulatory policy known as net metering. Net metering typically allows our customers to interconnect their on-site solar generation facilities to the utility grid and offset their utility electricity purchases by receiving a bill credit at the utility’s retail rate for energy generated by their solar generation facility that is exported to the grid. At the end of the billing period, the customer simply pays for the net energy used or receives a credit at the retail rate if more energy is produced than consumed. Some states require utilities to provide net metering to their customers until the total generating capacity of net metered systems exceeds a set percentage of the utilities’ aggregate customer peak demand.

Many states have also adopted procurement requirements for renewable energy production and/or a renewable portfolio standard (“RPS”) that requires regulated utilities to procure a specified percentage of total electricity delivered to customers in the state from eligible renewable energy sources, such as solar and wind power generation facilities, by a specified date. To prove compliance with such mandates, utilities must procure and retire RECs. System owners often are able to sell RECs to utilities directly or in REC markets.

On December 22, 2017, the U.S. government enacted a comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act. The Tax Act made broad and complex changes to the U.S. tax code, including, but not limited to, (i) reducing the U.S. federal corporate rate from 35% to 21%; (ii) requiring companies to pay a one-time transition tax on certain unrepatriated earnings (where applicable) of foreign subsidiaries; (iii) generally eliminating the U.S. federal income tax on distributions received from foreign subsidiaries; (iv) requiring current inclusion in the U.S. federal taxable income of certain earnings of controlled foreign corporations; (v) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits may be realized; (vi) creating the base erosion anti-abuse tax, a new minimum tax; (vii) creating a new limitation on the deductible interest expense; and (viii) changing rules related to uses and limitations of net operating loss (“NOL”) carryforwards created in tax years beginning after December 31, 2017. The federal corporate tax rate reduction is expected to have a favorable impact on our business but this favorable impact is expected to be offset by a more or less equal negative impact of the interest expense deduction and loss carryforward limitations. The other measures of the Tax Act are not expected to significantly impact our current portfolio.

The international markets in which we operate or may operate in the future also typically have in place regimes to promote renewable energy. These mechanisms vary from country to country. Our objective is to grow our distribution through the growth of our portfolio in North America and Western Europe. In seeking to achieve this growth, we may make investments, like our investment in our European platform, that, to some extent, rely on governmental incentives in international jurisdictions.

If the Transactions are not consummated for any reason, we may be subject to a number of known and unknown risks, including (i) the risk that the market price of our Common Stock reflects a market assumption that the Transactions will occur and that a failure to consummate the Transactions results in a decline in the market price of our Common Stock (ii) the risk that a failure to consummate the Transactions adversely impacts our relationships with employees, vendors, creditors and other business partners and results in negative publicity or a negative impression of the Company in the investment community; and (iii) the risk that we incur significant costs associated with the Transactions. If the Transactions are ultimately approved and consummated, there can be no assurances that the expected benefits of the Transactions will be realized.

The electricity produced and revenues generated by a wind power plant depend heavily on wind conditions, which are variable and difficult to predict. Operating results for wind power plants vary significantly from period to period, depending on the wind conditions during the periods in question. The electricity produced and the revenues generated by a solar power plant depends heavily on insolation, which is the amount of solar energy received at a site. While somewhat more predictable than wind conditions, operating results for solar power plants can also vary from period to period depending on the solar conditions during the periods in question. We base our decisions about which sites to acquire and operate in part on the findings of long-

As climate change increases the frequency and severity of severe weather conditions and may have the long-term effect of changing weather patterns, the disruptions to our sites may become more frequent and severe. In addition, our customers’ energy needs generally vary with weather conditions, primarily temperature and humidity. To the extent weather conditions are affected by climate change, our customers’ energy use could increase or decrease depending on the duration and magnitude of changing weather conditions, which could adversely affect our business, results of operations and cash flows.

If our wind and solar energy assessments turn out to be wrong, our business could suffer a number of material adverse consequences, including:

All but a minor portion of the electricity generated by our current portfolio of renewable energy facilities is sold under long-term PPAs, including PPAs with public utilities or commercial, industrial, residential or government end-users or hedge agreements with investment banks and creditworthy counterparties. Certain of the PPAs associated with renewable energy facilities in our portfolio allow the offtake purchaser to terminate the PPA in the event certain operating thresholds or performance measures are not achieved within specified time periods or, in certain instances, by payment of an early termination fee. PPA counterparties in our distributed generation portfolio, such as retail companies and residential customers, may become bankrupt or insolvent. If a PPA was terminated or if, for any reason, any purchaser of power under these contracts is unable or unwilling to fulfill their related contractual obligations or refuses to accept delivery of power delivered thereunder (for example, due to bankruptcy or insolvency), and if we are unable to enter a new PPA on acceptable terms in a timely fashion or at all, we would be required to sell the power from the associated renewable energy facility into the wholesale power markets, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. Moreover, seeking to enforce the obligations of our counterparties under our PPAs could be time consuming or costly with little certainty of success.

Certain of the PPAs for renewable energy facilities in our portfolio or that we may acquire in the future give the offtake purchaser the right, in certain circumstances, to purchase all or a portion of the applicable renewable energy facility

In general, our PPAs do not contain inflation-based price increase provisions. To the extent that the jurisdictions in which we operate experience high rates of inflation, which increases our operating costs in those countries, we may not be able to generate sufficient revenues to offset the effects of inflation, which could materially and adversely affect our business, financial condition, results of operations and cash flows.

We may not be able to replace an expiring PPA with a contract on equivalent terms and conditions, including at prices that permit operation of the related facility on a profitable basis. If we are unable to replace an expiring PPA with an acceptable new revenue contract, we may be required to sell the power produced by the facility at wholesale prices which may cause a significant reduction in CAFD and be exposed to market fluctuations and risks, or the affected site may temporarily or permanently cease operations. In the case of a distributed generation facility that ceases operations, the PPA terms generally require that we remove the assets, including fixing or reimbursing the site owner for any damages caused by the assets or the removal of such assets. The cost of removing a significant number of distributed generation facilities could be material. Alternatively, we may agree to sell the assets to the site owner, but the sale price may not be sufficient to replace the revenue previously generated by the solar generation facility.

Decreases in the retail prices of electricity supplied by traditional utilities or other clean energy sources would harm our ability to offer competitive pricing and could harm our ability to sign PPAs with customers. The price of electricity from traditional utilities could decrease for a number of reasons, including:

A shift in the timing of peak rates for electricity supplied by traditional utilities to a time of day when solar energy generation is less efficient could make solar energy less competitive and reduce demand. If the retail price of energy available from traditional utilities were to decrease, we would be at a competitive disadvantage in negotiating new PPAs and therefore we might be unable to attract new customers and our growth would be limited, and the value of our renewable energy facilities may be impaired or their useful life may be shortened.

The operation of our utility scale renewable energy facilities depends on having interconnection arrangements with transmission providers and depends on a reliable electricity grid. If the interconnection or transmission agreement of a renewable energy facility we own or acquire is terminated for any reason (for example, due to the bankruptcy or insolvency of the transmission provider) we may not be able to replace it with an interconnection or transmission arrangement on terms as favorable as the existing arrangement, or at all, or we may experience significant delays or costs in securing a replacement. Moreover, if a transmission network to which one or more of our existing power plants or a power plant we acquire is connected experiences “down time,” the affected renewable energy facility may lose revenue and be exposed to non-performance penalties and claims from its customers. Curtailment as a result of transmission system down time can arise from the need to prevent damage to the transmission system and for system emergencies, force majeure, safety, reliability,

In addition, we cannot predict whether transmission facilities will be expanded in specific markets to accommodate or increase competitive access to those markets. Expansion of the transmission system by transmission providers is costly, time consuming and complex. To the extent the transmission system is not adequate in an area, our operating facilities’ generation of electricity may be physically or economically curtailed without compensation due to transmission capacity limitations, reducing our revenues and impairing our ability to capitalize fully on a particular facility’s generating potential. Such curtailments could have a material adverse effect on our business, financial condition, results of operations and cash flows. Furthermore, economic congestion on the transmission grid (for instance, a positive price difference between the location where power is put on the grid by a clean power generation asset and the location where power is taken off the grid by the facility’s customer) in certain of the bulk power markets in which we operate may occur and we may be deemed responsible for those congestion costs. If we were liable for such congestion costs, our financial results could be adversely affected.

The solar and wind energy industries, and the broader clean energy industry, are highly competitive and continually evolving, as market participants strive to distinguish themselves within their markets and compete with large incumbent utilities and new market entrants. We believe that our primary competitors are the traditional incumbent utilities that supply energy to our potential customers under highly regulated rate and tariff structures. We compete with these traditional utilities primarily based on price, predictability of price and the ease with which customers can switch to electricity generated by our renewable energy facilities. If we cannot offer compelling value to our customers based on these factors, then our business will not grow. Traditional utilities generally have substantially greater financial, technical, operational and other resources than we do, and as a result may be able to devote more resources to the research, development, promotion and sale of their products or respond more quickly to evolving industry standards and changes in market conditions than we can. Traditional utilities could also offer other value-added products or services that could help them to compete with us even if the cost of electricity they offer is higher than ours. In addition, the source of a majority of traditional utilities’ electricity is non-renewable, which may allow them to sell electricity more cheaply than electricity generated by our solar generation facilities and wind power plants. Such non-renewable generation is typically available for dispatch at any time, as it is not dependent on the availability of intermittent resources such as wind or insolation.

We also face risks that traditional utilities could change their volumetric-based (i.e., cents per kWh) rate and tariff structures to make distributed solar generation less economically attractive to their retail customers. Currently, net metering programs are utilized in the majority of states to support the growth of distributed generation facilities by requiring traditional utilities to reimburse certain of their retail customers for the excess power they generate at the level of the utilities’ retail rates rather than the rates at which those utilities buy power at wholesale. Certain states allow its traditional utilities to assess a surcharge on customers with solar generation facilities for their use of the utility’s grid, based on the size of the customer’s solar generation facility. This surcharge reduces the economic returns for the excess electricity that the solar generation facilities produce. These types of charges, which reduce or eliminate the economic benefits of net metering, if implemented across a large number of states, could significantly change the economic benefits of solar energy as perceived by traditional utilities’ retail customers.

We also face competition from other renewable energy companies who may offer different products, lower prices and other incentives, which may impact our ability to maintain our customer base. As the solar and wind industries grow and evolve, we will also face new competitors who are not currently in the market, such as an emerging storage market. Our failure to adapt to changing market conditions and to compete successfully with existing or new competitors could limit our growth and could have a material adverse effect on our business and prospects.

Since the transmission and distribution of electricity is either monopolized or highly concentrated in most jurisdictions, there are a limited number of possible purchasers for utility-scale quantities of electricity in a given geographic location,

A portion of our revenues is attributable to the sale of RECs, SRECs and other environmental attributes of our facilities. These RECs, SRECs and other environmental attributes are created under the state laws, generally in the state where the renewable energy facility is located. We sometimes seek to sell forward a portion of our RECs, SRECs or other environmental attributes under contracts having terms in excess of one year to fix the revenues from those attributes and hedge against future declines in prices of RECs, SRECs or other environmental attributes. These programs have a finite life and our revenues may decline if and when we are unable to generate a sufficient number of RECs or SRECs. If our renewable energy facilities do not generate the amount of electricity required to earn the RECs, SRECs or other environmental attributes sold under such forward contracts or if for any reason the electricity we generate does not produce RECs, SRECs or other environmental attributes for a particular state, we may be required to make up the shortfall of RECs, SRECs or other environmental attributes under such forward contracts through purchases on the open market or make payments of liquidated damages. We have from time to time provided guarantees of Terra LLC or Terra Operating LLC as credit support for these obligations. Additionally, forward contracts for REC or SREC sales often contain adequate assurances clauses that allow our counterparties to require us to provide credit support in the form of parent guarantees, letters of credit or cash collateral.

Our ability to hedge forward our anticipated volume of RECs, SRECs or other environmental attributes is limited by market conditions, leaving us exposed to the risk of falling prices for RECs, SRECs or other environmental attributes. Utilities in many states are required by law or regulation to purchase a portion of their energy from renewable energy sources. Changes in state laws or regulations relating to RECs or SRECs may adversely affect the demand for, or availability of, RECs, SRECs or other environmental attributes and the future prices for such products. This could have an adverse effect on our business, financial condition and results of operations.

We also have been and continue to be involved in legal proceedings, administrative proceedings, claims and other litigation that arise in the ordinary course of business, including proceedings related to the operation of our renewable energy facilities. For example, individuals or groups have in the past and may in the future challenge the issuance of a permit for a renewable energy facility or may make claims related to alleged impacts of the operation of our renewable energy facilities on adjacent properties. We are currently and/or may in the future be subject to claims, lawsuits or arbitration proceedings related to matters in tort or under contracts, employment matters, securities class action lawsuits, stockholder derivative actions, breaches of fiduciary duty, conflicts of interest, tax authority examinations or other lawsuits, regulatory actions or government inquiries

Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such proceedings. Unfavorable outcomes or developments relating to these proceedings, or new proceedings involving similar allegations or otherwise, such as monetary damages or equitable remedies or potential negative publicity associated with such legal actions, could have a material adverse impact on our business and financial position, results of operations or cash flows or limit our ability to engage in certain of our business activities. Settlement of claims could adversely affect our financial condition, results of operations and cash flows. In addition, regardless of the outcome of any litigation or regulatory proceedings, such proceedings are often expensive, lengthy and disruptive to normal business operations and require significant attention from our management, and may at times divert management’s attention from other business concerns.

We believe the acquisition of projects from third parties, including the approximately 320 MW portfolio of distributed generation facilities in the United States from subsidiaries of AltaGas, will be accretive to cash available for distribution to our stockholders on a per share basis. However, to realize the anticipated benefits of these acquisitions, the acquired projects must be successfully combined with our existing business. We may fail to realize the anticipated benefits of the acquisition and any other third party acquisitions as a result of our inability to successfully integrate the assets and, if applicable, operations, technologies and personnel of the acquired business with and into our existing business for a variety of reasons, including the following:

In August 2018, we executed an 11-year framework agreement with an affiliate of General Electric to provide us with long-term service agreements (“LTSAs”) for turbine operations and maintenance as well as other balance of plant services for our 1.6 GW North American wind fleet. In November 2019, we executed a 10-year framework agreement with SMA Solar Technology that, among other things, provides for the roll out, subject to receipt of third-party consents, of project level LTSAs for solar operations and maintenance services, as well as other balance of plant services across our North American solar fleet (excluding the DG Portfolio). During 2019, we also executed new LTSAs with the original equipment manufacturers for turbine operations and maintenance services for our European wind fleet.

These LTSAs are expected to improve performance of the wind and solar assets that they cover, and in certain circumstances, realize cost savings. However, we may not be able to fully realize these anticipated benefits or at all. For example, we may not achieve increased production from our wind and solar fleet or realize any of the expected cost savings. While we have put in place LTSAs on all but one of our North American wind projects, there can be no assurances that we will

In addition, during 2019, as a result of our acquisition of the WGL Portfolio, we acquired a portfolio of fuel cells which are reliant on proprietary technology and intellectual property of a third party who also serves as the O&M provider for the portfolio. If this third party becomes insolvent or otherwise is unable or unwilling to perform its contractual obligations to us, we may not be able to adequately operate and maintain our fuel cell portfolio, which may have an adverse effect on us.

Our facilities may require periodic upgrading and improvement. Any unexpected operational or mechanical failure, such as the failure of a single faulty blade which caused the collapse of a tower at our Raleigh wind facility in 2018, other single blade failures at our Bishop Hill, Cal Ridge and Cohocton wind facilities during 2019 and 2020, or other failures associated with breakdowns and forced outages generally, and any decreased operational or management performance, could reduce our facilities’ generating capacity below expected levels, reducing our revenues and jeopardizing our ability to pay distributions to holders of our Common Stock at forecasted levels or at all. Incomplete performance by us or third parties under O&M agreements, including subcontractors, may increase the risks of operational or mechanical failure of our facilities which could cause significant personal injury or loss of life, severe damage to and destruction of property, plant and equipment and contamination of, or damage to, the environment and suspension of operations, which could expose us to significant liability. Degradation of the performance of our renewable energy facilities provided for in the related PPAs may also reduce our revenues. Unanticipated capital expenditures associated with maintaining, upgrading or repairing our facilities may also reduce profitability.

We may also choose to refurbish or upgrade our facilities based on our assessment that such activity will provide adequate financial returns and key assumptions underpinning a decision to make such an investment may prove incorrect, including assumptions regarding construction costs, timing, available financing and future power prices. This could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Moreover, spare parts for wind turbines and solar facilities and key pieces of equipment may be hard to acquire or unavailable to us. Sources of some significant spare parts and other equipment are located outside of North America and the other jurisdictions in which we operate. Suppliers of some spare parts have filed, or will in the future file for, bankruptcy protection, potentially reducing the availability of parts that we require to operate certain of our power generation facilities. Suppliers may be reliant on global supply chains, including supply chains that extend to areas that are subject to economic disruptions, as is the case currently where supply chains have been disrupted by the outbreak of the COVID-19 coronavirus, which began in December 2019. Other suppliers may for other reasons cease to manufacture parts that we require to operate certain of our power generation facilities. If we were to experience a shortage of or inability to acquire critical spare parts we could incur significant delays in returning facilities to full operation, which could negatively impact the financial condition of our business, results of operations and cash flows.

There have been periods of industry-wide shortage of key components, including solar panels and wind turbines, in times of rapid industry growth. The manufacturing infrastructure for some of these components has a long lead time, requires significant capital investment and relies on the continued availability of key commodity materials, potentially resulting in an inability to meet demand for these components. A shortage of key commodity materials could also lead to a reduction in the number of renewable energy facilities that we may have the opportunity to acquire in the future, or delay or increase the costs of acquisitions.

In addition, potential acquisition of solar projects could be more challenging as a result of increases in the cost of solar panels or tariffs on imported solar panels imposed by the U.S. government. The U.S. government has imposed tariffs on imported solar cells and modules manufactured in China. If project developers purchase solar panels containing cells manufactured in China, our purchase price for renewable energy facilities may reflect the tariff penalties mentioned above. While solar panels containing solar cells manufactured outside of China are not subject to these tariffs, the prices of these solar panels are, and may continue to be, more expensive than panels produced using Chinese solar cells, before giving effect to the tariff penalties.

We may from time to time seek to replace all or part of an existing wind or solar project with new more efficient equipment in order to improve performance, lower costs, decrease operational risk and extend the useful life of such a project. This process is referred to as a repowering. Repowerings could include replacing existing wind turbines, solar panels, inverters or other components with new equipment. Our ability to repower a project is dependent on, among other things, our ability to procure equipment and parts, including parts that are subject to safe harbors for federal tax credits and other incentives, and to complete all necessary construction contemplated for a particular repowering on time and on budget. The repowering of an existing generating facility may be subject to environmental, engineering, tax and construction risks that could result in cost overruns, delays and reduced performance, or in a planned repowering not happening at all. A number of factors that could cause such delays, cost over runs or reduced performance or cancellation of a planned repowering include, but are not limited to, changes in local laws or difficulties in obtaining permits, rights of way or approvals, changing engineering and design requirements, construction costs exceeding estimates for various reasons, including inaccurate engineering and planning, failures to properly estimate the cost of raw materials, components, equipment, labor or the inability to timely obtain them, unanticipated problems with project start-up, the performance of contractors, the insolvency of the head contractor or of a major equipment supplier (including panel, inverter and wind turbine supplier), a major subcontractor and/or a key equipment supplier, labor disruptions, inclement weather, defects in design, engineering or construction (including, without limitation, latent defects that do not materialize during an applicable warranty or limitation period), the occurrence of force majeure events and any unanticipated project modifications. The repowering of certain projects in the United States may also depend on the availability of equipment that is subject to safe harbors for federal tax credits and the availability of construction financing, tax equity and other forms of financing in capital markets.

A delay in the projected completion of a repowering can result in a material increase in total construction costs through higher capitalized interest charges, additional labor and other expenses, a loss of production tax credits in the United States and a resultant delay in the re-commencement of cash flow. In addition, such unexpected issues may result in increased debt service costs, operations and maintenance expenses and damage payments for late delivery or the failure to meet agreed upon generation levels. This may result in an inability to meet the higher interest and principal repayments arising from any additional debt required.

In some circumstances, we may be required to notify, consult, or obtain the consent of certain stakeholders, including landowners and municipalities, regarding a repowering transaction. Certain of these communities and partners may have or may develop interests or objectives which are different from or even in conflict with our objectives. Any such differences could have a negative impact on the success of any contemplated repowering.

The solar panels, inverters, modules and other system components utilized in our solar generation facilities are generally covered by manufacturers’ warranties, which typically range from 5 to 20 years. When purchasing wind turbines, the purchaser will enter into warranty agreements with the manufacturer which typically expire within two to five years after the turbine delivery date. In the event any such components fail to operate as required, we may be able to make a claim against the applicable warranty to cover all or a portion of the expense associated with the faulty component. However, these suppliers could cease operations and no longer honor the warranties, which would leave us to cover the expense associated with the faulty component. Our business, financial condition, results of operations and cash flows could be adversely affected if we cannot make claims under warranties covering our renewable energy facilities.

Our concentrated solar power (“CSP”) facilities located in Spain consist primarily of parabolic troughs that concentrate reflected light onto receiver tubes. The receiver tubes are filled with a working fluid which is heated by the concentrated sunlight and then used to heat water for a standard steam power generation system. This technology differs from that used in more common solar photovoltaic (“PV”) facilities and concentrated solar technology is much less widely used worldwide and is subject to known and unknown risks that differ from those associated with solar PV facilities. For example, the temperatures used in concentrated solar facilities can be extremely high. Fires or leaks of heated working fluid at any of our facilities could result in a loss of generating capacity and could require us to expend significant amounts of capital and other resources. Such failures could result in personal injury or loss of life, severe damage to and destruction of property, plant and equipment and contamination of, or damage to, the environment and suspension of operations, which could expose us to significant liability. Repairing any such failure could require us to expend significant amounts of capital and other resources.

We recently acquired over 4,000 solar rooftop residential assets in California and Arizona. As a result of this acquisition and any future acquisitions of residential solar assets, we have become subject to certain consumer protection laws that may not be applicable to our commercial and power plant businesses, such as privacy and data security, federal truth-in-lending, consumer leasing, and equal credit opportunity laws and regulations, as well as state and local finance laws and regulations. Claims arising out of actual or alleged violations of law may be asserted against us by individuals or governmental entities and may expose us to significant damages or other penalties, including fines that could be material to our business.

The ongoing operation of our facilities involves risks that include the breakdown or failure of equipment, such as the failure of a single faulty blade which caused the collapse of a tower at our Raleigh wind facility in 2018, other single blade failures at our Bishop Hill, Cal Ridge and Cohocton wind facilities during 2019 and 2020, or processes or performance below expected levels of output or efficiency due to wear and tear, latent defect, design error or operator error or force majeure events, among other things. Unplanned outages of generating units, including extensions of scheduled outages, occur from time to time and are an inherent risk of our business. Unplanned outages typically increase our operation and maintenance expenses and may reduce our revenues as a result of generating and selling less power or require us to incur significant costs as a result of obtaining replacement power from third parties in the open market to satisfy our forward power sales obligations.

Our inability to efficiently operate our renewable energy facilities, manage capital expenditures and costs and generate earnings and cash flow from our assets could have a material adverse effect on our business, financial condition, results of operations and cash flows. While we maintain insurance, obtain warranties from vendors and obligate contractors to meet certain performance levels (in some cases backed by liquidated damages from the contractor), the proceeds of such insurance, warranties or performance guarantees may not cover our lost revenues, increased expenses or payments should we experience equipment breakdown or non-performance by contractors or vendors.

Power generation involves hazardous activities, including delivering electricity to transmission and distribution systems. In addition to natural risks such as earthquake, flood, lightning, hurricane and wind, other hazards, such as fire, structural collapse and machinery failure are inherent risks in our operations. These and other hazards can cause significant personal injury or loss of life, severe damage to and destruction of property, plant and equipment and contamination of, or damage to, the environment and suspension of operations. The occurrence of any one of these events may result in our being named as a defendant in lawsuits asserting claims for substantial damages, including for environmental cleanup costs, personal injury and property damage and fines and/or penalties. We maintain an amount of insurance protection that we consider adequate but we cannot provide any assurance that our insurance will be sufficient or effective under all circumstances and against all hazards or liabilities to which we may be subject. Furthermore, our insurance coverage is subject to deductibles, caps, exclusions and other limitations. A loss for which we are not fully insured could have a material adverse effect on our business, financial condition, results of operations or cash flows. Furthermore, due to rising insurance costs and changes in the insurance markets, we cannot provide any assurance that our insurance coverage will continue to be available at all or at rates or on terms similar to those presently available. Any losses not covered by insurance could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Certain of our wind power plants are party to financial swaps or other similarly structured hedging arrangements (“swaps”). We may also acquire additional assets with similar hedging arrangements in the future. Under the terms of the existing swaps, certain wind power plants receive payments for specified quantities of electricity based on a fixed-price and are obligated to deliver (if physically settled) or pay (if financially settled) the counterparty the market price for the same quantities of electricity. These swaps cover quantities of electricity that we estimated are highly likely to be produced. As a result, gains or losses under the swaps are designed to be offset by decreases or increases in a facility’s revenues from spot sales of electricity in liquid markets. However, the actual amount of electricity a facility generates from operations may be materially different from our estimates for a variety of reasons, including variable wind conditions and wind turbine availability. If a wind power plant does not generate the volume of electricity required by the associated contract, we could incur significant losses if electricity prices in the market rise substantially above the fixed-price provided for in the swap arrangement. This risk is particularly acute in the ERCOT market during summer months due to low reserve margins and the attendant risk of scarcity pricing. If a wind power plant generates more electricity than is contracted in the swap arrangement, the excess production will not be hedged and the related revenues will be exposed to market price fluctuations.

Moreover, in some power markets, at times we have experienced negative power prices with respect to merchant energy sales. In these situations, we must pay grid operators to take our power. Because our tax investors receive production tax credits from the production of energy from our wind plants, it may be economical for the plant to continue to produce power at negative prices, which results in the applicable facility paying for the power it produces. In addition, certain swap arrangements are settled with reference to energy prices (or locational marginal prices) at a certain hub or node on the transmission system in the relevant energy market. At the same time, revenues generated by physical sales of energy from the applicable facility may be determined by the energy price (or locational marginal price) at a different node on the transmission system. This is an industry practice used to address the lack of liquidity at individual facility locations. There is a risk, however, that prices at these two nodes differ materially, and as a result of this so called “basis risk,” we may be required to settle our swaps at prices that are higher than the prices at which we are able to sell physical power from the applicable facility, thus reducing the economic effectiveness of the swap hedges. Basis risk is particularly acute in the Texas Panhandle, where we own one wind power plant with over 200 MW of nameplate capacity, due to transmission constraints caused by line outages and high wind penetration.

We generate a substantial portion of our revenues and incur a substantial portion of our expenses in currencies other than U.S. dollars. The portion of our revenues generated in currencies other than U.S. dollars may increase in the future if we continue to acquire additional assets outside of the United States. Changes in economic or political conditions in any of the countries in which we operate now or in the future could result in exchange rate movement, expropriation, new currency or exchange controls or other restrictions being imposed on our operations. As our financial results are reported in U.S. dollars, if we generate revenue or earnings in other currencies, the translation of those results into U.S. dollars can result in a significant increase or decrease in the amount of those revenues or earnings. To the extent that we are unable to match revenues received in foreign currencies with costs paid in the same currency, exchange rate fluctuations in any such currency could have a negative impact on our profitability. Our debt service requirements are primarily in U.S. dollars even though a percentage of our cash flow is generated in other foreign currencies and therefore significant changes in the value of such foreign currencies relative to the U.S. dollar could have a material negative impact on our financial condition and our ability to meet interest and principal payments on debts denominated in U.S. dollars. In addition to currency translation risks, we incur currency transaction risks whenever we or one of our facilities enter into a purchase or sales transaction using a currency other than the local currency of the transacting entity.

Given the volatility of exchange rates, there can be no assurance that we will be able to effectively manage our currency transaction and/or translation risks. It is possible that volatility in currency exchange rates will have a material adverse effect on our financial condition or results of operations. We expect to experience economic losses and gains and negative and positive impacts on earnings as a result of foreign currency exchange rate fluctuations, particularly as a result of changes in the value of the Euro.

Additionally, although a portion of our revenues and expenses are denominated in foreign currency, any distributions we pay will be denominated in U.S. dollars. The amount of U.S. dollar denominated distributions paid to our holders of our Common Stock will therefore be exposed to a certain level of currency exchange rate risk. Although we have entered into certain hedging arrangements to help mitigate some of this exchange rate risk, these arrangements may not be sufficient to

We are subject to geopolitical uncertainties in all jurisdictions in which we operate. We make investments in businesses that are based outside of the United States, and we may pursue investments in unfamiliar markets, which may expose us to additional risks not typically associated with investing in the United States. We may not properly adjust to the local culture and business practices in such markets, and there is the prospect that we may hire personnel or partner with local persons who might not comply with our culture and ethical business practices; either scenario could result in the failure of our initiatives in new markets and lead to financial losses. There are risks of political instability in several of the jurisdictions in which we conduct business, including, for example, social and political unrest (e.g., recent social unrest in Chile), tariffs, income inequality, refugee migration, terrorism, the potential break-up of political-economic unions (or the departure of a union member, e.g., Brexit) and political corruption. The materialization of one or more of these risks in markets where we own and operate assets could create economic uncertainty that causes disruptions to our businesses, including affecting the business of and/or our relationships with our customers, contractors and suppliers which could in turn negatively affect our financial performance. For example, although the long-term impact on economic conditions is uncertain, Brexit may have an adverse effect on the rate of economic growth in the U.K. and continental Europe.

Our business is subject to extensive federal, state and local laws in the U.S. and regulations in the foreign countries in which we operate. Compliance with the requirements under these various regulatory regimes may cause us to incur significant costs, and failure to comply with such requirements could result in the shutdown of the non-complying facility or, the imposition of liens, fines and/or civil or criminal liability.

With the exception of certain of our utility scale plants, our renewable energy facilities located in the United States in our portfolio are QFs as defined under PURPA. Depending upon the power production capacity of the facility in question, our QFs and their immediate project company owners may be entitled to various exemptions from wholesale ratemaking and certain other regulatory provisions of the FPA, from the federal and state books and records access provisions of PUHCA and FERC’s record-keeping, accounting, and reporting obligations under PUHCA, and from state ratemaking, organizational and financial regulation of electric utilities.

On September 19, 2019, FERC published a NOPR to revise its PURPA regulations. Of relevance to our QFs, the NOPR proposes to revise (i) the obligation of interconnected utilities to purchase power from renewable QFs under 20 MW and the terms and conditions of such purchases, (ii) the process for third-party challenges to the QF status of self-certified projects, and (iii) the rules used to aggregate and treat as a single facility (for purposes of the 80 MW QF size limit and other exemption thresholds) renewable QFs that use the same fuel source, are owned or operated by the same person or its affiliates, and are located within a certain distance of each other. The public comment period on the NOPR closed on December 3, 2019.

The immediate owners of certain of our utility scale plants are EWGs, as defined under PUHCA, which allows their upstream owners to qualify for an exemption from the federal books and access provisions of PUHCA and FERC’s record-keeping, accounting, and reporting obligations under PUHCA. Certain of the EWGs also own QFs. EWGs are often subject to regulation for most purposes as “public utilities” under the FPA, including regulation of their wholesale rates and their issuances of securities and assumption of liabilities. Each of our EWGs (except Evergreen Gen Lead, LLC) has obtained “market based rate authorization” and associated blanket authorizations and waivers from FERC under the FPA, which allows it to sell electricity, capacity and ancillary services at wholesale at negotiated, market based rates, instead of cost-of-service rates, as well as waivers of, and blanket authorizations under, certain FERC regulations that are commonly granted to market based rate sellers, including blanket authorizations to issue securities and assume liabilities. FERC typically grants an entity the authority to charge market-based rates as long as the entity can demonstrate that it does not have, or has adequately mitigated, market power and it cannot otherwise erect barriers to market entry. Currently, none of our project companies or their affiliates has been found by FERC to have the potential to exercise market power in any U.S. markets. In the event that FERC’s analysis of market power changes or if certain other conditions of market-based rate authority are not met, FERC has the authority to impose mitigation measures or withhold or rescind market-based rate authority and require sales to be made based on cost-of-service rates, which could result in a reduction in rates.

In addition to QFs and EWGs, we own certain fuel cell projects in a number of U.S. states that engage exclusively in retail energy sales. These projects are not subject to regulation under the FPA; however, they are “electric utility companies”

The failure of our QFs to maintain QF status may result in their owners becoming subject to significant additional regulatory requirements. In addition, the failure of the EWGs or our QFs to comply with applicable regulatory requirements may result in the imposition of civil penalties or other sanctions. FERC has the authority to assess substantial civil penalties (i.e. up to approximately $1.3 million USD per day per violation) for failure to comply with the conditions of market-based rate authority and the requirements of the FPA and PUHCA.

In particular, any person or entity that engages in FERC-jurisdictional transactions (e.g., wholesale power sales), including our EWGs and any project companies that own or operate our QFs, are subject to certain market behavior and anti-manipulation rules as established and enforced by FERC, and if they are determined to have violated those rules, will be subject to potential disgorgement of profits associated with the violation, penalties, and suspension or revocation of their market-based rate authority. If such entities were to lose their market-based rate authority, they would be required to obtain FERC’s acceptance of a cost-of-service rate schedule for wholesale sales of electric energy, capacity and ancillary services and could become subject to significant accounting, record-keeping, and reporting requirements that are imposed on FERC regulated public utilities with cost-based rate schedules.

Substantially all of our assets are also subject to the rules and regulations applicable to power generators generally, in particular the NERC Reliability Standards or similar standards in jurisdictions in which we operate. If we fail to comply with these mandatory Reliability Standards, we could be subject to sanctions, including substantial monetary penalties, increased compliance obligations and disconnection from the grid.

The regulatory environment for electricity generation in the United States has undergone significant changes in the last several years due to state and federal policies affecting the wholesale and retail power markets and the creation of incentives for the addition of large amounts of new renewable energy generation and demand response resources. These changes are ongoing and we cannot predict the ultimate effect that the changing regulatory environment will have on our business. In addition, in some of these markets, interested parties have proposed material market design changes, as well as made proposals to re-regulate the markets or require divestiture of power generation assets by asset owners or operators to reduce their market share. If competitive restructuring of the power markets is reversed, discontinued or delayed, our business prospects and financial results could be negatively impacted.

In November 2019, the Spanish government issued Royal Decree-Law 17/2019, which set the reasonable return at 7.09% for the next regulatory period (through December 31, 2025) for all assets. However, Royal Decree-Law 17/2019 contained an exception for all plants (i) that were commissioned prior to July 2013 and (ii) that did not have any pending litigation against the Kingdom of Spain regarding the prior regulatory change that took place in July 2013. For these excepted assets, Royal Decree-Law 17/2019 maintained 7.39% as the reasonable return for the next two regulatory periods (through December 31, 2031). As a result, all of our assets in Spain will be entitled to the more favorable regulated rate of 7.39% through December 31, 2031, except for the approximately 45 MW of solar PV assets that we acquired in December 2019 and the approximately 100 MW of CSP assets that we acquired subsequent to year end, each of which are entitled to a reasonable return rate of 7.09% through December 31, 2025.

In all of our agreements in Uruguay, we have long term PPAs with the Administración Nacional de Usinas y Transmisiones Eléctricas (“UTE”), Uruguay’s state-owned electricity company. Under these PPAs, we are required to deliver power at a fixed rate for the contract period, in all cases inflation adjusted. In addition, during the life of a concession, the relevant government authority may unilaterally impose additional restrictions on our tariff rates, subject to the regulatory frameworks applicable in each jurisdiction. Furthermore, changes in laws and regulations may, in certain cases, have retroactive effect and expose us to additional compliance costs or interfere with our existing financial and business planning.

Renewable energy generation assets currently benefit from, or are affected by, various federal, state and local governmental incentives and regulatory policies. In the United States, these policies include federal ITCs, PTCs, and trade import tariff policies, as well as state RPS and integrated resource plan programs, state and local sales and property taxes, siting policies, grid access policies, rate design, net energy metering, and modified accelerated cost-recovery system of depreciation. The growth of our wind and solar energy business will also be dependent on the federal and state tax and regulatory regimes generally and as they relate in particular to our investments in our wind and solar facilities. For example, future growth in the renewable energy industry in the U.S. will be impacted by the availability of the ITC and PTCs and accelerated depreciation and other changes to the federal income tax codes, including reductions in rates or changes that affect the ability of tax equity providers to effectively obtain the benefit of available tax credits or deductions or forecast their future tax liabilities, which may materially impair the market for tax equity financing for wind and solar power plants. Any effort to overturn federal and state laws, regulations or policies that are supportive of wind and solar power plants or that remove costs or other limitations on other types of generation that compete with wind and solar power plants could materially and adversely affect our business, financial condition, results of operations and cash flows.

In the U.S., many states have adopted RPS programs mandating that a specified percentage of electricity sales come from eligible sources of renewable energy. If the RPS requirements are reduced or eliminated, it could lead to fewer future power contracts or lead to lower prices for the sale of power in future power contracts, which could have a material adverse effect on our future growth prospects. Such material adverse effects may result from decreased revenues, reduced economic returns on certain project company investments, increased financing costs and/or difficulty obtaining financing.

Our projects located internationally typically benefit from RPS regimes, feed-in tariffs or other regulatory incentives. For example, renewable energy sources in Chile, including our approximately 100 MW solar facility, benefit from an RPS program, and renewable energy sources in Portugal, including our wind assets, benefit from a government regulated feed-in tariff. In Canada, our projects benefit from a long-term power purchase agreement with an entity owned by the government of the province of Ontario. Any adverse change to, or the elimination of, these incentives could have a material adverse effect on our business and our future growth prospects. In Ontario, in December 2019 the government directed the Independent Electricity System Operator of Ontario to solicit feedback from generators on potential cost-lowering opportunities that would reduce electricity rates for consumers while maintaining grid reliability. They indicated that this review might include the triggering of rights within existing power purchase agreements, as well as negotiating changes to existing power purchase agreements, which in either case could have an adverse effect on our business, financial condition, results of operations and cash flows.

Our portfolio consists of renewable energy facilities located in the United States (including Puerto Rico), Canada, the United Kingdom, Chile, Spain, Portugal and Uruguay. In addition, we could decide to expand our presence in our existing

In addition, we may be unable to adjust our tariffs or rates as a result of fluctuations in prices above the regulated recognized inflation of raw materials, exchange rates, labor and subcontractor costs, or any other variations in the conditions of specific jurisdictions in which our concession-type infrastructure projects are located, which may reduce our profitability.

These uncertainties, many of which are beyond our control, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may suffer a significant loss resulting from fraud, bribery, corruption, other illegal acts, inadequate or failed internal processes or systems, or from external events, such as security threats affecting our ability to operate. We operate in multiple jurisdictions and it is possible that our operations will expand into new jurisdictions. Doing business in multiple jurisdictions requires us to comply with the laws and regulations of the U.S. government as well as those of various non-U.S. jurisdictions, and the number of jurisdictions in which we are operating has grown in recent years. These laws and regulations may apply to TerraForm Power, Terra LLC, our subsidiaries, our individual directors, officers, employees and third-party contractors and agents. In particular, our non-U.S. operations are subject to U.S. and foreign anti-corruption laws and regulations, such as the Foreign Corrupt Practices Act of 1977, as amended (“FCPA”). The FCPA, among other things, prohibits companies and their officers, directors, employees and third-party agents acting on their behalf from corruptly offering, promising, authorizing or providing anything of value to foreign officials for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The Company and its officers, directors, employees and third-party agents regularly deal with government bodies and government owned and controlled businesses, the employees and representatives of which may be considered foreign officials for purposes of the FCPA. Also, as we make acquisitions, we may expose ourselves to FCPA or other corruption related risks if our due diligence processes are unable to uncover or detect violations of applicable anti-corruption laws.

We rely on our infrastructure, controls, systems and personnel, to manage the risk of illegal and corrupt acts or failed systems. We also rely on our employees and certain third parties to comply with our policies and processes as well as applicable laws. Specific programs, policies, standards, methodologies and training have been developed to support the management of these risks. However, the failure to adequately identify or manage these risks could result in direct or indirect financial loss, regulatory censure and/or harm to our reputation. The acquisition of businesses with weak internal controls to manage the risk of illegal or corrupt acts may create additional risk of financial loss, regulatory censure and/or harm to our reputation. In addition, programs, policies, standards, methodologies and training, no matter how well designed, do not provide absolute assurance of effectiveness.

Our assets are subject to numerous and significant federal, state, local and foreign laws, and other requirements governing or relating to the environment, health and safety. Our facilities could experience incidents, malfunctions and other unplanned events, such as spills of hazardous materials that may result in personal injury, penalties, property or environmental damage.

Our CSP facilities use regulated thermal “working fluid”, and any leakage of working fluid from storage basins or otherwise could contaminate local groundwater and be hazardous to the environment. In the event of a leak, we are obligated to report it to local authorities and, depending on the severity of the leak, we may also be required to implement certain decontamination measures. If any such leak is not managed adequately and in accordance with applicable regulation, we may be subject to fines or, in extreme cases, have our operating permits revoked. In 2019, we identified leaks at two of our CSP facilities. These leaks are being remediated and as of the date of the Annual Report we are working with our technical advisors and local regulatory authorities to decontaminate the affected soil. While no enforcement action has been taken against us at this time and we do not expect to incur any liability in respect of the current incident, there is no assurance that we will not face liability for these leaks or any future leaks that may occur.

In addition, certain environmental, health and safety laws may result in liability for failure to comply with periodic reporting and other administrative requirements, regardless of fault, concerning contamination at a range of properties, including properties currently or formerly owned, leased or operated by us and properties where we disposed of, or arranged for disposal of, waste and other hazardous materials. In addition, with an increasing global focus and public sensitivity to environmental sustainability and environmental regulation becoming more stringent, we could also be subject to increasing environmental related responsibilities and associated liability. Environmental legislation and permitting requirements may evolve in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their directors and employees. As such, the operation of our facilities carries an inherent risk of environmental liability, and may result in our involvement from time to time in administrative and judicial proceedings relating to such matters. These changes may result in increased costs to our operations and may have an adverse impact on prospects for growth of our business. While we have implemented environmental management and health and safety programs designed to continually improve environmental, health and safety performance, there is no assurance that such liabilities including significant required capital expenditures, as well as the costs for complying with environmental laws and regulations, will not have a material adverse effect on our business, financial condition, results of operations and cash flows.

The operation of wind power plants can adversely affect endangered, threatened or otherwise protected animal species, as the turbine blades travel at a high speed and may strike flying animals (such as birds or bats) that happen to travel into the path of spinning blades. Our wind power plants periodically strike and kill flying animals, including, occasionally, endangered or protected species. As a result, we observe industry guidelines and comply with regulator approved incidental take permits and governmentally recommended best practices to avoid harm to such protected species. This includes but is not limited to avoiding erecting structures that could be used as perches, minimizing guy wires that may kill birds or bats in flight, and avoiding lighting that may attract protected species to the wind turbines at night. In addition, we attempt to reduce the attractiveness of a site to predatory birds through regular site maintenance (e.g., mowing and removal of animal and bird carcasses, among other things).

Where possible, we obtain permits for incidental taking of protected species. We hold such permits for some of our wind power plants, particularly in Hawaii, where several species are endangered and protected by law. In addition, we monitor on an ongoing basis U.S. Fish & Wildlife Service and state policy and rulemakings for species relevant to our projects, and will seek permits as appropriate. In 2019, we received approval for amended federal and state incidental take permits for one wind power plant in Hawaii, where, based on standardized monitoring, endangered species mortality exceeded prior estimates and the prior permitted limit on such takings. We are now in full compliance.

Excessive taking of protected species could result in requirements to implement mitigation strategies, including potentially costly modification of operations and/or substantial monetary fines and could also result in negative publicity. For example, our wind power plants in Hawaii are subject to curtailment (i.e., reduction in operations) if excessive taking of protected species is detected through monitoring. Curtailments to protect endangered bats has been implemented at our Hawaiian facilities, but not currently at levels that materially reduce electricity generation or revenues. Such curtailments require, among other things, reduced nighttime operations and also require that operations be limited to times when wind speeds are high enough to prevent bats from flying into a wind power plant’s blades. We cannot guarantee that such curtailments, or

Our renewable energy facilities, or those that we otherwise acquire in the future, may be targets of terrorist activities that could cause environmental repercussions and/or result in full or partial disruption of the facilities’ ability to generate electricity. Hostile cyber intrusions, including those targeting information systems as well as electronic control systems used at the facilities and for the related distribution systems, could severely disrupt business operations and result in loss of service to customers, as well as create significant expense to repair security breaches or system damage.

Furthermore, certain of our renewable energy facilities are located in active earthquake zones. The occurrence of a natural disaster, such as an earthquake, hurricane, lightning, flood or localized extended outages of critical utilities or transportation systems, or any critical resource shortages, affecting us could cause a significant interruption in our business, damage or destroy our facilities or those of our suppliers or the manufacturing equipment or inventory of our suppliers.

Additionally, certain of our renewable energy facilities and equipment are at risk for theft and damage. For example, we are at risk for copper wire theft, especially at our solar generation facilities, due to an increased demand for copper in the United States and internationally. Theft of copper wire or solar panels can cause significant disruption to our operations for a period of months and can lead to operating losses at those locations. Damage to wind turbine equipment may also occur, either through natural events such as lightning strikes that damage blades or in-ground electrical systems used to collect electricity from turbines, or through vandalism, such as gunshots into towers or other generating equipment. Such damage can cause disruption of operations for unspecified periods, which may lead to operating losses at those locations.

Other catastrophic events, such as pandemic diseases, may also disrupt our business operations. For example, the recent outbreak of the COVID-19 coronavirus has resulted in closures of manufacturing facilities, travel restrictions, disruptions to supply chains and disruptions to workplaces as employees and contractors cease to be available to perform critical work functions. A prolonged disruption could limit the availability of certain parts required to operate our facilities and adversely impact the ability of our LTSA contractors and other service providers to service our equipment, which may result in operational delays. It could also adversely impact our efforts to repower certain facilities, causing important construction milestones to be missed.

Any such terrorist acts, environmental repercussions or disruptions, natural disasters, theft incidents or other catastrophic events could result in a significant decrease in revenues or significant reconstruction, remediation or replacement costs, beyond what could be recovered through insurance policies, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We rely on information technology systems for secure storage, processing and transmission of sensitive electronic data and other proprietary information for the efficient operation of its renewable energy facilities and corporate operations. In light of this, we may be subject to material cyber security risks or other breaches of information technology security intended to obtain unauthorized access to our proprietary information and that of our business partners, destroy data or disable, degrade, or sabotage these systems through the introduction of computer viruses, fraudulent emails, cyberattacks and other means, and such breaches could originate from a variety of sources including our own employees or unknown third parties. There can be no assurance that measures implemented to protect the integrity of these systems will provide adequate protection, and any such breach could go undetected for an extended period of time. If these information technology systems are impacted by a cyberattack or cyber-intrusion, our operations or capabilities could be interrupted or diminished and important information could be lost, deleted, misused or stolen, which could have a negative impact on our renewable energy facilities, operating results and revenues or which could cause us to incur unanticipated liabilities, reputational damage and regulatory penalties, or incur costs and expenses to repair, replace or enhance affected systems, including costs related to cyber security for our renewable energy facilities and technology systems.

While the impact on our business from the recent outbreak of the COVID-19 coronavirus is unknown at this time and difficult to predict, various aspects of our business could be adversely affected by it. While there are many unknowns as to the

We are subject to federal, state, and international laws relating to the collection, use, retention, security, and transfer of customer, employee, and business partner personally identifiable information, including the European Union’s General Data Protection Regulation (“GDPR”), which came into effect in May 2018. In many cases, these laws apply not only to third-party transactions, but also to transfers of information between one company and its subsidiaries, and among the subsidiaries and other parties with which we have commercial relations. The introduction of new products or expansion of our activities in certain jurisdictions may subject us to additional laws and regulations. Foreign data protection, privacy, and other laws and regulations, including GDPR, can be more restrictive than those in the United States. These U.S. federal and state and foreign laws and regulations, including GDPR which can be enforced by private parties or government entities, are constantly evolving and can be subject to significant change. In addition, the application and interpretation of these laws and regulations, including GDPR, are often uncertain, particularly in the new and rapidly evolving industry in which we operate, and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices. These existing and proposed laws and regulations can be costly to comply with and can delay or impede the development of new products, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to inquiries or investigations, claims or other remedies, including fines, which may be significant, or demands that we modify or cease existing business practices.

A failure by us, our suppliers, or other parties with whom we do business to comply with posted privacy policies or with other federal, state, or international privacy-related or data protection laws and regulations, including GDPR, in effect since May 2018, could result in proceedings against us by governmental entities or others, which could have a material adverse effect on our business, results of operations, and financial condition.

Renewable energy facilities generally are and are likely to be located on land occupied by the facility pursuant to long-term easements and leases. The ownership interests in the land subject to these easements and leases may be subject to mortgages securing loans or other liens (such as tax liens) and other easement and lease rights of third parties (such as leases of oil or mineral rights) that were created prior to the facility’s easements and leases. As a result, the facility’s rights under these easements or leases may be subject, and subordinate, to the rights of those third parties. We perform title searches and obtain title insurance to protect ourselves against these risks. Such measures may, however, be inadequate to protect us against all risk of loss of our rights to use the land on which our renewable energy facilities are located, which could have a material adverse effect on our business, financial condition and results of operations.

Negative public or community response to solar, wind and other renewable energy facilities could adversely affect our ability to acquire and operate our facilities. Our experience is that such opposition subsides over time after renewable energy facilities are completed and are operating, but there are cases where opposition, disputes and even litigation continue into the operating period and could lead to curtailment of a facility’s operations and potentially costly litigation settlements.

We need to maintain sufficient financial liquidity to absorb the impact of seasonal variations in energy production or other significant events. Our principal sources of liquidity are cash generated from our operating activities, and the cash retained for working capital purposes out of the gross proceeds of financing activities as well as our borrowing capacity under our existing credit facilities, subject to any conditions required to draw under such existing credit facilities. Our results of

If we fail to adequately manage the fluctuations in the timing of distributions from our renewable energy facilities, our business, financial condition or results of operations could be materially affected. The seasonality of our energy production may create increased demands on our working capital reserves and borrowing capacity under our existing credit facilities during periods where cash generated from operating activities are lower. In the event that our working capital reserves and borrowing capacity under our existing credit facilities are insufficient to meet our financial requirements, or in the event that the restrictive covenants in our existing credit facilities restrict our access to such facilities, we may require additional equity or debt financing to maintain our solvency. Additional equity or debt financing may not be available when required or available on commercially favorable terms or on terms that are otherwise satisfactory to us, in which event our financial condition may be materially adversely affected.

We have incurred substantial corporate and project-level indebtedness and may incur additional substantial indebtedness in the future. This substantial indebtedness has certain consequences on our business, results of operations and financial condition, including, but not limited to, the following:

As a result of these consequences, our substantial indebtedness could have a material adverse effect on our business, results of operations and financial condition.

We are subject to operating and financial restrictions through covenants in our corporate and project-level loan, debt and security agreements. These restrictions prohibit or limit our ability to, among other things, incur additional debt, provide guarantees for indebtedness, grant liens, dispose of assets, liquidate, dissolve, amalgamate, consolidate or effect corporate or capital reorganizations, and declare distributions. A financial covenant in our corporate revolver limits the overall corporate indebtedness that we may incur to a multiple of our cash available for debt service, which may limit our ability to obtain additional financing, withstand downturns in our business and take advantage of business and development opportunities. If we breach our covenants, our corporate Revolver or senior notes may be terminated or come due and such event may cause our credit rating to deteriorate and subject us to higher interest and financing costs. We may also be required to seek additional debt financing on terms that include more restrictive covenants, require repayment on an accelerated schedule or impose other obligations that limit our ability to grow our business, acquire assets or take other actions that we might otherwise consider appropriate or desirable.

In July 2017, the U.K. Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. Currently, it is not possible to predict the exact transitional arrangements for calculating applicable reference rates that may be made in the U.K., the U.S., the Eurozone or elsewhere given that a number of outcomes are possible, including the cessation of the publication of one or more reference rates. To the extent LIBOR is not available, we do not anticipate alternative calculations will be materially different from what would have been calculated under LIBOR. Additionally, no mandatory prepayment or redemption provisions would be triggered under our loan documents in the event that the LIBOR rate is not available. It is possible, however, that any new reference rate that applies to our LIBOR-indexed debt could be different than any new reference rate that applies to our LIBOR-indexed derivative instruments. We anticipate managing this difference and any resulting increased variable-rate exposure through modifications to our debt and/or derivative instruments however, future market conditions may not allow immediate implementation of desired modifications and/or we may incur significant associated costs.

The credit rating assigned to the Company or any of our subsidiaries’ debt securities may be changed or withdrawn entirely by the relevant rating agency. A lowering or withdrawal of such ratings may have an adverse effect on our financial position and ability to raise capital.

The following factors, among others, could affect the availability of attractive renewable energy facilities to grow our business and distributions per share:

Even if we consummate acquisitions that we believe will be accretive to our distributions per share, those acquisitions may in fact result in a decrease in distributions per share as a result of incorrect assumptions in our evaluation of such acquisitions, unforeseen consequences or external events beyond our control.

Our acquisition of renewable energy facilities or of companies that own and operate renewable energy facilities is subject to substantial risk, including but not limited to the failure to identify material problems during due diligence (for which we may not be indemnified post-closing), the risk of over-paying for assets (or not making acquisitions on an accretive basis), the ability to obtain or retain customers and, if the renewable energy facilities are in new markets, the risks of entering markets where we have limited experience. While we perform due diligence on prospective acquisition targets, we may not be able to discover all potential operational deficiencies in such renewable energy facilities. In addition, our expectations for the operating performance of newly constructed renewable energy facilities as well as those under construction may be based on assumptions and estimates made without the benefit of operating history. However, the ability of these renewable energy facilities to meet our performance expectations is subject to the risks inherent in newly constructed renewable energy facilities and the construction of such facilities, including, but not limited to, degradation of equipment in excess of our expectations, system failures and outages. Future acquisitions may not perform as expected or the returns from such acquisitions may not support the financing utilized to acquire them or maintain them. Furthermore, integration and consolidation of acquisitions requires substantial human, financial and other resources and may divert management’s attention from our existing business concerns and any such integration may not be successful. As a result, the consummation of acquisitions could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Future acquisition opportunities for renewable energy facilities are limited and there is substantial competition for the acquisition of these assets. Moreover, while Brookfield and its affiliates will grant us a ROFO with respect to the projects in the right of first offer portfolio as a result of the Merger and Sponsorship Transaction, there is no assurance that we will be able to acquire or successfully integrate any such projects. We will compete with other companies for future acquisition opportunities from Brookfield and its affiliates and third parties.

Competition for acquisitions may increase our cost of making acquisitions or cause us to refrain from making acquisitions at all. Some of our competitors are much larger than us with substantially greater resources, have access to lower costs of capital, or have lower return targets. These companies may be able to pay more for acquisitions and may be able to identify, evaluate, bid for and purchase a greater number of assets than our resources, costs of capital or return targets permit. In addition, our competitors may be to make acquisitions for renewable energy facilities having less desirable economic returns or higher risk profiles than we believe suitable for our business plan and investment strategy. If we are unable to identify and consummate future acquisitions, it will impede our ability to execute our growth strategy and limit our ability to increase the amount of distributions paid to holders of our Common Stock. In addition, as we continue to manage our liquidity profile, we may engage in asset dispositions, or incur additional project-level debt, which may result in a decrease in our CAFD. Even if we consummate acquisitions that we believe will be accretive, those acquisitions may in fact result in a decrease in CAFD as a result of incorrect assumptions in our evaluation of such acquisitions, unforeseen consequences or other external events beyond our control. Furthermore, if we consummate any future acquisitions, our capitalization and results of operations may change significantly, and stockholders will generally not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in determining the application of these funds and other resources.

We own certain assets alongside minority investors, in which we do not have complete control over management decisions as a result of the agreements governing such investments. For example, minority investor approval may be required for us to receive distributions of funds from these assets or to sell, pledge, transfer, assign or otherwise convey our interest in such assets. Alternatively, our minority investors may have rights of first refusal or rights of first offer in the event of a proposed sale or transfer of our interests in such assets. The interests of any minority investor may not be aligned with ours and they may seek to exercise consent rights that may inhibit our ability to manage the asset as we see fit. As we look to from time to time recycle capital, we may deem it advisable to opportunistically sell a minority interest in one or more assets, and such new minority investors may negotiate consent rights or other governance arrangements that restrict our ability to control all management decisions in respect of such assets.

In the future, we intend to pay distributions to our stockholders each quarter and to rely primarily upon external financing sources, including the issuance of debt and equity securities to fund our acquisitions and growth capital expenditures. We may be precluded from pursuing otherwise attractive acquisitions if the projected short-term cash flow from the acquisition or investment is not adequate to service the capital raised to fund the acquisition or investment. As such, our growth may not be as fast as that of businesses that reinvest more available cash from operations.

Our ability to grow through acquisitions depends on Brookfield’s ability to identify and present us with acquisition opportunities. Brookfield has designated TerraForm Power, subject to certain exceptions, as its primary vehicle to acquire operating wind and solar assets in North America and Western Europe. However, Brookfield’s obligations to the Company under the Relationship Agreement are subject to a number of exceptions and Brookfield has no obligation to source acquisition opportunities specifically for us. There are a number of factors which could materially and adversely impact the extent to which suitable acquisition opportunities are made available to us by Brookfield, for example:

We may need to arrange additional financing to fund all or a portion of the cost of acquisitions, including potential contingent liabilities and other aspects of our operations. Our ability to arrange additional financing or otherwise access the debt or equity capital markets, either at the corporate-level or at a non-recourse project-level subsidiary, may be limited. Any limitations on our ability to obtain financing may have an adverse effect on our business, or growth prospects or our results of operations. Additional financing, including the costs of such financing, will be dependent on numerous factors, including:

We may not be successful in obtaining additional financing for these or other reasons. Furthermore, we may be unable to refinance or replace non-recourse financing arrangements or other credit facilities on favorable terms or at all upon the expiration or termination thereof. Our failure, or the failure of any of our renewable energy facilities, to obtain additional capital or enter into new or replacement financing arrangements when due may constitute a default under such existing indebtedness and may have a material adverse effect on our business, financial condition, results of operations and cash flows.

The amount of our cash available for distribution principally depends upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things:

As a result of all these factors, we cannot guarantee that we will have sufficient cash generated from operations to pay a specific level of cash distributions to holders of our Common Stock. Furthermore, holders of our Common Stock should be aware that the amount of cash available for distribution depends primarily on our cash flow, and is not solely a function of profitability, which is affected by non-cash items. We may incur other expenses or liabilities during a period that could significantly reduce or eliminate our cash available for distribution and, in turn, impair our ability to pay distributions to holders of our Common Stock during the period. We are a holding company and our ability to pay distributions on our Common Stock is limited by restrictions on the ability of our subsidiaries to pay distributions or make other distributions to us, including restrictions under the terms of the agreements governing project-level financing. Our project-level financing agreements prohibit distributions to us unless certain specific conditions are met, including the satisfaction of financial ratios and the absence of payment or covenant defaults.

Furthermore, we have issued additional equity securities from time to time, including in connection with our acquisition of our European Platform and for general corporate purposes, and we may issue additional equity securities in the future. The payment of distributions on these additional equity securities may increase the risk that we will be unable to maintain or increase our per share distribution. There are no limitations in our amended and restated certificate of incorporation (other than a specified number of authorized shares) on our ability to issue equity securities, including securities ranking senior to our Common Stock. The incurrence of bank borrowings or other debt by Terra Operating LLC or by our project-level subsidiaries to finance our growth strategy will result in increased interest expense and the imposition of additional or more restrictive covenants which, in turn, may impact the cash distributions we distribute to holders of our Common Stock.

Finally, distributions to holders of our Common Stock will be paid at the discretion of our Board.

Our payout ratio is a measure of our ability to make cash distributions to stockholders. We target a long-term payout ratio of 80 to 85% of CAFD. From time to time, our payout ratio may exceed 100%, for example, during periods of lower generation or lower merchant power prices or combination thereof, or repowering or operational maintenance investment periods. Because our business is primarily dependent on generation conditions and merchant power prices, as well as other factors beyond our control, it is possible that our payout ratio may remain above 100% for a sustained period. If this were to occur, it could impact our ability to maintain or grow our distributions to stockholders in line with our stated targets.

TerraForm Power is a holding company and has no material assets other than its direct and indirect ownership of membership interests in Terra LLC, a holding company that has no material assets other than its interest in Terra Operating LLC, whose sole material assets are interests in holding companies that directly or indirectly own the renewable energy facilities that comprise our portfolio and the renewable energy facilities that we subsequently acquire. TerraForm Power, Terra LLC and Terra Operating LLC have no independent means of generating revenue. We intend to cause Terra Operating LLC’s

One of the factors that influences the price of shares of our Common Stock will be the effective distribution yield of such shares (i.e., the yield as a percentage of the then market price of our shares) relative to market interest rates. An increase in market interest rates may lead prospective purchasers of shares of our Common Stock to expect a higher distribution yield. If market interest rates increase and we are unable to increase our distribution in response, including due to an increase in borrowing costs, insufficient cash available for distribution or otherwise, investors may seek alternative investments with higher yield, which would result in selling pressure on, and a decrease in the market price of, our Common Stock. As a result, the price of our Common Stock may decrease as market interest rates increase.

The market price of our shares may fluctuate significantly. Many factors may significantly affect the market price and marketability of our shares and may adversely affect our ability to raise capital through equity financings and otherwise materially adversely impact our business. These factors include, but are not limited to, the following:

We are in a capital intensive business, and may not have sufficient funds to finance the growth of our business, acquisitions or to support our projected capital expenditures. As a result, we have engaged in, and may require additional funds from further, equity or debt financings, including tax equity financing transactions or sales of preferred shares or convertible debt to complete future acquisitions, expansions and capital expenditures and pay the general and administrative costs of our business. In the future, we may issue our previously authorized and unissued securities, resulting in the dilution of the ownership interests of purchasers of our Common Stock offered hereby. Under our amended and restated certificate of incorporation, we are authorized to issue 1,200,000,000 shares of Common Stock and 100,000,000 shares of preferred stock with preferences and rights as determined by our Board. The potential issuance of additional shares of Common Stock or preferred stock or convertible debt may create downward pressure on the trading price of our Common Stock. We may also issue additional shares of our Common Stock or other securities that are convertible into or exercisable for our Common Stock in future public offerings or private placements for capital raising purposes or for other business purposes, potentially at an offering price, conversion price or exercise price that is below the trading price of our Common Stock.

The trading market for our Common Stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our Common Stock adversely, or provide more favorable relative recommendations about our competitors, the price of our Common Stock would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the stock price or trading volume of our Common Stock to decline.

We are required to comply with Section 404(a) of the Sarbanes-Oxley Act in the course of preparing our financial statements, and our management is required to report on the effectiveness of our internal control over financial reporting for such year. Additionally, our independent registered public accounting firm is required pursuant to Section 404(b) of the Sarbanes-Oxley Act to attest to the effectiveness of our internal control over financial reporting on an annual basis. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected on a timely basis. The existence of any material weakness would require management to devote significant time and incur significant expense to remediate any such material weaknesses and management may not be able to remediate any such material weaknesses in a timely manner.

The existence of these or other material weaknesses in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause stockholders to lose confidence in our reported financial information, all of which could materially and adversely affect our business and stock price.

As of December 31, 2019, the net carrying value of long-lived assets represented $9.3 billion, or 93%, of our total assets and consisted of renewable energy facilities, intangible assets and goodwill from the acquisition of Saeta. Renewable energy facilities and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate carrying values may not be recoverable. An impairment loss is recognized if the total future estimated undiscounted cash flows expected from an asset are less than its carrying value.

Goodwill is reviewed for impairment at least annually and whenever facts and circumstances indicate that it is more-likely-than-not that the fair value of a reporting unit that has goodwill is less than its carrying value. An impairment loss is recognized if the fair value of a reporting unit is less than its carrying value. As of December 1, 2019, we performed a qualitative impairment test for the goodwill balance in Saeta of $128.0 million and determined that it is more-likely-than-not that the fair values of the reporting units exceed their carrying amounts. We concluded that further evaluation of impairment was not necessary and goodwill associated with the Saeta acquisition was not impaired at December 31, 2019.

TerraForm Power and Brookfield are party to certain sponsorship agreements, which include, among other things, for Brookfield to provide strategic and investment management services to us, for Brookfield, subject to certain terms and conditions, to provide us with a right of first offer on certain operating wind and solar assets that are located in North America and Western Europe and developed by persons sponsored by or under the control of Brookfield and for Brookfield to provide TerraForm Power with a $500 million secured revolving credit facility to fund certain acquisitions or growth capital expenditures.

We may not realize expected benefits of Brookfield’s management services and the other aspects of the sponsorship arrangements. For example, we may fail to realize expected operational or margin improvements, synergies or other cost savings or reductions, may not achieve expected growth in its portfolio through organic growth or third-party acquisitions and may not acquire assets from Brookfield. We may also not be able to effectively utilize the $500 million revolving credit facility provided by Brookfield for accretive acquisitions or at all. Our failure to realize these aspects of Brookfield sponsorship may have an adverse effect on the price of our Common Stock and on our business, growth and the results of our operations.