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1. |
Description of Business and Presentation of Financial Statements |
Basis of Presentation
InfraREIT, Inc. is a Maryland corporation and the surviving corporation of a merger (Merger) with InfraREIT, L.L.C., a Delaware limited liability company, completed on February 4, 2015 in connection with the initial public offering (IPO) of InfraREIT, Inc. and related transactions effected during the first quarter of 2015 (collectively, the Reorganization). For additional information related to our IPO and Reorganization, refer to the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the U.S. Securities and Exchange Commission (SEC) on March 3, 2016.
The Merger was accounted for as a reverse acquisition, which means for accounting purposes we treated the assets and liabilities of InfraREIT, Inc. as assumed and incorporated with the assets and liabilities of InfraREIT, L.L.C. The accompanying unaudited interim financial statements of InfraREIT, Inc. (which may be referred to as the “Company,” “InfraREIT,” “we,” “our” and “us”) include our accounts and the accounts of all other entities in which we have a controlling financial interest with noncontrolling interest of consolidated subsidiaries reported separately. This Quarterly Report on Form 10-Q presents the operations of InfraREIT, L.L.C. prior to the Merger and the operations of InfraREIT, Inc. after the Merger.
These unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. For further information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 3, 2016.
We held 72.2% of the outstanding partnership units (OP Units) in InfraREIT Partners, LP (Operating Partnership or InfraREIT LP) as of September 30, 2016 and are its general partner. We include the accounts of the Operating Partnership and its subsidiaries in our consolidated financial statements. Affiliates of Hunt Consolidated, Inc. (HCI) and members of our board of directors held the other 27.8% of the outstanding OP Units as of September 30, 2016.
Recent Accounting Guidance
Recently Adopted Accounting Guidance
In February 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis. This amendment affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 was effective for periods beginning after December 15, 2015 with early adoption permitted. We adopted the guidance on January 1, 2016. The adoption of the new guidance did not have an impact on our current consolidation.
In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. ASU 2015-03 was effective for periods beginning after December 15, 2015 with early adoption permitted. The adoption of the new guidance was applied on a retrospective basis with each balance sheet presented reflecting the new guidance along with transitional disclosures. The adoption did change the presentation of our financial position. As a result, $0.2 million of unamortized deferred financing costs were reclassified from other assets to long-term debt, less deferred financing costs on our Consolidated Balance Sheets as of December 31, 2015. The adoption of the new guidance did not have an impact on our results of operations or cash flows.
In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustments. ASU 2015-16 requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The change in provisional amounts will be recorded in the period in which they are determined with changes to the income statement for any effect on earnings for changes in depreciation, amortization or other income effect calculated as if the accounting had been completed at the acquisition date. ASU 2015-16 was effective for periods beginning after December 15, 2015 with early adoption permitted. The new guidance was adopted as of January 1, 2016 and will be applied prospectively to adjustments to provisional amounts that occur for any future business combination. The adoption of the new guidance has not affected our financial position, results of operations or cash flows.
Recent Accounting Guidance Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 amended the existing accounting standard for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 is effective for periods beginning after December 15, 2018 with early adoption permitted. The new standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We are currently evaluating the new guidance and have not determined the impact this standard may have on our financial position, results of operations or cash flows.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Clarification of Certain Cash Receipts and Cash Payments. The objective of ASU 2016-15 is to eliminate the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows by adding or clarifying guidance on eight specific cash flow issues. ASU 2016-15 is effective for periods beginning after December 15, 2017 with early adoption permitted. The new standard should be applied retrospectively to all periods presented, unless deemed impracticable, in which case, prospective application is permitted. We are currently evaluating the new guidance and have not determined the impact this standard may have on our cash flows.
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2. |
Related Party Transactions |
Our subsidiary, Sharyland Distribution & Transmission Services, L.L.C. (SDTS), is party to several lease agreements with Sharyland Utilities, L.P. (Sharyland) through which we lease all our electric transmission and distribution assets (T&D assets) to Sharyland. Under the leases we have agreed to fund capital expenditures for footprint projects. Our leases define “footprint projects” to be transmission or distribution projects primarily situated within our distribution service territory, that physically hang from our existing transmission assets or that are physically located within one of our substations.
We earned lease revenues from Sharyland under these agreements of $49.4 million and $41.5 million during the three months ended September 30, 2016 and 2015, respectively. We earned $116.9 million and $100.3 million from Sharyland during the nine months ended September 30, 2016 and 2015, respectively. In connection with our leases with Sharyland, we recorded a deferred rent liability of $19.4 million and $11.5 million as of September 30, 2016 and December 31, 2015, respectively, which is included in accounts payable and accrued liabilities on the Consolidated Balance Sheets.
In addition to rent payments that Sharyland makes to us, we and Sharyland also make payments to each other under the leases that primarily consist of payments to reimburse Sharyland for the costs of gross plant and equipment added to our T&D assets. For the nine months ended September 30, 2016 and 2015, the net amount of the payments we made to Sharyland was $179.5 million and $170.8 million, respectively.
As of September 30, 2016 and December 31, 2015, accounts payable and accrued liabilities on the Consolidated Balance Sheets included $6.0 million and $9.2 million, respectively, related to amounts owed to Sharyland. Additionally, as of September 30, 2016, accounts payable and accrued liabilities on the Consolidated Balance Sheets included $0.3 million related to amounts owed to Hunt Utility Services, LLC (Hunt Manager) for reimbursement of software upgrade expenses in accordance with our management agreement. There were no such costs accrued as of December 31, 2015. As of September 30, 2016 and December 31, 2015, amounts due from affiliates on the Consolidated Balance Sheets included $26.0 million and $31.2 million, respectively, related to amounts owed by Sharyland associated with our leases.
Our management fee paid to Hunt Manager for the nine months ended September 30, 2016 and 2015 was $10.3 million and $9.1 million, respectively. As of September 30, 2016 and December 31, 2015, there were no prepaid or accrued amounts associated with management fees on the Consolidated Balance Sheets. Additionally, during the nine months ended September 30, 2016 and 2015, we paid Hunt Manager $0.1 million and $0.3 million, respectively, for reimbursement of annual software license and maintenance fees and other expenses in accordance with our management agreement.
Our current management agreement with Hunt Manager provided for an annual base fee, or management fee, of $10.0 million through April 1, 2015. Effective as of April 1, 2015, the annual base fee was automatically adjusted to $13.1 million annually through March 31, 2016. Effective as of April 1, 2016, the annual base fee was automatically adjusted to $14.0 million annually through March 31, 2017. The base fee and each base fee going forward for the twelve month period beginning on each April 1 thereafter will equal 1.50% of our total equity (including noncontrolling interest) as of December 31 of the immediately preceding year, subject to a $30.0 million cap, unless a greater amount is approved by a majority of our independent directors or a committee comprised solely of independent directors. The term of the management agreement expires December 31, 2019 and will automatically renew for successive five-year terms unless a majority of our independent directors decides to terminate the agreement.
In connection with the organization of InfraREIT, L.L.C. in November 2010, our Operating Partnership agreed to issue deemed capital credits and Class A OP Units to Hunt-InfraREIT, L.L.C. (Hunt-InfraREIT), a subsidiary of HCI. Our Operating Partnership agreed to issue up to $82.5 million to Hunt-InfraREIT, pro-rata, as we funded the capital expenditures related to our competitive renewable energy zones (CREZ) project up to $737.0 million. In addition, our Operating Partnership also agreed to issue to Hunt-InfraREIT deemed capital credits in an amount equal to 5% of our capital expenditures on certain development projects. As of December 31, 2014, our Operating Partnership issued Hunt-InfraREIT an aggregate of 6.8 million Class A OP Units in respect of these obligations. On January 1, 2015, our Operating Partnership issued an additional 70,846 Class A OP Units to Hunt-InfraREIT, and, upon completion of our IPO, our Operating Partnership issued Hunt-InfraREIT an accelerated deemed capital credit equal to 983,418 Class A OP Units, which settled the related obligations to Hunt-InfraREIT. Following this issuance, our Operating Partnership no longer has the obligation to issue deemed capital credits or related equity to Hunt-InfraREIT. We recorded these capital account credits as asset acquisition costs included as part of the capital project in our construction work in progress (CWIP) balance.
In connection with the IPO, Reorganization and related transactions, we incurred an aggregate of $5.0 million of legal fees, a portion of which was paid to reimburse HCI and its subsidiaries (collectively, Hunt), to reimburse certain of our pre-IPO investors and to reimburse certain of our pre-IPO independent directors, in each case for legal expenses they incurred in connection with such transactions. Of the total legal fees incurred, $0.1 million of the legal fees were recorded during the first quarter of 2015. There were no such costs incurred after the completion of our IPO. For additional information related to our IPO and Reorganization refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 3, 2016.
In November 2014, InfraREIT, Inc. borrowed $1.0 million from HCI pursuant to a promissory note. The note accrued interest at 2.5% per year and was due on November 1, 2015. This note and accrued interest were repaid in February 2015 with proceeds from our IPO for a total of $1.0 million.
Effective January 15, 2015, we sold all the assets related to the Cross Valley transmission line (Cross Valley Project) to a newly formed development company owned by Hunt and certain of its affiliates for cash of $34.2 million, which equaled the CWIP of the project on the date of sale, plus reimbursement of out of pocket expenses associated with the project financing. Also on January 15, 2015, we sold all the assets related to the Golden Spread Electric Cooperative interconnection (Golden Spread Project) to Hunt for cash of $7.0 million, which equaled the CWIP of the project on the date of sale.
In November 2015 and February 2016, the Conflicts Committee of our board of directors received an offer for the purchase of the Golden Spread Project and Cross Valley Project, respectively. On March 10, 2016, we announced our decision to postpone the consideration of the purchase of the Golden Spread Project and Cross Valley Project.
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3. |
Electric Plant and Depreciation |
The major classes of electric plant are as follows:
(In thousands) |
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September 30, 2016 |
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December 31, 2015 |
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Electric plant: |
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Transmission plant |
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$ |
1,175,051 |
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$ |
1,080,050 |
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Distribution plant |
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544,363 |
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457,988 |
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General plant |
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15,950 |
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15,655 |
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Total plant in service |
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1,735,364 |
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1,553,693 |
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CWIP |
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113,517 |
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121,602 |
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Total electric plant |
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1,848,881 |
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1,675,295 |
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Accumulated depreciation |
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(259,189 |
) |
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(240,764 |
) |
Electric plant, net |
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$ |
1,589,692 |
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$ |
1,434,531 |
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General plant consists primarily of a warehouse, buildings and associated assets. CWIP relates to various transmission and distribution projects underway. The capitalized amounts of CWIP consist primarily of route development expenditures, labor and materials expenditures, right of way acquisitions, engineering services and legal fees. Electric plant, net includes plant acquisition adjustments of $27.9 million and $28.6 million as of September 30, 2016 and December 31, 2015, respectively.
In 2013, SDTS purchased from Southwestern Public Service Company approximately 66 miles of existing transmission lines and two substations located near Stanton, Texas for $37.1 million. SDTS holds legal title to the assets and they are subject to a lease with Sharyland. Sharyland has the responsibility for operating these T&D assets and complying with all applicable regulatory requirements. As of December 31, 2014, these transmission lines and substations were classified as electric plant held for future use within electric plant, net. During August 2015, the assets classified as electric plant held for future use were placed in service and reclassified to transmission plant within electric plant, net on the Consolidated Balance Sheets and began depreciating.
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4. |
Goodwill |
Goodwill represents the excess of costs of an acquired business over the fair value of the assets acquired, less liabilities assumed. We conduct an impairment test of goodwill at least annually. As of September 30, 2016 and December 31, 2015, $138.4 million was recorded as goodwill on the Consolidated Balance Sheets.
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5. |
Other Assets |
Other assets are as follows:
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September 30, 2016 |
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December 31, 2015 |
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(In thousands) |
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Gross Carrying Amount |
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Accumulated Amortization |
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Net Carrying Amount |
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Gross Carrying Amount |
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Accumulated Amortization |
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Net Carrying Amount |
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Deferred financing costs on undrawn revolver |
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$ |
967 |
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$ |
(349 |
) |
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$ |
618 |
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|
$ |
967 |
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|
$ |
(204 |
) |
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$ |
763 |
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Other regulatory assets: |
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Deferred financing costs |
|
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27,761 |
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(16,049 |
) |
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11,712 |
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|
|
27,112 |
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|
|
(13,208 |
) |
|
|
13,904 |
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Deferred costs recoverable in future years |
|
|
23,793 |
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|
|
— |
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|
|
23,793 |
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|
|
23,793 |
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|
|
— |
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|
|
23,793 |
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Other regulatory assets, net |
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51,554 |
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|
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(16,049 |
) |
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|
35,505 |
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|
|
50,905 |
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|
|
(13,208 |
) |
|
|
37,697 |
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Investments |
|
|
2,519 |
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|
|
— |
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|
|
2,519 |
|
|
|
2,519 |
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|
|
— |
|
|
|
2,519 |
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Other assets |
|
$ |
55,040 |
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|
$ |
(16,398 |
) |
|
$ |
38,642 |
|
|
$ |
54,391 |
|
|
$ |
(13,412 |
) |
|
$ |
40,979 |
|
Deferred financing costs on undrawn revolver consist of costs incurred in connection with the establishment of the InfraREIT LP revolving credit facility, see Note 6, Borrowings Under Credit Facilities.
Other regulatory assets consist of deferred financing costs within our regulated entities, which are SDTS and, before its December 2015 merger with SDTS, Sharyland Projects, LLC (SPLLC). These assets are classified as regulatory assets and amortized over the length of the related loan. These costs will be included in the costs to be recovered in connection with a future rate case. Deferred financing costs included in other regulatory assets primarily consist of debt issuance costs incurred in connection with the construction credit agreement entered into in 2011 by SPLLC, which was at the time one of our subsidiaries; refinancing costs incurred in connection with the amended and restated revolving credit facility entered into by SDTS in 2013; refinancing costs incurred to amend and restate the SDTS credit facility in order to increase the revolving credit facility to a total of $250.0 million in 2014 and financing costs incurred in connection with SDTS’s senior secured notes, series A and series B in December 2015 and January 2016. See Note 6, Borrowings Under Credit Facilities and Note 7, Long-Term Debt.
Deferred costs recoverable in future years of $23.8 million as of September 30, 2016 and December 31, 2015 represent operating costs incurred from inception of Sharyland through 2007. We have determined that these costs are probable of recovery through future rates based on orders of the Public Utility Commission of Texas (PUCT) in Sharyland’s prior rate cases and regulatory precedent.
In connection with the acquisition of Cap Rock Holding Corporation (Cap Rock) in 2010, we received a participation in the National Rural Cooperative Corporation (NRUCFC). We account for this investment under the cost method of accounting. We believe that the investment is not impaired as of September 30, 2016 and December 31, 2015.
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6. |
Borrowings Under Credit Facilities |
InfraREIT LP Revolving Credit Facility
In December 2014, InfraREIT LP entered into a $75.0 million revolving credit facility, led by Bank of America, N.A., as administrative agent, with up to $15.0 million available for issuance of letters of credit and a maturity date of December 10, 2019. The revolving credit facility is secured by substantially all the assets of InfraREIT LP. In addition, Transmission and Distribution Company, LLC (TDC) guarantees the revolving credit facility and this guarantee is secured by the assets of, and InfraREIT LP’s equity interests in, TDC on materially the same basis as with TDC’s senior secured notes described below in Note 7, Long-Term Debt. Upon consummation of the IPO and Merger, InfraREIT, Inc. became a guarantor under this revolving credit facility.
The credit agreement requires InfraREIT LP to comply with coverage ratios on a consolidated basis and contains affirmative and negative covenants, including: limitations on additional debt, liens, investments, mergers, acquisitions, dispositions or entry into any line of business other than the business of the transmission and distribution of electric power and the provision of ancillary services and certain restrictions on the payment of dividends. The credit agreement also contains restrictions on the amount of Sharyland’s indebtedness and other restrictions on, and covenants applicable to, Sharyland.
Borrowings and other extensions of credit under the revolving credit facility bear interest, at InfraREIT LP’s election, at a rate equal to (1) the one, two, three or six month London Interbank Offered Rate (LIBOR) plus 2.5%, or (2) a base rate (equal to the highest of (a) the Federal Funds Rate plus ½ of 1%, (b) the Bank of America prime rate and (c) LIBOR plus 1%) plus 1.5%. Letters of credit are subject to a letter of credit fee equal to the daily amount available to be drawn multiplied by 2.5%. InfraREIT LP is also required to pay a commitment fee and other customary fees under the revolving credit facility. InfraREIT LP may prepay amounts outstanding under the revolving credit facility in whole or in part without premium or penalty.
As of September 30, 2016 and December 31, 2015, there were no outstanding borrowings or letters of credit and there was $75.0 million of borrowing capacity available under the revolving credit facility. As of September 30, 2016 and December 31, 2015, InfraREIT LP was in compliance with all covenants under the credit agreement.
SDTS Revolving Credit Facility
SDTS’s revolving credit facility has a borrowing capacity of up to $250.0 million and a maturity date of December 10, 2019. Up to $25.0 million of the revolving credit facility is available for issuance of letters of credit, and up to $5.0 million of the revolving facility is available for swingline loans. The revolving credit facility is secured by SDTS’s T&D assets, the leases, certain accounts and TDC’s equity interests in SDTS on the same basis as SDTS’s various senior secured note obligations described below in Note 7, Long-Term Debt.
The interest rate for the revolving credit facility is based, at SDTS’s option, at a rate equal to either (1) a base rate, determined as the greatest of (a) the administrative agent’s prime rate, (b) the federal funds effective rate plus ½ of 1% and (c) LIBOR plus 1.00% per annum, plus a margin of either 0.75% or 1.00% per annum, depending on the total debt to capitalization ratio of SDTS on a consolidated basis or (2) LIBOR plus a margin of either 1.75% or 2.00% per annum, depending on the total debt to capitalization ratio of SDTS on a consolidated basis. SDTS is also required to pay a commitment fee and other customary fees under its revolving credit facility. SDTS is entitled to prepay amounts outstanding under the revolving credit facility with no prepayment penalty.
As of September 30, 2016, SDTS had $92.5 million of borrowings outstanding at a weighted average interest rate of 2.27%, no letters of credit outstanding and $157.5 million of remaining borrowing capacity available under this revolving credit facility. As of December 31, 2015, SDTS had $54.0 million of borrowings outstanding at a weighted average interest rate of 2.05% with no letters of credit outstanding and $196.0 million of remaining borrowing capacity under this revolving credit facility. As of September 30, 2016 and December 31, 2015, SDTS was in compliance with all covenants under its credit agreement.
The revolving credit facilities of InfraREIT LP and SDTS are subject to customary events of default. If an event of default occurs under either facility and is continuing, the lenders may accelerate amounts due under such revolving credit facility (except in the case of a bankruptcy event of default, in which case such amounts will automatically become due and payable).
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7. |
Long-Term Debt |
Long-term debt consisted of the following:
|
|
|
|
September 30, 2016 |
|
|
December 31, 2015 |
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(In thousands) |
|
Maturity Date |
|
Amount Outstanding |
|
|
Interest Rate |
|
|
Amount Outstanding |
|
|
Interest Rate |
|
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TDC |
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior secured notes - $25.0 million |
|
December 30, 2020 |
|
$ |
17,813 |
|
|
|
8.50% |
|
|
$ |
18,750 |
|
|
|
8.50% |
|
SDTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior secured notes - $60.0 million |
|
June 20, 2018 |
|
|
60,000 |
|
|
|
5.04% |
|
|
|
60,000 |
|
|
|
5.04% |
|
Senior secured notes - $400.0 million |
|
December 3, 2025 |
|
|
400,000 |
|
|
|
3.86% |
|
|
|
400,000 |
|
|
|
3.86% |
|
Senior secured notes - $100.0 million |
|
January 14, 2026 |
|
|
100,000 |
|
|
|
3.86% |
|
|
|
— |
|
|
N/A |
|
|
Senior secured notes - $53.5 million |
|
December 30, 2029 |
|
|
43,091 |
|
|
|
7.25% |
|
|
|
44,512 |
|
|
|
7.25% |
|
Senior secured notes - $110.0 million |
|
September 30, 2030 |
|
|
98,457 |
|
|
|
6.47% |
|
|
|
101,627 |
|
|
|
6.47% |
|
Total SDTS debt |
|
|
|
|
701,548 |
|
|
|
|
|
|
|
606,139 |
|
|
|
|
|
Total long-term debt |
|
|
|
|
719,361 |
|
|
|
|
|
|
|
624,889 |
|
|
|
|
|
Less unamortized deferred financing costs |
|
|
|
|
(137 |
) |
|
|
|
|
|
|
(161 |
) |
|
|
|
|
Total long-term debt, less deferred financing costs |
|
|
|
|
719,224 |
|
|
|
|
|
|
|
624,728 |
|
|
|
|
|
Less current portion of long-term debt |
|
|
|
|
(7,740 |
) |
|
|
|
|
|
|
(7,423 |
) |
|
|
|
|
Debt classified as long-term debt, less deferred financing costs |
|
|
|
$ |
711,484 |
|
|
|
|
|
|
$ |
617,305 |
|
|
|
|
|
Senior Secured Notes – In 2010, in connection with the acquisition of Cap Rock, TDC issued $25.0 million aggregate principal amount of 8.50% per annum senior secured notes to The Prudential Insurance Company of America and affiliates. Principal and interest on these senior secured notes are payable quarterly and these senior secured notes are collateralized by the equity interest of TDC and substantially all the assets of TDC on materially the same basis as with lenders under InfraREIT LP’s revolving credit facility described above in Note 6, Borrowings Under Credit Facilities. In connection with the issuance of these senior secured notes, TDC incurred deferred financing costs which are shown as a reduction of the senior secured notes balance. The amount of unamortized deferred financing costs associated with these senior secured notes was $0.1 million and $0.2 million as of September 30, 2016 and December 31, 2015, respectively. These costs were reclassified from other assets to long-term debt, less deferred financing costs on the Consolidated Balance Sheets in accordance with new accounting guidance adopted January 1, 2016, see Note 1, Description of Business and Presentation of Financial Statements.
In December 2015, SDTS issued $400.0 million in 10 year senior secured notes, series A (Series A Notes), due December 3, 2025, and on January 14, 2016 issued an additional $100.0 million in 10 year senior secured notes, series B (Series B Notes), due January 14, 2026. These senior secured notes were issued through a private placement conducted pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and bear interest at a rate of 3.86% per annum, payable semi-annually. The Series A Notes are due at maturity with outstanding accrued interest payable each June and December. The Series B Notes are due at maturity with outstanding accrued interest payable each January and July.
In 2009, SDTS issued $53.5 million aggregate principal amount of 7.25% per annum senior secured notes to The Prudential Insurance Company of America and affiliates (2009 Notes). Principal and interest on these senior secured notes are payable quarterly.
In 2010, in connection with the acquisition of Cap Rock, SDTS issued $110.0 million aggregate principal amount of 6.47% per annum senior secured notes to The Prudential Insurance Company of America (2010 Notes). Principal and interest on these senior secured notes are payable quarterly.
SDTS and TDC are entitled to prepay amounts outstanding under their senior secured notes, subject to a prepayment penalty equal to the excess of the discounted value of the remaining scheduled payments with respect to such notes over the amount of the prepaid notes.
The agreements governing the senior secured notes contain certain default triggers related to the failure to maintain compliance with financial and other covenants contained in the agreements, such as limitations on liens, investments and the incurrence of additional indebtedness. As of September 30, 2016 and December 31, 2015, SDTS and TDC were in compliance with all covenants under the applicable agreements.
Senior Secured Credit Facilities - In 2011, SPLLC entered into a construction term loan agreement syndicated broadly to a group of international banks, and issued fixed rate notes to The Prudential Insurance Company of America and affiliates (Fixed Rate Notes).
The $447.0 million construction term loan was converted into a term loan with a balance of $407.0 million in May 2014. After this conversion, interest accrued at LIBOR plus 2.25%. Interest under the term loan was payable the last day of the selected interest period for interest periods of three months or less, and every three months for interest periods greater than three months. Amortized principal amounts of the term loan were payable quarterly after the conversion. The term loan had an interest rate of 2.45% as of September 30, 2015.
In December 2015, the outstanding principal and interest on the term loan were paid in full with proceeds from the SDTS Series A Notes. Also in December 2015, the Fixed Rate Notes were assumed by SDTS in connection with the merger of SPLLC into SDTS.
The Fixed Rate Notes have a principal balance of $60.0 million which is due in full on June 20, 2018. Interest is payable quarterly at an interest rate of 5.04% per annum. The Fixed Rate Notes do not provide for any principal payments.
The credit agreement governing the Fixed Rate Notes contains certain default triggers related to the failure to maintain compliance with financial and other covenants contained in the agreements, such as limitations on liens, investments and the incurrence of additional indebtedness. SDTS was in compliance with all covenants for the Fixed Rate Notes as of September 30, 2016 and December 31, 2015.
SDTS’s Series A Notes, Series B Notes, 2009 Notes, 2010 Notes and Fixed Rate Notes are secured by SDTS’s T&D assets, the leases, certain accounts and TDC’s equity interests in SDTS on the same basis as SDTS’s revolving credit facility described above in Note 6, Borrowings Under Credit Facilities.
|
8. |
Fair Value of Financial Instruments |
The carrying amounts of our cash and cash equivalents, restricted cash, due from affiliates and accounts payable approximate fair value due to the short-term nature of these assets and liabilities.
We had borrowings totaling $719.4 million and $624.9 million under our senior secured notes with a weighted average interest rate of 4.64% and 4.78% per annum as of September 30, 2016 and December 31, 2015, respectively. The fair value of these borrowings is estimated using discounted cash flow analysis based on current market rates.
Financial instruments, measured at fair value, by level within the fair value hierarchy were as follows:
|
|
Carrying |
|
|
Fair Value |
|
||||||||||
(In thousands) |
|
Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
$ |
719,361 |
|
|
$ |
— |
|
|
$ |
792,934 |
|
|
$ |
— |
|
December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
$ |
624,889 |
|
|
$ |
— |
|
|
$ |
657,270 |
|
|
$ |
— |
|
|
9. |
Regulatory Liability |
Our regulatory liability is established through our depreciation rates related to cost of removal and represents amounts that we expect to incur in the future. As of September 30, 2016 and December 31, 2015, we recorded on the Consolidated Balance Sheets as a long-term liability $18.4 million and $10.6 million, respectively, net of actual removal costs incurred.
|
10. |
Commitments and Contingencies |
The amounts reported as regulatory assets as of September 30, 2016 and December 31, 2015 are subject to review by the PUCT and as with all utility assets may change at a later date based on that review, see Note 5, Other Assets.
We are not a party to any legal proceedings other than legal proceedings arising in the ordinary course of business. See Note 17, Subsequent Events for information related to our rate case. We do not believe the resolution of these proceedings, individually or in the aggregate, will have a material impact on our business, financial condition or results of operations, liquidity and cash flows.
|
11. |
Equity |
On September 1, 2016, our board of directors approved a cash distribution by the Operating Partnership to all unit holders of record, including InfraREIT, Inc., on September 30, 2016 of $0.25 per unit for a total distribution of $15.2 million ($10.9 million to InfraREIT, Inc.). Also, on September 1, 2016, our board of directors approved a cash dividend to stockholders of record of InfraREIT, Inc. on September 30, 2016 of $0.25 per share for a total of $10.9 million. The cash distribution and cash dividend were paid on October 20, 2016.
On June 3, 2016, our board of directors approved a cash distribution by the Operating Partnership to all unit holders of record, including InfraREIT, Inc., on June 30, 2016 of $0.25 per unit for a total distribution of $15.2 million ($10.9 million to InfraREIT, Inc.). Also, on June 3, 2016, our board of directors approved a cash dividend to stockholders of record of InfraREIT, Inc. on June 30, 2016 of $0.25 per share for a total of $10.9 million. The cash distribution and cash dividend were paid on July 21, 2016.
On March 2, 2016, our board of directors approved a cash distribution by the Operating Partnership to all unit holders of record, including InfraREIT, Inc., on March 31, 2016 of $0.25 per unit for a total distribution of $15.2 million ($10.9 million to InfraREIT, Inc.). Also, on March 2, 2016, our board of directors approved a cash dividend to stockholders of record of InfraREIT, Inc. on March 31, 2016 of $0.25 per share for a total of $10.9 million. The cash distribution and cash dividend were paid on April 21, 2016.
On September 3, 2015, our board of directors approved a cash distribution by the Operating Partnership to all unit holders of record, including InfraREIT, Inc., on September 30, 2015 of $0.225 per unit for a total distribution of $13.6 million ($9.8 million to InfraREIT, Inc.). Also, on September 3, 2015, our board of directors approved a cash dividend to stockholders of record of InfraREIT, Inc. on September 30, 2015 of $0.225 per share for a total of $9.8 million. The cash distribution and cash dividend were paid on October 22, 2015.
On June 5, 2015, our board of directors approved a cash distribution by the Operating Partnership to all unit holders of record, including InfraREIT, Inc., on June 30, 2015 of $0.225 per unit for a total distribution of $13.6 million ($9.8 million to InfraREIT, Inc.). Also, on June 5, 2015, our board of directors approved a cash dividend to stockholders of record of InfraREIT, Inc. on June 30, 2015 of $0.225 per share for a total of $9.8 million. The cash distribution and cash dividend were paid on July 23, 2015.
On March 6, 2015, our board of directors approved a cash distribution by the Operating Partnership to all unit holders of record, including InfraREIT, Inc., on March 31, 2015 of $0.14 per unit for a total distribution of $8.5 million ($6.1 million to InfraREIT, Inc.). Also, on March 6, 2015, our board of directors approved a cash dividend to stockholders of record of InfraREIT, Inc. on March 31, 2015 of $0.14 per share for a total of $6.1 million. The cash distribution and cash dividend were paid on April 23, 2015.
On January 13, 2015, InfraREIT, L.L.C.’s board of directors approved a cash distribution by the Operating Partnership to all unit holders of record, including InfraREIT, L.L.C., on January 20, 2015 of $0.26 per unit for a total distribution of $11.7 million ($9.0 million to InfraREIT, L.L.C.). Also, on January 13, 2015, InfraREIT, L.L.C.’s board of directors approved a cash dividend to shareholders of record of InfraREIT, L.L.C. on January 20, 2015 of $0.26 per share for a total of $9.0 million. The cash distribution and cash dividend were paid on January 29, 2015.
On December 18, 2014, InfraREIT, L.L.C.’s board of directors approved a cash distribution by the Operating Partnership to all unit holders of record, including InfraREIT, L.L.C., on December 18, 2014 of $0.31 per unit for a total distribution of $14.1 million ($10.8 million to InfraREIT, L.L.C.). Also, on December 18, 2014, InfraREIT, L.L.C.’s board of directors approved a cash dividend to shareholders of record of InfraREIT, L.L.C. on December 18, 2014 of $0.31 per share for a total of $10.8 million. The cash distribution and cash dividend were paid on January 16, 2015.
|
12. |
Noncontrolling Interest |
We present as a noncontrolling interest the portion of any equity in entities that we control and consolidate but do not own. Generally, OP Units of our Operating Partnership participate in net income allocations and distributions and entitle their holder the right, subject to the terms set forth in the partnership agreement, to require the Operating Partnership to redeem all or a portion of the OP Units held by such limited partner. At our option, we may satisfy this redemption with cash or by exchanging shares of InfraREIT, Inc. common stock on a one-for-one basis. As of September 30, 2016 and December 31, 2015, there were a total of 16.9 million and 17.0 million OP Units, respectively, held by the limited partners of the Operating Partnership.
During the nine months ended September 30, 2016 and 2015, our Operating Partnership issued an aggregate of 29,722 and 28,000 long-term incentive units (LTIP Units), respectively, to seven members of our board of directors. For additional information, refer to Note 15, Share-Based Compensation.
We follow the guidance issued by the FASB regarding the classification and measurement of redeemable securities. Accordingly, we have determined that the OP Units meet the requirements to be classified as permanent equity. We redeemed 183,496 OP Units with the issuance of 183,496 shares of common stock during the nine months ended September 30, 2016. During the year ended December 31, 2015, we did not redeem any OP Units other than, in connection with the Reorganization: (1) 1,551,878 Class A OP Units held by Hunt-InfraREIT, which were exchanged with InfraREIT, Inc. for 1,551,878 shares of common stock of InfraREIT, Inc. and (2) 6,242,999 Class A OP Units in exchange for the assignment of a promissory note in the principal amount of $66.5 million.
|
14. |
Leases |
The following table shows the composition of our lease revenue:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(In thousands) |
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Base rent (straight-line) |
|
$ |
38,629 |
|
|
$ |
31,253 |
|
|
$ |
106,079 |
|
|
$ |
90,083 |
|
Percentage rent |
|
|
10,790 |
|
|
|
10,199 |
|
|
|
10,790 |
|
|
|
10,199 |
|
Total lease revenue |
|
$ |
49,419 |
|
|
$ |
41,452 |
|
|
$ |
116,869 |
|
|
$ |
100,282 |
|
SDTS has entered into various leases with Sharyland for all our placed in service T&D assets. The master lease agreements, as amended, expire at various dates from December 31, 2017 through December 31, 2022. Each agreement includes annual base rent while all but one agreement includes additional percentage rent (based on an agreed upon percentage of the gross revenue of Sharyland, as defined in the lease agreements, in excess of annual specified breakpoints). The rate used for percentage rent for the reported time periods varies by lease and ranges from a high of 37% to a low of 23%. Because an annual specified breakpoint must be met under our leases before we can recognize any percentage rent, we anticipate our revenue will grow over the year with little to no percentage rent recognized in the first and second quarters of each year and with the largest amounts recognized during the third and fourth quarters of each year.
|
16. |
Supplemental Cash Flow Information |
Supplemental cash flow information and non-cash investing and financing activities are as follows:
|
|
Nine Months Ended September 30, |
|
|||||
(In thousands) |
|
2016 |
|
|
2015 |
|
||
Supplemental cash flow information |
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
|
$ |
21,879 |
|
|
$ |
20,022 |
|
Non-cash investing and financing activities |
|
|
|
|
|
|
|
|
Change in accrued additions to electric plant |
|
|
3,383 |
|
|
|
4,387 |
|
Allowance for funds used during construction - debt |
|
|
2,517 |
|
|
|
1,312 |
|
Net non-cash equity issuances related to the Merger and Reorganization |
|
|
— |
|
|
|
97,193 |
|
Net non-cash noncontrolling equity issuances related to the Merger and Reorganization |
|
|
— |
|
|
|
119,607 |
|
Redemption of operating partnership units for common stock |
|
|
3,226 |
|
|
|
— |
|
Non-cash noncontrolling interest equity issuances |
|
|
— |
|
|
|
755 |
|
Dividends and distributions payable |
|
|
15,160 |
|
|
|
13,634 |
|
|
17.Subsequent Events
As a result of a preliminary order issued by the PUCT in October 2016, Sharyland and SDTS are required to:
|
• |
File amended rate filing packages no later than January 1, 2017; |
|
• |
Amend the rate case application to request PUCT approval of a tariff establishing terms and conditions for the leases between Sharyland and SDTS; and |
|
• |
Amend the rate case application to request the PUCT to issue SDTS its own certificate of convenience and necessity. |
The preliminary order also contemplates that we will replace the five current lease agreements between Sharyland and SDTS with two leases, one for transmission assets and one for distribution assets. The preliminary order provides that the PUCT’s determinations in the rate case will supersede prior orders to the extent of any conflict, but will not rescind the PUCT’s 2008 approval of the transfer of T&D assets from Sharyland to SDTS. As a result of the PUCT’s regulation of our leases as part of a PUCT approved tariff for SDTS, the rent that we are permitted to charge Sharyland under the leases will be established and approved by the PUCT. We also expect that other rate case issues, such as the allowed return on equity, capital structure, cost of debt and income tax allowance, will be determined by the PUCT’s final order at the conclusion of the rate case. The timing and outcome of the rate case is uncertain, although we currently expect it to be completed during 2017.
|
Basis of Presentation
InfraREIT, Inc. is a Maryland corporation and the surviving corporation of a merger (Merger) with InfraREIT, L.L.C., a Delaware limited liability company, completed on February 4, 2015 in connection with the initial public offering (IPO) of InfraREIT, Inc. and related transactions effected during the first quarter of 2015 (collectively, the Reorganization). For additional information related to our IPO and Reorganization, refer to the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the U.S. Securities and Exchange Commission (SEC) on March 3, 2016.
The Merger was accounted for as a reverse acquisition, which means for accounting purposes we treated the assets and liabilities of InfraREIT, Inc. as assumed and incorporated with the assets and liabilities of InfraREIT, L.L.C. The accompanying unaudited interim financial statements of InfraREIT, Inc. (which may be referred to as the “Company,” “InfraREIT,” “we,” “our” and “us”) include our accounts and the accounts of all other entities in which we have a controlling financial interest with noncontrolling interest of consolidated subsidiaries reported separately. This Quarterly Report on Form 10-Q presents the operations of InfraREIT, L.L.C. prior to the Merger and the operations of InfraREIT, Inc. after the Merger.
These unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. For further information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 3, 2016.
We held 72.2% of the outstanding partnership units (OP Units) in InfraREIT Partners, LP (Operating Partnership or InfraREIT LP) as of September 30, 2016 and are its general partner. We include the accounts of the Operating Partnership and its subsidiaries in our consolidated financial statements. Affiliates of Hunt Consolidated, Inc. (HCI) and members of our board of directors held the other 27.8% of the outstanding OP Units as of September 30, 2016.
Recent Accounting Guidance
Recently Adopted Accounting Guidance
In February 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis. This amendment affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 was effective for periods beginning after December 15, 2015 with early adoption permitted. We adopted the guidance on January 1, 2016. The adoption of the new guidance did not have an impact on our current consolidation.
In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. ASU 2015-03 was effective for periods beginning after December 15, 2015 with early adoption permitted. The adoption of the new guidance was applied on a retrospective basis with each balance sheet presented reflecting the new guidance along with transitional disclosures. The adoption did change the presentation of our financial position. As a result, $0.2 million of unamortized deferred financing costs were reclassified from other assets to long-term debt, less deferred financing costs on our Consolidated Balance Sheets as of December 31, 2015. The adoption of the new guidance did not have an impact on our results of operations or cash flows.
In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustments. ASU 2015-16 requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The change in provisional amounts will be recorded in the period in which they are determined with changes to the income statement for any effect on earnings for changes in depreciation, amortization or other income effect calculated as if the accounting had been completed at the acquisition date. ASU 2015-16 was effective for periods beginning after December 15, 2015 with early adoption permitted. The new guidance was adopted as of January 1, 2016 and will be applied prospectively to adjustments to provisional amounts that occur for any future business combination. The adoption of the new guidance has not affected our financial position, results of operations or cash flows.
Recent Accounting Guidance Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 amended the existing accounting standard for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 is effective for periods beginning after December 15, 2018 with early adoption permitted. The new standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We are currently evaluating the new guidance and have not determined the impact this standard may have on our financial position, results of operations or cash flows.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Clarification of Certain Cash Receipts and Cash Payments. The objective of ASU 2016-15 is to eliminate the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows by adding or clarifying guidance on eight specific cash flow issues. ASU 2016-15 is effective for periods beginning after December 15, 2017 with early adoption permitted. The new standard should be applied retrospectively to all periods presented, unless deemed impracticable, in which case, prospective application is permitted. We are currently evaluating the new guidance and have not determined the impact this standard may have on our cash flows.
|
The major classes of electric plant are as follows:
(In thousands) |
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||
Electric plant: |
|
|
|
|
|
|
|
|
Transmission plant |
|
$ |
1,175,051 |
|
|
$ |
1,080,050 |
|
Distribution plant |
|
|
544,363 |
|
|
|
457,988 |
|
General plant |
|
|
15,950 |
|
|
|
15,655 |
|
Total plant in service |
|
|
1,735,364 |
|
|
|
1,553,693 |
|
CWIP |
|
|
113,517 |
|
|
|
121,602 |
|
Total electric plant |
|
|
1,848,881 |
|
|
|
1,675,295 |
|
Accumulated depreciation |
|
|
(259,189 |
) |
|
|
(240,764 |
) |
Electric plant, net |
|
$ |
1,589,692 |
|
|
$ |
1,434,531 |
|
|
Other assets are as follows:
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||||||||||||||||||
(In thousands) |
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
||||||
Deferred financing costs on undrawn revolver |
|
$ |
967 |
|
|
$ |
(349 |
) |
|
$ |
618 |
|
|
$ |
967 |
|
|
$ |
(204 |
) |
|
$ |
763 |
|
Other regulatory assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred financing costs |
|
|
27,761 |
|
|
|
(16,049 |
) |
|
|
11,712 |
|
|
|
27,112 |
|
|
|
(13,208 |
) |
|
|
13,904 |
|
Deferred costs recoverable in future years |
|
|
23,793 |
|
|
|
— |
|
|
|
23,793 |
|
|
|
23,793 |
|
|
|
— |
|
|
|
23,793 |
|
Other regulatory assets, net |
|
|
51,554 |
|
|
|
(16,049 |
) |
|
|
35,505 |
|
|
|
50,905 |
|
|
|
(13,208 |
) |
|
|
37,697 |
|
Investments |
|
|
2,519 |
|
|
|
— |
|
|
|
2,519 |
|
|
|
2,519 |
|
|
|
— |
|
|
|
2,519 |
|
Other assets |
|
$ |
55,040 |
|
|
$ |
(16,398 |
) |
|
$ |
38,642 |
|
|
$ |
54,391 |
|
|
$ |
(13,412 |
) |
|
$ |
40,979 |
|
|
Long-term debt consisted of the following:
|
|
|
|
September 30, 2016 |
|
|
December 31, 2015 |
|
||||||||||
(In thousands) |
|
Maturity Date |
|
Amount Outstanding |
|
|
Interest Rate |
|
|
Amount Outstanding |
|
|
Interest Rate |
|
||||
TDC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior secured notes - $25.0 million |
|
December 30, 2020 |
|
$ |
17,813 |
|
|
|
8.50% |
|
|
$ |
18,750 |
|
|
|
8.50% |
|
SDTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior secured notes - $60.0 million |
|
June 20, 2018 |
|
|
60,000 |
|
|
|
5.04% |
|
|
|
60,000 |
|
|
|
5.04% |
|
Senior secured notes - $400.0 million |
|
December 3, 2025 |
|
|
400,000 |
|
|
|
3.86% |
|
|
|
400,000 |
|
|
|
3.86% |
|
Senior secured notes - $100.0 million |
|
January 14, 2026 |
|
|
100,000 |
|
|
|
3.86% |
|
|
|
— |
|
|
N/A |
|
|
Senior secured notes - $53.5 million |
|
December 30, 2029 |
|
|
43,091 |
|
|
|
7.25% |
|
|
|
44,512 |
|
|
|
7.25% |
|
Senior secured notes - $110.0 million |
|
September 30, 2030 |
|
|
98,457 |
|
|
|
6.47% |
|
|
|
101,627 |
|
|
|
6.47% |
|
Total SDTS debt |
|
|
|
|
701,548 |
|
|
|
|
|
|
|
606,139 |
|
|
|
|
|
Total long-term debt |
|
|
|
|
719,361 |
|
|
|
|
|
|
|
624,889 |
|
|
|
|
|
Less unamortized deferred financing costs |
|
|
|
|
(137 |
) |
|
|
|
|
|
|
(161 |
) |
|
|
|
|
Total long-term debt, less deferred financing costs |
|
|
|
|
719,224 |
|
|
|
|
|
|
|
624,728 |
|
|
|
|
|
Less current portion of long-term debt |
|
|
|
|
(7,740 |
) |
|
|
|
|
|
|
(7,423 |
) |
|
|
|
|
Debt classified as long-term debt, less deferred financing costs |
|
|
|
$ |
711,484 |
|
|
|
|
|
|
$ |
617,305 |
|
|
|
|
|
|
Financial instruments, measured at fair value, by level within the fair value hierarchy were as follows:
|
|
Carrying |
|
|
Fair Value |
|
||||||||||
(In thousands) |
|
Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
$ |
719,361 |
|
|
$ |
— |
|
|
$ |
792,934 |
|
|
$ |
— |
|
December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
$ |
624,889 |
|
|
$ |
— |
|
|
$ |
657,270 |
|
|
$ |
— |
|
|
The following table shows the composition of our lease revenue:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(In thousands) |
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
Base rent (straight-line) |
|
$ |
38,629 |
|
|
$ |
31,253 |
|
|
$ |
106,079 |
|
|
$ |
90,083 |
|
Percentage rent |
|
|
10,790 |
|
|
|
10,199 |
|
|
|
10,790 |
|
|
|
10,199 |
|
Total lease revenue |
|
$ |
49,419 |
|
|
$ |
41,452 |
|
|
$ |
116,869 |
|
|
$ |
100,282 |
|
|
Supplemental cash flow information and non-cash investing and financing activities are as follows:
|
|
Nine Months Ended September 30, |
|
|||||
(In thousands) |
|
2016 |
|
|
2015 |
|
||
Supplemental cash flow information |
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
|
$ |
21,879 |
|
|
$ |
20,022 |
|
Non-cash investing and financing activities |
|
|
|
|
|
|
|
|
Change in accrued additions to electric plant |
|
|
3,383 |
|
|
|
4,387 |
|
Allowance for funds used during construction - debt |
|
|
2,517 |
|
|
|
1,312 |
|
Net non-cash equity issuances related to the Merger and Reorganization |
|
|
— |
|
|
|
97,193 |
|
Net non-cash noncontrolling equity issuances related to the Merger and Reorganization |
|
|
— |
|
|
|
119,607 |
|
Redemption of operating partnership units for common stock |
|
|
3,226 |
|
|
|
— |
|
Non-cash noncontrolling interest equity issuances |
|
|
— |
|
|
|
755 |
|
Dividends and distributions payable |
|
|
15,160 |
|
|
|
13,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|