Fair Value Measurements

12 Months Ended

Dec. 31, 2023

The Company holds various financial instruments that are not required to be recorded at fair value. For cash, restricted cash, accounts receivable, accounts payable, and short-term debt, the carrying amounts approximate fair value due to the short maturity of these instruments. The Company’s money market funds are classified as Level 1 because they are valued using quoted market prices.

The following table provides the financial instruments measured at fair value on a recurring basis:


	December 31, 2023
	Level 1	Level 2	Level 3	Total
Assets
Derivative assets:
Interest rate swaps	—	530	—	530
Total assets at fair value	—	530	—	530

Liabilities
Alignment Shares liability	—	—	60,502	60,502
Other current liabilities:
True Green II Acquisition - contingent liability	—	—	4,658	4,658
Caldera Acquisition - contingent liability	—	—	2,600	2,600
Total liabilities at fair value	—	—	67,760	67,760


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Money market fund	$	101,842	$	—	$	—	$	101,842
Derivative assets:
Interest rate swaps	—		3,953		—		3,953
Total assets at fair value	101,842		3,953		—		105,795

Liabilities
Alignment Shares liability	—		—		66,145		66,145
Other current liabilities:
Solar Acquisition - contingent liability	—		—		2,875		2,875
Total liabilities at fair value	—		—		69,020		69,020

Long-term debt

The estimated fair value of long-term debt, including current portion, as of December 31, 2023 and 2022, was $1,101.0 million and $588.8 million, respectively, using a discounted cash flow analysis of both outstanding principal and future interest payments until such time the Company has the ability to repay the loan. The long-term debt is considered a Level 2 financial liability under the fair value hierarchy.

Alignment Shares Liability

As of December 31, 2023, the Company has 996,188 Alignment Shares outstanding, all of which are held by the Sponsor, certain former officers of CBAH (such officers, together with the Sponsor, the “Sponsor Parties”) and former CBAH directors. The Alignment Shares will automatically convert into shares of Class A common stock based upon the Total Return (as defined in Exhibit 4.2 to this Form 10-K) on the Class A common stock as of the relevant measurement date over each of the seven fiscal years following the Merger.

Upon the consummation of the Merger, Alignment Shares have no continuing service requirement and do not create an unconditional obligation requiring the Company to redeem the instruments by transferring assets. In addition, the shares convert to a variable number of Class A common stock depending on the trading price of the Class A common stock and dividends paid/payable to the holders of Class A common stock. Therefore, the shares do not represent an obligation or a conditional obligation to issue a variable number of shares with a monetary value based on any of the criteria in ASC 480, Distinguishing Liabilities From Equity. The Company determined that the Alignment Shares meet the definition of a derivative because they contain (i) an underlying (Class A common stock price), (ii) a notional amount (a fixed number of Class B common stock), (iii) no or minimal initial net investment (the Sponsor paid a de minimis amount which is less than the estimated fair value of the shares), and (iv) net settleable through a conversion of the Alignment Shares into Class A shares. As such, the Company concluded that the

Alignment Shares meet the definition of a derivative, which will be presented at fair value each reporting period, with changes in fair value recorded through earnings.

The Company estimates the fair value of outstanding Alignment Shares using a Monte Carlo simulation model utilizing a distribution of potential outcomes based on a set of underlying assumptions such as stock price, volatility, and risk-free interest rate. As volatility of 67% and risk-free interest rate of 3.9% are not observable inputs, the overall fair value measurement of Alignment Shares is classified as Level 3. Unobservable inputs can be volatile and a change in those inputs might result in a significantly higher or lower fair value measurement of Alignment Shares.


	For the year ended December 31, 2023			For the year ended December 31, 2022
	Shares	$		Shares	$
Beginning balance	1,207,500	$	66,145	1,408,750	$	127,474
Alignment Shares converted	(201,250)	(11)		(201,250)	(15)
Alignment Shares forfeited	(10,062)	(432)		—	—
Fair value remeasurement	—	(5,200)		—	(61,314)
Ending balance	996,188	$	60,502	1,207,500	$	66,145

Interest Rate Swaps

The Company’s derivative instruments consist of interest rate swaps that are not designated as cash flow hedges or fair value hedges under accounting guidance. The Company uses interest rate swaps to manage its net exposure to interest rate changes. These instruments are custom, over-the-counter contracts with various bank counterparties that are not traded on an active market but valued using readily observable market inputs and the overall fair value measurement is classified as Level 2. As of December 31, 2023 and 2022, the notional amounts were $112.8 million and $141.6 million, respectively. The change in fair value of interest rate swaps resulted in a loss of $1.2 million for the year ended December 31, 2023, and gain of $3.0 million for the year ended December 31, 2022. The change in fair value of interest rate swaps was recorded as interest expense in the consolidated statements of operations.

Forward Starting Interest Rate Swap

The Company entered into a forward starting interest rate swap on January 31, 2023, with an effective date of January 31, 2025 and a termination date of January 31, 2035. This transaction had a notional amount of $250.0 million and was designated as a cash flow hedge of the Company's forecasted fixed-rate or floating-rate debt issuances.

Later in 2023, the Company terminated the forward starting interest rate swap for the total cash proceeds of $16.7 million, which is reported in the Cash flows from operating activities section of the consolidated statements of cash flows. The total gain of $17.3 million, was recorded as a component of Other comprehensive income in the consolidated statements of comprehensive income for the year ended December 31, 2023. The Company allocated $238.0 million of the notional amount to the incremental debt issuances under the APAF III Term Loan and the remaining $12.0 million to a future debt issuance that is probable of occurrence prior to January 31, 2025.

Other comprehensive income of $16.1 million associated with the incremental debt issuances under the APAF III Term Loan is recognized as an adjustment to Interest expense, net over the term of the debt. For the year ended December 31, 2023, the adjustment to Interest expense, net was not material. The Company also incurred $0.6 million of transaction fees associated with the swap termination and recorded them as a component of Interest expense, net in the consolidated statements of operations for the year ended December 31, 2023. Approximately $1.6 million of the gain in other comprehensive income will be reclassified into earnings during the next 12 months.

The cash flow hedge was determined to be fully effective during the year ended December 31, 2023. As such, no amount of ineffectiveness has been included in net income. The amount included in other comprehensive income would be reclassified to current earnings should all or a portion of the hedge no longer be considered effective. The Company expects the hedge to remain fully effective during the remaining term of the swap.

Contingent Consideration

Caldera Acquisition

In connection with the Caldera Acquisition on December 20, 2023, contingent consideration of $8.0 million may be payable upon achieving certain power volumes generated by the acquired solar energy facilities. The Company estimated the fair value of contingent consideration for future earnout payments using a Monte Carlo simulation model. Significant assumptions used in the measurement include the estimated volumes of power generation of acquired solar energy facilities during the 12-month period

since the acquisition date and the risk-adjusted discount rate associated with the business. As the inputs are not observable, the overall fair value measurement of the contingent consideration is classified as Level 3. As of December 31, 2023, the fair value of the contingent consideration was $2.6 million and was included in Other current liabilities in the consolidated balance sheets. No gain or loss on remeasurement of contingent liability was reported for the year ended December 31, 2023.

True Green II Acquisition

In connection with the True Green II acquisition on February 15, 2023, contingent consideration of $10.0 million may be payable upon the seller's completion of in-development solar energy facilities and the Company obtaining tax equity financing. The Company estimated the fair value of the contingent consideration by using the expected cash flow approach. These cash flows were then discounted to present value using the risk-adjusted discount rate associated with the business. As the inputs are not observable, the overall fair value measurement of the contingent consideration is classified as Level 3. As of the acquisition date and December 31, 2023, the fair value of the contingent consideration was $8.0 million and $4.7 million, respectively, and was included in Other current liabilities in the consolidated balance sheets. During the year ended December 31, 2023, the Company paid $5.3 million to settle a portion of the contingent liability and the remaining contingency is expected to be resolved and settled in 2024. For the year ended December 31, 2023, the Company recorded $2.0 million loss on fair value remeasurement of contingent liability associated with the True Green II Acquisition in the consolidated statements of operations. The loss was recorded due to changes in significant assumptions used in the measurement, including the percentage of completion of in-development solar energy facilities.

Solar Acquisition

In connection with the acquisition of a portfolio of sixteen solar energy facilities with a combined nameplate capacity of 61.5 MW on December 22, 2020 (the "Solar Acquisition"), contingent consideration of $3.1 million may be payable upon achieving certain market power rates and $7.4 million upon achieving certain power volumes generated by the acquired solar energy facilities. The Company estimated the fair value of the contingent consideration for future earnout payments using a Monte Carlo simulation model. Significant assumptions used in the measurement include the estimated volumes of power generation of acquired solar energy facilities during the 18-36-month period since the acquisition date, market power rates during the 36-month period, and the risk-adjusted discount rate associated with the business. As the inputs are not observable, the overall fair value measurement of the contingent consideration is classified as Level 3. Liability for the contingent consideration associated with production volumes expired on June 30, 2022 and the Company remeasured its fair value to zero with $1.1 million gain on fair value remeasurement recognized in the consolidated statement of operations for the year ended December 31, 2022. Liability for the contingent consideration associated with power rates is included in other long-term liabilities in the consolidated balance sheets at the estimated fair value of $3.1 million and $2.9 million as of December 31, 2023 and 2022, respectively. For the year ended December 31, 2023, the Company recorded a loss on fair value remeasurement of contingent consideration associated with power rates of $0.2 million within operating income in the consolidated statements of operations. For the year ended December 31, 2022, the Company recorded $1.7 million loss and $1.1 million gain on fair value remeasurement of contingent consideration associated with power rates and production volumes, respectively, in the consolidated statements of operations. Gain and loss was recorded due to changes in significant assumptions used in the measurement, including the actual versus estimated volumes of power generation of acquired solar energy facilities and market power rates. As of December 31, 2023, the 36-month measurement period for the contingent liability associated with market power rates has ended and the contingency was resolved with $3.1 million payable in 2024.

Other

There were no other contingent consideration liabilities recorded during the year ended December 31, 2023. Gain on fair value remeasurement of other contingent consideration of $0.5 million was recorded within operating income in the consolidated statements of operations for the year ended December 31, 2022.

Redeemable Warrant Liability

As part of the Merger, the Company assumed the Redeemable Warrant Liability of $47.6 million. On October 17, 2022, the Company redeemed all outstanding Redeemable Warrants. Prior to the redemption, Redeemable Warrants were recorded as liabilities in the consolidated balance sheet at fair value, with subsequent changes in their respective fair values recognized in the consolidated statements of operations at each reporting date. There were no Redeemable Warrants outstanding during the year ended December 31, 2023. For the year ended December 31, 2022, the Company recorded a loss from fair value remeasurement of $5.6 million in the consolidated statements of operations.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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