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Fair Value Measurements
 6 Months Ended
Jun. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
The Company measures certain assets and liabilities at fair value, which is defined as the price that would be received from the sale of an asset or paid to transfer a liability (i.e., an exit price) on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. Our fair value measurements use the following hierarchy, which prioritizes valuation inputs based on the extent to which the inputs are observable in the market.
•Level 1 - Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured.
•Level 2 - Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs are observable in active markets are Level 2 valuation techniques.
•Level 3 - Valuation techniques in which one or more significant inputs are unobservable. Such inputs reflect our estimate of assumptions that market participants would use to price an asset or liability.
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 following table provides the financial instruments measured at fair value on a recurring basis:
June 30, 2024
Level 1Level 2Level 3Total
Assets
Cash equivalents:
Money market fund$53,886 $— $— $53,886 
Derivative assets:
Interest rate swaps— 2,965 — 2,965 
Total assets at fair value$53,886 $2,965 $— $56,851 
Liabilities
Alignment Shares liability— — 22,534 22,534 
Other long-term liabilities:
True Green II Acquisition - contingent liability— — 2,187 2,187 
Caldera Acquisition - contingent liability— — 900 900 
Total liabilities at fair value$— $— $25,621 $25,621 
December 31, 2023
Level 1Level 2Level 3Total
Assets
Derivative assets:
Interest rate swaps$— $530 $— $530 
Total assets at fair value$— $530 $— $530 
Liabilities
Alignment Shares liability— — 60,502 60,502 
Other long-term liabilities:
True Green II Acquisition - contingent liability— — 4,658 4,658 
Caldera Acquisition - contingent liability— — 2,600 2,600 
Total liabilities at fair value$— $— $67,760 $67,760 
Alignment Shares Liability
As of June 30, 2024, the Company had 796,950 Alignment Shares outstanding, all of which are held by CBRE Acquisition Sponsor, LLC (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 4.4 to our 2022 Annual Report on 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 valuation 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 69% and risk-free interest rate of 4.45% 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 six months ended June 30, 2024
For the six months ended June 30, 2023
 Shares$Shares$
Beginning balance996,188 $60,502 1,207,500 $66,145 
Alignment shares converted(199,238)(10)(201,250)(11)
Fair value remeasurement— (37,958)— (19,823)
Ending balance796,950 $22,534 1,006,250 $46,311 

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 June 30, 2024 and December 31, 2023, the notional amounts were $118.8 million and $112.8 million, respectively. For the three and six months ended June 30, 2024, the change in fair value of interest rate swaps resulted in a gain of $0.4 million and a gain of $2.4 million, respectively. For the three and six months ended June 30, 2023, the change in fair value of interest rate swaps resulted in a gain of $2.8 million and a gain of $0.1 million, respectively. The change in fair value of interest rate swaps is recorded as interest expense in the condensed 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 total cash proceeds of $16.7 million. 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 $12.0 million to the APAF IV Term Loan.
Other comprehensive income of $17.3 million associated with the incremental debt issuances under the APAF III Term Loan and APAF IV Term Loan is recognized as an adjustment to interest expense, net over the term of the debt. For the three and six months ended June 30, 2024, the adjustment to Interest expense, net was $0.4 million and $0.8 million, respectively. 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 three and six months ended June 30, 2024. As such, no amount of ineffectiveness has been included in net income. The amount included in other comprehensive income will 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 June 30, 2024 and December 31, 2023, the fair value of the contingent consideration was $0.9 million and $2.6 million, respectively, and was included in Other current liabilities in the condensed consolidated balance sheets. For the three and six months ended June 30, 2024, the Company recorded a gain on remeasurement of contingent liability of $1.4 million and $1.7 million, respectively.
True Green II Acquisition
In connection with the acquisition of a portfolio of 58 solar energy facilities with a combined nameplate capacity of 220 MW on February 15, 2023 (the "True Green II Acquisition"), 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 June 30, 2024 and December 31, 2023, the fair value of the contingent consideration was $2.2 million and $4.7 million, respectively, and was included in Other current liabilities in the condensed consolidated balance sheets. For both the three and six months ended June 30, 2024, the Company recorded loss of $0.2 million on fair value remeasurement of contingent liability associated with the True Green II Acquisition in the condensed consolidated statements of operations. The loss was recorded due to the remeasurement of the contingent liability based on the actual amount of tax equity financing received. For the three and six months ended June 30, 2023, there was no gain or loss on fair value remeasurement of the contingent liability. During the three months ended June 30, 2024, the Company paid $2.7 million to settle a portion of the contingent liability.
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.
The liability for the contingent consideration associated with production volumes expired on June 30, 2022. The liability for the contingent consideration associated with power rates is included in other current liabilities in the condensed consolidated balance sheets at the estimated fair value of $3.1 million as of both June 30, 2024 and December 31, 2023, respectively. For the three and six months ended June 30, 2024, the Company recorded no gain or loss on fair value remeasurement of contingent consideration associated with power rates. For the three and six months ended June 30, 2023, the Company recorded a $0.1 million loss on fair value remeasurement of contingent consideration associated with power rates within operating income in the condensed consolidated statements of operations. Gains and losses are 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.