Reporting entities often form separate entities for the development, construction, and operation of renewable energy or other power plant facilities (referred to herein as single power plant entities). Single power plant entities typically hold a single power plant and may be corporate joint ventures, partnerships, or limited liability companies, and are often formed by power generators or regulated utilities, with investments by strategic and financial investors. The capital structure of a single power plant entity may vary depending on the specific objectives of the parties involved. For example, some structures include different classes of equity owners, while other entities obtain funding through debt arrangements or a combination of debt and equity. In addition, the original developer may guarantee the return or provide other incentives to debt or equity investors to obtain the necessary financing.

This chapter provides a framework for and discusses key considerations associated with the accounting by an investor for its investment in a single power plant entity (assuming consolidation is not required). It also addresses the accounting by the entity and its investors. Further, this chapter provides guidance on how to allocate the net income of a single power plant entity to its investors, including use of the hypothetical liquidation at book value (HLBV) method. The use of the HLBV method to allocate net income is frequently used for single power plant entities, due to the nature of the profit sharing and other ownership agreements.

See UP 10 for information on consolidation of single power plant entities, PwC’s Consolidation guide (CG) for general consolidation guidance, and UP 15 for information on accounting for undivided interests in a power plant (i.e., a joint plant).