Vivint Solar Inc. (VSLR) 2015年年度報告「NYSE」.pdf

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1、2015 Annual ReportSPINE2015A NNUA L R E PORTPOWERINGPEOPLE.Dear Stockholders,It is an honor to write this letter as Vivint Solars new Interim Chief Executive Officer.I look forward to leading the companys strong team as we continue to build on our position as a leader in a rapidly growing distribute

2、d solar market.For Vivint Solar,2015 was a challenging year defined in a large part by our efforts to close the merger with SunEdison.Despite those challenges,the company achieved a number of important accomplishments.Here are a few highlights from the past year:We installed 231 megawatts for over 3

3、2,000 customers.This represents 49%growth year-over-year.On a cumulative basis,Vivint Solar has installed 459 megawatts for nearly 69,000 customers.Our estimated nominal contracted payments remaining at the end of the year was$1,872 million,growing 82%from the year ago period and estimated cumulativ

4、e retained value was$906 million at the end of the year,growing 88%from the year ago period.We finished the year with an annual cost per watt of$3.12,dropping$0.15 per watt from 2014s cost per watt of$3.27.As we look forward,I am confident in our ability to execute on our vision of building a sustai

5、nable business that brings clean,affordable energy to our customers.Consumer demand for cheaper,cleaner energy remains strong and we believe that the addressable market is still large compared to the number of customers who have gone solar thus far.We believe the strengths that propelled us to becom

6、e a leading residential solar provider position us well for the future.Sincerely,David Bywater Interim Chief Executive Officer May 3,2016 THIS PAGE INTENTIONALLY LEFT BLANK UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington,D.C.20549 FORM 10-K (Mark One)?ANNUAL REPORT PURSUANT TO SECTION 13

7、 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31,2015 OR?TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-36642 VIVINT SOLAR,INC.(Exact name of Registrant as specified in its Charter)Delaware 45-56

8、05880(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)3301 N.Thanksgiving Way,Suite 500 Lehi,UT 84043 (Address of principal executive offices)(Zip Code)(877)404-4129 (Registrants telephone number,including area code)Securities registered pursuant to Se

9、ction 12(b)of the Act:Common Stock,Par Value$0.01 Per Share;Common stock traded on the New York Stock Exchange Securities registered pursuant to Section 12(g)of the Act:None Indicate by check mark if the Registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.YES?NO?I

10、ndicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d)of the Act.YES?NO?Indicate by check mark whether the Registrant:(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 mo

11、nths(or for such shorter period that the Registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.YES?NO?Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site,if any,every Interacti

12、ve Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the Registrant was required to submit and post such files).YES?NO?Indicate by check mark if disclosure of delinquent filers p

13、ursuant to Item 405 of Regulation S-K(229.405)is not contained herein,and will not be contained,to the best of Registrants knowledge,in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.?Indicate by check mark whethe

14、r the Registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or a smaller reporting company.See the definition of“large accelerated filer”,“accelerated filer”,and“smaller reporting company”in Rule 12b-2 of the Exchange Act.(Check one):Large accelerated filer?Accelerated

15、 filer?Non-accelerated filer?(Do not check if a small reporting company)Small reporting company?Indicate by check mark whether the Registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).YES?NO?As of June 30,2015,the last business day of the registrants most recently completed se

16、cond quarter,the aggregate market value of voting stock held by non-affiliates of the registrant based on the closing price of$12.17 for shares of the registrants common stock as reported by the New York Stock Exchange,was approximately$264.1 million.As of March 2,2016,there were 106,595,407 shares

17、of registrants common stock outstanding.Portions of the Registrants Definitive Proxy Statement relating to the Annual Meeting of Shareholders,scheduled to be held on June 6,2016,are incorporated by reference into Part III of this report.THIS PAGE INTENTIONALLY LEFT BLANKi?Table of Contents Page PART

18、 I Item 1.Business.1Item 1A.Risk Factors.8Item 1B.Unresolved Staff Comments.35Item 2.Properties.36Item 3.Legal Proceedings.36Item 4.Mine Safety Disclosures.37 PART II Item 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities.38Item 6.Selected F

19、inancial Data.39Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations.41Item 7A.Quantitative and Qualitative Disclosures About Market Risk.67Item 8.Financial Statements and Supplementary Data.68Item 9.Changes in and Disagreements With Accountants on Accounting a

20、nd Financial Disclosure.110Item 9A.Controls and Procedures.110Item 9B.Other Information.111 PART III Item 10.Directors,Executive Officers and Corporate Governance.112Item 11.Executive Compensation.112Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matte

21、rs.112Item 13.Certain Relationships and Related Transactions,and Director Independence.112Item 14.Principal Accounting Fees and Services.112 PART IV Item 15.Exhibits,Financial Statement Schedules.113 THIS PAGE INTENTIONALLY LEFT BLANK1 PART I Forward-looking Statements This report,including the sect

22、ions entitled“Business,”“Risk Factors,”and“Managements Discussion and Analysis of Financial Condition and Results of Operations”and certain information incorporated by reference into this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,as ame

23、nded,and Section 21E of the Securities Exchange Act of 1934,as amended.Forward-looking statements are identified by words such as“believe,”“anticipate,”“expect,”“intend,”“plan,”“will,”“may,”“seek”and other similar expressions.You should read these statements carefully because they discuss future exp

24、ectations,contain projections of future results of operations or financial condition or state other“forward-looking”information.These statements relate to our future plans,objectives,expectations,intentions and financial performance and the assumptions that underlie these statements.These forward-lo

25、oking statements include,but are not limited to:?federal,state and local regulations and policies governing the electric utility industry;?the regulatory regime for our offerings and for third-party owned solar energy systems;?technical limitations imposed by operators of the power grid;?the continu

26、ation of tax rebates,credits and incentives,including changes to the rates of the income tax credit,or ITC,beginning in 2020;?the price of utility-generated electricity and electricity from other sources;?our ability to finance the installation of solar energy systems;?our ability to efficiently ins

27、tall and interconnect solar energy systems to the power grid;?our ability to sustain and manage growth and costs;?our ability to further penetrate existing markets,expand into new markets and expand into markets for non-residential solar energy systems,such as the commercial and industrial market,or

28、 C&I;?our ability to develop new product offerings and distribution channels;?our relationship with our sister company Vivint Inc.,or Vivint,and The Blackstone Group L.P.,our sponsor;?our ability to manage our supply chain;?the cost of solar panels and the residual value of solar panels after the ex

29、piration of our customer contracts;?the course and outcome of litigation and other disputes;and?our ability to maintain our brand and protect our intellectual property.In combination with the risk factors we have identified,we cannot assure you that the forward-looking statements in this report will

30、 prove to be accurate.Further,if our forward-looking statements prove to be inaccurate,the inaccuracy may be material.In light of the significant uncertainties in these forward-looking statements,you should not regard these statements as a representation or warranty by us or any other person that we

31、 will achieve our objectives and plans in any specified time frame,or at all,or as predictions of future events.Moreover,neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements.We undertake no obligation to publicly update any forwar

32、d-looking statements,whether as a result of new information,future events or otherwise,except as required by law.Item 1.Business.BUSINESS Overview We primarily offer distributed solar energy electricity generated by a solar energy system installed at or near customers locations to residential custom

33、ers based on 20-year contracts at prices below their current utility rates.Our customers pay little to no money upfront,and typically save 20%to 40%on solar-generated electricity rates relative to utility-generated electricity rates following system interconnection to the power grid and continue to

34、benefit from locked-in energy prices over the term of their contracts,insulating them against unpredictable increases in utility rates.In 2015,we began offering our customers the option to purchase solar energy systems.2 Our 20-year customer contracts generate predictable,recurring cash flows and es

35、tablish a long-term relationship with homeowners.Through our investment funds,we own an interest in the solar energy systems we install and ownership of the solar energy systems allows us and the other fund investors to benefit from various local,state and federal incentives.We obtain financing base

36、d on these cash flows and incentives.When customers decide to move or sell the home prior to the end of their contract term,the customer contracts allow our customers to transfer their obligations to the new home buyer,subject to a creditworthiness determination.If the home buyer is not creditworthy

37、 or does not wish to assume the customers obligations,the contract allows us to require the customer to purchase the system.Our sources of financing are used to offset our direct installation costs and most,if not all,of our allocated overhead expenses.From our inception in May 2011 through December

38、 31,2015,we have experienced rapid growth,installing solar energy systems with an aggregate of 458.9 megawatts of capacity at more than 68,500 homes in 12 states for an average solar energy system capacity of approximately 6.7 kilowatts.According to GTM Research,an industry research firm,we were the

39、 second largest installer of solar energy systems to the U.S.residential market in 2015,capturing approximately 11%market share in the third quarter of 2015,down from approximately 16%in the third quarter of 2014.We attribute the decrease in market share to distractions from the proposed SunEdison a

40、cquisition and increased competition in the residential solar market.We believe the key ingredients to our growth include the following:?High growth industry.The market for residential distributed solar energy is growing rapidly and disrupting the traditional electricity market.According to GTM Rese

41、arch,the U.S.residential solar energy market is expected to grow at a compound annual growth rate,or CAGR,of approximately 19%from 2015 through 2020.?Differentiated and scalable platform.We have developed an integrated approach to providing residential distributed solar energy where we fully control

42、 the lifecycle of our customers experience including the initial professional consultation,design and engineering process,installation and ongoing monitoring and service.We deploy our sales force on a neighborhood-by-neighborhood basis,which allows us to cultivate a geographically concentrated custo

43、mer base that reduces our costs and increases our operating efficiency.We couple this model with repeatable and scalable processes to establish warehouse facilities,assemble and train sales and installation teams and open new offices.We believe that our processes enable us to expand within existing

44、markets and into new markets.We also believe that our direct sales model and integrated approach represent a differentiated platform,unique in the industry that accelerates our growth by maximizing sales effectiveness,delivering high levels of customer satisfaction and driving cost efficiency.?Long-

45、term,highly visible,recurring cash flow.The majority of our customers sign 20-year contracts for solar electricity generated by the system owned by us and pay us directly over the term of their contracts.These customer contracts generate recurring monthly customer payments.As of December 31,2015,the

46、 average estimated nominal contracted payment for our customer contracts was approximately$28,500,and there is the potential for additional payments if customers choose to renew their contracts at the end of the term.The solar energy systems we install are eligible for ITCs,accelerated tax depreciat

47、ion and other utility and governmental incentives.We have historically financed the assets created by substantially all of these contracts through investment funds.As of February 29,2016,we had raised 16 residential investment funds to which investors such as banks have committed to invest approxima

48、tely$1.1 billion which will enable us to install solar energy systems of total fair market value approximating$2.6 billion.As of February 29,2016,we had remaining tax equity commitments to fund approximately 55 megawatts of future deployments,which we estimate to be sufficient to fund solar energy s

49、ystems with a total fair market value of approximately$241 million.Our Approach We secure financing that enables our customers to access solar energy for little to no upfront cost to them.The key elements of our integrated approach to providing distributed solar energy include:?Professional consulta

50、tion.We deploy our direct-to-home sales force to provide in-person professional consultations to prospective customers to evaluate the feasibility of installing a solar energy system at their residence.Our sales closing and referral rates are enhanced by homeowners responsiveness to our direct-to-ho

51、me,neighborhood-by-neighborhood outreach strategy.?Design and engineering.We have developed a process that enables us to design and install a custom solar energy system that delivers customer savings.This process,which incorporates proprietary software,standardized templates and data derived from on

52、-site surveys,allows us to design each system to comply with complex and varied state and local regulations and optimize system performance on a per panel basis.We continue to pursue technology innovation to integrate accurate system design into the initial in-person sales consultation as a competit

53、ive tool to enhance the customer experience and increase sales close rates.For example,in 2015 we released our internal-use SunEye 360 site survey and system design tool that improves the accuracy of our solar energy generation estimates and decreases the number of homes where our personnel need to

54、get on the roof for pre-installation measurements,which reduces the invasiveness of these initial processes on the customer experience.3?Installation.We are a licensed contractor in the markets we serve and are responsible for each customer installation.Once we complete the system design,we obtain t

55、he necessary building permits and begin installation.Upon completion,we schedule the required inspections and arrange for interconnection to the power grid.By directly handling these logistics,we control quality and streamline the system installation process for our customers.Throughout this process

56、,we apprise our customers of the project status with regular updates from our account representatives.?Monitoring and service.We monitor the performance of our solar energy systems,leveraging a combination of internally developed solutions as well as capabilities provided by our suppliers.Our system

57、s use communication gateways and monitoring services to collect performance data and we use this data to ensure that we deliver quality operations and maintenance services for our solar energy systems.If services are required,our strong local presence enables rapid response times.?Referrals.We belie

58、ve our commitment to delivering customer satisfaction and our concentrated geographic deployment strategy have generated a significant amount of sales through customer referrals,which increase our neighborhood penetration rates,lower our customer acquisition costs and drive our growth.Our financial

59、returns also benefit from the cost savings derived from increasing the density of installations in a neighborhood.Our Strategy Our goal is to become the premier provider of distributed solar energy.Key elements of our strategy include:?Further penetrating our existing markets.While we have chosen to

60、 initially introduce our solar energy systems in states whose utility prices,sun exposure,climate conditions and regulatory policies provide for the most compelling market for distributed solar energy,we believe that many of those states are still significantly underpenetrated.Accordingly,we intend

61、to increase our presence in many of these markets by introducing our solar energy systems into new neighborhoods and communities in states in which we already have operations.We intend to leverage our existing customer base to grow in these markets at lower customer acquisition and installation cost

62、s relative to our competitors.In addition,we have complemented our existing go-to-market strategy with outright sales of solar energy systems.?Expanding into new locations and commercial markets.To enlarge our addressable market,we plan to expand our presence to new states and we have entered the C&

63、I market,which includes small businesses such as community retailers as well as larger retailers and manufacturers.We plan to pursue similar debt,equity and other financing strategies consistent with our approach in the residential market,including creating investment funds,to help finance our C&I o

64、perations.In May 2015,we entered into a C&I solar investment fund arrangement with a fund investor.As of December 31,2015,we have contracts in place with commercial off-takers but no projects have been accepted into the fund.The development cycle of C&I projects is typically longer than the developm

65、ent of residential solar energy systems due to complexities associated with larger system sizes and installations.The project approval process by the fund investor has been delayed due to uncertainty related to the proposed SunEdison acquisition.?Capitalizing on opportunities to increase sales and l

66、ower costs.We intend to capitalize on our opportunities to increase sales and lower costs through internal development initiatives and alternative financing structures.We plan to make additional investments in new technologies related to our system design and installation and ongoing customer servic

67、e practices.Such investments will enable us to continue to improve our operating efficiency,cost structure and customer satisfaction.?Building and leveraging strategic relationships.We plan to build and leverage strategic relationships with new and existing partners to grow our business and drive co

68、st reductions.For example,in addition to our direct sales channel,we are currently exploring opportunities to sell solar energy systems to customers through a number of distribution channels including relationships with real estate management companies,homebuilders,home improvement stores,large cons

69、truction,electrical and roofing companies and other third parties that have access to large numbers of potential customers.In February 2016,we entered into an agreement with a real estate management company to install solar on 488 homes in Utah.We expect to enter into other similar agreements with r

70、eal estate management companies.In addition,we expect to benefit from Blackstones network of strategic relationships.4 Customer Contracts Prior to the first quarter of 2014,all of our long-term contracts were structured as power purchase agreements.In 2014,we began offering legal-form leases to resi

71、dential customers.In 2015,we began offering contracts whereby customers could purchase solar energy systems with cash or enter into a loan product administered by a third party.Of our over 68,500 cumulative installations through December 31,2015,approximately 1,300 systems were leased.Through Decemb

72、er 31,2015,a de minimis number were sold;however,we expect installations related to sales to grow in future periods.In the power purchase agreement structure,we charge customers a fee per kilowatt hour based on the amount of electricity the solar energy system actually produces.In the lease structur

73、e,the customers monthly payment is fixed based on a calculation that takes into account expected solar energy generation.The lease includes a performance guarantee under which we agree to refund a proportion of the customer payments if the leased solar energy system does not meet the annual guarante

74、ed energy production level.As of December 31,2015,the average FICO score of our customers was approximately 760.The power purchase agreement and lease terms are typically for 20 years,and all of the prices that we charge to our customers are subject to pre-determined annual fixed percentage price es

75、calations as specified in the customer contract.Since January 2014,substantially all of our customer contracts have included an annual price escalator of 2.9%.Over the term of these agreements,we operate the systems and agree to maintain them in good condition.Customers who buy energy from us under

76、power purchase agreements or lease systems are covered by our workmanship warranty equal to the length of the term of these agreements.Sales and Marketing We place our integrated residential solar energy systems through a scalable sales organization that primarily uses a direct-to-home sales model.W

77、e believe that a high-touch,customer-focused selling process is important before,during and after the sale of our products to maximize our sales success.The members of our sales force typically reside and work within the market they serve.We also generate a significant amount of sales through custom

78、er referrals.We have found that customer referrals increase in relation to our penetration in a particular market and shortly after entering a new market become an increasingly effective way to market our solar energy systems.In addition to direct sales,we sell to customers through our inside sales

79、team and through our retail channel that reaches new customers at kiosks in malls and other locations.We also continue to explore opportunities to sell solar energy systems to customers through a number of other distribution channels,including relationships with real estate management companies,home

80、 builders,home improvement stores,large construction,electrical and roofing companies and other third parties that have access to large numbers of potential customers.We establish a sales office in each market that we enter.A typical sales team may consist of 15 to 20 sales representatives,depending

81、 on the sales region,which we refer to as sales managers,and one to two district managers.Sales managers are typically recruited by district managers or through our sales recruiting team.These sales teams are supported by approximately 30 installation technicians and an operations manager.There are

82、also regional managers who generally oversee 10 to 20 sales offices.As of December 31,2015,we had 66 total sales offices.Operations and Suppliers We purchase solar panels directly from multiple manufacturers.During 2015,Trina Solar Limited,Yingli Green Energy Americas,Inc.and JinkoSolar Holding Co.,

83、Ltd.accounted for substantially all of our solar photovoltaic module purchases and Enphase Energy,Inc.and SolarEdge Technologies Inc.accounted for substantially all of our inverter purchases.Ecolibrium Solar,EcoFasten Solar and Mounting Systems Inc.accounted for substantially all of our racking purc

84、hases.We generally source the other products related to our solar energy systems,such as fasteners,wiring and electrical fittings,through a variety of distributors.If we fail to develop,maintain and expand our relationships with these or other suppliers,our ability to meet anticipated demand for our

85、 solar energy systems may be adversely affected,or we may only be able to offer our systems at higher costs or after delays.If one or more of the suppliers that we rely upon to meet anticipated demand ceases or reduces production due to its financial condition,acquisition by a competitor or otherwis

86、e,it may be difficult to quickly identify alternative suppliers or to qualify alternative products on commercially reasonable terms,and our ability to satisfy this demand may be adversely affected.We screen all suppliers and components based on expected cost,reliability,warranty coverage,ease of ins

87、tallation and other ancillary costs.We typically enter into master contract arrangements with our major suppliers that define the general terms and conditions of our purchases,including warranties,product specifications,indemnities,delivery and other customary terms.We typically purchase solar panel

88、s,inverters and racking from our suppliers at then prevailing prices pursuant to purchase orders issued under our master contract arrangements.5 The declining cost of solar panels and the raw materials necessary to manufacture them has been a key driver in the price we charge for electricity and cus

89、tomer adoption of solar energy.According to industry experts,solar panel and raw material prices are not expected to continue to decline at the same rate as they have over the past several years.The resulting prices we pay for components could slow our growth and cause our financial results to suffe

90、r.In the past we have purchased virtually all of the solar panels used in our solar energy systems from manufacturers based in China and we expect that our manufacturers will begin to seek lower tariff countries such as Vietnam,Malaysia and Thailand.As of December 31,2015,we operated in Arizona,Cali

91、fornia,Connecticut,Hawaii,Maryland,Massachusetts,New Jersey,New Mexico,New York,Pennsylvania,South Carolina and Utah.Our corporate headquarters are located in Utah.We manage inventory through our local warehouses and maintain a fleet of nearly 900 trucks and other vehicles to support our installers

92、and operations.In 2015,our field teams completed on average approximately 2,730 residential installations per month.Our project management teams simultaneously manage thousands of projects as they move through the stages of engineering,permitting,installation,maintenance and monitoring.We offer an i

93、nstallation warranty that the solar energy systems under our customer contracts will be free from material defects in design and workmanship for the term of the contract as well as a limited warranty on roof penetrations.We are also obligated to maintain the solar energy systems in good condition fo

94、r the term of the contract or for a stated period,usually 20 years.We provide a performance guarantee to our lease customers that requires us to refund money to the lessee if the solar energy system fails to generate the minimum amount of electricity in a given term,as specified in the lease.We comp

95、ensate customers if their systems produce less energy than the guaranteed amount in any given year by making a payment to customers with under-performing systems.Through December 31,2015,such compensation has been de minimis.As of December 31,2015,approximately 1,300 of our systems in service had be

96、en leased.As the number of leased systems grows,payments for underperforming systems may increase over time and may vary from period-to-period based on a number of factors,including weather conditions in the areas in which we lease systems,which may adversely impact our results of operations.We furt

97、her offer a range of warranties on our solar energy systems to our investment funds.All of our systems feature a workmanship warranty during which we are obligated,at our cost and expense,to correct defects in our installation work,which depending on the particular investment fund,is for periods of

98、five to twenty years.Generally our maintenance obligations to our investment funds do not include the cost of panels,inverters or racking,should such major components require replacement.The cost of such components are borne instead by the applicable investment fund,although we are obligated to inst

99、all such equipment as part of our services covered by the agreed maintenance services fee.This obligation is satisfied by Vivint Solar Developer,LLC,on behalf of Vivint Solar Provider,LLC,which provides operations and maintenance services to each of our investment funds.As part of Vivint Solar Provi

100、ders operations and maintenance work,we provide a pass-through of the inverter and panel manufacturers warranty coverage to our customers,which generally range from 10 to 25 years.We also provide ongoing service and repair during the entire term of the customer relationship,regardless of whether or

101、not such repairs are covered by our or a manufacturers warranty.We expect the costs we incur in providing these services will continue to grow as the number of systems in our portfolio increases and as installed solar energy systems age.Competition We believe that our primary competitors are the tra

102、ditional utilities that supply electricity to our potential customers.We compete with these traditional utilities primarily based on price(cents per kilowatt hour),predictability of future prices(by providing pre-determined annual price escalations)and the ease by which customers can switch to elect

103、ricity generated by our solar energy systems.We believe that we compete favorably with traditional utilities based on these factors in the states where we operate.We also compete with companies that are not regulated like traditional utilities but that have access to the traditional utility electric

104、ity transmission and distribution infrastructure pursuant to state and local pro-competitive and consumer choice policies and with solar companies with business models that are similar to ours,such as SolarCity Corporation and Sunrun Inc.We believe that we compete favorably with these companies;howe

105、ver,in 2015,we experienced a decrease in market share which we attribute to distractions associated with the proposed SunEdison acquisition.6 In addition,we compete with solar companies in the downstream value chain of solar energy.For example,we face competition from purely finance driven organizat

106、ions that acquire customers and then subcontract out the installation of solar energy systems,from installation businesses that seek financing from external parties,from large construction companies and utilities and increasingly from sophisticated electrical and roofing companies.These distributed

107、energy competitors typically work in contractual arrangements with third parties,leaving the customer in the position of having to deal with different companies for different aspects of their solar energy systems.We believe that we compete favorably with these companies because we offer an integrate

108、d approach to residential solar energy systems,which includes in-house sales,financing,engineering,installation,maintenance and monitoring.Many of our competitors offer only a subset of the services we provide.Aside from simple cost efficiency,we offer distinct practical benefits as an all-in-one pr

109、ovider such as providing a single point of contact and accountability for our offerings during the relationship with our customers.Further,we are not dependent on installation subcontractors,enabling us to better scale our business while maintaining quality control.Technology and Intellectual Proper

110、ty As of December 31,2015,we,directly or through our wholly owned subsidiary Vivint Solar Labs(formerly known as Solmetric Corporation)had five patents and 12 pending applications with the U.S.Patent and Trademark Office.These patents and applications relate primarily to shade and site analysis.Our

111、issued patents start expiring in 2026.We intend to file additional patent applications as we innovate through our research and development efforts.Vivint Solar Labs is our research and development team focused on proprietary photovoltaic installation instruments and software.In February 2015,we deci

112、ded to discontinue external sales of two of the three main Vivint Solar Labs products,which were at the end of their product life cycles.We will continue selling the PV Analyzer product,which is commercially used in commissioning,auditing,operating,maintaining and troubleshooting issues with photovo

113、ltaic systems.We will continue to develop and produce the discontinued products for internal use only.As part of our strategy,we may expand our technological capabilities through targeted acquisitions such as Solmetric,licensing technology and intellectual property from third parties,joint developme

114、nt relationships with partners and suppliers and other strategic initiatives as we strive to offer the industrys best operational efficiency,performance prediction,operations and management.Government Regulation,Policies and Incentives Government Regulation We are not regulated as a public utility i

115、n the United States under current applicable national,state or other local regulatory regimes where we conduct business.To operate our systems we obtain interconnection permission from the applicable local primary electric utility.Depending on the size of the solar energy system and local law requir

116、ements,interconnection permission is provided by the local utility and us and/or our customer.In almost all cases,interconnection permissions are issued on the basis of a standard process that has been pre-approved by the local public utility commission or other regulatory body with jurisdiction ove

117、r net metering procedures.We maintain a utility administration function,with primary responsibility for engaging with utilities and ensuring our compliance with interconnection rules.Our operations are subject to stringent and complex federal,state and local laws,including regulations governing the

118、occupational health and safety of our employees and wage regulations.For example,we are subject to the requirements of the federal Occupational Safety and Health Act,as amended,or OSHA,the U.S.Department of Transportation,or DOT,and comparable state laws that protect and regulate employee health and

119、 safety.We strive to maintain compliance with applicable OSHA,DOT and similar government regulations;however,as discussed in the section captioned“Risk FactorsCompliance with occupational safety and health requirements and best practices can be costly,and noncompliance with such requirements may res

120、ult in potentially significant monetary penalties,operational delays and adverse publicity,”there have been instances in which we experienced workplace accidents and received citations from regulators,resulting in fines.Such instances have not materially impacted our business or relations with our e

121、mployees.Government Policies Net metering is one of several key policies that have enabled the growth of distributed solar in the United States.Net metering allows a homeowner to pay his or her local traditional utility only for their power usage net of production from the solar energy system instal

122、led on his or her roof.Where the customers utility provides for net metering,the customer typically pays for the net energy used or receives a credit against future bills at the retail rate if more energy is produced than consumed.Homeowners receive credit for the energy that the solar installation

123、exports to the local power grid,and are reimbursed by the utility for net excess 7 generation in some utility markets,including some of those in which we operate.Forty-one states,Puerto Rico,the District of Columbia,American Samoa and the U.S.Virgin Islands have adopted some form of net metering law

124、 or regulation.According to the U.S.Energy Information Administration,or EIA,the total number of net metered customers in the United States has grown at a CAGR of approximately 90%,from approximately 19,000 households in 2005 to approximately 6,213,130 households in 2014.Net metering programs have b

125、een subject to regulatory scrutiny or legislative proposals in Arizona,California,Colorado,Hawaii,Nevada,Puerto Rico,Utah and several other states.Regulators in these states have considered imposing limits on the aggregate capacity of net metering generation,fees on net metering customers,reducing t

126、he rate that net metering customers are paid for the power that they deliver back to the grid and allegations that homeowners with net metered solar systems shift the costs of maintaining the electric grid onto non-solar ratepayers.In California,the Public Utilities Commission largely upheld net met

127、ering in its current form with full retail compensation for exports,but did impose some additional fees on net metering customers,and will require such customers to take service on time-of-use rates.In 2015,Hawaiis Public Utilities Commission significantly lowered the rate of compensation paid to ne

128、t metering customers.In late 2015,the Nevada Public Utilities Commission voted in favor of a plan which limits export compensation to net metering customers and imposed high monthly fees,which greatly reduced the economic benefit to Nevada customers of residential solar.As a result we no longer have

129、 a presence in Nevada.Government Incentives Federal,state and local government bodies and utilities provide incentives to various parties,including owners,end users,distributors,system integrators and manufacturers of solar energy systems to promote solar energy.These incentives come in various form

130、s,including rebates,tax credits and other financial incentives such as system performance payments,payments for renewable energy credits associated with renewable energy generation and exclusion of solar energy systems from property tax assessments.These incentives enable us to lower the price we ch

131、arge our customers,helping to catalyze customer acceptance of solar energy as an alternative to utility-provided power.The Federal government currently offers a 30%ITC under Section 48(a)of the Internal Revenue Code for the installation of certain solar power facilities;legislation was passed in Dec

132、ember 2015 which extended this 30%rate until December 31,2019.The rate will decrease to 26%in 2020 and 22%in 2021.By statute,this tax credit is scheduled to decrease to 10%on January 1,2022.The economics of purchasing a solar energy system are also improved by eligibility for accelerated depreciatio

133、n,also known as the modified accelerated cost recovery system,or MACRS,which allows for the depreciation of equipment according to an accelerated schedule established by the Internal Revenue Service.The acceleration of depreciation creates a valuable tax benefit that reduces the overall cost of the

134、solar energy system and increases the return on investment.Approximately half of the states in which we operate offer a personal and/or corporate investment or production tax credit for solar energy that is additive to the ITC.Further,most of the states and local jurisdictions have established prope

135、rty tax incentives for renewable energy systems that include exemptions,exclusions,abatements and credits.Many state governments,traditional utilities,municipal utilities and co-operative utilities offer a rebate or other cash incentive for the installation and operation of a solar energy system or

136、energy efficiency measures.Capital costs or“up-front”rebates provide funds to solar customers or developers or systems owners based on the cost,size or expected production of a customers solar energy system.Performance-based incentives provide cash payments to solar customers or a system owner based

137、 on the energy generated by the solar energy system during a pre-determined period.Many states also have adopted procurement requirements for renewable energy production.Twenty-nine states,the District of Columbia and three U.S.territories have adopted a renewable portfolio standard that requires re

138、gulated utilities to procure a specified percentage of total electricity delivered to customers in the state from eligible renewable energy sources,such as solar energy systems,by a specified date.To prove compliance with such mandates,utilities usually must surrender solar renewable energy certific

139、ates,or SRECs to the applicable authority.Solar energy system owners such as our investment funds often are able to sell SRECs to utilities directly or in SREC markets.Workforce As of December 31,2015,we had a total workforce of 3,685,including 1,750 employees in installation,831 service providers i

140、n sales and marketing,790 employees in operations,282 employees in general and administrative and 32 employees in research and development.Our sales and marketing headcount includes 721 active direct sellers.We consider a direct sales person to be active if they completed at least four customer pre-

141、surveys in the prior four weeks.Our operations personnel work primarily in installation,design and account management.Our general and administrative personnel work primarily in finance,business development,capital markets and human resources.None of our service providers are represented by a labor u

142、nion and we consider relations with our workers to be good.8 Item 1A.Risk Factors You should carefully consider the following risk factors,together with all of the other information included in this report,including the section of this report captioned“Managements Discussion and Analysis of Financia

143、l Condition and Results of Operations”and our financial statements and related notes.If any of the following risks occurred,it could materially adversely affect our business,financial condition or operating results.This report also contains forward-looking statements that involve risks and uncertain

144、ties.Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this report.Risk Related to our Proposed Acquisition by SunEdison SunEdisons failure to complete the acquisition has affected and

145、may in the future,materially and adversely affect our results of operations and stock price.On July 20,2015,we entered into an Agreement and Plan of Merger,or Merger Agreement,as amended by the Amendment to the Agreement and Plan of Merger,dated as of December 9,2015,with SunEdison,Inc.,or SunEdison

146、,a Delaware corporation,and SEV Merger Sub Inc.,a Delaware corporation and a wholly owned subsidiary of SunEdison,pursuant to which the we were to have been acquired by SunEdison.We delivered notice to SunEdison on February 26,2016,and again on March 1,2016,that,pursuant to the terms of the Merger A

147、greement,SunEdison was required to cause the closing of the acquisition to occur on February 26,2016,and remained obligated to cause the closing to occur,given that all conditions to SunEdisons obligations to close the acquisition in the Merger Agreement were satisfied on February 24,2016 when(1)our

148、 stockholders adopted the Merger Agreement,and(2)the marketing period contemplated by the Merger Agreement related to SunEdisons financing of the acquisition(which commenced when we delivered all required information to SunEdison on February 11,2016)terminated on February 21,2016.SunEdisons failure

149、to cause the closing within three business days of the delivery of the notices specified in the preceding sentence triggered our right to terminate the Merger Agreement pursuant to Section 7.01(i)thereof.Moreover,as of SunEdisons failure to cause the closing to occur on February 26,2016,SunEdison wa

150、s in breach of its covenants under Sections 1.02 and 4.05(a)of the Merger Agreement,and such breach resulted in the failure of the conditions set forth in Section 6.02 of the Merger Agreement to be satisfied on such date.SunEdisons representatives subsequently informed us that SunEdison was unable t

151、o cause the closing to occur in the foreseeable future.Since such breach was therefore incurable prior to March 18,2016,the date on which the Merger Agreement would otherwise terminate,we have the right to terminate the Merger Agreement pursuant to Section 7.01(e)thereof.As a result of the foregoing

152、 and in accordance with and pursuant to our rights under Section 7.01(i)and 7.01(e)of the Merger Agreement,we terminated the Merger Agreement on March 7,2016.On March 8,2016,we filed suit in the Court of Chancery State of Delaware against SunEdison and SEV Merger Sub Inc.alleging that SunEdison will

153、fully breached its obligations under the Merger Agreement.While we believe that SunEdison willfully breached its obligations under the Merger Agreement and that our claims have merit and are likely to succeed,the outcomes of lawsuits are inherently unpredictable,and we may be unsuccessful in our cla

154、ims.However,SunEdisons failure to close the acquisition presents significant risks to us,including:?we will not realize any or all of the potential benefits of the acquisition,including any synergies that could result from combining the resources of us and SunEdison,which could have a negative effec

155、t on our stock price;?we will remain liable for significant transaction costs,including legal,accounting,financial advisory and other costs relating to the transaction;?the attention of our management and employees has been diverted,and may continue to be diverted,from day-to-day operations as we pu

156、rsue our remedies under the Merger Agreement;?our business has been disrupted by customer uncertainty over when or if the acquisition will be completed or customers and investors perception of us as a standalone company and our business may continue to be affected by the residual impact of these or

157、similar factors;?under the Merger Agreement,we were subject to certain restrictions on the conduct of our business prior to completing the acquisition,which restrictions have adversely affected our ability to conduct business as we otherwise would have done if we were not subject to these restrictio

158、ns and our business may continue to be affected by the residual impact of these or similar factors;9?due to investor uncertainty regarding the acquisition,our ability to raise additional financing was limited,which may adversely affect our ability to raise additional financing in a timely manner or

159、on favorable terms;and?our ability to retain current key employees or attract new employees may be harmed by uncertainties associated with our future as a standalone company.The occurrence,continuation or exacerbation of any of these events individually or in combination could materially and adverse

160、ly affect our results of operations and stock price.The announcement and pendency of the acquisition caused disruptions in our business,which has had,and may continue to have,an adverse effect on our business operations and financial results.During the pendency of the acquisition,we and SunEdison op

161、erated independently.Uncertainty about the effect of the acquisition on customers and employees has had,and may continue to have,an adverse effect on us and consequently,may have an adverse effect on our business operations and financial results as a standalone company.During the pendency of the acq

162、uisition,current and prospective employees experienced uncertainty about their future with SunEdison,us or the combined company.These uncertainties have impaired,and may continue to impair the ability of us to retain,recruit or motivate key personnel,and may have negatively impacted the productivity

163、 of current employees.In addition,due to these uncertainties and to SunEdisons required approvals,we ceased certain employee actions such as hiring,terminating and reallocating personnel.Our employees and our management teams reallocated significant time to integration efforts.We deferred transition

164、s to key IT systems as a standalone company.We were also caused to defer and delay financing options,including additional acquiring investment funds and debt facilities,which has decreased our operational efficiency and effectiveness.Further,SunEdison withheld approval of power purchase agreement en

165、hancements as a leverage tool,which further decreased our effectiveness in attracting and obtaining prospective customers.In response to the announcement of the acquisition,and due to uncertainty regarding the closing of the acquisition,our existing or prospective customers or suppliers have or may

166、have:?delayed,deferred and may cease purchasing products or services from or providing products or services to us;?delayed or deferred other decisions concerning us;or?otherwise sought to change the terms on which they do business with us.These such delays or changes to terms have disrupted,and may

167、continue to disrupt our business and adversely impact our results of operations as we continue to operate as a standalone company.Risks Related to our Business We need to enter into substantial additional financing arrangements to facilitate new customers access to our solar energy systems,and if fi

168、nancing is not available to us on acceptable terms when needed,our ability to continue to grow our business would be materially adversely impacted.Our future success depends on our ability to raise capital from third-party investors on competitive terms to help finance the deployment of our solar en

169、ergy systems.We seek to minimize our cost of capital in order to maintain the price competitiveness of the electricity produced by,or the lease payments for,our solar energy systems.If we are unable to establish new investment funds when needed,or upon desirable terms,to enable our customers access

170、to our solar energy systems with little to no upfront cost to them,we may be unable to finance installation of our customers systems or our cost of capital could increase,either of which would have a material adverse effect on our business,financial condition,results of operations and prospects.As o

171、f February 29,2016,we had raised 16 residential investment funds to which investors such as banks and other large financial investors have committed to invest approximately$1.1 billion which will enable us to install solar energy systems of total fair market value approximating$2.6 billion.As of Feb

172、ruary 29,2016,we had remaining residential tax equity commitments to fund approximately 55 megawatts of future deployments,which we estimate to be sufficient to fund solar energy systems with a total fair market value of approximately$241 million.As of February 29,2016,we had entered into one C&I in

173、vestment fund with a total committed capital amount of$150.0 million,however,no projects had been accepted into the investment fund as of February 29,2016.The contract terms in certain of our investment fund documents impose conditions on our ability to draw on financing commitments from the fund in

174、vestors,including if an event occurs that could reasonably be expected to have a material adverse effect on the fund or on us.If we do not satisfy such conditions due to events related to our business or a specific investment fund or developments in our industry or otherwise,and as a result we are u

175、nable to draw on existing commitments,our inability to draw on such commitments could have a material adverse effect on our business,liquidity,financial condition and prospects.In addition to our inability to draw on the investors commitments,we may incur financial penalties for non-performance,incl

176、uding delays in the installation process and interconnection to the power grid of solar energy systems and other factors.Based on the terms of the investment fund agreements,we will either reimburse a 10 portion of the fund investors capital or pay the fund investor a penalty fee.For the C&I investm

177、ent fund,we could incur a non-performance fee of up to$3.0 million primarily due to a delay in solar energy systems being interconnected to the power grid.To meet the capital needs of our growing business,we will need to obtain additional financing from new investors and investors with whom we curre

178、ntly have arrangements.If any of the financial institutions that currently provide financing decide not to invest in the future due to general market conditions,concerns about our business or prospects or any other reason,or decide to invest at levels that are inadequate to support our anticipated n

179、eeds or materially change the terms under which they are willing to provide future financing,we will need to identify new financial institutions and companies to provide financing and negotiate new financing terms.In addition,the pendency of the SunEdison acquisition and the risks and uncertainties

180、associated with it adversely affected the willingness of parties to enter into financing arrangements with us.This,combined with restrictions under the Merger Agreement on our ability to incur,assume or guarantee any indebtedness,or make any loans or advances to any other person,restricted our abili

181、ty to raise additional capital during the pendency of the acquisition and our business may continue to be affected by the residual impact of these or similar factors.If we are unable to raise additional capital in a timely manner,our ability to meet our capital needs and fund future growth may be li

182、mited.In the past,we have sometimes been unable to timely establish investment funds in accordance with our plans,due in part to the relatively limited number of investors attracted to such types of funds,competition for such capital and the complexity associated with negotiating the agreements with

183、 respect to such funds.Delays in raising financing could cause us to delay expanding in existing markets or entering into new markets and hiring additional personnel in support of our planned growth.Any future delays in capital raising could similarly cause us to delay deployment of a substantial nu

184、mber of solar energy systems for which we have signed power purchase agreements or leases with customers.Our future ability to obtain additional financing depends on banks and other financing sources continued confidence in our business model and the renewable energy industry as a whole.It could als

185、o be impacted by the liquidity needs of such financing sources themselves.We face intense competition from a variety of other companies,technologies and financing structures for such limited investment capital.If we are unable to continue to offer a competitive investment profile,we may lose access

186、to these funds or they may only be available to us on terms that are less favorable than those received by our competitors.For example,if we experience higher customer default rates than we currently experience in our existing investment funds,this could make it more difficult or costly to attract f

187、uture financing.In our experience,there are a relatively small number of investors that generate sufficient profits and possess the requisite financial sophistication that can benefit from and have significant demand for the tax benefits that our investment funds can provide.Historically,in the dist

188、ributed solar energy industry,investors have typically been large financial institutions and a few large,profitable corporations.Our ability to raise investment funds is limited by the relatively small number of such investors.Any inability to secure financing could lead us to cancel planned install

189、ations,could impair our ability to accept new customers and could increase our borrowing costs,any of which would have a material adverse effect on our business,financial condition,results of operations and prospects.A material reduction in the retail price of traditional utility-generated electrici

190、ty or electricity from other sources or other reduction in the cost of such electricity would harm our business,financial condition,results of operations and prospects.We believe that a significant number of our customers decide to buy solar energy because they want to pay less for electricity than

191、what is offered by the traditional utilities.However,distributed residential solar energy has yet to achieve broad market adoption.The customers decision to choose solar energy may also be affected by the cost of other renewable energy sources.Decreases in the retail prices of electricity from the t

192、raditional utilities or from other renewable energy sources would harm our ability to offer competitive pricing and could harm our business.The cost of electricity from traditional utilities could decrease as a result of:?construction of new power generation plants,including plants utilizing natural

193、 gas,nuclear,coal,renewable energy or other generation technologies;?relief of transmission constraints that enable local centers to generate energy less expensively;?reductions in the price of natural gas or other fuel sources;?utility rate adjustment and customer class cost reallocation;?energy co

194、nservation technologies and public initiatives to reduce electricity consumption;?widespread deployment of existing or development of new or lower-cost energy storage technologies that have the ability to reduce a customers average cost of electricity by shifting load to off-peak times;and?developme

195、nt of new energy generation technologies that provide less expensive energy.11 A reduction in utility electricity costs would make the purchase of electricity under our power purchase agreements or the lease of our solar energy systems less economically attractive.If the cost of energy available fro

196、m traditional utilities were to decrease due to any of these reasons,or other reasons,we would be at a competitive disadvantage,we may be unable to attract new customers and our growth would be limited.Electric utility industry policies and regulations may present technical,regulatory and economic b

197、arriers to the purchase and use of solar energy systems that may significantly reduce demand for electricity from our solar energy systems.Federal,state and local government regulations and policies concerning the electric utility industry,utility rate structures,interconnection procedures,and inter

198、nal policies of electric utilities,heavily influence the market for electricity generation products and services.These regulations and policies often relate to electricity pricing and the interconnection of distributed electricity generation systems to the power grid.Policies and regulations that pr

199、omote renewable energy and customer-sited energy generation have been challenged by traditional utilities and questioned by those in government and others arguing for less governmental spending and involvement in the energy market.To the extent that such views are reflected in government policy,the

200、changes in such policies and regulations could adversely affect our results of operations,cost of capital and growth prospects.In the United States,governments and the state public service commissions that determine utility rates continuously modify these regulations and policies.These regulations a

201、nd policies could result in a significant reduction in the potential demand for electricity from our solar energy systems and could deter customers from entering into contracts with us.In addition,depending on the region,electricity generated by solar energy systems competes most effectively with th

202、e most expensive retail rates for electricity from the power grid,rather than the less expensive average price of electricity.Modifications to the utilities peak hour pricing policies or rate design,such as to a flat rate,would make our current products less competitive with the price of electricity

203、 from the power grid.For example,the California Public Utilities Commission recently issued a decision that will transition residential rates over the next four years from a four-tiered structure to a two-tiered structure,with only a 25%differential between the two rates and a surcharge for very hig

204、h energy users.It is possible that this change could have the effect of lowering the incentive for residential customers of Californias large investor-owned utilities to reduce their purchases of electricity from their utility by supplying more of their own electricity from solar,and thereby reduce

205、demand for our products.In addition,California is in the process of shifting to a time-of-use rate structure in the coming years.A shift in the timing of peak rates for utility-generated electricity to a time of day when solar energy generation is less efficient could make our solar energy system of

206、ferings less competitive and reduce demand for our offerings.The California Public Utilities Commission determined in January of 2016 that net metering customers taking service on the net energy metering(NEM)successor tariff will be required to take service on time-of-use rates.This transition may o

207、ccur in 2016 for some of our potential customers.In addition,since we are required to obtain interconnection permission for each solar energy system from the local utility,changes in a local utilitys regulations,policies or interconnection process have in the past delayed and in the future could del

208、ay or prevent the completion of our solar energy systems.This in turn has delayed and in the future could delay or prevent us from generating revenues from such solar energy systems or cause us to redeploy solar energy systems,adversely impacting our results of operations.In addition,any changes to

209、government or internal utility regulations and policies that favor electric utilities could reduce our competitiveness and cause a significant reduction in demand for our offerings or increase our costs or the prices we charge our customers.Certain jurisdictions have proposed allowing traditional ut

210、ilities to assess fees on customers purchasing energy from solar energy systems or have imposed or proposed new charges or rate structures that would disproportionately impact solar energy system customers who utilize net metering,either of which would increase the cost of energy to those customers

211、and could reduce demand for our solar energy systems.For example,the California Public Utilities Commission issued a decision in July 2015 that allowed utilities to impose a minimum$10 monthly bill for residential customers,approved the concept of fixed charges and will permit the utilities to propo

212、se such fixed charges again in 2018.A decision issued in January 2016 will allow new interconnection fees and additional nonbypassable charges to be assessed on customers taking service on Californias net metering successor tariff.This will result in monthly charges being imposed on our customers in

213、 California.Additionally,certain utilities in Arizona have approved increased rates and charges for net metering customers,and others have proposed doing away with the states renewable electricity standard carve-outs for distributed generation as well as the states net metering program.These policy

214、changes may negatively impact our customers and affect demand for our solar energy systems,and similar changes to net metering policies may occur in other states.It is also possible that these or other changes could be imposed on our current customers,as well as future customers.Due to the current a

215、nd expected continued concentration of our solar energy systems in California,any such changes in this market would be particularly harmful to our reputation,customer relations,business,results of operations and future growth in these areas.We may be similarly adversely affected if our business beco

216、mes concentrated in other jurisdictions.12 Our business currently depends on the availability of rebates,tax credits and other financial incentives.The expiration,elimination or reduction of these rebates,credits or incentives could adversely impact our business.Federal,state and local government an

217、d regulatory bodies provide for tariff structures and incentives to various parties including owners,end users,distributors,system integrators and manufacturers of solar energy systems to promote solar energy in various forms,including rebates,tax credits and other financial incentives such as syste

218、m performance payments,renewable energy credits associated with renewable energy generation,exclusion of solar energy systems from property tax assessments and net metering.We rely on these governmental and regulatory programs to finance solar energy system installations,which enables us to lower th

219、e price we charge customers for energy from,and to lease,our solar energy systems,helping to catalyze customer acceptance of solar energy with those customers as an alternative to utility-provided power.However,these programs may expire on a particular date,end when the allocated funding is exhauste

220、d or be reduced or terminated.These reductions or terminations often occur without warning.For example,the Arizona Department of Revenue recently decided that it will begin to collect property taxes in 2015 on rooftop solar energy systems such as ours.In addition,the financial value of certain incen

221、tives decreases over time.For example,the value of solar renewable energy certificates,or SRECs,in a market tends to decrease over time as the supply of SREC-producing solar energy systems installed in that market increases.If we overestimate the future value of these incentives,it could adversely i

222、mpact our financial results.The federal government currently offers a 30%investment tax credit,or the ITC,under Section 48(a)of the Internal Revenue Code for the installation of certain solar power facilities;the 30%rate continues until December 31,2019.By statute,the ITC is scheduled to decrease to

223、 26%for 2020,22%for 2021 and 10%of the fair market value of a solar energy system on January 1,2022,and the amounts that fund investors are willing to invest could decrease or we may be required to provide a larger allocation of customer payments to the fund investors as a result of this scheduled d

224、ecrease.To the extent we have a reduced ability to raise investment funds as a result of this reduction,the rate of growth of installations of our residential solar energy systems could be negatively impacted.The ITC has been a significant driver of the financing supporting the adoption of residenti

225、al solar energy systems in the United States and its scheduled reduction beginning in 2020,unless modified by an intervening change in law,will significantly impact the attractiveness of solar energy to these investors and could potentially harm our business.Applicable authorities may adjust or decr

226、ease incentives from time to time or include provisions for minimum domestic content requirements or other requirements to qualify for these incentives.Reductions in,eliminations or expirations of or additional application requirements for,governmental incentives could adversely impact our results o

227、f operations and ability to compete in our industry by increasing our cost of capital,causing us to increase the prices of our energy and solar energy systems and reducing the size of our addressable market.In addition,this would adversely impact our ability to attract investment partners and to for

228、m new investment funds and our ability to offer attractive financing to prospective customers.We rely on net metering and related policies to offer competitive pricing to our customers in all of our current markets,and changes to net metering policies may significantly reduce demand for electricity

229、from our solar energy systems.Our business benefits significantly from favorable net metering policies in states in which we operate.Net metering allows a homeowner to pay his or her local electric utility only for their power usage net of production from the solar energy system,transforming the con

230、ventional relationship between customers and traditional utilities.Homeowners receive credit for the energy that the solar installation generates in excess of that needed by the home to offset energy usage at times when the solar installation is not generating energy.In states that provide for net m

231、etering,the customer typically pays for the net energy used or receives a credit against future bills at the retail rate if more energy is produced by the solar installation than consumed.In some states and utility territories,customers are also reimbursed by the electric utility for net excess gene

232、ration on a periodic basis.Forty-one states,Puerto Rico,the District of Columbia,American Samoa and the U.S.Virgin Islands have adopted some form of net metering.Each of the states where we currently serve customers has adopted some form of a net metering policy.13 In recent years,net metering progr

233、ams have been subject to regulatory scrutiny and legislative proposals in some states,such as Arizona,California,Colorado,Hawaii,Nevada and Utah.In California,for example,after the earlier of July 1,2017 or the date the applicable investor owned utility reaches its statutory net metering cap,custome

234、rs will take service on a new net metering successor tariff.The net metering cap is measured based on the nameplate capacity of net metered systems within the applicable utilitys service territory.Currently,the net metering caps for the three large investor-owned utilities are:617 megawatts for San

235、Diego Gas and Electric Company;2,240 megawatts for Southern California Edison Company;and 2,409 megawatts for Pacific Gas and Electric Company.As reflected in their January 31,2016 reports required by statute,these investor-owned utilities have approximately 12%,35%and 22%,respectively,of capacity r

236、emaining under their respective net metering caps.The statute providing the current caps also provides that,once the new net metering rules are effective,there will be no net metering caps applied to these utilities.For the NEM successor tariff,the California Public Utilities Commission largely uphe

237、ld net metering in its current form with full retail compensation for exports and rejected utility requests to impose extremely high fixed and capacity charges.The Commission did allow the utilities to impose reasonable interconnection fees and some additional charges on customers,and will require s

238、uch customers to take service on time-of-use rates.On October 12,2015,the Hawaii Public Utilities Commission issued an order closing the Hawaiian Electric Companys net metering program to new participants and replaced this program with two new options for customers to interconnect to the utilities e

239、lectric grids,neither of which provides for compensation for exports at retail electricity rates.Solar advocates have filed suit challenging this order and seeking to enjoin its effectiveness.In late 2015,the Nevada Public Utilities Commission voted in favor of a plan which limits export compensatio

240、n to net metering customers to avoided cost rates and imposes high monthly fees on such customers.This order greatly reduced the economic benefit to Nevada customers of residential solar.Solar advocates have filed suit challenging this order.Several other states plan to revisit their net metering po

241、licies in the coming years,and the First Circuit Courts order denying the plaintiffs requested relief is currently on appeal.If and when net metering caps in certain jurisdictions are reached while they are still in effect,the value of the credit that customers receive for net metering is significan

242、tly reduced,utility rate structures are altered,or fees are imposed on net metering customers,future customers may be unable to recognize the same level of cost savings associated with net metering that current customers enjoy.The absence of favorable net metering policies or of net metering entirel

243、y,or the imposition of new charges that only or disproportionately impact customers that use net metering would significantly limit customer demand for our solar energy systems and the electricity they generate and could adversely impact our business,results of operations and future growth.For examp

244、le,shortly after expanding our operations into Nevada,the states primary electric utility reached its net metering cap.As a result,we have suspended operations in Nevada pending revisions to the net metering available in the state.Technical and regulatory limitations may significantly reduce our abi

245、lity to sell electricity from our solar energy systems and retain employees in certain markets.Technical and regulatory limits may curb our growth in certain key markets,which may also reduce our ability to retain employees in those markets.For example,the Federal Energy Regulatory Commission,in pro

246、mulgating the first form small generator interconnection procedures,recommended limiting customer-sited intermittent generation resources,such as our solar energy systems,to a certain percentage of peak load on a given electrical feeder circuit.Similar limits have been adopted by many states as a de

247、 facto standard and could constrain our ability to market to customers in certain geographic areas where the concentration of solar installations exceeds this limit.For example,Hawaiian electric utilities have adopted certain policies that limit distributed electricity generation in parts of their s

248、ervice territories.In the first half of 2014,Hawaii was the second largest market in which we operated as measured by total installations.However,despite legislative and regulatory actions to allow further distributed electricity penetration,these limitations constrained growth of distributed reside

249、ntial solar energy in Hawaii in the second half of 2014 and beyond,and Hawaii has become a less important market to us as a result;which in turn resulted in the loss of employees located in that market that were not willing to relocate.While a recent Hawaii Public Utilities Commission order seeks to

250、 streamline the interconnection process,and while our growth in other markets has more than offset the impact of these limitations in Hawaii,if we experienced similar or other limitations on the deployment of solar energy systems,our business,operating results and growth prospects could be materiall

251、y adversely affected.Furthermore,in certain areas,we benefit from policies that allow for expedited or simplified procedures related to connecting solar energy systems to the power grid.If such procedures are changed or cease to be available,our ability to sell the electricity generated by solar ene

252、rgy systems we install may be adversely impacted.As adoption of solar distributed generation rises along with the commercial operation of utility scale solar generation in key markets such as California,the amount of solar energy being fed into the power grid will surpass the amount planned for rela

253、tive to the amount of aggregate demand.Some traditional utilities claim that in less than five years,solar generation resources may reach a level capable of producing an over-generation situation,which may require some solar generation resources to be curtailed to maintain operation of the grid.Whil

254、e the prospect of such curtailment is somewhat speculative,the adverse effects of such curtailment without compensation could adversely impact our business,results of operations and future growth.14 We have incurred operating losses and may be unable to achieve or sustain profitability in the future

255、.We have incurred operating losses since our inception.We incurred net losses of$253.3 million and$165.9 million for the years ended December 31,2015 and 2014.We expect to continue to incur net losses from operations as we finance the expansion of our operations,expand our installation,engineering,a

256、dministrative,sales and marketing staffs,and implement internal systems and infrastructure to support our growth.Failure to grow at a sufficient rate to support these investments in personnel,systems and infrastructure,have adversely impacted and in the future could adversely impact our business and

257、 results of operations.Our ability to achieve profitability depends on a number of factors,including:?growing our customer base;?finding investors willing to invest in our investment funds;?maintaining and further lowering our cost of capital;?reducing the time between system installation and interc

258、onnection to the power grid,which allows us to begin generating revenue;?reducing the cost of components for our solar energy systems;and?reducing our operating costs by optimizing our sales,design and installation processes and supply chain logistics.Even if we do achieve profitability,we may be un

259、able to sustain or increase our profitability in the future.The vast majority of our business is conducted primarily using one channel,direct-selling.Historically,our primary sales channel has been a direct sales model.Recently,we have opened a new retail sales channel and set up an inside sales tea

260、m as new means of reaching customers.We compete against companies with experience selling solar energy systems to customers through a number of distribution channels,including homebuilders,home improvement stores,large construction,electrical and roofing companies and other third parties and compani

261、es that access customers through relationships with third parties in addition to other direct-selling companies.Our less diversified distribution channels may place us at a disadvantage with consumers who prefer to purchase products through these other distribution channels.Additionally,we are exper

262、ienced in reaching customers efficiently through a direct sale model;however,due to limited experience,acquiring customers through other channels has been slow to develop,leading to less market penetration in these channels.We are also vulnerable to changes in laws related to direct marketing as reg

263、ulations have limited unsolicited residential sales calls and may impose additional restrictions.If additional laws affecting direct marketing are passed in the markets in which we operate,it would take time to train our sales force to comply with such laws,and we may be exposed to fines or other pe

264、nalties for violations of such laws.If we fail to compete effectively through our direct-selling efforts or are not successful in executing our strategy to sell our solar energy systems through other channels,our financial condition,results of operations and growth prospects will be adversely affect

265、ed.We are highly dependent on our ability to attract,train and retain an effective sales force.The success of our direct-selling channel efforts depends upon the recruitment,retention and motivation of a large number of sales personnel to compensate for a high turnover rate among sales personnel,whi

266、ch is a common characteristic of a direct-selling business.In order to grow our business,we need to recruit,train and retain sales personnel on a continuing basis.Historically,we have recruited a large portion of our sales personnel from our sister company,Vivint,particularly in California,where a s

267、ignificant portion of our business is concentrated.Pursuant to a non-competition agreement entered into in connection with our initial public offering,we and Vivint have agreed not to solicit for employment any of the others employees who primarily manage sales,installation or servicing of the other

268、s products and services.The commitment not to solicit those employees lasts for 180 days after the employee finishes employment with us or Vivint.In the future,we will need to recruit greater numbers of our sales personnel from other sources and we may be unable to successfully do so.Sales personnel

269、 are attracted to direct-selling by competitive earnings opportunities and so direct-sellers typically compete for sales personnel by providing a more competitive earnings opportunity than that offered by the competition.Competitors devote substantial effort to determining the effectiveness of such

270、incentives so that they can invest in incentives that are the most cost effective or produce the best return on incentive.For example,we have historically compensated our sales personnel on a commission basis,based on the size of the solar energy systems they sell.Some sales personnel may prefer a c

271、ompensation structure that also includes a salary and equity incentive component.We may need to adjust our compensation model to include such components,and these adjustments could adversely impact our operating results and financial performance.15 In addition to our sales compensation model,our abi

272、lity to recruit,train and retain effective sales personnel could be harmed by additional factors,including:?the residual impact of uncertainty associated with the termination of the SunEdison acquisition or our future as a standalone company;?any adverse publicity regarding us,our solar energy syste

273、ms,our distribution channel or our industry;?lack of interest in,or the technical failure of,our solar energy systems;?lack of a compelling product or income opportunity that generates interest for potential new sales personnel,or perception that other product or income opportunities are more attrac

274、tive;?any negative public perception of our sales personnel and direct-selling businesses in general;?any regulatory actions or charges against us or others in our industry;?general economic and business conditions;and?potential saturation or maturity levels in a given market which could negatively

275、impact our ability to attract and retain sales personnel in such market.We are subject to significant competition for the recruitment of sales personnel from other direct-selling companies and from other companies that sell solar energy systems in particular.Furthermore,the regional and district man

276、agers of our sales personnel are instrumental in recruiting,retaining and motivating our sales personnel.When managers have elected to leave us and join other companies,the sales personnel they supervise have often left with them.We expect to experience similar attrition in our sales personnel in th

277、e future which may impact our results of operations and growth.The impact of such attrition could be particularly acute in those jurisdictions,such as California,where contractual non-competition agreements for service providers are not enforceable or subject to significant limitations.It is therefo

278、re continually necessary to innovate and enhance our direct-selling and service model as well as to recruit and retain new sales personnel.If we are unable to do so,our business will be adversely affected.We are not currently regulated as an electric utility under applicable law,but we may be subjec

279、t to regulation as an electric utility in the future.We are not regulated as a public utility in any of the markets in which we currently operate.As a result,we are not subject to the various federal,state and local standards,restrictions and regulatory requirements applicable to traditional utiliti

280、es that operate transmission and distribution systems and that have an obligation to serve electric customers within a specified jurisdiction.Any federal,state,or local regulations that cause us to be treated as an electric utility,or to otherwise be subject to a similar regulatory regime of commiss

281、ion-approved operating tariffs,rate limitations,and related mandatory provisions,could place significant restrictions on our ability to operate our business and execute our business plan by prohibiting,restricting or otherwise regulating our sale of electricity.If we were subject to the same state o

282、r federal regulatory authorities as electric utilities in the United States or if new regulatory bodies were established to oversee our business in the United States,then our operating costs would materially increase.Our business depends in part on the regulatory treatment of third-party owned solar

283、 energy systems.Retail sales of electricity by non-utilities such as us face regulatory hurdles in some states and jurisdictions,including states and jurisdictions that we intend to enter where the laws and regulatory policies have not historically embraced competition to the service provided by the

284、 incumbent,vertically integrated electric utility.Some of the principal challenges pertain to whether non-customer owned systems qualify for the same levels of rebates or other non-tax incentives available for customer-owned solar energy systems,whether third-party owned systems are eligible at all

285、for these incentives and whether third-party owned systems are eligible for net metering and the associated significant cost savings.Furthermore,in some states and utility territories third parties are limited in the way that they may deliver solar to their customers.In jurisdictions such as Arizona

286、,South Carolina and Utah and in Los Angeles,California,laws have been interpreted to prohibit the sale of electricity pursuant to our standard power purchase agreement,in some cases,leading residential solar energy system providers to use leases in lieu of power purchase agreements.Changes in law,re

287、ductions in,eliminations of or additional application requirements for,these benefits could reduce demand for our systems,adversely impact our access to capital and could cause us to increase the price we charge our customers for energy.16 If the Internal Revenue Service or the U.S.Treasury Departme

288、nt makes a determination that the fair market value of our solar energy systems is materially lower than what we have reported in our fund tax returns or cash grant applications,we may have to pay significant amounts to our investment funds,to our fund investors and/or the U.S.government.Such determ

289、inations could have a material adverse effect on our business,financial condition and prospects.We report in our fund tax returns and we and our fund investors claim the ITC based on the fair market value of our solar energy systems.While we are not aware of any audits or results of audits related t

290、o our appraisals or fair market value determinations of any of our investment funds by the Internal Revenue Service,or IRS,scrutiny with respect to fair market value determinations has increased industry-wide in recent years.If as part of an examination the IRS were to review the fair market value t

291、hat we used to establish our basis for claiming ITCs and determine that the ITCs previously claimed should be reduced,we would owe certain of our investment funds or our fund investors an amount equal to 30%of the investors share of the difference between the fair market value used to establish our

292、basis for claiming ITCs and the adjusted fair market value determined by the IRS,plus any costs and expenses associated with a challenge to that fair market value,plus a gross up to pay for additional taxes.We could also be subject to tax liabilities,including interest and penalties based on our sha

293、re of claimed ITCs.To date,we have not been required to make such payments under any of our investment funds.Our ability to provide solar energy systems to customers on an economically viable basis depends on our ability to finance these systems with fund investors who require particular tax and oth

294、er benefits.Substantially all of our solar energy systems installed to date have been eligible for ITCs or U.S.Treasury grants,as well as accelerated depreciation benefits.We have relied on,and will continue to rely on,financing structures that monetize a substantial portion of those benefits and pr

295、ovide financing for our solar energy systems.If,for any reason,we were unable to continue to monetize those benefits through these arrangements,we may be unable to provide solar energy systems for new customers and maintain solar energy systems for new and existing customers on an economically viabl

296、e basis.The availability of this tax-advantaged financing depends upon many factors,including:?our ability to compete with other renewable energy companies for the limited number of potential investment fund investors,each of which has limited funds and limited appetite for the tax benefits associat

297、ed with these financings;?the state of financial and credit markets;?changes in the legal or tax risks associated with these financings;and?non-renewal of these incentives or decreases in the associated benefits.Solar energy system owners are currently allowed to claim the ITC that is equal to 30%of

298、 the systems eligible tax basis,which is generally the fair market value of the system.By statute,the ITC is scheduled to decrease to 26%for 2020,22%for 2021 and 10%on January 1,2022.Moreover,potential fund investors must remain satisfied that the structures we offer qualify for the tax benefits ass

299、ociated with solar energy systems available to these investors,which depends both on the investors assessment of tax law and the absence of any unfavorable interpretations of that law.Changes in existing law and interpretations by the IRS and the courts could reduce the willingness of fund investors

300、 to invest in funds associated with these solar energy system investments.We cannot assure you that this type of financing will continue to be available to us.Alternatively,new investment fund structures or other financing mechanisms may become available,and if we are unable to take advantage of the

301、se fund structures and financing mechanisms it may place us at a competitive disadvantage.If,for any reason,we are unable to finance solar energy systems through tax-advantaged structures or if we are unable to realize or monetize depreciation benefits,or if we are otherwise unable to structure inve

302、stment funds in ways that are both attractive to investors and allow us to provide desirable pricing to customers,we may no longer be able to provide solar energy systems to new customers on an economically viable basis.This would have a material adverse effect on our business,financial condition,re

303、sults of operations and prospects.Rising interest rates could adversely impact our business.Rising interest rates could have an adverse impact on our business by increasing our cost of capital.The majority of our cash flows to date have been from customer contracts that have been partially monetized

304、 under various investment fund structures.One of the components of this monetization is the present value of the payment streams from the customers who enter into these contracts.If the rate of return required by the fund investor rises as a result of a rise in interest rates,the present value of th

305、e customer payment stream and the total value that we are able to derive from monetizing the payment stream will each be reduced.Interest rates are at historically low levels.It is likely that interest rates will rise in 2016,which would cause our costs of capital to increase.17 Our investment funds

306、 contain arrangements which provide for priority distributions to fund investors until they receive their targeted rates of return.In addition,under the terms of certain of our investment funds,we may be required to make payments to the fund investors if certain tax benefits that are allocated to su

307、ch fund investors are not realized as expected.Our financial condition may be adversely impacted if a fund is required to make these priority distributions for a longer period than anticipated to achieve the fund investors targeted rates of return or if we are required to make any tax-related paymen

308、ts.Our investment funds contain terms that contractually require the investment funds to make priority distributions to the fund investor,to the extent cash is available,until it achieves its targeted rate of return.The amounts of potential future distributions under these arrangements depends on th

309、e amounts and timing of receipt of cash flows into the investment fund,almost all of which is generated from customer payments related to solar energy systems that have been previously purchased(or leased,as applicable)by such fund.If such cash flows are lower than expected,the priority distribution

310、s to the investor may continue for longer than initially anticipated.Additionally,certain of our investment funds require that,under certain circumstances,we forego distributions from the fund that we are otherwise contractually entitled to,or make capital contributions to the fund,so that such dist

311、ributions owed to us,or additional capital contributions made by us,can be redirected to the fund investor such that it achieves the targeted return.For example,as of December 31,2015,we accrued an estimated$5.2 million capital contribution to reimburse a fund investor a portion of its capital contr

312、ibution in order to true-up the investors expected rate of return primarily due to a delay in solar energy systems being interconnected to the power grid and other factors.Our fund investors also expect returns partially in the form of tax benefits and,to enable such returns,our investment funds con

313、tain terms that contractually require us to make payments to the funds that are then used to make payments to the fund investor in certain circumstances so that the fund investor receives value equivalent to the tax benefits it expected to receive when entering into the transaction.The amounts of po

314、tential tax payments under these arrangements depend on the tax benefits that accrue to such investors from the funds activities.Due to uncertainties associated with estimating the timing and amounts of these cash distributions and allocations of tax benefits to such investors,we cannot determine th

315、e potential maximum future impact on our cash flows or payments that we could have to make under these arrangements.We may agree to similar terms in the future if market conditions require it.Any significant payments that we may be required to make or distributions to us that are reduced or diverted

316、 as a result of these arrangements could adversely affect our financial condition.We may incur substantially more debt or take other actions that could restrict our ability to pursue our business strategies.In September 2014,we entered into an aggregation credit facility,which was subsequently amend

317、ed in February 2015 and November 2015,pursuant to which we may borrow up to an aggregate of$375.0 million and,upon the satisfaction of certain conditions and the approval of the lenders,up to an aggregate of$175.0 million in additional borrowings.In addition,in March 2015,we entered into a revolving

318、 credit facility pursuant to which we may borrow up to an aggregate of$131.0 million.In May 2015,certain conditions were satisfied and the aggregate amount of available revolver borrowings was increased to$150.0 million.These credit facilities restrict our ability to dispose of assets,incur indebted

319、ness,incur liens,pay dividends or make other distributions to holders of our capital stock,repurchase our capital stock,make specified investments or engage in transactions with our affiliates.In addition,we do not have full access to the cash and cash equivalents held in our investments funds until

320、 distributed per the terms of the arrangements.We and our subsidiaries may incur substantial additional debt in the future and any debt instrument we enter into in the future may contain similar,or more onerous,restrictions.These restrictions could inhibit our ability to pursue our business strategi

321、es.Furthermore,if we default on one of our debt instruments,and such event of default is not cured or waived,the lenders could terminate commitments to lend and cause all amounts outstanding with respect to the debt to be due and payable immediately,which in turn could result in cross acceleration u

322、nder other debt instruments.Our assets and cash flow may not be sufficient to fully repay borrowings under all of our outstanding debt instruments if some or all of these instruments are accelerated upon a default.Furthermore,there is no assurance that we will be able to enter into new debt instrume

323、nts on acceptable terms.If we are unable to satisfy financial covenants and other terms under existing or new instruments or obtain waivers or forbearance from our lenders or if we are unable to obtain refinancing or new financings for our working capital,equipment and other needs on acceptable term

324、s if and when needed,our business would be adversely affected.Our business is concentrated in certain markets,putting us at risk of region specific disruptions.As of December 31,2015,approximately 39%of our cumulative installations and total offices were located in California.In addition,we expect f

325、uture growth to occur in California,which could further concentrate our customer base and operational infrastructure.Accordingly,our business and results of operations are particularly susceptible to adverse economic,regulatory,political,weather and other conditions in California and in other market

326、s that may become similarly concentrated.18 It is difficult to evaluate our business and prospects due to our limited operating history.Since our formation in 2011,we have focused our efforts exclusively on the sales,financing,engineering,installation,maintenance and monitoring of solar energy syste

327、ms for residential customers.We may be unsuccessful in significantly broadening our customer base through installation of solar energy systems within our current markets or in new markets we may enter.Our limited operating history,combined with the rapidly evolving and competitive nature of our indu

328、stry,may not provide an adequate basis for you to evaluate our operating and financial results and business prospects.In addition,we have limited insight into emerging trends that may adversely impact our business,prospects and operating results.Additionally,due to our limited operating history,we d

329、o not have empirical evidence of the effect of our systems on the resale value of our customers houses.Due to the length of our customer contracts,the system deployed on a customers roof may be outdated prior to the expiration of the term of the customer contract reducing the likelihood of renewal o

330、f our contracts at the end of the 20-year term,and possibly increasing the occurrence of defaults.This could have an adverse effect on our business,financial condition,results of operations and cash flow.As a result,our limited operating history may impair our ability to accurately forecast our futu

331、re performance and to invest accordingly.We have identified a material weakness in our internal control over financial reporting relating to inadequate financial statement preparation and review procedures in connection with the preparation of our consolidated financial statements that resulted in t

332、he restatement of certain of our financial statements,and we may identify material weaknesses in the future.In connection with the preparation,audits and interim reviews of our consolidated financial statements,we and our independent registered public accounting firm identified a material weakness i

333、n internal control over financial reporting.Under standards established by the Public Company Accounting Oversight Board of the United States,a material weakness is a deficiency,or a combination of deficiencies in internal control over financial reporting,such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or