Bloom Energy Corp

1. Nature of Business, Liquidity and Basis of Presentation

Nature of Business

We design, manufacture, sell and, in certain cases, install solid-oxide fuel cell systems (the “Energy Servers”) for on-site power generation. Our Energy Servers utilize innovative fuel cell technology and provide efficient energy generation with reduced operating costs and lower greenhouse gas emissions as compared to conventional fossil fuel generation. By generating power where it is consumed, our energy producing systems offer increased electrical reliability and improved energy security, while providing a path to energy independence. The corporate headquarters is located in San Jose, California.

Liquidity

We have generally incurred operating losses and negative cash flows from operations since our inception. With the series of new debt offerings, debt extinguishments, and conversions to equity that we completed during 2023, 2022 and 2021, we had $842.0 million and $4.6 million of total outstanding recourse and non-recourse debt, respectively, as of December 31, 2023, which was classified as long-term debt.

On October 23, 2021, we entered into the Securities Purchase Agreement (the “SPA”) with SK ecoplant Co., Ltd. (“SK ecoplant”, formerly known as SK Engineering & Construction Co., Ltd.) in connection with a strategic partnership. Pursuant to the SPA, on December 29, 2021, SK ecoplant purchased 10,000,000 shares of Bloom Energy Series A preferred stock, par value $0.0001 per share (the “Series A RCPS”) at a purchase price of $25.50 per share, for an aggregate purchase price of $255.0 million, including an option to purchase additional Class A common stock.

On August 10, 2022, pursuant to the SPA, SK ecoplant notified us of its intent to exercise its option to purchase additional shares of our Class A common stock, pursuant to a Second Tranche Exercise Notice (as defined in the SPA). It elected to purchase 13,491,701 shares (the “Second Tranche Shares”) at a purchase price of $23.05 per share. The aggregate purchase price approximated cash proceeds to be received by us of $311.0 million, excluding related incremental direct costs.

On March 20, 2023, we entered intothe Amended SPA, with SK ecoplant, pursuant to which we issued and sold to SK ecoplant 13,491,701 shares of Series B RCPS for cash proceeds of $311.0 million, excluding issuance cost of $0.5 million. On March 20, 2023, in connection with the Amended SPA, we also entered into the Shareholders’ Loan Agreement with SK ecoplant (the “Loan Agreement”), pursuant to which we were entitled to draw down on a loan from SK ecoplant with a maximum principal amount of $311.0 million, if SK ecoplant sent a redemption notice to us under the Amended SPA or otherwise had reduced any portion of its current holdings of our Class A common stock. On September 23, 2023, all 13,491,701 shares of the Series B redeemable convertible preferred stock, par value $0.0001 per share (the “Series B RCPS”) were automatically converted into shares of our Class A common stock.

On April 11, 2023 and October 5, 2023, our joint venture in the Republic of Korea entered into athree-year $1.5 million andthree-year $3.1 million credit agreements with SK ecoplant, respectively, to help fund its working capital. Both loans bear a fixed interest rate of 4.6% payable upon maturity along with the principle.

For more information on the strategic investment with SK ecoplant, please see Note 17 —SK ecoplant Strategic Investment, and for more information about our joint venture in the Republic of Korea, please see Note 11 —Related Party Transactions.

In November 2021, PPA V entered into $136.0 million,3.04% Senior Secured Notes due June 30, 2031. On August 24, 2023, as part of the PPA V Upgrade, we paid off the outstanding balance and related accrued interest of $118.5 million and $0.5 million, respectively, of our 3.04% Senior Secured Notes due June 30, 2031. For more information, please see Note 10 —Portfolio Financings.

On August 19, 2022, we completed an underwritten public offering (the “Offering”), pursuant to which we issued and sold 13,000,000 shares of Class A common stock at the price of $26.00 per share. As a part of the Offering, the underwriters were provided a 30-day option to purchase an additional 1,950,000 shares of our Class A common stock at the same price, less underwriting discounts and commissions, which was exercised contemporaneously with the Offering. The aggregate net proceeds received by us from the Offering were $371.5 million after deducting underwriting discounts and commissions of $16.5 million and incremental costs directly attributable to the Offering of $0.7 million.

On May 16, 2023, we issued the 3% Green Convertible Senior Notes due June 2028 (the “3% Green Notes”) with an aggregate principal amount of $632.5 million due June 2028, unless earlier repurchased, redeemed or converted, resulting in net cash proceeds of $612.8 million. On June 1, 2023, we used approximately $60.9 million of the net proceeds from this offering to redeem all of the outstanding principal amount of our 10.25% Senior Secured Notes due March 2027. The redemption price equaled 104% of the principal amount redeemed plus accrued and unpaid interest. We also used approximately $54.5 million of the net proceeds from the offering to purchase the Capped Calls. The remaining portion of the 3% Green Notes was planned to be used for working capital investment and general corporate purposes. For more information, please see Note 7 —Outstanding Loans and Security Agreements.

For further information on repayment of 3.04% Senior Secured Notes, issuance of 3% Green Notes, redemption of our 10.25% Senior Secured Notes, and purchase of Capped Calls, please see Note 7 —Outstanding Loans and Security Agreements.

Our future capital requirements depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, the rate of growth in the volume of system builds and the need for additional manufacturing space, the expansion of sales and marketing activities both in domestic and international markets, market acceptance of our products, our ability to secure financing for customer use of our Energy Servers, the timing of installations and of inventory build in anticipation of future sales and installations, and overall economic conditions. In order to support and achieve our future growth plans, we may need or seek advantageously to obtain additional funding through equity or debt financing. Failure to obtain this financing in future quarters may affect our results of operations, including our revenues and cash flows.

In the opinion of management, the combination of our existing cash and cash equivalents and operating cash flows is expected to be sufficient to meet our operational and capital cash flow requirements and other cash flow needs for the next 12 months from the date of issuance of this Annual Report on Form 10-K.

Inflation Reduction Act of 2022

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “IRA”). It contains provisions which we expect will have a significant impact on the development and financing of clean energy projects in the U.S. The IRA includes the extension and expansion of the Investment Tax Credit (the “ITC”) and the Production Tax Credit (the “PTC”) and the addition of expanded tax credits for other technologies and for manufacturing of clean energy equipment as well as terms allowing parties to more easily monetize the tax credits. The IRA also includes some targeted bonus credit incentives intended to encourage development in low-income communities, the use of domestically produced materials, and compliance with certain labor-related requirements.

The IRA contains several credits and incentive provisions that may be relevant to us, which we have summarized below:

•Section 48 – the ITC, which provides a tax credit based on capital investment in a variety of renewable and conventional energy technologies to incentivize investment in new energy resources and more efficient use of fuel, including fuel cell technology;

•Section 48C – Qualified Advanced Energy Project (reenacted), which provides an ITC through a competitive application process administered through the Department of Energy equal to 6% or 30% of the investment with respect to advanced energy projects;

•Section 45V – Clean Hydrogen, which provides a PTC of up to $3 per kg of qualified clean hydrogen over a 10-year credit period for the production of qualified clean hydrogen at a qualified facility in the US; and

•Section 45Q – Carbon Capture Sequestration, which provides a credit ranging from $12-$17 or $60-$85 per metric ton based on the amount of carbon oxides captured from a qualified facility over a 12-year period.

We believe that the programs and credits included in the IRA align well with our business model and could provide significant benefits with respect to incentivizing the purchase of our current product offerings and technologies. In particular, the IRA authorized a competitive process to apply for credits to expand or enhance manufacturing capacity under IRC 48C, and we have applied for a credit under this provision; at this time, we cannot be assured our application will ultimately be accepted or result in our receipt of credits. Also, the new PTC for qualified clean hydrogen and credit for carbon capture could result in increased demand for commercial solutions to hydrogen production technology and carbon capture, including our solid oxide fuel-cell based Electrolyzer and Energy Servers.

At the time of IRA implementation in August 2022, some of our existing contracts contemplated price adjustments at the inception of the contract for the change in the ITC rate to 30%. As a result, we recognized $8.7 million in product revenue and $1.3 million in installation revenue for the year ended December 31, 2022 from such existing contracts, as a change in variable consideration estimate for energy servers placed in service during the eligible periods under the IRA and which qualified for the 30% ITC rate. In fiscal 2023, all of our contract prices included the impact of the 30% ITC rate under the IRA provisions.

The IRA also creates certain bonus tax credits relevant to our products placed in service in fiscal 2023 and fiscal 2024, available by satisfying domestic content criteria and/or other criteria if such products are located within an “energy community,” as defined by the IRA. In fiscal 2023, contracts that included price adjustments related to the domestic content bonus tax credit were evaluated as variable consideration and we estimated variable consideration by using the most likely amount method of meeting the IRA domestic content criteria. When recognizing revenue, we constrained the estimate of variable consideration to an amount that was not probable of a significant revenue reversal.

Basis of Presentation

We have prepared the consolidated financial statements included herein pursuant to the rules and regulations of the U. S. Securities and Exchange Commission (“SEC”), and as permitted by those rules, including all disclosures required by generally accepted accounting principles as applied in the U.S. (“U.S. GAAP”). Certain prior period amounts have been reclassified to conform to the current period presentation.

Principles of Consolidation

These consolidated financial statements reflect our accounts and operations and those of our subsidiaries in which we have a controlling financial interest. We use a qualitative approach in assessing the consolidation requirement for our variable interest entities (“VIEs”), which we refer to as tax equity partnerships (each such VIE, also referred to as our power purchase agreement PPA Entity) and a joint venture in the Republic of Korea (the “Korean JV”). This approach focuses on determining whether we have the power to direct those activities of the PPA Entities and the Korean JV that most significantly affect their economic performance and whether we have the obligation to absorb losses, or the right to receive benefits, which could potentially be significant to the PPA Entities and the Korean JV. For all periods presented, we have determined that we are the primary beneficiary in all of our operational PPA Entities and the Korean JV, as discussed in Note 10 —Portfolio Financings and Note 17 — SK ecoplant Strategic Investment, respectively. We evaluate our relationships with the PPA Entities and the Korean JV on an ongoing basis to ensure that we continue to be the primary beneficiary. In August 2023, we sold our last consolidated PPA Entity, PPA V, as a result of the PPA V Repowering of Energy Servers (see Note 10 —Portfolio Financings). All intercompany transactions and balances have been eliminated upon consolidation.

The sale of an operating company with a portfolio of the PPAs in which we do not have an equity interest is called a “Third-Party PPA.” We have determined that, although these entities are VIEs, we do not have the power to direct those activities of the Third-Party PPAs that most significantly affect their economic performance. We also do not have the obligation to absorb losses, or the right to receive benefits, which could potentially be significant to the Third-Party PPAs. Because we are not the primary beneficiary of these activities, we do not consolidate Third-Party PPAs.

Business Combinations

Acquisitions of a business are accounted by using the acquisition method of accounting. Assets acquired and liabilities assumed, including amounts attributed to noncontrolling interests, are recorded at the acquisition date at their fair values. Assigning fair values requires us to make significant estimates and assumptions regarding the fair value of identifiable intangible assets, property, plant and equipment, deferred tax asset valuation allowances and liabilities, such as uncertain tax positions and contingencies. We may refine these estimates if necessary, over a period not to exceed one year by taking into consideration new information that, if known at the acquisition date, would have affected the fair values ascribed to the assets acquired and liabilities assumed.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. The most significant estimates include the determination of the stand-alone selling price, valuation of financial instruments associated with SK ecoplant Amended SPA, inventory valuation, specifically excess and obsolescence provisions for obsolete or unsellable inventory and, in relation to property, plant and equipment (specifically Energy Servers), assumptions relating to economic useful lives and impairment assessments.

Other accounting estimates include variable consideration relating to product performance guaranties, lease and non-lease components and related financing obligations such as incremental borrowing rates, estimated output, efficiency and residual value of the Energy Servers, product performance warranties and guaranties and extended maintenance, derivative valuations, estimates relating to contractual indemnities provisions, estimates for income taxes and deferred tax asset valuation allowances, stock-based compensation expense, estimates of fair value of preferred stock and equity and non-equity items in relation to the SK ecoplant strategic investment, and financing obligation allocations in managed service transactions. In addition, certain of such estimates could require further judgment or modification and therefore carry a higher degree of variability and volatility. Actual results could differ materially from these estimates under different assumptions and conditions.

Concentration of Risk

Geographic Risk —The majority of our revenue and long-lived assets are attributable to operations in the U.S. for all periods presented. In addition to shipments in the U.S., we also ship our Energy Servers to other countries, primarily to the Republic of Korea, Japan, India and Taiwan (collectively referred to as the “Asia Pacific region”). In the years ended December 31, 2023, 2022 and 2021, total revenue related to shipments to the Asia Pacific region was 30%,44% and 38%, respectively.

Credit Risk —At December 31, 2023, and 2022, one customer that is our related party (see Note 11 —Related Party Transactions) accounted for approximately 74% and 75% of accounts receivable, respectively. To date, we have not experienced any credit losses.

Customer Risk —During the year ended December 31, 2023, revenue fromtwo customers accounted for approximately 37% and 26% of our total revenue. During the year ended December 31, 2022, two customers represented approximately 38% and 37% of our total revenue. In the year ended December 31, 2021, revenue fromtwo customers accounted for approximately 43% and 11% of our total revenue.

2. Summary of Significant Accounting Policies

Revenue Recognition

We primarily earn product and installation revenue from the sale and installation of our Energy Servers, service revenue by providing services under operations and maintenance services contracts, and electricity revenue by selling electricity to customers under PPAs and Managed Services Agreements. We offer our customers several ways to finance their use of Bloom Energy Servers. Customers, including some of our international channel providers and the Third Party PPAs, may choose to purchase our Energy Servers outright. Customers may also enter into contracts with us for the purchase of electricity generated by our Energy Servers (i.e., Managed Services Agreement), which is then financed through one of our financing partners (i.e., Managed Services Financings). Finally, customers may purchase electricity through our PPA Entities (i.e., Portfolio Financings). For additional information, please see Part I, Item 7, Section Purchase and Financing Options.

Revenue Recognition under ASC 606 Revenue from Contracts with Customers

In applying Accounting Standards Codification (“ASC”) 606 revenue is recognized by following a five-step process:

1. Identify the contract(s) with a customer. Evidence of a contract generally consists of an agreement, or a purchase order issued pursuant to the terms and conditions of a distributor, reseller, purchase, use and maintenance agreement, maintenance services agreements or energy supply agreement.

2. Identify the performance obligations in the contract. Performance obligations are identified in our contracts and primarily include transferring control of the Energy Servers, installation of the Energy Servers, providing maintenance services and maintenance services renewal options which, in certain situations, provide customers with material rights.

3. Determine the transaction price. The purchase price stated in an agreed-upon purchase order or contract is generally representative of the transaction price. When determining the transaction price, we consider the effects of any variable consideration, which include performance guarantees that may be payable to our customers.

4. Allocate the transaction price to the performance obligations in the contract. The transaction price in a contract is allocated based upon the relative standalone selling price of each distinct performance obligation identified in the contract.

5. Recognize revenue when (or as) we satisfy a performance obligation. We satisfy performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring control of the promised products or services to a customer.

We sometimes combine contracts governing the sale and installation of our Energy Servers with the related maintenance services contracts and account for them as a single contract at contract inception to the extent the contracts are with the same customer. These contracts are not combined when the customer for the sale and installation of the Energy Servers is different to the maintenance services contract customer. We also assess whether any contract terms including default provisions, put or call options result in components of our contracts being accounted for as financing or leasing transactions outside of the scope of ASC 606.

Most of our contracts contain performance obligations with a combination of our Energy Servers, installation and maintenance services. For these performance obligations, we allocate the total transaction price to each performance obligation based on the relative standalone selling price. Our maintenance services contracts are typically subject to renewal by customers on an annual basis. We assess these maintenance services renewal options at contract inception to determine whether they provide customers with material rights that give rise to separate performance obligations.

The total transaction price is determined based on the total consideration specified in the contract, including variable consideration in the form of a performance guaranty payment that represents potential amounts payable to customers. The expected value method is generally used when estimating variable consideration, which typically reduces the total transaction price due to the nature of the performance obligations to which the variable consideration relates. These estimates reflect our historical experience and current contractual requirements which cap the maximum amount that may be paid. The expected value method requires judgment and considers multiple factors that may vary over time depending upon the unique facts and circumstances related to each performance obligation. Depending on the facts and circumstances, a change in variable consideration estimate will either be accounted for at the contract level or using the portfolio method.

We exclude from the transaction price all taxes assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers. Accordingly, such tax amounts are not included as a component of net sales or cost of sales. These tax amounts are recorded in cost of electricity revenue, cost of service revenue, and general and administrative operating expenses.

We allocate the transaction price to each distinct performance obligation based on relative standalone selling prices. Given that we typically sell our Energy Servers together with the related installation and maintenance services, standalone selling prices are not directly observable. We estimate standalone selling prices by using a cost-plus approach. Costs relating to the Energy Servers include all direct and indirect manufacturing costs, applicable overhead costs and costs for normal production inefficiencies (i.e., variances). We then apply a margin to the Energy Servers based on our Company’s pricing strategy. As our business offerings and eligibility for the ITC evolve over time, we may be required to modify the expected margin in subsequent periods and our revenue could be materially affected. Costs relating to installation include all direct and indirect installation costs. The margin we apply reflects our profit objectives relating to installation. Costs for maintenance services arrangements are estimated over the life of the maintenance contracts and include estimated future material costs and non-material costs. Material costs over the period of the service arrangement are impacted significantly by the longevity of the fuel cells themselves. We apply a lower margin to our total service costs than to our Energy Servers as it best reflects our long-term service margin expectations and comparable historical industry service margins.

We generally recognize product and installation revenue at a point in time that our customers obtain control of the Energy Servers. For certain instances, control of the installations is transferred to the customers over time, and the related revenue is recognized over time as the performance obligation is satisfied using the cost-to-cost (percentage-of-completion) method. We use an input measure of progress to determine the amount of revenue to be recognized during each reporting period. We recognize maintenance services revenue, including revenue associated with any related customer material rights, over time as we perform service maintenance activities.

Amounts billed to our customers for shipping and handling activities are considered contract fulfillment activities and not a separate performance obligation of the contract. Shipping and handling costs are recorded within the cost of revenue.

The following is a description of the principal activities from which we generate revenue. Our four revenue streams are classified as follows:

Product Revenue —All of our product revenue is generated from the sale of our Energy Servers to direct purchase customers, including financing partners on the Third-Party PPAs and sale-and-leaseback transactions, and international channel providers. We generally recognize product revenue from contracts with customers at the point that control is transferred to the customers. This occurs when we achieve customer acceptance, which depending on the contract terms is when the system is shipped and delivered to our customers, when the system is shipped and delivered and is physically ready for startup and commissioning (i.e., Mechanical Completion), or when the system is shipped and delivered and is turned on and producing power (i.e., Commencement of Operations or “COO”).

Under our traditional lease financing option that we had in fiscal 2021, we sell our Energy Servers through a direct sale to a financing partner who, in turn, leases the Energy Servers to the customer under a lease agreement. With our sales to our international channel providers, our international channel providers typically sell the Energy Servers to, or sometimes provide a PPA to, an end customer. In both traditional lease and international channel providers transactions, we contract directly with the end customer to provide extended maintenance services after the end of the standard warranty period. As a result, since the customer that purchases the server is a different and unrelated party to the customer that purchases extended warranty services, the product and maintenance services contract are not combined.

Installation Revenue —Nearly all of our installation revenue relates to the installation of the Energy Servers sold to the customers as part of a direct purchase and to financing parties as part of a traditional lease or Portfolio Financings. Generally, we recognize installation revenue when the system is physically ready for startup and commissioning (i.e., Mechanical Completion), or when the system is turned on and producing power (i.e., COO). For instances when control for installation services is transferred over time, we use an input measure of progress to determine the amount of revenue to recognize during each reporting period based on the costs incurred to satisfy the performance obligation.

Payments received from customers are recorded within deferred revenue and customer deposits in the consolidated balance sheets until control is transferred. The related cost of such product and installation is also deferred as a component of deferred cost of revenue in the consolidated balance sheets until control is transferred.

Service Revenue —Service revenue is generated from O&M Agreements. As part of our initial contract with customers for the sale and installation of our Energy Servers, we typically provide a standard one-year warranty which covers defects in materials and workmanship and manufacturing or performance conditions under normal use and service for the first year following Commencement of Operations. As part of this standard first-year warranty, we also monitor the operations of the underlying systems and provide output and efficiency guaranties. We have determined that this standard first-year warranty is a distinct performance obligation — being a promise to stand-ready to maintain the Energy Servers when and if required during the first year following installation. We also sell to our customers extended annual maintenance services that effectively extend the standard first-year warranty coverage at the customer’s option. These customers generally have an option to renew or cancel the extended maintenance services on an annual basis and nearly every customer has renewed historically. Similar to the standard first-year warranty, the optional extended annual maintenance services are considered a distinct performance obligation – being a promise to stand-ready to maintain the Energy Servers when and if required during the renewal service year.

Given our customers’ renewal history, we anticipate that most of them will continue to renew their maintenance services agreements each year for the period of their expected use of the Energy Servers. The contractual renewal price may be less than the standalone selling price of the maintenance services and consequently the contract renewal option may provide the customer with a material right. We estimate the standalone selling price for customer renewal options that give rise to material rights using the practical alternative by reference to optional maintenance services renewal periods expected to be provided and the corresponding expected consideration for these services. This reflects the fact that our additional performance obligations in any contractual renewal period are consistent with the services provided under the standard first-year warranty. Where we have determined that the customers have material rights as a result of their contract renewal option, we recognize that portion of the transaction price allocated to the material rights over the period in which such rights are exercised.

Payments from customers for the extended maintenance contracts are generally received at the beginning of each service year. Accordingly, the customer payment received is recorded as a customer deposit and revenue is recognized over the related service period as the services are performed.

Electricity Revenue —We sell electricity produced by our Energy Servers owned directly by us or by our consolidated PPA Entities. Our PPA Entities purchased the Energy Servers from us and sold electricity produced by these systems to customers through long-term PPAs. Customers were required to purchase all of the electricity produced by those Energy Servers at agreed-upon rates over the course of the PPAs’ contractual term. In August 2023, we sold our last consolidated PPA Entity, PPA V.

In addition, in certain Managed Services Financings pursuant to which we are party to a Managed Services Agreement with a customer in a sale-leaseback-sublease arrangement, we may recognize electricity revenue. We first determine whether the Energy Servers under the sale-leaseback arrangement of a Managed Services Financing were “integral equipment.” As the Energy Servers were determined not to be integral equipment, we determined if the leaseback was classified as a financing lease or an operating lease.

During 2023, 2022, and the second half of fiscal 2021, we completed several successful sale-and-leaseback transactions in which we transferred control of the Energy Server to the financier and leased it back as an operating lease to provide electricity to the end customer.

In order for the transaction to meet the criteria for successful sale-leaseback accounting, control of the Energy Servers must transfer to the financier, which requires, among other criteria, the leaseback to meet the criteria for an operating lease in accordance with ASC 842, Leases (“ASC 842”). Accordingly, for such transactions where control transfers and the leaseback is classified as an operating lease, the proceeds from the sale to the financier are recognized as revenue based on the fair value of the Energy Servers sold and are allocated between product revenue and installation revenue based on the relative standalone selling prices.

We recognize an operating lease liability for the Energy Servers leaseback obligation based on the present value of the future payments to the financier that are attributed to the Energy Servers leaseback using our incremental borrowing rate. We also record an operating lease right-of-use asset, which is amortized over the term of the leaseback, and is included as a cost of electricity revenue on the consolidated statements of operations.

For certain sale-and-leaseback transactions, we receive proceeds from the financier in excess of the fair value of the Energy Servers in order to finance our ongoing costs associated with the operation of the Energy Servers during the term of the end customer agreement to provide electricity. Such proceeds are recognized as financing obligations.

We allocate payments we are obligated to make under the leaseback agreement with the financier between the lease liability and the financing obligation based on the proportion of the financing obligation to the total proceeds to be received.

We recognize revenue from the satisfaction of performance obligations under our PPAs and Managed Services Financings to provide electricity to our end customers as the electricity is provided over the term of the agreement in the amount invoiced, which reflects the amount of consideration to which we have the right to invoice, and which corresponds to the value transferred under such arrangements.

Modifications

Contract modifications are accounted for as separate contracts if the additional products and services are distinct and priced at standalone selling prices. If the additional products and services are distinct, but not priced at standalone selling prices, the modification is treated as a termination of the existing contract and the creation of a new contract. If the additional products and services are not distinct within the context of the contract, the modification is combined with the original contract and either an increase or decrease in revenue is recognized on the modification date.

Deferred Revenue

We recognize a contract liability (referred to as deferred revenue in our consolidated financial statements) when we have an obligation to transfer products or services to a customer in advance of us satisfying a performance obligation and the contract liability is reduced as performance obligations are satisfied and revenue is recognized. The related cost of such product is deferred as a component of deferred cost of revenue in the consolidated balance sheets. Prior to shipment of the product or the commencement of performance of maintenance services, any prepayment made by the customer is recorded as a customer deposit. Deferred revenue related to material rights for options to renew are recognized in revenue over the maintenance services period.

A description of the principal activities from which we recognize cost of revenues associated with each of our revenue streams are classified as follows:

Cost of Product Revenue —Cost of product revenue consists of costs of our Energy Servers that we sell to direct purchase, including financing partners on the Third-Party PPAs, international channel providers and traditional lease customers. It includes costs paid to our materials suppliers, direct labor, manufacturing and other overhead costs, shipping costs, provisions for excess and obsolete inventory and the depreciation costs of our equipment. For the Energy Servers sold to customers pending installation, we provide warranty reserves as a part of product costs for the period from transfer of control of the Energy Servers to Commencement of Operations.

Cost of Installation Revenue —Cost of installation revenue primarily consists of the costs to install our Energy Servers that we sell to direct purchase, including financing partners on the Third-Party PPAs and traditional lease and successful sale-leaseback customers. It includes the cost of materials and service providers, personnel costs, shipping costs and allocated costs.

Cost of Service Revenue —Cost of service revenue consists of costs incurred under maintenance service contracts for all customers. It includes the cost of field replacement units, personnel costs for our customer support organization, certain allocated costs, and extended maintenance-related product repair and replacement costs.

Cost of Electricity Revenue —Cost of electricity revenue primarily consists of the depreciation of the cost of the Energy Servers owned by us or the consolidated PPA Entities. The cost of electricity revenue is generally recognized over the term of the Managed Services Agreement or customer’s PPA contract. In August 2023, we sold our last consolidated PPA Entity, PPA V.

Revenue Recognized from Portfolio Financings Through the PPA Entities(See Note 10 —Portfolio Financings)

In 2010, we began selling our Energy Servers to tax equity partnerships in which we held an equity interest as a managing member, or a PPA Entity. The investors in a PPA Entity contribute cash to the PPA Entity in exchange for an equity interest, which then allows the PPA Entity to purchase the Operating Company and the Energy Servers.

The cash contributions held are classified as short-term or long-term restricted cash according to the terms of each PPA Entity’s governing documents. As we identified customers, the Operating Company entered into a PPA with the customer pursuant to which the customer agreed to purchase the power generated by one or more Energy Servers at a specified rate per kilowatt hour for a specified term, which can range from 10 to 21 years. The Operating Company, wholly owned by the PPA Entity, typically entered into a maintenance services agreement with us following the first year of service to extend the standard one-year performance warranties and guaranties. This intercompany arrangement is eliminated on consolidation. Those PPAs that qualify as leases are classified as either sales-type leases or operating leases and those that do not qualify as leases are classified as tariff agreements or revenue arrangements with customers. For arrangements classified as operating leases, tariff agreements, or revenue arrangements with customers, income is recognized as contractual amounts are due when the electricity is generated and presented within electricity revenue on the consolidated statements of operations.

In August 2023, we sold our last consolidated PPA Entity, PPA V. Please refer to Note 10 —Portfolio Financings for details.

Sales-type Leases —Certain Portfolio Financings with the PPA Entities entered into prior to our adoption of ASC 842 qualified as sales-type leases in accordance with ASC 840, Leases (“ASC 840”). The classification for such arrangements were carried over and accounted for as sales-type leases under ASC 842.

As the Portfolio Financings through the PPA Entities entered into prior to our adoption of ASC 842 contain a lease, the consideration received was allocated between the lease elements (lease of property and related executory costs) and non-lease elements (other products and services, excluding any derivatives) based on relative fair value. Lease elements included the leased system and the related executory costs (i.e. installation of the system, electricity generated by the system, maintenance costs). Non-lease elements included service, fuel and interest related to the leased systems.

Service revenue was recognized over the term of the PPA as electricity was generated. For those transactions that contained a lease, the interest component related to the leased system was recognized as interest revenue over the life of the lease term. The customer had the option to purchase the Energy Servers at the then fair market value at the end of the PPA contract term.

In fiscal 2022 we sold PPA IIIa, as such we no longer have sale-type lease arrangements. Please refer to Note 10 —Portfolio Financings for details.

Service revenue related to sales-type leases of$0.4 million and$2.3 million for the years ended December 31, 2022 and 2021, respectively, is included in service revenue in the consolidated statements of operations. There was no service revenue related to sales-type leases for the year ended December 31, 2023. We have not entered into any new Portfolio Financing arrangements through the PPA Entities during the last three years.

Operating Leases —Certain Portfolio Financings with the PPA Entities entered into prior to the adoption of ASC 842 that were deemed leases in substance but did not meet the criteria of sales-type leases or direct financing leases in accordance with ASC 840, were accounted for as operating leases. The classification for such arrangements were carried over and accounted for as operating leases under ASC 842. Revenue under these arrangements was recognized as electricity sales and service revenue and was provided to the customer at rates specified under the PPAs. During the years ended December 31, 2023, 2022 and 2021, revenue from electricity sales from these Portfolio Financings with the PPA Entities amounted to $14.3 million, $25.9 million and $28.6 million, respectively. During the years ended December 31, 2023, 2022 and 2021, service revenue amounted to $3.1 million, $13.1 million and $14.6 million, respectively.

Investment Tax Credits —Under our Portfolio Financings with PPA Entities, ITCs were primarily passed through to Equity Investors with approximately 1% to 10% of incentives received by us. These incentives were accounted for by using the flow-through method.

The ITC program has operational criteria for the first five years after the qualified equipment is placed in service. If the qualified energy property is disposed of or otherwise ceases to be investment credit property before the close of the five-year recapture period is fulfilled, it could result in a partial reduction of the federal tax incentives. No recapture has occurred during the years ended December 31, 2023, 2022 and 2021.

In August 2022, the IRA was signed into law. The IRA includes numerous investments in climate protection, among them the extension and expansion of the ITC and the PTC, the addition of expanded tax credits for other technologies and for manufacturing clean energy equipment, as well as terms allowing parties to more easily monetize the tax credits. The IRA contains a two-tiered credit-amount structure for many applicable tax credits. Specifically, many of the credits have a lower base credit amount that can be increased up to five times if the taxpayer can satisfy applicable prevailing wage or apprenticeship requirements. The IRA also creates certain bonus tax credit amounts relevant to Bloom products placed in service in 2023 and 2024, available by satisfying domestic content criteria and/or locating within an “energy community,” as defined by the IRA. The IRA also creates tax credits for the production of hydrogen and carbon capture.

On August 16, 2022, the IRA enacted provisions to enable our Energy Servers to be qualified for 30% or more ITCs. If a contract consideration subject to changes due to the underlying ITC rate assumption changes, we will consider such potential ITC benefit changes as a variable consideration and will generally estimate the variable consideration by using the most likely amount method. When recognizing revenue, we will constrain the estimate of variable consideration to an amount that is not probable of a significant revenue reversal.

Recapture of Federal Tax Incentives, Including the ITC

Our Energy Servers are eligible for federal ITCs that accrued to qualified property under Internal Revenue Code Section 48 when placed into service. However, the ITC program has operational criteria that extend for five years. If the energy property is disposed of or otherwise ceases to be qualified investment credit property before the close of the five-year recapture period is fulfilled, it could result in a partial reduction of the ITC. Our sale of Energy Servers to the PPA Entities and pursuant to the Third-Party PPAs, in each case pursuant to Portfolio Financings, generates ITCs benefiting the third-party owners of the PPA Entities or tax equity partnerships (the tax equity partnership purchaser, an “Investment Company”) and, therefore, the third-party owners of the PPA Entities or Investment Companies, as the case may be, bear the risk of recapture if the assets placed in service do not meet the ITC operational criteria in the future.

Warranty Costs

We generally warrant our products sold to our customers, international channel providers, and financing parties for the first year following the date of acceptance of the Energy Servers. This standard warranty covers defects in materials, workmanship and manufacturing or performance conditions under normal use and service conditions for the first year following acceptance or for the optional extended annual maintenance services period.

We recognize warranty costs for those contracts that are considered to be assurance-type warranties and consequently do not give rise to performance obligations or for those maintenance service contracts that were previously in the scope of ASC 605-20-25, Separately Priced Extended Warranty and Product Maintenance Contracts.

In addition, as part of our standard one-year warranty and Managed Services Agreement obligations, we monitor the operations of the underlying systems and provide output and efficiency guaranties (collectively “product performance guaranties”). If the Energy Servers run at a lower efficiency or power output than we committed under our performance warranty or guaranty, we will reimburse the customer for this underperformance. Our performance obligation includes ensuring the Energy Servers operate at least at the efficiency and/or power output levels set forth in the customer agreement. Our aggregate reimbursement obligation for a performance guaranty for each customer is capped based on the purchase price of the underlying Energy Servers. Product performance guaranty payments are accounted for as a reduction in service revenue. We accrue for performance guaranties based on the estimated amounts reimbursable at each reporting period and recognize the costs as a reduction to revenue.

Shipping and Handling Costs

We record costs related to shipping and handling in cost of product revenue, cost of installation revenue and cost of service as they are incurred.

Sales and Utility Taxes

We recognize revenue on a net basis for taxes charged to our customers and collected on behalf of the taxing authorities.

Operating Expenses

Advertising and Promotion Costs —Expenses related to advertising and promotion of products are charged to sales and marketing expense as incurred. We did not incur any material advertising or promotion expenses during the years ended December 31, 2023, 2022 and 2021.

Research and Development —We conduct internally funded research and development activities to improve anticipated product performance and reduce product life-cycle costs. Research and development costs are expensed as incurred and include salaries and expenses related to employees conducting research and development and other costs.

Stock-Based Compensation —We account for stock options, restricted stock units (“RSUs”) and performance-based stock units (“PSUs”) awarded to employees and non-employee directors under the provisions of ASC 718, Compensation – Stock Compensation (“ASC 718”).

Stock-based compensation costs for options are measured using the Black-Scholes valuation model. The Black-Scholes valuation model uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of the award, the risk-free interest rate for a period that approximates the expected term of the stock options and the expected dividend yield. In developing estimates used to calculate assumptions, we established the expected term for employee options as well as expected forfeiture rates based on the historical settlement experience and after giving consideration to vesting schedules. For options with a vesting condition tied to the attainment of service and market conditions, stock-based compensation costs are recognized using Monte Carlo simulations. Stock-based compensation costs are recorded net of estimated forfeitures such that expense is recorded only for those stock-based awards that are expected to vest. We typically record stock-based compensation costs for options under the straight-line attribution method over the requisite service period, which is generally the vesting term, which is generally four years for options.

Stock-based compensation costs for RSUs and PSUs are measured based on the fair value of the underlying shares on the date of grant. We recognize the compensation cost for RSUs using a straight-line basis over the requisite service period of the RSUs, which is generally three tofour years. We recognize the compensation cost for PSUs over the expected performance period using the graded vesting method as the achievement of the milestones become probable, which is generallyone tothree years.

We also use the Black-Scholes valuation model to estimate the fair value of stock purchase rights under the Bloom Energy Corporation 2018 Employee Stock Purchase Plan (the “2018 ESPP”). The fair value of the 2018 ESPP purchase rights is recognized as an expense under the multiple options approach. Forfeitures are estimated at the time of grant and revised in subsequent periods, if necessary, if actual forfeitures differ from initial estimates.

Stock issued to grantees in our stock-based compensation is from authorized and previously unissued shares. Stock-based compensation costs are recorded in the consolidated statements of operations based on the employees’ respective functions. Stock-based compensation costs directly associated with the product manufacturing operations process are capitalized into inventory and expensed when the capitalized asset is used in the normal course of the sales or services process.

We record deferred tax assets for awards that result in deductions on our income tax returns, unless we cannot realize the deduction (i.e., we are in a net operating loss position), based on the amount of compensation cost recognized and our statutory tax rate.

Refer to Note 9 —Stock-Based Compensation and Employee Benefit Plansfor further discussion of our stock-based compensation arrangements.

Income Taxes

We account for income taxes using the liability method under ASC 740, Income Taxes (“ASC 740”). Under this method, deferred tax assets and liabilities are determined based on net operating loss carryforwards, research and development credit carryforwards and temporary differences resulting from the different treatment of items for tax and financial reporting purposes. Deferred items are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse. Additionally, we must assess the likelihood that deferred tax assets will be recovered as deductions from future taxable income. We have provided a full valuation allowance on our domestic deferred tax assets because we believe it is more likely than not that our deferred tax assets will not be realized.

We follow the accounting guidance in ASC 740, which requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. We record a liability for the difference between the benefit recognized and measured pursuant to ASC 740-10 and the tax position taken or expected to be taken on our tax return. To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. We established reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that the tax return positions are fully supportable. The reserves are adjusted in light of changing facts and circumstances such as the outcome of a tax audit. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate. We recognize interest and penalties related to unrecognized tax benefits in income tax expense.

Refer to Note 15 —Income Taxes for further discussion of our income tax expense.

Comprehensive Loss

Our comprehensive loss is comprised of net loss attributable to common stockholders, change in derivative instruments designated and qualifying as cash flow hedges, foreign currency translation adjustment and comprehensive loss attributable to noncontrolling interest and redeemable noncontrolling interest.

Fair Value Measurement

ASC 820, Fair Value Measurement (“ASC 820”), defines fair value, establishes a framework for measuring fair value under U.S. GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principle or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The guidance describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:

Other Balance Sheet Components

Cash, Cash Equivalents, and Restricted Cash —Cash equivalents consist of highly liquid short-term investments with maturities of 90 days or less at the date of purchase.

Restricted cash is held as collateral to provide financial assurance that we will fulfill obligations and commitments primarily related to our Portfolio Financings, the Third-Party PPAs and Managed Services Agreements. Restricted cash also includes debt service reserves, maintenance service reserves and facility lease agreements. Restricted cash that is expected to be used within one year of the balance sheet date is classified as a current asset, whereas restricted cash expected to be used more than one year from the balance sheet date is classified as a non-current asset.

Derivatives —We account for our derivative instruments as either an asset or a liability which are carried at fair value on the consolidated balance sheets. Changes in the fair value of the derivatives that are designated and qualify as cash flow hedges are recorded in accumulated other comprehensive loss on the consolidated statements of comprehensive loss. Changes in fair value of those derivatives that no longer qualify as cash flow hedges or are derivatives that do not qualify for hedge accounting are recorded through earnings in the consolidated statements of operations.

Accounts Receivable —Accounts receivable primarily represents trade receivables from sales to customers recorded at amortized cost less allowance for credit losses. The allowance for credit losses reflects our best estimate about future losses over the contractual life of outstanding accounts receivable taking into consideration historical experience, specific allowances for known troubled accounts, other currently available information including customer financial condition, and both current and forecasted economic conditions.

Inventories —Inventories consist principally of raw materials, work-in-process and finished goods and are stated on a first-in, first-out basis at a lower of cost or net realizable value. We record inventory excess and obsolescence provisions for estimated obsolete or unsellable inventory, equal to the difference between the cost of inventory and estimated net realizable value based upon assumptions about market conditions and future demand for product generally expected to be utilized over the next 12 to 24 months, including product needed to fulfill our warranty obligations. If actual future demand for our products is less than currently forecasted, additional inventory provisions may be required. Once a provision is recorded, it is maintained until the product to which it relates is sold or otherwise disposed.

Property, Plant and Equipment —Property, plant and equipment, including leasehold improvements, are stated at cost less accumulated depreciation. The Energy Servers are depreciated to their residual values over their useful economic lives which reflect consideration of the terms of their related PPA and tariff agreements. These useful lives are reassessed when there is an expected change in the use of the Energy Servers. Leasehold improvements are depreciated over the shorter of the lease term or their estimated depreciable lives. Buildings are amortized over the shorter of the lease or property term or their estimated depreciable lives. Assets under construction are capitalized as costs are incurred and depreciation commences after the assets are put into service within their respective asset class.

Depreciation is calculated using the straight-line method over the estimated depreciable lives of the respective assets as follows:

• Lesser of 35 years or the term of the underlying land lease.

When assets are retired or disposed of, the assets and related accumulated depreciation and amortization are removed from our consolidated financial statements and the resulting gain or loss is reflected in the consolidated statements of operations.

Impairment of Long-Lived Assets — Our long-lived assets include property, plant and equipment and the Energy Servers capitalized in connection with our Managed Services Financing Program, Portfolio Financings and other similar arrangements. The carrying amounts of our long-lived assets are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated. Impairment charges for the year ended December 31, 2023, amounted to $123.7 million related to the PPA

V Upgrade. Impairment charges for the year ended December 31, 2022, amounted to $44.8 million and $64.0 million related to the PPA IIIa Upgrade and the PPA IV Upgrade, respectively (see Note 10 —Portfolio Financings). We didnot have impairment charges for the year ended December 31, 2021.

Allocation of Profits and Losses of Consolidated Entities to Noncontrolling Interests —We generally allocate profits and losses to noncontrolling interests under the hypothetical liquidation at book value (“HLBV”) method. The determination of equity in earnings under the HLBV method requires management to determine how proceeds, upon a hypothetical liquidation of the entity at book value, would be allocated between our investors. The noncontrolling interest balance is presented as a component of permanent equity in the consolidated balance sheets.

For income tax purposes, the Equity Investors of the PPA Entities receive a greater proportion of the share of losses and other income tax benefits. This includes the allocation of investment tax credits which are distributed to the Equity Investors through an Investment Company subsidiary of Bloom. Allocations are initially based on the terms specified in each respective partnership agreement until either a specific date or the Equity Investors’ targeted rate of return specified in the partnership agreement is met (the “flip” of the flip structure) whereupon the allocations change. In some cases, after the Equity Investors receive their contractual rate of return, we receive substantially all of the remaining value attributable to the long-term recurring customer payments and the other incentives. In August 2023, we sold our last consolidated PPA Entity being our VIE, PPA V, as a result of the PPA V Repowering of the Energy Servers (see Note 10 —Portfolio Financings). As of December 31, 2023 we had one VIE which we consolidate, Korean JV, which profit and loss are allocated to noncontrolling interests under the HLBV method.

Foreign Currency Considerations

Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The functional currency of the Company’s parent entity is the U.S. dollar.

The functional currencies of our foreign subsidiaries are local currencies. The functional currency of our joint venture in the Republic of Korea is the local currency, the South Korean won (“KRW”), since the joint venture is financially independent of its U.S. parent and the KRW is the currency in which the joint venture generates and expends cash. The assets and liabilities of these entities are translated at the rate of exchange at the balance sheet date. Revenue and expenses are translated at the weighted average rate of exchange during the period. For these entities, translation adjustments resulting from the process of translating the local currency financial statements into the U.S. dollars are included in other comprehensive loss. Translation adjustments attributable to noncontrolling interests are allocated to and reported as part of the noncontrolling interests in the consolidated financial statements.

Transactions made in a currency other than the functional currency are remeasured to the functional currency at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are remeasured to the functional currency at the exchange rate at that date and non-monetary assets and liabilities are measured at historical rates. Foreign currency transaction gains and losses are included as a component of other (expense) income, net in our consolidated statements of operations.

The reporting currency for these consolidated financial statements is the U.S. dollar.

Accounting Guidance Not Yet Adopted

In August 2023, the FASB issued ASU 2023-05, Business Combinations — Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement (“ASU 2023-05”), which addresses the accounting for contributions made to a joint venture. ASU 2023-05 requires joint ventures to measure all assets and liabilities upon formation at fair value. This guidance will be applied prospectively to all joint venture formations with a formation date on or after January 1, 2025. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within the segment measure of profit or loss. This guidance will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023, and interim reporting periods in fiscal years beginning after December 31, 2024. We are currently evaluating the potential impact, but we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures(“ASU 2023-09”). ASU 2023-09 addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This guidance will be applied on a prospective basis and is effective for annual reporting periods in fiscal years beginning after December 15, 2024. Retrospective application is permitted. We are currently evaluating the potential impact, but we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements

Contract Assets and Contract Liabilities Acquired in a Business Combination — In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, as if it had originated the contracts. This approach differs from the previous requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. ASU 2021-08 became effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022. The standard does not impact acquired contract assets or liabilities from business combinations occurring prior to the adoption date.

There have been no significant changes in our reported financial position or results of operations and cash flows resulting from the adoption of new accounting pronouncements.

3. Revenue Recognition

Contract Balances

The following table provides information about accounts receivables, contract assets, customer deposits and deferred revenue from contracts with customers (in thousands):

Contract assets relate to contracts for which revenue is recognized upon transfer of control of performance obligations, but where billing milestones have not been reached. Customer deposits and deferred revenue include payments received from customers or invoiced amounts prior to transfer of controls of performance obligations. At December 31, 2022, customer deposits included $24.6 million related to transactions with SK ecoplant, and refundable fees received from customers. At December 31, 2023, there wereno customer deposits related to transactions with SK ecoplant (see Note 17 —SK ecoplant Strategic Investment).

Contract assets and contract liabilities are reported in a net position on an individual contract basis at the end of each reporting period. Contract assets are classified as current in the consolidated balance sheets when both the milestones other than the passage of time, are expected to be complete and the customer is invoiced within one year of the balance sheet date, and as long-term when both the above-mentioned milestones are expected to be complete, and the customer is invoiced more than one year out from the balance sheet date. Contract liabilities are classified as current in the consolidated balance sheets when the revenue recognition associated with the related customer payments and invoicing is expected to occur within one year of the balance sheet date and as long-term when the revenue recognition associated with the related customer payments and invoicing is expected to occur in more than one year from the balance sheet date.

Contract Assets

Contract assets as of December 31, 2023 were primarily related to the PPA V Upgrade. For additional information, please see Note 10— Portfolio Financings.

Deferred Revenue

Deferred revenue activity during the years ended December 31, 2023 and 2022 consisted of the following (in thousands):

Deferred revenue is equivalent to the total transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, as of the end of the period. The primary component of deferred revenue at the end of the period consists of performance obligations relating to the provision of maintenance services under current contracts and future renewal periods. Some of these obligations provide customers with material rights over a period that we estimate to be largely commensurate with the period of their expected use of the associated Energy Servers. As a result, we expect to recognize these amounts as revenue over a period of up to 21 years, predominantly on a relative standalone selling price basis that reflects the cost of providing these services. Deferred revenue also includes performance obligations relating to product acceptance and installation. A significant amount of this deferred revenue is reflected as additions and revenue recognized in the same 12-month period, and a portion of this deferred revenue is expected to be recognized beyond this 12-month period mainly due to deployment schedules.

We do not disclose the value of the unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

Disaggregated Revenue

We disaggregate revenue from contracts with customers into four revenue categories: product, installation, service and electricity (in thousands):

4. Financial Instruments

Cash, Cash Equivalents, and Restricted Cash

The carrying values of cash, cash equivalents, and restricted cash approximate fair values and were as follows (in thousands):

Restricted cash consisted of the following (in thousands):

1 As of December 31, 2022, we had a variable interest entity (“VIE”) related to our PPA Entity, PPA V, which represented a portion of the consolidated balances recorded within the “restricted cash” and other financial statement line items in the consolidated balance sheets (see Note 10— Portfolio Financings). In August 2023, we sold the PPA V as a result of the PPA V Repowering of the Energy Servers (see Note 10— Portfolio Financings), and as such there were no balances related to PPA V in the consolidated balance sheets as of December 31, 2023. In addition, the restricted cash held in the PPA II and PPA IIIb entities as of December 31, 2023 included $32.2 million and $0.9 million of current restricted cash, respectively, and $8.2 million and $6.7 million of non-current restricted cash, respectively. The restricted cash held in the PPA II and PPA IIIb entities as of December 31, 2022, included $40.6 million and $1.2 million of current restricted cash, respectively, and $28.5 million and $6.7 million of non-current restricted cash, respectively. These entities are not considered VIEs.

Factoring Arrangements

We sell certain customer trade receivables on a non-recourse basis under factoring arrangements with certain financial institutions. These transactions are accounted for as sales and cash proceeds are included in cash used in operating activities. We derecognized $291.4 million, $283.3 million and $116.3 million of accounts receivable during the years ended December 31, 2023, 2022 and 2021, respectively.

The cost of factoring such accounts receivable on our consolidated statements of operations for the years ended December 31, 2023 and 2022 was $5.5 million and $4.0 million, respectively. The cost of factoring such accounts receivable on our consolidated statements of operations for the year ended December 31, 2021 wasnot material. The cost of factoring is recorded in general and administrative expenses.

5. Fair Value

Our accounting policy for the fair value measurement of cash equivalents is described in Note 2— Summary of Significant Accounting Policies.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The tables below set forth, by level, our financial assets that are accounted for at fair value for the respective periods. The table does not include assets and liabilities that are measured at historical cost or any basis other than fair value (in thousands):

Money Market Funds —Money market funds are valued using quoted market prices for identical securities and are therefore classified as Level 1 financial assets.

Embedded Escalation Protection Plan Derivative Liability in Sales Contracts —We estimate the fair value of the embedded EPP derivatives in certain sales contracts using a Monte Carlo simulation model, which considers various potential electricity price curves over the sales contracts’ terms. We use historical grid prices and available forecasts of future electricity prices to estimate future electricity prices. We have classified these derivatives as a Level 3 financial liability.

The changes in the Level 3 financial liabilities during the years ended December 31, 2023,2022 and 2021 were as follows (in thousands):

To estimate the liabilities related to the EPP contracts, an option pricing method was implemented through a Monte Carlo simulation, which considers various potential electricity price forward curves over the sales contracts’ terms. We use historical grid prices and available forecasts to estimate future electricity prices. The grid pricing EPP guarantees that we provided in some of our sales arrangements represent an embedded derivative, with the initial value accounted for as a reduction in product revenue and any changes, reevaluated quarterly, in the fair market value of the derivative recorded in gain (loss) on revaluation of embedded derivatives.

The unobservable inputs were simulated based on the available values for avoided cost and cost of electricity as calculated for December 31, 2023 and 2022, using an expected growth rate of 7% over the contracts’ life and volatility of 15%. The estimated growth rate and volatility were estimated based on the historical tariff changes for the period 2008 to 2023. Avoided cost is the transmission and distribution cost expressed in dollars per kilowatt hours avoided in the given year of the contract, calculated using the billing rates of the effective utility tariff applied during the year to the host account for which usage is offset by the generator. If the billing rates within the utility tariff change during the measurement period, the average amount of charge for each rate shall be weighted by the number of effective months for each amount.

The inputs listed above would have had a direct impact on the fair values of the EPP derivatives if they were adjusted. Generally, a decrease in electric grid prices would result in an increase in the estimated fair value of our EPP derivative liabilities.

For the years ended December 31, 2023, 2022 and 2021, we recorded the fair value of the embedded EPP derivatives with no material unrealized gains or losses in either of the three years ended December 31, 2023, 2022 and 2021 in our consolidated statements of operations. The fair value of these derivatives was 4.4 million and 5.9 million as of December 31, 2023 and 2022, respectively.

In June 2023, per an EPP agreement with one of our customers, we paid $3.2 million, which was recorded as a reduction to our balance of embedded EPP derivative liability as of December 31, 2023.

Financial Assets and Liabilities and Other Items Not Measured at Fair Value on a Recurring Basis

Debt Instruments —The senior secured notes, term loans and convertible senior notes are based on rates currently offered for instruments with similar maturities and terms (Level 2). The following table presents the estimated fair values and carrying values of debt instruments (in thousands):

6. Balance Sheet Components

Inventories

The components of inventory consist of the following (in thousands):

The inventory reserves were $18.7 million and $17.2 million as of December 31, 2023 and 2022, respectively.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

Property, Plant and Equipment, Net

Property, plant and equipment, net, consists of the following (in thousands):

Depreciation expense related to property, plant and equipment was $62.6 million, $61.6 million and $53.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Property, plant and equipment under operating leases by PPA V was $226.0 million and accumulated depreciation for these assets was $92.7 million as of December 31, 2022. There were no property, plant and equipment under operating leases by PPA V as of December 31, 2023. Depreciation expense for property, plant and equipment under operating leases by PPA V (sold in August 2023) was $10.9 million for the year ended December 31, 2023. Depreciation expense for property, plant and equipment under operating leases by PPA V, PPA IV (sold in November 2022), and PPA IIIa (sold in June 2022) was $12.1 million and $23.5 million for the years ended December 31, 2022 and 2021, respectively.

PPA IIIa Upgrade

In June 2022, we started a project (the “PPA IIIa Upgrade,” the “PPA IIIa Repowering”) to replace 9.8 megawatts of the Energy Servers (the “old PPA IIIa Energy Servers”) at PPA IIIa Investment Company and Operating Company (“PPA IIIa”)

with current generation Energy Servers (the “new PPA IIIa Energy Servers”). The replacement was complete in the fourth quarter of fiscal 2022. See Note 10— Portfolio Financingsfor additional information.

PPA IV Upgrade

In November 2022, we started a project (the “PPA IV Upgrade,” the “PPA IV Repowering”) to replace 19.3 megawatts of the Energy Servers (the “old PPA IV Energy Servers”) at PPA IV Investment Company and Operating Company (“PPA IV”) with current generation Energy Servers (the “new PPA IV Energy Servers”). The replacement was substantially complete as of December 31, 2023. See Note 10— Portfolio Financingsfor additional information.

PPA V Upgrade

In August 2023, we started a project (the “PPA V Upgrade,” the “PPA V Repowering”) to replace 37.1 megawatts of the Energy Servers (the “old PPA V Energy Servers”) at PPA V with current generation Energy Servers (the “new PPA V Energy Servers”). The replacement was complete in the first quarter of fiscal 2024. See Note 10— Portfolio Financings for additional information.

Other Long-Term Assets

Other long-term assets consist of the following (in thousands):

Accrued Warranty and Product Performance Liabilities

Accrued warranty liabilities consist of the following (in thousands):

Changes in the product warranty and product performance liabilities were as follows (in thousands):

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

Preferred Stock

As of December 31, 2023, we had 20,000,000 shares of preferred stock authorized.13,491,701 of these shares were designated as Series B RCPS and were converted to Class A common stock as of September 23, 2023, as a result of the SK ecoplant Second Tranche Closing. As of December 31, 2022, we had 20,000,000 shares of preferred stock authorized.10,000,000 of these shares were designated as Series A redeemable convertible preferred stock and were converted to Class A common stock as of November 8, 2022, as a result of the SK ecoplant Initial Investment. For additional information, please see Note 17— SK ecoplant Strategic Investment.

The preferred stock had $0.0001 par value. There wereno shares of preferred stock issued and outstanding as of December 31, 2023 and December 31, 2022.

Conversion of Class B Common Stock

On July 27, 2023, in accordance with our Restated Certificate of Incorporation, each share of our Class B common stock entitled toten votes per share automatically converted intoone share of our Class A common stock entitled toone vote per share.

7. Outstanding Loans and Security Agreements

The following is a summary of our debt as of December 31, 2023 (in thousands, except percentage data):

The following is a summary of our debt as of December 31, 2022 (in thousands, except percentage data):

Recourse debt refers to debt that we have an obligation to pay. Non-recourse debt refers to debt that is recourse to only our subsidiaries (i.e., PPAs and Korean JV). The differences between the unpaid principal balances and the net carrying values apply to deferred financing costs. We and all of our subsidiaries were in compliance with all financial covenants as of December 31, 2023 and December 31, 2022.

Recourse Debt Facilities

3% Green Convertible Senior Notes due June 2028

On May 16, 2023, we issued the 3% Green Notes in an aggregate principal amount of $632.5 million due on June 1, 2028, unless earlier repurchased, redeemed or converted, less an initial purchasers’ discount of $15.8 million and other issuance costs of $3.9 million (together, the “3% Green Notes Transaction Costs”), resulting in net proceeds of $612.8 million. The 3% Green Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of May 16, 2023, between us and U.S. Bank Trust Company, National Association, as Trustee, in private placements to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”).

Pursuant to the purchase agreement among us and the representatives of the initial purchasers of the 3% Green Notes, we granted the initial purchasers an option to purchase up to an additional $82.5 million aggregate principal amount of the 3% Green Notes (the “Greenshoe Option”). The 3% Green Notes issued on May 16, 2023, included $82.5 million aggregate principal amount pursuant to the full exercise by the initial purchasers of the Greenshoe Option.

The 3% Green Notes are senior, unsecured obligations accruing interest at a rate of 3% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2023.

We may not redeem the 3% Green Notes prior to June 5, 2026, subject to a partial redemption limitation. We may elect to redeem, at face value, all or any portion of the 3% Green Notes at any time, and from time to time, on or after June 5, 2026, and on or before the forty-sixth scheduled trading day immediately before the maturity date, provided the share price for our Class A common stock exceeds 130% of the conversion price at redemption.

Before March 1, 2028, the noteholders have the right to convert their 3% Green Notes only upon the occurrence of certain events, including satisfaction of a condition relating to the closing price of our common stock (the “Closing Price Condition”) or the trading price of the 3% Green Notes (the “Trading Price Condition”), a redemption event, or other specified corporate events. If the Closing Price Condition is met on at least 20 (whether or not consecutive) of the last 30 consecutive trading days in any calendar quarter, and only during such calendar quarter, the noteholders may convert their 3% Green Notes at any time during the immediately following quarter, commencing after the calendar quarter ending on September 30, 2023, subject to partial redemption limitation. The Closing Price Condition was not met during the three months ended September 30, 2023, and accordingly, the noteholders could not convert their 3% Green Notes during the quarter ended December 31, 2023.

Subject to the Trading Price Condition, the noteholders may convert their 3% Green Notes during thefive business days immediately after anyfive consecutive trading day period in which the trading price per $1,000 principal amount of the 3% Green Notes, as determined following a request by a holder of the 3% Green Notes, for each day of that period is less than 98% of the product of the closing price of our common stock and the then applicable conversion rate. From and after March 1, 2028, the noteholders may convert their 3% Green Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. Should the noteholders elect to convert their 3% Green Notes, we may elect to settle the conversion by paying or delivering, as applicable, cash, shares of our Class A common stock, $0.0001 par value per share, or a combination thereof, at our election.

The initial conversion rate is 53.0427 shares of Class A common stock per $1,000 principal amount of notes, which represents an initial conversion price of approximately $18.85 per share of Class A common stock. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events. Also, we may increase the conversion rate at any time if our Board of Directors determines it is in the best interests of the Company or to avoid or diminish income tax to holders of common stock. In addition, if certain corporate events that constitute a Make-Whole Fundamental Change, as defined below, occur, then the conversion rate applicable to the conversion of the 3% Green Notes may, in certain circumstances, be increased by up to 22.5430 shares of Class A common stock per $1,000 principal amount of notes for a specified period of time. On December 31, 2023, the maximum number of shares into which the 3% Green Notes could have been potentially converted if the conversion features were triggered was 47,807,955 shares of Class A common stock.

According to the Indenture, a Make-Whole Fundamental Change means (i) a Fundamental Change, that includes certain change-of-control events relating to us, certain business combination transactions involving us and certain delisting events with respect to our Class A common stock, or (ii) the sending of a redemption notice with respect to the 3% Green Notes.

The 3% Green Notes contain certain customary provisions relating to the occurrence of Events of Default, as defined in the Indenture. If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to us occurs, then the principal amount of, and all accrued and unpaid interest on, all of the 3% Green Notes then outstanding will immediately become due and payable without any further action or notice by any person. However, notwithstanding the foregoing, we may elect, at our option, that the sole remedy for an Event of Default relating to certain failures by us to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive special interest on the 3% Green Notes for up to 180 days at a specified rate per annum not exceeding 0.50% on the principal amount of the 3% Green Notes.

The 3% Green Notes Transaction Costs were recorded as debt issuance costs and presented a reduction to the 3% Green Notes on our consolidated balance sheets and are amortized to interest expense at an effective interest rate of 3.8%.

Total interest expense recognized related to the 3% Green Notes for the year ended December 31, 2023, was $14.4 million, and was comprised of contractual interest expense of $12.0 million and amortization of the initial purchasers’ discount and other issuance costs of 2.4 million. We have not recognized any special interest expense related to the 3% Green Notes to date. The amount of unamortized debt issuance costs as of December 31, 2023, was $17.3 million.

Although the 3% Green Notes contain embedded conversion features, we account for the 3% Green Notes in its entirety as a liability. As of December 31, 2023, the net carrying value of the 3% Green Notes was classified as a long-term liability in our consolidated balance sheets.

Capped Calls

On May 11, 2023, in connection with the pricing of the 3% Green Notes, and on May 15, 2023, in connection with initial purchasers’ exercise of the Greenshoe Option, we entered into privately negotiated capped call transactions (the “Capped Calls”) with certain counterparties (the “Option Counterparties”). The Capped Calls cover, subject to customary anti-dilution adjustments substantially similar to those applicable to the 3% Green Notes, the aggregate number of shares of our Class A common stock that initially underlie the 3% Green Notes, and are expected generally to reduce potential dilution to holders of our common stock upon any conversion of the 3% Green Notes and at our election (subject to certain conditions) offset any cash payments we would be required to make in excess of the principal amount of converted 3% Green Notes.

The Capped Calls expire on June 1, 2028, and are exercisable only at maturity, but may be early terminated in various circumstances, including if the 3% Green Notes are early converted or repurchased. The default settlement method for the Capped Calls is net share settlement. However, we may elect to settle the Capped Calls in cash.

The Capped Calls have an initial strike price of approximately $18.85 per share of Class A common stock, subject to certain adjustments. The strike price of $18.85 corresponds to the initial conversion price of the 3% Green Notes. The number of shares underlying the Capped Calls is 33,549,508 shares of Class A common stock. The cap price of the Capped Calls is initially $26.46 per share of Class A common stock, which represents a premium of 100% over the last reported sale price of our common stock on May 11, 2023.

The Capped Calls are freestanding financial instruments. We used a portion of the proceeds from the issuance of the 3% Green Notes to pay for the Capped Calls’ premium. As the Capped Calls meet certain accounting criteria, they are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $54.5 million incurred to purchase the Capped Calls was recorded as a reduction to additional paid-in capital on our consolidated balance sheets and will not be remeasured.

2.5% Green Convertible Senior Notes due August 2025

In August 2020, we issued 2.5% Green Convertible Senior Notes due August 2025 (the “2.5% Green Notes”) in an aggregate principal amount of $230.0 million, unless earlier repurchased, redeemed or converted, less an initial purchaser’s discount of $6.9 million and other issuance costs of $3.0 million (together, the “2.5% Green Notes Transaction Costs”), resulting in net proceeds of $220.1 million.

The Green Notes are senior, unsecured obligations accruing interest at a rate of 2.5% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2021.

We may elect to redeem, at face value, all or any portion of the 2.5% Green Notes at any time on or after August 21, 2023, and on or before the twenty-sixth trading day immediately before the maturity date, provided certain conditions are met.

Before May 15, 2025, the noteholders have the right to convert their 2.5% Green Notes only upon the occurrence of certain events, including the Closing Price Condition. If the Closing Price Condition is met on at least 20 of the last 30 consecutive trading days in any quarter, the noteholders may convert their 2.5% Green Notes at any time during the immediately following quarter. The Closing Price Condition was not met during the three months ended September 30, 2023, and accordingly, the noteholders could not convert their 2.5% Green Notes during the quarter ended December 31, 2023. From and after May 15, 2025, the noteholders may convert their 2.5% Green Notes at any time at their election until the close of business on the second trading day immediately before the maturity date. Should the noteholders elect to convert their 2.5% Green Notes, we may elect to settle the conversion by paying or delivering, as applicable, cash, shares of our Class A common stock or a combination thereof.

The initial conversion rate is 61.6808 shares of Class A common stock per $1,000 principal amount of notes, which represents an initial conversion price of approximately $16.21 per share of Class A common stock. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change”, as defined, occur, the conversion rate applicable to the conversion of the 2.5% Green Notes may, in certain circumstances, be increased by up to 15.4202 shares of Class A common stock per $1,000 principal amount of notes for a specified period of time. On December 31, 2023, the maximum number of shares into which the 2.5% Green Notes could have been potentially converted if the conversion features were triggered was 17,733,230 shares of Class A common stock.

The 2.5% Green Notes Transaction Costs were recorded as debt issuance costs and presented a reduction to the 2.5% Green Notes on our consolidated balance sheets and are amortized to interest expense at an effective interest rate of 3.5%.

Interest on the 2.5% Green Notes for the years ended December 31, 2023, 2022 and 2021, was $7.7 million, $7.7 million and $7.7 million, respectively, including amortization of issuance costs of $2.0 million, $2.0 million and $2.0 million, respectively. The amount of unamortized debt issuance costs as of December 31, 2023 and 2022, was $3.2 million and $5.2 million, respectively.

10.25% Senior Secured Notes due March 2027

On May 1, 2020, we issued $70.0 million of 10.25% Senior Secured Notes in a private placement (the “10.25% Senior Secured Notes”). The 10.25% Senior Secured Notes were governed by an indenture (the “Senior Secured Notes Indenture”) entered into among us, the guarantor party thereto and U.S. Bank National Association, in its capacity as trustee and collateral agent. The 10.25% Senior Secured Notes were secured by certain of our operations and maintenance agreements. The 10.25% Senior Secured Notes were supported by a $150.0 million indenture between us and U.S. Bank National Association, which contained an accordion feature for an additional $80.0 million of notes that could have been issued on or prior to September 27, 2021. We chose not to exercise this accordion feature, which has already expired.

Interest on the 10.25% Senior Secured Notes was payable quarterly, commencing June 30, 2020. The 10.25% Senior Secured Notes Indenture contained customary events of default and covenants relating to, among other things, the incurrence of new debt, affiliate transactions, liens and restricted payments. Commencing on March 27, 2022, we had the right to redeem all of the 10.25% Senior Secured Notes at a price equal to 108% of the principal amount of the 10.25% Senior Secured Notes plus accrued and unpaid interest, with such optional redemption prices decreasing to 104% on and after March 27, 2023,102% on and after March 27, 2024, and 100% on and after March 27, 2026. Had we experienced a change of control, we must have offered to purchase for cash all or any part of each holder’s 10.25% Senior Secured Notes at a purchase price equal to 101% of the principal amount of the 10.25% Senior Secured Notes, plus accrued and unpaid interest.

The current and non-current balances of the outstanding unpaid principal of the 10.25% Senior Secured Notes were $12.7 million and $48.9 million as of December 31, 2022, respectively. The total outstanding unpaid principal balance of $57.6 million on the 10.25% Senior Secured Notes due March 2027 was called and retired at 104% on June 1, 2023. The 4% premium of $2.3 million and unpaid accrued interest of $1.0 million were included in the final payment to the noteholders. We recognized a loss on extinguishment of debt of $2.9 million as a result of redemption of the 10.25% Senior Secured Notes.

Interest on the 10.25% Senior Secured Notes for the years ended December 31, 2023, 2022 and 2021, was $2.6 million, $7.0 million and $7.2 million, respectively, including amortization of issuance costs of 0.1 million,0.3 million and 0.4 million, respectively.

Non-recourse Debt Facilities

3.04% Senior Secured Notes due June 2031

In November 2021, PPA V issued senior secured notes in an aggregate principal amount of $136.0 million due June 2031. The notes bore a fixed rate of 3.04% per annum payable quarterly. The proceeds from the 3.04% Senior Secured Notes due June 2031 were utilized to (i) repay all obligations of the LIBOR +2.5% Term Loan due December 2021, including an outstanding principal balance of $109.1 million, accrued interest of $0.1 million, and fees required to terminate associated interest rate swaps of $11.5 million, (ii) pay the required premium for the PPA V production insurance of $6.5 million, (iii) and pay related fees and expenses related to the refinancing totaling $2.1 million, resulting in a net cash flow of $6.7 million. The note purchase agreement required us to maintain a debt service reserve, the balance of which was $8.6 million as of December 31, 2022, out of which $8.0 million was included as part of long-term restricted cash and $0.6 million was included as part of current restricted cash in the consolidated balance sheets. The loan was secured by all assets of PPA V.

On August 24, 2023, as part of the PPA V Upgrade, we paid off the outstanding balance and related accrued interest of $118.5 million and $0.5 million, respectively, of our 3.04% Senior Secured Notes due June 2031, and recognized a loss on extinguishment of debt of $1.4 million (for additional information, please see Note 10— Portfolio Financings). The debt service reserve of $8.6 million was reclassified from restricted cash to cash and cash equivalents at the time of extinguishment of debt.

7.5% Term Loan due September 2028

On June 14, 2022, as part of the PPA IIIa Upgrade, we paid off the outstanding balance and related accrued interest of $30.2 million and $0.4 million, respectively, and recognized a loss on extinguishment of debt of $4.2 million. The debt service reserve of $3.6 million was reclassified from restricted cash to cash and cash equivalents at the time of extinguishment of debt.

6.07% Senior Secured Notes due March 2030

On November 22, 2022, as part of the PPA IV Upgrade, we paid off the outstanding balance and related accrued interest of $70.5 million and $0.4 million, respectively, and recognized a loss on extinguishment of debt of $4.7 million. The debt service reserve of $9.1 million was reclassified from restricted cash to cash and cash equivalents at the time of extinguishment of debt.

4.6% Term Loans due April 2026 and October 2026

On April 11, 2023 and October 5, 2023, Korean JV entered into three-year $1.5 million andthree-year $3.1 million credit agreements with SK ecoplant, respectively, to help fund its working capital. Both loans bear a fixed interest rate of 4.6% payable upon maturity along with the principle. Neither loan requires us to maintain a debt service reserve.

Repayment Schedule and Interest Expense

The following table presents details of our outstanding loan principal repayment schedule as of December 31, 2023 (in thousands):

Interest expense of $108.3 million, $53.5 million and $69.0 million for the years ended December 31, 2023, 2022 and 2021, respectively, was recorded in interest expense on the consolidated statements of operations. Interest expense for the year ended December 31, 2023 included $52.8 million as a result of the SK ecoplant Second Tranche Closing. For additional information, please see Note 17 —SK ecoplant Strategic Investment.

8. Leases

Facilities, Energy Servers, and Vehicles

We lease most of our facilities, the Energy Servers, and vehicles under operating and finance leases that expire at various dates through November 2037. We lease various manufacturing facilities in California and Delaware. We lease additional office space as field offices in the U.S. and around the world including in China, India, Germany, Japan, the Republic of Korea and Taiwan.

Some of the lease arrangements have free rent periods or escalating rent payment provisions. We recognize lease cost under such arrangements on a straight-line basis over the life of the leases. For the years ended December 31, 2023, 2022 and 2021, rent expenses for all occupied facilities were $23.0 million, $21.4 million and $16.0 million, respectively.

At inception of the contract, we assess whether a contract is a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Lease classification, measurement, and recognition are determined at lease commencement, which is the date the underlying asset is available for use by us. The accounting classification of a lease is based on whether the arrangement is effectively a financed purchase of the underlying asset (financing lease) or not (operating lease). Our operating leases are comprised primarily of leases for facilities, the Energy Servers, office buildings, and vehicles, and our financing leases are comprised primarily of vehicles.

Our leases have lease terms ranging from less than 1 year to 15 years, some of which include options to extend the leases. The lease term is the non-cancelable period of the lease and includes options to extend the lease when it is reasonably certain that an option will be exercised.

Lease liabilities are measured at the lease commencement date as the present value of future lease payments. Lease right-of-use assets are measured as the lease liability plus unamortized initial direct costs and prepaid (accrued) lease payments less unamortized balance lease incentives received. In measuring the present value of the future lease payments, the discount rate for the lease is the rate implicit in the lease unless that rate cannot be readily determined. In that case, the lessee is required to use its Incremental Borrowing Rate (“IBR”). In computing our lease liabilities, we use the IBR based on the information available on the commencement date using an estimate of company-specific rate in the U.S. on a collateralized basis and consistent with the lease term for each lease. The lease term is the non-cancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will be exercised.

Operating and financing lease right-of-use assets and lease liabilities as of December 31, 2023 and 2022 were as follows (in thousands):

1 These assets primarily include leases for facilities, the Energy Servers, and vehicles.

2 Net of accumulated amortization.

3 These assets primarily include leases for vehicles.

4 Included in property, plant and equipment, net in the consolidated balance sheets.

5 Included in accrued expenses and other current liabilities in the consolidated balance sheets.

6 Included in other long-term liabilities in the consolidated balance sheets.

The components of our lease costs for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):

Weighted average remaining lease terms and discount rates for our leases as of December 31, 2023 and 2022 were as follows:

Future lease payments under lease agreements as of December 31, 2023 were as follows (in thousands):

Managed Services and Portfolio Financings Through the PPA Entities

Certain of our customers enter into Managed Services or Portfolio Financings through a PPA Entity to finance their lease of Bloom Energy Servers. Customer arrangements under Managed Services and Portfolio Financings through PPA Entities entered into after January 1, 2020, do not contain a lease under ASC 842 and are accounted for under ASC 606 as revenue arrangements.

Lease agreements under our Managed Services Financings and Portfolio Financings through the PPA Entities include non-cancellable lease terms, during which terms the majority of our investment in the Energy Servers under lease are typically recovered. We mitigate remaining residual value risk of the Energy Servers through provision of maintenance on the Energy Servers during the lease term and through insurance which proceeds are payable in the event of theft, loss, damage, or destruction.

Managed Services — Our Managed Services Financings with financiers that result in failed sale-and-leaseback transactions are accounted for as financing transactions. Payments received from the financier are recognized as financing obligations in our consolidated balance sheets. Proceeds from the financiers in excess of fair value of the Energy Servers under successful sale-and-leaseback transactions are also accounted for as financing obligations. These financing obligations are included in each agreement’s contract value and are recognized as short-term or long-term financing obligations based on the estimated payment dates. The lease agreements expire on various dates through 2034. For successful sale-and-leaseback transactions, we record operating lease right-of-use assets and operating lease liabilities and record operating lease expenses over the lease term. The recognized operating lease expenses for the years ended December 31, 2023 and 2022 were $9.7 million and $5.6 million. The recognized operating lease expenses for the year ended December 31, 2021 were immaterial.

We recognized $28.7 million, $20.4 million and $35.1 million of product revenue, $8.4 million, $11.3 million and $20.9 million of installation revenue, $5.0 million, $3.3 million and $10.0 million of financing obligations, and $16.5 million, $12.6 million and $29.4 million of operating lease right-of-use assets and operating lease liabilities from such successful sale and leaseback transactions for the years ended December 31, 2023, 2022 and 2021, respectively.

At December 31, 2023, future lease payments under the Managed Services Agreements financing obligations were as follows (in thousands):

The total financing obligations, as reflected in our consolidated balance sheets, were $444.8 million and $459.4 million as of December 31, 2023 and 2022, respectively. We expect the difference between these obligations and the principal obligations in the table above to be offset against the carrying value of the related Energy Servers at the end of the lease and the remainder recognized as either a gain or loss at that point.

Portfolio Financings through the PPA Entities — Customer arrangements entered into prior to January 1, 2020 under Portfolio Financing arrangements through a PPA Entity that qualified as leases were accounted for as either sales-type leases or operating leases. Since January 1, 2020, we have not entered into any PPAs with customers under such arrangements.

In August 2023, we sold our last consolidated PPA Entity, PPA V. For additional information, please see Note 10 —Portfolio Financings.

9. Stock-Based Compensation and Employee Benefit Plans

Share-based grants are designed to reward employees for their long-term contributions to us and provide incentives for them to remain with us.

2012 Equity Incentive Plan

Our 2012 Equity Incentive Plan (the “2012 Plan”) was approved in August 2012. The 2012 Plan provided for the grant of incentive stock options, non-statutory stock options, stock appreciation rights and RSUs, all of which may be granted to employees, including officers, and to non-employee directors and consultants except we may grant incentive stock options only to employees.

Grants under the 2012 Plan generally vest ratably over afour-year period from the vesting commencement date and expireten years from the grant date. Original grants under the 2012 Plan were for “common stock”. Pursuant to the Twelfth Amended and Restated Articles of Incorporation authorized in July 2018, all such shares automatically converted to Class B shares of common stock. As of December 31, 2023 and 2022, stock options to purchase of 4,511,074 and 5,436,417 shares of Class B common stock were outstanding with a weighted average exercise price of $27.28 and $27.15 per share, respectively, andno shares were available for future grant. The 2012 Equity Incentive Plan has been canceled but continues to govern outstanding option grants under the 2012 Plan.

2018 Equity Incentive Plan

The 2018 Equity Incentive Plan (the “2018 Plan”) was approved in April 2018. The 2018 Plan became effective upon our initial public offering (“IPO”) and serves as the successor to the 2012 Plan. The 2018 Plan authorizes the award of stock options, restricted stock awards, stock appreciation rights, RSUs, PSUs and stock bonuses. The 2018 Plan provides for the grant of awards to employees, directors, consultants, independent contractors and advisors provided the consultants, independent contractors, directors and advisors render services not in connection with the offer and sale of securities in a capital-raising transaction. The exercise price of stock options is at least equal to the fair market value of Class A common stock on the date of grant. Grants under the 2018 Plan generally vest ratably over three orfour years from the vesting commencement date and expireten years from the grant date.

The 2018 Plan allows for an annual increase on January 1, of each of 2019 through 2028, by the lesser of (a) four percent (4%) of the number of Class A common stock, Class B common stock (until their automatic conversion to Class A common stock on July 27, 2023), and common stock equivalents (including options, RSUs, warrants and preferred stock on an as-converted basis) issued and outstanding on each December 31 immediately prior to the date of increase, and (b) such number of shares determined by the Board of Directors.

As of December 31, 2023 and 2022, stock options to purchase 2,736,550 and 3,311,892 shares of Class A common stock were outstanding, respectively, with a weighted average exercise price of $10.42 and $10.11 per share, respectively. As of December 31, 2023 and 2022,9,887,706 and 9,543,386 RSUs that may be settled for Class A common stock, which were granted pursuant to the 2018 Plan, respectively, were outstanding. As of December 31, 2023 and 2022, we had 32,877,906 and 28,340,641 shares reserved for issuance under the 2018 Plan, respectively.

Stock-Based Compensation Expense

The following table summarizes the components of stock-based compensation expense in the consolidated statements of operations (in thousands):

As of December 31, 2023, and 2022, we capitalized $8.9 million and $6.3 million of stock-based compensation cost, respectively, into inventory, property, plant and equipment and deferred cost of goods sold.

Stock Option and Stock Award Activity

The following table summarizes the stock option activity under our stock plans during the reporting period:

Stock Options — During the years ended December 31, 2023, 2022 and 2021, we recognized $0.4 million, $7.1 million and $15.6 million of stock-based compensation costs for stock options, respectively.

We didnot grant options in the years ended December 31, 2023, 2022 and 2021.

During the years ended December 31, 2023, 2022 and 2021, the intrinsic value of stock options exercised was $3.6 million, $3.8 million and $28.9 million, respectively.

As of December 31, 2023 and 2022, we had unrecognized compensation costs related to unvested stock options of $0.1 million and $0.4 million, respectively. This cost is expected to be recognized over the remaining weighted-average period of 0.3 years and 0.9 years, respectively. Cash received from stock options exercised totaled $3.6 million, $3.7 million and $79.7 million and for the years ended December 31, 2023, 2022 and 2021, respectively.

A summary of our stock awards activity and related information is as follows:

Stock Awards — The estimated fair value of RSUs and PSUs is based on the fair value of our Class A common stock on the date of grant. For the years ended December 31, 2023, 2022 and 2021, we recognized $71.2 million, $89.4 million and $50.1 million of stock-based compensation costs for stock awards, respectively.

As of December 31, 2023 and 2022, we had $113.5 million and $135.7 million of unrecognized stock-based compensation cost related to unvested stock awards, expected to be recognized over a weighted average period of 2.0 years and 1.9 years, respectively.

Executive Awards

In 2021, the Company granted RSU and PSU awards (the “2021 Executive Awards”) to certain executive staff, other than our Chief Executive Officer, pursuant to the 2018 Plan. The RSUs have time-based vesting schedules. The PSUs consist of annual vesting tranches based on the attainment of performance conditions and assuming continued employment and service through each vesting date. Stock-based compensation costs associated with the 2021 Executive Awards are recognized over the service period as we evaluate the probability of the achievement of the performance conditions.

In 2021, the Company also granted RSU and PSU awards to our Chief Executive Officer pursuant to the 2018 Plan. The RSUs will vest in equal annual installments over five years from the grant date. A portion of the PSUs can be earned based on achieving certain financial performance goals and another portion can be earned based upon achieving certain progressive stock price hurdles. Any shares issued under the PSU awards will be subject to atwo-year post-vest holding period in which the award holder will be restricted from selling any shares (net of shares settled for taxes). As of December 31, 2023, the unamortized compensation expense for the RSUs and PSUs was $8.2 million. Actual compensation expense is dependent on the performance of the PSUs that vest based upon a performance condition. We estimated the fair value of the PSUs that vest based on a market condition on the date of grant using a Monte Carlo simulation with the following assumptions: (i) expected volatility of 71.2%, (ii) risk-free interest rate of 1.6%, and (iii)no expected dividend yield.

In 2022, the Company granted RSU and PSU awards (the “2022 Executive Awards”) to certain executive staff, including our Chief Executive Officer, pursuant to the 2018 Plan. The RSUs have time-based vesting schedules. The PSUs consist ofthree vesting tranches during 2023-2025 with an annual vesting schedule based on the attainment of performance conditions related to fiscal 2022 and assuming continued employment and service through each vesting date. Stock-based compensation costs associated with the 2022 Executive Awards are recognized over the service period. As of December 31, 2023, the unamortized compensation expense for the RSUs and PSUs was $6.2 million. Actual compensation expense is determined by the attained performance condition of the PSUs in fiscal 2022.

On February 15, 2023 and July 11, 2023, the Company granted RSU and PSU awards (the “2023 Executive Awards”) to certain executive staff pursuant to the 2018 Equity Incentive Plan. The RSUs have time-based vesting schedules, started vesting on February 15, 2023 and shall vest over athree year period. The PSUs which started vesting on February 15, 2023 have either athree-year orone-year cliff vesting period, and the PSUs which started vesting on July 11, 2023, cliff vest on February 15, 2024. The PSUs will vest based on a combination of time and achievement against performance metrics targets assuming continued employment and service through each vesting date. Stock-based compensation costs associated with the 2023 Executive Awards are recognized over the service period as we evaluate the probability of the achievement of the performance conditions. As of December 31, 2023, the unamortized compensation expense for the RSUs and PSUs was $7.0 million.

The following table presents the stock activity and the total number of shares available for grant under our stock plans:

2018 Employee Stock Purchase Plan

In April 2018, we adopted the 2018 ESPP. The 2018 ESPP became effective upon our IPO in July 2018. The 2018 ESPP is intended to qualify under Section 423 of the Internal Revenue Code. The aggregate number of our shares that may be issued over the term of our ESPP is 33,333,333 Class A common stock. A total of 3,333,333 shares of our Class A common stock were initially reserved for issuance under the plan. The number of shares reserved for issuance under the 2018 ESPP will increase automatically on the 1st day of January of each of the first nine years following the first offering date by the number of shares equal to one percent (1%) of the total number of Class A common stock, Class B common stock (automatically converted to Class A common stock on July 27, 2023) and common stock equivalents (including options, RSUs, warrants and preferred stock on an as converted basis) issued and outstanding on the immediately preceding December 31 (rounded down to the nearest whole share); provided, that the Board of Directors or the Compensation Committee may in its sole discretion reduce the amount of the increase in any particular year.

The 2018 ESPP allows eligible employees to purchase shares, subject to purchase limits of 2,500 shares during eachsix month period or $25,000 worth of stock for each calendar year, of our Class A common stock through payroll deductions at a price per share equal to 85% of the lesser of the fair market value of our Class A common stock (i) on the first trading day of the applicable offering date and (ii) the last trading day of each purchase date.

During the years ended December 31, 2023, 2022 and 2021, we recognized $15.5 million, $16.2 million and $7.6 million of stock-based compensation costs for the 2018 ESPP, respectively. We issued 875,695,759,744 and 1,945,305 shares in the years ended December 31, 2023, 2022 and 2021, respectively. During the years ended December 31, 2023, 2022 and 2021, we added an additional 2,239,563,12,055,792 and 1,902,572 shares and there were 15,204,584 and 13,840,716 shares available for issuance as of December 31, 2023 and 2022, respectively.

As of December 31, 2023 and 2022, we had $8.8 million and $12.0 million of unrecognized stock-based compensation costs, expected to be recognized over a weighted average period of 0.8 years and 0.6 years and respectively.

We used the following weighted-average assumptions in applying the Black-Scholes valuation model for determination of the 2018 ESPP share valuation: