Opening of Proposals - WWTP Solar Guaranteed Energy Savings Contract Proj. No. 124-015 - Ameresco

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Table of Contents AMERESCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) acquisitions. For other acquisitions, we derived the fair value of contingent consideration using a Monte Carlo simulation in an option pricing framework. We established discount rates utilized in our valuation models based on the cost to borrow that would be required by a market participant for similar instruments. In determining the probability of attaining certain technical, financial and operational targets, we utilized data regarding similar milestone events from our own experience, while considering the inherent difficulties and uncertainties in developing a product. On a quarterly basis, we reassess the probability factors associated with the financial, operational, and technical targets for our contingent consideration obligations. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. We derived the fair value of the contingent consideration of $2,160 from the acquisition of Plug Smart in December 2021 using a Monte Carlo simulated model. The key assumptions used in the model include two scenarios of EBITDA projections, a base case and a higher case, a risk -adjusted discount rate of 16.9%, and estimated EBITDA volatility of 75.0%. The balances and subsequent key assumptions used in the model were as follows: Balance of remaining contingent consideration Risk -adjusted discount rate Estimated EBITDA volatility At December 31, 2023 2022 1,465 $ 3,800 16.9 % 16.9 % 70.0 % 75.0 % The balance of contingent consideration from the acquisition of certain assets of Chelsea Group Limited was decreased to 9 at December 31, 2023 from S358 at December 31, 2022 as the cumulative revenue earn -out targets were not achieved and the term expired The following table sets forth a summary of changes in the fair value of contingent consideration liabilities classified as level 3: Contingent consideration liabilities balance at the beginning of year Remeasurement period adjustment Changes in fair value included in earnings Payment of contingent consideration Contingent consideration liabilities balance at the end of year Year Ended December 31, 2023 2022 4,158 $ 2,838 (19) 347 1,614 (3,040) (275) $ 1,465 $ 4,158 The fair value of financial instruments is determined by reference to observable market data and other valuation techniques, as appropriate. Long-term debt is the only category of financial instruments where the difference between fair value and recorded book value is notable. At December 31, 2023 and 2022, the fair value of our long-term debt was estimated using discounted cash flows analysis, based on our current incremental borrowing rates for similar types of borrowing arrangements which are considered to be level two inputs. There have been no transfers in or out of level two or three for the years ended December 31, 2023 and 2022. The following table sets forth the fair value and the carrying value of our long-term debt, excluding financing leases: Long-term debt value (level 2) December 31, 2023 December 31, 2022 Fair Value Carrying Value Fair Value Carrying Value 1,466,458 $ 1,478,394 $ 869,771 $ 884,054 We are also required to periodically measure certain other assets at fair value on a nonrecurring basis, including long-lived assets, goodwill, and other intangible assets. We calculated the fair value used in our annual goodwill impairment analysis utilizing a discounted cash flow analysis and determined that the inputs used were level 3 inputs. Other than intangible assets acquired from the Enerqos acquisition, as noted in Note 4, there were no other assets recorded at fair value on a non -recurring basis as of December 31, 2023 or 2022. 99