Massachusetts Clean Energy Center Financial Statements June 30, 2014

Transcription

1 Massachusetts Clean Energy Center Financial Statements

2 Index Page(s) Independent Auditor s Report Management s Discussion and Analysis (Unaudited) Summary of Net Position (Unaudited) Summary of Changes in Net Position (Unaudited) Financial Statements Statement of Net Position Statement of Activities Balance Sheet - Governmental Fund Statement of Revenue, Expenditures, and Changes in Fund Balance Governmental Fund Statement of Net Position Proprietary Fund Statement of Revenue, Expenditures, and Changes in Fund Net Position Proprietary Fund Statement of Cash Flows Proprietary Fund Statement of Net Position Proprietary Fund Statement of Revenue, Expenditures, and Changes in Fund Net Position Proprietary Fund Statement of Cash Flows Proprietary Fund Notes to Financial Statements

3 500 Boylston Street Boston, MA Tel: Fax: Independent Auditors Report The Board of Directors Massachusetts Clean Energy Center Boston, Massachusetts Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, and each major fund of the Massachusetts Clean Energy Center (the MassCEC ), as of and for year ended, and the related notes to the financial statements, which collectively comprise the MassCEC s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

4 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, and each major fund of the MassCEC as of, and the respective changes in financial position, and where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 3 through 9 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in the appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, to the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. November 18, 2014 Boston, Massachusetts

5 Management s Discussion and Analysis (Unaudited) Year Ended Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the basic financial statements of the Massachusetts Clean Energy Technology Center, doing business as the Massachusetts Clean Energy Center (the MassCEC ), which has three components: (1) government-wide financial statements, (2) business-type financial statements, and (3) notes to the financial statements. The basic financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ( GAAP ) as applied to government entities. The Governmental Accounting Standards Board ( GASB ) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The government-wide financial statements present both the governmental activities (governmental fund) and business-type activities (proprietary fund) of the MassCEC on a full accrual basis of accounting. The fund-level statements include separate statements for (i) the governmental activities, which are supported by state appropriations and legislatively mandated surcharges and (ii) the business-type activities, which rely on fees and charges for support after the initial development period. All activities, both governmental and business-type, are performed as part of carrying out the MassCEC s essential governmental function. General Overview The MassCEC s mission is to accelerate job growth and economic development and to serve as a clearinghouse and support center for the Commonwealth of Massachusetts (the "Commonwealth") burgeoning clean energy industry while creating a sustainable path for continued economic growth. Its commitment to leveraging the Commonwealth s outstanding resources in academic research, technology entrepreneurship and workforce skills will result in new technologies, new companies, and a workforce ready to ensure the Commonwealth's place as a national clean energy hub. Enabling Legislation and Funding Sources In its current form, the MassCEC is the creation of several legislative acts of the Commonwealth and is primarily funded through State and State-directed funds received in support of initiatives within MassCEC s mandate. Funding received is presented as revenue in the financial statements. Funding sources include: Alternative Clean Energy Investment Trust Fund In August 2008, the Commonwealth enacted Chapter 307 of the Acts of 2008, creating the MassCEC and establishing the Massachusetts Alternative and Clean Energy Investment Trust Fund ("ACEIT") to financially support its activities. In accordance with the enabling legislation, ACEIT is funded through annual transfers from the Massachusetts Renewable Energy Trust Fund. ACEIT funds support MassCEC s clean energy and clean energy technology research initiatives. Massachusetts Renewable Energy Trust Fund The RETF was created through the Electric Utility Restructuring Act of 1997 and provides for a charge on each kilowatt hour of electricity purchased by consumers in the service territories of investor-owned electric distribution utilities to support a broad range of activities related to renewable energy. The renewable energy charge is collected by distribution companies and transferred to the MassCEC specifically for the use by the RETF. The charge currently stands at $.0005/kWh. In November 2009, Governor Deval Patrick signed An Act Relative to Clean Energy, which transferred the Massachusetts Renewable Energy Trust Fund ( RETF ) from the Massachusetts Technology Park Corporation ( MTPC ) to the MassCEC. This act united two entities with complementary missions, consolidated staff and financial resources, and established the MassCEC as the lead state entity charged 3

6 Management s Discussion and Analysis (Unaudited) Year Ended with growing the clean energy sectors in the Commonwealth. RETF funds support MassCEC s diverse renewable energy initiatives. Alternative Compliance Payments In accordance with guidelines set forth by the Department of Energy Resources ( DOER ), any electric supplier that does not secure enough Renewable Energy Credits ( RECs ) to meet the Commonwealth s Renewable Portfolio Standard requirements shall be deemed in compliance if they make an Alternative Compliance Payment ( ACP ). The MassCEC acts as the collection agent for ACP funds from electricity suppliers and holds these in escrow on behalf of the DOER. From time to time the DOER, at its sole discretion, may decide to award funds from the ACP to MassCEC for its programs. Other State Funding Sources In 2013, the MassCEC commenced construction of a Marine Commerce Terminal in New Bedford, Massachusetts ( Terminal ). The Terminal is a multi-purpose facility designed to support the construction, assembly and deployment of offshore wind projects, as well as handle bulk, break-bulk, container and large specialty marine cargo. This first in the nation facility has been engineered to sustain mobile crane and storage loads that rival the highest capacity ports in the nation. Currently nearing the end of construction, the Terminal is scheduled to be completed by the end of The project is primarily funded by an award of $95.0 million from the Commonwealth Executive Office of Energy and Environmental Affairs. Divisions MassCEC has three programmatic divisions: the Renewable Energy Generation division, the Innovation and Industry Support division and the Investments in Clean Technology division. MassCEC also has two business-type divisions: the Wind Technology Testing Center ( WTTC ) and the Terminal. Through its three programmatic divisions MassCEC is: - Catalyzing and funding training programs to grow and strengthen the Commonwealth s clean energy workforce; - Investing in new and existing clean energy companies; - Supporting the installation of renewable energy projects throughout the Commonwealth; - Promoting the Commonwealth as the leading state to establish and grow clean energy companies and jobs; During the fiscal year ended on MassCEC provided financial assistance awards in the clean energy sector totaling $35.3M. Financial assistance awards are legal commitments made to award recipients or to projects which directly benefit the Commonwealth, and are presented by division as follows: Renewable Energy Generation The Renewable Energy Generation division promotes and supports the deployment and installation of a variety of clean energy technologies to increase the use of energy from renewable energy sources throughout Massachusetts. Awards for fiscal year 2014 totaled $27.1M. The Renewable Energy Generation division focuses on the following technologies: - Solar ($13.4M) - programs to incentivize homeowners and businesses to adopt the generation of electricity through the use of solar panels, build a standalone solar industry and organize communities to drive down the cost of solar installation. - Wind ($5.1M) - programs to assist land based wind and offshore project development aimed at harnessing wind energy to power homes and businesses by mitigating the early stage risks of permitting and financing 4

7 Management s Discussion and Analysis (Unaudited) Year Ended - Hydro Energy ($56K) programs to create electricity by capturing the energy of flowing water in addition to improving output of existing hydroelectric facilities. - Organics to Energy ($1.9M) - programs to capture energy from certain types of organic material such as food waste. - Renewable Thermal ($3.6M) programs to increase the use of cleaner more efficient biomass heating using wood pellets and chips, heat pumps using either pressurized refrigerants or ground water to heat or cool individual buildings, providing energy to a central plant, and capturing thermal energy from sunlight through panels for domestic hot water use. - Other ($3.0M) partnerships with other agencies to extend the reach of renewable energy adoption and to monitor the energy production and effectiveness of renewable energy generation programs Innovation and Industry Support In fiscal year 2014 MassCEC combined three existing divisions into the Innovation and Industry Support division: Workforce Development, Clean Energy Business Development (formerly Sector Development) and Strategic Analysis (formerly Knowledge Development); and added two new departments: Market Development and Water Technology Innovation. The Innovation and Industry Support division is charged with making Massachusetts a leading destination for clean energy and clean water technology companies by stimulating innovation and creating a fertile environment for technological advancement. It complements the mission of the other two divisions by working with new and existing companies and organizations to provide critical support, mentoring and resources, and helps to train the workforce needed to make clean energy companies run. Moreover, MassCEC engages with schools to provide student job training and employment opportunities in the clean energy field, collaborating with other countries to expand the international outreach of the Commonwealth s clean energy technologies, providing support to incubators that nurture fledgling clean energy businesses and encouraging clean energy ideas not yet at the business stage. Awards for fiscal year 2014 totaled $6.2M. Although the platforms of the Innovation and Industry Support division differ, all enrich the reach of clean energy adoption through - Workforce Development ($2.3M) programs funding schools including high schools, vocational schools, colleges and community-based, job-training offerings for the development of a clean energy workforce at all levels of skill and interests - Business Development ($0.6M) programs to expand the business opportunities for the Commonwealth s clean energy businesses by providing access to customers at home and abroad, establishing test bed networks for new technologies in addition to providing incentives for the Commonwealth s facilities to adopt renewable, efficient technologies for their energy needs - Strategic Analysis ($0.8M) programs offering services, mentors and specialized equipment to stimulate the commercialization of new clean energy technology, facilitation of research and development partnerships with Massachusetts-based universities, as well as producing detailed industry reports to provide a metric-based analysis of all MassCEC programs - Market Development ($0.6M) programs offering competitive awards for the most innovative, effective and impactful solutions to challenging energy and environmental problems - Water Technology Innovation ($1.9M) programs designed to support the water innovation economy by leveraging internationally proven technologies to encourage the development of new technologies that provide a path to the efficient update of existing water infrastructure. Investments in Clean Technology The Investments division stimulates and accelerates the commercialization of clean energy technologies in the Commonwealth through its support of promising early and growth stage clean energy companies and university research teams. This support is often supplementary to funding received from private, state and federal sources and is provided in the form of grants, loans or equity investments to address funding gaps through the early development lifecycle. The resulting economic development advances MassCEC s 5

8 Management s Discussion and Analysis (Unaudited) Year Ended goal of growing the clean energy sector and leads to the creation of high value, private sector jobs. Awards for fiscal year 2014 totaled $2.0M. Marine Commerce Terminal in New Bedford, Massachusetts The MassCEC is managing the construction of the Terminal. The Terminal will serve to support future offshore wind construction projects. The New Bedford location is well suited for the Terminal due to its proximity to high wind areas from Maine to Delaware, maritime workforce, lack of overhead (bridge) restrictions, access to land-based transportation nodes, and physical protection provided by the New Bedford Hurricane Barrier. The development of this terminal will position New Bedford to be the first choice support and staging facility for most of the offshore wind projects slated for development off the east coast. Being the first mover will provide strong competitive advantages. In addition, the facility will be able to support other high volume and specialty marine shipping. The Terminal is scheduled to be completed in the fourth quarter of MassCEC has received five expressions of interest from professional terminal operators interested in managing the facility. MassCEC is engaged with the executive branch on future ownership and management options. In September, MassCEC announced that Cape Wind signed a two-year lease to utilize the Terminal for the deployment of the Cape Wind project. Wind Technology Testing Center The MassCEC managed the construction and development of the WTTC in Charlestown, Massachusetts and officially opened the facility on May 19, The facility was partly funded by an American Recovery and Reinvestment Act ( ARRA ) grant of approximately $25.0 million from the United States Department of Energy. The WTTC is the first commercial large blade test facility in the nation, testing commercial-sized wind turbine blades to help reduce cost, improve technical advancements and expedite the deployment of the next generation of wind turbine blades into the marketplace. The facility has attracted world renowned companies to Massachusetts and is responsible, in part, for such companies designing, manufacturing and testing their blades in the United States. In FY14 the WTTC reached a milestone achieving a profit on an operating basis. This is well ahead of the original break-even target of FY2016. Net Operating Income Revenues Fiscal year 2014's net operating income for the governmental activities is largely driven by the amount of expenditures recognized during the fiscal year. Expenditures are driven by the level of financial assistance awards that are granted based on actual and expected revenues. There is the potential for timing differences to occur whereby grants are recognized in one fiscal year and expenditures are recognized in subsequent fiscal years. Sources of funding increased primarily due to a full year of funding for the Terminal. Expenditures increased from fiscal year 2013 by $3.0 million primarily due to higher awards paid in fiscal year The $1.3 million decrease in the value of loan programs was due primarily to the revaluation of several loans. The significant operating profit experienced in the Marine Commerce Terminal in New Bedford activities is due mainly to the receipt of grant money in excess of actual expenses for the construction of the Terminal. The Wind Technology Testing Center activity experienced a net operating income due mainly to the increase in revenue over the previous year. Expense increased slightly as the WTTC facility continues to increase its operations capacity. The increase in operating expenses was budgeted and planned. The positive net operating income in FY14 was achieved well before FY16 as originally anticipated. 6

9 Management s Discussion and Analysis (Unaudited) Year Ended The MassCEC s funding for the year ended excluding the unrealized and realized change in value of program investments and loans was $91.4 million. These funds were sourced from the following: - Systems benefits charge ($23.8 M) received from utility companies and applied to the RETF - State Appropriations ($7.2M) - received from the DOER and the Massachusetts Department of Environmental Protection and applied to the RETF - Testing revenues ($2.7M) received from testing revenues for the WTTC and applied to the RETF - Terminal grant ($56.4 M) received from the Commonwealth s Executive Office of Energy and Environmental Affairs and applied to the construction of the Terminal - Program earnings ($1.3 M) Program games from sales net of purchases and interest income and dividends received from loans and investments The RETF funded ACEIT for $8M in fiscal year 2014 per the enabling legislation. Total Fiscal Year 2014 MassCEC Funding Systems Benefit Charge - 26% State Appropriations - 8% Testing Revenues - 3% Terminal Grant - 62% Program Earnings - 1% Funds Expended For Awards Total funds expended for awards for fiscal year 2014 were $23.9 million, including $14.5M for Renewable Energy Generation projects, $3.7M for Innovation and Industry Support grants, $2.7M for Investment grants, $40K for WTTC grants, and $2.7 million in debt and equity investments. Financial assistance expenditures are those paid out to award recipients or to projects which directly benefit the Commonwealth. 7

10 Management s Discussion and Analysis (Unaudited) Year Ended Total Fiscal Year 2014 MassCEC Expended for Awards Renewable Energy Generation - 61% Innovation and Industry Support - 16% Investments in Clean Technology - 23% General and Administrative Expenses General and administrative expenses are included in the expenditure totals for each division. In fiscal year 2014 the MassCEC incurred $10.1 million of general and administrative expenses, representing a $1.1 million increase from fiscal year The increase in G&A expense includes costs related to additional FTEs arising from new and expanded programs particularly in the Innovation and Industry Support division and the Terminal totaling approximately $670K. The rest of the $182K increase is primarily due to $96K of moving expenses which are non-recurring. The balance of the increase was due mainly to an increase in depreciation. Net Position The Statement of Net Position is a government-wide statement that presents information on all of the MassCEC s assets, liabilities, defined inflows/outflows, and net assets. Increases or decreases in net position serve as one indicator of MassCEC s financial position. From June 30, 2013 to, net position of the MassCEC increased by $66.2 million to $297.1 million. Total liabilities were $190.9 million, representing a $9.3 million increase from the prior year, primarily related to the receipt of $20.5 million (net of disbursements) of ACP deposits, and $1.6 million decrease related to all other liabilities. All of the MassCEC s assets are restricted for use by ACEIT, the RETF and the operation of the Terminal and the WTTC. ACEIT s net position as of was $73.8 million which represents an increase of $1.2 million or 1.6% from the prior fiscal year. These funds are restricted and the primary objectives for their use are to accelerate job growth and economic development in the Commonwealth's clean energy sector. These objectives are accomplished by making direct investments in new companies, providing assistance to enable companies to access capital and other vital resources for growth and promoting training programs to build a strong clean energy workforce. The RETF s net position as of was $114.5 million which represents an increase of $11.2 million or 10.8% from the previous year. These funds are restricted primarily for the development, implementation and execution of programs intended to increase both the generation and consumption of renewable energy in the Commonwealth, the advancement of the renewable energy industry in the 8

11 Management s Discussion and Analysis (Unaudited) Year Ended Commonwealth, and to stimulate overall economic activity in the Commonwealth relating to the renewable energy sector. The net position of the two business-type activities as of was $73.1 million and $35.4 million which represents an increase of $54.9 million for the business-type activity new in fiscal year 2013 and a decrease of $1.1 million or 3% for the other business-type from the prior year. The primary function of the new business-type activity is to provide critical infrastructure to serve offshore renewable energy facilities and accommodate international shipping at the Terminal. The primary function of the other business-type activities is the operation of the WTTC. Of the total net position, $75.6 million was invested in capital assets including $1.2 million which related to development and maintenance of the testing lab, and $45.1 million related to the new business-type activity. Refer to the Notes to the Financial Statements for more detailed information about capital assets. During the year ended, MassCEC collected on behalf of the DOER $31.4 million of Alternative Compliance Payments. The funds are held in a restricted depository account and will be utilized in a manner directed by the DOER. Refer to the Summary of Net Position and Summary of Changes in Net Position for information about net position for the fiscal years ending and

12 Summary of Net Position (Unaudited) Years ended and June 30, Governmental Business-Type Activities Governmental Business-Type Activities Activities Terminal WTTC Total Activities Terminal WTTC Total Assets Noncapital assets $371,397,727 $34,740,619 $5,823,409 $411,961,755 $352,031,681 $13,618,973 $5,930,476 $371,581,130 Capital assets (net of accumulated depreciation) 418,117 45,132,493 30,485,610 76,036, ,659 9,076,784 31,585,013 40,863,456 Less: Liabilities 183,136,949 6,761, , ,856, ,122,077 4,438,551 1,031, ,592,572 Net Position 188,678,895 73,111,941 35,350, ,141, ,111,263 18,257,206 36,483, ,852,014 Net Assets Invested in capital assets 418,117 45,132,493 30,485,610 76,036, ,659 9,076,784 31,585,013 40,863,456 Restricted for Alternative Clean Energy Investment Trust Fund 73,805, ,805,734 72,652, ,652,380 Renew able Energy Trust Fund 114,455, ,455, ,257, ,257,224 Marine Commerce Terminal - 27,979,448-27,979,448-9,180,422-9,180,422 Wind Technology Testing Center - - 4,864,769 4,864, ,898,532 4,898,532 Total net position $188,678,895 $73,111,941 $35,350,379 $297,141,215 $176,111,263 $18,257,206 $36,483,545 $230,852,014 10

13 Summary of Changes in Net Position (Unaudited) Years Ended and June 30, 2013 June 30, 2013 Business-Type Business-Type Business-Type Business-Type Governmental Activities Activities Govermental Activities Activities Activities NBMCT WTTC Activities NBMCT WTTC Revenue Systems benefit charge $23,797, $23,738, Testing revenue - - 2,658, ,957,120 State appropriations 7,304,730 56,400,000-3,377,258 19,761,201 - Program earnings 303, , Total Revenue 31,405,751 56,400,000 2,658,978 27,714,450 19,761,201 1,957,120 Expenditures Renew able Energy Generation 17,764, ,176, Investments in Clean Technology 3,383, ,013, Innovation and Industry Support 5,751, ,105, Marine Commerce Terminal - 1,564, ,426,348 - Wind Technology Testing Center - - 3,623, ,413,215 Total expenditures 26,899,345 1,564,787 3,623,776 24,295,529 1,426,348 3,413,215 Net operating income (loss) 4,506,406 54,835,213 (964,798) 3,418,921 18,334,853 (1,456,095) Other income (expense) Net decrease in net realizable value of loan programs (823,644) - - (1,974,571) - - Net increase in carrying and fair value of program investments 1,390, ,360, Interest and investment income 983,901 19,522 4, ,242 3,348 5,430 Net increase in fair value of investments 6,601, , Other income/(loss) 102,500 - (173,212) (4,519) - 3,900 Net loss from return of program funds (205,500) - - (384,536) - - Carry costs (80,995) - Net increase in fair value of REC contracts 13, , Gain or loss on sale of fixed assets (1,435) Total other income (expense) 8,061,226 19,522 (168,368) 248,759 (77,647) 9,330 Change in net position before transfers 12,567,632 54,854,735 (1,133,166) 667,680 18,257,206 (1,446,765) Net Position Beginning of year 176,111,263 18,257,206 36,483, ,443,583-37,930,310 End of year $ 188,678,895 $ 73,111,941 $ 35,350,379 $ 176,111,263 $ 18,257,206 $ 36,483,545 11

14 Statement of Net Position Total Governmental Business-Type Activities Business-Type Activities Terminal WTTC Activities Total Assets Noncapital assets Cash and cash equivalents $ - $34,740,619 $5,659,763 $40,400,382 $40,400,382 Accounts receivable Renew able energy surcharge 2,079, ,079,921 Accounts receivable - trade , , ,395 Due from other funds 2,655, ,655,443 Other 349,985-39,439 39, ,424 Prepaid expenses 74,129-11,812 11,812 85,941 Program loans (net of allow ance of $2,832,641) 1,983, ,983,709 Program investments 8,803, ,803,453 Assets committed under programs Cash and cash equivalents - restricted for aw ards 63,949, ,949,669 Term investments - restricted for aw ards 112,498, ,498,121 Alternative compliance payments - custodial 176,979, ,979,123 Escrow - restricted 2,024, ,024,174 Total assets committed under programs 355,451, ,451,087 Total noncapital assets 371,397,727 34,740,619 5,823,409 40,564, ,961,755 Capital assets (net of accumulated depreciation) Land - 2,535,625-2,535,625 2,535,625 Buildings - 42,451,111 28,915,032 71,366,143 71,366,143 Furniture and fixtures 379,421 2, , , ,474 Operational equipment - 143,674 1,370,246 1,513,920 1,513,920 Leasehold improvements 38,696-13,362 13,362 52,058 Total capital assets (net of accumulated depreciation) 418,117 45,132,493 30,485,610 75,618,103 76,036,220 Total assets $371,815,844 $79,873,112 $36,309,019 $116,182,131 $487,997,975 Liabilities Accounts payable and accrued expenses - trade 867,342 4,220, ,371 5,064,368 5,931,710 Accounts payable and accrued expenses - aw ards 4,480, ,480,395 Other liabilities 612, ,488 Due to other funds - 2,540, ,269 2,655,443 2,655,443 Renew able energy contracts 197, ,601 Alternative compliance payments - custodial 176,979, ,979,123 Total liabilities 183,136,949 6,761, ,640 7,719, ,856,760 Net Assets Invested in capital assets 418,117 45,132,493 30,485,610 75,618,103 76,036,220 Restricted for Alternative Clean Energy Investment Trust Fund 73,805, ,805,734 Renew able Energy Trust Fund 114,455, ,455,044 Marine Commerce Terminal - 27,979,448-27,979, ,979,448 Wind Technology Testing Center - - 4,864,769 4,864,769 4,864,769 Total net position 188,678,895 73,111,941 35,350, ,462, ,141,215 Total Liabilities and Net Position $371,815,844 $79,873,112 $36,309,019 $116,182,131 $487,997,975 The accompanying notes are an integral part of these financial statements. 12

15 Statement of Activities Year Ended g Net Revenue and Changes Revenue and Operating Grants and Capital Grants and Governmental Business-Type Activities Program Functions Expenses Services Contributions Contributions Activities Terminal WTTC Total Governmental Activities Alternative Clean Energy Investment Trust Fund Investments in Clean Technology $3,383,606 $ - $ - $ - ($3,383,606) $ - $ - ($3,383,606) Innovation and Industry Support 5,751, (5,751,619) - - (5,751,619) Renewable Energy Trust Fund Renew able Energy Generation 17,764, ,809 7,304,730 - (10,155,581) - - (10,155,581) Total governmental activities 26,899, ,809 7,304,730 - (19,290,806) - - ($10,155,581) Business-Type Activities Marine Commerce Terminal 1,564, ,400,000-54,835,213-54,835,213 Wind Technology Testing Center 3,801,788 2,658, (1,142,810) (1,142,810) Total Business-Type Activities 5,366,575 2,658,978-56,400,000-54,835,213 (1,142,810) 53,692,403 General Revenue Other income 8,061,226 19,522 9,644 8,090,392 Renew able energy surcharge 23,797, ,797,212 Testing revenue Change in assets 12,567,632 54,854,735 (1,133,166) 75,424,426 Net Position Beginning of year 176,111,263 18,257,206 36,483, ,852,014 End of Year $ 188,678,895 $ 73,111,941 $ 35,350,379 $ 306,276,440 The accompanying notes are an integral part of these financial statements. 13

16 Balance Sheet Governmental Fund Assets Accounts receivable Renewable energy surcharge $2,079,921 Due from other funds 2,655,443 Other 349,985 Total Accounts receivable 5,085,349 Prepaid expenses 74,129 Program loans (net of allowance of $2,832,641) 1,983,709 Program investments 8,803,453 Assets committed under programs Cash and cash equivalents - restricted for awards 63,949,669 Term investments - restricted for awards 112,498,121 Alternative compliance payments - custodial 176,979,123 Escrow - restricted 2,024,174 Total assets committed under programs 355,451,087 Total assets 371,397,727 Liabilities Accounts payable and accrued expenses - trade 748,055 Accounts payable and accrued expenses - awards 4,480,395 Other liabilities 612,488 Renewable energy contracts 197,601 Alternative compliance payments - custodial 176,979,123 Total liabilities 183,017,662 Fund Balance - Restricted 188,380,065 Total Liabilities and Fund Balance 371,397,727 Total governmental fund balance Amounts reported for governmental funds above and those reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and therefore, are not reported in funds (net of accumulated depreciation). 418,117 Straight-line rent calculated for reporting purposes is not considered an expense and therefore is not reported in Funds (119,287) Net position of governmental activities $ 188,678,895 The accompanying notes are an integral part of these financial statements. 14

17 Statement of Revenue, Expenditures, and Changes in Fund Balance Governmental Fund Year Ended Revenues Systems benefit charge $23,797,212 State appropriations 7,304,730 Program earnings 303,809 Total Revenue 31,405,751 Expenditures Renewable Energy Generation 17,482,569 Investments in Clean Technology 3,331,563 Innovation and Industry Support 5,580,869 Total expenditures 26,395,001 Net operating income 5,010,750 Non-Operating Revenues (Expenditures) Net decrease in net realizable value of loan programs (823,644) Net increase in carrying and fair value of program investments 1,390,563 Interest and investment income 983,901 Net increase in fair value of investments 6,601,099 Other income 102,500 Net loss from return of program funds (205,500) Net increase in fair value of REC contracts 13,742 Loss on sale of fixed assets (1,435) Total non-operating revenues 8,061,226 Net change in fund balance 13,071,976 Fund balance beginning of year 176,111,263 Fund balance end of year $ 189,183,239 Amounts reported for governmental funds above and those reported for governmental activities in the statement of net assets are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their useful lives and reported as depreciation expense. This is the amount by which depreciation exceeds capital outlays in the current period. 105,497 Straight-line rent calculated for reporting purposes is not considered an expense for Fund perspective reporting and therefore is not reported in Funds. 398,847 Change in net position of governmental activities $ 12,567,632 The accompanying notes are an integral part of these financial statements. 15

18 Statement of Net Position Proprietary Fund Marine Commerce Terminal Assets Current Assets Cash and cash equivalents - Uncommingled $34,740,619 Total current assets 34,740,619 Non-current Assets (net of accumulated depreciation) Land 2,535,625 Buildings 42,451,111 Furniture and fixtures 2,083 Operational equipment 143,674 Total capital assets 45,132,493 Total assets 79,873,112 Liabilities Current Liabilities Accounts payable and accrued expenses - awards 4,220,997 Due to other funds 2,540,174 Total liabilities 6,761,171 Net Position Invested in capital assets 45,132,493 Restricted for operations 27,979,448 Total net position $ 73,111,941 The accompanying notes are an integral part of these financial statements. 16

19 Statement of Revenue, Expenditures, and Changes in Fund Net Position Proprietary Fund Year Ended Marine Commerce Terminal Operating expenses Personnel $355,196 Program expenses 872,676 Program fees 329,705 Facility expenses 7,210 Total expenditures 1,564,787 Net operating loss (1,564,787) Non-operating revenues (expenditures) Interest and investment income 19,522 Total non-operating revenues (expenditures) 19,522 Income before capital contributions (1,545,265) Capital contributions Grants 56,400,000 Total capital contributions 56,400,000 Change in net position 54,854,735 Net position Beginning of year 18,257,206 End of year $73,111,941 The accompanying notes are an integral part of these financial statements. 17

20 Statement of Cash Flows Proprietary Fund Year Ended Marine Commerce Terminal Cash flows from operations Payments to suppliers $ (1,209,591) Payments to employees (355,196) Other receipts 2,604,798 Net cash provided by operating activities 1,040,011 Cash flows from capital and related financing activities Grant Revenue 56,400,000 Acquisitions and constructon of capital assets (36,330,257) Cash provided by financing activities 20,069,743 Cash flows from investing activities Interest & other income received 19,522 Cash provided by investing activities 19,522 Cash Net increase in cash and cash equivalents 21,129,276 Beginning of period 13,611,343 End of period $34,740,619 Reconciliation of operating income to net cash provided by operating activities Operating loss (1,564,787) Adjustments to reconcile operating loss to net cash provided Depreciation 274,547 Increase in accounts receivable 7,630 Increase in accounts payable and other liabilities 2,322,621 Net cash provided by operating activities $ 1,040,011 The accompanying notes are an integral part of these financial statements. 18

21 Statement of Net Position Proprietary Fund Wind Technology Testing Center Assets Current Assets Cash and cash equivalents - Uncommingled $5,659,763 Other 151,834 Prepaid expenses 11,812 Total noncapital assets 5,823,409 Non-Current Assets (net of accumulated depreciation) Buildings 28,915,032 Furniture and fixtures 186,970 Operational equipment 1,370,246 Leasehold improvements 13,362 Total capital assets 30,485,610 Total assets $36,309,019 Liabilities Current Liabilities Accounts payable and accrued expenses - trade 843,371 Due to other funds 115,269 Total liabilities 958,640 Net Position Invested in capital assets 30,485,610 Restricted for operations 4,864,769 Total net position $ 35,350,379 The accompanying notes are an integral part of these financial statements. 19

22 Statement of Revenue, Expenditures, and Changes in Fund Net Position Proprietary Fund Year Ended Wind Technology Testing Center Operating revenue Testing revenue $2,658,978 Total Revenue 2,658,978 Operating expenses Grants 39,372 Personnel 749,851 Program expenses 1,761,164 Program fees 408,212 Facility expenses 665,177 Total expenditures 3,623,776 Net operating loss (964,798) Non-Operating Revenues (expenditures) Interest and investment income 4,844 Other income/(loss) (178,012) Net gain from superfund settlement 4,800 Total non-operating revenues (expenditures) (168,368) Change in net position (1,133,166) Net Position Beginning of year 36,483,545 End of year $ 35,350,379 The accompanying notes are an integral part of these financial statements. 20

23 Statement of Cash Flows - Proprietary Fund Year Ended Wind Technology Testing Center Cash flows from Operations Testing revenue $2,658,978 Payments to suppliers (2,873,924) Payments to employees (749,851) Other receipts 1,769,275 Net cash provided by operating activities 804,478 Cash flows from capital and related financing activities Acquisitions and construction of capital assets (310,951) Net cash used in capital and related financing activities (310,951) Cash flows from investing activities Interest & other income received 9,644 Net cash provided by investing activities 9,644 Cash Net increase in cash and cash equivalents 503,171 Beginning of period 5,156,592 End of period $5,659,763 Reconciliation of operating loss to net cash provided by operating activities Operating loss ($964,798) Adjustments to reconcile operating loss to net cash provided Depreciation 1,410,354 Non-cash rent 89,324 Increase in accounts receivable and other assets 432,227 Increase in accounts payable and other liabilities (162,629) Net cash provided by operating activities $804,478 The accompanying notes are an integral part of these financial statements. 21

24 Notes to Financial Statements 1. Significant Accounting Principles These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, as prescribed by the Governmental Accounting Standards Board (GASB). Reporting Entity On August 12, 2008, the Commonwealth of Massachusetts (the "Commonwealth") enacted Chapter 307 of the Acts of 2008, creating the MassCEC and establishing the Massachusetts Alternative and Clean Energy Investment Trust Fund ("ACEIT") to financially support its activities. The MassCEC s mission is to accelerate job growth and economic development in the Commonwealth s clean energy industry. The MassCEC serves as a clearinghouse and support center for the clean energy industry. The MassCEC makes direct investments in new and existing companies, provides assistance to enable companies to access capital and other vital resources for growth, and promotes training programs to build a strong clean energy and technology workforce that capitalizes on the job opportunities created by this vital new industry. In addition, the MassCEC directly supports the installation of renewable energy and technology projects throughout the Commonwealth. On November 23, 2009, Governor Deval Patrick signed an Act Relative to Clean Energy, which transferred the state s Renewable Energy Trust Fund (the RETF ) from the MTPC to the MassCEC. This act united two entities with complementary missions, consolidated staff and financial resources, and established MassCEC as the lead state entity charged with growing the clean energy sector in the Commonwealth. With the RETF merger, MassCEC has the added mission of supporting the installation of renewable energy projects throughout the Commonwealth. The RETF was created in 1997 by the Massachusetts Legislature pursuant to Section 4E of Chapter 40J. The MassCEC is governed by a board of directors ( Board ) comprised of twelve members, including five members appointed by the governor and seven state officials that serve in an ex officio capacity. Government-Wide and Fund-Level Financial Statements The financial statements include both government-wide and fund-level reporting. The governmentwide financial statements (e.g., the Statement of Net Position and the Statement of Activities) report information on all of the non-fiduciary activities of the MassCEC. In the government-wide reporting model, governmental activities (those supported by state appropriations and legislatively mandated surcharges remitted from public utilities) are reported separately from a proprietary fund s business-type activities which rely on testing fees and charges for operational support after the initial development period. The Statement of Activities demonstrates the degree to which the expenses of a given function are offset by program revenue. Expenses are those that are clearly identifiable with a specific function. Administrative overhead charges are included in expense totals. Revenue includes: (1) state appropriations that support specific programmatic functions of the MassCEC; (2) legislatively mandated surcharges remitted by public utilities; (3) sponsorship and grant revenue; and (4) Alternative Compliance Payments received and appropriated to the MassCEC from the DOER. Other income and expenses includes (1) returns on program loan and equity investments; and (2) interest, dividends and capital gains earned on invested, unused funds from the sources noted above. 22

25 Notes to Financial Statements In the fund-level reporting model, the MassCEC reports its financial position and results of operations within the proprietary funds business-type activities, each of which is considered a separate accounting entity. The MassCEC has two business-type activities, a Marine Commerce Terminal in New Bedford ( Terminal ) and the Wind Technology Testing Center ( WTTC ). The fund-level statements are separate financial statements provided for governmental funds and proprietary funds. The operations of each fund are accounted for with a self-balancing set of accounts that comprise its assets, liabilities, fund equity, revenue and expenditures/expenses. The ACEIT and the RETF are not required to be presented as separate funds for financial reporting purposes and, accordingly, have been co-mingled within the fund-level statements. Transactions between ACEIT and the RETF funds have been eliminated. The government-wide and the proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid interest-bearing deposits with a creditable banking institution. Renewable Energy Surcharge Receivable The renewable energy surcharge receivable represents legislatively imposed surcharges due from electric companies paid to them by their consumers in support of the renewable energy programs of the MassCEC. No allowances are established against these receivables as all balances are deemed to be fully collectible. Program Loans Receivable Program loans receivable consist of loans to companies to accelerate job growth, economic and/or project development and technological innovation in the Commonwealth. Such amounts are reported net of an allowance for uncollectible loans. This allowance is established based on management s assessment of the collectability of the loan portfolio and are reassessed at least annually. These loans bear interest at rates ranging from 5.25% to 9.5% and mature during calendar years 2014 through 2015, or in some cases not until the project is sold or commences operations. Some project loans provide for the payment of principal and interest in the form of Renewal Energy Certificates which in turn are sold in the open market. Program Investments Program investments represent equity investments in new and existing clean energy companies as mandated by the MassCEC s legislative intent. Privately held equity investments are valued based on a fundamental business and operation analysis performed by management on each investment. These investments are carried at fair value or cost less other-than-temporary impairment adjustments depending on the type of investment in accordance with GASB 31 and GASB 62. Cash and Cash Equivalents Restricted for Awards Cash and cash equivalents are restricted for the uses stated in our enabling legislation. 23

26 Notes to Financial Statements Term Investments Restricted for Awards Term Investments Restricted for Awards represent investments in various fixed income, equity mutual funds and United State Treasury Notes that are restricted for the uses stated in our enabling legislation. RETF Investments US Treasuries $16,305,839 Bond Funds $45,042,976 Stock Funds $19,488,008 ACEIT Investments US Treasuries $17,415,923 Bond Funds $ 9,167,882 Stock Funds $ 5,077,493 Escrow Restricted Escrowed balances held with a third party agent for the purpose of satisfying contract obligations related to the REC contracts are discussed in Note 6. Funds are invested in United States Treasury Notes and are released upon notification from both counter parties or after the passage of time if the beneficiary declines to exercise its option to sell under the contract terms. Alternative Compliance Payments Custodial The MassCEC acts as the collection agent for ACP funds from electricity suppliers and holds these in escrow on behalf of the DOER. Capital Assets Capital assets are recorded at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets. The estimated useful life of the asset categories are as follows: Buildings* Leasehold improvements Operational equipment Assets capitalized for New Bedford Port** Furniture and fixtures 30 years 5 years 7 years 50 years 3-5 years *Buildings consist of the WTTC's blade test facility and large components and fixtures that are affixed to the facility. **No depreciation is calculated for construction in progress as it has not been placed into service as of. Capitalization Policy All costs related to construction in progress, leasehold improvements and operational equipment are capitalized. Costs for furniture and fixtures which include computer equipment and software are capitalized if the purchase is over $1,