What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-22 compared with 2021-02-22 · 238 added, 243 removed, 947 unchanged (34% of the section changed)

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Hannon Armstrong Sustainable Infrastructure Capital, Inc., Consolidated Financial Statements, For the Years Ended December 31, 2021, 2020 and 2019

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

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The Company’s determination that it does not have the power to direct the significant activities impacting each of the investees’ economic performance (“power”) is critical to its determination that it is not the primary beneficiary of the investee.

Also, as described in Note 2 to the consolidated financial statements, for equity method investments that contain preferences with regard to cash flows from operations, capital events and liquidation in their respective limited liability company agreements (“LLC Agreements”), the Company applies the Hypothetical Liquidation at Book Value (“HLBV”) method to record its share of profits and losses on these investments.

Auditing the Company’s determination of whether it has power was complex and required significant judgment to determine both the activities of the investee that most significantly impact the investee’s economics, and the distribution of the power among the members of the investee that ultimately determine the outcome of such activities.

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How We Addressed the Matter in our Audit We tested controls that address the risks of material misstatement relating to:

i) the determination of whether the Company has the power to direct the significant activities of the investees and ii) the recognition of its share of investees’ profits and losses through use of the HLBV method.

For example, we tested controls over management’s review of the variable interest model and determination of whether the Company has power.

We also tested controls over management’s review of the HLBV method, including the application of the liquidation provisions.

We also tested controls over management’s review of the HLBV method, including the application of the liquidation provisions and the financial information reported from their investees.

To evaluate whether the Company has power over each investee, our audit procedures included, among others, inspecting LLC Agreements and evaluating management’s analysis of the significant activities of the investee and which parties can direct those significant activities.

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Our audit procedures included, among others, involving tax professionals to assist in evaluating the Company’s application of the liquidation provisions within the LLC Agreements.

Specifically, we assessed the Company’s HLBV calculations by agreeing inputs to the calculations, such as the application of stated preferred returns and allocation of tax attributes, to the terms of the LLC Agreements for each of these investments.

We also performed additional procedures on the Company’s HLBV calculations that included recalculating the stated preferred returns, allocations of tax attributes, and the Company’s share of profits and losses of the investee.

Specifically, we assessed the Company’s HLBV calculations by agreeing provisions of the calculations, such as the application of stated preferred returns and allocation of tax attributes, to the terms of the LLC Agreements for each of these investments.

We also performed additional procedures on the Company’s HLBV calculations that included, but were not limited to, recalculating the stated preferred returns, recalculating allocations of tax attributes, comparing inputs included within the calculations to the information reported to the Company by its investee, and recalculating the Company’s share of profits and losses of the investee.

/s/ Ernst & Young LLP

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Equity method investments 1,759,651 1,279,651

Government receivables 248,455 263,175

Commercial receivables, net of allowance of $ 36 million and $ 36 million, respectively

1,298,529 965,452

Government receivables 125,409 248,455

Receivables held-for-sale

Real estate 356,088 359,176

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Credit facilities 100,473 22,591

Commercial paper notes 50,094 —

Non-recourse debt (secured by assets of $ 573 million and $ 723 million, respectively)

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Balance at December 31, 2018 60,510 $ 605 $ 965,384 $ ( 163,205 ) $ ( 1,684 ) $ 3,423 $ 804,523

— — — 41,577 — 221 41,798

Net income (loss) — — — 81,564 — 356 81,920

Unrealized gain (loss) on available-for-sale securities

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Other 4 — ( 61 ) — — ( 43 ) ( 104 )

Tax basis difference on contributed asset

— — ( 4,549 ) — — — ( 4,549 )

Dividends and distributions

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Balance at December 31, 2019 66,338 $ 663 $ 1,102,303 $ ( 169,786 ) $ 3,300 $ 3,432 $ 939,912

— — — 81,564 — 356 81,920

Net income (loss) — — — 82,416 — 343 82,759

Adoption of ASU 2016-13, net of tax effect — — — ( 14,031 ) — ( 74 ) ( 14,105 )

Unrealized gain (loss) on available-for-sale securities — — — — 12,380 57 12,437

— — — — 11,200 49 11,249

Unrealized gain (loss) on interest rate swaps — — — — ( 3,046 ) ( 17 ) ( 3,063 )

— — — — ( 6,216 ) ( 27 ) ( 6,243 )

Issued shares of common stock 9,523 96 298,375 — — — 298,471

5,399 54 138,347 — — — 138,401

Equity-based compensation — — 9,711 — — 4,812 14,523

— — 12,355 — — 55 12,410

Issuance (repurchase) of vested equity-based compensation shares 537 6 ( 17,293 ) — — — ( 17,287 )

425 4 ( 9,173 ) — — — ( 9,169 )

Other 59 — 913 — — ( 859 ) 54

Tax basis difference on contributed asset

— — ( 4,549 ) — — — ( 4,549 )

Dividends and distributions — — — ( 102,711 ) — ( 841 ) ( 103,552 )

— — — ( 88,145 ) — ( 381 ) ( 88,526 )

Balance at December 31, 2020 76,457 $ 765 $ 1,394,009 $ ( 204,112 ) $ 12,634 $ 6,853 $ 1,210,149

Net income (loss) — — — 126,579 — 767 127,346

Adoption of ASU 2016-13, net of tax effect — — — ( 14,031 ) — ( 74 ) ( 14,105 )

Unrealized gain (loss) on available-for-sale securities — — — — ( 5,401 ) ( 33 ) ( 5,434 )

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Issuance (repurchase) of vested equity-based compensation shares 324 3 ( 14,020 ) — — — ( 14,017 )

Other 59 — 913 — — ( 859 ) 54

Conversion of convertible notes 5,220 52 140,831 — — — 140,883

Dividends and distributions — — — ( 116,173 ) — ( 1,277 ) ( 117,450 )

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Non-cash gain on securitization ( 48,332 ) ( 55,413 ) ( 56,717 )

Gain on sale of receivables and investments 13,811 13,241 —

Gain (loss) on sale of receivables and investments ( 720 ) 13,811 13,241

Changes in receivables held-for-sale ( 22,035 ) — —

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Changes in accounts payable and accrued expenses 11,313 8,023 5,184

Accrued interest and other ( 27,253 ) ( 11,962 ) ( 15,720 )

Change in accrued interest on receivables and investments ( 859 ) ( 24,282 ) ( 17,721 )

Other ( 5,875 ) ( 2,971 ) 5,759

Net cash provided by operating activities 13,309 73,282 29,489

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Proceeds from sales of receivables 75,582 59,398 134,932

Purchases of real estate — — ( 27,549 )

Purchases of investments ( 4,830 ) ( 40,185 ) ( 45,830 )

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Principal payments on credit facilities ( 22,441 ) ( 134,594 ) ( 328,465 )

Proceeds from issuance of commercial paper notes 50,000 — —

Proceeds from issuance of non-recourse debt — 15,938 130,988

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Proceeds from issuance of senior unsecured notes 1,000,000 771,250 507,313

Redemption of senior unsecured notes ( 500,000 ) — —

Proceeds from issuance of convertible notes — 143,750 —

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Withholdings on employee share vesting ( 14,018 ) ( 17,287 ) ( 9,168 )

Redemption premium paid ( 14,101 ) — —

Payment of debt issuance costs ( 17,750 ) — —

Other ( 12 ) ( 15,176 ) ( 9,764 )

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Interest paid $ 108,267 $ 75,934 $ 48,056

Non-cash changes in deferred funding obligations and non-recourse debt (financing activity) — ( 112,027 ) ( 6,973 )

Non-cash changes in receivables and investments (investing activity) — 93,730 ( 248 )

Non-cash changes in residual assets (investing activity) ( 56,967 ) ( 61,001 ) ( 25,827 )

Supplemental disclosure of non-cash activity

Residual assets retained from securitization transactions $ 56,432 $ 56,697 $ 61,001

Right-of-use asset obtained in exchange for lease liability 4,628 — —

Issuance of common stock from conversion of convertible notes 141,810 — —

Deconsolidation of non-recourse debt and other liabilities 126,139 — 59,532

Deconsolidation of assets pledged for non-recourse debt 130,513 — 116,829

See accompanying notes.

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Hannon Armstrong Sustainable Infrastructure Capital, Inc.

(the “Company”) focuses on making investments in climate solutions by providing capital to the leading companies in the energy efficiency, renewable energy and other sustainable infrastructure markets.

(the “Company”) invests in climate solutions by providing capital to leading companies in the energy efficiency, renewable energy and other sustainable infrastructure markets.

Our goal is to generate attractive returns from a diversified portfolio of projects with long-term and predictable cash flows from proven technologies that reduce carbon emissions or increase resilience to climate change.

The Company and its subsidiaries are hereafter referred to as “we,” “us,” or “our.” Our investments take various forms, including equity, joint ventures, lending or other financing transactions, as well as real estate ownership and typically benefit from contractually committed high credit quality obligors.

The Company and its subsidiaries are hereafter referred to as “we,” “us” or “our.” Our investments take various forms, including equity, joint ventures, real estate ownership, or lending or other financing transactions, and typically benefit from contractually committed high credit quality obligors.

We also generate on-going fees through off-balance sheet securitization transactions, advisory services and asset management.

We refer to the income producing assets that we hold on our balance sheet as our “Portfolio.” Our Portfolio may include:

• Equity investments in either preferred or common structures in unconsolidated entities;

• Government and commercial receivables, such as loans for renewable energy and energy efficiency projects;

• Real estate, such as land or other assets leased for use by sustainable infrastructure projects typically under long-term leases;

• equity investments in either preferred or common structures in unconsolidated entities which own renewable energy or energy efficiency projects;

• commercial and government receivables, such as loans for renewable energy and energy efficiency projects;

• real estate, such as land or other assets leased for use by climate solutions projects typically under long-term leases;

• investments in debt securities of renewable energy or energy efficiency projects.

We finance our business through cash on hand, borrowings under credit facilities and debt transactions, asset-backed securitization transactions and equity issuances.

We finance our business through cash on hand, borrowings through short-term commercial paper issuances and revolving credit facilities, issuances of unsecured debt, asset-backed securitization transactions and equity issuances.

We also generate fee income through securitizations and syndications, by providing broker/dealer services and by managing and servicing assets owned by third parties.

Some of our subsidiaries are special purpose entities that are formed for specific operations associated with investing in sustainable infrastructure receivables for specific long-term contracts.

Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “HASI.” We have qualified as a real estate investment trust (“REIT”) and also intend to continue to operate our business in a manner that will maintain our exemption from registration as an investment company under the 1940 Act, as amended.

We operate our business through, and serve as the sole general partner of, our operating partnership subsidiary, Hannon Armstrong Sustainable Infrastructure, L.P., (the “Operating Partnership”), which was formed to acquire and directly or indirectly own our assets.

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Actual results could differ from these estimates and such differences could be material.

In the opinion of management, all adjustments necessary to present fairly our financial position, results of operations and cash flows have been included.

Certain amounts in the prior years have been reclassified to conform to the current year presentation.

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All material intercompany transactions and balances have been eliminated in consolidation.

Following the guidance for non-controlling interests in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation (“ASC 810”) , references in this report to our earnings per share and our net income and stockholders’ equity attributable to common stockholders do not include amounts attributable to non-controlling interests.

Following the guidance for non-controlling interests in Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 810, Consolidation (“ASC 810:), references in this report to our earnings per share and our net income and stockholders’ equity attributable to common stockholders do not include amounts attributable to non-controlling interests.

Consolidation

We account for our investments in entities that are considered voting interest entities or variable interest entities (“VIEs”) under ASC 810 and assess whether we should consolidate these entities on an ongoing basis.

We have established various special purpose entities or securitization trusts for the purpose of securitizing certain assets which are not consolidated in our financial statements as described below in Securitization of Financial Assets.

Since we have assessed that we have power over and receive the benefits from those special purpose entities that are formed for the purpose of holding our government and commercial receivables and investments on our balance sheet, we have concluded we are the primary beneficiary and should consolidate these entities under the provisions of ASC 810.

We have established various special purpose entities or securitization trusts for the purpose of securitizing certain assets that are not consolidated in our financial statements as described below in Securitization of Financial Assets.

Since we have assessed that we have power over and receive the benefits from those special purpose entities that are formed for the purpose of holding our assets on our balance sheet, we have concluded we are the primary beneficiary and

should consolidate these entities under the provisions of ASC 810.

We also have certain subsidiaries we deem to be voting interest entities that we control through our ownership of voting interests and accordingly consolidate.

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However, we may provide financial commitments to these VIEs or guarantees of certain of their obligations.

Certain other equity method investments have been assessed to be voting interest entities as we exert significant influence through our ownership of voting interests, and accordingly we do not consolidate.

Certain other entities in which we have equity investments have been assessed to be voting interest entities and are not consolidated as we exert significant influence rather than control through our ownership of voting interests, and accordingly we account for them as equity method investments described below.

Equity Method Investments

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We share in the cash flows, income, and tax attributes according to a negotiated schedule which typically does not correspond with our ownership percentages.

Investors, if any, in a preferred return position typically receive a stated preferred return consisting of a priority distribution of all or a portion of the project's cash flows, and in some cases, tax attributes.

Once the stated return, if applicable, is achieved, the partnership “flips” and the operator of the project along with any other common equity investors receive a larger portion of the cash flows, with the previously preferred investors retaining an on-going residual interest.

Investors, if any, in a preferred return position typically receive a priority distribution of all or a portion of the project’s cash flows, and in some cases, tax attributes.

Once the preferred return, if applicable, is achieved, the partnership “flips” and the operator of the project along with any other common equity investors receive a larger portion of the cash flows, with the previously preferred investors retaining an on-going residual interest.

Our equity investments in renewable energy or energy efficiency projects are accounted for under the equity method of accounting.

Under the equity method of accounting, the carrying value of these equity method investments is determined based on amounts we invested, adjusted for the equity in earnings or losses of the investee allocated based on the LLC agreement, less distributions received.

For the LLC agreements which contain preferences with regard to cash flows from operations, capital events and liquidation, we reflect our share of profits and losses by determining the difference between our claim on the investee’s book value at the beginning and the end of the period, which is adjusted for distributions received and contributions made.

For the LLC agreements that contain preferences with regard to cash flows from operations, capital events and liquidation, we reflect our share of profits and losses by determining the difference between our claim on the investee’s reported book value at the beginning and the end of the period, which is adjusted for distributions received and contributions made.

This claim is calculated as the amount we would receive if the investee were to liquidate all of its assets at the recorded amounts determined in accordance with GAAP and distribute the resulting cash to creditors and investors in accordance with their respective priorities.

This method is referred to as the hypothetical liquidation at book value method (“HLBV”).

Our exposure to loss to these investments is limited to the amount of our equity investment, as well as other investments we may have in the same investee.

Any difference between the amount of our investment and the amount of underlying equity in net assets is generally amortized over the life of the assets and liabilities to which the difference relates.

Cash distributions received from these equity method investments are classified as operating activities to the extent of cumulative HLBV earnings in our consolidated statements of cash flows.

Cash distributions received from each equity method investment are classified as operating activities to the extent of cumulative earnings for each investment in our consolidated statements of cash flows.

Our initial investment and additional cash distributions beyond that which are classified as operating activities are classified as investing activities in our consolidated statements of cash flows.

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and other factors.

Government and Commercial Receivables

Government and commercial receivables (“receivables”) include project loans and receivables.

Commercial and Government Receivables

Commercial and government receivables (“receivables”) include project loans and receivables.

These receivables are separately presented in our balance sheet to illustrate the differing nature of the credit risk related to these assets.

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Our initial investment and principal repayments of these receivables are classified as investing activities and the interest collected is classified as operating activities in our consolidated statements of cash flows.

Receivables that we intend to sell in the short-term are classified as held-for-sale and are carried at the lower of amortized cost or fair value on our balance sheet.

Receivables that we intend to sell in the short-term are classified as held-for-sale and are carried at the lower of amortized cost or fair value on our balance sheet, which is assessed on an individual asset basis.

The purchases and proceeds from receivables that we intend to sell at origination are classified as operating activities in our consolidated statements of cash flows.

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We generally accrue this paid-in-kind (“PIK”) interest when collection is expected, and cease accruing PIK interest if there is insufficient value to support the accrual or we expect that any portion of the principal or interest due is not collectible.

We evaluate our receivables for an allowance as determined under ASC Topic 326 Financial Instruments- Credit Losses ("Topic 326") and for our internally derived asset performance categories included in Note 6 on at least a quarterly basis and

more frequently when economic or other conditions warrant such an evaluation.

We evaluate our receivables for an allowance as determined under ASC Topic 326 Financial Instruments- Credit Losses (“Topic 326”) and for our internally derived asset performance categories included in Note 6 to our financial statements on at least a quarterly basis and more frequently when economic or other conditions warrant such an evaluation.

When a receivable becomes 90 days or more past due, and if we otherwise do not expect the debtor to be able to service all of its debt or other obligations, we will generally consider the receivable delinquent or impaired and place the receivable on non-accrual status and cease recognizing income from that receivable until the borrower has demonstrated the ability and intent to pay contractual amounts due.

If a receivable’s status significantly improves regarding the debtor’s ability to service the debt or other obligations, we will remove it from non-accrual status.

Prior to January 1, 2020, a receivable was also considered impaired as of the date when, based on current information and events, it was determined that it was probable that we would be unable to collect all amounts due in accordance with the original contracted terms.

Many of our receivables are secured by energy efficiency and renewable energy infrastructure projects.

Accordingly, we evaluated the extent and impact of any credit deterioration associated with the performance and value of the underlying project, as well as the financial and operating capability of the borrower, its sponsors or the obligor as well as any guarantors.

If a receivable was impaired, we determined if a specific allowance should be recorded and recorded such allowance if the present value of expected future cash flows discounted at the receivable’s contractual effective rate was less than its carrying value.

This estimate of cash flows also considered the estimated fair market value of the collateral less estimated selling costs if repayment was expected from the collateral.

Beginning January 1, 2020, we determine our allowance based on the current expectation of credit losses over the contractual life of our receivables as required by Topic 326.

We determine our allowance based on the current expectation of credit losses over the contractual life of our receivables as required by Topic 326, which we adopted in the year ended December 31, 2020.

We use a variety of methods in developing our allowance including discounted cash flow analysis and probability-of-default/loss given default (“PD/LGD”) methods.

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In developing our forecasts, we consider a number of qualitative and quantitative factors in our assessment, including a project’s operating results, loan-to-value ratio, any cash reserves, the ability of expected cash from operations to cover the cash flow requirements currently and into the future, key terms of the transaction, the ability of the borrower to refinance the transaction, other credit support from the sponsor or guarantor and the project’s collateral value.

In addition, we consider the overall economic environment, the sustainable infrastructure sector, the effect of local, industry, and broader economic factors such as unemployment rates and power prices, the impact of any variation in weather and the historical and anticipated trends in interest rates, defaults and loss severities for similar transactions.

In addition, we consider the overall economic environment, the climate solutions sector, the effect of local, industry, and broader economic factors such as unemployment rates and power prices, the impact of any variation in weather and the historical and anticipated trends in interest rates, defaults and loss severities for similar transactions.

For those assets where we record our allowance using a discounted cash flow method, we have elected to record the change in allowance due solely to the passage of time through the provision for loss on receivables in our income statement.

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Any provision we record for an allowance is a non-cash reconciling item to cash from operating activities in our consolidated statements of cash flows.

Real estate consists of land or other real estate and its related lease intangibles, net of any amortization.

Real estate consists of land or other real property and its related lease intangibles, net of any amortization.

Our real estate is generally leased to tenants on a triple net lease basis, whereby the tenant is responsible for all operating expenses relating to the property, generally including property taxes, insurance, maintenance, repairs and capital expenditures.

Certain real estate transactions may be characterized as “failed sale-leaseback” transactions as defined under ASC Topic 842 (“Topic 842”), Leases , and thus are accounted for similarly to our Commercial Receivables as described above in Government and Commercial Receivables.

Certain real estate transactions may be characterized as “failed sale-leaseback” transactions as defined under ASC Topic 842, Leases , and thus are accounted for similarly to our commercial receivables as described above in Government and Commercial Receivables.

For our other real estate lease transactions that are classified as operating leases, the scheduled rental revenue typically varies during the lease term and thus rental income is recognized on a straight-line basis, unless there is considerable risk as to collectability, so as to produce a constant periodic rent over the term of the lease.

Accrued rental income is the aggregate difference between the scheduled rents which vary during the lease term and the income recognized on a straight-line basis and is recorded in other assets.

Accrued rental income is the aggregate difference between the scheduled rents that vary during the lease term and the income recognized on a straight-line basis and is recorded in other assets.

Expenses, if any, related to the ongoing operation of leases where we are the lessor are charged to operations as incurred.

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The as-if-vacant fair value of a property is typically determined by management based on appraisals by a qualified appraiser.

In determining the fair value of the identified intangibles of an acquired property, above-market and below-market in-place lease values are valued based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases, and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining term of the lease, including renewal periods reasonably certain of being exercised by the lessee.

The capitalized off-market lease values are amortized as an adjustment to rental income over the term used to value the intangible.

In determining the fair value of the identified intangibles of an acquired property, above-market and below-market in-place lease values are valued based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases, and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining term of the lease, including renewal periods reasonably certain of being exercised by the lessee.

The capitalized off-market lease values are amortized as an adjustment of rental income over the term used to value the intangible.

We also record, as appropriate, an intangible asset for in-place leases.

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We determined that the trusts used in securitizations are VIEs, as defined in ASC 810.

When we conclude that we are not the primary beneficiary of certain trusts because we do not have power over those trusts' significant activities, we do not consolidate the trust.

When we conclude that

we are not the primary beneficiary of certain trusts because we do not have power over those trusts’ significant activities, we do not consolidate the trust.

We typically serve as primary or master servicer of these trusts;

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We account for transfers of financial assets to these securitization trusts as sales pursuant to ASC 860, Transfers and Servicing (“ASC 860”), when we have concluded the transferred assets have been isolated from the transferor (i.e., put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership) and we have surrendered control over the transferred assets.

We treat those trusts where we are unable to conclude that we have been isolated from the securitized financial assets as secured borrowings, retaining the assets on our balance sheet and recording the amounts due to the trust investor as non-recourse debt.

For transfers treated as sales under ASC 860, we have received true-sale-at-law and non-consolidation legal opinions for all of our securitization trust structures that support our conclusion regarding the transferred financial assets.

When we are unable to conclude that we have been sufficiently isolated from the securitized financial assets, we treat such trusts as secured borrowings, retaining the assets on our balance sheet and recording the amounts due to the trust investor as non-recourse debt.

For transfers treated as sales under ASC 860, we have received true-sale-at-law and non-consolidation legal opinions for all of our securitization trust structures to support our conclusion regarding the transferred financial assets.

When we sell financial assets in securitizations, we generally retain interests in the form of servicing rights and residual assets, which we refer to as securitization assets.

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If the amortized cost of servicing assets is greater than the estimated fair value, we will recognize an impairment in net income.

Our other retained interest in securitized assets, the residual assets, are accounted for similarly to available-for-sale debt securities and carried at fair value.

Our other retained interest in securitized assets, the residual assets, are accounted for similar to available-for-sale debt securities and carried at fair value.

Income related to the residual assets is recognized using the effective interest rate method and included in fee income in our income statement.

Our residual assets are evaluated for impairment on a quarterly basis.

Income related to the residual assets is recognized using the effective interest rate method and included in fee income in the income statement.

If there is a change in the expected cash flows related to the residual assets, we will assess whether the asset is impaired and will calculate a new yield based on the current amortized cost of the residual assets and the revised expected cash flows.

A residual asset is impaired if its fair value is less than its carrying value.

The credit component of impairments, if any, are recognized by recording an allowance against the amortized cost of the asset.

For changes in expected cash flows, we will calculate a new yield based on the current amortized cost of the residual assets and the revised expected cash flows.

This yield is used prospectively to recognize our income related to these assets.

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Restricted cash includes cash and cash equivalents set aside with certain lenders primarily to support obligations outstanding as of the balance sheet dates.

Restricted cash is reported as part of other assets in the consolidated balance sheets.

Refer to Note 3 for disclosure of the balances of restricted cash included in other assets.

Restricted cash is reported as part of other assets in our consolidated balance sheets.

Refer to Note 3 to our financial statements in this Form 10-K for disclosure of the balances of restricted cash included in other assets.

Convertible Notes

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The initial issuance and any principal repayments are classified as financing activities and interest payments are classified as operating activities in our consolidated statements of cash flows.

If converted, the carrying value of each convertible note is reclassified into stockholders’ equity.

We elected and qualified to be taxed as a REIT for U.S.

federal income tax purposes, commencing with our taxable year ended December 31, 2013.

We also have taxable REIT subsidiaries (“TRS”) which are taxed separately, and which will generally be subject to U.S.

We also have taxable REIT subsidiaries (“TRS”) that are taxed separately, and that will generally be subject to U.S.

federal, state, and local income taxes as well as taxes of foreign jurisdictions, if any.

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The effect on deferred tax assets and liabilities from a change in tax rates is recognized in earnings in the period when the new rate is enacted.

We evaluate any deferred tax assets for valuation allowances based on an assessment of available evidence including sources of taxable income, prior years taxable income, any existing

taxable temporary differences and our future investment and business plans that may give rise to taxable income.

We evaluate any deferred tax assets for valuation allowances based on an assessment of available evidence including sources of taxable income, prior years taxable income, any existing taxable temporary differences and our future investment and business plans that may give rise to taxable income.

We treat any tax credits we receive from our equity investments in renewable energy projects as reductions of federal income taxes of the year in which the credit arises.

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We compute earnings per share of common stock in accordance with ASC 260, Earnings Per Share .

Basic earnings per share is calculated by dividing net income attributable to controlling stockholders (after consideration of the earnings allocated to unvested grants under the 2013 Plan, if applicable) by the weighted-average number of shares of common stock outstanding during the period excluding the weighted average number of unvested grants under the 2013 Plan, if applicable (“participating securities” as defined in Note 12).

Diluted earnings per share is calculated by dividing net income attributable to controlling stockholders (after consideration of the earnings allocated to unvested grants under the 2013 Plan, if applicable) by the weighted-average number of shares of common stock outstanding during the period plus other potential common stock instruments if they are dilutive.

Other potentially dilutive common stock instruments include our unvested restricted stock, other equity-based awards, and convertible notes.

Other potentially dilutive common stock instruments include

our unvested restricted stock, other equity-based awards, and convertible notes.

The restricted stock and other equity-based awards are included if they are dilutive using the treasury stock method.

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Segment Reporting

We make equity and debt investments in the energy efficiency, renewable energy, and other sustainable infrastructure markets.

We make equity and debt investments in the climate solutions markets.

We manage our business as a single portfolio and report all of our activities as one business segment.

Recently Issued Accounting Pronouncements

Credit Losses

In June 2016, the FASB issued Topic 326 which significantly changes how entities will recognize and measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

Topic 326 has replaced the “incurred loss” approach under existing guidance with an “expected loss” model for instruments measured at amortized cost and require entities to record allowances for expected losses from available-for-sale debt securities rather than reduce the amortized cost, as previously required.

It also simplified the accounting model for purchased credit-impaired debt securities and loans.

Topic 326 is effective for fiscal years beginning after December 15, 2019 and was adopted through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.

Topic 326 became effective for us on January 1, 2020.

As a result of the adoption of Topic 326, we recorded a cumulative-effect pre-tax adjustment to retained earnings as of January 1, 2020 of approximately $ 17 million in the process of establishing our allowance for our commercial receivables.

The allowance for our government receivables recorded as of the adoption date of Topic 326 is not material.

We did not have a material impact to the accounting for our available-for-sale securities portfolio.

Other accounting standards updates issued before February 22, 2021 and effective after December 31, 2020, are not expected to have a material effect on our consolidated financial statements and related disclosures.

There were no accounting standards that became effective in the year ended December 31, 2021 that had a material effect on our consolidated financial statements and related disclosures.

Accounting standards updates issued before February 22, 2022 and effective after December 31, 2021, are not expected to have a material effect on our consolidated financial statements and related disclosures.

Fair Value Measurements

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(in millions)

Government receivables $ 282 $ 248 Level 3

Commercial receivables $ 1,433 $ 1,299 Level 3

Government receivables 137 125 Level 3

Receivables held-for-sale 32 22 Level 3

Investments (1)

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Credit facilities $ 100 $ 100 Level 3

Commercial paper notes 50 50 Level 3

Non-recourse debt 476 440 Level 3

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(2) Included in securitization assets on the consolidated balance sheet.

This amount excludes securitization servicing assets, which are carried at amortized cost.

The amortized cost of our securitization assets as of December 31, 2021, was $ 194 million.

(3) Fair value and carrying value exclude unamortized financing costs.

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(in millions)

Government receivables $ 278 $ 263 Level 3

Commercial receivables $ 1,018 $ 965 Level 3

Government receivables 282 248 Level 3

Investments (1)

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This amount excludes securitization servicing assets which are carried at amortized cost.

The amortized cost of our securitization assets as of December 31, 2020, was $ 141 million.

(3) Fair value and carrying value exclude unamortized financing costs.

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We may use third party valuation firms to assist us with developing our estimates of fair value.

See Note 6 for a discussion of a fair value measurement recorded during the year ended December 31, 2021 related to an equity method investment.

Concentration of Credit Risk

Government and commercial receivables, real estate leases, and debt investments consist primarily of U.S.

federal government-backed receivables, investment grade state and local government receivables and receivables from various sustainable infrastructure projects and do not, in our view, represent a significant concentration of credit risk.

Commercial and government receivables, real estate leases, and debt investments consist primarily of receivables from various projects, U.S.

federal government-backed receivables, and investment grade state and local government receivables and do not, in our view, represent a significant concentration of credit risk.

Additionally, certain of our investments are collateralized by projects concentrated in certain geographic regions throughout the United States.

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The outstanding OP units held by outside limited partners represent less than 1 % of our outstanding OP units and are redeemable by the limited partners for cash, or at our option, for a like number of shares of our common stock.

Non-controlling interest holders exchanged 57,400 OP units for the same number of shares of common stock during the year ended December 31, 2020.

OP units of 3,703 were exchanged for the same number of shares of our common stock during the year ended December 31, 2019.

No OP units were exchanged by non-controlling interest holders during the year ended December 31, 2021.

Non-controlling interest holders exchanged 57,400 OP units for the same number of shares of our common stock during the year ended December 31, 2020.

We have also granted to members of our leadership team and directors LTIP Units pursuant to the 2013 Plan.

These LTIP Units are held by HASI Management HoldCo LLC.

The LTIP Units issued to employees are held by HASI Management HoldCo LLC.

The LTIP Units are designed to qualify as profits interests in the Operating Partnership and initially will have a capital account balance of zero and, therefore, will not have full parity with OP units with respect to liquidating distributions or other rights.

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Once this has occurred, the LTIP Units will achieve full parity with the OP units for all purposes, including with respect to liquidating distributions and redemption rights.

In addition to these attributes, there are vesting and settlement conditions similar to our other equity-based awards as discussed in Notes 2 and 11.

In addition to these attributes, there are vesting and settlement conditions similar to our other equity-based awards as discussed in Notes 2 and 11 to our financial statements in this Form 10-K.

Securitization of Financial Assets

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In connection with securitization transactions, we typically retain servicing responsibilities and residual assets.

We generally receive annual servicing fees of typically up to 0.20 % of the outstanding balance.

We may periodically make servicer advances, which are subject to credit risk.

Included in securitization assets in our consolidated balance sheets are our servicing assets at amortized cost, our residual assets at fair value, and our servicing advances at cost, if any.

We generally receive annual servicing fees that are typically up to 0.20 % of the outstanding balance.

We may periodically make servicer advances, that are subject to credit risk.

Included in securitization assets in our consolidated balance sheets are our servicing assets at amortized cost and our residual assets at fair value.

Our residual assets are subordinate to investors’ interests, and their values are subject to credit, prepayment and interest rate risks on the transferred financial assets.

Other than these residual assets, the investors and the securitization trusts have no recourse to our other assets for failure of debtors to pay when due.

Other than our securitization assets representing these residual interests in the trusts’ assets, the investors and the securitization trusts have no recourse to our other assets for failure of debtors to pay when due.

In computing gains and losses on securitizations, we use discount rates based on a review of comparable market transactions including Level 3 unobservable inputs which consist of base interest rates and spreads over these base rates.

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As of December 31, 2021, there were no material payments from debtors to the securitization trusts that were greater than 90 days past due.

Receivables from contracts for the installation of energy efficiency and other technologies are $ 100 million of our securitization residual assets.

Receivables from contracts for the installation of energy efficiency and other technologies are the source of cash flows for $ 104 million of our securitization residual assets.

These technologies are installed in facilities owned by, or operated for or by, federal, state or local government entities where the ultimate obligor for the receivable is a governmental entity.

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The real estate is typically land and related lease intangibles for long-term leases to wind and solar projects.

Our analysis of our Portfolio has historically been analyzed by type of obligor categorized as either government or commercial obligors and whether those obligors are investment grade or non-investment grade.

In conjunction with the adoption of Topic 326, we re-evaluated our reporting for this disclosure and have modified our credit quality disclosure to provide more detail of how the assets in our Portfolio are performing.

Additionally, as discussed in Note 2, we have adopted Topic 326 which requires the establishment of an allowance at origination for our receivables expected over the life of the asset rather than at the time it is probable that a loss has been incurred.

These allowances are reflected in our disclosures below and are not necessarily an indication that an actual loss has been incurred.

We determine our expectation of credit losses related to our investments by evaluating a number of qualitative and quantitative credit criteria including a project’s operating results, loan-to-value ratio, any cash reserves, the ability of expected cash from operations to cover the cash flow requirements currently and into the future, key terms of the transaction, the ability of the borrower to refinance the transaction, the financial and operating capability of the borrower, its sponsors or the obligor as well as any guarantors and the project’s collateral value.

In addition, when deriving our reasonable and supportable forecasts we consider the overall economic environment, the sustainable infrastructure sector, the effect of local, industry, and broader economic factors, the impact of any variation in weather and the historical and anticipated trends in interest rates, defaults and loss severities for similar transactions.

In developing and evaluating performance against our credit criteria, we consider a number of qualitative and quantitative criteria including a project’s operating results, loan-to-value ratio, any cash reserves, the ability of expected cash from operations to cover the cash flow requirements currently and into the future, key terms of the transaction, the ability of the borrower to refinance the transaction, the financial and operating capability of the borrower, its sponsors or the obligor as well as any guarantors and the project’s collateral value.

In addition, we consider the overall economic environment, the climate solutions sector, the effect of local, industry and broader economic factors, the impact of any variation in weather and the historical and anticipated trends in interest rates, defaults and loss severities for similar transactions.

The following is an analysis of the Performance Ratings of our Portfolio as of December 31, 2021, which is assessed quarterly:

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Prior to 2017 94 103 — 8 205

Total receivables 248 984 10 8 1,250

Total receivables held-for-investment 125 1,316 11 8 1,460

Allowance for loss on receivables

— ( 25 ) ( 3 ) ( 8 ) ( 36 )

Net receivables (4)

Net receivables held-for-investment (4)

125 1,291 8 — 1,424

Receivables held-for-sale — 22 — — 22

Investments 11 7 — — 18

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We expect to continue to pursue our legal claims with regards to these assets.

This category previously contained an equity method investment in a wind project with no book value due to our allocation of impairment losses recorded by the project sponsor.

We sold this equity method investment in the third quarter for nominal proceeds.

(4) Total reconciles to the total of the government receivables and commercial receivables lines of the consolidated balance sheets

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As they are part of large portfolios, they are not classified separately.

(6) Average remaining balance is calculated gross of allowance for loss on receivables per transaction and excludes approximately 143 transactions each with outstanding balances that are less than $1 million and that in the aggregate total $ 56 million.

We adopted Topic 326 during the year ended December 31, 2020 which requires us to recognize a provision for loss on receivables expected over the life of the receivable rather than only recording an allowance when it is probable a loss has been incurred.

As of December 31, 2019, we had an allowance for loss on receivables on specific assets of $ 8 million discussed above with a Performance Rating of 3.

At adoption on January 1, 2020, we recorded an additional pre-tax allowance for loss on receivables of $ 17 million which reflects our estimated loss as of that date.

Quarterly, we update that expected loss to reflect both the expected loss on newly originated receivables and any changes in the expected loss on existing receivables.

During the year ended December 31, 2020, we increased the allowance on our receivables by $ 10 million primarily as a result of additional loans and loan commitments made during this period.

While macroeconomic indicators we consider in our analyses including unemployment rates and power prices degraded over the year ended December 31, 2020, we have not seen these factors translate to material default rates, and the contracted nature of many of our assets protects us from low spot energy prices.

Below is a summary of the carrying value, expected loan funding commitments, and allowance by type of receivable or "Portfolio Segment," as defined by Topic 326, as of December 31, 2020 and January 1, 2020:

December 31, 2020 January 1, 2020

(6) Average remaining balance is calculated gross of allowance for loss on receivables and excludes approximately 174 transactions each with outstanding balances that are less than $ 1 million and that in the aggregate total $ 84 million.

As of December 31, 2021 our allowance for loan losses was $ 36 million based on our expectation for credit losses over the lives of the receivables in our Portfolio.

During 2021, our reserve was unchanged, as additional allowances associated with loans and loan commitments were offset by the release of certain loan-specific reserves.

Below is a summary of the carrying value, expected loan funding commitments, and allowance by type of receivable or “Portfolio Segment,” as defined by Topic 326, as of December 31, 2021 and 2020:

December 31, 2021 December 31, 2020

Gross Carrying Value Loan Funding Commitments Allowance Gross Carrying Value Loan Funding Commitments Allowance

(in millions)

Government (1)

$ 248 $ — $ — $ 263 $ — $ —

Commercial (1)

$ 1,335 $ 184 $ 36 $ 1,002 $ 282 $ 36

Government (2)

125 — — 248 — —

Total $ 1,460 $ 184 $ 36 $ 1,250 $ 282 $ 36

(1) As of December 31, 2021, this category of assets include $ 776 million of mezzanine loans made on a non-recourse basis to special purpose subsidiaries of residential solar companies which are secured by residential solar assets where we rely on certain limited indemnities, warranties, and other obligations of the residential solar companies or their other subsidiaries.

Approximately $ 684 million of our commercial receivables are loans made to entities in which we also have non-controlling equity investments of approximately $ 108 million.

This total also includes $ 48 million of lease agreements where we hold legal title to the underlying real estate which are treated under GAAP as receivables since they were deemed to be failed sale/leaseback transactions as described in Note 2.

Risk characteristics of our commercial receivables include a project’s operating risks, which include the impact of the overall economic environment, the climate solutions sector, the effect of local, industry, and broader economic factors, the impact of any variation in weather and trends in interest rates.

We use assumptions related to these risks to estimate an allowance using a discounted cash flow analysis or the PD/LGD method as discussed in Note 2.

All of our commercial receivables are included in Performance Rating 1 in the Portfolio Performance table above, except for $ 11 million of receivables included in Performance Category 2 and the $ 8 million of receivables we have placed on non-accrual status which are included in Performance Rating 3.

For those assets in Performance Rating 1, the credit worthiness of the obligor combined with the various structural protections of our assets cause us to believe we have a low risk we will not receive our invested capital, however we recorded a $ 25 million allowance on these $ 1.3 billion in assets as a result of lower probability assumptions utilized in our allowance methodology.

(2) As of December 31, 2021, our government receivables include $ 28 million of U.S.

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Our expectation of credit losses for these receivables is immaterial given the high credit-quality of the obligors.

(2) As of December 31, 2020, this category of assets includes, gross of allowance, $ 505 million of mezzanine loans made on a non-recourse basis to special purpose subsidiaries of residential solar companies which are secured by residential solar assets where we rely on certain limited indemnities, warranties, and other obligations of the residential solar companies or their other subsidiaries.

Approximately $ 408 million of our commercial receivables are loans made to entities in which we also have non-controlling equity investments of approximately $ 23 million.

This total also includes $ 111 million of lease agreements where we hold legal title to the underlying real estate which are treated under GAAP as receivables since they were deemed to be failed sale/leaseback transactions as described in Note 2.

Risk characteristics of our commercial receivables include a project’s operating risks, which include the impact of the overall economic environment, the sustainable infrastructure sector, the effect of local, industry, and broader economic factors, the impact of any variation in weather and trends in interest rates.

We use assumptions related to these risks to estimate an allowance using a discounted cash flow analysis or the PD/LGD method as discussed in Note 2.

All of our commercial receivables are included in Performance Rating 1 in the Portfolio Performance table above, except for $ 10 million of receivables included in Performance Category 2 and the $ 8 million of receivables we have placed on non-accrual status which are included in Performance Rating 3.

For those assets in Performance Rating 1, the credit worthiness of the obligor combined with the various structural protections of our assets cause us to believe we have a low risk we will not receive our invested capital, however we recorded a $ 24 million allowance on these $ 984 million in assets as a result of lower probability assumptions utilized in our allowance methodology.

The following table reconciles our beginning and ending allowance for loss on receivables by Portfolio Segment for the year ended December 31, 2021:

Government Commercial

Commercial Government

(in millions)

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Ending balance - December 31, 2020 36 —

Provision for loss on receivables — —

Ending balance - December 31, 2021 $ 36 $ —

(1) Balance as of the adoption of Topic 326, which includes the pre-tax allowance for loss on receivables of $ 17 million recorded upon adoption which reflects our estimated loss as of that date under the new standard as well as the $ 8 million of receivables which were previously on non-accrual status and fully reserved.

Other than the $ 8 million of receivables discussed above with a Performance Rating of 3, we have no receivables which are on non-accrual status.

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March 2020 University of Iowa Energy Collaborative Holdings LLC 123

December 2015 Buckeye Wind Energy Class B Holdings, LLC 72

Various Vivint Solar Asset 2 Class B, LLC 66

Various Other investees 707

Total equity method investments $ 1,760

(1) Represents a portfolio of interests in renewable energy projects discussed below.

(1) Represents the total of three equity investments in a portfolio of a renewable energy projects discussed below.

Jupiter Equity Holdings, LLC

On July 1, 2020, we acquired a preferred equity interest in Jupiter Equity Holdings, LLC ("Jupiter") that is expected to own an approximately 2.3 gigawatt portfolio of renewable energy projects.

We have agreed to guarantee certain of the obligations of the subsidiary in connection with these agreements.

To date, we have made capital contributions to Jupiter of approximately $ 467 million related to eight operating wind projects and two operating solar projects with an aggregate capacity of approximately 2.1 gigawatts.

We expect to ultimately invest approximately $ 540 million in Jupiter by making additional periodic capital contributions related to three more projects anticipated to be commercially operational on or prior to June 30, 2021, at which time the additional projects relating to a specific funding will be transferred into Jupiter.

Assuming all of the projects are acquired by Jupiter, the renewables portfolio will consist of 13 projects ( nine onshore wind projects and four utility-scale solar projects) and will feature cash flows from fixed-price power purchase agreements and financial hedges with a weighted average contract life of 13 years, contracted with highly creditworthy off-takers and counterparties.

Jupiter is governed by an amended and restated limited liability company agreement, dated July 1, 2020, by and among Jupiter, one of our subsidiaries and a subsidiary of the project sponsor who serves as managing member, and contains customary terms and conditions.

We have a preferred equity interest in Jupiter Equity Holdings, LLC (“Jupiter”) that owns nine operating onshore wind projects and four operating utility-scale solar projects with an aggregate capacity of approximately 2.3 gigawatts.

We have made capital contributions to Jupiter of approximately $ 540 million related to these projects.

The projects feature cash flows from fixed-price power purchase agreements and financial hedges with a weighted average contract life of 13 years, contracted with highly creditworthy off-takers and counterparties.

We own 100 % of the Class A Units in Jupiter corresponding to 49 % of the distributions from Jupiter subject to the preferences discussed below.

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Through Jupiter, we will be entitled to preferred distributions until certain return targets are achieved.

Once these return targets are achieved, then distributions will be allocated approximately 33 % to us and approximately 67 % to the sponsor.

Once these return targets are achieved, distributions will be allocated approximately 33 % to us and approximately 67 % to the sponsor.

We and the sponsor each have a right of first offer if the other party desires to transfer any of its equity ownership to a third party on or after July 1, 2023.

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Lighthouse Renewables Portfolio

In December 2020, we entered into certain agreements relating to the acquisition, ownership and management of approximately $ 663 million in preferred cash equity investments in three partnerships (the “Lighthouse Partnerships”) that expect to own cash equity interests in an approximately 1.6 gigawatt portfolio of onshore wind, utility-scale solar and solar-plus-storage projects (the “Renewables Portfolio”) developed and managed by the project sponsor.

We have made initial investments in the preferred cash equity interests of the Lighthouse Partnerships of approximately $ 200 million in 2020 and additional investments are expected to be made in 2021 and 2022 as the projects become commercially operational.

In December 2020, we entered into certain agreements relating to the acquisition, ownership and management of approximately $ 663 million in preferred cash equity investments in three partnerships that expect to own cash equity interests in an approximately 1.6 gigawatt portfolio of onshore wind, utility-scale solar and solar-plus-storage projects (the “Renewables Portfolio”) developed and managed by the project sponsor.

In 2021, we modified this structure to include an additional project in the renewables portfolio and to be held through the four partnerships (“Lighthouse Partnerships”), bringing our total expected investment to $ 870 million.

We have made initial investments in the preferred cash equity interests of the Lighthouse Partnerships of approximately $ 388 million through December 31, 2021, and additional investments are expected to be made in 2022 as the projects become commercially operational.

The Renewables Portfolio currently has contracted cash flows with a combined weighted average contract life of greater than 15 years with a diversified group of predominately investment grade corporate, utility, university, and municipal offtakers.

Each Lighthouse Partnership governed by a limited liability company agreement by and among us and the sponsor serving as managing member that will contain customary terms and conditions.

In 2021, we made approximately $ 15 million in equity contributions and made $ 10 million in member loans to one of the Lighthouse Partnerships for the settlement of hedging activity under one of the project’s power hedge agreements as a result of the February 2021 winter storms in Texas.

Each of the Lighthouse Partnerships are or will be governed by a limited liability company agreement between us and the sponsor serving as managing member and contain customary terms and conditions.

Most major decisions that may impact each of the Lighthouse Partnerships, its subsidiaries or its assets, require a unanimous vote of the representatives present at a meeting of a review committee in which a quorum is present.

The review committee is a four person committee, which includes two Company representatives and two sponsor representatives.

Through each Lighthouse Partnership, commencing on a certain date following the effective date of the applicable limited liability company agreement, we will be entitled to preferred distributions until certain return targets are achieved.

Subject to customary exceptions, no member of a Lighthouse Partnership can transfer any of its equity ownership in any Lighthouse Partnership to a third party without approval of the review committee of that Lighthouse Partnership.

We use the equity method of accounting to account for its preferred equity interest in each Lighthouse Partnership, and have elected to recognize earnings from this investment one quarter in arrears to allow for the receipt of financial information.

Based on an evaluation of our equity method investments we determined that no OTTI had occurred as of December 31, 2020, 2019, or 2018.

Credit facilities

Senior credit facilities

We have two senior revolving credit facilities (our “Senior Credit Facilities”), a representation-based loan agreement (the “Rep-Based Facility”) and an approval-based loan agreement (the “Approval-Based Facility”) with various lenders, which mature in July 2023.

The Rep-Based Facility is a senior secured revolving limited-recourse credit facility with a maximum outstanding principal amount of $ 250 million and the Approval-Based Facility is a senior secured revolving recourse credit facility with a maximum outstanding principal amount of $ 200 million.

The following table provides additional detail on our Senior Credit Facilities as of December 31, 2020:

We use the equity method of accounting to account for our preferred equity interest in each Lighthouse Partnership, and have elected to recognize earnings from this investment one quarter in arrears to allow for the receipt of financial information.

Other Equity method investments

In 2021 we restructured an equity method investment with a GAAP carrying value of $ 24 million to convert it to a $ 17 million loan.

The GAAP carrying value of this investment included amounts related to non-cash HLBV income that in normal course would have reversed over time.

Upon restructuring, we accelerated the reversal of $ 7 million of previously recorded non-cash HLBV income included in the carrying value of this investment through income from equity method investments on our income statement.

Also in 2021, we had a working capital loan with an outstanding principal balance of $ 18 million to one of our equity method investments which we exchanged for an additional equity investment in that investee.

Credit facilities and commercial paper notes

Secured credit facilities

We have two secured revolving credit facilities (our “Secured Credit Facilities”), a representation-based loan agreement (the “Rep-Based Facility”) and an approval-based loan agreement (the “Approval-Based Facility”) with various lenders, which mature in July 2023.

The Rep-Based Facility is a secured revolving limited-recourse credit facility, which we modified in March 2021 to have a maximum outstanding principal amount of $ 100 million, lowered from a previous amount of $ 250 million.

This modification resulted in a $ 1.5 million loss due to the acceleration of a portion of the related unamortized financing costs that was recognized in interest expense in 2021.

The Approval-Based Facility is a secured revolving recourse credit facility with a maximum outstanding principal amount of $ 200 million.

The following table provides additional detail on our Secured Credit Facilities as of December 31, 2021:

Rep-Based Facility Approval-Based Facility

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Value of collateral pledged to credit facility 24 90

Available capacity based on pledged assets 11 14

Weighted average short-term borrowing rate N/A 2.1 %

Loans under the Rep-Based Facility bear interest at a rate equal to one-month LIBOR plus 1.40 % or 1.85 % (depending on the type of collateral) or, in certain circumstances, the Federal Funds Rate plus 0.40 % or 0.85 % (depending on the type of collateral) and loans under the Approval-Based Facility bear interest at a rate equal to one-month LIBOR plus 1.50 % or 2.00 % (depending on the type of collateral) or, under certain circumstances, the Federal Funds Rate plus 0.50 % or 1.00 % (depending on the type of collateral).

Loans under the Approval-Based Facility bear interest at a rate equal to one-month LIBOR plus 1.50 % or 2.00 % (depending on the type of collateral) or, under certain circumstances, the Federal Funds Rate plus 0.50 % or 1.00 % (depending on the type of collateral).

Inclusion of any financings of the Company in the borrowing base as collateral under the Rep-Based Facility will be subject to the Company making certain agreed upon representations and warranties.

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Inclusion of any financings of the Company in the borrowing base as collateral under the Approval-Based Facility will be subject to the approval of a super-majority of the lenders, and we have provided a guarantee of the Approval-Based Facility.

The amount eligible to be drawn under the facilities is based on a discount to the value of each included investment based upon the type of collateral or an applicable valuation percentage.

The sum of included financings after taking into account the applicable valuation percentages and any changes in the valuation of the financings in accordance with the Loan Agreements determines the borrowing capacity, subject to the overall facility limits described above.

The amount eligible to be drawn under the Secured Credit Facilities is based on a discount to the value of each included investment based upon the type of collateral or an applicable valuation percentage.

The sum of included financings after taking into account the applicable valuation percentages and any changes in the valuation of the financings in accordance with the Secured Credit Facilities determines the borrowing capacity, subject to the overall facility limits described above.

Under the Rep-Based Facility, the applicable valuation percentage is 85 % in the case of a land-lease obligor or a U.S.

Federal Government obligor, 80 % in the case of an institutional obligor or state and local obligor, and with respect to other obligors or in certain circumstances, such other percentage as the administrative agent may prescribe.

Under the Approval-Based Facility, the applicable valuation percentage is 85 % in the case of certain approved financings and 67 % or such other percentage as the administrative agent may prescribe, including in the case of one asset, an agreed-upon amortization schedule.

The stated minimum maturities to be paid under the amortization schedule to meet the required target loan balances as of December 31, 2020 are as follows:

Future Minimum Maturities

For the year ended December 31, (in millions)

We have approximately $ 5 million of remaining unamortized financing costs associated with the credit facilities that have been capitalized and included in other assets on our balance sheet and are being amortized on a straight-line basis over the term of the credit facilities.

Administrative fees are payable annually to the administrative agent under each of the Loan Agreements and letter agreements with the administrative agent.

Under the Rep-Based Facility, we pay to the administrative agent on each monthly payment date, for the benefit of the lenders, certain availability fees for the Rep-Based Facility equal to 0.60 %, divided by 365 or 366, as applicable, multiplied by the excess of the available total commitments under the Rep-Based Loan Agreement over the actual amount borrowed under the Rep-Based Facility.

The credit facilities contain terms, conditions, covenants, and representations and warranties that are customary and typical for a transaction of this nature, including various affirmative and negative covenants, and limitations on the incurrence of liens and indebtedness, investments, fundamental organizational changes, dispositions, changes in the nature of business, transactions with affiliates, use of proceeds and stock repurchases.

Under the Approval-Based Facility, the applicable valuation percentage is 85 % in the case of certain approved financings and 67 % or such other percentage as the administrative agent may prescribe.

The Approval-Based Facility previously had an outstanding draw with a fixed amortization schedule that was prepaid in 2021.

We have approximately $ 2 million of remaining unamortized financing costs associated with the Secured Credit Facilities that have been capitalized and included in other assets on our balance sheet and are being amortized on a straight-line basis over the term of the Secured Credit Facilities.

Administrative fees are payable annually to the administrative agent under each of the Secured Credit Facilities and letter agreements with the administrative agent.

Under the Rep-Based Facility, we pay to the administrative agent on each monthly payment date, for the benefit of the lenders, certain availability fees for the Rep-Based Facility equal to 0.60 %, divided by 365 or 366, as applicable, multiplied by the excess of the available total commitments under the Rep-Based Facility over the actual amount borrowed under the Rep-Based Facility.

The Secured Credit Facilities contain terms, conditions, covenants, and representations and warranties that are customary and typical for a transaction of this nature, including various affirmative and negative covenants, and limitations on the incurrence of liens and indebtedness, investments, fundamental organizational changes, dispositions, changes in the nature of business, transactions with affiliates, use of proceeds and stock repurchases.

We were in compliance with our covenants as of December 31, 2021.

The credit facilities also include customary events of default, including the existence of a default in more than 50 % of underlying financings.

The occurrence of an event of default may result in termination of the credit facilities, acceleration of amounts due under the credit facilities, and accrual of default interest at a rate of LIBOR plus 2.00 % in the case of both the Rep-Based Facility and the Approval-Based Facility.

Unsecured credit facility

In February 2021, we entered into an unsecured credit facility with a maximum outstanding principal amount of $ 50 million which matures in February 2022.

The unsecured credit facility has a commitment fee based on our current credit rating and bears interest at a rate of the LIBOR or prime rate plus applicable margins based on our current credit rating, which may be adjusted downward up to 0.05 % to the extent our Portfolio achieves certain targeted levels of carbon emissions reductions.

As of the inception of the unsecured credit facility, the applicable margins are 2.25 % for LIBOR-based loans and 1.25 % for prime rate-based loans.

The unsecured credit facility contains terms, conditions, covenants, and representations and warranties that are customary and typical for a transaction of this nature, including various affirmative and negative covenants, and limitations on the incurrence of liens and indebtedness, investments, fundamental organizational changes, dispositions, changes in the nature of business, transactions with affiliates, use of proceeds, stock repurchases, and dividends we can declare.

The unsecured credit facility also includes customer events of default, which may result in the Company having to post cash collateral equal to 102 % of any amounts of outstanding letters of credit drawn on the unsecured credit facility.

At our option, upon maturity of the facility, we have the ability to convert amounts borrowed into term loans for a fee equal to 2.25 % of the term loans.

The Secured Credit Facilities also include customary events of default, including the existence of a default in more than 50 % of the value of underlying financings.

The occurrence of an event of default may result in termination of the credit facilities, acceleration of amounts due under the Secured Credit Facilities, and accrual of default interest at a rate of LIBOR plus 2.00 % in the case of both the Rep-Based Facility and the Approval-Based Facility.

Unsecured revolving credit facilities

In April 2021, we entered into a $ 400 million 364 -day unsecured revolving credit facility (“Existing Revolving Credit Facility”) pursuant to a revolving credit agreement with a syndicate of lenders, replacing our then-existing $ 50 million unsecured revolving credit facility entered into in February 2021.

As of December 31, 2021, the outstanding balance on the Existing Revolving Credit Facility was $ 50 million, and it beared interest at a rate of 2.35 %.

As of December 31, 2021, we had less than $ 1 million of remaining unamortized financing costs associated with the Existing Revolving Credit Facility that have been capitalized and included in other assets on our balance sheet and are being amortized on a straight-line basis over the term of the Existing Revolving Credit Facility.

In February 2022, the Existing Revolving Credit Facility was replaced with a $ 600 million unsecured revolving credit facility (“New Revolving Credit Facility”), which matures in February 2025.

The Existing Revolving Credit Facility bears interest at a rate of the LIBOR or prime rate plus applicable margins based on our current credit rating, which may be adjusted downward up to 0.05 % to the extent our Portfolio achieves certain targeted levels of carbon emissions avoidance as measured by our CarbonCount metric.

As of the inception of the unsecured revolving credit facility, the applicable margins are 2.25 % for LIBOR-based loans and 1.25 % for prime rate-based loans.

The New Revolving Credit facility bears interest at a rate of SOFR plus applicable margins, which may be adjusted downward up to 0.10 % to the extent our Portfolio achieves certain targeted levels of carbon emissions avoidance.

The initial applicable margins are 1.875 % for Term SOFR Rate-based loans and 0.875 % for prime rate-based loans.

Both unsecured revolving credit facilities have commitment fee based on our current credit rating.

Both unsecured revolving credit facilities contain terms, conditions, covenants, and representations and warranties that are customary and typical for transactions of this nature, including various affirmative and negative covenants, and limitations on the incurrence of liens and indebtedness, investments, fundamental organizational changes, dispositions, changes in the nature of business, transactions with affiliates, use of proceeds, stock repurchases, and dividends we can declare.

Both unsecured revolving credit facilities also include customary events of default and remedies.

At our option, upon maturity of the New Revolving Credit Facility, we have the ability to convert amounts borrowed into term loans for a fee equal to 1.875 % of the term loan amounts.

CarbonCount Green Commercial Paper Note Program

In September 2021, we entered into an agreement allowing us to issue commercial paper notes, in amounts up to $ 100 million outstanding at any time.

We obtained an irrevocable direct-pay letter of credit in an amount not to exceed $ 100 million from Bank of America, N.A, to support these obligations which expires in December 2022.

Commercial paper notes will not be redeemable, will not be subject to voluntary prepayment and are not to exceed 397 days.

The proceeds of our commercial paper notes are used to acquire or refinance, in whole or in part, eligible green projects, including assets that are neutral to negative on incremental carbon emissions.

In December 2021, we issued $ 50 million in green commercial paper notes which mature in March 2022, bearing a total borrowing rate of 1.26 %.

Green commercial paper notes will be issued at a discount based on market pricing, subject to broker fees of 0.10 %.

For issuance of the letter of credit, we will pay 0.95 % on any drawn letter of credit amounts to Bank of America, N.A., and 0.40 % on any unused letter of credit capacity.

Fees paid on the drawn letters of credit may be reduced by up to 0.05 % to the extent our Portfolio achieves certain targeted levels of carbon emissions avoidance as measured by our CarbonCount metric.

As of December 31, 2021, we have approximately $ 1 million of remaining unamortized financing costs associated with the commercial paper program and associated letter of credit that have been capitalized and included in other assets on our balance sheet and are being amortized on a straight-line basis over the term of the commercial paper program.

The associated letter of credit contains terms, conditions, covenants, and representations and warranties that are customary and typical for a transaction of this nature, including various affirmative and negative covenants, and limitations on the incurrence of liens and indebtedness, investments, fundamental organizational changes, dispositions, changes in the nature of business, transactions with affiliates, use of proceeds, stock repurchases and dividends we declare.

The letter of credit also includes customary events of default and remedies.

Long-term Debt

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Balance as of

December 31, Interest

Maturity Date Anticipated

December 31, Interest Rate Maturity Date Anticipated

Maturity Carrying Value of

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HASI Sustainable Yield Bond 2015-1A $ 77 $ 81 4.28 % October 2034 $ — $ 133 $ 134 Receivables, real estate and real estate intangibles

HASI Sustainable Yield Bond 2015-1B Note 13 13 5.41 % October 2034 — 134 126 Class B Bond of HASI Sustainable Yield Bond 2015-1

Agreement (2)

— 61 4.12 % January 2023 — — 120 Equity interests in Strong Upwind Holdings I, II, III, and IV LLC, and Northern Frontier Wind, LLC

HASI SYB Loan Agreement 2015-2 (3)

— 28 N/A December 2023 — — 73 Equity interest in Buckeye Wind Energy Class B Holdings LLC

HASI Sustainable Yield Bond 2015-1B Note (1)

— 13 5.41 % October 2034 — — 134 Class B Bond of HASI Sustainable Yield Bond 2015-1

HASI SYB Trust 2016-2 62 67 4.35 % April 2037 — 65 71 Receivables

HASI ECON 101 Trust 126 129 3.57 % May 2041 — 133 135 Receivables and investments

HASI ECON 101 Trust (2)

— 126 3.57 % May 2041 — — 133 Receivables and investments

HASI SYB Trust 2017-1 146 150 3.86 % March 2042 — 203 205 Receivables, real estate and real estate intangibles

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Non-recourse debt (4)

(1) Represents the interest rate as of December 31, 2020.

(2) This loan was prepaid in January 2020.

(3) This loan was prepaid in September 2020.

(4) Other non-recourse debt consists of various debt agreements used to finance certain of our receivables for their term.

(1) The Company repurchased this note in 2021.

(2) In 2021, contractual terms were modified resulting in the deconsolidation of both this debt and the related pledged assets.

We recognized a loss of approximately $ 3 million, which is included in gain on sale of receivables and investments in our income statement.

(3) Other non-recourse debt consists of various debt agreements used to finance certain of our receivables.

Scheduled debt service payment requirements are equal to or less than the cash flows received from the underlying receivables.

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We typically act as servicer for the debt transactions.

We are in compliance with all covenants as of December 31, 2020 and 2019.

We were in compliance with all covenants as of December 31, 2021 and 2020.

We have guaranteed the accuracy of certain of the representations and warranties and other obligations of certain of our subsidiaries under certain of the debt agreements and provided an indemnity against certain losses from “bad acts” of such subsidiaries including fraud, failure to disclose a material fact, theft, misappropriation, voluntary bankruptcy or unauthorized transfers.

In the case of the debt secured by certain of our renewable energy equity interests, we have also guaranteed the compliance of our subsidiaries with certain tax matters and certain obligations if our joint venture partners exercise their right to withdraw from our partnerships.

The stated minimum maturities of non-recourse debt as of December 31, 2021, were as follows:

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The stated minimum maturities of non-recourse debt above include only the mandatory minimum principal payments.

To the extent there are additional cash flows received from our investments in renewable energy projects serving as collateral for certain of our non-recourse debt facilities, these additional cash flows are required to be used to make additional principal payments against the respective debt.

To the extent there are additional cash flows received from our investments in climate solutions projects serving as collateral for certain of our non-recourse debt facilities, these additional cash flows may be required to be used to make additional principal payments against the respective debt.

Any additional principal payments made due to these provisions may impact the anticipated balance at maturity of these financings.

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Senior Unsecured Notes

We have outstanding senior unsecured notes issued jointly by certain of our TRS and are guaranteed by the Company and certain other subsidiaries (the "Senior Unsecured Notes").

The Senior Unsecured Notes are subject to covenants which limit our ability to incur additional indebtedness and require us to maintain unencumbered assets of not less than 120 % of our unsecured debt.

We have outstanding senior unsecured notes issued jointly by certain of our TRS and are guaranteed by the Company and certain other subsidiaries (the “Senior Unsecured Notes”), including $ 1 billion of senior notes due 2026 (“2026 Notes”) issued in June 2021.

Proceeds from the 2026 Notes were used to redeem the 2024 Notes as described below.

The Senior Unsecured Notes are subject to covenants that limit our ability to incur additional indebtedness and require us to maintain unencumbered assets of not less than 120 % of our unsecured debt.

These covenants will terminate on any date at which the Senior Unsecured Notes have been rated investment grade by two of the three major credit rating agencies and no event of default has occurred.

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The Senior Unsecured Notes impose certain requirements in the event that we merge with or sell substantially all of our assets to another entity.

The proceeds of our Senior Unsecured Notes are used to acquire or refinance, in whole or in part, eligible green projects, including assets which are neutral to negative on incremental carbon emissions.

The proceeds of our Senior Unsecured Notes are used to acquire or refinance, in whole or in part, eligible green projects, including assets that are neutral to negative on incremental carbon emissions.

The following are summarized terms of the Senior Unsecured Notes:

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October 15th April 15, 2022 (2)

2026 Notes 1,000 June 15, 2026 3.38 % June 15 and December 15 March 15, 2026 (2)

2030 Notes 375 (3)

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We subsequently issued $ 150 million of the $ 500 million aggregate principal amount of the 2024 Notes for total proceeds of $ 157 million ($ 155 million net of issuance costs) at an effective interest rate of 4.13 %.

The 2024 Notes were redeemed in June 2021 using a portion of the proceeds from the 2026 Notes.

We recognized a loss of $ 15 million upon redemption for the redemption premium and the acceleration of debt issuance cost and premium amortization which is recorded in interest expense in our income statement.

(2) Prior to this date, we may redeem, at our option, some or all of the 2025 Notes or 2026 Notes for the outstanding principal amount plus the applicable “make-whole” premium as defined in the indenture governing the 2025 Notes or 2026 Notes plus accrued and unpaid interest through the redemption date.

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Accrued interest 12 22

Unamortized premium 2 7

Unamortized premium (discount) ( 3 ) 2

Unamortized financing costs ( 21 ) ( 16 )

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We have outstanding $ 152 million aggregate principal amount of convertible senior notes (“Convertible Senior Notes”), including $ 144 million of principal amount convertible senior notes due August 15, 2023 issued in August 2020 at a stated interest rate of 0 %.

Holders may convert any of their convertible notes into shares of our common stock at the applicable conversion ratio at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, unless the convertible notes have been previously redeemed or repurchased by us.

Holders may convert any of their convertible notes into shares of our common stock at the applicable conversion ratio at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, unless the Convertible Senior Notes have been previously redeemed or repurchased by us.

The following are summarized terms of the Convertible Senior Notes as of December 31, 2021:

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(in millions) (in millions)

2022 Convertible Notes $ 150 September 1,

2022 Convertible Senior Notes $ 8 (2)

2022 4.125 % March 1 and September 1 36.8366 $ 27.15 0.3 $ 0.33

2023 Convertible Notes 144 August 15,

2023 Convertible Senior Notes 144 August 15,

2023 0.000 % N/A 20.6931 $ 48.33 3.0 $ 0.34

(1) The conversion ratio is subject to adjustment for dividends declared above these amounts per share per quarter and certain other events that may be dilutive to the holder.

For both the 2022 Convertible Notes and the 2023 Convertible Notes, following the occurrence of a make-whole fundamental change, we will, in certain circumstances, increase the conversion rate for a holder that converts its convertible notes in connection with such make-whole fundamental change.

(2) During the year ended December 31, 2021, $ 142 million in principal amount of 2022 Convertible Senior Notes were converted into 5.2 million shares of common stock.

For both the 2022 Convertible Senior Notes and the 2023 Convertible Senior Notes, following the occurrence of a make-whole fundamental change, we will, in certain circumstances, increase the conversion rate for a holder that converts its convertible notes in connection with such make-whole fundamental change.

There are no cash settlement provisions in the convertible notes and the conversion option can only be settled through physical delivery of our common stock.

Additionally, upon the occurrence of certain fundamental changes involving us, holders of the convertible notes may require us to redeem all or a portion of their convertible notes for cash at a price of 100 % of the principal amount outstanding, plus accrued and unpaid interest.

We have a redemption option to call the 2022 Convertible Notes prior to maturity (i) on or after March 1, 2022 and (ii) at any time if such a redemption is deemed reasonably necessary to preserve our qualification as a REIT.

We have a redemption option to call the 2022 Convertible Senior Notes prior to maturity (i) on or after March 1, 2022 and (ii) at any time if such a redemption is deemed reasonably necessary to preserve our qualification as a REIT, with the holder of the notes having the option of converting prior to our redemption becoming effective.

The redemption price will be equal to the principal of the notes being redeemed, plus accrued and unpaid interest.

In the event of redemption after March 1, 2022, there will be an additional make-whole premium paid to the holder of the redeemed notes unless the redemption is deemed reasonably necessary to preserve our qualification as a REIT.

We may redeem the 2023 Convertible notes at any time only if such a redemption is deemed reasonably necessary to preserve our qualification as a REIT.

The following table presents a summary of the components of the convertible notes:

We may redeem the 2023 Convertible Senior Notes at any time only if such a redemption is deemed reasonably necessary to preserve our qualification as a REIT.

The following table presents a summary of the components of our Senior Convertible Notes:

As of and for the year ended December 31,

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Unamortized financing costs ( 2 ) ( 5 )

Carrying value of convertible notes $ 291 $ 149

Carrying value of Convertible Senior Notes $ 150 $ 291

Interest expense $ 6 $ 8

Commitments and Contingencies

We lease office space at our headquarters in Annapolis, Maryland under an operating lease entered into in 2011 and amended in 2013 and 2017 to add additional space.

The lease provides for operating expense reimbursements and annual escalations that are amortized over the respective lease terms on a straight-line basis.

We lease office space at our headquarters in Annapolis, Maryland under an operating lease entered into in 2011 and amended in 2013 and 2017.

Lease payments under this lease commenced in 2012 and incremental payments related to the amendments commenced in 2014 and 2017.

The lease expires in 2027.

In 2021, we signed a lease for new office space which expires in 2033, and expect to begin subleasing the prior space in 2023.

The leases provide for operating expense reimbursements and annual escalations that are amortized over the respective lease terms on a straight-line basis.

Rent expense was less than $ 1 million for each of the years ended December 31, 2021, 2020, and 2019, respectively.

Future gross minimum lease payments are less than $ 1 million per year during the remaining term of the lease.

Future gross minimum lease payments are approximately $ 1 million per year during the remaining term of the leases.

The nature of our operations exposes us to the risk of claims and litigation in the normal course of our business.

We are not currently subject to any legal proceedings that are probable of having a material adverse effect on our financial position, results of operations or cash flows.

Guarantees and other commitments

We made a guarantee related to the financing of one of our joint venture entities that owns debt securities of energy efficiency projects.

The entity entered into a financing arrangement where we had guaranteed the obligations of the entity related to this financing, which includes collateral posting requirements as well as repayment of the financing at maturity in December 2021, which was paid as scheduled.

We have no performance obligations remaining under this guarantee as of December 31, 2021.

In connection with some of our transactions, we have provided certain limited representations, warranties, covenants and/or provided an indemnity against certain losses resulting from our own actions, including related to certain investment tax credits.

As of December 31, 2021, there have been no such actions resulting in claims against the Company.

We have made a guarantee related to the financing of one of our joint venture entities that owns debt securities of energy efficiency projects.

The entity entered into a financing arrangement where we have guaranteed the obligations of the entity related to this financing, which includes collateral posting requirements as well as repayment of the financing at maturity in February 2021.

As of December 31, 2020, our maximum obligation under this guarantee is approximately $ 60 million.

We have executed a separate agreement with the other joint venture partner pursuant to which it is liable for 15 % of this obligation repayable to us.

The COVID-19 global pandemic has brought forth uncertainty and disruption to the global economy.

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To the extent COVID-19 continues to cause dislocations in the global economy, our financial condition, results of operations, and cash flows may be adversely impacted.

We recorded an income tax benefit of approximately $ 3 million for the year ended December 31, 2020, an $ 8 million tax expense for the year ended December 31, 2019, and a $ 2 million tax expense for the year for the year ended 2018 related to the activities of our TRS.

Of our $ 3 million benefit for the year ended December 31, 2020, approximately $ 1 million is related to the remeasurement of deferred tax liabilities as the result of the changes in our estimated state tax rates.

We recorded an income tax benefit (expense) of approximately $( 17 ) million for the year ended December 31, 2021, a $ 3 million tax benefit (expense) for the year ended December 31, 2020, and an $( 8 ) million tax benefit (expense) for the year for the year ended 2019 related to the activities of our TRS.

The federal income tax expense and benefits recorded were determined using a rate of 21%.

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Equity Offerings

We have an effective universal shelf registration statement registering the potential offer and sale, from time to time and in one or more offerings, of any combination of our common stock, preferred stock, depositary shares, debt securities, warrants

and rights (collectively referred to as the “securities”).

We may offer the securities directly, through agents, or to or through underwriters by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of sale or at negotiated prices and may include “at the market” (“ATM”) offerings or sales, to or through a market maker or into an existing trading market on an exchange or otherwise.

We may offer the securities directly, through agents, or to or through underwriters by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of sale or at negotiated prices and may include “at the market” (“ATM”) offerings, to or through a market maker or into an existing trading market on an exchange or otherwise.

We completed the following public offerings (including ATM issuances) of our common stock in 2020 and 2021:

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Offerings Shares

Per Share Net

Per Share (1)

(amounts in millions, except per share amounts)

Public Offering 0.465 $ 21.60 (3)

Q1 2020 ATM 4.500 $ 25.84 $ 115

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Q1 2021 ATM 1.639 63.55 103

Q2 2021 None — — —

Q3 2021 ATM 0.857 57.56 49

Q4 2021 ATM 0.830 59.82 49

(1) Net proceeds from the offerings are shown after deducting underwriting discounts, commissions and other offering costs.

(2) Includes shares issued in connection with the exercise of the underwriters’ option to purchase additional shares.

(3) Represents the price per share at which the underwriters in our public offerings purchased our shares.

(1) Represents the average price per share at which investors in our ATM offerings purchased our shares.

(2) Net proceeds from the offerings are shown after deducting underwriting discounts, commissions and other offering costs.

Equity-based Compensation Awards under our 2013 Plan

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During the year ended December 31, 2021, our board of directors awarded employees and directors 434,159 shares of restricted stock, restricted stock units, and LTIP Units that vest from 2022 to 2025.

As of December 31, 2020, as it relates to previously issued restricted stock awards with performance conditions, we have concluded that it is probable that the performance conditions will be met.

Refer to Note 4 for background on the LTIP Units.

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Granted 23,342 27.18 0.6

Incremental performance shares granted 216,932 18.99 4.1

Vested ( 439,986 ) 19.04 ( 8.4 )

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Granted 86,274 65.28 5.6

Incremental performance shares granted 51,500 21.09 1.1

Vested ( 103,000 ) 21.09 ( 2.1 )

Forfeited — — —

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LTIP Units with market-based vesting conditions can vest between 0 % and 200 % subject to both the absolute performance of the Company’s common stock as well as relative performance compared to a group of peers.

The incremental performance shares granted relate to the vesting of an award at the 200 % level.

Earnings per Share of Common Stock

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Certain share-based awards are included in the diluted share count to the extent they are dilutive as discussed in Note 2.

To the extent our convertible notes are dilutive under the if-converted method, we add back the interest expense to the numerator and include the weighted average shares of potential common stock over the period issuable upon conversion of the note in the denominator in calculating dilutive EPS as described in Note 2.

To the extent our Senior Convertible Notes are dilutive under the if-converted method, we add back the interest expense to the numerator and include the weighted average shares of potential common stock over the period issuable upon conversion of the note in the denominator in calculating dilutive EPS as described in Note 2.

The computation of basic and diluted earnings per common share of common stock is as follows:

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We describe our accounting for the non-controlling equity investments in Note 2.

The following is a summary of the consolidated financial position and results of operations of the significant entities accounted for using the equity method.

SunStrong Capital Holdings, LLC Jupiter Equity Holdings, LLC

The following is a summary of the consolidated balance sheets and income statements of the entities in which we have a significant equity method investment.

These amounts are presented on the underlying investees’ accounting basis.

In certain instances, adjustment to these equity values may be necessary in order to reflect our basis in these investments.

As described in Note 2, any difference between the amount of our investment and the amount of our share of underlying equity is generally amortized over the life of the assets and liabilities to which the differences relate.

Vivint Solar Asset 3 Borrower, LLC Rosie Targetco, LLC

Other Investments (1)

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We contributed less than $ 1 million under the plan for the years ended December 31, 2021, 2020, and 2019, respectively.

Selected Quarterly Financial Data (Unaudited)

The following table summarizes our quarterly financial data which, in the opinion of management, reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our results of operations (Amounts for the individual quarters when aggregated may not agree to the full year due to rounding):

For the Three-Months Ended

(in millions, except for per share data)

March 31, 2020 June 30, 2020 Sept.

30, 2020 Dec.

Total revenue $ 40,834 $ 48,595 $ 48,589 $ 48,889

Total expenses 31,089 37,354 41,474 44,973

Income before equity method investments 9,745 11,241 7,115 3,916

Income (loss) from equity method investments 16,588 ( 589 ) 16,507 15,457

Income (loss) before income taxes 26,333 10,652 23,622 19,373

Income tax (expense) benefit ( 1,923 ) 1,407 ( 2,345 ) 5,640

Net income (loss) 24,410 12,059 21,277 25,013

Net income (loss) attributable to controlling stockholders $ 24,308 $ 12,008 $ 21,175 $ 24,925

Basic earnings (loss) per common share $ 0.36 $ 0.16 $ 0.28 $ 0.33

Diluted earnings (loss) per common share 0.35 0.16 0.28 0.32

For the Three-Months Ended

(in millions, except for per share data)

March 31, 2019 June 30, 2019 Sept.

30, 2019 Dec.

Total revenue $ 33,143 $ 31,268 $ 38,842 $ 38,328

Total expenses 26,211 25,258 35,518 28,751

Income before equity method investments 6,932 6,010 3,324 9,577

Income (loss) from equity method investments 4,506 7,624 5,984 46,060

Income (loss) before income taxes 11,438 13,634 9,308 55,637

Income tax (expense) benefit 2,270 ( 839 ) ( 132 ) ( 9,396 )

Net income (loss) 13,708 12,795 9,176 46,241

Net income (loss) attributable to controlling stockholders $ 13,646 $ 12,740 $ 9,102 $ 46,076

Basic earnings (loss) per common share $ 0.22 $ 0.20 $ 0.14 $ 0.70

Diluted earnings (loss) per common share 0.21 0.19 0.13 0.66

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

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Charged to provision (1)

496 27,730 8,027

Loan charge-offs — — —

Balance at end of period $ 36,253 $ 35,757 $ 8,027

(1) Amounts in 2020 include $ 17 million related to the adoption of ASC 326, which we adopted as of January 1, 2020 .

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data