What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-09 compared with 2022-05-06 · 236 added, 146 removed, 818 unchanged (32% of the section changed)

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(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

March 31, 2022 (unaudited) December 31, 2021

June 30, 2022 (unaudited) December 31, 2021

Cash and cash equivalents $ 279,459 $ 226,204

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(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2022 2021 2022 2021

Interest income $ 33,358 $ 25,016 $ 63,601 $ 50,117

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Net income (loss) attributable to non-controlling interest holders

( 89 ) 434 270 626

Net income (loss) attributable to controlling stockholders $ ( 18,449 ) $ 15,974 $ 26,896 $ 66,998

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(DOLLARS IN THOUSANDS)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Net income (loss) $ ( 18,538 ) $ 16,408 $ 27,166 $ 67,624

Unrealized gain (loss) on available-for-sale securities, net of tax benefit (provision) of $ 1.0 million for the three months ended March 31, 2022 and $ 0.8 million for the three months ended March 31, 2021

Unrealized gain (loss) on available-for-sale securities, net of tax benefit (provision) of $ 0.6 million and $ 1.5 million for the three and six months ended June 30, 2022 and $( 0.6 ) million and $ 0.2 million for the three and six months ended June 30, 2021

( 21,448 ) 11,943 ( 44,158 ) ( 7,368 )

Unrealized gain (loss) on interest rate swaps, net of tax benefit (provision) of $( 0.1 ) million for the three months ended March 31, 2022 and $( 0.4 ) million for the three months ended March 31, 2021

Unrealized gain (loss) on interest rate swaps, net of tax benefit (provision) of $( 3.5 ) million and $( 3.6 ) million for the three and six months ended June 30, 2022 and $( 1.5 ) million and $( 1.9 ) million for the three and six months ended June 30, 2021

11,512 4,814 11,801 6,054

Comprehensive income (loss) ( 28,474 ) 33,165 ( 5,191 ) 66,310

Comprehensive income (loss) attributable to non-controlling interest holders

( 234 ) 496 ( 52 ) 611

Comprehensive income (loss) attributable to controlling stockholders $ ( 28,240 ) $ 32,669 $ ( 5,139 ) $ 65,699

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Shares Amount

Balance at December 31, 2021 85,327 $ 853 $ 1,727,667 $ ( 193,706 ) $ 9,904 $ 21,797 $ 1,566,515

Balance at March 31, 2022 86,720 $ 867 $ 1,783,938 $ ( 181,282 ) $ ( 12,341 ) $ 22,812 $ 1,613,994

Net income (loss) — — — ( 18,449 ) — ( 89 ) ( 18,538 )

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Equity-based compensation — — 976 — — 11,416 12,392

Conversion of convertible notes 283 3 7,671 — — — 7,674

Issuance (repurchase) of vested equity-based compensation shares 39 — ( 951 ) — — — ( 951 )

Dividends and distributions — — — ( 32,859 ) — ( 521 ) ( 33,380 )

Balance at June 30, 2022 87,490 $ 875 $ 1,811,889 $ ( 232,590 ) $ ( 22,132 ) $ 33,473 $ 1,591,515

Balance at March 31, 2021 78,319 $ 783 $ 1,489,168 $ ( 181,992 ) $ ( 5,360 ) $ 8,721 $ 1,311,320

Net income (loss) — — — 15,974 — 434 16,408

Unrealized gain (loss) on available-for-sale securities — — — — 11,905 38 11,943

Unrealized gain (loss) on interest rate swaps — — — — 4,791 23 4,814

Issued shares of common stock — — ( 37 ) — — — ( 37 )

Equity-based compensation — — 1,602 — — 7,970 9,572

Issuance (repurchase) of vested equity-based compensation shares 100 1 ( 3,630 ) — — — ( 3,629 )

Dividends and distributions — — — ( 27,512 ) — ( 330 ) ( 27,842 )

Balance at June 30, 2021 78,419 $ 784 $ 1,487,103 $ ( 193,530 ) $ 11,336 $ 16,856 $ 1,322,549

See accompanying notes.

Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Non-controlling interests Total

Shares Amount

Balance at December 31, 2021 85,327 $ 853 $ 1,727,667 $ ( 193,706 ) $ 9,904 $ 21,797 $ 1,566,515

Net income (loss)

— — — 26,896 — 270 27,166

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

— — — — ( 43,720 ) ( 438 ) ( 44,158 )

Unrealized gain (loss) on interest rate swaps — — — — 11,684 117 11,801

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Issuance (repurchase) of vested equity-based compensation shares 99 1 ( 3,163 ) — — — ( 3,162 )

Conversion of Convertible Notes 283 3 7,671 — — — 7,674

Dividends and distributions — — — ( 65,780 ) — ( 2,268 ) ( 68,048 )

Balance at March 31, 2021 78,319 $ 783 $ 1,489,168 $ ( 181,992 ) $ ( 5,359 ) $ 8,721 $ 1,311,321

Balance at June 30, 2022 87,490 $ 875 $ 1,811,889 $ ( 232,590 ) $ ( 22,132 ) $ 33,473 $ 1,591,515

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

Net income (loss)

— — — 66,998 — 626 67,624

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

— — — — ( 7,323 ) ( 45 ) ( 7,368 )

Unrealized gain (loss) on interest rate swaps — — — — 6,025 29 6,054

Issued shares of common stock 1,639 16 102,873 — — — 102,889

Equity-based compensation — — 4,241 — — 10,009 14,250

Issuance (repurchase) of vested equity-based compensation shares 323 3 ( 14,020 ) — — — ( 14,017 )

Dividends and distributions — — — ( 56,416 ) — ( 616 ) ( 57,032 )

Balance at June 30, 2021 78,419 $ 784 $ 1,487,103 $ ( 193,530 ) $ 11,336 $ 16,856 $ 1,322,549

See accompanying notes.

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(DOLLARS IN THOUSANDS)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

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(Gain) loss on sale of receivables and investments ( 218 ) ( 720 )

Loss on debt extinguishment — 14,584

Changes in receivables held-for-sale ( 51,649 ) ( 9,190 )

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Cash flows from financing activities

Proceeds from credit facilities 100,000 25,000

Principal payments on credit facilities — ( 3,041 )

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( 13,529 ) ( 25,554 )

Proceeds from issuance of senior unsecured notes — 1,000,000

Proceeds from issuance of convertible notes 200,000 —

Redemption of senior unsecured notes — ( 514,101 )

Net proceeds of common stock issuances 77,974 102,727

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Residual assets retained from securitization transactions $ 14,952 $ 34,684

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

Issuance of common stock from conversion of Convertible Notes 7,674 —

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

June 30, 2022

Hannon Armstrong Sustainable Infrastructure Capital, Inc.

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

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

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

Our results of operations for the three-month periods ended March 31, 2022 and 2021, are not necessarily indicative of the results to be expected for the full year or any other future period.

Our results of operations for the three- and six- month periods ended June 30, 2022 and 2021, are not necessarily indicative of the results to be expected for the full year or any other future period.

Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted.

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

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.

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Certain of our equity method investments were determined to be interests in VIEs in which we are not the primary beneficiary, as we do not direct the significant activities of these entities, and thus we account for those investments as Equity Method Investments as discussed below.

Our maximum exposure to loss through these investments is limited to their recorded values.

Our maximum exposure to loss through these investments is typically limited to their recorded values.

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

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These investments are typically owned in holding companies (using limited liability companies (“LLCs”) taxed as partnerships) where we partner with either the operator of the project or other institutional investors.

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

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

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.

Once the preferred return, if applicable, is achieved, the partnership “flips” and common equity investors, often the operator of the project, 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.

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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 receivables from the same investee.

Our exposure to loss in these investments is limited to the amount of our equity investment, as well as receivables from or guarantees made to 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.

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An OTTI occurs when the estimated fair value of an investment is below the carrying value and the difference is determined to not be recoverable.

First, we consider both qualitative and quantitative indicators whether there may be loss in investment value below carrying value.

After considering the weight of available evidence, if it is determined that there is a indication of loss in investment value, we will perform a fair value analysis.

If the resulting fair value is less than the carrying value, we will determine if this loss in value is OTTI.

This evaluation requires significant judgment regarding, but not limited to, the severity and duration of the impairment;

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

Unless otherwise noted, we generally have the ability and intent to hold our receivables for the foreseeable future and thus they are

classified as held for investment.

Unless otherwise noted, we generally have the ability and intent to hold our receivables for the foreseeable future and thus they are classified as held for investment.

Our ability and intent to hold certain receivables may change from time to time depending on a number of factors including economic, liquidity and capital market conditions.

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Interest collected is classified as an operating activity in our consolidated statements of cash flows.

Certain of our receivables may include the ability to defer required interest payments in exchange for increasing the receivable balance at the borrower’s option.

Certain of our receivables are subordinate to preferred investors in a project who are allocated the majority of the project’s cash in the early years of the investment, so accordingly these investments may include the ability to defer scheduled interest payments in exchange for increasing the receivable balance.

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.

The change in PIK in any period is included in the Change in accrued interest line in the operating section of our statement of cash flows.

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 in this Form 10-Q on at least a quarterly basis and more frequently when economic or other conditions warrant such an evaluation.

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For periods following the reasonable and supportable forecast period, we revert to historical information when developing assumptions used in our estimates.

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 developing our forecasts, we consider a number of qualitative and quantitative factors in our assessment, which may include 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 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.

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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, 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.

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 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 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.

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

Our initial investment is classified as investing activities and income collected for rental income is classified as operating activities in our consolidated statements of cash flows.

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however, as the servicer, we do not have the power to make significant decisions impacting the performance of the trusts.

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 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.

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.

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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.

Changes in fair value are recorded in AOCI.

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

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Convertible Notes

We have issued convertible senior notes that are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options , and ASC 815, Derivatives and Hedging (“ASC 815”) .

Under ASC 815, issuers of certain convertible debt instruments are generally required to separately account for the conversion option of the convertible debt instrument as either a derivative or equity, unless it meets the scope exemption for contracts indexed to, and settled in, an issuer’s own equity.

Since this conversion option is both indexed to our equity and can only be settled in our common stock, we have met the scope exemption, and therefore, we are not separately accounting for the embedded conversion option.

We have issued convertible and exchangeable senior notes (together, “Convertible Notes”) that are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options , and ASC 815, Derivatives and Hedging (“ASC 815”) .

Under ASC 815, issuers of certain convertible or exchangeable debt instruments are generally required to separately account for the conversion or exchange option of the debt instrument as either a derivative or equity, unless it meets the scope exemption for contracts indexed to, and settled in, an issuer’s own equity.

Since our conversion and exchange options are both indexed to our equity and can only be settled in our common stock, we have met the scope exemption, and therefore, we are not separately accounting for the embedded conversion or exchange options.

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.

If converted or exchanged, 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.

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In 2013, we adopted the 2013 Hannon Armstrong Sustainable Infrastructure Capital, Inc.

Equity Incentive Plan (as amended, the “2013 Plan”), which provides for grants of stock options, stock appreciation rights, restricted stock units, shares of restricted common stock, phantom shares, dividend equivalent rights, long-term incentive-plan units (“LTIP units”) and other restricted limited partnership units issued by our Operating Partnership and other equity-based awards.

From time to time, we may grant equity or equity-based awards as compensation to our independent directors, employees, advisors, consultants and other personnel under our 2013 Plan.

Certain awards earned under the plan are based on achieving various performance targets, which are generally earned between 0 % and 200 % of the initial target, depending on the extent to which the performance target is met.

In addition to performance targets, certain LTIP units issued by our Operating Partnership also require a certain level of appreciation of partnership interests to occur before parity is reached and LTIP units can be converted to limited partnership units.

We record compensation expense for grants made under the 2013 Plan in accordance with ASC 718, Compensation-Stock Compensation .

Equity Incentive Plan, which provides for grants of stock options, stock appreciation rights, restricted stock units, shares of restricted common stock, phantom shares, dividend equivalent rights, long-term incentive-plan units (“LTIP units”) and other restricted limited partnership units issued by our Operating Partnership and other equity-based awards.

In 2022, our board of directors approved the 2022 Hannon Armstrong Sustainable Infrastructure Capital, Inc.

Equity Incentive Plan (“the 2022 Plan”), which was subsequently approved by shareholders at our 2022 annual meeting of stockholders, for the purpose of continuing to provide equity-based incentive compensation to members of our senior management team, our independent directors, employees, advisers, consultants and other personnel.

From time to time, we may grant equity or equity-based awards as compensation to our independent directors, employees, advisors, consultants and other personnel under the 2022 Plan.

Certain awards earned under each plan are based on achieving various performance targets, which are generally earned between 0 % and 200 % of the initial target, depending on the extent to which the performance target is met.

In addition to performance targets, income or gain must be allocated by our Operating Partnership to certain LTIP units issued by our Operating Partnership so that the capital accounts of such units are equalized with the capital accounts of other holders of OP units before parity is reached and LTIP units can be converted to limited partnership units.

We record compensation expense for grants made under the plans in accordance with ASC 718, Compensation-Stock Compensation .

We record compensation expense for unvested grants that vest solely based on service conditions on a straight-line basis over the vesting period of the entire award based upon the fair market value of the grant on the date of grant.

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The grant date fair value of these awards was developed by an independent appraiser using a Monte Carlo simulation.

In the second quarter of 2022, our Board approved a retirement policy that provides for full vesting at retirement of any time-based awards that were granted prior to the date of retirement and permits the vesting of performance-based awards that were granted prior to the date of retirement according to the original vesting schedule of the award, subject to the achievement of the applicable performance measures and without the requirement for continued employment.

Employees are eligible for the retirement policy upon meeting age and years of service criteria.

We record compensation expense for unvested grants through

the date in which an employee meets the retirement criteria.

At implementation of this policy, we recorded compensation expense of $ 9 million to reflect unvested grants of employees who meet the retirement eligibility criteria.

Earnings Per Share

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When unvested grants are dilutive, the earnings allocated to these dilutive unvested grants are not deducted from the net income attributable to controlling stockholders when calculating diluted earnings per share.

The convertible notes are included if they are dilutive using the if-converted method.

The if-converted method removes interest expense related to the convertible notes from the net income attributable to controlling stockholders and includes the weighted average shares of potential common stock over the period issuable upon conversion of the note.

The Convertible Notes are included if they are dilutive using the if-converted method, which removes interest expense related to the Convertible Notes from the net income attributable to controlling stockholders and includes the weighted average shares of potential common stock over the period issuable upon conversion or exchange of the note.

No adjustment is made for shares of potential common stock that are anti-dilutive during a period.

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Recently Issued Accounting Pronouncements

Accounting standards updates issued before May 6, 2022, and effective after March 31, 2022, are not expected to have a material effect on our consolidated financial statements and related disclosures.

Accounting standards updates issued before August 9, 2022, and effective after June 30, 2022, are not expected to have a material effect on our consolidated financial statements and related disclosures.

Fair Value Measurements

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We use our judgment and consider factors specific to the financial assets and liabilities in determining the significance of an input to the fair value measurements.

As of March 31, 2022 and December 31, 2021, only our residual assets related to our securitization trusts and investments were carried at fair value on the consolidated balance sheets on a recurring basis.

As of June 30, 2022 and December 31, 2021, only our residual assets related to our securitization trusts and investments were carried at fair value on the consolidated balance sheets on a recurring basis.

The three levels of the fair value hierarchy are described below:

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The tables below illustrate the estimated fair value of our financial instruments on our balance sheet.

Unless otherwise discussed below, fair value for our Level 2 and Level 3 measurements is measured using a discounted cash flow model, contractual terms and inputs which consist of base interest rates and spreads over base rates which are based upon market observation and recent comparable transactions.

Unless otherwise discussed below, fair values for our Level 3 measurements are measured using a discounted cash flow model, contractual terms and inputs which consist of base interest rates and spreads over base rates which are based upon market observation and recent comparable transactions.

An increase in these inputs would result in a lower fair value and a decline would result in a higher fair value.

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The receivables held-for-sale, if any, are carried at the lower of cost or fair value.

As of March 31, 2022

As of June 30, 2022

Fair Value Carrying

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Senior unsecured notes 1,563 1,784 Level 2

Convertible notes 156 144 Level 2

(1) The amortized cost of our investments as of March 31, 2022, was $ 17 million.

Convertible Notes:

2023 Convertible Senior Notes 140 144 Level 2

2025 Exchangeable Senior Notes 195 201 Level 2

Total Convertible Notes 335 345

(1) The amortized cost of our investments as of June 30, 2022, was $ 12 million.

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

The amortized cost of our securitization residual assets as of March 31, 2022 was $ 198 million.

The amortized cost of our securitization residual assets as of June 30, 2022 was $ 206 million.

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

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Senior unsecured notes 1,823 1,784 Level 2

Convertible notes 186 152 Level 2

Convertible Notes:

2022 Convertible Senior Notes 16 8 Level 2

2023 Convertible Senior Notes 170 144 Level 2

Total Convertible Notes 186 152

(1) The amortized cost of our investments as of December 31, 2021, was $ 17 million.

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The following table reconciles the beginning and ending balances for our Level 3 investments that are carried at fair value on a recurring basis:

For the three months ended March 31,

For the three months ended June 30, For the six months ended June 30,

2022 2021 2022 2021

(in millions)

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Sale of investments ( 7 ) ( 10 ) ( 7 ) ( 38 )

Realized gains on investments recorded in gain on sale of receivables and investments — 1 — —

Unrealized gains (losses) on investments recorded in OCI — 1 ( 1 ) ( 4 )

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(in millions)

March 31, 2022 $ 9 $ — $ 0.7 $ —

June 30, 2022 $ 5 $ 7 $ 0.3 $ 0.4

December 31, 2021 7 — 0.1 —

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We have the intent and ability to hold these investments until a recovery of fair value.

In determining the fair value of our investments we used a market-based risk-free rate and a range of interest rate spreads of approximately 1 % to 4 % based upon transactions involving similar assets as of March 31, 2022 and December 31, 2021.

The weighted average discount rates used to determine the fair value of our investments as of March 31, 2022 and December 31, 2021 were 4.5 % and 3.6 %, respectively.

In determining the fair value of our investments we used a risk-free rate and add a range of interest rate spreads based upon transactions involving similar assets of approximately 1 % to 3 % as of June 30, 2022, and 1 % to 4 % as of December 31, 2021.

The weighted average discount rates used to determine the fair value of our investments as of June 30, 2022 and December 31, 2021 were 5.3 % and 3.6 %, respectively.

Securitization residual assets

The following table reconciles the beginning and ending balances for our Level 3 securitization residual assets that are carried at fair value on a recurring basis:

For the three months ended March 31,

The following table reconciles the beginning and ending balances for our Level 3 securitization residual assets that are carried at fair value on a recurring basis, with changes in fair value recorded through AOCI:

For the three months ended June 30, For the six months ended June 30,

2022 2021 2022 2021

(in millions)

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Balance, end of period $ 178 $ 188 $ 178 $ 188

In determining the fair value of our securitization residual assets, we used a market-based risk-free rate and a range of interest rate spreads of approximately 1 % to 7 % based upon transactions involving similar assets as of March 31, 2022 and December 31, 2021.

The weighted average discount rates used to determine the fair value of our securitization residual assets as of March 31, 2022 and December 31, 2021 were 5.2 % and 4.3 %, respectively.

The difference between fair value and amortized cost is due to interest rates movements.

In determining the fair value of our securitization residual assets, we used a risk-free rate and add a range of interest rate spreads of approximately 1 % to 6 % based upon transactions involving similar assets as of June 30, 2022 and December 31, 2021.

The weighted average discount rates used to determine the fair value of our securitization residual assets as of June 30, 2022 and December 31, 2021 were 6.0 % and 4.3 %, respectively.

The difference between fair value and amortized cost is due to interest rate movements, and no securitization residual assets have been in a material loss position for more than 12 months or has a loss which is individually material.

We have the intent and ability to hold these assets until a recovery of fair value.

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Our financial statements may include non-recurring fair value measurements related to acquisitions and non-monetary transactions, if any.

Assets acquired in a business combination are recorded at their fair value.

Assets acquired in a business combination, if any, are recorded at their fair value.

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

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We had cash deposits that are subject to credit risk as shown below:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(in millions)

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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.

No OP units were exchanged by non-controlling interest holders during the three months ended March 31, 2022 and March 31, 2021.

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

No OP units were redeemed by non-controlling interest holders during the six months ended June 30, 2022 and June 30, 2021.

We have also granted to members of our leadership team and directors LTIP Units pursuant to our equity incentive plans.

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

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The following summarizes certain transactions with securitization trusts:

As of and for the three months ended March 31,

As of and for the six months ended June 30,

(in millions)

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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.

Depending on the nature of the transaction risks, the discount rate ranged from 3 % to 9 %.

As of March 31, 2022 and December 31, 2021, our managed assets totaled $ 9.0 billion and $ 8.8 billion, respectively, of which $ 5.3 billion and $ 5.2 billion, respectively, were securitized assets held in unconsolidated securitization trusts.

There were no securitization credit losses in the three months ended March 31, 2022 or March 31, 2021.

As of March 31, 2022, there were no material payments from debtors to the securitization trusts that were greater than 90 days past due.

Depending on the nature of the transaction risks, the all-in discount rate ranged from 4 % to 5 % for the six months ended June 30, 2022.

As of June 30, 2022 and December 31, 2021, our managed assets totaled $ 9.3 billion and $ 8.8 billion, respectively, of which $ 5.4 billion and $ 5.2 billion, respectively, were securitized assets held in unconsolidated securitization trusts.

There were no securitization credit losses in the six months ended June 30, 2022 or June 30, 2021.

As of June 30, 2022, 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 the source of cash flows of $ 91 million of our securitization residual assets.

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Our Portfolio

As of March 31, 2022, our Portfolio included approximately $ 3.7 billion of equity method investments, receivables, real estate and investments on our balance sheet.

As of June 30, 2022, our Portfolio included approximately $ 3.9 billion of equity method investments, receivables, real estate and investments on our balance sheet.

The equity method investments represent our non-controlling equity investments in renewable energy and energy efficiency projects and land.

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

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 developing and evaluating performance against our credit criteria, we consider a number of qualitative and quantitative criteria which may include 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 March 31, 2022, which is assessed quarterly:

The following is an analysis of the Performance Ratings of our Portfolio as of June 30, 2022, which is assessed quarterly:

Portfolio Performance

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(3) This category includes our assets where based on our credit criteria and performance to date, we believe there is substantial doubt regarding our ability to recover some or all of our invested capital.

Included in this category are two commercial receivables with a combined total carrying value of approximately $ 8 million as of March 31, 2022, which we have held on non-accrual status since 2017.

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

Loans in this category are placed on non-accrual status.

In the second quarter of 2022, we moved to this category from Category 2 $ 11 million of loans we had made in a new market venture where the performance has not met expectations.

Previously included in this category were two commercial receivables with a combined total carrying value of approximately $ 8 million which were assignments of land lease payments from two wind projects that we had originated in 2014.

In 2017, the operator of the projects terminated the lease, at which time we filed a legal claim and placed these assets on non-accrual status.

In 2019, we received a court decision indicating that the owners of the projects were within their rights under the contract terms to terminate the lease which impacts the land lease assignments to us, at which time we reserved the receivables for their full carrying amount.

In the second quarter of 2022, we received a court decision indicating that our appeal was not successful, and accordingly we wrote off the full amount of the receivable.

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

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(6) Average remaining balance is calculated gross of allowance for loss on receivables and excludes approximately 243 transactions each with outstanding balances that are less than $ 1 million and that in the aggregate total $ 76 million.

As of March 31, 2022, our allowance for loan losses was $ 37 million based on our expectation of credit losses over the lives of the receivables in our portfolio.

During the three months ended March 31, 2022, we increased our reserve by approximately $ 1 million, primarily as a result of loans and loan commitments made during the period.

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 March 31, 2022 and December 31, 2021:

March 31, 2022 December 31, 2021

As of June 30, 2022, our allowance for loan losses was $ 37 million based on our expectation of credit losses over the lives of the receivables in our portfolio.

During the three and six months ended June 30, 2022, we increased our reserve by approximately $ 8 million, due to loans and loan commitments made during the period as well as an incremental reserve recorded on the loans moved into Portfolio Performance Category 3 discussed above.

Below is a summary of the carrying value, loan funding commitments, and allowance by type of receivable or “Portfolio Segment”, as defined by Topic 326, as of June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

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

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Total $ 1,594 $ 117 $ 37 $ 1,460 $ 184 $ 36

(1) As of March 31, 2022, this category of assets includes $ 781 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 $ 702 million of our commercial receivables are loans made to entities in which we also have non-controlling equity investments of approximately $ 119 million.

(1) As of June 30, 2022, this category of assets includes $ 1.0 billion 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.

This total also includes $ 47 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 to our financial statements in this Form 10-Q.

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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 to our financial statements in this Form 10-Q.

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.

All of our commercial receivables are included in Performance Rating 1 in the Portfolio Performance table above, except for the $ 11 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 $ 29 million allowance on these $ 1.5 billion in assets as a result of lower probability assumptions utilized in our allowance methodology.

(2) As of March 31, 2022, our government receivables include $ 20 million of U.S.

(2) As of June 30, 2022, our government receivables include $ 16 million of U.S.

federal government transactions and $ 95 million of transactions where the ultimate obligors are state or local governments.

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The following table reconciles our beginning and ending allowance for loss on receivables by Portfolio Segment:

Three months ended March 31, 2022 Three months ended March 31, 2021

Three months ended June 30, 2022 Three months ended June 30, 2021

Government Commercial Government Commercial

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Provision for loss on receivables — 8 — 1

Write-off of allowance — ( 8 ) — —

Ending balance $ — $ 37 $ — $ 37

Six months ended June 30, 2022 Six months ended June 30, 2021

Government Commercial Government Commercial

(in millions)

Beginning balance $ — $ 36 $ — $ 36

Provision for loss on receivables — 9 — 1

Write-off of allowance — ( 8 ) — —

Ending balance $ — $ 37 $ — $ 37

Other than the $ 11 million of receivables discussed above with a Performance Rating of 3, we have no receivables which are on non-accrual status.

The following table provides a summary of our anticipated maturity dates of our receivables and the weighted average yield for each range of maturities as of March 31, 2022:

The following table provides a summary of our anticipated maturity dates of our receivables and the weighted average yield for each range of maturities as of June 30, 2022:

Total Less than 1

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Weighted average yield by period 8.1 % 7.4 % 4.6 % 8.3 % 8.2 %

The following table provides a summary of our anticipated maturity dates of our investments and the weighted average yield for each range of maturities as of March 31, 2022:

The following table provides a summary of our anticipated maturity dates of our investments and the weighted average yield for each range of maturities as of June 30, 2022:

Total Less than 1

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Weighted average yield by period 4.7 % — % — % — % 4.7 %

We had no investments that were impaired or on non-accrual status as of March 31, 2022 or December 31, 2021, and no allowances associated with our investments.

We had no investments that were impaired or on non-accrual status as of June 30, 2022 or December 31, 2021, and no allowances associated with our investments.

Our real estate is leased to renewable energy projects, typically under long-term triple net leases with expiration dates that range between the years 2033 and 2058 under the initial terms and 2047 and 2080 if all renewals are exercised.

The components of our real estate portfolio as of March 31, 2022 and December 31, 2021, were as follows:

March 31, 2022 December 31, 2021

The components of our real estate portfolio as of June 30, 2022 and December 31, 2021, were as follows:

June 30, 2022 December 31, 2021

(in millions)

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Real estate $ 359 $ 356

As of March 31, 2022, the future amortization expense of the intangible assets and the future minimum rental income payments under our land lease agreements are as follows:

As of June 30, 2022, the future amortization expense of the intangible assets and the future minimum rental income payments under our land lease agreements are as follows:

Future Amortization Expense Minimum Rental Income Payments

(in millions)

From April 1, 2022 to December 31, 2022 $ 2 $ 17

From July 1, 2022 to December 31, 2022 $ 2 $ 12

Thereafter 67 713

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We have made non-controlling equity investments in a number of renewable energy and energy efficiency projects as well as in a joint venture that owns land with long-term triple net lease agreements to several solar projects that we account for as equity method investments.

As of March 31, 2022, we held the following equity method investments:

As of June 30, 2022, we held the following equity method investments:

Investment Date Investee Carrying Value

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March 2020 University of Iowa Energy Collaborative Holdings LLC 127

Various Vivint Solar Asset 3 HoldCo Parent, LLC 96

Various Other investees 589

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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.

As of March 31, 2022, we have made capital contributions to Jupiter of approximately $ 546 million related to these projects.

As of June 30, 2022, we have made capital contributions to Jupiter of approximately $ 536 million related to these projects reflecting final funding true-ups after all projects reached substantial completion.

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.

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We have entered into certain agreements relating to the acquisition, ownership and management of approximately $ 870 million in preferred cash equity investments in four 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 $ 423 million through March 31, 2022, and additional investments are expected to be made in 2022 as the projects become commercially operational.

We have made initial investments in the preferred cash equity interests of the Lighthouse Partnerships of approximately $ 423 million through June 30, 2022, and additional investments are expected to be made as the projects become commercially operational.

The Renewables Portfolio currently has contracted cash flows with a combined weighted average contract life of greater than 14 years with a diversified group of predominately investment grade corporate, utility, university and municipal offtakers.

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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.

The review committee is a four person committee, which includes two of our 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 of the Renewables Portfolio are achieved.

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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.

Related Party Transactions

Of our commercial receivables, approximately $ 612 million are loans made to entities in which we also have non-controlling equity investments of approximately $ 128 million.

These equity method investments are LLCs taxed as partnerships that we have entered into with various renewable energy project sponsors, such as SunPower Corporation.

We negotiate the commercial terms of these loans with the other partner, and the assets against which the project sponsors are borrowing are contributed into the LLCs upon the execution of the loans.

Our equity investments allow us to participate in the residual economics of those contributed assets alongside the other partner, and our rights under the project operating agreements do not allow us to make any significant unilateral decisions regarding the terms of the arrangement.

Because the loans made to these entities are typically subordinate to senior debt and tax equity investors in the projects, these loans, which have maturities of over ten years, may accrue PIK interest in the early years of the project until sufficient cash flow is available for our interest payments.

Any change in PIK interest is included in Change in Accrued Interest in the operating section of our statement of cash flows.

On a quarterly basis, we assess these loans for any impairment inclusive of any PIK interest accrued under CECL as discussed above under Receivables.

We recorded approximately $ 15 million and $ 30 million in interest income inclusive of any PIK interest related to these loans in the three and six months ended June 30, 2022, respectively, compared to $ 13 million and $ 24 million in the three and six months ended June 30, 2021, respectively.

In the six months ended June 30, 2022 and 2021, we made $ 50 million and $ 179 million, respectively, of investments in these loans to related parties, and we collected $ 69 million and $ 14 million, respectively, of principal payments related to these loans.

For the six months ended June 30, 2022 and 2021, we collected $ 35 million and $ 27 million of cash related to interest income, including cash collections of amounts accrued in prior periods, respectively, which are reflected in cash flows from operating activities.

In the six months ended June 30, 2022, as part of a purchase and sale agreement with an equity investee, we exchanged three performing loans for equity interests in the same project companies.

The GAAP carrying value of the loans was $ 55 million, which were exchanged in a non-cash transaction for equity method investments with no gain or loss recognized at the time of exchange as calculated using discounted cash flows at a market interest rate.

Credit facilities and commercial paper notes

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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 the first quarter of 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 March 31, 2022:

The Rep-Based Facility is a secured revolving limited-recourse credit facility which has a maximum outstanding principal amount of $ 100 million, and 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 June 30, 2022:

Facility Approval-Based Facility

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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 March 31, 2022.

We were in compliance with our covenants as of June 30, 2022.

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.

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In February 2022, we entered into a new $ 600 million unsecured revolving credit facility pursuant to a revolving credit agreement with a syndicate of lenders which matures in February 2025, replacing our then-existing $ 400 million unsecured revolving credit facility entered into in April 2021.

As of March 31, 2022, the outstanding balance on this facility was $ 50 million, and it currently bears interest at a rate of 2.169 %.

As of June 30, 2022, the outstanding balance on this facility was $ 151 million, and it currently bears interest at a weighted average rate of 3.381 %.

We have approximately $ 3 million of remaining unamortized financing costs associated with the unsecured 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 unsecured revolving credit facility.

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An amount equal to the proceeds of our commercial paper notes are allocated to either the acquisition or refinance of, in whole or in part, eligible green projects, including assets that are neutral to negative on incremental carbon emissions.

As of March 31, 2022, we have $ 75 million of commercial paper notes outstanding, maturing in the second quarter of 2022, which together bear an average total borrowing rate of 1.46 %.

As of June 30, 2022, we have $ 100 million of commercial paper notes outstanding, maturing in 2022, which together bear an average total borrowing rate of 2.76 %.

An amount equal to the proceeds of these notes were allocated to the refinance of commercial paper notes issued in December 2021 as well as to additional investments in eligible green projects.

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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 March 31, 2022, 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.

As of June 30, 2022, we have less than $ 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.

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Maturity Carrying Value of Assets Pledged as of

March 31, 2022 December 31, 2021 Interest

Rate Maturity Date March 31, 2022 December 31, 2021 Description

June 30, 2022 December 31, 2021 Interest

Rate Maturity Date June 30, 2022 December 31, 2021 Description

of Assets Pledged

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

(2) The total collateral pledged against our non-recourse debt was $ 567 million and $ 573 million as of March 31, 2022 and December 31, 2021, respectively.

In addition, $ 21 million and $ 24 million of our restricted cash balance was pledged as collateral to various non-recourse loans as of March 31, 2022 and December 31, 2021, respectively.

(2) The total collateral pledged against our non-recourse debt was $ 553 million and $ 573 million as of June 30, 2022 and December 31, 2021, respectively.

In addition, $ 23 million and $ 24 million of our restricted cash balance was pledged as collateral to various non-recourse loans as of June 30, 2022 and December 31, 2021, respectively.

We have pledged the financed assets, and typically our interests in one or more parents or subsidiaries of the borrower that are legally separate bankruptcy remote special purpose entities as security for the non-recourse debt.

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We typically act as servicer for the debt transactions.

We were in compliance with all covenants as of March 31, 2022 and December 31, 2021.

We were in compliance with all covenants as of June 30, 2022 and December 31, 2021.

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.

The stated minimum maturities of non-recourse debt as of March 31, 2022, were as follows:

The stated minimum maturities of non-recourse debt as of June 30, 2022, were as follows:

Future minimum maturities

(in millions)

April 1, 2022 to December 31, 2022 $ 19

July 1, 2022 to December 31, 2022 $ 15

Thereafter 272

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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.

We are in compliance with all of our covenants as of March 31, 2022 and December 31, 2021.

We are in compliance with all of our covenants as of June 30, 2022 and December 31, 2021.

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

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(in millions)

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Carrying value of Senior Unsecured Notes $ 1,765 $ 1,763

We recorded approximately $ 19 million in interest expense related to the Senior Unsecured Notes in the three months ended March 31, 2022, compared to approximately $ 17 million in the three months ended March 31, 2021.

Convertible Senior Notes

We have outstanding $ 144 million aggregate principal amount of convertible senior notes (“Convertible Senior Notes”).

Holders may convert any of their Convertible Senior 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 March 31, 2022:

Outstanding Principal Amount Maturity Date Stated Interest Rate Interest Payment Dates Conversion Ratio Conversion Price Issuable Shares Dividend Threshold Amount (1)

We recorded approximately $ 19 million and $ 38 million in interest expense related to the Senior Unsecured Notes in the three and six months ended June 30, 2022, respectively, compared to approximately $ 17 million and $ 34 million in the three and six months ended June 30, 2021, respectively.

Convertible Notes

We have outstanding $ 144 million aggregate principal amount of convertible senior notes and $ 200 million aggregate principal amount of exchangeable senior notes together “Convertible Notes”.

Holders may convert or exchange any of their Convertible Notes into shares of our common stock at the applicable conversion or exchange 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.

The following are summarized terms of the Convertible Notes as of June 30, 2022:

Outstanding Principal Amount Maturity Date Stated Interest Rate Interest Payment Dates Conversion/Exchange Ratio Conversion/Exchange Price Issuable Shares Dividend Threshold Amount (1)

(in millions) (in millions)

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2023 0.000 % N/A 20.7085 $ 48.29 3.0 $ 0.340

(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.

(2) During the quarter ended March 31, 2022, the remaining $ 8 million in principal amount of 2022 Convertible Senior Notes were converted into 282,678 shares of common stock.

2025 Exchangeable Senior Notes 200 (3)

2025 0.000 % N/A 17.6873 $ 56.54 3.5 $ 0.375

(1) The conversion or exchange 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.

(2) During the six months ended June 30, 2022, the remaining $ 8 million in principal amount of 2022 Convertible Senior Notes were converted into 282,678 shares of common stock.

(3) The 2025 Exchangeable Senior Notes accrete to a premium at maturity equal to 3.25 % per annum.

In March 2022, we exercised a redemption option to call the remaining outstanding $ 8.1 million principal amount of 2022 Convertible Senior Notes.

$ 7.6 million principal amount of notes converted prior to the effectiveness of the redemption option, with the remaining notes being redeemed for cash of $ 0.5 million.

For 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.

In March 2022, we exercised a redemption option to call the remaining outstanding $ 8.1 million principal 2022 Convertible Senior Notes.

$ 7.6 million principal of notes converted prior to the effectiveness of the redemption option, with the remaining notes being redeemed for cash of $ 0.5 million.

Additionally, upon the occurrence of certain fundamental changes involving us, holders of the 2023 Convertible Senior Notes may require us to redeem all or a portion of their notes for cash at a price of 100 % of the principal amount outstanding, plus accrued and unpaid interest.

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 the Convertible Senior Notes:

March 31, 2022 December 31, 2021

In April 2022, certain of our TRS jointly issued $ 200 million of 0.00 % Exchangeable Senior Notes due 2025 which are guaranteed by us and certain of our subsidiaries and may, under certain conditions, be exchangeable for our common stock.

The notes accrete to a premium at maturity at an effective rate of 3.25 % annually.

Upon any exchange, holders will receive a number of shares of our common stock equal to the product of (i) the aggregate initial principal amount of the notes to be exchanged, divided by $1,000 and (ii) the applicable exchange rate, plus cash in lieu of fractional shares.

We intend to allocate an amount equal to the net proceeds of this offering to the acquisition or refinancing of, in whole or in part, new and/or existing eligible green projects, which include assets that are neutral to negative on incremental carbon emissions.

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

June 30, 2022 December 31, 2021

(in millions)

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Unamortized financing costs ( 5 ) ( 2 )

Carrying value of Convertible Senior Notes

We recorded approximately $ 0.5 million and $ 2.1 million in interest expense related to the Convertible Senior Notes in the three months ended March 31, 2022 and 2021, respectively.

In April 2022, certain of our TRS jointly issued $ 200 million of 0.00 % green exchangeable senior notes due 2025 which are guaranteed by the Company and certain other subsidiaries and may, under certain conditions, be exchangeable for the Company’s common stock.

The notes accrete to a premium at maturity at an effective rate of 3.25 % annually.

Upon any exchange, holders will receive a number of shares of the Company’s common stock equal to the product of (i) the aggregate initial principal amount of the notes to be exchanged, divided by $1,000 and (ii) the applicable exchange rate, which will initially be 17.6873 , equivalent to an initial exchange price of approximately $ 56.54 per share, plus cash in lieu of fractional shares.

The Company intends to allocate an amount equal to the net proceeds of this offering to the acquisition or refinancing of, in whole or in part, new and/or existing eligible green projects, which include assets that are neutral to negative on incremental carbon emissions.

Carrying value of Convertible Notes

We recorded approximately $ 2 million and $ 3 million in interest expense related to our Convertible Notes in the three and six months ended June 30, 2022, respectively, compared to $ 2 million and $ 4 million for the three and six months ended June 30, 2021, respectively.

Commitments and Contingencies

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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 March 31, 2022, there have been no such actions resulting in claims against the Company.

As of June 30, 2022, there have been no such actions resulting in claims against the Company.

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

As of March 31, 2022, we have not recorded any contingencies on our balance sheet related to COVID-19 with the exception of any allowances related to our receivables described in Note 6 to our financial statements in this Form 10-Q.

As of June 30, 2022, we have not recorded any contingencies on our balance sheet related to COVID-19 with the exception of any allowances related to our receivables described in Note 6 to our financial statements in this Form 10-Q.

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 (expense) benefit of approximately $( 11 ) million for the three months ended March 31, 2022, compared to a $( 7 ) million income tax (expense) benefit in the three months ended March 31, 2021.

For the three months ended March 31, 2022 and 2021, our income tax (expense) benefit was determined using the federal tax rate of 21%, and combined state tax rates, net of federal benefit, of approximately 3 % for 2022 and 2021.

We recorded an income tax (expense) benefit of approximately $ 5 million and $( 6 ) million for the three and six months ended June 30, 2022, respectively, compared to a $( 6 ) million and $( 13 ) million income tax (expense) benefit in the three and six months ended June 30, 2021, respectively.

For the three and six months ended June 30, 2022 and 2021, our income tax (expense) benefit was determined using the federal tax rate of 21%, and combined state tax rates, net of federal benefit, of approximately 3 % for 2022 and 2021.

Dividends and Distributions

8 unchanged sentences

5/3/2022 7/5/2022 7/12/2022 $ 0.375

8/4/2022 10/4/2022 10/11/2022 $ 0.375

(1) This dividend was treated as a distribution in 2022 for tax purposes.

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Q1 2022 ATM 1.050 48.14 50

Q2 2022 ATM 0.731 38.91 28

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

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We have issued equity awards that vest from 2023 to 2026 subject to service, performance and market conditions.

During the three months ended March 31, 2022, our board of directors awarded employees and directors 332,322 shares of restricted stock, restricted stock units and LTIP Units that vest from 2023 to 2026.

As of March 31, 2022, we have concluded that it is probable that the performance conditions will be met for previously issued restricted stock awards with performance conditions.

During the six months ended June 30, 2022, our board of directors awarded employees and directors 332,322 shares of restricted stock, restricted stock units and LTIP Units that vest from 2023 to 2026.

As of June 30, 2022, we have concluded that it is probable that the performance conditions will be met for previously issued restricted stock awards with performance conditions.

Refer to Note 4 to our financial statements in this Form 10-Q for background on the LTIP Units.

For the three months ended March 31, 2022 we recorded $ 4 million of stock based compensation, compared to $ 5 million during the three months ended March 31, 2021.

Of the prior-year three-month period expense, $ 2 million is related to the acceleration of compensation expense related to an employee with a change in employment status that occurred in the first quarter of 2021.

The total unrecognized compensation expense related to awards of shares of restricted stock and restricted stock units was approximately $ 28 million as of March 31, 2022.

For the three and six months ended June 30, 2022 we recorded $ 12 million and $ 16 million of stock based compensation, respectively, compared to $ 4 million and $ 10 million during the three and six months ended June 30, 2021.

$ 9 million of the current period expense is due to the acceleration of expense upon adoption of a retirement policy.

The retirement policy provides for full vesting at retirement of any time-based awards that were granted prior to the date of retirement and permits the vesting of performance-based awards that were granted prior to the date of retirement according to the original vesting schedule of the award, subject to the achievement of the applicable performance measures.

Employees are eligible for the retirement policy upon meeting age and years of service criteria.

Upon adoption of the policy, we recognized any remaining unrecognized share based compensation expense for awards to employees who met the retirement criteria at the time of adoption and accelerated the recognition of expense for employees who will meet the criteria prior to the vesting of their existing awards.

Of the prior-year six-month period expense, $ 2 million is related to the acceleration of compensation expense related to an employee with a change in employment status that occurred in the first quarter of 2021.

The total unrecognized compensation expense related to awards of shares of restricted stock and restricted stock units was approximately $ 16 million as of June 30, 2022.

We expect to recognize compensation expense related to our equity awards over a weighted-average term of approximately 2 years.

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Forfeited ( 553 ) 48.05 —

Ending Balance — March 31, 2022 195,659 $ 41.61 $ 8.1

Ending Balance — June 30, 2022 130,642 $ 35.48 $ 4.6

A summary of the unvested shares of restricted stock units that have market-based vesting conditions that have been issued is as follows:

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Forfeited ( 506 ) 58.77 —

Ending Balance — March 31, 2022 63,426 $ 50.88 $ 3.2

Ending Balance — June 30, 2022 62,920 $ 50.82 $ 3.2

(1) As discussed in Note 2 to our financial statements in this Form 10-Q, restricted stock 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.

12 unchanged sentences

Forfeited ( 2,497 ) 46.08 ( 0.1 )

Ending Balance — March 31, 2022 451,095 $ 48.15 $ 21.7

Ending Balance — June 30, 2022 256,544 $ 43.26 $ 11.1

(1) See Note 4 to our financial statements in this Form 10-Q for information on the vesting of LTIP Units.

5 unchanged sentences

Granted 86,274 65.28 5.6

Incremental performance shares granted 51,500 21.09 1.1

Vested ( 103,000 ) 21.09 ( 2.1 )

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Forfeited — — —

Ending Balance — March 31, 2022 324,028 $ 42.84 $ 13.9

Ending Balance — June 30, 2022 324,028 $ 42.84 $ 13.9

(1) See Note 4 to our financial statements in this Form 10-Q for information on the vesting of LTIP Units.

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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 our financial statements in this Form 10-Q.

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 to our financial statements in this Form 10-Q.

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 or exchange of the note in the denominator in calculating dilutive EPS as described in Note 2 to our financial statements in this Form 10-Q.

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

(in millions, except share and per share data)

14 unchanged sentences

Weighted-average number of OP units 1,054,706 493,737 864,956 409,102

As of March 31, 2022 As of March 31, 2021

As of June 30, 2022 As of June 30, 2021

Participating securities:

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We have non-controlling unconsolidated equity investments in renewable energy and energy efficiency projects as well as in a joint venture that owns land with long-term triple net lease agreements to several solar projects.

We recognized income (loss) from our equity method investments of approximately $ 48 million during the three months ended March 31, 2022, compared to $ 54 million during the three months ended March 31, 2021.

We recognized income (loss) from our equity method investments of approximately $( 20 ) million and $ 28 million during the three and six months ended June 30, 2022, respectively, compared to $ 22 million and $ 77 million during the three and six months ended June 30, 2021, respectively.

In the three months ended June 30, 2022, the loss from our equity method investments was due to the unrealized mark-to-market losses on energy hedges at the project level that do not qualify for hedge accounting.

These unrealized mark-to-market losses, which resulted from rising energy prices, are recorded in the revenue line of the projects’ statements of operations.

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

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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.

Jupiter Equity Holdings LLC Phase V Class A LLC Vivint Solar Asset 3 Holdco Parent LLC Other Investments (1)

Empower Clean Energies Infrastructure LLC Lighthouse Renewable HoldCo LLC Lighthouse Renewable HoldCo 2 LLC Jupiter Equity Holdings LLC Phase V Class A LLC Vivint Solar Asset 3 Holdco Parent LLC Other Investments (1)

(in millions)

Balance Sheet

As of December 31, 2021

As of March 31, 2022

Current assets $ 17 $ 51 $ 21 $ 237 $ 29 $ 13 $ 438 $ 806

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Income Statement

For the twelve months ended December 31, 2021

For the three months ended March 31, 2022

Revenue 10 ( 28 ) ( 23 ) ( 90 ) 1 8 118 ( 4 )

1 unchanged sentence

Net income (loss) ( 3 ) ( 40 ) ( 33 ) ( 143 ) ( 2 ) ( 1 ) ( 16 ) ( 238 )

For the twelve months ended December 31, 2020

For the three months ended March 31, 2021

Revenue 6 ( 62 ) — ( 72 ) — 3 96 ( 29 )

3 unchanged sentences

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-Q

Item 1. Financial Statements