What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-09 compared with 2022-08-09 · 84 added, 80 removed, 343 unchanged (32% of the section changed)

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• Sustainable Infrastructure (“SI”) :

upgraded transmission and distribution systems, water and storm water infrastructure, and other projects that improve water or energy efficiency, increase resiliency, positively impact the environment or more efficiently use natural resources.

upgraded transmission and distribution systems, water and storm water infrastructure, fleet transportation, renewable natural gas, and other projects that improve water or energy efficiency, increase resiliency, positively impact the environment or more efficiently use natural resources.

We prefer investments in which the assets use proven technology and have a long-term, creditworthy off-taker or counterparties.

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For GC assets, the off-takers or counterparties may be utility or electric users who have entered into contractual commitments, such as power purchase agreements (“PPAs”), to purchase power produced by a renewable energy project at a specified price with potential price escalators for a portion of the project’s estimated life.

We completed approximately $340 million and $671 million of transactions during the three and six months ended June 30, 2022, respectively, compared to approximately $509 million and $697 million during the same periods in 2021, respectively.

As of June 30, 2022, pursuant to our strategy of holding transactions on our balance sheet, we held approximately $3.9 billion of transactions on our balance sheet, which we refer to as our “Portfolio.” As of June 30, 2022, our Portfolio consisted of over 352 assets and we seek to manage the diversity of our Portfolio by, among other factors, project type, project operator, type of investment, type of technology, transaction size, geography, obligor and maturity.

We completed approximately $273 million and $944 million of transactions during the three and nine months ended September 30, 2022, respectively, compared to approximately $359 million and $1.1 billion during the same periods in 2021, respectively.

As of September 30, 2022, pursuant to our strategy of holding transactions on our balance sheet, we held approximately $3.9 billion of transactions on our balance sheet, which we refer to as our “Portfolio.” As of September 30, 2022, our Portfolio consisted of over 366 assets and we seek to manage the diversity of our Portfolio by, among other factors, project type, project operator, type of investment, type of technology, transaction size, geography, obligor and maturity.

For those transactions that we choose not to hold on our balance sheet, we transfer all or a portion of the economics of the transaction, typically using securitization trusts, to institutional investors in exchange for cash and/or residual interests in the assets and in some cases, ongoing fees.

As of June 30, 2022, we managed approximately $5.4 billion in assets in these securitization trusts or vehicles that are not consolidated on our balance sheet.

When combined with our Portfolio, as of June 30, 2022, we manage approximately $9.3 billion of assets which we refer to as our “Managed Assets”.

As of September 30, 2022, we managed approximately $5.5 billion in assets in these securitization trusts or vehicles that are not consolidated on our balance sheet.

When combined with our Portfolio, as of September 30, 2022, we manage approximately $9.4 billion of assets which we refer to as our “Managed Assets”.

We make our investments utilizing a variety of structures including:

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

Our equity investments in renewable energy and energy efficiency projects are operated by various renewable energy companies or by joint ventures in which we participate.

Our equity investments in climate solutions projects are operated by various renewable energy companies or by joint ventures in which we participate.

These transactions allow us to participate in the cash flows associated with these projects, typically on a priority basis.

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We have a large and active pipeline of potential new opportunities that are in various stages of our underwriting process.

We believe the Inflation Reduction Act signed into law on August 16, 2022, that incentivizes the construction of and investment in climate solutions will result in additional investment opportunities in the markets in which we invest over the next several years, which may result in increases in our pipeline in the future.

We refer to potential opportunities as being part of our pipeline if we have determined that the project fits within our climate solutions investment strategy and exhibits the appropriate risk and reward characteristics through an initial credit analysis, including a quantitative and qualitative assessment of the opportunity, as well as research on the relevant market and sponsor.

Our pipeline of transactions that could potentially close in the next 12 months consists of opportunities in which we will be the lead originator as well as opportunities in which we may participate with other institutional investors.

As of June 30, 2022, our pipeline consisted of more than $4.0 billion in new equity, debt and real estate opportunities.

As of September 30, 2022, our pipeline consisted of more than $4.5 billion in new equity, debt and real estate opportunities.

Of our pipeline, 47% is related to BTM assets and 35% is related to GC assets, with the remainder related to other sustainable infrastructure.

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Understanding our accounting policies and the extent to which we make judgments and estimates in applying these policies is integral to understanding our financial statements.

We believe the estimates and assumptions used in preparing our financial statements and related footnotes are reasonable and supportable based on the best information available to us as of June 30, 2022.

Various uncertainties, including those surrounding COVID-19, may materially impact the accuracy of the estimates and assumptions used in the financial statements and related footnotes and, as a result, actual results may vary significantly from estimates.

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Our Portfolio

Our Portfolio totaled approximately $3.9 billion as of June 30, 2022 and included approximately $2.3 billion of BTM assets and approximately $1.6 billion of GC assets.

Our Portfolio totaled approximately $3.9 billion as of September 30, 2022 and included approximately $2.2 billion of BTM assets and approximately $1.6 billion of GC assets, with the remainder in SI assets.

Approximately 48% of our Portfolio consisted of unconsolidated equity investments in renewable energy related projects.

Approximately 42% consisted of fixed-rate commercial and government receivables and debt securities, which are classified as investments, on our balance sheet, and 10% of our Portfolio was real estate leased to renewable energy projects under lease agreements.

Our Portfolio consisted of over 352 transactions with an average size of $11 million and the weighted average remaining life of our Portfolio (excluding match-funded transactions) of approximately 18 years as of June 30, 2022.

Our Portfolio included the following as of June 30, 2022:

Our Portfolio consisted of over 366 transactions with an average size of $11 million and the weighted average remaining life of our Portfolio (excluding match-funded transactions) of approximately 18 years as of September 30, 2022.

Our Portfolio included the following as of September 30, 2022:

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

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

The table below provides details on the interest rate and maturity of our receivables and debt securities as of June 30, 2022:

The table below provides details on the interest rate and maturity of our receivables and debt securities as of September 30, 2022:

Balance Maturity

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Our earnings from our equity method investments are not included in this table.

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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(1) Excludes loss on debt modification or extinguishment included in interest expense in our income statement.

The following table provides a summary of our anticipated principal repayments for our receivables and investments as of June 30, 2022:

The following table provides a summary of our anticipated principal repayments for our receivables and investments as of September 30, 2022:

Payment due by Period

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See Note 6 to our financial statements in this Form 10-Q for information on:

• the anticipated maturity dates of our receivables and investments and the weighted average yield for each range of maturities as of June 30, 2022,

• the term of our leases and a schedule of our future minimum rental income under our land lease agreements as of June 30, 2022,

• the anticipated maturity dates of our receivables and investments and the weighted average yield for each range of maturities as of September 30, 2022,

• the term of our leases and a schedule of our future minimum rental income under our land lease agreements as of September 30, 2022,

• the Performance Ratings of our Portfolio, and

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Results of Operations

Comparison of the Three Months Ended June 30, 2022 vs.

Three Months Ended June 30, 2021

Three months ended June 30,

Comparison of the Three Months Ended September 30, 2022 vs.

Three Months Ended September 30, 2021

Three months ended September 30,

2022 2021 $ Change % Change

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Net income (loss) $ 34,941 $ (3,099) $ 38,040 (1,228) %

• Net income decreased by $35 million due to a decrease in equity method investments income (loss) of $42 million and an $8 million increase in total expenses, offset by a $4 million increase in revenue and an $11 million increase in income tax benefit (expense).

• Total revenue increased by $4 million due to a $8 million increase in interest income, driven primarily by a higher average Portfolio balance offset by a decrease in average interest rate and by a $5 million decrease in gain on sale income, driven by a change in the mix of assets being securitized.

• Interest expense decreased by $12 million primarily due to a one time loss on the redemption of senior unsecured notes in the prior period which did not recur, offset by additional expense from a larger average outstanding debt balance with a lower average interest rate.

We recorded an $8 million provision for loss on receivables as a result of loans and loan commitments made as well as certain loan specific reserves made during the quarter.

• Compensation and benefits increased by $10 million primarily due to the acceleration of share based compensation associated with the adoption of a new retirement policy.

General and administrative expenses increased by $2 million due to additional investment in corporate infrastructure.

• Income (loss) from equity method investments using HLBV allocations decreased by $42 million primarily due to the impact of increasing power prices and the resulting unrealized mark to market losses on economic hedges used by some of our projects to reduce the impact of power price fluctuations.

• Income tax benefit (expense) increased by $11 million primarily due to the decrease in GAAP net income (loss).

Comparison of the Six Months Ended June 30, 2022 vs.

Six Months Ended June 30, 2021

Six Months Ended June 30,

• Net income (loss) increased by $38 million due to an increase in equity method investments income (loss) of $38 million and an $11 million increase in total revenue, offset by a $2 million increase in total expenses and a $9 million increase in income tax benefit (expense).

• Total revenue increased by $11 million due to a $8 million increase in interest income, driven primarily by a higher average Portfolio balance offset by a decrease in average interest rate and by a $3 million increase in gain on sale and fee income, driven by a change in the mix and volume of assets being securitized.

• Interest expense increased by $2 million primarily due to a larger average outstanding debt balance.

We released $2 million from our allowance for loan losses, driven primarily by improvements in loans in our Portfolio, offset partially by provision for loans and loan commitments made during the quarter.

• Compensation and benefits and general and administrative expenses increased by $4 million due to additional investment in corporate infrastructure and corporate governance expenses.

• Income (loss) from equity method investments using HLBV allocations increased by $38 million primarily due to income from new projects in the current period and lower losses related to mark to market losses on economic hedges used by some of our projects to reduce the impact of power price fluctuations.

• Income tax expense increased by $9 million primarily due to the increase in GAAP net income.

Comparison of the Nine Months Ended September 30, 2022 vs.

Nine Months Ended September 30, 2021

Nine Months Ended September 30,

2022 2021 $ Change % Change

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Net income (loss) $ 62,107 $ 64,525 $ (2,418) (4) %

• Net income decreased by $40 million due to a decrease in equity method investment income of $49 million and an increase in total expenses of $9 million, offset by an increase in total revenue of $11 million and an increase in income tax (expense) benefit of $7 million.

• Total revenue increased by $11 million due to a $13 million increase in interest income resulting from a higher average Portfolio balance and a $2 million increase in fee income due to additional advisory fee opportunities, offset partially by a decrease in gain on sale revenue of $5 million due to a change in the mix of assets being securitized.

• Interest expense decreased by $13 million due to a one time loss on the redemption of senior unsecured notes in the prior period which did not recur, as well as additional expense from a larger average outstanding debt balance with a lower average rate.

We recorded a provision for loss on receivables of $9 million as a result of loans and loan commitments made as well as certain loan specific reserves made during the quarter.

• Compensation and benefits expense increased by $10 million primarily due to the acceleration of share based compensation associated with the adoption of a new retirement policy.

General and administrative expenses increased by $5 million due to additional investment in corporate infrastructure and charitable contributions.

• Net income decreased by $2 million due to a decrease in equity method investment income of $11 million, an increase in total expenses of $11 million, and a decrease in income tax (expense benefit) of $2 million, offset by an increase in total revenue of $22 million.

• Total revenue increased by $22 million due to a $22 million increase in interest income resulting from a higher average Portfolio balance and a $4 million increase in fee income due to additional deferred fee income on our securitizations, offset partially by a decrease in gain on sale revenue of $4 million due to a change in the mix of assets being securitized.

• Interest expense decreased by $10 million due to a one time loss on the redemption of senior unsecured notes in the prior period which did not recur, offset by additional expense from a larger average outstanding debt balance with a lower average rate.

We recorded a provision for loss on receivables of $6 million primarily as a result of loans and loan commitments.

• Compensation and benefits expense increased by $10 million primarily due to the acceleration of share based compensation associated with the adoption of a new retirement policy in the second quarter of 2022.

General and administrative expenses increased by $8 million due to additional investment in corporate infrastructure, charitable contributions, and an increase in corporate governance expenses.

• Income from equity method investments decreased by $11 million primarily due to the impact of increasing power prices and the resulting unrealized mark to market losses on economic hedges used by some of our projects to reduce the impact of power price fluctuations.

• Income tax (expense) benefit increased by $7 million primarily due to the decrease in GAAP net income (loss).

• Income tax expense increased by $2 million due to an increase in our estimated annual effective tax rate.

Non-GAAP Financial Measures

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allocations determined under GAAP for an investor to understand the economic performance of these investments where HLBV income can differ substantially from the economic returns in any one period.

In 2021, we acquired equity investments in portfolios of renewable energy projects which have the majority of the distributions payable to more senior investors in the first few years of the project.

The following table provides results related to our equity method investments for the three and six months ended June 30, 2022 and 2021.

Three months ended June 30, Six months ended June 30,

We have acquired equity investments in portfolios of renewable energy projects which have the majority of the distributions payable to more senior investors in the first few years of the project.

The following table provides results related to our equity method investments for the three and nine months ended September 30, 2022 and 2021.

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

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Cash collected (1)

$ 80 $ 13 $ 132 $ 35

(1) Cash collected during the three- and nine-months ended September 30, 2022 includes $64 million related to the issuance of debt by three of our equity method investees, the repayment of which we have guaranteed.

Distributable earnings does not represent cash generated from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), or an indication of our cash flow from operating activities (determined in accordance with GAAP), or a measure of our liquidity, or an indication of funds available to fund our cash needs, including our ability to make cash distributions.

In addition, our methodology for calculating distributable earnings may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures, and accordingly, our reported distributable earnings may not be comparable to similar metrics reported by other companies.

The table below provides a reconciliation of our GAAP net income (loss) to distributable earnings for the three and six months ended June 30, 2022 and 2021.

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

The table below provides a reconciliation of our GAAP net income (loss) to distributable earnings for the three and nine months ended September 30, 2022 and 2021.

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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(2) In addition to these provisions, in the second quarter of 2022 we wrote-off two commercial receivables with a combined total carrying value of approximately $8 million which represented assignments of land lease payments from two wind projects that we had originated in 2014 as a part of an acquisition of a large land portfolio.

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 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 wrote off the full amount of

the receivable.

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

We have excluded the write off from Distributable earnings due to the infrequent occurrence of credit losses as well as the unique nature of the receivables, as the assignment of land lease payments from wind projects represent a small portion of our total portfolio.

(3) Distributable earnings per share are based on 88,994,421 and 88,100,480 shares for the three and six months ended June 30, 2022, respectively, and 82,832,735 and 82,723,380 shares for the three and six months ended June 30, 2021, respectively, which represents the weighted average number of fully-diluted shares outstanding including our restricted stock awards, restricted stock units, long-term incentive plan units, and the non-controlling interest in our Operating Partnership.

(3) Distributable earnings per share are based on 89,635,572 and 88,612,178 shares for the three and nine months ended September 30, 2022, respectively, and 83,912,769 and 83,118,733 shares for the three and nine months ended September 30, 2021, respectively, which represents the weighted average number of fully-diluted shares outstanding including our restricted stock awards, restricted stock units, long-term incentive plan units, and the non-controlling interest in our Operating Partnership.

We include any potential common stock issuances related to share based compensation units in the amount we believe is reasonably certain to vest.

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The following is a reconciliation of our GAAP-based net investment income to our distributable net investment income:

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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The following is a reconciliation of our GAAP-based Portfolio to our Managed Assets:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(in millions)

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Our management uses portfolio yield this way and we believe that our investors use it in a similar fashion to evaluate certain characteristics of our Portfolio compared to our peers, and as such, we believe that the disclosure of portfolio yield is useful to our investors.

Our Portfolio totaled approximately $3.9 billion as of June 30, 2022.

Unlevered portfolio yield was 7.4% as of June 30, 2022 and 7.5% as of December 31, 2021.

Our Portfolio totaled approximately $3.9 billion as of September 30, 2022.

Unlevered portfolio yield was 7.4% as of September 30, 2022 and 7.5% as of December 31, 2021.

Portfolio yield decreased primarily due to adjustments in the expected performance of certain of our assets as a result of grid congestion in the power market where those assets are located.

See Note 6 to our financial statements and MD&A - Our Business in this Form 10-Q for additional discussion of the characteristics of our portfolio as of June 30, 2022.

See Note 6 to our financial statements and MD&A - Our Business in this Form 10-Q for additional discussion of the characteristics of our portfolio as of September 30, 2022.

Environmental Metrics

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We then determine the metric tons of carbon emissions avoided per thousand dollars of investments, in a calculation we refer to as CarbonCount, which enables us to measure the impact our investments have on reducing carbon emissions.

We estimate that our investments originated during the quarter ended June 30, 2022, will avoid annual carbon emissions by approximately 81,000 metric tons, equating to a CarbonCount® of 0.24.

We estimate that our investments originated during the quarter ended September 30, 2022, will avoid annual carbon emissions by approximately 49,000 metric tons, equating to a CarbonCount® of 0.18.

We estimate that our investments made since 2013 have cumulatively avoided annual carbon emissions by over 23 million metric tons.

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We finance our investments primarily with non-recourse or recourse debt, equity and off-balance sheet securitization structures.

We have adequate liquidity as of June 30, 2022, with unrestricted cash balances of $279 million, an unsecured revolving credit facility with an unused capacity of $450 million, and $16 million of available capacity in our secured revolving credit facilities.

As of June 30, 2022, we had used the available $100 million capacity in our green commercial paper program.

We have adequate liquidity as of September 30, 2022, with unrestricted cash balances of $273 million, an unsecured revolving credit facility with an unused capacity of $550 million, and $16 million of available capacity in our secured revolving credit facilities.

As of September 30, 2022, we had used the available $100 million capacity in our green commercial paper program.

During 2022, we have issued $127 million in equity.

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In April 2022, we issued $200 million principal amount of Senior Exchangeable Notes which mature in 2025, have a 0.00% coupon and accrete to a premium at maturity at an effective rate of 3.25% annually.

As of June 30, 2022, we had $426 million of non-recourse borrowings, $1.8 billion of senior unsecured notes and $344 million of Convertible Notes outstanding.

In November of 2022, we entered into a delayed draw term loan facility with a committed and available amount of $383 million.

As of September 30, 2022, we had $418 million of non-recourse borrowings, $1.8 billion of senior unsecured notes and $344 million of Convertible Notes outstanding.

For further information, see Note 8 to our financial statements of this Form 10-Q.

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We have continued to complete off-balance sheet securitization transactions with large institutional investors such as life insurance companies.

As of June 30, 2022, the outstanding balance of our assets financed through the use of these off-balance sheet transactions was approximately $5.4 billion.

As of September 30, 2022, the outstanding balance of our assets financed through the use of these off-balance sheet transactions was approximately $5.5 billion.

In addition to general operational obligations, which are typically paid as incurred, and dividends, which are declared by our board of directors quarterly, we will have future cash needs related to the maturity of the non-amortizing balances of our Senior Unsecured Notes and the balances of our short-term commercial paper issuances and revolving credit facilities.

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The amount of financial leverage we may deploy for particular assets will depend upon the availability of particular types of financing and our assessment of the credit, liquidity, price volatility and other risks of those assets, and the interest rate environment.

As shown in the table below, our debt to equity ratio was approximately 1.8 to 1 as of June 30, 2022, below our current board-approved leverage limit of up to 2.5 to 1.

Our percentage of fixed rate debt was approximately 93% as of June 30, 2022, which is within our targeted fixed rate debt percentage range of 75% to 100%.

As shown in the table below, our debt to equity ratio was approximately 1.7 to 1 as of September 30, 2022, below our current board-approved leverage limit of up to 2.5 to 1.

Our percentage of fixed rate debt was approximately 93% as of September 30, 2022, which is within our targeted fixed rate debt percentage range of 75% to 100%.

The calculation of our fixed-rate debt and financial leverage is shown in the chart below:

June 30, 2022 % of Total December 31, 2021 % of Total

September 30, 2022 % of Total December 31, 2021 % of Total

(dollars in millions) (dollars in millions)

Floating-rate borrowings (1)

$ 200 7 % $ 151 6 %

Fixed-rate debt 2,528 93 % 2,342 94 %

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Leverage 1.7 to 1 1.6 to 1

(1) Floating-rate borrowings include borrowings under our floating-rate credit facilities.

(1) Floating-rate borrowings include borrowings under our floating-rate credit facilities and commercial paper issuances with less than six months original maturity.

(2) Debt excludes securitizations that are not consolidated on our balance sheet.

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Sources and Uses of Cash

We had approximately $304 million and $251 million of unrestricted cash, cash equivalents, and restricted cash as of June 30, 2022 and December 31, 2021, respectively.

We had approximately $298 million and $251 million of unrestricted cash, cash equivalents, and restricted cash as of September 30, 2022 and December 31, 2021, respectively.

Cash flows relating to operating activities

Net cash used in operating activities was approximately $27 million for the six months ended June 30, 2022, driven primarily by net income of $27 million offset by adjustments for non-cash and other items of $54 million.

The non-cash and other adjustments consisted of $52 million in changes in receivables held-for-sale, decreases of $12 million related to equity method investments, $15 million related to gains on securitizations, $7 million related to portfolio accrued interest, and $4 million related to other items.

These decreases were partially offset by increases of $16 million related to equity-based compensation, $8 million of depreciation and amortization, $3 million related to changes in accounts payable and accrued expenses, and $9 million related to provision for loss on receivables.

Net cash used in operating activities was approximately $2 million for the six months ended June 30, 2021, driven primarily by net income of $68 million offset by adjustments for non-cash and other items of $70 million.

The non-cash and other adjustments consisted of decreases of $63 million related to equity method investments, $9 million related to purchases of receivables held-for-sale, $27 million related to gains on securitizations, and $4 million related to other items.

These decreases

were partially offset by a loss on debt extinguishment of $15 million and by increases of $10 million related to equity-based compensation, $7 million of depreciation and amortization, and $1 million related to provision for loss on receivables.

Net cash provided by operating activities was approximately $64 million for the nine months ended September 30, 2022, driven primarily by net income of $62 million plus adjustments for non-cash and other items of $2 million.

The non-cash and other adjustments consisted of increases of $18 million related to equity-based compensation, $12 million of depreciation and amortization, $28 million related to changes in accounts payable and accrued expenses, $6 million related to provision for loss on receivables, and $5 million in changes in receivables held-for-sale.

These were partially offset by decreases of $26 million related to equity method investments, $25 million related to gains on securitizations, $10 million related to portfolio accrued interest, and $6 million related to other items.

Net cash provided by operating activities was approximately $22 million for the nine months ended September 30, 2021, driven primarily by net income of $65 million offset by adjustments for non-cash and other items of $43 million.

The non-cash and other adjustments consisted of decreases of $46 million related to equity method investments, $38 million related to gains

on securitizations, $10 million related to portfolio accrued interest, and $3 million related to other items.

These decreases were partially offset by a loss on debt extinguishment of $15 million and by increases of $14 million related to equity-based compensation, $11 million of depreciation and amortization, $11 million related to changes in accounts payable and accrued expenses, and $3 million related to provision for loss on receivables.

Cash flows relating to investing activities

Net cash used in investing activities was approximately $256 million for the six months ended June 30, 2022.

Net cash used in investing activities was approximately $254 million for the nine months ended September 30, 2022.

We made $340 million of investments in receivables and fixed rate debt-securities, made $144 million of equity method investments and purchased $5 million of real estate.

We collected $107 million of principal payments from receivables and fixed rate debt-securities, $101 million from equity method investments in excess of income recognized to date under GAAP, and $12 million from the sale of receivables and investments, and withdrew $15 million from escrow accounts.

Net cash used in investing activities was approximately $199 million for the six months ended June 30, 2021.

We made $202 million of investments in receivables and fixed rate debt-securities, funded escrow accounts for $12 million and made $137 million of equity method investments.

We collected $51 million of principal payments from receivables and fixed rate debt-securities, $91 million from the sales of financial assets, $8 million from equity method investments in excess of income recognized to date under GAAP and received $2 million from escrow accounts and other items.

Net cash used in investing activities was approximately $388 million for the nine months ended September 30, 2021.

We made $412 million of investments in receivables and fixed rate debt-securities, made $156 million of equity method investments, and funded escrow accounts for $12 million.

We collected $91 million from the sales of financial assets, $88 million of principal payments from receivables and fixed rate debt-securities, $11 million from equity method investments in excess of income recognized to date under GAAP and received $2 million from escrow accounts and other items.

Cash flows relating to financing activities

Net cash provided by financing activities was approximately $336 million for the six months ended June 30, 2022.

We received $200 million from the issuance of Convertible Notes, $100 million from our credit facilities, $78 million of net proceeds from issuances of common stock and $50 million of net proceeds from the issuance of green commercial paper notes, which were offset by $14 million of principal prepayments on non-recourse debt, $8 million for financing costs, $3 million for withholding requirements resulting from the vesting of employee shares and payments of $67 million of dividends, distributions and other items.

Net cash provided by financing activities was approximately $500 million for the six months ended June 30, 2021.

We received $1 billion from the issuance of senior unsecured notes, $103 million of net proceeds from issuances of common stock, and $25 million of borrowings from credit facilities, which were offset by $514 million related to the redemption of senior unsecured notes, $26 million of principal prepayments on non-recourse debt, $15 million for debt issuance costs, $3 million of principal payments on credit facilities, $14 million for withholding requirements resulting from the vesting of employee shares and payments of $56 million of dividends, distributions and other items.

Net cash provided by financing activities was approximately $237 million for the nine months ended September 30, 2022.

We received $200 million from the issuance of Convertible Notes, $100 million from our credit facilities, $127 million of net proceeds from issuances of common stock and $50 million of net proceeds from the issuance of green commercial paper notes, which were offset by $100 million of payments on credit facilities, $22 million of principal prepayments on non-recourse debt, $8 million for financing costs, $3 million for withholding requirements resulting from the vesting of employee shares and payments of $107 million of dividends, distributions and other items.

Net cash provided by financing activities was approximately $495 million for the nine months ended September 30, 2021.

We received $1 billion from the issuance of senior unsecured notes, $152 million of net proceeds from issuances of common stock, and $25 million of borrowings from credit facilities, which were offset by $500 million related to the redemption of senior unsecured notes, $30 million of principal prepayments on non-recourse debt, $23 million of principal payments on credit facilities, $18 million for debt issuance costs, $14 million for the payment of redemption premium on retirement of the senior unsecured notes, $14 million for withholding requirements resulting from the vesting of employee shares and paid $83 million of dividends, distributions and other items.

Off-Balance Sheet Arrangements

We have relationships with non-consolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, or special purpose or variable interest entities, established to facilitate the sale of securitized assets.

Other than our securitization assets (including any outstanding servicer advances) of approximately $183 million as of June 30, 2022, that may be at risk in the event of defaults or prepayments in our securitization trusts and as discussed below, and except as disclosed in Note 9 to our financial statements in this Form 10-Q, we have not guaranteed any obligations of non-consolidated entities or entered into any commitment or intent to provide additional funding to any such entities.

Other than our securitization assets (including any outstanding servicer advances) of approximately $181 million as of September 30, 2022, that may be at risk in the event of defaults or prepayments in our securitization trusts and as discussed below, and except as disclosed in Note 9 to our financial statements in this Form 10-Q, we have not guaranteed any obligations of non-consolidated entities or entered into any commitment or intent to provide additional funding to any such entities.

A more detailed description of our relations with non-consolidated entities can be found in Note 2 to our financial statements in this Form 10-Q.

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Book Value Considerations

As of June 30, 2022, we carried only our investments and residual assets in securitized financial assets at fair value on our balance sheet.

As of September 30, 2022, we carried only our investments and residual assets in securitized financial assets at fair value on our balance sheet.

As a result, in reviewing our book value, there are a number of important factors and limitations to consider.

Other than our investments and the residual assets in securitized financial assets that are carried on our balance sheet at fair value as of June 30, 2022, the carrying value of our remaining assets and liabilities are calculated as of a particular point in time, which is largely determined at the time such assets and liabilities were added to our balance sheet using a cost basis in accordance with GAAP.

Other than our investments and the residual assets in securitized financial assets that are carried on our balance sheet at fair value as of September 30, 2022, the carrying value of our remaining assets and liabilities are calculated as of a particular point in time, which is largely determined at the time such assets and liabilities were added to our balance sheet using a cost basis in accordance with GAAP, adjusted for income or loss recognized on such assets.

Other than the allowance for current expected credit losses applied to our commercial and governmental receivables, our remaining assets and liabilities do not incorporate other factors that may have a significant impact on their value, most notably any impact of business activities, changes in estimates, or changes in general economic conditions, interest rates or commodity prices since the dates the assets or liabilities were initially recorded.

Accordingly, our book value does not necessarily represent an estimate of our net realizable value, liquidation value or our market value.

Accordingly, our book value does not necessarily represent an estimate of our net realizable value, liquidation value or our fair market value.

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 2. Management’s Discussion and Analysis