Our business and operations are subject to a number of risks and uncertainties, the occurrence of which could adversely affect our business, financial condition, consolidated results of operations and ability to make distributions to stockholders and could cause the value of our capital stock to decline.
−Removed: We may refer to the energy efficiency, renewable energy and the other
−Removed: sustainable infrastructure projects or market collectively as climate solutions projects or the industry.
+Added: We may refer to the energy efficiency, renewable energy and the other sustainable infrastructure projects or market collectively as climate solutions projects or the industry.
Please also refer to the sections entitled “Forward-Looking Statements” and “Risk Factor Summary”.
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federal, state or local governmental policies and incentives that support or enhance project economic feasibility.
−Removed: Such policies may include governmental initiatives, laws and regulations designed to reduce energy usage and impact the use of renewable energy or the investment in and the use of climate solutions.
+Added: Such policies may include governmental initiatives, laws and regulations designed to reduce energy usage and impact the use of renewable energy or the investment in and the use of climate solutions, including the Infrastructure Investment and Jobs Act and the Inflation Reduction Act.
federal policies and incentives include, for example, tax credits (including credits that have been recently reduced and scheduled to be eliminated or phased out in the future), tax deductions, bonus depreciation, federal grants and loan guarantees and energy market regulations.
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If the projects in which we invest fail to obtain or comply with applicable regulations, permits, or contractual obligations, they could be prevented from being constructed or subjected to monetary penalties or loss of operational rights, which could negatively impact project operating results and the returns on our assets.
−Removed: In addition, government counterparties also may have the discretion to change or increase regulation of project operations, or implement laws or regulations affecting project operations, separate from any contractual rights they may have.
+Added: In addition, government counterparties also may have the discretion to change or increase regulation of project operations, or implement laws or regulations affecting project operations, separate from any contractual
+Added: rights they may have.
These actions could adversely impact the efficient and profitable operation of the projects in which we invest.
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Our ability to originate new assets could be adversely affected if one or more of the ESCOs or other origination sources with whom we have relationships are suspended or debarred or fail to win new, or renew existing, contracts.
−Removed: A change in the fiscal health, level of appropriations or budgets of U.S.
−Removed: federal, state and local governments could reduce demand for our investments.
−Removed: Although our energy efficiency investments do not normally require additional governmental appropriations to cover repayment due to the energy and operating savings derived from the newly installed equipment and systems, a significant decline in the fiscal health, level of appropriations or budgets of government customers may make it difficult for them to remain current on existing payment obligations or undesirable to enter into new energy efficiency improvement projects.
−Removed: Alternatively, some government entities may choose to provide appropriations or other credit support for climate solutions projects, which
−Removed: would negatively impact the use of private capital such as ours.
−Removed: This could have a material and adverse effect on the return of and return on our investments for existing projects and on our ability to originate new assets.
−Removed: Moreover, other changes in resources available to governments may also impact their willingness to undertake energy efficiency projects.
−Removed: For example, an increase in money set aside for government expenditures for energy efficiency projects may reduce demand for our investments.
−Removed: In addition, to the extent we make investments that involve direct appropriations, we will depend on approval of the necessary spending for the projects.
−Removed: The repayment of the investment, or the return on our asset, could be adversely affected if appropriations for any such projects are delayed or terminated.
If the cost of energy generated by traditional sources of energy continues to stay or further declines from present levels, demand for the projects in which we invest may decline.
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Such prices, which have decreased and may continue to decrease, may reduce the demand for energy efficiency projects or other projects, including renewable energy facilities, that do not rely on fossil fuel energy sources.
−Removed: For example, low natural gas prices may reduce the demand for projects like renewable energy that can substitute for natural gas, as well as adversely affect both the price available to renewable energy projects under future power sale agreements and the price of the electricity the projects sell on either a forward or a spot-market basis.
−Removed: Technological progress in electricity generation, storage or in the production of traditional fuels or the discovery of large new deposits of traditional fuels could reduce the cost of energy generated from those sources and consequently reduce the demand for the types of projects in which we invest, which could harm our new business origination prospects as well as the value of our existing Portfolio.
+Added: For example, low natural gas prices may reduce the demand for projects like renewable energy that can substitute for natural gas.
+Added: Low natural gas prices also typically adversely affect both the price available to renewable energy projects under future power sale agreements and the price of the electricity the projects sell on either a forward or a spot-market basis.
+Added: Further, as has occurred in the past, technological progress in electricity generation, storage or in the production of traditional fuels or the discovery of large new deposits of traditional fuels could reduce the cost of energy generated from those sources and consequently reduce the demand for the types of projects in which we invest, which could harm our new business origination prospects as well as the value of our existing Portfolio.
In addition, volatility in commodity prices, including energy prices, may cause building owners and other parties to be reluctant to commit to projects for which repayment is based upon a fixed monetary value for energy savings that would not decline if the price of energy declines.
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The market for various types of climate solutions projects is emerging and rapidly evolving, leaving their future success uncertain.
−Removed: Similarly, various investing techniques, such as leasing land for renewable energy projects, purchasing interests in existing renewable energy projects, the use of C-PACE financing and the use of taxable debt for state and local energy efficiency or sustainable infrastructure financings are emerging and the future success of these investing techniques is also uncertain.
If some or all market segments or investing techniques prove unsuitable for widespread commercial deployment or if demand for such projects or techniques fail to grow sufficiently, the demand for our capital may decline or develop more slowly than we anticipate.
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Net metering policies are under review or have been limited or amended in a number of states.
−Removed: The ability and willingness of customers to pay for renewable energy systems which benefit from net metering rules may be reduced if net metering rules are eliminated or their benefits reduced, which may also impact our returns on such systems.
+Added: The ability and willingness of customers to pay for renewable energy systems that benefit from net metering rules may be reduced if net metering rules are eliminated or their benefits reduced, which may also impact our returns on such systems.
Existing electric utility industry regulations, and changes to regulations, may present technical, regulatory and economic barriers to the purchase and use of renewable energy and energy efficiency systems that may significantly reduce demand for systems and projects in which we invest or may adversely affect the profitability of such projects.
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These regulations and policies often relate to electricity pricing and the interconnection of customer-owned electricity generation.
−Removed: the United States, governments and utilities continuously modify these regulations and policies.
+Added: In the United States, governments and utilities continuously modify these regulations and policies.
These regulations and policies could deter customers from purchasing energy efficiency and renewable energy systems.
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• that we may fail or be unable to fully achieve one or more of our ESG goals due to a range of factors within or beyond our control, or that we may adjust or modify our goals in light of new information, adjusted projections, or a change in business strategy, which could negatively impact our reputation and our business;
−Removed: • that a failure to or perception of a failure to disclose metrics and set goals that are rigorous enough or in an acceptable format, a failure to appropriately manage selection of goals, a failure to or perception of a failure to make appropriate disclosures, stockholder perception of a failure to prioritize the “correct” ESG goals, or an unfavorable ESG-related rating by a third party, which could negatively impact our reputation and our business;
−Removed: • that certain data we utilize in our CarbonCount or similar metric calculations is prepared by third parties or receives limited assurance from and/or verification by third parties and may undergo a less rigorous review process than assurance sought in connection with more traditional audits and such review process may not identify errors and may not protect us from potential liability under the securities laws, and, if errors are identified our reputation and our business could be negatively impacted and if we were to seek more extensive assurance or attestation with respect to such ESG metrics, we may be unable to obtain such assurance or attestation or may face increased costs related to obtaining and/or maintaining such assurance or attestation;
+Added: • that a failure to or perception of a failure to disclose metrics and set goals that are rigorous enough or in an acceptable format, a failure to appropriately manage selection of goals, a failure to or perception of a failure to make appropriate disclosures, stockholder perception of a failure to prioritize the “correct” ESG goals, or an unfavorable ESG-related rating by a third party, that could negatively impact our reputation and our business;
+Added: • that certain data we utilize in our CarbonCount or similar metric calculations is prepared by third parties or receives limited assurance from and/or verification by third parties and may undergo a less rigorous review process than
+Added: assurance sought in connection with more traditional audits and such review process may not identify errors and may not protect us from potential liability under the securities laws, and, if errors are identified our reputation and our business could be negatively impacted and if we were to seek more extensive assurance or attestation with respect to such ESG metrics, we may be unable to obtain such assurance or attestation or may face increased costs related to obtaining and/or maintaining such assurance or attestation;
• that the ESG or sustainability standards, norms, or metrics, which are constantly evolving, change in a manner that impacts us negatively or requires us to change the content or manner of our disclosures, and our stockholders or third parties view such changes negatively, we are unable to adequately explain such changes, or we are required to expend significant resources to update our disclosures, any of which could negatively impact our reputation and our business;
• that our business could be negatively impacted if any of our disclosures, including our CarbonCount or similar metrics, reporting to third-party ESG standards, or reporting against our goals, are inaccurate, perceived to be inaccurate, or alleged to be inaccurate.
−Removed: We operate in a competitive market and future competition may impact the terms of our investments.
−Removed: We compete against a number of parties who may provide alternatives to our investments including specialty finance companies, savings and loan associations, banks, private equity, hedge or infrastructure investment funds, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, utilities, independent power producers, project developers, pension funds, government entities, public entities established to own infrastructure assets and other entities.
−Removed: The continued low interest rate environment and increasing investor acceptance of the climate solutions market have increased the level of competition we experience.
+Added: We operate in a competitive market, which may impact the terms of our investments.
+Added: We compete against a number of parties who may provide alternatives to our investments including, among others, a wide variety of financial institutions, government entities and energy industry participants.
+Added: A historically low interest rate environment over the past several years and increasing investor acceptance of the climate solutions market increased the level of competition we experience, and we expect supportive government policies and initiatives to further increase competition in the markets in which we invest.
We also encounter competition in the form of potential customers or our origination partners electing to use their own capital rather than engaging an outside provider such as us.
−Removed: In addition, we may also face competition based on technological developments that reduce demand for electricity, increase power supplies through existing infrastructure or that otherwise compete with our climate solutions projects.
+Added: In addition, we also face competition based on technological developments that reduce demand for electricity, increase power supplies through existing infrastructure or that otherwise compete with our climate solutions projects.
Some of our competitors are significantly larger than we are, have access to greater capital and other resources than we do and may have other advantages over us.
−Removed: In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than we can.
+Added: In addition, some of our competitors have higher risk tolerances or different risk assessments, which allow those competitors to consider a wider variety of investments and establish more relationships than we can.
Further, many of our competitors are not subject to the operating constraints associated with REIT tax compliance or maintenance of an exemption from the 1940 Act.
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As a result, competitive pressures we face could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Our business is affected by seasonal trends and construction cycles, and these trends and cycles could have an adverse effect on our operating results.
−Removed: The volume and timing of our originations are subject to seasonal fluctuations and construction cycles, particularly in climates that experience colder weather during the winter months or at educational institutions, where large projects are typically carried out during summer months when their facilities are unoccupied.
−Removed: In addition, government customers, many of which have fiscal years that do not coincide with ours, typically follow annual procurement cycles.
−Removed: Further, government contracting cycles can be affected by the timing of, and delays in, the legislative process related to government programs, funding, or incentives that help drive demand for climate solutions projects.
−Removed: As a result of such fluctuations, we may occasionally experience fluctuations in the timing of new asset opportunities or declines in revenue or earnings as compared to the immediately preceding quarter, and comparisons of our operating results on a period-to-period basis may not be meaningful.
+Added: A change in the fiscal health, level of appropriations or budgets of U.S.
+Added: federal, state and local governments could reduce demand for our investments.
+Added: Although our energy efficiency investments do not normally require additional governmental appropriations to cover repayment due to the energy and operating savings derived from the newly installed equipment and systems, a significant decline in the fiscal health, level of appropriations or budgets of government customers may make it difficult for them to remain current on existing payment obligations or undesirable to enter into new energy efficiency improvement projects.
+Added: Alternatively, some government entities may choose to provide appropriations or other credit support for climate solutions projects, which would negatively impact the use of private capital such as ours.
+Added: This could have a material and adverse effect on the return of and return on our investments for existing projects and on our ability to originate new assets.
+Added: Moreover, other changes in resources available to governments may also impact their willingness to undertake energy efficiency projects.
+Added: For example, an increase in money set aside for government expenditures for energy efficiency projects may reduce demand for our investments.
+Added: In addition, to the extent we make investments that involve direct appropriations, we will depend on approval of the necessary spending for the projects.
+Added: The repayment of the investment, or the return on our asset, could be adversely affected if appropriations for any such projects are delayed or terminated.
Risks Related to Our Assets and Projects in Which We Invest
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Many of our assets pay a fixed rate of interest or provide a fixed preferential return.
−Removed: With respect to our business operations, increases in interest rates, in general, may over time cause:
+Added: With respect to our business operations, increases in interest rates, have caused, and in general, may in the future cause:
(1) project owners to be less interested in borrowing or raising equity and thus reduce the demand for our investments;
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(3) the market value of our fixed rate or fixed return assets to decline;
−Removed: and (4) the market value of our interest rate swap agreements to increase.
+Added: and (4) the market value of any fixed-rate interest rate swap agreements to increase.
Decreases in interest rates, in general, may over time cause:
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(4) the market value of our fixed rate or fixed return assets to increase;
−Removed: and (5) the market value of our interest rate swap agreements to decrease.
+Added: and (5) the market value of any fixed-rate interest rate swap agreements to decrease.
Adverse developments resulting from changes in interest rates could have a material adverse effect on our business, financial condition and results of operations.
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We rely on our project sponsors for financial reporting related to our project companies, and our financial statements may be materially affected if the financial reporting related to our project companies proves to be incorrect.
−Removed: We have equity investments in climate solutions project companies which we account for under the equity method of accounting, which requires us to rely on the project sponsor for the reporting of the financial results of those project companies, including in some instances the allocation of earnings under the hypothetical liquidation at book value (“HLBV”) method.
+Added: We have equity investments in climate solutions project companies that we account for under the equity method of accounting, which requires us to rely on the project sponsor for the reporting of the financial results of those project companies, including in some instances the allocation of earnings under the hypothetical liquidation at book value (“HLBV”) method.
The HLBV method involves complex judgments around the interpretation of legal provisions governing liquidation of the entity in which we are invested.
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Any credit ratings assigned to our assets, debt or obligors are subject to ongoing evaluations and revisions and we cannot assure you that those ratings will not be downgraded.
−Removed: To the extent our assets, their underlying obligors, or our debt are rated by credit rating agencies or by our internal rating process, such assets, obligors or our debt will be subject to ongoing evaluation by credit rating agencies and our internal rating process, and we cannot assure you that any ratings will not be changed or withdrawn in the future.
+Added: To the extent our assets, their underlying obligors, or our debt are rated by credit rating agencies or by our internal rating process, such assets, obligors or our debt will be subject to ongoing evaluation by credit rating agencies and our internal rating process, and those ratings may be changed or withdrawn in the future.
If rating agencies assign a lower-than-expected rating or if a rating is further reduced or withdrawn by a rating agency or us, or if there are indications of a potential reduction or withdrawal of the ratings of our assets, the underlying obligors or our debt in the future, the value of these assets could significantly decline, the level of borrowings based on such asset could be reduced or we could incur higher borrowing costs or incur losses upon disposition or the failure of obligors to satisfy their obligations to us.
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By their terms, such instruments may entitle the holders to receive payment of interest, principal payments or other distributions on or before the dates on which we are entitled to receive payments with respect to the instruments in which we invest.
−Removed: Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of an entity in which we have invested, holders of instruments ranking senior to our investment in that project or business would typically be entitled to receive payment in full before we receive any distribution.
+Added: Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of an entity in which we have invested, holders of instruments ranking senior to our investment in that project or business would typically be entitled to receive payment in full before we receive any
+Added: distribution.
After repaying such senior stakeholders, such project may not have any remaining assets to use for repaying its obligation to us.
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Such rights may be triggered at a time when we may not want them to be exercised and such rights may inhibit our ability to sell our interest in an entity within our desired time frame or on any other desired terms.
−Removed: Many of our assets depend on revenues from third-party contractual arrangements.
+Added: Many of our assets depend on revenues from third-party contractual arrangements, including PPAs, that expose the projects to various risks.
Many of the projects in which we invest rely on revenue or repayment from contractual commitments of end-customers, including federal, state, or local governments for energy efficiency projects or utilities or other customers under PPAs.
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In addition, many of these end-customers are large entities with wide ranging activities.
−Removed: An event in a non-related part of the business could have a material adverse impact on the financial strength of such end-customer, such as the effect of recent wildfires on the California utilities.
+Added: An event in a non-related part of the business could have a material adverse impact on the financial strength of such end-customer, such as the effect of wildfires on the California utilities.
Furthermore, the bankruptcy, insolvency, or other liquidity constraints of one or more customers may result in a renegotiation or rejection of the third-party contract, delay the receipt of any obligations or reduce the likelihood of collecting defaulted obligations.
−Removed: Some projects rely on one customer for their revenue and thus the project could be materially and adversely affected by any material change in the financial condition of that customer.
+Added: Some projects rely on one customer for their revenue and thus the project could be materially and adversely affected by any material change in the
+Added: financial condition of that customer.
While there may be alternative customers for such a project, there can be no assurance that a new contract on the same terms will be able to be negotiated for the project.
Certain of our projects with contractually committed revenues or other sources of repayment under long term contracts will be subject to re-contracting risk in the future.
−Removed: We cannot provide assurance that these contracts can be re-negotiated once their terms expire on equally favorable terms or at all.
+Added: These projects may be unable to renegotiate these contracts once their terms expire on equally favorable terms or at all.
If it is not possible to renegotiate these contracts on favorable terms, our business, financial condition, results of operations, and prospects could be materially and adversely affected.
Revenues at some of the projects in which we invest depend on reliable and efficient metering, or other revenue collection systems, which are often specified in the contract.
−Removed: If one or more of such projects are not able to operate and maintain
−Removed: the metering or other revenue collection systems in the manner expected, if the operation and maintenance costs, are greater than expected, or if the customer disputes the output of the revenue collection system, the ability of the project to repay our investments or provide a return to us on our asset could be materially and adversely affected.
−Removed: We are exposed to the credit risk of ESCOs, various project sponsors, and others.
−Removed: We are subject to varying degrees of credit risk related to ESCOs in government energy efficiency projects in which guarantees provided by ESCOs under energy savings performance contracts are required in the event that certain energy savings are not realized by the customer.
−Removed: We are also exposed to credit risk in projects in which we invest that do not depend on funding from governments.
+Added: If one or more of these projects are not able to operate and maintain the metering or other revenue collection systems in the manner expected, if the operation and maintenance costs, are greater than expected, or if the customer disputes the output of the revenue collection system, the ability of the project to repay our investments or provide a return to us on our asset could be materially and adversely affected.
+Added: In most instances, projects which sell power under PPAs commit to sell minimum levels of generation.
+Added: If the project generates less than the committed volumes, it may be required to buy the shortfall of electricity on the open market or make payments of liquidated damages or be in default under a PPA, which could result in its termination.
+Added: In the event that any of these events were to occur, our business, financial condition, and results of operations could suffer as a result.
+Added: We are exposed to the credit risk of various project sponsors, ESCOs, and others.
+Added: We are exposed to credit risks in the commercial projects in which we invest.
+Added: We are also subject to varying degrees of credit risk related to ESCOs in government energy efficiency projects in which guarantees provided by ESCOs under energy savings performance contracts are required in the event that certain energy savings are not realized by the customer.
Where we make loans to or own equity interests in special purposes entities such as those that lease solar energy systems to residential customers, those special purpose entities often enter into various contractual arrangements with, or receive performance guarantees from the affiliate project sponsor to ensure satisfactory equipment or other project performance over the term of the lease or power purchase agreement.
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A material reduction in our financing sources or an adverse change in the terms of our financings could have a material adverse effect on our financial condition and results of operations.
−Removed: Certain participants in the sustainable energy industry have experienced significant declines in the value of their equity and difficulty in raising or refinancing debt, which increases the credit risk to these companies and there can be no assurance they will be able to fulfill their obligations which could adversely impact our operating results.
+Added: Certain participants in the sustainable energy industry have experienced significant declines in the value of their equity and difficulty in raising or refinancing debt, which increases the credit risk to these companies and they may not be able to fulfill their obligations which could adversely impact our operating results.
Some of the projects in which we invest have sold their output under PPAs that expose the projects to various risks.
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Some of the projects we invest in, or may plan to invest in, sell environmental attributes such as renewable energy credits or other similar credits on an uncontracted basis.
−Removed: To the extent merchant prices for these attributes are lower than expected, our projects revenues could be adversely impacts, and our business, financial condition, and results of operations could suffer as a result.
+Added: To the extent merchant prices for these attributes are lower than expected, our projects revenues could be adversely impacted, and our business, financial condition, and results of operations could suffer as a result.
The ability of our assets to generate revenue from certain projects depends on having interconnection arrangements and services.
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Components of renewable energy systems, such as turbines, solar panels and inverters, could be damaged by natural disasters or severe weather, including extreme temperatures, wildfires, hurricanes, hailstorms or tornadoes.
−Removed: Furthermore, the potential physical impacts of climate change may impact our projects, including the result of changes in weather patterns (including floods, tsunamis, drought, and rainfall levels), wind speeds, water availability, storm patterns and intensities, and temperature levels.
+Added: Furthermore, the potential physical impacts of climate change may impact our projects, including the result of changes in weather patterns (including floods, tsunamis, drought, mudslides, and rainfall levels), wind speeds, water availability, storm patterns and intensities, and temperature levels.
The projects in which we invest will be obligated to bear the expense of repairing the damaged renewable energy systems and replacing spare parts for key components and insurance may not cover the costs or the lost revenue.
−Removed: Natural disasters or unfavorable weather and atmospheric conditions, such as extreme cold temperatures impacting Texas in February 2021, could impair the effectiveness of the renewable energy assets, reduce their output beneath their rated capacity, require shutdown of key equipment or impede operation of the renewable energy assets, which could adversely affect our business, financial condition and results of operations and cash flows.
+Added: Natural disasters or unfavorable weather and atmospheric conditions, such as extreme cold temperatures or extreme events of rain, flooding, and mudslides, could impair the effectiveness of the renewable energy assets, reduce their output beneath their rated capacity, require shutdown of key equipment or impede operation of the renewable energy assets, which could adversely affect our business, financial condition and results of operations and cash flows.
Sustained unfavorable weather could also unexpectedly delay the installation of renewable energy systems, which could result in a delay in our investing in new projects or increase the cost of such projects.
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Operation of a project also involves risks that the operator will be unable to transport its product to its customers in an efficient manner due to a lack of transmission capacity.
−Removed: Unplanned outages of projects, including extensions of scheduled outages due to mechanical failures or other problems, occur from time to
−Removed: time and are an inherent risk of the business.
+Added: Unplanned outages of projects, including extensions of scheduled outages due to mechanical failures or other problems, occur from time to time and are an inherent risk of the business.
Unplanned outages typically increase operation and maintenance expenses and may reduce revenues as a result of selling less electricity or require the project to incur significant costs as a result of obtaining replacement power from third parties in the open market to satisfy forward power sales obligations.
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In addition, we may acquire rights to land or other real property.
−Removed: Although we believe that we, or our projects in which we invest, have valid rights to all material easements, licenses and rights of way, not all of such easements, licenses and rights of way are registered against the lands to which they relate and may not bind subsequent owners.
+Added: Although we believe that we, or the projects in which we invest, have valid rights to all material easements, licenses and rights of way, not all of such easements, licenses and rights of way are registered against the lands to which they relate and may not bind subsequent owners.
Some of our real property rights and projects generally are, and are likely to continue to be, located on land occupied pursuant to long-term easements and leases.
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Performance of projects where we invest may be harmed by future labor disruptions and economically unfavorable collective bargaining agreements.
−Removed: A number of the projects where we invest could have workforces that are unionized or that in the future may become unionized and, as a result, are required to negotiate the wages, benefits and other terms with many of their employees collectively.
+Added: A number of the projects where we invest could have workforces that are unionized or in the future may become unionized and, as a result, are required to negotiate the wages, benefits and other terms with many of their employees collectively.
If these projects were unable to negotiate acceptable contracts with any of their unions as existing agreements expire, they could experience a significant disruption of their operations, higher ongoing labor costs and restrictions on their ability to maximize the efficiency of their operations, which could have a material and adverse effect on our business, financial condition and results of operations.
−Removed: In addition, in some jurisdictions where our projects have operations, labor forces have a legal right to strike which may have a negative impact on our business, financial condition and results of operations, either directly or indirectly, for example if a critical upstream or downstream counterparty was itself subject to a labor disruption which impacted the ability of our projects to operate.
+Added: In addition, in some jurisdictions where our projects have operations, labor forces have a legal right to strike, which may have a negative impact on our business, financial condition and results of operations, either directly or indirectly, for example if a critical upstream or downstream counterparty was itself subject to a labor disruption that impacted the ability of our projects to operate.
We invest in projects that rely on third parties to manufacture quality products or provide reliable services in a timely manner and the failure of these third parties could cause project performance to be adversely affected.
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Certain obligors to which we have credit exposure are, or may be, subject to consumer protection laws, such as federal truth-in-lending, consumer leasing, and equal credit opportunity laws and regulations, as well as state and local sales and finance laws and regulations.
−Removed: Claims arising out of actual or alleged violations of law may be asserted against those obligors by individuals or governmental entities and may exposure them to significant damages or other penalties, including fines, or could reduce the likelihood the residential customer may pay their obligation, which could limit their ability to repay borrowings or make equity distributions to us.
+Added: Claims arising out of actual or alleged violations of law may be asserted against those obligors by individuals or governmental entities and may expose them to significant damages or other penalties, including fines, or could reduce the likelihood the residential customer may pay their obligation, which could limit their ability to repay borrowings or make equity distributions to us.
Risks Related to Our Company
We may change our operational policies (including our investment guidelines and strategies) with the approval of our Board but without stockholder consent at any time, which may adversely affect the market value of our common stock and our ability to make distributions to our stockholders.
−Removed: Our board of directors determines our operational policies and may amend or revise our policies, including our policies with respect to acquisitions, dispositions, growth, operations, compensation, indebtedness, capitalization and dividends, or approve transactions that deviate from these policies, without a vote of, or notice to, our stockholders at any time.
+Added: Our Board determines our operational policies and may amend or revise our policies, including our policies with respect to investments, acquisitions, dispositions, growth, operations, compensation, indebtedness, capitalization and dividends, or approve transactions that deviate from these policies, without a vote of, or notice to, our stockholders at any time.
We may change our investment guidelines, underwriting process and our strategy at any time with the approval of our Board, but without the consent of our stockholders, which could result in originating assets that are different in type from, and possibly riskier than, the assets initially contemplated.
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These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption.
−Removed: The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusions, including by computer hackers, nation-state affiliated actors, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
−Removed: The result of these incidents may include disrupted operations, misstated or unreliable financial data, disrupted market price of our common stock, misappropriation of assets, liability for stolen assets or information, increased cybersecurity protection and insurance cost, regulatory enforcement, litigation and damage to our relationships.
+Added: The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusions, including by computer hackers, nation-state affiliated actors, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased, and will likely continue to increase in the future.
+Added: The result of these incidents could include disrupted operations, misstated or unreliable financial data, disrupted market price of our common stock, misappropriation of assets, liability for stolen assets or information, increased cybersecurity protection and insurance cost, regulatory enforcement, litigation and damage to our relationships.
These risks require continuous and likely increasing attention and other resources from us to, among other actions, identify and quantify these risks, upgrade and expand our technologies, systems and processes to adequately address them and provide periodic training for our employees to assist them in detecting phishing, malware and other schemes.
Such attention diverts time and other resources from other activities and there is no assurance that our efforts will be effective.
+Added: Additionally, the cost of maintaining such systems and processes, procedures and internal controls may increase from its current level.
Potential sources for disruption, damage or failure of our information technology systems include, without limitation, computer viruses, security breaches, human error, cyber- attacks, natural disasters and defects in design.
Additionally, due to the size and nature of our company, we rely on third-party service providers for many aspects of our business.
−Removed: We can provide no assurance that the networks and systems that our third-party vendors have established or use will be effective.
+Added: The networks and systems that our third-party vendors have established or use may not be effective.
As our reliance on technology has increased, so have the risks posed to both our information systems and those provided by third-party service providers.
Our processes, procedures and internal controls that are designed to mitigate cybersecurity risks and cyber intrusions do not guarantee that a cyber incident will not occur or that our financial results, operations or confidential information will not be negatively impacted by such an incident.
−Removed: We may seek to expand our business internationally, which will expose us to additional risks that we do not face in the United States, which could have an adverse effect on our business, financial condition and operating results.
+Added: Even if we are not targeted directly, cyberattacks on the U.S.
+Added: and foreign governments, financial markets, financial institutions, or other businesses, including borrowers, vendors, software creators, cybersecurity service providers, and other third parties with whom we do business, may occur, and such events could disrupt our normal business operations and networks in the future.
+Added: Major public health issues and related disruptions in the U.S.
+Added: and global economy and financial markets could adversely impact or disrupt our financial condition and results of operations.
+Added: In recent years, the outbreaks of a number of diseases, including COVID-19, avian influenza, H1N1, and other viruses have resulted in and increased the risk of a pandemic or major public health issues.
+Added: We believe that our ability to operate, our level of business activity and the profitability of our business, as well as the values of, and the cash flows from, the assets we own could in the future be impacted by another pandemic or other major public health issue.
+Added: While we have implemented risk management and contingency plans and taken preventive measures and other precautions, no predictions of specific scenarios can be made with certainty and such measures may not adequately predict the impact on our business from such events.
+Added: We may seek to expand our business internationally, which would expose us to additional risks that we do not face in the United States.
+Added: A failure to manage these additional risks could have an adverse effect on our business, financial condition and operating results.
We generate substantially all of our revenue from operations in the United States.
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Our failure to manage these risks successfully could harm our international projects, reduce our international income or increase our costs, thus adversely affecting our business, financial condition and operating results.
−Removed: We grow our business in part through future acquisitions or other similar investments.
−Removed: As we grow our business, we have used, and will continue to use, acquisitions of, or other types of transactions such as equity or convertible debt investments in, companies or assets to invest in new or different projects or markets, expand our project skill-sets and capabilities, expand our geographic markets, add experienced management and increase our product and service offerings.
−Removed: There are a number of risks associated with these transactions and we may not achieve our goals in the transaction.
−Removed: Such transaction could disrupt our business, cause dilution to our stockholders and harm our business, financial condition or operating results.
−Removed: In addition, the time and effort involved to identify candidates and consummate such transactions may divert members of our management from the operations of our company.
Risks Relating to Regulation
2 unchanged sentences
Treasury, the SEC, U.S.
−Removed: Congress and other governmental and regulatory bodies have taken, are taking or may in the future take, various actions to address financial crises or other areas of regulatory concern.
+Added: Congress and other governmental and regulatory bodies have taken, are taking or may in the future take, various actions to address inflation, financial crises, or other areas of regulatory concern.
Such actions could have a dramatic impact on our business, results of operations and financial condition, and the cost of complying with any additional laws and regulations or the elimination or reduction in scope of various existing laws and regulations could have a material adverse effect on our financial condition and results of operations.
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In general, with regard to our subsidiaries relying on Section 3(c)(5)(C), we rely on other guidance published by the SEC or its staff or on our analyses of guidance published with respect to other types of assets to determine which assets are qualifying real estate assets and real estate-related assets.
−Removed: In addition, one or more of our subsidiaries qualifies for an exemption from registration as an investment company under the 1940 Act pursuant to either Section 3(c)(5)(A) of the 1940 Act, which is available for entities which are not engaged in the business of issuing redeemable securities, face-amount certificates of the installment type or periodic payment plan certificates, and which are primarily engaged in the business of purchasing or otherwise acquiring notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance, and services, or Section 3(c)(5)(B) of the 1940 Act, which is available for entities primarily engaged in the business of making loans to manufacturers, wholesalers, and retailers of, and to prospective purchasers of, specified merchandise, insurance, and services.
+Added: In addition, one or more of our subsidiaries qualifies for an exemption from registration as an investment company under the 1940 Act pursuant to either Section 3(c)(5)(A) of the 1940 Act, which is available for entities which are not engaged in the
+Added: business of issuing redeemable securities, face-amount certificates of the installment type or periodic payment plan certificates, and which are primarily engaged in the business of purchasing or otherwise acquiring notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance, and services, or Section 3(c)(5)(B) of the 1940 Act, which is available for entities primarily engaged in the business of making loans to manufacturers, wholesalers, and retailers of, and to prospective purchasers of, specified merchandise, insurance, and services.
These exemptions generally require that at least 55% of such subsidiaries’ portfolios must be comprised of qualifying assets that meet the requirements of the exemption.
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We may have to make decisions that we otherwise would not make absent the REIT and 1940 Act considerations.
−Removed: Because we expect to distribute substantially all of our REIT taxable income to our stockholders, we will need additional capital to finance our growth and such capital may not be available on favorable terms or at all.
−Removed: We will need additional capital to fund our growth.
−Removed: federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes greater than 90% but less than 100% of such REIT taxable income.
−Removed: Because we intend to grow our business, this limitation may require us to incur additional debt or raise additional equity at a time when it may be disadvantageous to do so.
−Removed: We cannot make any assurance that debt and equity financing will be available to us on favorable terms, or at all, and debt financings may be restricted by the terms of any of our outstanding borrowings.
−Removed: If additional funds are not available to us, we could be forced to curtail or cease new asset originations and acquisitions, which could have a material adverse effect on our business and financial condition.
Risks Related to our Borrowings and Hedging
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Some of our borrowings will have a remaining balance when they come due.
−Removed: If we are unable to repay or refinance the remaining balance of this debt, or if the terms of any available refinancing are not favorable, we may be forced to liquidate assets or incur higher costs which may significantly harm our business, financial condition, results of operations, and our ability to make distributions, which could cause the value of our common stock to decline.
−Removed: The return on our assets and cash available for distribution to our stockholders may be reduced to the extent that market conditions prevent us from leveraging our assets or increase the cost of our financing relative to the income that can be derived from the assets acquired.
+Added: If we are unable to repay or refinance the remaining balance of this debt, or if the terms of any available refinancing are not favorable, we may be forced to liquidate assets or incur higher costs which may significantly harm our business, financial condition, results of operations, and our ability to make distributions, which could in turn cause the value of our common stock to decline.
+Added: The return on our assets
+Added: and cash available for distribution to our stockholders may be reduced to the extent that market conditions prevent us from leveraging our assets or increase the cost of our financing relative to the income that can be derived from the assets acquired.
Increases in our financing costs will reduce cash available for distributions to stockholders.
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As some of our borrowings will have a remaining balance at maturity, we may be required to enter into new borrowings at higher rates or to sell certain of our assets to repay the loan.
−Removed: In addition, any increases in the federal funds rate announced by the Federal Reserve Board of Governors is likely to increase shorter-term interest rates and may lower the difference between shorter-term interest rates and longer-term interest rates which would result in a flattening or inversion of the yield curve.
−Removed: The Federal Reserve Board of Governors raised the federal funds rate nine times during the period between December 2015 and December 2018 and has announced its intention to determine what future adjustments are appropriate to the federal funds rate over time, including as a result of increased concerns over inflation, but such changes in fiscal and monetary policies are beyond our control and are difficult to predict.
Our credit facilities have rates that adjust on a frequent basis based on prevailing short-term interest rates.
−Removed: An increase in interest rates, or a flattening or inversion of the yield curve, would reduce the spread between the returns on our assets which are typically priced using longer-term interest rates and the cost of any new borrowings or borrowings where the interest rate adjusts to market rates or is based on shorter-term rates.
+Added: Increases in interest rates, or a flattening or inversion of the yield curve, reduce the spread between the returns on our assets which are typically priced using longer-term interest rates and the cost of any new borrowings or borrowings where the interest rate adjusts to market rates or is based on shorter-term rates.
This change in interest rates would adversely affect our earnings and, in turn, cash available for distribution to our stockholders.
−Removed: In addition, as we may use short-term borrowings including repurchase agreements and warehouse facilities that are generally short-term commitments of capital, lenders may respond to market conditions making it more difficult for us to obtain continued financing.
+Added: In addition, as we may use short-term borrowings that are generally short-term commitments of capital, lenders may respond to market conditions making it more difficult for us to obtain continued financing.
If we are not able to renew our then existing facilities or arrange for new financing on terms acceptable to us, or if we default on our covenants or are otherwise unable to access funds under any of these facilities, we may have to curtail entering into new transactions and/or dispose of assets.
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We have established leverage limits which are discussed in Item 7, Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Liquidity and Capital Resources.
−Removed: However, our charter and bylaws do not limit the amount or type of indebtedness we can incur, and our board of directors has changed, and has the discretion to deviate from or change at any time in the future, our leverage policy, which could result in an investment portfolio with a different risk profile.
+Added: However, our charter and bylaws do not limit the amount or type of indebtedness we can incur, and our Board has changed, and has the discretion to deviate from or change at any time in the future, our leverage policy, which could result in an investment portfolio with a different risk profile.
We utilize non-recourse facilities on certain types of assets that have significantly higher leverage.
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Although this subsidiary debt is typically non-recourse to us, we make certain representations and warranties or enter into certain guaranties of our subsidiary’s obligations or covenants to the non-recourse debt holder, the breach of which may require us to make payments to the lender.
−Removed: We may also from time to time determine to provide financial support to the subsidiary in
−Removed: order to maintain rights to the project or otherwise avoid the adverse consequences of a default.
+Added: We may also from time to time determine to provide financial support to the subsidiary in order to maintain rights to the project or otherwise avoid the adverse consequences of a default.
In the event a subsidiary defaults on its indebtedness, its creditors may foreclose on the collateral securing the indebtedness, which may result in us losing our ownership interest in some or all of the subsidiary’s assets.
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These provisions may limit our ability to obtain distributions from the underlying assets and could impact our cash flow and expected returns.
−Removed: We have issued senior unsecured notes which require us to maintain a certain amount of unencumbered assets as a part of our Portfolio, as well as to maintain certain debt coverage service ratios in order to issue additional notes.
+Added: We have issued senior unsecured notes that require us to maintain a certain amount of unencumbered assets as a part of our Portfolio, as well as to maintain certain debt coverage service ratios in order to issue additional notes.
These provisions may limit our ability to leverage certain assets and limit our overall debt levels.
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If our subsidiary is unable to repay or refinance the remaining balance of this debt, or if the terms of any available refinancing are not favorable, we may be forced to liquidate assets or incur higher costs which may significantly harm our business, financial condition, results of operations, and our ability to make distributions, which could cause the value of our common stock to decline.
−Removed: If a counterparty to repurchase transactions defaults on its obligation to resell the underlying security back to us at the end of the transaction term, or if the value of the underlying security has declined as of the end of that term, or if we default on obligations under the repurchase agreement, we may lose money on repurchase transactions.
−Removed: In repurchase transactions, we will generally sell certain of our assets to lenders (i.e., repurchase agreement counterparties) and receive cash from the lenders.
−Removed: The lenders will be obligated to resell the same assets back to us at the end of the term of the transaction.
−Removed: Because the cash we will receive from the lender when we initially sell the assets to the lender is less than its value, if the lender defaults on its obligation to resell the same asset back to us we would incur a loss on the transaction equal to the differential in value at which the lender purchased the asset (assuming there was no other change in value).
−Removed: We would also lose money on a repurchase transaction if the value of the underlying asset has declined as of the end of the transaction term, as we would have to repurchase the assets for their initial value but would receive loans worth less than that amount.
−Removed: We may also be forced to sell assets at significantly depressed prices to meet margin calls, post additional collateral and maintain adequate liquidity, which could cause us to incur losses.
−Removed: Moreover, to the extent we are forced to sell assets at such time, given market conditions, we may be selling at the same time as others facing similar pressures, which could exacerbate a difficult market environment and which could result in our incurring significantly greater losses on our sale of such assets.
−Removed: In an extreme case of market duress, a market may not even be present for certain of our assets at any price.
−Removed: Such a situation would likely result in a rapid deterioration of our financial condition and possibly necessitate a filing for protection under the United States Bankruptcy Code (the “Bankruptcy Code”).
−Removed: Further, if we default on one of our obligations under a repurchase transaction, the lender will be able to terminate the transaction and cease entering into any other repurchase transactions with us.
−Removed: Our repurchase agreements may contain cross-default provisions, so that if a default occurs under any one agreement, the lenders under any other of our agreements could also declare a default.
−Removed: If a default occurs under any of our repurchase agreements and the lenders terminate one or more of our repurchase agreements, we may need to enter into replacement repurchase agreements with different lenders.
−Removed: There can be no assurance that we will be successful in entering into such replacement repurchase agreements on the same terms as the repurchase agreements that were terminated or at all.
−Removed: Any losses we incur on our repurchase transactions could adversely affect our earnings and thus our cash available for distribution to our stockholders.
−Removed: In the event of our insolvency or bankruptcy, certain repurchase agreements may qualify for special treatment under the Bankruptcy Code, the effect of which, among other things, would be to allow the lender under the applicable repurchase agreement to avoid the automatic stay provisions of the Bankruptcy Code and to foreclose on the collateral agreement without delay, which could ultimately reduce the amounts we could otherwise recover.
The discontinuation of U.S.
dollar London Interbank Offered Rate (“LIBOR”) may adversely affect our borrowing costs and the costs of any related hedging transactions.
−Removed: The terms of certain of our revolving credit facilities and interest rate hedge agreements refer to U.S.
+Added: The terms of our secured credit facilities refer to U.S.
dollar LIBOR.
2 unchanged sentences
dollar LIBOR rates immediately after June 30, 2023.
−Removed: The Alternative Reference Rates Committee (“ARCC”), which was convened by the Federal Reserve Board and the New York Federal Reserve Bank, has identified the Secured Overnight Financing Rate (“SOFR”) as the recommended risk-free alternative rate for U.S.
+Added: The Alternative Reference Rates Committee (“ARCC”), which was convened by the Federal Reserve Board and the New York
+Added: Federal Reserve Bank, has identified the Secured Overnight Financing Rate (“SOFR”) as the recommended risk-free alternative rate for U.S.
dollar LIBOR.
+Added: The ARRC has also recommended the use of the CME Group's computation of forward-looking SOFR term rates (“Term SOFR”), subject to certain recommended limitations on the scope of its use.
+Added: In March 2022, the Adjustable Interest Rate (LIBOR) Act was enacted at the federal level in the United States, pursuant to which the Board of Governors of the Federal Reserve System has designated benchmark replacement rates based on SOFR for U.S.
+Added: law governed legacy contracts that have no or insufficient fallback provisions.
Some of our financing arrangements may not include robust fallback language that would facilitate replacing U.S.
2 unchanged sentences
dollar LIBOR, or applicable legislation or regulations may provide a benchmark replacement rate based on SOFR, a spread adjustment and conforming changes.
−Removed: Even when robust fallback language is included in financing arrangements, there can be no assurance that the benchmark replacement rate plus any spread adjustment will be economically equivalent to U.S.
+Added: Even when robust fallback language is included in financing arrangements, any alternative rates used to determine interest on our variable rate debt, including any version of SOFR or Term SOFR, plus any spread adjustment may not be economically equivalent to U.S.
dollar LIBOR.
1 unchanged sentence
Inconsistent use of replacement rates or calculation conventions among financial products could expose us to additional financial risks and increase the cost of any related hedging transactions.
−Removed: It is not possible to predict all consequences of the IBA’s plans to cease publishing LIBOR, any related regulatory actions and the expected discontinuance of the use of LIBOR as a reference rate for financial contracts.
−Removed: Any transition from LIBOR to alternative reference rates could result in financial market disruptions or significant increases in our borrowing costs or the costs of any related hedging, any of which could have an adverse effect on our business, results of operations, financial condition, and the market price of our common stock.
−Removed: Borrowings under our CarbonCount®-Based Revolving Credit Facility bear interest at a variable rate that is based on the SOFR, which may have consequences for us that cannot be reasonably predicted and may adversely affect our liquidity, financial condition, and results of operations.
−Removed: Borrowings under our CarbonCount®-Based Revolving Credit Facility may bear interest at a rate per annum that is based upon SOFR.
−Removed: Although SOFR has been endorsed by the Alternative Reference Rates Committee as its preferred replacement for LIBOR, it remains uncertain whether or when SOFR or other alternative reference rates will be widely accepted by lenders as
−Removed: the replacement for LIBOR.
+Added: Furthermore, the transition away from U.S.
+Added: dollar LIBOR may adversely impact our ability to hedge exposures to fluctuations in interest rates using derivative instruments.
+Added: It is not possible to predict all consequences of the IBA’s plans to cease publishing U.S.
+Added: dollar LIBOR, any related regulatory actions and the expected discontinuance of the use of U.S.
+Added: dollar LIBOR as a reference rate for financial contracts.
+Added: Any transition from LIBOR to alternative reference rates could result in financial market disruptions, hedging mismatches, or significant increases in our borrowing costs or the costs of any related hedging, any of which could have an adverse effect on our business, results of operations, financial condition, and the market price of our common stock.
+Added: We have borrowings which bear interest at a variable rate that is based on the SOFR, which may have consequences for us that cannot be reasonably predicted and may adversely affect our liquidity, financial condition, and results of operations.
+Added: We have borrowings which bear interest at a rate per annum that is based upon SOFR.
+Added: Although SOFR has been endorsed by the Alternative Reference Rates Committee as its preferred replacement for LIBOR, it remains uncertain whether or when SOFR or other alternative reference rates will be widely accepted by lenders as the replacement for LIBOR.
This may, in turn, impact the liquidity of the SOFR loan market, and SOFR itself.
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These economic losses will be reflected in our, or the project’s, financial statements, and our, or the project’s, ability to fund these obligations will depend on the liquidity of our, or the project’s, assets and access to capital at the time, and the need to fund these obligations could adversely impact our financial condition.
−Removed: In addition, over-the-counter hedges entered into to hedge interest rates, credit risk or commodity prices involve risk since they often are not traded on regulated exchanges or cleared through a central counterparty.
+Added: Even though most swaps are cleared through a central counterparty clearinghouse, certain transactions could be executed bilaterally with a counterparty.
We would remain exposed to our counterparty’s ability to perform on its obligations under each hedge and cannot look to the creditworthiness of a central counterparty for performance.
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In such case, we could be forced to cover our unhedged liabilities at the then current market price.
−Removed: We may also be at risk for any collateral we have pledged to secure our obligations under the hedge if the counterparty becomes insolvent or files for bankruptcy.
+Added: be at risk for any collateral we have pledged to secure our obligations under the hedge if the counterparty becomes insolvent or files for bankruptcy.
Furthermore, our interest rate swaps and other hedge transactions are subject to increasing statutory and other regulatory requirements and, depending on the identity of the counterparty, applicable international requirements.
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To the extent they enter into such hedges, the financial results of the project will be exposed to similar risks as described above which could adversely impact our results of operations.
−Removed: If we, or our projects, choose not to pursue, or fail to qualify for, hedge accounting treatment, our operating results may be impacted because losses on the derivatives that we enter into may not be offset by a change in the fair value of the related hedged transaction.
+Added: Further, the hedges entered into by us or the projects in which we invest may not be effective which could adversely impact our economics.
+Added: If we, or our projects, choose not to pursue, or fail to qualify for, hedge accounting treatment, our operating results under GAAP may be impacted because losses on the derivatives that we enter into may not be offset by a change in the fair value of the related hedged transaction.
We, or our projects, may choose not to pursue, or fail to qualify for, hedge accounting treatment relating to derivative and hedging transactions.
We, or our projects, may fail to qualify for hedge accounting treatment for a number of reasons, including if we, or our projects, use instruments that do not meet the Accounting Standards Codification (“ASC”) Topic 815 definition of a derivative, we, or our projects, fail to satisfy ASC Topic 815 hedge documentation and hedge effectiveness assessment requirements or the hedge relationship is not highly effective.
−Removed: If we, or our projects, fail to qualify for, or choose not to pursue, hedge accounting treatment, our, or our projects, operating results may be impacted because losses on the derivatives that we, or our projects, enter into may not be offset by a change in the fair value of the related hedged transaction.
+Added: If we, or our projects, fail to qualify for, or choose not to pursue, hedge accounting treatment, our, or our projects, operating results may be impacted because losses on the derivatives that we, or our projects, enter into may not be offset by a change in the fair value of the related hedged transaction in our statement of operations presented under GAAP.
Risks Related to Our Common Stock
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If market interest rates increase, prospective investors may demand a higher distribution rate or seek alternative investments paying higher dividends or interest.
−Removed: interest rate fluctuations and conditions in capital markets have, or in the future could, affect the market value of our common stock.
+Added: As a result, interest rate fluctuations and conditions in capital markets have, or in the future could, affect the market value of our common stock.
Common stock and preferred stock eligible for future sale may have adverse effects on our share price.
48 unchanged sentences
Additionally, the partnership agreement of our Operating Partnership expressly limits our liability by providing that neither we, as the general partner of the Operating Partnership, nor any of our directors or officers, will be liable or accountable in damages to our Operating Partnership, its limited partners or their assignees for errors in judgment, mistakes of fact or law or for any act or omission if the general partner, director or officer, acted in good faith.
−Removed: In addition, our Operating Partnership is required to indemnify us, our affiliates and each of our and their respective officers, directors, employees and agents to the fullest extent permitted by applicable law against any and all losses, claims, damages, liabilities (whether joint or several), expenses (including, without limitation, attorneys’ fees and other legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Operating Partnership, provided that our Operating Partnership will not indemnify any such person for (1) willful misconduct or a knowing violation of the law, (2) any transaction for which such person received an improper personal benefit in violation or breach of any provision of the partnership agreement of our Operating Partnership, or (3) in the case of a criminal proceeding, the person had reasonable cause to believe the act or omission was unlawful.
+Added: In addition, our Operating Partnership is required to indemnify us, our affiliates and each of our and their respective officers, directors, employees and agents to the fullest extent permitted by applicable law against any and all losses, claims, damages, liabilities (whether joint or several),
+Added: expenses (including, without limitation, attorneys’ fees and other legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Operating Partnership, provided that our Operating Partnership will not indemnify any such person for (1) willful misconduct or a knowing violation of the law, (2) any transaction for which such person received an improper personal benefit in violation or breach of any provision of the partnership agreement of our Operating Partnership, or (3) in the case of a criminal proceeding, the person had reasonable cause to believe the act or omission was unlawful.
Certain provisions of Maryland law could inhibit changes in control.
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Our charter authorizes us, and our bylaws and indemnification agreements entered into with each of our directors and executive officers require us, to the maximum extent permitted by Maryland law, to indemnify and, without requiring a preliminary determination of their ultimate entitlement to indemnification, to pay or reimburse defense costs and other expenses of each of our directors and officers in the defense of any proceeding to which he or she is made, or threatened to be made, a party or witness by reason of his or her service to us.
+Added: As a result, we and our stockholders have rights against our directors and officers that are more limited than might otherwise exist and, in the event that actions taken by any of our directors or officers impede the performance of our company, your and our ability to recover damages from such director or officer will be limited.
Our charter contains provisions that make removal of our directors difficult, which could make it difficult for our stockholders to effect changes to our management.
26 unchanged sentences
Although not controlling for REIT purposes, the general rule in the United States is that once improvements are permanently installed in real properties, such improvements become fixtures and thus take on the character of and are considered to be real property for certain state and local law purposes.
−Removed: In general, in the United States, laws governing fixtures, including the UCC and real property law, afford lenders who have secured their financings with security interests in fixtures with rights that extend not just to the fixtures that secure their financings, but also to the real properties in which such fixtures have been installed.
+Added: In general, in the United States, laws governing fixtures,
+Added: including the UCC and real property law, afford lenders who have secured their financings with security interests in fixtures with rights that extend not just to the fixtures that secure their financings, but also to the real properties in which such fixtures have been installed.
By way of example only, Section 9-604(b) of the UCC, which has been adopted in all but two states in the United States, permits a lender secured by fixtures, upon a default, to enforce its rights under the UCC or under applicable real property laws.
2 unchanged sentences
First, the Real Property Regulations do not define what is required for an obligation secured by a lien on a structural component to also be secured by a real property interest in the building served by such structural component.
−Removed: However, the initial proposed version of the Real Property Regulations, which never became effective,
−Removed: included a requirement that the interest in the real property held by a REIT be “equivalent” to the interest in a structural component held by the REIT in order for the structural component to be treated as a real estate asset.
+Added: However, the initial proposed version of the Real Property Regulations, which never became effective, included a requirement that the interest in the real property held by a REIT be “equivalent” to the interest in a structural component held by the REIT in order for the structural component to be treated as a real estate asset.
This requirement was ultimately not included in the final Real Property Regulations, in part in response to comments that such requirement may negatively affect investment in energy efficiency and renewable energy assets.
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Further, differences in timing between the recognition of taxable income, our GAAP income and the actual receipt of cash may occur.
−Removed: For example, we may be required to accrue interest and discount income on debt securities or interests in debt securities before we receive any payments of interest or principal on such assets, and there may be timing differences in the accrual of such interest and discount income for tax purposes and for GAAP purposes.
+Added: For example, we may be required to accrue interest and discount income on debt securities or interests in debt securities before we receive any payments of interest or principal on such assets,
+Added: and there may be timing differences in the accrual of such interest and discount income for tax purposes and for GAAP purposes.
If we fail to qualify as a REIT in any taxable year, and we do not qualify for certain statutory relief provisions, we would be required to pay U.S.
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federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, franchise, property and transfer taxes, including mortgage recording taxes.
−Removed: In addition, any TRSs we own will be subject to U.S.
+Added: In addition, any TRSs we own are subject to U.S.
federal, state and local corporate income or franchise taxes.
1 unchanged sentence
Any taxes paid by such TRSs would decrease the cash available for distribution to our stockholders.
−Removed: The failure of assets subject to a repurchase agreement to be considered owned by us or mezzanine loans or other assets to qualify as real estate assets may adversely affect our ability to qualify as a REIT.
−Removed: We may enter into repurchase agreements under which we will nominally sell certain of our assets to a counterparty and simultaneously enter into an agreement to repurchase the sold assets.
−Removed: We believe that we will be treated for U.S.
−Removed: federal income tax purposes as the owner of the assets that are the subject of any such agreements and that the repurchase agreements will be treated as secured lending transactions notwithstanding that such agreements may transfer record ownership of the assets to the counterparty during the term of the agreement.
−Removed: It is possible, however, that the IRS could assert that we did not own the assets during the term of the repurchase agreement, in which case our REIT asset test could be adversely affected.
−Removed: In addition, we may acquire mezzanine loans, which are loans secured by equity interests in a partnership or limited liability company that directly or indirectly owns real property.
−Removed: In IRS Revenue Procedure 2003-65, the IRS provided a safe harbor pursuant to which a mezzanine loan, if it meets each of the requirements contained in the Revenue Procedure, will be treated by the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the REIT 75% gross income test.
+Added: The failure of assets including mezzanine loans to qualify as real estate assets may adversely affect our ability to qualify as a REIT.
+Added: We may acquire mezzanine loans, which are loans secured by equity interests in a partnership or limited liability company that directly or indirectly owns real property.
+Added: In IRS Revenue Procedure 2003-65, the IRS provided a safe harbor pursuant to which a mezzanine loan, if it meets each of the requirements contained in the Revenue Procedure, will be treated by
+Added: the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the REIT 75% gross income test.
Although IRS Revenue Procedure 2003-65 provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law.
1 unchanged sentence
In the event we own a mezzanine loan that does not meet the safe harbor, the IRS could challenge such loan’s treatment as a real estate asset for purposes of the REIT asset and income tests, and if such a challenge were sustained, we could fail to qualify as a REIT.
−Removed: Further, we invest in
−Removed: assets such as C-PACE bonds and assessments, that we believe are secured by real property for purposes of the REIT income and asset tests but with respect to which no authority is directly on point.
+Added: Further, we invest in assets such as C-PACE bonds and assessments, that we believe are secured by real property for purposes of the REIT income and asset tests but with respect to which no authority is directly on point.
If the IRS were to successfully assert that such C-PACE assets are not qualifying assets for purposes of the REIT gross asset tests or do not generate qualifying income for purposes of the 75% gross income test, our REIT qualification could be adversely affected.
31 unchanged sentences
Because this tax generally would be imposed on us, all of our stockholders, including stockholders that are not disqualified organizations, generally will bear a portion of the tax cost associated with the classification of us or a portion of our assets as a taxable mortgage pool.
−Removed: A RIC, or other pass-through entity owning our common stock in record name will be subject to tax at the highest U.S.
+Added: A RIC, or other pass-through entity owning our common stock in record name will be subject
+Added: to tax at the highest U.S.
federal corporate income tax rate on any excess inclusion income allocated to their owners that are disqualified organizations.
1 unchanged sentence
Finally, if we were to fail to qualify as a REIT, any taxable mortgage pool securitizations would be treated as separate taxable corporations for U.S.
−Removed: federal income tax purposes that could not be included in any consolidated
+Added: federal income tax purposes that could not be included in any consolidated U.S.
federal corporate income tax return.
27 unchanged sentences
federal income tax laws and regulations governing REITs and their stockholders, as well as the administrative interpretations of those laws and regulations, are constantly under review and may be changed at any time, possibly with retroactive effect.
−Removed: Recently, the Biden administration has indicated an intention to enact tax legislation that could impact the taxation of an investment in our common stock.
No assurance can be given as to whether, when, or in what form, the U.S.
7 unchanged sentences
federal, state, local and foreign tax laws to you regarding an investment in shares of our common stock.
−Removed: Risks Related to COVID-19
−Removed: The current outbreak and spread of the COVID-19 outbreak has disrupted, and is likely to further cause severe disruptions in, the U.S.
−Removed: and global economies and financial markets and create widespread business continuity and viability issues.
−Removed: COVID-19 is having significant repercussions across regional, national and global economies and financial markets, and could trigger further periods of regional, national and global economic slowdown or regional, national or global recessions.
−Removed: COVID-19 continues to adversely impact regional, national and global economic activity and has contributed to significant volatility and negative pressure in financial markets.
−Removed: The impact of the outbreak continues to rapidly evolve.
−Removed: In an attempt to control COVID-19 the Federal government and most states and/or local governments, including the state in which we are headquartered and in regions where our projects and other investments are located or where they are managed, have implemented various restrictions, rules, or guidelines including quarantines, restrictions on travel, “shelter in place”, “stay at home”, or “safer at home” rules, restrictions on types of business that may continue to operate, and/or restrictions on types of construction projects allowed.
−Removed: While some of these restrictions have been relaxed or phased out, many of these or similar restrictions remain in place, continue to be implemented, or additional restrictions are being considered.
−Removed: Although, in certain cases, exceptions may be available for certain essential operations and businesses which generally include the renewable energy projects in which we invest, there is no assurance that such exceptions will enable us to avoid adverse effects to our results of operations and business.
−Removed: Further, such actions create disruption in energy efficiency, renewable energy, real estate and other climate solutions markets and adversely impact a number of industries.
−Removed: We believe that our ability to operate and our level of business activity has been, and will in all likelihood continue to be, impacted by effects of COVID-19 and could in the future be impacted by another pandemic and that such impacts could adversely affect the profitability of our business, as well as the values of, and the cash flows from, the assets we own.
−Removed: For example, the effects of COVID-19 or another pandemic could adversely impact our financial condition and results of operations due to, among other factors:
−Removed: • interrupted service and availability of personnel, including our executive officers and other employees that are part of our management team and an inability to recruit, attract and retain skilled personnel-to the extent our management or personnel are impacted by the outbreak of pandemic or epidemic disease and are not available or allowed to conduct work, our business and operating results may be negatively impacted;
−Removed: • difficulty accessing debt and equity capital on attractive terms, or at all, and severe disruption or instability in the global financial markets or deterioration in credit and financing conditions may affect our ability or the ability of our climate solutions projects and our ultimate off-taker or project users to make regular payments of principal, interest or project revenue (e.g., due to unemployment, underemployment, or reduced income or revenues) or to access savings or capital necessary to fund business operations or replace or renew maturing liabilities on a timely basis, and may adversely affect the valuation of financial assets and liabilities, any of which could result in the inability to make payments under our borrowing facilities or notes, affect our or our projects’ ability to meet liquidity, net worth, and leverage covenants under borrowing facilities or have a material adverse effect on the value of investments we hold or on our business, financial condition, results of operations and cash flows;
−Removed: • temporary or lasting changes involving the status, practices and procedures of our operations or our projects or our projects’ sponsors’ operations, including with respect to new originations of investments - to the extent we elect or are required to limit or be more selective in making new originations of investments, we may strain our relationships with business partners, customers and counterparties, breach actual or perceived obligations to them, and be subject to litigation and claims from such partners, customers and counterparties, any of which could have a material adverse effect on our reputation, business, financial condition, results of operations and cash flows;
−Removed: moreover, some of our ultimate off-taker or project users’ operations, or our operations, the climate solutions markets or projects and our ultimate off-taker or project users have not been able to and others may not be able to function effectively because of, among other factors, disruptions in the normal operation of climate solutions markets or projects, any inability to access short-term or long-term financing, a disruption in the market for securitization transactions, or the inability to access these markets or execute securitization transactions due to negative impacts to our, our projects or our ultimate off-taker or project users financial condition or operating capabilities resulting from the COVID-19 pandemic or future pandemics;
−Removed: any or all of these impacts could result in reduced net investment income and cash flow, as well as an impairment of our investments which reductions and impairments could be material;
−Removed: • to the extent ultimate off-taker or other project users that have been negatively impacted by the COVID-19 or other pandemics do not timely remit payments of principal, interest or other payments (whether due to an inability to make such payments, an unwillingness to make such payments, or a waiver of the requirement to make such payments on a timely basis or at all, including under the terms of any applicable forbearance, modification, or maturity extension agreement or program (which forbearance, waiver, or maturity extension may be available as a result of a government-
−Removed: sponsored or -imposed program or under any such agreement or program we or our project sponsors may otherwise offer)), then the value of our investments will likely be impaired, potentially materially;
−Removed: moreover, to the extent any such pandemic impacts local, regional or national economic conditions, the value of a climate solutions project is likely to decline, which would likely negatively impact the value of our investments, potentially materially;
−Removed: • some of our climate solutions projects are being constructed and others are subject to ongoing maintenance;
−Removed: planned construction or maintenance of some of these projects have not been able to proceed on a timely basis or at all and others may be similarly affected as a result of being negatively impacted by the COVID-19 pandemic and could be similarly affected by a future pandemic, including due to operating disruptions or government mandated moratoriums on construction, development or redevelopment or the inability to source the necessary construction personnel, equipment or parts;
−Removed: all of the foregoing factors would likely negatively impact the value of our investments, potentially materially;
−Removed: • the inability of our project sponsors to operate in affected areas, including the bankruptcy of one or more project sponsors or their suppliers, or inability of our internal resources to effectively manage our investments in certain of their activities or perform certain administration functions;
−Removed: • the inability of other third-party vendors we rely on to conduct our business to operate effectively and continue to support our business and operations, including vendors that provide IT services, legal and accounting services, or other operational support services;
−Removed: • the inability of our or our investments’ counterparties to make or satisfy the conditions, covenants or representations and warranties in agreements they have entered into with us or our counterparties;
−Removed: • our ability to ensure operational continuity in the event our business continuity plan is not effective or ineffectually implemented or deployed during a disruption.
−Removed: COVID-19 or a future pandemic and the impacts thereof on the current financial, economic and capital markets environments and other areas are difficult to predict and could present material uncertainty and risk with respect to our performance, financial condition, volume of business, results of operations and cash flows.
−Removed: To the extent the COVID-19 or a future pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this ‘‘Risk Factors’’ section, as well as the Risk Factors in the Form 10-K, such as those relating to changes in interest rates, declining demand for our projects due to declining costs of traditionally-sourced energy, the lack of liquidity of our assets and investments, changes in the fair value of our assets, negative market conditions, our dependence on third-party contractual arrangements, our dependence on the availability of capital, changes in credit ratings assigned to our assets, counterparties to repurchase transactions’ defaulting on their obligations and our investments’ subjectivity to delinquency, foreclosure and loss.
Unresolved Staff Comments
−Removed: Our principal executive offices are located at 1906 Towne Centre Blvd, Suite 370, Annapolis, Maryland 21401.
+Added: Our principal executive offices are located at One Park Place, Suite 200, Annapolis, Maryland 21401.
Our telephone number is (410) 571-9860.
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.