What changed in this filing

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Item 1. Financial Statements

2023-08-04 compared with 2023-05-05 · 209 added, 176 removed, 868 unchanged (31% of the section changed)

3 unchanged sentences

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

March 31, 2023 (unaudited) December 31, 2022

June 30, 2023 (unaudited) December 31, 2022

Cash and cash equivalents $ 126,907 $ 155,714

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(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

For the Three Months Ended March 31,

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

2023 2022 2023 2022

Interest income $ 48,222 $ 33,358 $ 91,330 $ 63,601

15 unchanged sentences

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

— ( 89 ) 492 270

Net income (loss) attributable to controlling stockholders $ 13,522 $ ( 18,449 ) $ 37,628 $ 26,896

7 unchanged sentences

(DOLLARS IN THOUSANDS)

Three Months Ended March 31,

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

2023 2022 2023 2022

Net income (loss) $ 13,522 $ ( 18,538 ) $ 38,120 $ 27,166

Unrealized gain (loss) on available-for-sale securities, net of tax benefit (provision) of $( 0.3 ) million for the three months ended March 31, 2023 and $ 1.0 million for the three months ended March 31, 2022

Unrealized gain (loss) on available-for-sale securities, net of tax benefit (provision) of $ 0.3 million and $ 0.0 million for the three and six months ended June 30, 2023 and $ 0.6 million and $ 1.5 million for the three and six months ended June 30, 2022

( 5,308 ) ( 21,448 ) 3,568 ( 44,158 )

Unrealized gain (loss) on interest rate swaps, net of tax benefit (provision) of $ 0.3 million for the three months ended March 31, 2023 and $( 0.1 ) million for the three months ended March 31, 2022

Unrealized gain (loss) on interest rate swaps, net of tax benefit (provision) of $ 1.1 million and $ 1.4 million for the three and six months ended June 30, 2023 and $( 3.5 ) million and $( 3.6 ) million for the three and six months ended June 30, 2022

30,651 11,512 ( 1,116 ) 11,801

1 unchanged sentence

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

526 ( 234 ) 548 ( 52 )

Comprehensive income (loss) attributable to controlling stockholders $ 38,339 $ ( 28,240 ) $ 40,024 $ ( 5,139 )

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Shares Amount

Balance at December 31, 2022 90,837 $ 908 $ 1,924,200 $ ( 285,474 ) $ ( 10,397 ) $ 35,509 $ 1,664,746

Balance at March 31, 2023 91,658 $ 917 $ 1,946,904 $ ( 297,708 ) $ ( 32,820 ) $ 41,522 $ 1,658,815

Net income (loss) — — — 13,522 — 13,522

3 unchanged sentences

Equity-based compensation — — 901 — — 2,679 3,580

Conversion of convertible notes — — 2 — — — 2

Issuance (repurchase) of vested equity-based compensation shares 8 — ( 118 ) — — ( 118 )

Dividends and distributions — — — ( 42,227 ) — ( 729 ) ( 42,956 )

Balance at June 30, 2023 106,770 $ 1,068 $ 2,283,255 $ ( 326,413 ) $ ( 8,003 ) $ 43,998 $ 1,993,905

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

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

Unrealized gain (loss) on available-for-sale securities — — — — ( 21,188 ) ( 260 ) ( 21,448 )

Unrealized gain (loss) on interest rate swaps — — — — 11,397 115 11,512

Issued shares of common stock 731 8 27,926 — — — 27,934

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

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

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

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

See accompanying notes.

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

Shares Amount

Balance at December 31, 2022 90,837 $ 908 $ 1,924,200 $ ( 285,474 ) $ ( 10,397 ) $ 35,509 $ 1,664,746

Net income (loss)

— — — 37,628 — 492 38,120

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

— — — — 3,521 47 3,568

Unrealized gain (loss) on interest rate swaps — — — — ( 1,127 ) 11 ( 1,116 )

4 unchanged sentences

Dividends and distributions — — — ( 78,567 ) — ( 1,864 ) ( 80,431 )

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

Balance at June 30, 2023 106,770 $ 1,068 $ 2,283,255 $ ( 326,413 ) $ ( 8,003 ) $ 43,998 $ 1,993,905

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

Net income (loss)

— — — 26,896 — 270 27,166

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

— — — — ( 43,720 ) ( 438 ) ( 44,158 )

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

Issued shares of common stock 1,781 18 77,776 — — — 77,794

Equity-based compensation — — 1,938 — — 13,995 15,933

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

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

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

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

See accompanying notes.

2 unchanged sentences

(DOLLARS IN THOUSANDS)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

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Purchases of real estate — ( 4,550 )

Purchases of investments and securitization assets ( 12,969 ) ( 2,329 )

Proceeds from sales of investments and securitization assets — 7,020

Withdrawal from escrow accounts — 15,156

Posting of hedge collateral ( 13,380 ) —

4 unchanged sentences

Principal payments on credit facilities ( 235,000 ) —

Principal payments on term loan ( 4,788 ) —

Proceeds from issuance of commercial paper notes 100,000 50,000

1 unchanged sentence

( 10,069 ) ( 13,529 )

Proceeds from issuance of convertible notes — 200,000

Net proceeds of common stock issuances 357,594 77,974

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

June 30, 2023

Hannon Armstrong Sustainable Infrastructure Capital, Inc.

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Our investments take many forms, including equity, joint ventures, land ownership, lending, and other financing transactions.

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

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

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

We generate Net Investment Income from our portfolio, and fees through gain-on-sale securitization transactions, asset management and servicing, broker/dealer and other services.

We also generate recurring income through our residual ownership in securitization and syndication structures.

The Company and its subsidiaries are hereafter referred to as “we,” “us” or “our.” We refer to the income producing assets that we hold on our balance sheet as our “Portfolio.” Our Portfolio includes:

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

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We finance our business through cash on hand, non-recourse debt, recourse debt, convertible securities, or equity and may also decide to finance such transactions through the use of off-balance sheet securitization structures.

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

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

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

Our results of operations for the three- month periods ended March 31, 2023 and 2022, are not necessarily indicative of the results to be expected for the full year or any other future period.

Our results of operations for the three- and six-month periods ended June 30, 2023 and 2022, are not necessarily indicative of the results to be expected for the full year or any other future period.

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

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

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

We have established various

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

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

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

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

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

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

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

Equity Method Investments

We have made equity investments in various climate solutions projects, typically in structures where we have a preferred return position.

We have made equity investments, typically in structures where we have a preferred return position.

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

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

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

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

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

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

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

Unless otherwise noted, we generally have the ability and intent to hold our receivables for the foreseeable future and accordingly we classify them as held for investment.

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

At inception of the arrangement, the carrying value of receivables held for investment represents the present value of the note, lease or other payments, net of any unearned fee income, which is recognized as income over the term of the note or lease using the effective interest method.

At inception of the arrangement, the

carrying value of receivables held for investment represents the present value of the note, lease or other payments, net of any unearned fee income, which is recognized as income over the term of the note or lease using the effective interest method.

Receivables that are held for investment are carried at amortized cost, net of any unamortized acquisition premiums or discounts and include origination and acquisition costs, as applicable.

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

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

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

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

Certain real estate

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

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

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

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

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

recorded in other assets.

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

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

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

We account for our other retained interests in securitized assets, the residual assets, similar to available-for-sale debt securities and carry them at fair value, with changes in fair value recorded in AOCI.

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

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

The initial issuance and any principal repayments are

classified as financing activities and interest payments are classified as operating activities in our consolidated statements of cash flows.

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

If converted or exchanged, the carrying value of each Convertible Note is reclassified into stockholders’ equity.

Derivative Financial Instruments

We use derivative financial instruments, primarily interest rate swaps, to manage, or hedge, our interest rate risk exposures associated with new debt issuances and anticipated refinancings of existing debt, to manage our exposure to fluctuations in interest rates on floating-rate debt, and to optimize the mix of our fixed and floating-rate debt.

We use derivative financial instruments, including interest rate swaps and collars, to manage, or hedge, our interest rate risk exposures associated with new debt issuances and anticipated refinancings of existing debt, to manage our exposure to fluctuations in interest rates on floating-rate debt, and to optimize the mix of our fixed and floating-rate debt.

Our objective is to reduce the impact of changes in interest rates on our results of operations and cash flows.

The fair values of our interest rate swaps designated and qualifying as effective cash flow hedges are reflected in our consolidated balance sheets as a component of other assets (if in an unrealized asset position) or accounts payable, accrued expenses and other (if in an unrealized liability position) and in net unrealized gains and losses in AOCI.

The fair values of our interest rate

derivatives designated and qualifying as effective cash flow hedges are reflected in our consolidated balance sheets as a component of other assets (if in an unrealized asset position) or accounts payable, accrued expenses and other (if in an unrealized liability position) and in net unrealized gains and losses in AOCI as described below.

The cash settlements of our interest rate swaps, if any, are classified as operating activities in our consolidated statements of cash flows.

The interest rate swaps we use are intended to be designated as cash flow hedges and are considered highly effective in reducing our exposure to the interest rate risk that they are designated to hedge.

The interest rate derivatives we use are intended to be designated as cash flow hedges and are considered highly effective in reducing our exposure to the interest rate risk that they are designated to hedge.

This effectiveness is required in order to qualify for hedge accounting.

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Any collateral posted or received as credit support against derivative positions are netted against those derivatives in our balance sheets.

Interest rate swap contracts contain a credit risk that counterparties may be unable to fulfill the terms of the agreement.

We attempt to minimize that risk by evaluating the creditworthiness of our counterparties, who are limited to major banks and financial institutions, and do not anticipate nonperformance by the counterparties.

Interest rate derivative contracts contain a credit risk that counterparties may be unable to fulfill the terms of the agreement.

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

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Equity-Based Compensation

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

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

In 2022, our board of directors approved

the 2022 Hannon Armstrong Sustainable Infrastructure Capital, Inc.

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

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

We have adopted equity incentive plans which provide for grants of stock options, stock appreciation rights, restricted stock units, shares of restricted common stock, phantom shares, dividend equivalent rights, long-term incentive-plan units (“LTIP Units”) and other restricted limited partnership units issued by our Operating Partnership and other equity-based awards.

From time to time, we may grant equity or equity-based awards under our equity incentive plans as compensation to our senior management team, independent directors, employees, advisors, consultants and other personnel.

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

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Recently Issued Accounting Pronouncements

Accounting standards updates issued before May 5, 2023, and effective after March 31, 2023, are not expected to have a material effect on our consolidated financial statements and related disclosures.

Accounting standards updates issued before August 4, 2023, and effective after June 30, 2023, are not expected to have a material effect on our consolidated financial statements and related disclosures.

Fair Value Measurements

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

As of March 31, 2023 and December 31, 2022, only our residual assets related to our securitization trusts, our derivatives, and our investments were carried at fair value on the consolidated balance sheets on a recurring basis.

As of June 30, 2023 and December 31, 2022, only our residual assets related to our securitization trusts, our derivatives, and our investments were carried at fair value on the consolidated balance sheets on a recurring basis.

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

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

As of March 31, 2023

As of June 30, 2023

Fair Value Carrying

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204 204 Level 3

Derivative assets 15 15 Level 2

Liabilities (3)

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Derivative liabilities 8 8 Level 2

(1) The amortized cost of our investments as of March 31, 2023, was $ 12 million.

(1) The amortized cost of our investments as of June 30, 2023, was $ 12 million.

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

The amortized cost of our securitization residual assets as of March 31, 2023 was $ 231 million.

The amortized cost of our securitization residual assets as of June 30, 2023 was $ 247 million.

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

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

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

For the three months ended March 31,

(in millions)

Balance, beginning of period $ 10 $ 18

Unrealized gains (losses) on investments recorded in OCI — ( 2 )

Balance, end of period $ 10 $ 16

The following table illustrates our investments in an unrealized loss position:

Estimated Fair Value Unrealized Losses (1)

Count of Securities

Securities with a loss shorter than 12 months Securities with a loss longer than 12 months Securities with a loss shorter than 12 months Securities with a loss longer than 12 months Securities with a loss shorter than 12 months Securities with a loss longer than 12 months

(in millions)

March 31, 2023 $ 2 $ 8 $ 0.4 $ 1.3 2 3

December 31, 2022 4 6 0.7 1.2 4 1

(1) Loss position is due to interest rates movements and is not indicative of credit deterioration.

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

In determining the fair value of our investments we used a risk-free rate and added a range of interest rate spreads based upon recent transactions involving similar assets of approximately 1 % to 4 % as of March 31, 2023, and 1 % to 4 % as of December 31, 2022.

The weighted average discount rates used to determine the fair value of our investments as of March 31, 2023 and December 31, 2022 were 6.2 % and 6.5 %, respectively.

Securitization residual assets

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

For the three months ended March 31,

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

2023 2022 2023 2022

(in millions)

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(in millions)

March 31, 2023 $ 71 $ 99 $ 11 $ 30 40 30

June 30, 2023 $ 42 $ 142 $ 2 $ 43 20 60

December 31, 2022 118 51 27 22 66 12

1 unchanged sentence

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

In determining the fair value of our securitization residual assets, we used a market-based risk-free rate and added a range of interest rate spreads, determined based upon recent transactions involving similar assets, of approximately 1 % to 6 % based upon transactions involving similar assets as of March 31, 2023 and December 31, 2022.

The weighted average discount rates used to determine the fair value of our securitization residual assets as of March 31, 2023 and December 31, 2022 were 6.3 % and 6.8 %, respectively.

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

The unrealized losses are due to interest rate movements, and we have the intent and ability to hold these assets until a recovery of fair value.

In determining the fair value of our securitization residual assets, we used a market-based risk-free rate and added a range of interest rate spreads of approximately 1 % to 6 % based upon transactions involving similar assets as of June 30, 2023 and December 31, 2022.

The weighted average discount rates used to determine the fair value of our securitization residual assets as of June 30, 2023 and December 31, 2022 were 6.6 % and 6.8 %, respectively.

Non-recurring Fair Value Measurements

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(in millions)

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The outstanding OP units not held by us represent approximately 1 % of our outstanding OP units and are redeemable by the limited partners for cash, or at our option, for a like number of shares of our common stock.

No OP units were redeemed by non-controlling interest holders during the three months ended March 31, 2023 or March 31, 2022.

No OP units were redeemed by non-controlling interest holders during the six months ended June 30, 2023 or June 30, 2022.

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

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The following summarizes certain transactions with securitization trusts:

As of and for the three months ended March 31,

As of and for the six months ended June 30,

(in millions)

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

Depending on the nature of the transaction risks, the all-in discount rate ranged from 5 % to 10 % for the three months ended March 31, 2023.

As of March 31, 2023 and December 31, 2022, our managed assets totaled $ 10.4 billion and $ 9.8 billion, respectively, of which $ 5.7 billion and $ 5.5 billion, respectively, were securitized assets held in unconsolidated securitization trusts.

no securitization credit losses in the three months ended March 31, 2023 or March 31, 2022.

As of March 31, 2023, there were no material payments from debtors to the securitization trusts that were greater than 90 days past due.

Depending on the nature of the transaction risks, the all-in discount rate ranged from 5 % to 10 % for the six months ended June 30, 2023.

As of June 30, 2023 and December 31, 2022, our managed assets totaled $ 10.7 billion and $ 9.8 billion, respectively, of which $ 5.8 billion and $ 5.5 billion, respectively, were securitized assets held in unconsolidated securitization trusts.

There were no securitization credit losses in the six months ended June 30, 2023 or June 30, 2022.

As of June 30, 2023, there were no material payments from debtors to the securitization trusts that were greater than 90 days past due.

Receivables from contracts for the installation of energy efficiency and other technologies are the source of cash flows of $ 105 million of our securitization residual assets.

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Our Portfolio

As of March 31, 2023, our Portfolio included approximately $ 4.7 billion of equity method investments, receivables, real estate and investments on our balance sheet.

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

As of June 30, 2023, our Portfolio included approximately $ 4.9 billion of equity method investments, receivables, real estate and investments on our balance sheet.

The equity method investments represent our non-controlling equity investments in climate solutions projects.

The receivables and investments are typically collateralized by contractually committed debt obligations of government entities or private high credit quality obligors and are often supported by additional forms of credit enhancement, including security interests and supplier guaranties.

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

The following is an analysis of the Performance Ratings of our Portfolio as of March 31, 2023, which is assessed quarterly:

The following is an analysis of the Performance Ratings of our Portfolio as of June 30, 2023, which is assessed quarterly:

Portfolio Performance

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

Previously included in this category was $ 11 million of loans we had made in a new market venture where the performance was not meeting expectations.

We collected this loan in full in the second quarter of 2023 and accordingly released the related allowance of $ 5 million.

(4) Receivable vintage refers to the period in which in which the relevant loan agreement is signed, and a given vintage may contain loan advances made in subsequent periods to the loan agreement.

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

As of March 31, 2023, our allowance for loan losses was $ 43 million based on our expectation of credit losses over the lives of the receivables in our portfolio.

During the three months ended March 31, 2023, we increased our reserve by approximately $ 2 million due to new loans and loan commitments made during the period.

Below is a summary of the carrying value, loan funding commitments, and allowance by type of receivable or “Portfolio Segment”, as defined by Topic 326, as of March 31, 2023 and December 31, 2022:

March 31, 2023 December 31, 2022

As of June 30, 2023, our allowance for loan losses was $ 44 million based on our expectation of credit losses over the lives of the receivables in our portfolio.

During the three months ended June 30, 2023, we increased our reserve by approximately $ 1 million, due to new loans and loan commitments made during the period which were partially offset by the release of an allowance related to loans that were collected in full.

Below is a summary of the carrying value, loan funding commitments, and allowance by type of receivable or “Portfolio Segment”, as defined by Topic 326, as of June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

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

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Total $ 2,275 $ 299 $ 44 $ 2,031 $ 256 $ 41

(1) As of March 31, 2023, this category of assets includes $ 1.2 billion of mezzanine loans made on a non-recourse basis to special purpose subsidiaries of residential solar companies which are secured by residential solar assets where we rely on certain limited indemnities, warranties, and other obligations of the residential solar companies or their other subsidiaries.

(1) As of June 30, 2023, this category of assets includes $ 1.2 billion of mezzanine loans made on a non-recourse basis to special purpose subsidiaries of residential solar companies which hold residential solar assets where we rely on certain limited indemnities, warranties, and other obligations of the residential solar companies or their other subsidiaries.

This total also includes $ 48 million of lease agreements where we hold legal title to the underlying real estate which are treated under GAAP as receivables since they were deemed to be failed sale/leaseback transactions as described in Note 2 to our financial statements in this Form 10-Q.

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We use assumptions related to these risks to estimate an allowance using a discounted cash flow analysis or the PD/LGD method as discussed in Note 2 to our financial statements in this Form 10-Q.

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

For those assets in Performance Rating 1, the credit worthiness of the obligor combined with the various structural protections of our assets cause us to believe we have a low risk we will not receive our invested capital, however we recorded a $ 38 million allowance on these $ 2.0 billion in assets as a result of lower probability assumptions utilized in our allowance methodology.

(2) As of March 31, 2023, our government receivables include $ 10 million of U.S.

All of our commercial receivables are included in Performance Rating 1 in the Portfolio Performance table above.

For those assets, the credit worthiness of the obligor combined with the various structural protections of our assets cause us to believe we have a low risk we will not receive our invested capital, however we recorded a $ 44 million allowance on these $ 2.2 billion in assets as a result of lower probability assumptions utilized in our allowance methodology.

(2) As of June 30, 2023, our government receivables include $ 10 million of U.S.

federal government transactions and $ 87 million of transactions where the ultimate obligors are state or local governments.

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

Three months ended March 31, 2023 Three months ended March 31, 2022

Three months ended June 30, 2023 Three months ended June 30, 2022

Government Commercial Government Commercial

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Provision for loss on receivables — 1 — 8

Write-off of allowance — — — ( 8 )

Ending balance $ — $ 44 $ — $ 37

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

The following table provides a summary of our anticipated maturity dates of our receivables and the weighted average yield for each range of maturities as of March 31, 2023:

Six months ended June 30, 2023 Six months ended June 30, 2022

Government Commercial Government Commercial

(in millions)

Beginning balance $ — $ 41 $ — $ 36

Provision for loss on receivables — 3 — 9

Write-off of allowance — — — ( 8 )

Ending balance $ — $ 44 $ — $ 37

We have no receivables on non-accrual status.

The following table provides a summary of our anticipated maturity dates of our receivables and the weighted average yield for each range of maturities as of June 30, 2023:

Total Less than 1

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Weighted average yield by period 8.1 % 6.6 % 6.4 % 8.4 % 7.9 %

The following table provides a summary of our anticipated maturity dates of our investments and the weighted average yield for each range of maturities as of March 31, 2023:

Total Less than 1

year 1-5 years 5-10 years More than 10

(dollars in millions)

Maturities by period $ 10 $ — $ — $ — $ 10

Weighted average yield by period 4.6 % — % — % — % 4.6 %

We had no investments that were impaired or on non-accrual status as of March 31, 2023 or December 31, 2022, and no allowances associated with our investments.

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

The components of our real estate portfolio as of March 31, 2023 and December 31, 2022, were as follows:

March 31, 2023 December 31, 2022

The components of our real estate portfolio as of June 30, 2023 and December 31, 2022, were as follows:

June 30, 2023 December 31, 2022

(in millions)

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Real estate $ 351 $ 353

As of March 31, 2023, the future amortization expense of the intangible assets and the future minimum rental income payments under our land lease agreements are as follows:

As of June 30, 2023, the future amortization expense of the intangible assets and the future minimum rental income payments under our land lease agreements are as follows:

Future Amortization Expense Minimum Rental Income Payments

(in millions)

From April 1, 2023 to December 31, 2023 $ 2 $ 18

From July 1, 2023 to December 31, 2023 $ 1 $ 12

Thereafter 66 673

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Equity Method Investments

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

As of March 31, 2023, we held the following equity method investments:

We have made non-controlling equity investments in a number of climate solutions projects that we account for as equity method investments.

As of June 30, 2023, we held the following equity method investments:

Investment Date Investee Carrying Value

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

As of March 31, 2023, we have made capital contributions to Jupiter of approximately $ 548 million related to these projects reflecting final funding true-ups after all projects reached substantial completion.

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

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

As of June 30, 2023, we have made capital contributions to Jupiter of approximately $ 562 million related to these projects reflecting final funding true-ups after all projects reached substantial completion.

Alongside the project sponsor and under terms outlined in the partnership agreement, we have made $ 10 million in working capital loans to Jupiter for one-time contract restructuring expenses and payments related to winter storm Uri.

Those working capital loans are included in our Related Party Transactions disclosures below.

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

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

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

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

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

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

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

We have made investments in the preferred cash equity interests of the Lighthouse Partnerships of approximately $ 563 million through March 31, 2023, and additional investments are expected to be made as the projects become commercially operational.

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

We have made investments in the preferred cash equity interests of the Lighthouse Partnerships of approximately $ 590 million through June 30, 2023, and additional investments are expected to be made as the remaining projects become commercially operational.

Alongside the project sponsor and under terms outlined in the partnership agreement, we have made $ 12 million in working capital loans to the Lighthouse Partnerships primarily for payments related to winter storm Uri.

Those working capital loans are included in our Related Party Transactions disclosures below.

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

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

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Of our commercial receivables, approximately $ 797 million are loans made to entities in which we also have non-controlling equity investments of approximately $ 355 million.

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

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

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

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The following table provides additional detail on these related party transactions:

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

(in millions)

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Secured credit facility

We have a secured revolving credit facility in the form of an approval-based loan agreement (the “Approval-Based Facility”) with various lenders, which matures in July 2023 with a maximum outstanding principal amount of $ 200 million.

We have a secured revolving credit facility in the form of an approval-based loan agreement (the “Approval-Based Facility”) with various lenders with a maximum outstanding principal amount of $ 200 million.

In July of 2023, we extended the maturity of the facility from July 2023 to January 2024.

In the first quarter of 2023, we terminated a previously existing representation-based secured revolving limited-recourse credit facility which had a maximum outstanding principal amount of $ 100 million.

The following table provides additional detail on our Secured Credit Facility as of March 31, 2023:

The following table provides additional detail on our Secured Credit Facility as of June 30, 2023:

Approval-Based Facility

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Weighted average short-term borrowing rate 7.22 %

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

Prior to the July 2023 amendment and extension, loans under the Approval-Based Facility bore interest at a rate equal to one-month LIBOR plus 1.50 % or 2.00 % (depending on the type of collateral) or, under certain circumstances, the Federal Funds Rate plus 0.50 % or 1.00 % (depending on the type of collateral).

Subsequent to the amendment and extension, loans under the Approval-Based Facility bear interest at daily SOFR plus 2.25 %.

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

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

We have less than $ 1 million of remaining unamortized financing costs associated with the Approval-Based Facility that have been capitalized and included in other assets on our balance sheet and are being amortized on a straight-line basis over the

term of the Approval-Based Facility.

Administrative fees are payable annually to the administrative agent under each of the Approval-Based Facility and letter agreements with the administrative agent.

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

We were in compliance with our covenants as of March 31, 2023.

We were in compliance with our covenants as of June 30, 2023.

The Approval-Based Facility also include customary events of default, including the existence of a default in more than 50 % of the value of underlying financings.

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

The occurrence of an event of default may result in termination of the credit facilities, acceleration of amounts due under the Approval-Based Facility, and, subsequent to the July 2023 amendment, accrual of default interest at a rate of the applicable interest rate plus 2.00 %.

Unsecured revolving credit facilities

We have a $ 600 million unsecured revolving credit facility pursuant to a revolving credit agreement with a syndicate of lenders which matures in February 2025.

As of March 31, 2023, the outstanding balance on this facility was $ 250 million, and it currently bears interest at a weighted average rate of 6.76 %.

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

We have an unsecured revolving credit facility pursuant to a revolving credit agreement with a syndicate of lenders which matures in February 2025.

In the second quarter of 2023, we increased the maximum outstanding borrowing amount of the facility from $ 600 million to $ 840 million.

As of June 30, 2023, the outstanding balance on this facility was $ 175 million, and it currently bears interest at a weighted average rate of 7.02 %.

We have approximately $ 3 million of remaining unamortized financing costs associated with the unsecured revolving credit facility that have been capitalized and included in other assets on our balance sheet and are being amortized on a straight-line basis over the term of the unsecured revolving credit facility.

The unsecured revolving credit facility has a commitment fee based on our current credit rating and bears interest at a rate of SOFR or prime rate plus applicable margins based on our current credit rating, which may be adjusted downward up to 0.10 % to the extent our Portfolio achieves certain targeted levels of carbon emissions avoidance, as measured by our CarbonCount © metric.

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

As of March 31, 2023, we have $ 100 million of commercial paper notes outstanding under the facility which matures in 2024, which together bear an average total borrowing rate of 6.18 %.

As of June 30, 2023, we have $ 100 million of commercial paper notes outstanding under the facility which matures in 2024, which together bear an average total borrowing rate of 6.65 %.

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

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

As of March 31, 2023, we have no remaining unamortized financing costs associated with the commercial paper program and associated letter of credit.

As of June 30, 2023, we have no remaining unamortized financing costs associated with the commercial paper program and associated letter of credit.

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

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Maturity Carrying Value of Assets Pledged as of

March 31, 2023 December 31, 2022 Interest

Rate Maturity Date March 31, 2023 December 31, 2022 Description

June 30, 2023 December 31, 2022 Interest

Rate Maturity Date June 30, 2023 December 31, 2022 Description

of Assets Pledged

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

(2) The total collateral pledged against our non-recourse debt was $ 602 million and $ 632 million as of March 31, 2023 and December 31, 2022, respectively.

These amounts include $ 21 million and $ 20 million of restricted cash pledged for debt service payments as of March 31, 2023 and December 31, 2022, respectively.

(2) The total collateral pledged against our non-recourse debt was $ 599 million and $ 632 million as of June 30, 2023 and December 31, 2022, respectively.

These amounts include $ 21 million and $ 20 million of restricted cash pledged for debt service payments as of June 30, 2023 and December 31, 2022, respectively.

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

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We typically act as servicer for the debt transactions.

We were in compliance with all covenants as of March 31, 2023 and December 31, 2022.

We were in compliance with all covenants as of June 30, 2023 and December 31, 2022.

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

The stated minimum maturities of non-recourse debt as of March 31, 2023, were as follows:

The stated minimum maturities of non-recourse debt as of June 30, 2023, were as follows:

Future minimum maturities

(in millions)

April 1, 2023 to December 31, 2023 $ 22

July 1, 2023 to December 31, 2023 $ 17

Thereafter 244

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

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

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

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

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

We are in compliance with all of our covenants as of March 31, 2023 and December 31, 2022.

We are in compliance with all of our covenants as of June 30, 2023 and December 31, 2022.

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

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(in millions)

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Carrying value of Senior Unsecured Notes $ 1,770 $ 1,768

We recorded approximately $ 19 million in interest expense related to the Senior Unsecured Notes in the three months ended March 31, 2023, compared to approximately $ 19 million in the three months ended March 31, 2022, respectively.

We recorded approximately $ 19 million and $ 38 million in interest expense related to the Senior Unsecured Notes in the three and six months ended June 30, 2023, respectively, compared to approximately $ 19 million and $ 38 million in the three and six months ended June 30, 2022, respectively.

Convertible Notes

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

The following are summarized terms of the Convertible Notes as of March 31, 2023:

The following are summarized terms of the Convertible Notes as of June 30, 2023:

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

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(in millions)

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Carrying value of Convertible Notes

We recorded approximately $ 2 million in interest expense related to our Convertible Notes in the three months ended March 31, 2023, compared to $ 1 million for the three months ended March 31, 2022, respectively.

We recorded approximately $ 2.4 million and $ 4.7 million in interest expense related to our Convertible Notes in the three and six months ended June 30, 2023, respectively, compared to $ 2.0 million and $ 2.5 million for the three and six months ended June 30, 2022, respectively.

CarbonCount Term Loan Facility

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Principal amounts under the term loan facility will bear interest at a rate of Term SOFR plus applicable margins based on our current credit rating, which may be adjusted downward up to 0.10 % to the extent our Portfolio achieves certain targeted levels of carbon emissions avoidance, as measured by our CarbonCount © metric.

As of March 31, 2023, the applicable margin is 2.225 %, and the current interest rate is 6.98 %.

As of June 30, 2023, the applicable margin is 2.225 %, and the current interest rate is 7.33 %.

The coupon on any drawn amounts will be reset at monthly, quarterly, or semi-annual intervals at our election.

Interest is due and payable quarterly.

Beginning six months after the effective date of the facility, 1.25 % of the outstanding principal balance will be due quarterly.

Payments of 1.25 % of the outstanding principal balance are due quarterly.

The term loan facility has a maturity date of October 31, 2025, and loans under the facility can be prepaid without penalty.

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

Principal payments which were due under the term loan facility as of March 31, 2023 are as follows:

Principal payments which were due under the term loan facility as of June 30, 2023 are as follows:

Future maturities

(in millions)

April 1, 2023 to December 31, 2023 $ 14

July 1, 2023 to December 31, 2023 $ 9

Unamortized Financing Costs ( 3 )

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Interest rate swaps

In connection with several of our long-term borrowings, including floating-rate loans from our Term Loan Facility, and the anticipated refinancings of certain of our Senior Secured Notes, in the first quarter of 2023 we entered into the following interest rate swaps that are designated as cash flow hedges:

Fair Value as of

Index Hedged Rate Notional Value March 31, 2023 Term

In connection with several of our long-term borrowings, including floating-rate loans from our Term Loan Facility and unsecured revolving credit facility and the anticipated refinancings of certain of our Senior Unsecured Notes we have entered into the following derivative transactions that are designated as cash flow hedges:

Instrument type Hedged Rate Notional Value Fair Value as of

Index June 30, 2023 Term

$ in millions

1 month SOFR 3.788 % $ 400 $ ( 22 ) March 2023 to March 2033

Overnight SOFR 2.980 % 400 ( 1 ) June 2026 to June 2033

Overnight SOFR 3.085 % 600 ( 5 ) June 2026 to June 2033

Overnight SOFR 3.075 % 400 ( 4 ) April 2025 to April 2035

$ 1,800 $ ( 32 )

The fair values of our interest rate swaps designated and qualifying as effective cash flow hedges are reflected in our consolidated balance sheets as a component of other assets (if in an unrealized gain position) or accounts payable, accrued expenses and other (if in an unrealized loss position) and in net unrealized gains and losses in AOCI.

As of March 31, 2023, all of our derivatives were designated as hedging instruments which were deemed to be effective.

As of March 31, 2023, we have posted $ 20 million of collateral related to our interest rate swaps, which we have netted against the derivative liability in accounts payable, accrued expenses and other on our balance sheet.

Interest rate swap 1 month SOFR 3.79 % $ 400 $ ( 8 ) March 2023 to March 2033

Interest rate swap Overnight SOFR 2.98 % 400 4 June 2026 to June 2033

Interest rate swap Overnight SOFR 3.09 % 600 3 June 2026 to June 2033

Interest rate swap Overnight SOFR 3.08 % 400 5 April 2025 to April 2035

Interest rate collar 1 month SOFR 3.70 % - 4.00 %

250 3 May 2023 to May 2026

(1) Interest rate collar consists of a purchased interest rate cap of 4.00 % and a written interest rate floor of 3.70 %.

The fair values of our interest rate derivatives designated and qualifying as effective cash flow hedges are reflected in our consolidated balance sheets as a component of other assets (if in an unrealized gain position) or accounts payable, accrued expenses and other (if in an unrealized loss position) and in net unrealized gains and losses in AOCI.

As of June 30, 2023, all of our derivatives were designated as hedging instruments which were deemed to be effective.

As of June 30, 2023, we have posted $ 13 million of collateral related to our interest rate derivatives, of which we have netted $ 1 million against the derivative liability in accounts payable, accrued expenses and other on our balance sheet and of which $ 12 million is included in other assets.

A benefit of $ 1 million was included in interest expense as a result of our hedging activities for the three and six months ended June 30, 2023.

Certain of the projects in which we have equity method investments also have interest rate swaps which are designated as cash flow hedges, and we recognize the portion of the gain or loss allocated to us related to those instruments through other comprehensive income.

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

As of March 31, 2023, there have been no such actions resulting in claims against the Company.

In 2022, we made a guarantee related to the financing of three of our joint venture entities that owns debt securities of energy efficiency projects.

We received $ 64 million of the proceeds of this financing arrangement, and in turn have guaranteed the obligations of the entity related to this financing, which includes collateral posting requirements as well as repayment of the financing at maturity in May 2023.

As of March 31, 2023, our maximum obligation under this guarantee is approximately $ 80 million.

As of June 30, 2023, there have been no such actions resulting in claims against the Company.

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

As of June 30, 2023, our maximum obligation under this guarantee is approximately $ 80 million.

We believe the likelihood of having to perform under the guarantee is remote, have recorded no liability associated with this guarantee, and presently have not been required to post collateral as the assets of the joint venture entities are enough to support the financing obligation.

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

We recorded an income tax (expense) benefit of approximately $( 1 ) million for the three months ended March 31, 2023, respectively, compared to a $( 11 ) million income tax (expense) benefit in the three months ended March 31, 2022, respectively.

For the three months ended March 31, 2023 and 2022, our income tax (expense) benefit was determined using the federal tax rate of 21%, and combined state tax rates, net of federal benefit, of approximately 3 % for 2023 and 2022.

We recorded an income tax (expense) benefit of approximately $ 2 million and $ 0 for the three and six months ended June 30, 2023, respectively, compared to a $ 5 million and $( 6 ) million income tax (expense) benefit in the three and six months ended June 30, 2022, respectively.

For the three and six months ended June 30, 2023 and 2022, our income tax (expense) benefit was determined using the federal tax rate of 21%, and combined state tax rates, net of federal benefit, of approximately 3 % for 2023 and 2022.

Dividends and Distributions

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5/4/2023 7/5/2023 7/12/2023 $ 0.395

8/3/2023 10/4/2023 10/11/2023 $ 0.395

(1) This dividend was treated as a distribution in 2023 for tax purposes.

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We completed the following public offerings (including ATM issuances) of our common stock during 2023 and 2022:

Date/Period Common Stock Offerings Shares Issued Price Per Share (2)

Net Proceeds (1)

Date/Period Common Stock Offerings Shares Issued (2)

Price Per Share Net Proceeds (1)

(amounts in millions, except per share amounts)

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Q1 2023 ATM 0.763 31.31 (3)

5/30/2023 Public Offering 15.000 22.23 (4)

Q2 2023 ATM 0.053 26.07 (3)

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

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

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

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

Equity-based Compensation Awards

We have issued equity awards that vest from 2023 to 2027 subject to service, performance and market conditions.

During the three months ended March 31, 2023, our board of directors awarded employees and directors 732,371 shares of restricted stock, restricted stock units and LTIP Units that vest from 2024 to 2026.

During the six months ended June 30, 2023, our board of directors awarded employees and directors 753,371 shares of restricted stock, restricted stock units and LTIP Units that vest from 2024 to 2026.

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

For the three months ended March 31, 2023 we recorded $ 8 million of stock based compensation, compared to $ 4 million during the three months ended March 31, 2022.

For the three and six months ended June 30, 2023 we recorded $ 4 million and $ 11 million of stock based compensation, respectively, compared to $ 12 million and $ 16 million during the three and six months ended June 30, 2022, respectively.

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

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

The total unrecognized compensation expense related to awards of shares of restricted stock and restricted stock units was approximately $ 30 million as of March 31, 2023.

The total unrecognized compensation expense related to awards of shares of restricted stock and restricted stock units was approximately $ 27 million as of June 30, 2023.

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

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Forfeited ( 541 ) 36.58 —

Ending Balance — March 31, 2023 151,671 $ 36.65 $ 5.6

Ending Balance — June 30, 2023 142,124 $ 35.74 $ 5.1

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

12 unchanged sentences

Forfeited ( 10,686 ) 21.03 ( 0.2 )

Ending Balance — March 31, 2023 99,884 $ 48.58 $ 4.9

Ending Balance — June 30, 2023 99,884 $ 48.59 $ 4.9

(1) As discussed in Note 2 to our financial statements in this Form 10-Q, restricted stock units with market-based vesting conditions can vest between 0 % and 200 % subject to both the absolute performance of the Company's common stock as well as relative performance compared to a group of peers.

The incremental performance shares granted relate to the vesting of awards at the actual performance level.

The incremental performance shares granted relate to the vesting of awards at the achieved performance level.

A summary of the unvested LTIP Units that have time-based vesting conditions that have been issued is as follows:

10 unchanged sentences

Forfeited — — —

Ending Balance — March 31, 2023 529,246 $ 35.96 $ 19.1

Ending Balance — June 30, 2023 488,296 $ 34.30 $ 16.8

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

13 unchanged sentences

Forfeited ( 56,102 ) 4.56 ( 0.3 )

Ending Balance — March 31, 2023 493,858 $ 47.76 $ 23.6

Ending Balance — June 30, 2023 493,858 $ 47.76 $ 23.6

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

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

The incremental performance shares granted relate to the vesting of awards at the actual performance level.

The incremental performance shares granted relate to the vesting of awards at the achieved performance level.

Earnings per Share of Common Stock

Both the net income or loss attributable to the non-controlling OP units and the non-controlling limited partners’ outstanding OP units have been excluded from the basic earnings per share and the diluted earnings per share calculations attributable to common stockholders.

The net income or loss attributable to the non-controlling OP units have been excluded from the basic earnings per share and the diluted earnings per share calculations attributable to common stockholders.

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are excluded from net income available to common shareholders in the computation of earnings per share pursuant to the two-class method.

2 unchanged sentences

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

Three Months Ended March 31,

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

2023 2022 2023 2022

(in millions, except share and per share data)

14 unchanged sentences

Weighted-average number of OP units 1,331,877 1,054,706 1,259,246 864,956

As of March 31, 2023 As of March 31, 2022

As of June 30, 2023 As of June 30, 2022

Participating securities:

Unvested restricted common stock and unvested LTIP Units with time-based vesting conditions outstanding at period end 630,420 387,186

Potentially dilutive securities as of period end:

Potentially dilutive securities as of period end that were not dilutive for the presented periods:

Unvested restricted common stock and unvested LTIP Units with time-based vesting conditions

4 unchanged sentences

Equity Method Investments

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

We recognized income (loss) from our equity method investments of approximately $ 22 million during the three months ended March 31, 2023 compared to $ 48 million during the three months ended March 31, 2022.

We recognized income (loss) from our equity method investments of approximately $ 2 million and $ 25 million during the three and six months ended June 30, 2023, respectively, compared to $( 20 ) million and $ 28 million during the three and six months ended June 30, 2022, respectively.

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

9 unchanged sentences

Balance Sheet

As of December 31, 2022

As of March 31, 2023

Current assets $ 92 $ 715 $ 807

10 unchanged sentences

Income Statement

For the year ended December 31, 2022

For the quarter ended March 31, 2023

Revenue 26 156 182

1 unchanged sentence

Net income (loss) ( 25 ) ( 59 ) ( 84 )

For the year ended December 31, 2021

For the quarter ended March 31, 2022

Revenue ( 90 ) 85 ( 5 )

3 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements