HA Sustainable Infrastructure Capital, Inc. 10-K

Item 8. Financial Statements and Supplementary Data HA Sustainable Infrastructure Capital, Inc., Consolidated Financial Statements, For the Years Ended December 31, 2024, 2023 and 2022 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 64 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 67 Consolidated Balance Sheets 67 Consolidated Statements of Operations 69 Consolidated Statements of Comprehensive Income 70 Consolidated Statements of Stockholders’ Equity 71 Consolidated Statements of Cash Flows 72 Notes to Consolidated Financial Statements 74 - 63 - Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of HA Sustainable Infrastructure Capital, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of HA Sustainable Infrastructure Capital, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 14, 2025 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates. - 64 - Accounting for Equity Investments Description of the Matter As discussed in Note 2 to the consolidated financial statements, the Company makes investments that are accounted for under the equity method of accounting. As of December 31, 2024, the Company held $3.61 billion of equity investments. The Company’s determination that it does not have the power to direct the significant activities impacting each of the investees’ economic performance (“power”) is critical to its determination that it is not the primary beneficiary of the investee. Also, as described in Note 2 to the consolidated financial statements, for equity method investments that contain preferences with regard to cash flows from operations, capital events and liquidation in their respective limited liability company agreements (“LLC Agreements”), the Company applies the Hypothetical Liquidation at Book Value (“HLBV”) method to record its share of profits and losses on these investments, which is recorded one quarter in arrears to allow for receipt of financial information from its investees. Also, as described in Note 2, the Company evaluates their equity method investments quarterly for other than temporary impairment (“OTTI”). This requires evaluating available qualitative and quantitative evidence to determine whether there may be indicators of a loss in investment value below carrying value. Auditing the Company’s determination of whether it has power over an investee was complex and required significant judgment to determine both the activities of the investee that most significantly impact the investee’s economics, and the distribution of power among the members of the investee that ultimately determine the outcome of such activities. In addition, auditing the Company’s application of the HLBV method was challenging and inherently complex, because the application is based on its interpretations of the liquidation provisions outlined within investees’ LLC Agreements. Lastly, evaluating available qualitative and quantitative evidence was subjective and required judgment as to whether there were indicators of a loss in investment value below carrying value. How We Addressed the Matter in Our Audit We tested the Company’s controls that address the risks of material misstatement relating to: i) the determination of whether the Company has the power to direct the significant activities of the investees, ii) the recognition of its share of investees’ profits and losses through use of the HLBV method based on financial information reported to the Company from its investees, and iii) the review of available qualitative and quantitative evidence in determining whether there may be indicators of a loss in investment value below carrying value. For example, we tested the Company’s controls over management’s review of the variable interest model and determination of whether the Company has power. We also tested controls over management’s review of the HLBV method, including the application of any liquidation provisions and the financial information reported from their investees. Lastly, we tested controls over management’s review of available quantitative and qualitative evidence and whether there were indicators of a loss in investment value below carrying value. To evaluate whether the Company has power over each investee, our audit procedures included, on a sample basis, reading LLC Agreements and evaluating management’s analysis of the significant activities of the investee and which parties can direct those significant activities. For example, as part of our evaluation, we considered the purpose and design of each investee and the legal rights of each of the involved parties, including the significance of the decisions that each party makes. We also tested the rights of each party included in management’s analysis by comparing such rights to the LLC Agreements. We tested the Company’s application of the HLBV method for a sample of investments. Our audit procedures included, among others, involving tax professionals to assist in evaluating the Company’s application of the liquidation provisions within the LLC Agreements. Specifically, we assessed the Company’s HLBV calculations by agreeing provisions of the calculations, such as the application of stated preferred returns and allocation of tax attributes, to the terms of the LLC Agreements for each of these investments. We also performed additional procedures on the Company’s HLBV calculations that included, but were not limited to, recalculating the stated preferred returns, recalculating allocations of tax attributes, comparing inputs included within the calculations to the information reported to the Company by its investee, and recalculating the Company’s share of profits and losses of the investee. We reviewed the Company’s evaluation of available qualitative and quantitative evidence and whether there may be indicators of a loss in investment value below carrying value for a sample of investments. This included, among others, evaluating management’s identification of indicators that the Company’s investments may have experienced a loss of value below carrying value, agreeing certain qualitative and quantitative information used in the assessment to source documents, testing clerical accuracy of the analysis as applicable, and assessing any contradictory evidence that arose during our audit. - 65 - /s/ Ernst & Young LLP We have served as the Company’s auditor since 1983. Tysons, Virginia February 14, 2025 - 66 - Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of HA Sustainable Infrastructure Capital, Inc. Opinion on Internal Control Over Financial Reporting We have audited HA Sustainable Infrastructure Capital, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, HA Sustainable Infrastructure Capital, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated February 14, 2025 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Tysons, Virginia February 14, 2025 - 67 - HA SUSTAINABLE INFRASTRUCTURE CAPITAL, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) December 31, 2024 December 31, 2023 Assets Cash and cash equivalents $ 129,758 $ 62,632 Equity method investments 3,612,394 2,966,305 Receivables, net of allowance of $ 50 million and $ 50 million, respectively 2,895,837 3,073,855 Receivables held-for-sale 75,556 35,299 Real estate 2,984 111,036 Investments 6,818 7,165 Securitization assets, net of allowance of $ 3 million and $ 3 million, respectively 248,688 218,946 Other assets 108,210 77,112 Total Assets $ 7,080,245 $ 6,552,350 Liabilities and Stockholders’ Equity Liabilities: Accounts payable, accrued expenses and other $ 275,639 $ 163,305 Credit facilities 1,001 400,861 Commercial paper notes 100,057 30,196 Term loans payable 407,978 727,458 Non-recourse debt (secured by assets of $ 307 million and $ 239 million, respectively) 131,589 160,456 Senior unsecured notes 3,139,363 2,318,841 Convertible notes 619,543 609,608 Total Liabilities 4,675,170 4,410,725 Stockholders’ Equity: Preferred stock, par value $ 0.01 per share, 50,000,000 shares authorized, no shares issued and outstanding — — Common stock, par value $ 0.01 per share, 450,000,000 shares authorized, 118,960,353 and 112,174,279 shares issued and outstanding, respectively 1,190 1,122 Additional paid-in capital 2,592,964 2,381,510 Accumulated deficit ( 297,499 ) ( 303,536 ) Accumulated other comprehensive income (loss) 40,101 13,165 Non-controlling interest 68,319 49,364 Total Stockholders’ Equity 2,405,075 2,141,625 Total Liabilities and Stockholders’ Equity $ 7,080,245 $ 6,552,350 See accompanying notes. - 68 - HA SUSTAINABLE INFRASTRUCTURE CAPITAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Years Ended December 31, 2024 2023 2022 Revenue Interest income $ 263,792 $ 207,794 $ 134,656 Rental income 2,095 21,251 26,245 Gain on sale of assets 80,341 68,637 57,187 Securitization asset income 26,054 19,259 17,905 Other income 11,313 2,930 3,744 Total revenue 383,595 319,871 239,737 Expenses Interest expense 242,364 171,008 115,559 Provision for loss on receivables and securitization assets 1,059 11,832 12,798 Compensation and benefits 81,319 64,344 63,445 General and administrative 32,905 31,283 29,934 Total expenses 357,647 278,467 221,736 Income before equity method investments 25,948 41,404 18,001 Income (loss) from equity method investments 247,878 140,974 31,291 Income (loss) before income taxes 273,826 182,378 49,292 Income tax benefit (expense) ( 70,198 ) ( 31,621 ) ( 7,381 ) Net income (loss) 203,628 150,757 41,911 Net income (loss) attributable to non-controlling interest holders 3,591 1,921 409 Net income (loss) attributable to controlling stockholders $ 200,037 $ 148,836 $ 41,502 Basic earnings (loss) per common share $ 1.72 $ 1.45 $ 0.47 Diluted earnings (loss) per common share $ 1.62 $ 1.42 $ 0.47 Weighted average common shares outstanding—basic 115,548,087 101,844,551 87,500,799 Weighted average common shares outstanding—diluted 130,501,006 109,467,554 90,609,329 See accompanying notes. - 69 - HA SUSTAINABLE INFRASTRUCTURE CAPITAL, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (DOLLARS IN THOUSANDS) Years Ended December 31, 2024 2023 2022 Net income (loss) $ 203,628 $ 150,757 $ 41,911 Unrealized gain (loss) on available-for-sale securities, net of tax (provision) benefit of $ 4.1 million, $ 1.8 million and $ 2.2 million in 2024, 2023, and 2022 respectively ( 11,754 ) 12,761 ( 63,935 ) Unrealized gain (loss) on interest rate swaps, net of tax (provision) benefit of $( 13.5 ) million, $( 3.3 ) million, and $( 13.2 ) million in 2024, 2023, and 2022 respectively 39,173 10,764 43,401 Comprehensive income (loss) 231,047 174,282 21,377 Less: Comprehensive income (loss) attributable to non-controlling interest holders 4,074 1,884 176 Comprehensive income (loss) attributable to controlling stockholders $ 226,973 $ 172,398 $ 21,201 See accompanying notes. - 70 - HA SUSTAINABLE INFRASTRUCTURE CAPITAL, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (AMOUNTS IN THOUSANDS) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Non-controlling Interest Total Shares Amount Balance at December 31, 2021 85,327 $ 853 $ 1,727,667 $ ( 193,706 ) $ 9,904 $ 21,797 $ 1,566,515 Net income (loss) — — — 41,502 — 409 41,911 Unrealized gain (loss) on available-for-sale securities — — — — ( 63,211 ) ( 724 ) ( 63,935 ) Unrealized gain (loss) on interest rate swaps — — — — 42,910 491 43,401 Issued shares of common stock 5,121 51 188,831 — — — 188,882 Equity-based compensation — — 3,159 — — 16,942 20,101 Issuance (repurchase) of vested equity-based compensation shares 103 1 ( 3,213 ) — — — ( 3,212 ) Other 286 3 7,756 — — ( 85 ) 7,674 Dividends and distributions — — — ( 133,270 ) — ( 3,321 ) ( 136,591 ) Balance at December 31, 2022 90,837 $ 908 $ 1,924,200 $ ( 285,474 ) $ ( 10,397 ) $ 35,509 $ 1,664,746 Net income (loss) — — — 148,836 — 1,921 150,757 Unrealized gain (loss) on available-for-sale securities — — — — 12,935 ( 174 ) 12,761 Unrealized gain (loss) on interest rate swaps — — — — 10,627 137 10,764 Issued shares of common stock 21,267 213 493,544 — — — 493,757 Equity-based compensation — — 3,089 — — 15,296 18,385 Issuance (repurchase) of vested equity-based compensation shares 69 1 ( 1,490 ) — — — ( 1,489 ) Conversion of convertible notes — — 2 — — — 2 Purchase of capped calls — — ( 37,835 ) — — — ( 37,835 ) Dividends and distributions — — — ( 166,898 ) — ( 3,325 ) ( 170,223 ) Balance at December 31, 2023 112,173 $ 1,122 $ 2,381,510 $ ( 303,536 ) $ 13,165 $ 49,364 $ 2,141,625 Net income (loss) — — — 200,037 — 3,591 203,628 Unrealized gain (loss) on available-for-sale securities — — — — ( 11,546 ) ( 208 ) ( 11,754 ) Unrealized gain (loss) on interest rate swaps — — — — 38,482 691 39,173 Issued shares of common stock 6,750 68 205,917 — — — 205,985 Equity-based compensation — — 4,293 — — 18,858 23,151 Issuance (repurchase) of vested equity-based compensation shares 27 — ( 530 ) — — — ( 530 ) Other 10 — 1,774 — — ( 403 ) 1,371 Dividends and distributions — — — ( 194,000 ) — ( 3,574 ) ( 197,574 ) Balance at December 31, 2024 118,960 $ 1,190 $ 2,592,964 $ ( 297,499 ) $ 40,101 $ 68,319 $ 2,405,075 See accompanying notes. - 71 - HA SUSTAINABLE INFRASTRUCTURE CAPITAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) Years Ended December 31, 2024 2023 2022 Cash flows from operating activities Net income (loss) $ 203,628 $ 150,757 $ 41,911 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loss on receivables 1,059 11,832 12,798 Depreciation and amortization 1,003 3,127 3,993 Amortization of financing costs 17,039 12,958 11,685 Equity-based compensation 23,151 18,386 20,101 Equity method investments ( 179,747 ) ( 108,025 ) 16,403 Non-cash gain on sale or securitization ( 70,685 ) ( 43,542 ) ( 28,614 ) (Gain) loss on sale of assets 7,299 1,305 ( 218 ) Changes in receivables held-for-sale ( 29,273 ) 51,538 ( 62,953 ) Loss on debt extinguishment — — — Changes in accounts payable, accrued expenses and other 101,410 48,485 18,176 Change in accrued interest on receivables and investments ( 78,639 ) ( 44,105 ) ( 15,414 ) Cash received (paid) upon hedge settlement 20,311 — — Other ( 10,704 ) ( 3,027 ) ( 17,638 ) Net cash provided by operating activities 5,852 99,689 230 Cash flows from investing activities Equity method investments ( 396,613 ) ( 869,412 ) ( 127,867 ) Equity method investment distributions received 39,142 30,140 110,064 Proceeds from sales of equity method investments 9,472 — 1,700 Purchases of and investments in receivables ( 667,140 ) ( 1,338,860 ) ( 726,931 ) Principal collections from receivables 600,652 197,784 125,976 Proceeds from sales of receivables 171,991 7,634 5,047 Purchases of real estate — — ( 4,550 ) Sales of real estate 115,767 — 4,550 Purchases of investments ( 10,537 ) ( 14,404 ) ( 2,329 ) Proceeds from sales of investments and securitization assets 5,390 — 7,020 Collateral provided to hedge counterparties ( 27,090 ) ( 93,550 ) — Collateral received from hedge counterparties 27,570 84,950 — Funding of escrow accounts — — ( 5,476 ) Withdrawal from escrow accounts — — 22,757 Other 204 2,915 ( 2,071 ) Net cash provided by (used in) investing activities ( 131,192 ) ( 1,992,803 ) ( 592,110 ) - 72 - Years Ended December 31, 2024 2023 2022 Cash flows from financing activities Proceeds from credit facilities 1,296,792 1,177,000 100,000 Principal payments on credit facilities ( 1,696,792 ) ( 827,000 ) ( 150,000 ) Proceeds from (repayment of) commercial paper notes 70,000 30,000 ( 50,000 ) Proceeds from issuance of non-recourse debt 94,000 — 32,923 Principal payments on non-recourse debt ( 72,989 ) ( 21,606 ) ( 30,581 ) Proceeds from issuance of term loan 250,000 365,000 383,000 Principal payments on term loan ( 567,952 ) ( 16,478 ) — Proceeds from issuance of senior unsecured notes 1,199,956 550,000 — Redemption of senior unsecured notes ( 400,000 ) — — Proceeds from issuance of convertible notes — 402,500 200,000 Principal payments on convertible notes — ( 143,748 ) ( 461 ) Purchase of capped calls related to the issuance of convertible notes — ( 37,835 ) — Net proceeds of common stock issuances 203,528 492,377 188,881 Payments of dividends and distributions ( 192,269 ) ( 159,786 ) ( 132,198 ) Withholdings on employee share vesting ( 529 ) ( 1,488 ) ( 3,211 ) Redemption premium paid — — — Payment of debt issuance costs ( 30,331 ) ( 22,894 ) ( 11,754 ) Collateral provided to hedge counterparties ( 151,330 ) ( 166,600 ) — Collateral received from hedge counterparties 199,300 176,050 — Other ( 969 ) ( 3,268 ) ( 9,820 ) Net cash provided by (used in) financing activities 200,415 1,792,224 516,779 Increase (decrease) in cash, cash equivalents, and restricted cash 75,075 ( 100,890 ) ( 75,101 ) Cash, cash equivalents, and restricted cash at beginning of period 75,082 175,972 251,073 Cash, cash equivalents, and restricted cash at end of period $ 150,157 $ 75,082 $ 175,972 Interest paid $ 192,960 $ 138,418 $ 98,704 Supplemental disclosure of non-cash activity Residual assets retained from securitization transactions $ 43,329 $ 35,483 $ 28,614 Equity method investments retained from securitization and deconsolidation transactions 32,564 144,603 — Issuance of common stock from conversion of convertible notes — — 7,674 Equity method investments retained from sale of assets to co-investment structure 115,249 — — Deconsolidation of non-recourse debt and other liabilities 51,233 257,746 — Deconsolidation of assets pledged for non-recourse debt 51,761 374,608 — Assumption of deferred financing obligation 32,910 — — See accompanying notes. - 73 - HA SUSTAINABLE INFRASTRUCTURE CAPITAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 1. The Company HA Sustainable Infrastructure Capital, Inc., formerly known as Hannon Armstrong Sustainable Infrastructure Capital, Inc. prior to July 2, 2024 (the “Company”), actively partners with clients to deploy real assets that facilitate the energy transition. Our investments take various forms, including equity, joint ventures, land ownership, lending and other financing transactions. 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; • receivables; and • debt securities. We finance our business through cash on hand, recourse and non-recourse debt, convertible securities, or equity issuances and may also decide to finance such transactions through the use of off-balance sheet securitization or syndication structures. Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “HASI.” We 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. We operate our business through, and along with two of our wholly owned subsidiaries serve as the general partners of, our operating partnership subsidiary, Hannon Armstrong Sustainable Infrastructure, L.P., (the “Operating Partnership”), which was formed to acquire and directly or indirectly own our assets. Transition to Taxable C Corporation As a result of expanding opportunities in non-qualifying assets, effective January 1, 2024, we have revoked our real estate investment trust (“REIT”) election and are taxed as a C Corporation beginning in tax year 2024. Commencing with the taxable year ended December 31, 2024, all of the Company’s taxable income is subject to U.S. federal and state income tax at the applicable corporate tax rate. Dividends paid to stockholders are no longer tax deductible to us. The Company is also no longer subject to the REIT requirement for distributions to stockholders when the Company has taxable income. The Company anticipates that operating as a taxable C Corporation will provide the Company with flexibility to execute various strategic initiatives without the constraints of complying with REIT requirements, including investing in power generating, transportation, and alternative fuel assets which are not REIT qualifying assets. The Company’s transition to a taxable C Corporation is not expected to result in significant incremental current income tax expense in the near term due to the availability of net operating loss (“NOL”) carryforwards and tax credits typically offered by the assets in which we often invest. See Note 10 for additional information. 2. Summary of Significant Accounting Policies Basis of Presentation The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and such differences could be material. In the opinion of management, all adjustments necessary to present fairly our financial position, results of operations and cash flows have been included. Certain amounts in the prior years have been reclassified to conform to the current year presentation. The consolidated financial statements include our accounts and controlled subsidiaries, including the Operating Partnership. All material intercompany transactions and balances have been eliminated in consolidation. Following the guidance for non-controlling interests in Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 810, Consolidation (“ASC 810”), references in this report to our earnings per share and our net income and stockholders’ equity attributable to common stockholders do not include amounts attributable to non-controlling interests. - 74 - Consolidation 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. Since we have assessed that we have power over and receive the benefits from those special purpose entities that are formed for the purpose of holding our assets on our balance sheet, we have concluded we are the primary beneficiary and should consolidate these entities under the provisions of ASC 810. We also have certain subsidiaries we deem to be voting interest entities that we control through our ownership of voting interests and accordingly consolidate. Certain of our equity method investments were determined to be interests in VIEs in which we are not the primary beneficiary, as we do not direct the significant activities of these entities, and thus we account for those investments as Equity Method Investments as discussed below. Our maximum exposure to loss through these investments is typically limited to their recorded values. 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, 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. We share in the cash flows, income, and tax attributes according to a negotiated schedule which typically does not correspond with our ownership percentages. Investors in a preferred return position, if any, typically receive a priority distribution of all or a portion of the project’s cash flows, and in some cases, tax attributes. Once the preferred return, if applicable, is achieved, the partnership “flips” and common equity investors, often the operator of the project, receive a larger portion of the cash flows, with the previously preferred investors retaining an on-going residual interest. Our equity investments in climate solutions projects are accounted for under the equity method of accounting. Under the equity method of accounting, the carrying value of these equity method investments is determined based on amounts we invested, adjusted for earnings or losses of the investee allocated to us based on the LLC agreement, less distributions received. We generally conclude that investments where the LLC agreements contain preferences with regard to cash flows from operations, capital events or liquidation are considered substantive profit sharing arrangements, so we accordingly 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 during the period. This claim is calculated as the amount we would receive if the investee were to liquidate all of its assets at the recorded amounts determined in accordance with GAAP and distribute the resulting cash to creditors and investors in accordance with their respective priorities. This method is referred to as the hypothetical liquidation at book value method (“HLBV”). Our exposure to loss in these investments is limited to the amount of our equity investment, as well as receivables from or guarantees made to the same investee. Any difference between the amount of our investment and the amount of underlying equity in net assets at the time of our investment is generally amortized over the life of the assets and liabilities to which the difference relates. Cash distributions received from each equity method investment are classified as operating activities to the extent of cumulative earnings for each investment in our consolidated statements of cash flows. Our initial investment and additional cash distributions beyond the amounts that are classified as operating activities are classified as investing activities in our consolidated statements of cash flows. We typically recognize earnings one quarter in arrears for these investments to allow for the receipt of financial information. Our proportionate share of any revenue earned from equity method investees is eliminated through the income (loss) from equity method investment line of our income statement. We evaluate quarterly whether the current carrying value of our investments accounted for using the equity method have an other than temporary impairment (“OTTI”). An OTTI occurs when the estimated fair value of an investment is below the carrying value and the difference is determined to not be recoverable in the near term. First, we consider both qualitative and quantitative evidence in determining whether there is an indicator of a loss in investment value below carrying value. After considering the weight of available evidence, if it is determined that there is an indication of loss in investment value, we will perform a fair value analysis. If the resulting fair value is less than the carrying value, we will determine if this loss in value is OTTI, and we will recognize any OTTI in the income statement as an impairment. This evaluation requires significant judgment regarding, but not limited to, the severity and duration of the impairment; the ability and intent to hold the securities until recovery; financial condition, liquidity, and near-term prospects of the issuer; specific events; and other factors. - 75 - Receivables Receivables include project loans and receivables. 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. 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. Our initial investment and principal repayments of these receivables are classified as investing activities and the interest collected is classified as operating activities in our consolidated statements of cash flows. Receivables that we intend to sell in the short-term are classified as held-for-sale and are carried at the lower of amortized cost or fair value on our balance sheet, which is assessed on an individual asset basis. The purchases and proceeds from receivables that we intend to sell at origination are classified as operating activities in our consolidated statements of cash flows. Interest collected is classified as an operating activity in our consolidated statements of cash flows. Receivables from certain projects are subordinate to preferred investors in a project who are allocated the majority of such project’s cash in the early years of the investment. Accordingly, such receivables may include the ability to defer scheduled interest payments in exchange for increasing our receivable balance. We generally accrue this paid-in-kind (“PIK”) interest when collection is expected and cease accruing PIK interest if there is insufficient value to support the accrual or we expect that any portion of the principal or interest due is not collectible. The change in PIK in any period is included in Change in accrued interest on receivables and investments in the operating section of our statement of cash flows. We evaluate our receivables for an allowance as determined under ASC Topic 326 Financial Instruments- Credit Losses (“Topic 326”) and for our internally derived asset performance categories included in Note 6 to our financial statements on at least a quarterly basis and more frequently when economic or other conditions warrant such an evaluation. When a receivable becomes 90 days or more past due, and if we otherwise do not expect the debtor to be able to service all of its debt or other obligations, we will generally consider the receivable delinquent or impaired and place the receivable on non-accrual status and cease recognizing income from that receivable until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a receivable’s status significantly improves regarding the debtor’s ability to service the debt or other obligations, we will remove it from non-accrual status. We determine our allowance based on the current expectation of credit losses over the contractual life of our receivables as required by Topic 326. We use a variety of methods in developing our allowance including discounted cash flow analysis and probability-of-default/loss given default (“PD/LGD”) methods. In developing our estimates, we consider our historical experience with our and similar assets in addition to our view of both current conditions and what we expect to occur within a period of time for which we can develop reasonable and supportable forecasts, typically two years . For periods following the reasonable and supportable forecast period, we revert to historical information when developing assumptions used in our estimates. In developing our forecasts, we consider a number of qualitative and quantitative factors in our assessment, which may include a project’s operating results, loan-to-value ratio, any cash reserves held by the project, the ability of expected cash from operations to cover the cash flow requirements currently and into the future, key terms of the transaction, the ability of the borrower to refinance the transaction, other credit support from the sponsor or guarantor and the project’s collateral value. In addition, we consider the overall economic environment, the climate solutions sector, the effect of local, industry, and broader economic factors such as unemployment rates and power prices, the impact of any variation in weather and the historical and anticipated trends in interest rates, defaults and loss severities for similar transactions. For assets where the obligor is a publicly rated entity, we consider the published historical performance of entities with similar ratings in developing our estimate of an allowance, making adjustments determined by management to be appropriate during the reasonable and supportable forecast period. We have made certain loan commitments that are within the scope of Topic 326. When estimating an allowance for these loan commitments we consider the probability of certain amounts to be funded and apply either a discounted cash flow or PD/LGD methodology as described above. We charge off receivables against the allowance, if any, when we determine the unpaid principal balance is uncollectible, net of recovered amounts. For those assets where we record our allowance using a discounted cash flow method, we have elected to record the change in allowance due solely to the passage of time through the provision for loss on receivables in our income statement. 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 Real estate consists of land or other real property and its related lease intangibles, net of any amortization. Our real estate is generally leased to tenants on a triple net lease basis, whereby the tenant is responsible for all operating expenses relating to the property, generally including property taxes, insurance, maintenance, repairs and capital expenditures. Certain real estate transactions may be characterized as “failed sale-leaseback” transactions as defined under ASC Topic 842, Leases , and thus are - 76 - 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. Expenses, if any, related to the ongoing operation of leases where we are the lessor are charged to operations as incurred. Our initial investment is classified as investing activities and income collected for rental income is classified as operating activities in our consolidated statements of cash flows. When our real estate transactions are treated as an asset acquisition with an operating lease, we typically record our real estate purchases at cost, including acquisition and closing costs, which is allocated to each tangible and intangible asset acquired on a relative fair value basis. Securitization of Assets We have established various special purpose entities or securitization trusts for the purpose of securitizing certain financial assets. We determined that the trusts used in securitizations are VIEs, as defined in ASC 810. When we conclude that we are not the primary beneficiary of certain trusts because we do not have power over those trusts’ significant activities, we do not consolidate the trust. We typically serve as primary or master servicer of these trusts; however, as the servicer, we do not have the power to make significant decisions impacting the performance of the trusts. We account for transfers of financial assets to these securitization trusts as sales pursuant to ASC 860, Transfers and Servicing (“ASC 860”), when we have concluded the transferred assets have been isolated from the transferor (i.e., put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership) and we have surrendered control over the transferred assets. When we are unable to conclude that we have been sufficiently isolated from the securitized financial assets, we treat such trusts as secured borrowings, retaining the assets on our balance sheet and recording the amounts due to the trust investor as non-recourse debt. Transfers of non-financial assets are accounted for under ASC 610-20, Gains and Losses from the Derecognition of Non-financial Assets , and those transfers are accounted for as sales when we have concluded that we have transferred control of the non-financial asset. For transfers treated as sales under ASC 860, we have received true-sale-at-law and non-consolidation legal opinions to support our conclusion regarding the transferred financial assets. When we sell financial assets in securitizations, we generally retain interests in the form of servicing rights and residual assets, which we refer to as securitization assets. Gain or loss on the sale of assets is calculated based on the excess of the proceeds received from the securitization (net of any transaction costs) plus any retained interests obtained over the cost basis of the assets sold. For retained interests, we generally estimate fair value based on the present value of future expected cash flows using our best estimates of the key assumptions of anticipated losses, prepayment rates, and current market discount rates commensurate with the risks involved. Cash flows related to our securitizations at origination are classified as operating activities in our consolidated statements of cash flows. We initially account for all separately recognized servicing assets and servicing liabilities at fair value and subsequently measure such servicing assets and liabilities using the amortization method. Servicing assets and liabilities are amortized in proportion to, and over the period of, estimated net servicing income with servicing income recognized as earned. We assess servicing assets for impairment at each reporting date. If the amortized cost of servicing assets is greater than the estimated fair value, we will recognize an impairment in net income. We account for our other retained interests in securitized financial assets, the residual assets, similar to available-for-sale debt securities and carry them at fair value with changes in fair value recorded in accumulated other comprehensive income (“AOCI”) pursuant to ASC 325-40, Beneficial Interests in Securitized Financial Assets . Income related to the residual assets is recognized using the effective interest rate method and included in securitization income in our income statement. Our residual assets are evaluated for impairment on a quarterly basis under Topic 326. A residual asset is impaired if its fair value is less than its carrying value. The credit component of impairments, if any, are recognized by recording an allowance against the amortized cost of the asset. For changes in expected cash flows, we will calculate a new yield based on the current amortized cost of the residual assets and the revised expected cash flows. This yield is used prospectively to recognize our income related to these assets. Residual interests in securitized non-financial assets are accounted for as equity method investments, and subject to those accounting policies described above. - 77 - Cash and Cash Equivalents Cash and cash equivalents include short-term government securities, certificates of deposit and money market funds, all of which had an original maturity of three months or less at the date of purchase. These securities are carried at their purchase price, which approximates fair value. Restricted Cash Restricted cash includes cash and cash equivalents set aside with certain lenders primarily to support obligations outstanding as of the balance sheet dates. Restricted cash is reported as part of other assets in our consolidated balance sheets. Refer to Note 3 to our financial statements in this Form 10-K for disclosure of the balances of restricted cash included in other assets. Convertible Notes We have issued convertible and exchangeable senior unsecured notes (together, “Convertible Notes”) that are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options , and ASC 815, Derivatives and Hedging (“ASC 815”) . Under ASC 815, issuers of certain convertible or exchangeable debt instruments are generally required to separately account for the conversion or exchange option of the debt instrument as either a derivative or equity, unless it meets the scope exemption for contracts indexed to, and settled in, an issuer’s own equity. Since our conversion or exchange options are both indexed to our equity and can be settled in our common stock at our option, we have met the scope exemption, and therefore, we do not separately account for the embedded conversion or exchange options. The initial issuance and any principal repayments are classified as financing activities and interest payments are classified as operating activities in our consolidated statements of cash flows. If converted or exchanged, the carrying value of each Convertible Note is reclassified into stockholders’ equity. Derivative Financial Instruments 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 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 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. Instruments that meet the required hedging criteria are formally designated as hedging instruments at the inception of the derivative contract. Derivatives are recorded at fair value. If a derivative is designated as a cash flow hedge and meets the highly effective threshold, the change in the fair value of the derivative is recorded in AOCI, net of associated deferred income tax effects. Any amounts in AOCI are recognized in earnings along with the income tax effect at the same time as the hedged item, which is when interest expense is recognized. For any derivative instruments not designated as hedging instruments, changes in fair value would be recognized in earnings in the period that the change occurs. We assess, both at the inception of the hedge and on an ongoing basis, whether the derivatives designated as cash flow hedges are highly effective in offsetting the changes in cash flows of the hedged items. We also assess on an ongoing basis whether the forecasted transactions remain probable, and discontinue hedge accounting if we conclude that they do not. We do not hold derivatives for trading purposes. Any collateral posted or received as credit support against derivative positions are netted against those derivatives in our balance sheets. When our collateral account with any particular counterparty is in a liability position, we include inflows and outflows related to those collateral postings within financing activities in our statement of cash flows. When our collateral account with any particular counterparty is in an asset position, we include inflows and outflows related to those collateral postings within investing activities in our statement of cash flows. The inflows and outflows related to instruments designated as cash flow hedges are included within our statement of cash flows in the same section as the hedge item, which is typically operating activities for our instruments which hedge interest rate risk exposures. Interest rate derivative 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 due to their requirement to post collateral. We have entered into certain capped call transactions to mitigate the economic dilution that may result from the conversion or exchange of certain of our Convertible Notes. These transactions are freestanding equity-linked derivative - 78 - instruments that qualify for the exemption for contracts indexed to, and settled in, an issuer’s own equity found in ASC 815, and accordingly the payment of the option premium was recorded as a reduction of Additional Paid-in-Capital within our Statement of Stockholders’ Equity. Income Taxes We elected and qualified to be taxed as a REIT for U.S. federal income tax purposes, commencing with our taxable year ended December 31, 2013 through our taxable year ended December 31, 2023. We have revoked our REIT election effective January 1, 2024, and beginning in taxable year 2024 are taxed as a taxable C Corporation. For tax years 2023 and prior, we had taxable REIT subsidiaries (“TRS”) that were taxed separately, and that were generally subject to U.S. federal, state, and local income taxes. To qualify as a REIT, we were required to meet on an ongoing basis several organizational and operational requirements, including a requirement that we distribute at least 90% of our REIT’s net taxable income before dividends paid, excluding capital gains, to our stockholders each year. As a REIT, for tax years ended December 31, 2023 and earlier, we were not subject to U.S. federal corporate income tax on that portion of net income that was distributed to our owners in accordance with the REIT rules. Subsequent to our REIT status revocation, all of our net taxable income is subject to U.S. federal and state income tax at the applicable corporate tax rate, and dividends paid to stockholders are no longer tax deductible. We account for income taxes under ASC 740, Income Taxes (“ASC 740”) using the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in earnings in the period when the new rate is enacted. We evaluate any deferred tax assets for valuation allowances based on an assessment of available evidence including sources of taxable income, prior years taxable income, any existing taxable temporary differences and our future investment and business plans that may give rise to taxable income. We treat any tax credits we receive from our equity investments in renewable energy projects as reductions of federal income taxes of the year in which the credit arises. We apply ASC 740 with respect to how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. This guidance requires the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing our tax returns to determine whether the tax positions are “more likely than not” to be sustained by the applicable tax authority. We are required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which includes U.S. federal and certain states. Equity-Based Compensation 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 as compensation to our independent directors, employees, advisors, consultants and other personnel. Certain awards earned under each plan are based on achieving various performance or market targets, which are generally earned between 0 % and 200 % of the initial target, depending on the extent to which the performance or market target is met. In addition to performance or market targets, income or gain must be allocated by our Operating Partnership to certain LTIP Units issued by our Operating Partnership so that the capital accounts of such units are equalized with the capital accounts of other holders of OP units before parity is reached and LTIP Units can be converted to limited partnership units. We record compensation expense for grants made in accordance with ASC 718, Compensation—Stock Compensation . We record compensation expense for unvested grants that vest solely based on service conditions on a straight-line basis over the vesting period of the entire award based upon the fair market value of the grant on the date of grant. Fair market value for restricted common stock is based on our share price on the date of grant. For awards where the vesting is contingent upon achievement of certain performance targets, compensation expense is measured based on the fair market value on the grant date and is recorded over the requisite service period (which includes the performance period). Actual performance results at the end of the performance period determines the number of shares that will ultimately be awarded. We have also issued awards where the vesting is contingent upon service being provided for a defined period and certain market conditions being met. The fair value of these awards, as measured at the grant date, is recognized over the requisite service period, even if the market conditions are not met. The grant date fair value of these awards was developed by an independent appraiser using a Monte Carlo simulation. Forfeitures of unvested awards are recognized as they occur. We have a retirement policy that provides for full vesting at retirement of any time-based awards that were granted prior to the date of retirement and permits the vesting of performance-based awards that were granted prior to the date of retirement according to the original vesting schedule of the award, subject to the achievement of the applicable performance measures and without the requirement for continued employment. Employees are eligible for the retirement policy upon meeting age and - 79 - years of service criteria. We record compensation expense for unvested grants through the date in which an employee meets the retirement criteria. Earnings Per Share We compute earnings per share of common stock in accordance with ASC 260, Earnings Per Share . Basic earnings per share is calculated by dividing net income attributable to controlling stockholders (after consideration of the earnings allocated to unvested grants, if applicable) by the weighted-average number of shares of common stock outstanding during the period excluding the weighted average number of unvested grants, if applicable (“participating securities” as defined in Note 12 to our financial statements in this Form 10-K). Diluted earnings per share is calculated by dividing net income attributable to controlling stockholders (after consideration of the earnings allocated to unvested grants, if applicable) by the weighted-average number of shares of common stock outstanding during the period plus other potential common stock instruments if they are dilutive. Other potentially dilutive common stock instruments include our unvested restricted stock, other equity-based awards, and Convertible Notes. The restricted stock and other equity-based awards are included if they are dilutive using the treasury stock method. The treasury stock method assumes that theoretical proceeds received for future service provided is used to purchase shares of treasury stock at the average market price per share of common stock, which is deducted from the total shares of potential common stock included in the calculation. When unvested grants are dilutive, the earnings allocated to these dilutive unvested grants are not deducted from the net income attributable to controlling stockholders when calculating diluted earnings per share. The Convertible Notes are included if they are dilutive using the if-converted method, which removes interest expense related to the Convertible Notes from the net income attributable to controlling stockholders and includes the weighted average shares of potential common stock over the period issuable upon conversion or exchange of the note. No adjustment is made for shares of potential common stock that are anti-dilutive during a period. Our capped call transactions are anti-dilutive and therefore their impact will be excluded from earnings per share. Segment Reporting We manage our business as a single portfolio which we originate from a single pipeline, and accordingly we report all of our activities as one reportable segment. Our single reportable segment generates net investment and equity method investment income through investments in climate solutions projects, as well as revenue through the gain on sale of assets and recurring asset management fees. The consolidated financial statements presented herein reflect the activities of our single reportable segment, and the accounting policies of our single reportable segment are those found here in this Note 2. Our chief operating decision maker (“CODM”) is our chief executive officer. The CODM assesses performance for this segment and decides how to allocate resources based in part on net income as recorded in our income statement. Included in this metric are the significant segment expenses reviewed by the CODM, which include interest expense, compensation and benefits, and general and administrative, each of which is reported in our income statement. We do not have material intra-company sales or transfers. In evaluating segment assets, the CODM uses receivables, equity method investments, real estate, and investments as reported on our balance sheet, which together we refer to as our Portfolio. Amounts invested in such assets can be found in our statement of cash flows. Segment asset amounts are used by the CODM when evaluating the return on investment on our Portfolio. Recently Issued Accounting Pronouncements Accounting standards updates issued before February 14, 2025, and effective after December 31, 2024, are not expected to have a material effect on our consolidated financial statements and related disclosures. There were no accounting standards that became effective in the year ended December 31, 2024 that had a material effect on our consolidated financial statements and related disclosures. 3. Fair Value Measurements Fair value is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value accounting guidance provides a three-level hierarchy for classifying financial instruments. The levels of inputs used to determine the fair value of our financial assets and liabilities carried on the balance sheet at fair value and for those which only disclosure of fair value is required are characterized in accordance with the fair value hierarchy established by ASC 820, Fair Value Measurements . Where inputs for a financial asset or liability fall in more than one level in the fair value hierarchy, the financial asset or liability is classified in its entirety based on the lowest level input that is significant to the fair value measurement of that financial asset or liability. 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 December 31, 2024 and December 31, 2023, 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: - 80 - • Level 1—Quoted prices (unadjusted) in active markets that are accessible at the measurement date. • Level 2—Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. • Level 3—Unobservable inputs are used when little or no market data is available. The tables below state the estimated fair value of our financial instruments on our balance sheet. Unless otherwise discussed below, fair values for our Level 2 and Level 3 measurements are measured using a discounted cash flow model, contractual terms and inputs which consist of base interest rates and spreads over base rates which are based upon market observation and recent comparable transactions. An increase in these inputs would result in a lower fair value and a decline would result in a higher fair value. Our Senior Unsecured Notes (as defined below) and Convertible Notes are valued using a market based approach and observable prices. The receivables held-for-sale, if any, are carried at the lower of cost or fair value, as determined on an individual asset basis. As of December 31, 2024 Fair Value Carrying Value Level (in millions) Assets Receivables $ 2,700 $ 2,896 Level 3 Receivables held-for-sale 79 76 Level 3 Investments (1) 7 7 Level 3 Securitization residual assets (2) 249 249 Level 3 Derivative assets 72 72 Level 2 Liabilities (3) Credit facilities $ 1 $ 1 Level 3 Commercial paper notes 100 100 Level 3 Term loan facilities 415 415 Level 3 Non-recourse debt 132 136 Level 3 Senior unsecured notes 3,098 3,162 Level 2 Convertible notes 2025 Exchangeable Senior Notes 214 218 Level 2 2028 Exchangeable Senior Notes 470 408 Level 2 Total Convertible Notes 684 626 Level 2 Derivative liabilities 3 3 Level 2 (1) The amortized cost of our investments as of December 31, 2024, was $ 8 million. (2) Included in securitization assets on the consolidated balance sheet. The amortized cost of our securitization residual assets net of allowance for credit losses as of December 31, 2024, was $ 301 million. A 5% adverse change in discount rates would decrease the fair value of these assets by $ 12 million, and a 10% adverse change would decrease the fair value by $ 23 million. (3) Fair value and carrying value exclude unamortized financing costs. - 81 - As of December 31, 2023 Fair Value Carrying Value Level (in millions) Assets Receivables $ 2,733 $ 3,074 Level 3 Receivables held-for-sale 36 35 Level 3 Investments (1) 7 7 Level 3 Securitization residual assets (2) 219 219 Level 3 Derivative assets 10 10 Level 2 Liabilities (3) Credit facilities $ 401 $ 401 Level 3 Commercial paper notes 30 30 Level 3 Term loan facilities 736 736 Level 3 Non-recourse debt 158 162 Level 3 Senior unsecured notes 2,251 2,337 Level 2 Convertible notes: 2025 Exchangeable Senior Notes 202 211 Level 2 2028 Exchangeable Senior Notes 481 408 Level 2 Total Convertible Notes 683 619 Level 2 Derivative liabilities 9 9 Level 2 (1) The amortized cost of our investments as of December 31, 2023, was $ 8 million. (2) Included in securitization assets on the consolidated balance sheet. The amortized cost of our securitization residual assets net of allowance for credit losses as of December 31, 2023, was $ 258 million. A 5% adverse change in discount rates would decrease the fair value of these assets by $ 10 million, and a 10% adverse change would decrease the fair value by $ 18 million. (3) Fair value and carrying value exclude unamortized financing costs. 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 year ended December 31, 2024 2023 (in millions) Balance, beginning of period $ 219 $ 177 Accretion of securitization residual assets 17 14 Additions to securitization residual assets 43 37 Collections of securitization residual assets ( 14 ) ( 17 ) Unrealized gains (losses) on securitization residual assets recorded in OCI ( 16 ) 11 Provision for loss on securitization residual assets — ( 3 ) Balance, end of period $ 249 $ 219 - 82 - We had the following securitization residual assets in an unrealized loss position: Estimated Fair Value Unrealized Losses (1) Count of Assets Assets with a loss shorter than 12 months Assets with a loss longer than 12 months Assets with a loss shorter than 12 months Assets with a loss longer than 12 months Assets with a loss shorter than 12 months Assets with a loss longer than 12 months (in millions) December 31, 2024 $ 67 $ 152 $ 4 $ 52 28 69 December 31, 2023 24 164 0.3 41 11 66 (1) Other than as discussed in Note 5, loss positions are 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 securitization residual assets, as of December 31, 2024 and 2023, 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. The weighted average discount rate used to determine the fair value of our securitization residual assets as of December 31, 2024 and 2023 was 7.3 % and 6.6 %, respectively. Non-recurring Fair Value Measurements Our financial statements may include non-recurring fair value measurements related to acquisitions and non-monetary transactions, if any. Assets acquired in a business combination, if any, are recorded at their fair value. We may use third party valuation firms to assist us with developing our estimates of fair value. Concentration of Credit Risk Receivables, real estate leases, and debt investments consist primarily of receivables from various projects, U.S. federal government-backed receivables, and investment grade state and local government receivables and do not, in our view, represent a significant concentration of credit risk given the large number of diverse offtakers and other obligors of the projects. Additionally, certain of our investments are collateralized by projects concentrated in certain geographic regions throughout the United States. These investments typically have structural credit protections to mitigate our risk exposure and, in most cases, the projects are insured for estimated physical loss which helps to mitigate the possible risk from these concentrations. We had cash deposits that are subject to credit risk as shown below: December 31, 2024 2023 (in millions) Cash deposits $ 130 $ 63 Restricted cash deposits (included in other assets) 20 12 Total cash deposits $ 150 $ 75 Amount of cash deposits in excess of amounts federally insured $ 148 $ 63 4. Non-Controlling Interest Units of limited partnership interests in the Operating Partnership (“OP units”) that are owned by limited partners other than us are included in non-controlling interest on our consolidated balance sheets. The non-controlling interest holders are generally allocated their pro rata share of income, other comprehensive income and equity transactions. 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. Non-controlling interest holders redeemed 10,000 OP units during the year ended December 31, 2024, and no OP units were exchanged during the year ended December 31, 2023. We have also granted to members of our leadership team and directors LTIP Units pursuant to our equity incentive plans. The LTIP Units issued to employees are held by HASI Management HoldCo LLC. The LTIP Units are designed to qualify as profits interests in the Operating Partnership and initially will have a capital account balance of zero and, therefore, will not have full parity with OP units with respect to liquidating distributions or other rights. However, the amended and restated agreement of limited partnership of the Operating Partnership (the “OP Agreement”) provides that “book gains,” or economic appreciation, in the Operating Partnership will be allocated first to the LTIP Units until the capital account per LTIP Units is equal to the capital account per-unit of the OP units. Under the terms of the OP Agreement, the Operating Partnership will revalue its assets upon the occurrence of certain specified events, and any increase in valuation from the time of grant until such - 83 - event will be allocated first to the holders of LTIP Units to equalize the capital accounts of such holders with the capital accounts of OP unit holders. Once this has occurred, the LTIP Units will achieve full parity with the OP units for all purposes, including with respect to liquidating distributions and redemption rights. In addition to these attributes, there are vesting and settlement conditions similar to our other equity-based awards as discussed in Notes 2 and 11 to our financial statements in this Form 10-K. 5. Securitization of Financial Assets The following summarizes certain transactions with securitization trusts: As of and for the year ended December 31, 2024 2023 2022 (in millions) Gains on securitizations $ 79 $ 69 $ 57 Cost of financial assets securitized 1,073 559 500 Proceeds from securitizations 1,152 628 557 Cash received from residual and servicing assets 20 20 20 In connection with securitization transactions, we typically retain servicing responsibilities and residual assets. We generally receive annual servicing fees that are typically up to 0.25 % of the outstanding balance. We may periodically make servicer advances, that are subject to credit risk. Included in securitization assets in our consolidated balance sheets are our servicing assets at amortized cost and our residual assets at fair value. Our residual assets are subordinate to investors’ interests, and their values are subject to credit, prepayment and interest rate risks on the transferred financial assets. Other than our securitization assets representing these residual interests in the trusts’ assets, the investors and the securitization trusts have no recourse to our other assets for failure of debtors to pay when due. In computing gains and losses on securitizations, we use discount rates based on a review of comparable market transactions including Level 3 unobservable inputs which consist of base interest rates and spreads over these base rates. Depending on the nature of the transaction risks, the all-in discount rate ranged from 5.45 % to 8.34 % during the year ended December 31, 2024. As of December 31, 2024 and December 31, 2023, our managed assets totaled $ 13.7 billion and $ 12.3 billion, respectively, of which $ 7.1 billion and $ 6.1 billion, respectively, were securitized assets held in unconsolidated securitization trusts or other investors’ portions of assets held in co-investment structures. As of December 31, 2024 and December 31, 2023, the securitization trusts held $ 6.2 billion and $ 5.6 billion, respectively, of notes due to investors. As of December 31, 2024, 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 for $ 116 million of our securitization residual assets. These technologies are installed in facilities owned by, or operated for or by, federal, state or local government entities where the ultimate obligor for the receivable is a governmental entity. The contracts may have guarantees of energy savings from third-party service providers, which typically are entities rated investment grade by an independent rating agency. The remainder of our securitization residual assets are related to contracts where the underlying cash flows are secured by an interest in real estate which are typically senior in terms of repayment to other financings. In 2023, we recorded an allowance for losses on securitization residual assets related to prepayable assets secured by real estate. While there is no change in the underlying credit quality of the securitized assets, we have revised our estimates of cash flows due to prepayments on certain of these assets. The following table reconciles our beginning and ending allowance for loss on securitization residual assets: - 84 - Commercial Government (in millions) Beginning balance - December 31, 2022 $ — $ — Provision for loss on securitization asset 3 — Provision recorded on purchase of a credit deteriorated asset — — Write-off of allowance — — Recovery of allowance — — Ending balance - December 31, 2023 $ 3 $ — Provision for loss on securitization asset — — Provision recorded on purchase of a credit deteriorated asset — — Write-off of allowance — — Recovery of allowance — — Ending balance - December 31, 2024 $ 3 $ — 6. Our Portfolio As of December 31, 2024, our Portfolio included approximately $ 6.6 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. The real estate is typically land and related lease intangibles for long-term leases to wind and solar projects. In developing and evaluating performance against our credit criteria, we consider a number of qualitative and quantitative criteria which may include a project’s operating results, loan-to-value ratio, any cash reserves, the ability of expected cash from operations to cover the cash flow requirements currently and into the future, key terms of the transaction, the ability of the borrower to refinance the transaction, the financial and operating capability of the borrower, its sponsors or the obligor as well as any guarantors and the project’s collateral value. In addition, we consider the overall economic environment, the climate solutions sector, the effect of local, industry and broader economic factors, the impact of any variation in weather and the historical and anticipated trends in interest rates, defaults and loss severities for similar transactions. - 85 - The following is an analysis of the Performance Ratings of our Portfolio as of December 31, 2024, which is assessed quarterly: Portfolio Performance Commercial Government 1 (1) 2 (2) 3 (3) 1 (1) Total Receivable vintage (4) (dollars in millions) 2024 $ 65 $ — $ — $ — $ 65 2023 881 — — — 881 2022 959 — — — 959 2021 295 — — — 295 2020 175 — — — 175 Prior to 2020 536 — — 35 571 Total receivables held-for-investment 2,911 — — 35 2,946 Less: Allowance for loss on receivables ( 50 ) — — — ( 50 ) Net receivables held-for-investment 2,861 — — 35 2,896 Receivables held-for-sale 39 — — 37 76 Investments 5 — — 2 7 Real estate 3 — — — 3 Equity method investments (5) 3,577 35 — — 3,612 Total $ 6,485 $ 35 $ — $ 74 $ 6,594 Percent of Portfolio 98 % 1 % — % 1 % 100 % (1) This category includes our assets where based on our credit criteria and performance to date we believe that our risk of not receiving our invested capital remains low. (2) This category includes our assets where based on our credit criteria and performance to date we believe there is a moderate level of risk to not receiving some or all of our invested capital. (3) This category includes our assets where based on our credit criteria and performance to date, we believe there is substantial doubt regarding our ability to recover some or all of our invested capital. Loans in this category are placed on non-accrual status. (4) Receivable vintage refers to the period in which the relevant loan agreement is signed, and a given vintage may contain loan advances made in periods subsequent to the period in which the loan agreement was signed. (5) Some of the individual projects included in portfolios that make up our equity method investments have government off-takers. As they are part of large portfolios, they are not classified separately. Receivables As of December 31, 2024 our allowance for loan losses related to our receivables was $ 50 million based on our expectation for credit losses over the lives of the receivables in our Portfolio. During 2024, we recorded a benefit for loss on receivables of less than $ 1 million, as the provision related to new loans and loan commitments was offset by a release in the reserves related to loans contributed to a co-investment structure. Below is a summary of the carrying value, expected loan funding commitments, and allowance by type of receivable or “Portfolio Segment,” as defined by Topic 326, as of December 31, 2024 and 2023: - 86 - December 31, 2024 December 31, 2023 Gross Carrying Value Loan Funding Commitments Allowance Gross Carrying Value Loan Funding Commitments Allowance (in millions) Commercial (1) $ 2,911 $ 545 $ 50 $ 3,033 $ 423 $ 50 Government (2) 35 — — 91 — — Total $ 2,946 $ 545 $ 50 $ 3,124 $ 423 $ 50 (1) As of December 31, 2024, this category of assets includes $ 1.5 billion of mezzanine loans made on a non-recourse basis to bankruptcy-remote 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. These residential solar assets typically contain back-up servicer provisions to allow for continuity of operations in the event the project sponsor is unable to fulfill its duties in that capacity. See “Related Party Transactions” below for discussion of loans in this category made to special purpose entities that were previously sponsored by the SunPower Corporation. Risk characteristics of our commercial receivables include a project’s operating risks, which include the impact of the overall economic environment, the climate solutions sector, the effect of local, industry, and broader economic factors, the impact of any variation in weather and trends in interest rates. We use assumptions related to these risks to estimate an allowance using a discounted cash flow analysis or the PD/LGD method as discussed in Note 2. All of our commercial receivables are included in Performance Rating 1 in the Portfolio Performance table above. 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 $ 50 million allowance on these $ 2.9 billion in assets as a result of lower probability assumptions utilized in our allowance methodology. (2) As of December 31, 2024, our government receivables include $ 7 million of U.S. federal government transactions and $ 28 million of transactions where the ultimate obligors are state or local governments. Risk characteristics of our government receivables include the energy savings or the power output of the projects and the ability of the government obligor to generate revenue for debt service, via taxation or other means. Transactions may have guarantees of energy savings or other performance support from third-party service providers, which typically are entities, directly or whose ultimate parent entity is, rated investment grade by an independent rating agency. All of our government receivables are included in Performance Rating 1 in the Portfolio Performance table above. Our allowance for government receivables is primarily calculated by using PD/LGD methods as discussed in Note 2. Our expectation of credit losses for these receivables is immaterial given the high credit-quality of the obligors. The following table reconciles our beginning and ending allowance for loss on receivables by Portfolio Segment for the year ended December 31, 2024: Commercial Government (in millions) Beginning balance - December 31, 2022 $ 41 $ — Provision for loss on receivables 9 — Write-off of allowance — — Ending balance - December 31, 2023 50 — Provision for loss on receivables — — Write-off of allowance — — Ending balance - December 31, 2024 $ 50 $ — 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 December 31, 2024: Total Less than 1 year 1-5 years 5-10 years More than 10 years (dollars in millions) Maturities by period (excluding allowance) $ 2,946 $ 24 $ 892 $ 894 $ 1,136 Weighted average yield by period 8.6 % 6.6 % 8.3 % 9.4 % 8.4 % Real Estate - 87 - Our real estate is leased to renewable energy projects, typically under long-term triple net leases. In 2024, we sold $ 100 million carrying value of land and related intangibles, and we retain a residual interest in those assets in the form of an equity method investment. The components of our real estate portfolio as of December 31, 2024 and 2023, were as follows: December 31, 2024 2023 (in millions) Real estate Land $ 3 $ 97 Lease intangibles — 22 Accumulated amortization of lease intangibles — ( 8 ) Real estate $ 3 $ 111 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 December 31, 2024, we held the following equity method investments: Investee Carrying Value (in millions) Jupiter Equity Holdings, LLC $ 613 Daggett Renewable HoldCo LLC 422 Lighthouse Renewable HoldCo 2 LLC 363 CarbonCount Holdings 1 LLC 309 Other equity method investments 1,905 Total equity method investments $ 3,612 Jupiter Equity Holdings, LLC 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. Through December 31, 2024, 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 $ 94 million in loans to Jupiter for for both payments related to winter storm Uri as well as payments to allow for the restructuring of certain power purchase agreements and tax equity arrangements which we expect to increase both near-term cash flows and expected lifetime return. Those loans are included in our Related Party Transactions disclosures below. The projects feature cash flows from fixed-price power purchase agreements and financial hedges, 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 the members, one of our subsidiaries and a subsidiary of the project sponsor, which contains customary terms and conditions. We own 100 % of the Class A Units in Jupiter corresponding to 49 % of the distributions from Jupiter subject to the preferences discussed below. Most major decisions that may impact Jupiter, its subsidiaries or its assets, require the majority vote of a four person committee on which we and the project sponsor each have two representatives. Through Jupiter, we will be entitled to preferred distributions until certain return targets are achieved. 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. 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. Daggett Renewable HoldCo LLC We have preferred equity interests in Daggett Renewable HoldCo LLC (“Daggett”) which owns two utility-scale solar projects developed and managed by the project sponsor. We have made investments in the preferred cash equity interests of Daggett of approximately $ 232 million through December 31, 2024, reflecting final funding true-ups after all projects reached substantial completion. The Daggett projects feature contracted cash flows with a diversified group of predominately investment grade utility off-takers. - 88 - Daggett is governed by a limited liability company agreement between us and the sponsor serving as managing member and contain customary terms and conditions. Most major decisions that may impact Daggett, its subsidiaries or its assets, require a unanimous vote of the representatives present at a meeting of a review committee in which a quorum is present. The review committee is a four -person committee, which includes two of our representatives and two sponsor representatives. Commencing on a certain date following the effective date of the applicable limited liability company agreement, we will be entitled to preferred distributions until certain return targets of each investment are achieved. Subject to customary exceptions, no member can transfer any of its equity ownership in Daggett to a third party without approval of the review committee of Daggett. We use the equity method of accounting to account for our preferred equity interests in Daggett, and have elected to recognize earnings from this investment one quarter in arrears to allow for the receipt of financial information. Lighthouse Renewables HoldCo 2 LLC We have a preferred equity investment in Lighthouse Renewables HoldCo 2 LLC (“Lighthouse 2”) which owns three onshore wind and utility-scale solar and solar-plus-storage projects, all developed and managed by the project sponsor. We have made investments in the preferred cash equity interests of Lighthouse 2 of approximately $ 420 million through December 31, 2024. Alongside the project sponsor and under terms outlined in the partnership agreement, we have made $ 18 million in working capital loans to the Lighthouse 2 primarily for payments related to winter storm Uri. Those working capital loans are included in our Related Party Transactions disclosures below. The Lighthouse 2 projects feature contracted cash flows with a diversified group of predominately investment grade corporate and university offtakers. Lighthouse 2 is governed by a limited liability company agreement between us and the sponsor serving as managing member and contain customary terms and conditions. Most major decisions that may impact Lighthouse 2, its subsidiaries or its assets, require a unanimous vote of the representatives present at a meeting of a review committee in which a quorum is present. The review committee is a four -person committee, which includes two of our representatives and two sponsor representatives. Commencing on a certain date following the effective date of the applicable limited liability company agreement, we will be entitled to preferred distributions until certain return targets are achieved. Subject to customary exceptions, no member of Lighthouse 2 can transfer any of its equity ownership in Lighthouse 2 to a third party without approval of the review committee of Lighthouse 2. We use the equity method of accounting to account for our preferred equity interest in Lighthouse 2, and have elected to recognize earnings from this investment one quarter in arrears to allow for the receipt of financial information. Related party transactions CarbonCount Holdings 1 LLC On May 4, 2024, we, through our indirect subsidiary, HASI CarbonCount Holdings 1, LLC (“HASI CarbonCount”), a Delaware limited liability company, and Hoops Midco, LLC (“KKR Hoops”), an investment vehicle established as a Delaware limited liability company and managed by an affiliate of Kohlberg Kravis Roberts & Co. L.P. (“KKR”), entered into agreements to acquire interests in CarbonCount Holdings 1 LLC (“CCH1”), established to invest in certain eligible climate positive projects across the United States, as further described below. CCH1 has been formed as a Delaware limited liability company. HASI CarbonCount and KKR Hoops have each committed $ 1 billion to CCH1 to be invested in clean energy assets during an 18 month investment period. In addition, HASI, through its indirect subsidiaries, HA Securities, LLC (the “Broker-Dealer”) and CarbonCount Holdings Manager LLC (the “Asset Manager”, and, together with the Broker-Dealer, the “Service Providers”), is engaged by CCH1 pursuant to a services agreement (the “Services Agreement’) to provide certain services to CCH1. CCH1 is governed by a board of directors (“the CCH1 Board”) which will initially be composed of four directors, two of whom will be appointed by us and two of whom will be appointed by KKR Hoops. Actions of the CCH1 Board generally require the affirmative vote of at least three out of four directors. Pursuant to the service agreement, the CCH1 Board has delegated to the Service Providers certain rights and powers to manage the day-to-day business and affairs of CCH1, while retaining control over the significant decision making of CCH1. We account for our investment in CCH1 as an equity method investment. The Broker-Dealer sources investment opportunities for CCH1 pursuant to the terms of the Services Agreement. Through the Broker-Dealer, HASI is obligated to present all of the investment opportunities it identifies that fit within certain predetermined criteria to the CCH1 Board until either joint venture party’s commitment has been fully invested or upon the date that the 18 -month investment period described above expires or is earlier terminated. The investment criteria under the Services Agreement includes investment opportunities that we would typically have originated on our balance sheet. CCH1 pays the Broker-Dealer, for provision of the services provided, an upfront fee on each funding of investments generally equal to 1 % of the total cash consideration funded by CCH1 to the applicable investment counterparty. CCH1 also pays the Asset Manager, for provision of the services provided by it, ongoing fees in respect of asset management and administering the management and operation of CCH1, payable when deducted from CCH1’s cash available for distribution. - 89 - The fee payable to the Asset Manager is calculated on the basis of certain performance thresholds and will generally not be less than 0.5 % of invested capital per annum, subject to certain limited exceptions, nor more than 1.00 %. At inception, and prior to KKR’s acquisition of its interest in CCH1, we seeded CCH1 with equity method investments and receivables which were previously on our balance sheet with a combined book value of $ 108 million, and which are expected to have a total invested amount of $ 191 million once fully funded. We received approximately $ 55 million from KKR for the purchase of their share of the net assets of CCH1, resulting in the deconsolidation of CCH1 by us. There were no material differences between the amounts paid by KKR and the carrying values of the contributed assets, resulting in no material gain or loss upon deconsolidation and no material basis differences established. Subsequent to the KKR’s acquisition of their interest in CCH1, we contributed a further $ 112 million book value of financial assets to CCH1 which were previously on our balance sheet, for which we received $ 61 million of cash from KKR. Additionally, we contributed $ 190 million of cash which CCH1 used to make investments. As of December 31, 2024, CCH1 contains $ 600 million book value in assets, 81 % of which are receivables. CCH1 will recognize income from its equity method investees one quarter in arrears to allow for its receipt of financial information. Other Related Party Transactions As of December 31, 2024, of our commercial receivables, approximately $ 822 million are loans made to entities in which we also have non-controlling equity investments of approximately $ 852 million. Typically, these equity method investments are LLCs taxed as partnerships that we have entered into with various renewable energy project sponsors, including the SunPower Corporation as further described below. We negotiate the commercial terms of these loans with the other partner, and the assets against which the project sponsors are borrowing are contributed into the LLCs upon the execution of the loans. Our equity investments allow us to participate in the residual economics of those contributed assets alongside the other partner, and our rights under the project operating agreements do not allow us to make any significant unilateral decisions regarding the terms of the arrangement. These assets are bankruptcy remote from the project sponsor, and residential solar assets typically contain back-up servicer provisions to allow for continuity of operations in the event the project sponsor is unable to fulfill its duties in that capacity. We are not obligated to contribute capital to support these entities, beyond agreements to make contributions to allow for the entities to purchase additional renewable energy assets. Because the loans made to these entities are typically subordinate to senior debt and tax equity investors in the projects, these loans, which have maturities of over ten years , may accrue PIK interest in the early years of the project until sufficient cash flow is available for our interest payments. Any change in PIK interest is included in Change in accrued interest on receivables and investments in the operating section of our statement of cash flows. On a quarterly basis, we assess these loans for any impairment inclusive of any PIK interest accrued under CECL as discussed above under Receivables. The following table provides additional detail on our transactions with related party equity method investees: For the year ended December 31, 2024 2023 2022 (in millions) Interest income from related party loans $ 81 $ 68 $ 60 Additional investments made in related party loans 246 324 164 Principal collected from related party loans 322 36 87 Interest collected from related party loans 64 62 64 Investments related to SunPower Corporation On August 5, 2024, SunPower Corporation (“SunPower”), a project sponsor for certain of the residential solar projects in which we invest, declared Chapter 11 bankruptcy. As of December 31, 2024, we have commercial receivables with a gross carrying value of $ 333 million due from special purpose entities which own individual residential solar assets (“SunStrong SPEs”) for which SunPower performed certain services including billing and collections, operations and maintenance, and accounting, tax filings, and financial reporting. These SunStrong SPEs are bankruptcy remote from SunPower, and were jointly owned by SunPower and us. The cash flows supporting our loans are from each individual residential customer rather than SunPower and are not expected to be materially impacted by this event. We evaluate these loans quarterly during our assessment of allowance for loan losses, and have determined that our allowance for loan losses related to these loans has not been materially impacted by these events. As of December 31, 2024, we had equity method investments of $ 32 million in the SunStrong SPEs. We have not identified any OTTI with regards to these assets, and we do not expect our equity method investments in these entities to be materially impacted by this ownership change. - 90 - In October of 2024, SunPower’s interests in such entities were purchased by a third party, who have retained SunPower’s governance rights within those structures and who intend to be a long-term co-owner of the SunStrong SPEs, and accordingly we have continued and will continue to account for our interest in these entities as equity method investments. We have taken steps to ensure continuation of the services currently provided by SunPower, including the engagement of replacement service providers. We do not believe the bankruptcy of SunPower will have a material impact on our consolidated financial statements. 7. Credit facilities and commercial paper notes Unsecured revolving credit facility We have an unsecured revolving credit facility pursuant to a revolving credit agreement with a syndicate of lenders. In 2024, we increased the maximum outstanding borrowing amount of the facility from $ 915 million to $ 1.35 billion, and extended the maturity to April 2028. As of December 31, 2024, there were no outstanding borrowings under the unsecured revolving credit facility. As of December 31, 2024, we had less than $ 9 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 also 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. The current applicable margins are 1.625 % for SOFR-based loans and 0.625 % for prime rate-based loans, plus an additional 0.10 %. The unsecured revolving credit facility has a commitment fee based on our current credit rating. The unsecured revolving credit facility contains terms, conditions, covenants, and representations and warranties that are customary and typical for transactions of this nature, including various affirmative and negative covenants, and limitations on the incurrence of liens and indebtedness, investments, fundamental organizational changes, dispositions, changes in the nature of business, transactions with affiliates, use of proceeds, stock repurchases, and dividends we can declare. The unsecured revolving credit facility also includes customary events of default and remedies. At our option, upon maturity of the unsecured revolving credit facility, we have the ability to convert amounts borrowed into term loans for a fee equal to 1.625 % of the term loan amounts. Credit-Enhanced Commercial Paper Note Program We have a Green CarbonCount commercial paper program that allows us to issue commercial paper notes at any time, with such notes supported by an irrevocable direct-pay letter of credit from Bank of America, N.A (“Credit-Enhanced Commercial Paper Notes”). In 2024, we increased the capacity of the program inclusive of the letter of credit to allow for up to $ 125 million outstanding at any time, and extended the maturity of the program and it’s related letter of credit to April 2026. Bank of America provides a direct-pay letter of credit to the noteholders in the same amount of each Credit-Enhanced Commercial Paper Note. The letter of credit is automatically drawn upon at maturity of a Credit-Enhanced Commercial Paper Note and the noteholders are repaid in full. We have a five business-day grace period during which we repay Bank of America for the amount drawn or issue a new Credit-Enhanced Commercial Paper Note. Following the five business-day grace period, any amount then-outstanding is converted into a loan from Bank of America. Credit-Enhanced Commercial Paper Notes are not redeemable, are not subject to voluntary prepayment and are not to exceed 397 days. The proceeds from our Credit-Enhanced Commercial Paper Notes are used to acquire or refinance, in whole or in part, eligible green projects, including assets that are neutral to negative on incremental carbon emissions. As of December 31, 2024, we had no outstanding Credit-Enhanced Commercial Paper Notes. Credit-Enhanced Commercial Paper Notes are issued at a discount based on market pricing, subject to broker fees of 0.10 %. For issuance of the letter of credit, we will pay 1.325 % on any drawn letter of credit amounts to Bank of America, N.A., and 0.35 % on any unused letter of credit capacity. Any loans converted from drawn letter of credit amounts bear interest at a rate of Term SOFR plus 1.875 %, plus an additional 0.10 %. Fees paid on the drawn letters of credit may be reduced by 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 December 31, 2024, 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. The letter of credit also includes customary events of default and remedies. - 91 - Standalone Commercial Paper Program Beginning in 2024, we began to issue unsecured short-term promissory notes pursuant to a CarbonCount green commercial paper program which are guaranteed by certain of our subsidiaries (“Standalone Commercial Paper Notes”). Standalone Commercial Paper Notes are issued at a discount based on market pricing, subject to broker fees of 0.05 %. Standalone Commercial Paper Notes are not redeemable, are not subject to voluntary prepayment, and are not to exceed 367 days. Our Board has approved the issuance of up to $ 1 billion principal amount of Standalone Commercial Paper Notes at any given time. To enhance the credit of the Standalone Commercial Paper Notes,we reserve availability under our unsecured revolving credit facility for the principal amount of any outstanding Standalone Commercial Paper Notes. The proceeds from our Standalone Commercial Paper Notes are used to acquire or refinance, in whole or in part, eligible green projects, including assets that are neutral to negative on incremental carbon emissions. As of December 31, 2024, we had $ 100 million principal amount of Stand-alone Commercial Paper Notes outstanding, which bear an average borrowing cost of 5.35 %. Senior secured revolving credit agreement In 2024, we entered into a senior secured revolving credit agreement with a maximum outstanding principal amount of $ 100 million which matures in 2029. Under the terms of the senior secured revolving credit agreement, we will pledge collateral to the facility in the form of certain qualifying land assets or assets secured by land and will be allowed to borrow up to 80 % of our cash amount invested in the collateral pledged. Any loans under the agreement bear interest at a rate of Term SOFR plus 1.90 %, and interest is due quarterly. The rate of interest can be reduced by up to 0.10 % to the extent our Portfolio achieves certain targeted levels of carbon emissions avoidance as measured by our CarbonCount metric. There is a commitment fee of 0.20 % of the unused capacity of the agreement, which is paid quarterly. The senior secured revolving credit agreement contains terms, conditions, covenants, and representations and warranties that are customary and typical for transactions of this nature, including various affirmative and negative covenants, and limitations on the incurrence of liens and indebtedness, investments, fundamental organizational changes, dispositions, changes in the nature of business, transactions with affiliates, use of proceeds, stock repurchases, and dividends we can declare. The senior secured revolving credit agreement also includes customary events of default and remedies. As of December 31, 2024, we had no balance outstanding on the senior secured revolving credit agreement, and we had availability under the revolving credit agreement of $ 22 million based on the pledged collateral. We had approximately $ 1 million in unamortized financing costs associated with the senior secured revolving credit agreement, which are included in other assets. 8. Long-term Debt Non-recourse debt We have outstanding the following asset-backed non-recourse debt and bank loans: Outstanding Balance as of December 31, Interest Rate Maturity Date Anticipated Balance at Maturity Carrying Value of Assets Pledged as of December 31, Description of Assets Pledged 2024 2023 2024 2023 (dollars in millions) HASI Sustainable Yield Bond 2015-1A (1) $ — $ 68 4.28 % October 2034 $ — $ — $ 136 Receivables, real estate, real estate intangibles, and restricted cash HASI SYB Trust 2016-2 (2) — 51 4.35 % April 2037 — — 57 Receivables and restricted cash HASI Harmony Issuer 96 — 6.78 % July 2043 — 266 — Equity method investments Other non-recourse debt (3) 40 43 3.15 % - 7.23 % 2026 to 2032 17 41 46 Receivables Unamortized financing costs ( 4 ) ( 2 ) Non-recourse debt (4) $ 132 $ 160 (1) We prepaid this obligation in 2024. (2) In 2024, the contractual terms of this agreement were modified, which caused us to deconsolidate the entities holding such debt and its related pledged collateral. - 92 - (3) Other non-recourse debt consists of various debt agreements used to finance certain of our receivables. Scheduled debt service payment requirements are equal to or less than the cash flows received from the underlying receivables. (4) The total collateral pledged against our non-recourse debt was $ 307 million and $ 239 million as of December 31, 2024 and December 31, 2023, respectively, which includes $ 20 million and $ 11 million of restricted cash that was pledged for debt service as of December 31, 2024 and December 31, 2023, 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. There is no recourse for repayment of these obligations other than to the applicable borrower and any collateral pledged as security for the obligations. Generally, the assets and credit of these entities are not available to satisfy any of our other debts and obligations. The creditors can only look to the borrower, the cash flows of the pledged assets and any other collateral pledged, to satisfy the debt and we are not otherwise liable for nonpayment of such cash flows. The debt agreements contain terms, conditions, covenants, and representations and warranties that are customary and typical for transactions of this nature, including 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. The agreements also include customary events of default, the occurrence of which may result in termination of the agreements, acceleration of amounts due, and accrual of default interest. We typically act as servicer for the debt transactions. We were in compliance with all covenants as of December 31, 2024 and 2023. 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 December 31, 2024, were as follows: Year Ending December 31, Future minimum maturities (in millions) 2025 $ 15 2026 7 2027 14 2028 6 2029 10 Thereafter 84 Total minimum maturities 136 Unamortized financing costs ( 4 ) Total non-recourse debt $ 132 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 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. To the extent there are not sufficient cash flows received from those investments pledged as collateral, the investor has no recourse against other corporate assets to recover any shortfalls. Senior Unsecured Notes We have outstanding senior unsecured notes issued by us or jointly by certain of our subsidiaries which are guaranteed by the Company and certain other subsidiaries (the “Senior Unsecured Notes”). The Senior Unsecured Notes were subject to covenants that limited our ability to incur additional indebtedness and required us to maintain unencumbered assets of not less than 120 % of our unsecured debt. These covenants terminated during 2024 as a result of us being rated an investment grade issuer by two of the three major credit rating agencies and no event of default having occurred. We are in compliance with all of our remaining covenants as of December 31, 2024 and 2023. The Senior Unsecured Notes impose certain requirements in the event that we merge with or sell substantially all of our assets to another entity. We allocate an amount equal to the net proceeds of our Senior Unsecured Notes to the acquisition or refinance of, in whole or in part, eligible green projects, including assets that are neutral to negative on incremental carbon emissions. - 93 - The following are summarized terms of the Senior Unsecured Notes as of December 31, 2024: Outstanding Principal Amount Maturity Date Stated Interest Rate Interest Payment Dates Redemption Terms Modification Date (in millions) 2025 Notes $ — (1) April 15, 2025 6.000 % April 15 and October 15 N/A 2026 Notes 1,000 June 15, 2026 3.375 % June 15 and December 15 March 15, 2026 (2) 2027 Notes 750 (4) June 15, 2027 8.000 % June 15 and December 15 March 15, 2027 (3) 2030 Notes 375 (5) September 15, 2030 3.750 % February 15 and August 15 N/A 2034 Notes 1,000 (1) July 1, 2034 6.375 % July 1st and January 1st N/A (1) In June 2024, we issued $ 700 million principal amount of Senior Unsecured Notes due in July 2034 (“2034 Notes”), which bear interest at a rate of 6.375 %. The notes were issued for gross proceeds of $ 695 million, resulting in a yield to maturity of 6.476 %. We used a portion of the proceeds from this issuance to redeem the outstanding principal amount of the 2025 notes. There was no premium paid upon redemption. In December 2024, we issued an additional $ 300 million principal amount of 2034 Notes for gross proceeds of $ 300 million. (2) Prior to this date, we may redeem, at our option, some or all of the 2026 Notes for the outstanding principal amount plus the applicable “make-whole” premium as defined in the indenture governing the 2026 Notes plus accrued and unpaid interest through the redemption date. In addition, prior to this date, we may redeem up to 40 % of the Senior Unsecured Notes using the proceeds of certain equity offerings at a price equal to par plus the coupon percentage of the principal amount thereof, plus accrued but unpaid interest, if any, to, but excluding, the applicable redemption date. On, or subsequent to, this date we may redeem the 2026 Notes in whole or in part at par, plus accrued and unpaid interest though the redemption date. (3) Prior to this date, we may redeem, at our option, some or all of the 2027 Notes for the outstanding principal amount plus the applicable “make-whole” premium as defined in the indenture governing the 2027 Notes plus accrued and unpaid interest through the redemption date. In addition, prior to this date, we may redeem up to 40 % of the Senior Unsecured Notes using the proceeds of certain equity offerings at a price equal to par plus the coupon percentage of the principal amount thereof, plus accrued but unpaid interest, if any, to, but excluding, the applicable redemption date. On, or subsequent to, this date we may redeem the 2027 Notes in whole or in part at a price equal to 100 % of the principal amount, plus accrued and unpaid interest though the redemption date. (4) In 2024, in a following offering we issued $ 200 million principal amount of 2027 Notes for net proceeds of $ 204 million, equivalent to a yield to maturity of 7.08 % for the new issuance. (5) We issued the $ 375 million aggregate principal amount of the 2030 Notes for total proceeds of $ 371 million ($ 367 million net of issuance costs) at an effective interest rate of 3.87 %. We may redeem the 2030 Notes in whole or in part at redemption prices defined in the indenture governing the 2030 Notes plus accrued and unpaid interest though the redemption date. The following table presents a summary of the components of the Senior Unsecured Notes: As of and for the year ended December 31, 2024 2023 (in millions) Principal $ 3,125 $ 2,325 Accrued interest 41 15 Unamortized premium (discount) ( 4 ) ( 3 ) Less: Unamortized financing costs ( 23 ) ( 18 ) Carrying value of Senior Unsecured Notes $ 3,139 $ 2,319 Interest expense $ 148 $ 80 Convertible Notes We have outstanding exchangeable senior notes, and have previously issued convertible senior notes together “Convertible Notes”. Holders may convert or exchange any of their Convertible Notes into shares of our common stock at the applicable conversion or exchange ratio at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, unless the Convertible Notes have been previously redeemed or repurchased by us. - 94 - The following are summarized terms of the Convertible Notes as of December 31, 2024: Outstanding Principal Amount Maturity Date Stated Interest Rate Interest Payment Dates Conversion/Exchange Ratio Conversion/ Exchange Price Issuable Shares Dividend Threshold Amount (1) (in millions) (in millions) 2025 Exchangeable Senior Notes 200 (2) May 1, 2025 0.000 % N/A 17.8443 $ 56.04 3.6 $ 0.375 2028 Exchangeable Senior Notes 403 August 15, 2028 3.750 % February 15 and August 15 36.9520 $ 27.06 14.9 $ 0.395 (1) The conversion or exchange ratio is subject to adjustment for dividends declared above these amounts per share per quarter and certain other events that may be dilutive to the holder. (2) The 2025 Exchangeable Senior Notes accrete to a premium at maturity equal to 3.25 % per annum. The current balance including accreted premium is $ 218 million. For the exchangeable senior notes, following the occurrence of a make-whole fundamental change, we will, in certain circumstances, increase the exchange rate for a holder that converts its exchangeable notes in connection with such make-whole fundamental change. There are no cash settlement provisions for the 2025 Exchangeable Senior Notes and the exchange option can only be settled through physical delivery of our common stock. Upon exchange of the 2028 Exchangeable Senior Notes, exchange may be settled through cash, shares of our common stock or a combination of cash and shares of our common stock, at our election (as described in the indenture related to the 2028 Exchangeable Senior Notes). Additionally, upon the occurrence of certain fundamental changes involving us, holders of the 2025 Exchangeable Senior Notes or the 2028 Exchangeable Senior Notes may require us to redeem all or a portion of their notes for cash at a price of 100 % of the principal amount outstanding, plus accrued and unpaid interest. We may redeem the 2028 Exchangeable Senior Notes, in whole or in part, at our option, on or after August 20, 2026 and prior to the 62nd scheduled trading day immediately preceding the maturity date for such notes, if certain conditions are met including our common stock trading above 130 % of the exchange price for at least 20 trading days, as set forth in the indenture relating to the 2028 Exchangeable Senior Notes. Any shares of our common stock issuable upon exchange of the 2025 Exchangeable Senior Notes or 2028 Exchangeable Senior Notes will have certain registration rights. We have issued $ 200 million of 0.00 % Exchangeable Senior Notes due 2025 which are guaranteed by us and certain of our subsidiaries and may, under certain conditions, be exchangeable for our common stock. The notes accrete to a premium at maturity at an effective rate of 3.25 % annually. Upon any exchange of the notes, holders will receive a number of shares of our common stock equal to the product of (i) the aggregate initial principal amount of the notes to be exchanged, divided by $1,000 and (ii) the applicable exchange rate, plus cash in lieu of fractional shares. We have allocated an amount equal to the net proceeds of this offering to the acquisition or refinancing of, in whole or in part, new and/or existing eligible green projects, which include assets that are neutral to negative on incremental carbon emissions. The following table presents a summary of the components of our Convertible Notes: As of and for the year ended December 31, 2024 2023 (in millions) Principal $ 603 $ 603 Accrued interest 6 6 Premium 18 11 Less: Unamortized financing costs ( 7 ) ( 10 ) Carrying value of Convertible Notes $ 620 $ 610 Interest expense $ 25 $ 9 In order to mitigate the potential dilution to our common stock upon exchange of the 2028 Exchangeable Senior Notes, we entered into privately-negotiated capped call transactions (“Capped Calls”) with certain counterparties. The Capped Calls are separate transactions and are not part of the terms of the 2028 Exchangeable Senior Notes. The total premium for the Capped Calls was recorded as a reduction of additional paid-in capital. The Company used a portion of the proceeds from the 2028 Exchangeable Senior Notes to pay for the cost of the Capped Call premium. The material terms of the Capped Calls are as follows: - 95 - (in millions except per share data) Aggregate cost of capped calls $ 38 Initial strike price per share $ 27.14 Initial cap price per share $ 43.42 Shares of our common stock covered by the capped calls 14.8 Expiration date August 15, 2028 CarbonCount Term Loan Facility We have entered into a CarbonCount Term Loan Facility (“the unsecured term loan facility”) with a syndicate of banks, which has an outstanding principal and accrued interest amount of $ 247 million. Principal amounts under the term loan facility 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 December 31, 2024, the applicable margin is 1.875 % plus 0.10 %, and the current interest rate is 6.30 %. 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. Payments of 1.25 % of the outstanding principal balance are due quarterly. 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. Loans under the unsecured term loan facility can be prepaid without penalty. In 2024, we extended the maturity date to 2027, with no changes to the pricing terms, and used proceeds from our unsecured revolving credit facility to make a partial prepayment of $ 275 million on the unsecured term loan facility to reduce the outstanding principal balance. Principal and interest payments which were due under the term loan facility as of December 31, 2024 are as follows: Year Ending December 31, Future maturities (in millions) 2025 $ 12 2026 12 2027 223 Total $ 247 Less: Unamortized financing costs ( 4 ) Carrying Value $ 243 The unsecured term loan facility contains terms, conditions, covenants, and representations and warranties that are customary and typical for a transaction of this nature, including various affirmative and negative covenants, and limitations on the incurrence of liens and indebtedness, investments, fundamental organizational changes, dispositions, changes in the nature of business, transactions with affiliates, use of proceeds, stock repurchases and dividends we declare. The unsecured term loan facility also includes customary events of default and remedies. Secured Term Loan We have a secured term loan (“secured term loan”) with a maturity date of January 2028. Principal amounts under the secured term loan will bear interest at a rate of Daily Term SOFR plus a credit spread of 2.25 %, plus 0.10 %. We are required to hold interest rate swaps with notional values equal to 85 % of the outstanding principal amount of the loan. The secured term loan is subject to mandatory principal amortization of 5 % per annum, with principal and interest payments due quarterly. The secured term loan contains terms, conditions, covenants, and representations and warranties that are customary and typical for a transaction of this nature, including various affirmative and negative covenants, and limitations on the incurrence of liens and indebtedness, investments, fundamental organizational changes, dispositions, changes in the nature of business, transactions with affiliates, use of proceeds, stock repurchases and dividends we declare. The secured term loan also includes customary events of default and remedies. As of December 31, 2024, with respect to the secured term loan, the outstanding principal balance is $ 167 million, the interest rate as of the last rate reset is 6.99 %, and we have financing receivables pledged with a carrying value of $ 410 million. In 2024, we removed $ 45 million of pledged collateral, and made a principal payment of $ 28 million. Amounts which were due under the secured term loan as of December 31, 2024 are as follows: - 96 - Year Ending December 31, Future maturities (in millions) 2025 $ 10 2026 12 2027 11 2028 134 Total 167 Less: Unamortized Financing Costs ( 2 ) Carrying Value $ 165 Interest rate swaps In connection with several of our long-term borrowings, including floating-rate loans from our Term Loan Facility, unsecured revolving credit facility, Secured Term Loan, and the anticipated refinancings of certain of our Senior Unsecured Notes we have entered into the following interest rate swaps derivative transactions that are designated as cash flow hedges as of December 31, 2024: Instrument Type Index Hedged Rate Notional Value Fair Value as of Term December 31, 2024 December 31, 2023 ($ in millions) Interest Rate Swap 1 month SOFR 3.79 % $ 200 (1) $ 3 $ ( 12 ) March 2023 to March 2033 Interest Rate Swap Overnight SOFR 2.98 % 400 24 7 June 2026 to June 2033 Interest Rate Swap Overnight SOFR 3.09 % 600 32 7 June 2026 to June 2033 Interest Rate Swap Overnight SOFR 3.08 % 400 — (2) 8 April 2025 to April 2035 Interest Rate Collar 1 month SOFR 3.70 % - 4.00 % (3) 250 — — May 2023 to May 2026 Interest Rate Swap Overnight SOFR 4.39 % to 4.42 % (4) 168 ( 3 ) ( 8 ) September 2023 to June 2033 Interest Rate Swap Overnight SOFR 3.72 % 375 11 — June 2027 to June 2037 (1) This swap was partially financially settled in 2024 for a benefit of $ 1 million. Approximately $ 1 million of this benefit is in AOCI as of December 31, 2024 and will be amortized into interest expense over the term of our current floating rate borrowings. (2) This swap was financially settled in 2024, for a benefit of $ 19 million. Approximately $ 18 million of this benefit is in AOCI as of December 31, 2024 and will be amortized into interest expense over the term of the 2034 Notes. (3) Interest rate collar consists of a purchased interest rate cap of 4.00 % and a written interest rate floor of 3.70 %. (4) Consists of three interest rate swaps with identical maturities and effective dates. 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 December 31, 2024, all of our derivatives which were designated as hedging instruments were deemed to be effective. As of December 31, 2024, we hold $ 57 million of collateral related to our interest rate derivatives that are assets, and we have netted the liability associated with that collateral against our derivative assets in other assets on our balance sheet. As of December 31, 2024, we have posted $ 8 million worth of collateral related to our interest rate derivatives that are liabilities, $ 3 million of which we have netted against our derivative liabilities in accounts payable, accrued assets, and other liabilities on our balance sheet, with the remaining $ 5 million in other assets. - 97 - The below table shows the changes in our AOCI balance related to our interest rate derivatives designated and qualifying as effective cash flow hedges: (Amounts in millions) Beginning Balance - January 1, 2023 $ — Changes in fair value 7 Amounts released into interest expense ( 6 ) Ending balance - December 31, 2023 1 Changes in fair value 95 Amounts released into interest expense ( 10 ) Ending balance - December 31, 2024 $ 86 The below table shows the benefit (expense) included in interest expense as a result of our hedging activities. We expect an expense of $ 2 million to be released out of AOCI into interest expense over the 12 months following December 31, 2024. For the Year ended December 31, 2024 2023 2022 (amounts in millions) Interest expense $ 242 $ 171 $ 116 Benefit (expense) included in interest expense due to hedging activities ( 10 ) ( 6 ) — 9. Commitments and Contingencies Leases We lease office space at our headquarters in Annapolis, Maryland under an operating lease entered into in 2021 which expires in 2033. In 2023, we entered into a lease for additional office space in New York, New York. We have a lease related to our previous office space entered into in 2011 and amended in 2013 and 2017. Lease payments under this prior lease commenced in 2012 and incremental payments related to the amendments commenced in 2014 and 2017. The lease expires in 2027, and we began subleasing this space in 2023. The leases provide for operating expense reimbursements and annual escalations that are amortized over the respective lease terms on a straight-line basis. Rent expense related to these three leases was less than $ 1 million for each of the years ended December 31, 2024, 2023, and 2022, respectively. Future gross minimum lease payments are approximately $ 2 million for years 2025 and 2026, and $ 1 million per year during the remaining term of the leases. Litigation The nature of our operations exposes us to the risk of claims and litigation in the normal course of our business. We are not currently subject to any legal proceedings that are probable of having a material adverse effect on our financial position, results of operations or cash flows. Guarantees and other commitments We have made guarantees related to the financing of four of our joint venture entities that own debt securities of energy efficiency projects. We received $ 73 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 2025. As of December 31, 2024, our maximum obligation under this guarantee is approximately $ 87 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 for this guarantee 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 repayment to us of 15 % of this guarantee obligation. - 98 - As a part of broader project restructuring in order to increase our expected cash flows from the investment, we alongside the project sponsor, made guarantees to support the working capital needs of two of the project companies owned by Jupiter, an equity method investee. The guarantees are in effect until the tax equity investors in those project companies achieve their target preferred returns, and our contractual maximum under these guarantees is $ 53 million, and is limited to $ 20 million in any particular calendar year. As of December 31, 2024, we have no liability recorded as a result of these guarantees as we believe it is not probable we will be required to perform under them. As of December 31, 2024 we have not been asked to perform under them. In connection with some of our transactions, we have provided certain limited representations, warranties, covenants and/or provided an indemnity against certain losses resulting from our own actions, including related to certain investment tax credits. As of December 31, 2024, there have been no such actions resulting in claims against the Company. 10. Income Tax As discussed in Note 1, as a result of expanding opportunities in non-qualifying REIT assets, effective January 1, 2024, we have elected to revoke our REIT election, and are taxed as a C Corporation beginning in tax year 2024. Commencing with the taxable year ended December 31, 2024, all of the Company’s taxable income is subject to U.S. federal and state income tax at the applicable corporate tax rate. Dividends paid to stockholders are no longer tax deductible. The Company is also no longer subject to the REIT compliance requirements for assets, income, or distributions to stockholders among other REIT compliance requirements. The Company anticipates that operating as a taxable C Corporation will provide the Company with flexibility to execute various strategic initiatives without the constraints of complying with REIT requirements, including increased investing in power generating, transportation, and alternative fuel assets that are not REIT qualifying. The Company’s transition to a taxable C Corporation is not expected to result in significant incremental current income tax expense in the near term due to the availability of net operating loss (“NOL”) carryforwards and tax credits typically offered by the assets in which we often invest. We recorded an income tax expense of approximately $ 70 million for the year ended December 31, 2024, a $ 32 million tax expense for the year ended December 31, 2023, and an $ 7 million tax expense for the year ended 2022. The federal income tax expense and benefits recorded were determined using a rate of 21%. Our deferred tax assets and liabilities were measured using a federal rate of 21%. Below is a reconciliation between the federal statutory rates and our effective tax rates for the years ended December 31: 2024 2023 2022 Federal statutory income tax rate 21 % 21 % 21 % Changes in rate resulting from: Share-based compensation 2 % 2 % 11 % Equity method investments ( 3 ) % ( 6 ) % ( 9 ) % Recognition of deferred tax liability from REIT revocation — % 18 % — % REIT benefit / dividends paid deduction — % ( 14 ) % ( 32 ) % State income taxes 5 % 2 % ( 2 ) % Other 1 % — % 7 % Valuation allowance — % ( 6 ) % 19 % Effective tax rate 26 % 17 % 15 % Our deferred tax liability was $ 155 million and $ 77 million as of December 31, 2024 and 2023. Our deferred tax liability is included in accounts payable, accrued expenses and other on our consolidated balance sheet. Deferred income taxes represent the tax effect from continuing operations of the differences between the book and tax basis of assets and liabilities. Deferred tax assets (liabilities) include the following as of December 31: - 99 - 2024 2023 (in millions) Net operating loss (NOL) carryforwards $ 219 $ 163 Tax credit carryforwards 40 31 Share-based compensation 2 6 Other — 4 Valuation allowance — — Gross deferred tax assets 261 204 Receivables basis difference $ ( 68 ) $ ( 57 ) Equity method investments ( 338 ) ( 224 ) Other ( 10 ) — Gross deferred tax liabilities ( 416 ) ( 281 ) Net deferred tax liabilities $ ( 155 ) $ ( 77 ) We have unused NOLs of $ 841 million and tax credits of approximately $ 40 million. Approximately $ 87 million of our NOLs will begin to expire in 2034. If we were to experience a change in control as defined in Section 382 of the Internal Revenue Code, our ability to utilize NOLs in the years after the change in control would be limited. Similar rules and limitation may apply for state tax purposes as well. Of our NOLs, $ 754 million were added in taxable years after 2017 which are not subject to expiration but are limited to 80% of taxable income. Our tax credits begin to expire in 2034. We have no examinations in progress, none are expected at this time, and years 2021 through 2024 are open. As of December 2024 and 2023, we had no uncertain tax positions. Our policy is to recognize interest expense and penalties related to income tax matters as a component of general and administrative expense. There were no accrued interest and penalties as of December 31, 2024 and 2023, and no interest and penalties were recognized during the years ended December 31, 2024, 2023, or 2022. For federal income tax purposes, the cash dividends paid for the years ended December 31, 2024 and 2023 are characterized as follows: 2024 2023 Common distributions Ordinary income — % 52 % Return of capital 100 % 6 % Capital gain dividend — % 42 % 100 % 100 % 11. Equity Dividends and Distributions Our Board declared the following dividends in 2023, 2024, and 2025: Announced Date Record Date Pay Date Amount per share 2/16/2023 04/3/2023 04/10/2023 $ 0.395 5/4/2023 07/5/2023 07/12/2023 0.395 8/3/2023 10/4/2023 10/11/2023 0.395 11/2/2023 12/29/2023 (1) 01/12/2024 0.395 02/15/2024 04/5/2024 04/19/2024 0.415 05/7/2024 07/3/2024 07/12/2024 0.415 08/1/2024 10/4/2024 10/18/2024 0.415 11/7/2024 12/30/2024 (1) 01/10/2025 0.415 02/13/2025 04/4/2025 04/18/2025 0.420 (1) These dividends are treated as distributions in the following year for tax purposes. - 100 - Equity Offerings We have an effective universal shelf registration statement registering the potential offer and sale, from time to time and in one or more offerings, of any combination of our common stock, preferred stock, depositary shares, debt securities, warrants and rights (collectively referred to as the “securities”). We may offer the securities directly, through agents, or to or through underwriters by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of sale or at negotiated prices and may include “at the market” (“ATM”) offerings, to or through a market maker or into an existing trading market on an exchange or otherwise. We have a dividend reinvestment and stock purchase plan, allowing stockholders and holders of OP Units (including LTIP Units) to purchase shares of our common stock by reinvesting cash dividends or distributions received. We completed the following public offerings (including ATM issuances) of our common stock in 2023 and 2024: Date/Period Common Stock Offerings Shares Issued Price Per Share (1) Net Proceeds (2) (amounts in millions, except per share amounts) Q1 2023 ATM 0.763 $ 31.31 $ 24 5/30/2023 Public Offering 15.000 22.23 333 Q2 2023 ATM 0.053 26.07 1 Q3 2023 ATM 4.394 24.71 107 Q4 2023 ATM 1.006 28.81 29 Q1 2024 ATM 1.193 25.89 31 Q2 2024 ATM 1.662 31.42 52 Q3 2024 ATM 3.040 32.55 98 Q4 2024 ATM 0.753 32.01 24 (1) Represents the average price per share at which investors in our ATM offerings purchased our shares. (2) Net proceeds from the offerings are shown after deducting underwriting discounts, commissions and other offering costs. Equity-based Compensation Awards We have 7,500,000 awards authorized for issuance under our current equity-based compensation plan. As of December 31, 2024, we have issued awards with service, performance and market conditions and have 5,295,725 awards remaining available for issuance. During the year ended December 31, 2024, our Board awarded employees and directors 808,948 shares of restricted stock, restricted stock units, and LTIP Units that vest from 2025 to 2029. Refer to Note 4 for background on the LTIP Units. A summary of equity-based compensation expense and the fair value of shares and LTIP Units vested on the vesting date for the years ended December 31, 2024, 2023, and 2022 is shown below. 2024 2023 2022 (in millions) Equity-based compensation expense $ 23 $ 18 $ 20 Fair value of awards vested on vesting date 8 11 34 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 market-based or 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 market or 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, restricted stock units, and LTIP Units was approximately $ 20 million as of December 31, 2024. We expect to recognize compensation expense related to these awards over a weighted-average term of approximately 1 year. A summary of the unvested shares of restricted common stock that have been issued is as follows: - 101 - Restricted Shares of Common Stock Weighted Average Grant Date Fair Value Value (per share) (in millions) Ending Balance—December 31, 2022 168,452 $ 33.59 $ 5.7 Granted 77,938 30.03 2.3 Vested ( 98,367 ) 29.18 ( 2.9 ) Forfeited ( 12,356 ) 42.74 ( 0.5 ) Ending Balance—December 31, 2023 135,667 $ 33.90 $ 4.6 Granted 232,837 26.96 6.3 Vested ( 44,540 ) 36.98 ( 1.7 ) Forfeited ( 4,584 ) 27.55 ( 0.1 ) Ending Balance—December 31, 2024 319,380 $ 28.50 $ 9.1 A summary of the unvested shares of restricted stock units that have market-based vesting conditions that have been issued is as follows: Restricted Stock Units (1) Weighted Average Grant Date Fair Value Value (per share) (in millions) Ending Balance—December 31, 2022 58,404 $ 51.03 $ 3.0 Granted 63,446 39.29 2.4 Incremental performance shares granted 7,305 34.63 0.3 Vested ( 18,041 ) 35.17 ( 0.6 ) Forfeited ( 16,460 ) 30.90 ( 0.5 ) Ending Balance—December 31, 2023 94,654 $ 48.42 $ 4.6 Granted — — — Incremental performance shares granted — — — Vested — — — Forfeited ( 15,912 ) 68.12 ( 1.1 ) Ending Balance—December 31, 2024 78,742 $ 44.44 $ 3.5 (1) As discussed in Note 2, 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 achieved performance level. A summary of the unvested LTIP Units that have time-based vesting conditions that have been issued is as follows: LTIP Units (1) Weighted Average Grant Date Fair Value Value (per share) (in millions) Ending Balance—December 31, 2022 276,766 $ 42.21 $ 11.7 Granted 342,349 30.08 10.3 Vested ( 142,041 ) 39.21 ( 5.5 ) Forfeited — — — Ending Balance—December 31, 2023 477,074 $ 34.40 $ 16.5 Granted 320,063 26.96 8.6 Vested ( 236,166 ) 34.79 ( 8.2 ) Forfeited — — — Ending Balance—December 31, 2024 560,971 $ 29.99 $ 16.9 (1) See Note 4 for information on the vesting of LTIP Units. - 102 - A summary of the unvested LTIP Units that have market-based vesting conditions that have been issued is as follows: LTIP Units (1) Weighted Average Grant Date Fair Value Value (per share) (in millions) Ending Balance—December 31, 2022 324,028 $ 42.84 $ 13.9 Granted 282,034 39.29 11.1 Incremental performance shares granted 40,394 19.94 0.8 Vested ( 96,496 ) 19.94 ( 1.9 ) Forfeited ( 56,102 ) 4.56 ( 0.3 ) Ending Balance—December 31, 2023 493,858 $ 47.76 $ 23.6 Granted 128,024 39.11 5.0 Incremental performance shares granted — — — Vested — — — Forfeited ( 86,274 ) 65.28 ( 5.6 ) Ending Balance—December 31, 2024 535,608 $ 42.87 $ 23.0 (1) See Note 4 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 achieved performance level. A summary of the unvested LTIP Units that have performance-based vesting conditions that have been issued is as follows: LTIP Units (1) Weighted Average Grant Date Fair Value Value (per share) (in millions) Ending Balance—December 31, 2023 — $ — $ — Granted 128,024 25.96 3.3 Incremental performance shares granted — — — Vested — — — Forfeited — — — Ending Balance—December 31, 2024 128,024 $ 25.96 $ 3.3 (1) See Note 4 for information on the vesting of LTIP Units. LTIP Units with performance-based vesting conditions can vest between 0 % and 200 % subject to the achievement of certain adjusted earnings per share. The incremental performance shares granted relate to the vesting of awards at the achieved performance level. NOL Stockholder Rights Plan In 2023, we established a Tax Benefits Preservation Plan (“the Plan”), which was designed to protect our tax benefits in connection with any “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986. Under the Plan, we declared a dividend distribution of one right (a “Right”) for each outstanding share of our common stock to be paid to all record holders of our common stock at the close of business on November 21, 2023. The Plan was intended to reduce the risk that our ability to use net operating losses (“NOLs”) and certain other Tax Benefits would have substantially limited as the result of an “ownership change”. As of December 31, 2023, we had approximately $ 666 million of NOLs and $ 31 million of tax credits available that may be used to offset future taxable income. On July 1, 2024, we entered into an amendment which caused the Rights under the Plan to expire on July 1, 2024, effectively terminating the Plan at that time in anticipation of the effectiveness of the Company’s reincorporation as a Delaware corporation on July 2, 2024. The Company’s Delaware Certificate of Incorporation includes Charter Tax Benefit Provisions which are intended to replace the Tax Benefits Preservation Plan. Pursuant to the Plan, during the period in which it existed, if a stockholder (or group) became a 5 % stockholder without meeting certain exceptions, the Rights became exercisable upon board approval and entitled stockholders (other than the 5 % stockholder or group causing the Rights to become exercisable) to purchase additional of our common shares at a significant discount, resulting in significant dilution in the economic interest and voting power of the 5 % stockholder or group causing the Rights to become exercisable. Stockholders owning 5 % or more of our outstanding shares at the time the Plan was adopted were grandfathered and would have only caused the Rights to distribute and become exercisable if they acquire any additional HASI shares. Under the Plan, the Board had the ability to determine in its sole discretion that any person shall not be deemed an acquiring person and therefore that the Rights shall not become exercisable if such person becomes a 5 % stockholder. The - 103 - adoption and termination of the Plan and the dividend distribution did not have an impact on our consolidated financial statements. 12. Earnings per Share of Common Stock 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 stockholders in the computation of earnings per share pursuant to the two-class method. Certain share-based awards are included in the diluted share count to the extent they are dilutive as discussed in Note 2. To the extent our Convertible Notes are dilutive under the if-converted method, we add back the interest expense to the numerator and include the weighted average shares of potential common stock over the period issuable upon conversion or exchange of the note in the denominator in calculating dilutive EPS as described in Note 2. The computation of basic and diluted earnings per common share of our common stock is as follows: Year ended December 31, Numerator: 2024 2023 2022 (dollars in millions, except share and per share data) Net income (loss) attributable to controlling stockholders and participating securities $ 200.0 $ 148.8 $ 41.5 Less: Dividends and distributions on participating securities ( 1.5 ) ( 1.0 ) ( 0.7 ) Less: Undistributed earnings attributable to participating securities — — — Net income (loss) attributable to controlling stockholders $ 198.5 $ 147.8 $ 40.8 Add: Interest expense related to Convertible Notes under the if-converted method 12.6 7.5 1.4 Add: Undistributed earnings attributable to participating securities — — — Net income (loss) attributable to controlling stockholders—dilutive $ 211.1 $ 155.3 $ 42.2 Denominator: Weighted-average number of common shares—basic 115,548,087 101,844,551 87,500,799 Weighted-average number of common shares—diluted 130,501,006 109,467,554 90,609,329 Basic earnings per common share $ 1.72 $ 1.45 $ 0.47 Diluted earnings per common share $ 1.62 $ 1.42 $ 0.47 Securities being allocated a portion of earnings: Weighted-average number of OP units 1,535,425 1,314,182 1,002,002 Participating securities: Unvested restricted common stock and unvested LTIP Units with time-based vesting conditions outstanding at period end 880,352 612,742 445,218 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 880,352 612,742 445,218 Restricted stock units 78,742 94,654 38,222 LTIP Units with market-based vesting conditions 535,608 493,858 211,824 Potential shares of common stock related to convertible notes 3,568,862 3,549,083 3,537,460 13. Equity Method Investments During the years ended December 31, 2024, 2023, and 2022 we recognized income of $ 248 million, $ 141 million, and $ 31 million respectively, from our equity method investments. We describe our accounting for the non-controlling equity investments in Note 2. As of both December 31, 2024 and December 31, 2023, we had 47 investments which we accounted for under the equity method. The majority of these investees are limited liability companies taxed as partnerships wherein we participate in cash distributions and tax attributes according to pre-negotiated profit-sharing arrangements. The limited liability company agreements do not define a fixed percentage of our ownership of these entities, and our claims on the net assets of each investment changes over time as preferred investors achieve their pre-negotiated preferred returns. - 104 - The following is a summary of the consolidated balance sheets and income statements of the entities in which we have a significant equity method investment. These amounts are presented on the underlying investees’ accounting basis. In certain instances, adjustment to these equity values may be necessary in order to reflect our basis in these investments, for reasons including but not limited to the investees reporting to us being on a cost basis rather than a fair value basis or due to our allocations under HLBV differing from our purchase price of the investment. As described in Note 2, any difference between the amount of our investment and the amount of our share of underlying equity is generally amortized over the life of the assets and liabilities to which the differences relate. Our basis in equity method investments exceeds the basis reported to us by our investees by an aggregate amount of $ 104 million, and $ 284 million, as of December 31, 2024 and 2023, respectively. 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. As of December 31, 2024 and 2023, we have accumulated other comprehensive income net of tax effect of $ 23 million and $ 47 million respectively, related to the interest rate swaps designated as cash flow hedges by our investees. Daggett Renewable HoldCo LLC Other Investments (1) Total Balance Sheet (in millions) As of September 30, 2024 Current assets $ 66 $ 1,156 $ 1,222 Total assets 1,114 20,217 21,331 Current liabilities 13 2,050 2,063 Total liabilities 453 9,514 9,967 Members’ equity 661 10,703 11,364 As of December 31, 2023 Current assets 35 947 982 Total assets 677 17,917 18,594 Current liabilities 10 920 930 Total liabilities 262 8,398 8,660 Members’ equity 415 9,519 9,934 Income Statement For the nine months ended September 30, 2024 Revenue 50 860 910 Income (loss) from continuing operations ( 16 ) ( 264 ) ( 280 ) Net income (loss) ( 16 ) ( 264 ) ( 280 ) For the year ended December 31, 2023 Revenue 16 1,209 1,225 Income (loss) from continuing operations ( 6 ) ( 63 ) ( 69 ) Net income (loss) ( 6 ) ( 63 ) ( 69 ) For the year ended December 31, 2022 Revenue — 500 500 Income (loss) from continuing operations — ( 392 ) ( 392 ) Net income (loss) — ( 392 ) ( 392 ) (1) Represents aggregated financial statement information for investments not separately presented. 14. Defined Contribution Plan We administer a 401(k) savings plan, a defined contribution plan covering substantially all of our employees. Employees in the plan may contribute up to the maximum annual IRS limit before taxes via payroll deduction. Under the plan, we provide a dollar for dollar match for the first 4 % of the employee’s contributions and a $0.50 per dollar match for the next 2 % of employee contributions. We contributed approximately $ 2 million under the plan for the year ended December 31, 2024, approximately $ 1 million during the years ended December 31, 2023 and 2022. - 105 - SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS ALLOWANCE FOR CREDIT LOSSES For the year ended December 31, 2024 2023 2022 (in thousands) Balance at beginning of period $ 52,856 $ 41,024 $ 36,253 Charged to provision 1,059 11,832 12,798 Loan charge-offs ( 500 ) — ( 8,027 ) Balance at end of period $ 53,415 $ 52,856 $ 41,024 - 106 - Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.