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☒
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Maryland
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46-1347456
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1906 Towne Centre Blvd
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21401
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Suite 370
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Annapolis
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MD
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, $0.01 par value per share
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HASI
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New York Stock Exchange
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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Page
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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Item 16.
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•
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our expected returns and performance of our investments;
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•
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the state of government legislation, regulation and policies that support or enhance the economic feasibility of projects that reduce carbon emissions or increase resilience to climate change, which we refer to as climate change solutions, including energy efficiency and renewable energy projects and the general market demands for such projects;
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•
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market trends in our industry, energy markets, commodity prices, interest rates, the debt and lending markets or the general economy;
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•
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our business and investment strategy;
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•
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availability of opportunities to invest in climate change solutions including energy efficiency and renewable energy projects and our ability to complete potential new opportunities in our pipeline;
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•
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our relationships with originators, investors, market intermediaries and professional advisers;
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•
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competition from other providers of capital;
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•
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our or any other company’s projected operating results;
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•
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actions and initiatives of the federal, state and local governments and changes to federal, state and local government policies, regulations, tax laws and rates and the execution and impact of these actions, initiatives and policies;
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•
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the state of the U.S. economy generally or in specific geographic regions, states or municipalities and economic trends;
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•
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our ability to obtain and maintain financing arrangements on favorable terms, including securitizations;
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•
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general volatility of the securities markets in which we participate;
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•
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changes in the value of our assets, our portfolio of assets and our investment and underwriting process;
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•
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the impact of weather conditions, natural disasters, accidents or equipment failures or other events that disrupt the operation of our investments or negatively impact the value our assets;
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•
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rates of default or decreased recovery rates on our assets;
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•
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interest rate and maturity mismatches between our assets and any borrowings used to fund such assets;
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•
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changes in interest rates and the market value of our assets and target assets;
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•
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changes in commodity prices, including continued low natural gas prices;
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•
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effects of hedging instruments on our assets or liabilities;
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•
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the degree to which our hedging strategies may or may not protect us from risks, such as interest rate volatility;
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•
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impact of and changes in accounting guidance;
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•
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our ability to maintain our qualification as a real estate investment trust (a “REIT”) for U.S. federal income tax purposes;
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•
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our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended (the “1940 Act”);
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•
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availability of and our ability to attract and retain qualified personnel;
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•
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estimates relating to our ability to generate sufficient cash in the future to operate our business and to make distributions to our stockholders; and
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•
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our understanding of our competition.
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Item 1.
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Business
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•
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More efficient technologies are more productive and thus should lead to higher economic returns;
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•
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Lower portfolio risk is inherent in a portfolio of smaller investments, generated by trends of increasing decentralization and digitalization of energy assets, compared to larger, centralized utility-scale investments;
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•
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Investing in assets aligned with scientific consensus and society’s general beliefs will reduce potential regulatory and social costs through better internalization of externalities; and
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•
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Assets that reduce carbon emissions represent an embedded option that may increase in value if carbon regulations were to set a price on carbon emissions.
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•
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Behind-the-Meter (“BTM”): distributed building or facility projects, which reduce energy usage or cost through the use of solar generation and energy storage or energy efficiency improvements including heating, ventilation and air conditioning systems (“HVAC”), lighting, energy controls, roofs, windows, building shells, and/or combined heat and power systems;
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•
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Grid-Connected (“GC”): projects that deploy cleaner energy sources, such as solar and wind to generate power where the off-taker or counterparty is part of the wholesale electric power grid; and
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•
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Sustainable Infrastructure: upgraded transmission and distribution systems, water and storm water infrastructure, and other projects that improve water or energy efficiency, increase resiliency, positively impact the environment or more efficiently use natural resources.
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•
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Equity investments in either preferred or common structures in unconsolidated entities;
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•
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Government and commercial receivables or securities, such as loans for renewable energy and energy efficiency projects; and
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•
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Real estate, such as land or other assets leased for use by sustainable infrastructure projects typically under long term leases.
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•
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Risk Management - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors Impacting our Operating Results - Impact of climate of climate change on our future operations (Scenario Analysis). Also Item 7A. Quantitative and Qualitative Disclosures About Market Risk - Risk Management, and
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•
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Metrics and Targets - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Environmental Metrics.
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•
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our board of directors is not staggered, with each of our directors subject to re-election annually;
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•
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six of our seven directors have been determined to be independent for purposes of the New York Stock Exchange (“NYSE”) corporate governance listing standards and Rule 10A-3 under the Exchange Act;
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•
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the lead independent director of the board of directors convenes and chairs executive sessions of the independent directors to discuss certain matters without management present;
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•
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three of our directors qualify as an “audit committee financial expert” as defined by the Securities and Exchange Commission (the “SEC”);
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•
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two of our directors, including our lead independent director are women, constituting 29% of the board in furtherance of our board diversity policy;
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•
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our Corporate Governance Guidelines provide for a majority vote policy for the election of directors pursuant to which any nominee who receives a greater number of votes “withheld” from his or her election than votes “for” such election shall promptly tender his or her resignation to our board of directors for their consideration as to accept or reject such resignation;
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•
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target retirement age of 75 has been established for our directors;
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•
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we have an active stockholder outreach program, including providing stockholders the right to vote on the fairness of the remuneration of executives;
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•
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our Statement of Corporate Policy Regarding Equity Transaction prohibits our directors and officers from hedging our equity securities, holding such securities in a margin account or pledging such securities as collateral for a loan;
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•
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a Clawback Policy was adopted whereby it is possible to recoup performance or incentive-based compensation in the event of an accounting restatement due to material noncompliance with any financial reporting requirements under the securities laws (other than due to a change in applicable accounting methods, rules or interpretations);
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•
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we have opted out of the control share acquisition statute in the Maryland General Corporations Law (the “MGCL”) and have exempted, from the business combinations statute in the MGCL, transactions that are approved by our board of directors;
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•
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we do not have a stockholder rights plan; and
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•
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our Nominating, Governance and Corporate Responsibility Committee oversees and directs our ESG strategies, activities, policies and communications.
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Item 1A.
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Risk Factors
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•
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such investments could be subject to further dilution as a result of the issuance of additional debt or equity interests and to serious risks because subordinated and mezzanine debt are subordinate to other indebtedness and in some cases, project tax equity, and equity interests are subordinate to all indebtedness (including trade creditors) and any senior securities in the event that the issuer is unable to meet its obligations or becomes subject to a bankruptcy process;
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•
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to the extent that a project in which we invest requires additional capital and is unable to obtain it, we may not recover our investment; and
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•
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in some cases, subordinated and mezzanine debt may not pay current interest or principal or equity investments may not pay current dividends, and our ability to realize a return on our investment, as well as to recover our investment, will be dependent on the success of the project in which we invest. The project may face unanticipated costs or delays or may not generate projected cash flows which could lead to the project generating lower than expected rates of return.
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•
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lack of demand in areas where our properties are located;
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•
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inability to retain existing tenants and attract new tenants;
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•
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oversupply of space and changes in market rental rates;
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•
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our tenants’ creditworthiness and ability to pay rent, which may be affected by their operations, the current economic situation and competition within their industries from other operators;
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•
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defaults by and bankruptcies of tenants, failure of tenants to pay rent on a timely basis, or failure of tenants to comply with their contractual obligations;
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•
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economic or physical decline of the areas where the properties are located; and
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•
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destruction from natural disasters.
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•
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incur or guarantee additional debt;
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•
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make certain investments, originations or acquisitions;
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•
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make distributions on or repurchase or redeem capital stock;
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•
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engage in mergers or consolidations;
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•
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reduce liquidity below certain levels;
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•
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grant liens;
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•
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have a tangible net worth below a defined threshold;
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•
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incur operating losses for more than a specified period; and
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•
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enter into transactions with affiliates.
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•
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our actual or projected operating results, financial condition, cash flows and liquidity or changes in business strategy or prospects;
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•
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changes in the mix of our investment products and services, including the level of securitizations or fee income in any quarter;
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•
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actual or perceived conflicts of interest with individuals, including our executives;
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•
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our ability to arrange financing for projects;
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•
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equity issuances by us, or share resales by our stockholders, or the perception that such issuances or resales may occur;
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•
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seasonality in construction and demand for our investments;
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•
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actual or anticipated accounting problems;
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•
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publication of research reports about us or the sustainable infrastructure industry;
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•
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changes in market valuations of similar companies;
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•
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adverse market reaction to any increased indebtedness we may incur in the future;
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•
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commodity price changes;
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•
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interest rate changes;
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•
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additions to or departures of our key personnel;
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•
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speculation or negative publicity in the press or investment community;
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•
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our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts;
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•
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increases in market interest rates, which may lead investors to demand a higher distribution yield for our common stock, and would result in increased interest expenses on certain of our debt;
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•
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changes in governmental policies, regulations or laws;
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•
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failure to qualify, or maintain our qualification, as a REIT or failure to maintain our exemption from registration as an investment company under the 1940 Act;
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•
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price and volume fluctuations in the stock market generally; and
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•
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general market and economic conditions, including the current state of the credit and capital markets.
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•
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our ability to make profitable investments;
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•
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margin calls or other expenses that reduce our cash flow;
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•
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defaults in our asset portfolio or decreases in the value of our portfolio;
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•
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the cash flow we receive from our assets, including those subject to non-recourse debt; and
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•
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the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates.
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•
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actual receipt of an improper benefit or profit in money, property or services; or
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•
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active and deliberate dishonesty by the director or officer that was established by a final judgment and was material to the cause of action adjudicated.
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Item 1B.
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Unresolved Staff Comments
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Item 2.
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Properties
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Item 3.
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Legal Proceedings
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Item 4.
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Mine Safety Disclosures
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Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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Company or Index
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12/31/2014
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12/31/2015
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12/31/2016
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12/31/2017
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12/31/2018
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12/31/2019
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||||||||||||
Hannon Armstrong Sustainable Infrastructure Capital, Inc.
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$
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100.00
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|
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$
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140.81
|
|
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$
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150.16
|
|
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$
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201.70
|
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$
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170.69
|
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$
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302.25
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S&P 500 Index
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100.00
|
|
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101.38
|
|
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113.49
|
|
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138.26
|
|
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132.19
|
|
|
173.80
|
|
||||||
SNL Finance REIT Index (1)
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100.00
|
|
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91.70
|
|
|
112.96
|
|
|
131.80
|
|
|
126.69
|
|
|
152.75
|
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||||||
Dow Jones Utility Average
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100.00
|
|
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96.94
|
|
|
114.56
|
|
|
129.85
|
|
|
132.43
|
|
|
168.57
|
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(1)
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As of December 31, 2019, the SNL Finance REIT Index comprised of the following companies: AG Mortgage Investment Trust Inc.; AGNC Investment Corp.; American Church Mortgage Company; Annaly Capital Management Inc.; Anworth Mortgage Asset Corporation; Apollo Commercial Real Estate Finance, Inc.; Arbor Realty Trust Inc.; Ares Commercial Real Estate Corporation.; Arlington Asset Investment Corporation.; ARMOUR Residential REIT Inc.; Blackstone Mortgage Trust, Inc.; Broadmark Realty Capital Inc.; Capstead Mortgage Corporation.; Cherry Hill Mortgage Investment Corporation.; Chimera Investment Corporation.; Colony Credit Real Estate; Inc; CV Holdings Inc.; Dynex Capital Inc.; Ellington Financial Inc.; Ellington Residential Mortgage REIT; Exantas Capital Corp.; Granite Point Mortgage Trust; Great Ajax Corp.; Hannon Armstrong Sustainable Infrastructure Capital, Inc.; Hunt Companies Finance Trust; Invesco Mortgage Capital Inc.; Jernigan Capital Inc.; KKR Real Estate Finance Trust, Inc.; Ladder Capital Corp.; MFA Financial Inc.; New Residential Investment Corp.; New York Mortgage Trust Inc.; Orchid Island Capital Inc.; PennyMac Mortgage Investment Trust; RAIT Financial Trust; Ready Capital Corp.; Redwood Trust Inc.; Sachem Capital Corp.; Starwood Property Trust Inc.; TPG RE Finance Trust Inc; Tremont Mortgage Trust; Two Harbors Investment Corporation.; United Development Funding IV; and Western Asset Mortgage Capital Corporation.
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Award
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Number of securities remaining available for future issuance under
equity compensation plans (1)
|
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Equity compensation plans approved by stockholders
|
1,990,996
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|
Equity compensation plans not approved by stockholders
|
—
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Total
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1,990,996
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(1)
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The 2013 Plan provides for grants of equity awards up to, in the aggregate, the equivalent of 7.5% of the issued and outstanding shares of our common stock from time to time (on a fully diluted basis (assuming, if applicable, the exercise of all outstanding options and the conversion of all warrants and convertible securities into shares of common stock and assuming performance based LTIP units vest at 200%)) at the time of the award. As of December 31, 2019, we did not have outstanding under our equity compensation plan, any options, warrants or rights to purchase shares of our common stock.
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Period
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Total number
of shares
purchased
|
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Average price
per share
|
|
Total number of
shares purchased
as part of publicly
announced plans
or programs
|
|
Maximum number
of shares that may
yet be purchased
under the plans or
programs
|
||
March 1 - March 31, 2019
|
253,743
|
|
|
25.31
|
|
|
N/A
|
|
N/A
|
May 1 - May 31, 2019
|
97,343
|
|
|
26.36
|
|
|
N/A
|
|
N/A
|
July 1 - July 31, 2019
|
885
|
|
|
28.06
|
|
|
N/A
|
|
N/A
|
August 1 - August 31, 2019
|
91
|
|
|
26.83
|
|
|
N/A
|
|
N/A
|
November 1 - November 31, 2019
|
5,323
|
|
|
28.73
|
|
|
N/A
|
|
N/A
|
Item 6.
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Selected Financial Data
|
|
Year Ended December 31,
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||||||||||||||||||
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2019
|
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2018
|
|
2017
|
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2016
|
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2015
|
||||||||||
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(dollars in millions, except share and per share data)
|
||||||||||||||||||
Total revenue
|
$
|
142
|
|
|
$
|
140
|
|
|
$
|
106
|
|
|
$
|
81
|
|
|
$
|
59
|
|
Total expenses
|
116
|
|
|
118
|
|
|
96
|
|
|
72
|
|
|
51
|
|
|||||
Income (loss) from equity method investments
|
64
|
|
|
22
|
|
|
22
|
|
|
6
|
|
|
—
|
|
|||||
Income tax (expense) benefit
|
(8
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||||
Net income (loss)
|
$
|
82
|
|
|
$
|
42
|
|
|
$
|
31
|
|
|
$
|
15
|
|
|
$
|
8
|
|
Net income (loss) attributable to controlling stockholders
|
$
|
82
|
|
|
$
|
42
|
|
|
$
|
31
|
|
|
$
|
15
|
|
|
$
|
8
|
|
Balance sheet data (at period end):
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity method investments
|
$
|
499
|
|
|
$
|
471
|
|
|
$
|
523
|
|
|
$
|
363
|
|
|
$
|
319
|
|
Government receivables
|
263
|
|
|
497
|
|
|
519
|
|
|
526
|
|
|
401
|
|
|||||
Commercial receivables
|
896
|
|
|
447
|
|
|
473
|
|
|
516
|
|
|
383
|
|
|||||
Receivables held-for-sale
|
—
|
|
|
—
|
|
|
19
|
|
|
—
|
|
|
60
|
|
|||||
Real estate (1)
|
362
|
|
|
365
|
|
|
341
|
|
|
172
|
|
|
156
|
|
|||||
Investments
|
75
|
|
|
170
|
|
|
151
|
|
|
58
|
|
|
29
|
|
|||||
Securitization assets
|
124
|
|
|
72
|
|
|
46
|
|
|
19
|
|
|
9
|
|
|||||
Total assets
|
2,387
|
|
|
2,155
|
|
|
2,250
|
|
|
1,746
|
|
|
1,470
|
|
|||||
Credit facilities
|
31
|
|
|
259
|
|
|
70
|
|
|
283
|
|
|
247
|
|
|||||
Non-recourse debt
|
700
|
|
|
835
|
|
|
1,211
|
|
|
692
|
|
|
664
|
|
|||||
Senior unsecured notes
|
512
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Convertible notes
|
149
|
|
|
148
|
|
|
148
|
|
|
—
|
|
|
—
|
|
|||||
Total liabilities
|
1,447
|
|
|
1,350
|
|
|
1,607
|
|
|
1,172
|
|
|
1,038
|
|
|||||
Total equity
|
940
|
|
|
805
|
|
|
643
|
|
|
574
|
|
|
432
|
|
|||||
Per share data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic earnings per share
|
$
|
1.25
|
|
|
$
|
0.75
|
|
|
$
|
0.57
|
|
|
$
|
0.32
|
|
|
$
|
0.21
|
|
Diluted earnings per share
|
$
|
1.24
|
|
|
$
|
0.75
|
|
|
$
|
0.57
|
|
|
$
|
0.32
|
|
|
$
|
0.21
|
|
Dividends declared
|
$
|
1.34
|
|
|
$
|
1.32
|
|
|
$
|
1.32
|
|
|
$
|
1.23
|
|
|
$
|
1.08
|
|
Weighted average shares outstanding—basic
|
63,916,440
|
|
|
52,780,449
|
|
|
50,361,672
|
|
|
40,290,717
|
|
|
30,761,151
|
|
|||||
Weighted average shares outstanding—dilutive
|
64,771,491
|
|
|
52,780,449
|
|
|
50,361,672
|
|
|
40,290,717
|
|
|
30,761,151
|
|
|||||
Managed Assets (2)
|
$
|
6,196
|
|
|
$
|
5,284
|
|
|
$
|
4,736
|
|
|
$
|
3,933
|
|
|
$
|
3,188
|
|
(1)
|
Includes real estate intangible assets.
|
(2)
|
See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures—Managed Assets for information on Managed Assets.
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Assumption
|
|
Qualitative impacts
|
|
Quantitative impacts
|
|
Considerations of and impact on our management strategy
|
The price of Renewable Energy Credits (“RECs”) or similar structures increase as more aggressive renewable portfolio standards and corporate renewable energy targets are implemented
|
|
Increased expected cash flows and financial returns for certain of our investments to the extent the RECs are sold at higher market prices.
|
|
If the overall price level of RECs increased by 5% we would not expect a material impact to the overall cash flows from our existing investments. The is largely due to the lower value of RECs in comparison to power prices in most of the markets where our investments are located.
|
|
We may identify more investment opportunities resulting from the increased REC value. In addition, to the extent that our investments become more valuable we would consider whether it would be more economical to our stockholders to either monetize the investment given the increase in value or continue to hold in our Portfolio and maximize our returns from adding additional leverage to our financing.
|
|
Increased debt/lease service coverage ratio for the obligors of our renewable energy debt investments and solar real estate leases that sell RECs at higher market pricing.
|
|
||||
|
The resulting increase in cash flows may also allow us to apply greater financial leverage to these investments and enhance our profitability.
|
|
||||
|
If there was a material increase in value associated with RECs, it is likely that more renewable energy projects would be developed in geographic areas where the RECs were more valuable, leading to more potential investment opportunities for us.
|
|
Assumption
|
|
Qualitative impacts
|
|
Quantitative impacts
|
|
Considerations of and impact on our management strategy
|
A carbon tax or similar carbon pricing mechanism is implemented by governmental authorities which may cause an increase to (i) power prices, (ii) operating costs for certain entities, and (iii) the competitiveness of renewable energy, energy efficiency and storage projects
|
|
Increased cash flows and financial returns from certain investments to the extent power is sold at higher market prices due to the increase in cost imposed on fossil fueled energy projects.
|
|
A portion of our portfolio is exposed to changes in the market price of power. Whether it is due to sales of energy at the then current market price or through a re-contracting of fixed price power purchase agreements.
Under a scenario where a carbon tax drives the price of power up by 10%, our wind equity investments may generate approximately 4% in additional cashflows over their life as compared to the cashflow the investments are expected to generate under the current baseline scenario.
We would not expect a material impact to our solar equity, renewable energy debt, solar real estate or energy efficiency investments.
|
|
In relation to new business, there is the potential that more competitors enter our markets and put pressure on our asset pricing strategies as renewable energy and energy efficiency projects become more cost competitive with fossil fuel electricity generation assets. We are constantly reviewing our pricing strategies and would continue to do so in this scenario to understand how we can continue to make investments with acceptable risk adjusted returns.
In addition, to the extent that our investments become more valuable we would consider whether it would be more economical to our stockholders to either monetize the investment given the increase in value or continue to hold in our portfolio and maximize our returns from adding additional leverage to our financing.
|
|
Increases in the debt/lease service coverage ratio for the obligors of our renewable energy debt investments and solar real estate leases that sell power at higher market pricing.
|
|
||||
|
The resulting increase in cash flows may also allow us to apply greater financial leverage to these investments and enhance our profitability.
|
|
||||
|
Increased energy cost savings from energy efficiency solutions.
|
|
||||
|
Increased competitiveness of renewable energy projects with fossil fueled power plants, due to an increase in power prices.
|
|
||||
|
An increase in the items mentioned above may increase the volume of assets available in which we can invest.
|
|
||||
|
However, the implementation of a carbon tax may also have a negative impact on the financial health of utilities and corporate entities who also happen to purchase power from renewable energy projects in which we have invested. The credit ratings of these entities may be downgraded due to additional operating expenses resulting from a carbon tax. A credit rating downgrade may reduce the amount of financial leverage we are able to utilize. If this were to occur, our overall profitability could decline.
|
|
Assumption
|
|
Qualitative impacts
|
|
Quantitative impacts
|
|
Considerations of and impact on our management strategy
|
A significant increase in research and re-development investment in renewable energy, energy storage, and energy efficiency technologies by public and private entities
|
|
Continued decreases in cost could make renewable energy, energy storage, and energy efficiency technologies more cost competitive. As a result, we may experience an increase in investment opportunities available to us.
|
|
Given the nature of our business activities and focus on structuring transactions to meet the capital needs of our clients, it is difficult to reliably quantify the positive impact on our investment opportunities. However, we would expect to achieve accretive economics from this assumption.
|
|
In the development of our investment strategies we would consider investment in different technologies that we may not have historically invested based upon the additional development and maturation gained through the prospective increase in research and development. Additionally, the lower cost of projects may influence the amount of investment we would make in each opportunity.
|
Significant growth in positive public sentiment for sustainable infrastructure investment
|
|
Increased demand for investment in sustainable infrastructure increase the volume of transactions in which we may invest, reduce our overall cost of capital and increase our profitability.
|
|
Given the nature of our business activities and focus on structuring transactions to meet the capital needs of our clients, it is difficult to reliably quantify the positive impact on our investment opportunities. However, we would expect to achieve accretive economics from this assumption.
|
|
An increased demand for sustainable infrastructure may increase competition and influence our pricing strategy. We would continue to review our pricing strategies with these opportunities.
|
Assumption
|
|
Qualitative impacts
|
|
Quantitative impacts
|
|
Considerations of and impact to our management strategy
|
No meaningful government policy to shift the trajectory of global climate change
|
|
Given current trends, even without an increase in government support, we might expect increased demand for climate change solutions due to the improving economics and cost competitiveness of these technologies.
|
|
Given the nature of our business activities and focus on structuring transactions to meet the capital needs of our clients, it is difficult to reliably quantify the impact on our investment opportunities. However, we would expect to achieve accretive economics from this assumption.
|
|
The increased demand in climate change solutions may increase competition and influence our pricing strategy.
|
|
Such growth in demand may increase the volume of investment opportunities available to us.
|
|
|
|||
An increase in demand for climate change resiliency solutions
|
|
Flooding and storm surges may become more frequent, resulting in an increase in demand for storm water management assets.
|
|
Given the nature of our business activities and focus on structuring transactions to meet the capital needs of our clients, it is difficult to reliably quantify the positive impact on our investment opportunities. However, we would expect to achieve accretive economics from this assumption.
|
|
The increased demand in climate change solutions may increase competition and influence our pricing strategy.
|
|
Greater instability in the power grid may increase the demand for on-site and distributed power generation systems and battery storage.
|
|
||||
|
If the above events occur, we may experience an increase in the volume of investment opportunities available to us.
|
|
||||
Greater variability and instability in the commodity markets
|
|
Potential increases in the price of commodities (e.g., natural gas) due to climate change induced supply chain and transport disruptions, such as a major hurricane striking a series of gulf coast pipelines, may drive power prices higher, thus increasing financial returns from certain of our investments to the extent the power is sold at market prices rather than under fixed price contracts.
|
|
We believe any mentioned impacts that are realized, are short-term in nature and we would not expect a material impact on our investments.
|
|
We currently have risk management processes which include a recurring review of our investments through our portfolio management function to assess any increasing operational costs of our investments. For our existing portfolio, we will actively manage the risk to make appropriate adjustments to budget approvals, operational approvals, and other asset management tasks. For any new investments, we make conservative assumptions to protect our investments from such types of pricing volatility and will continue to do so, including new assumptions around commodity volatility as relevant.
|
|
However, climate change-related impacts to the amount of potable water supplies, such as irregular rainfall and salt water intrusion, may drive increases in the price of water. These increases in cost may increase the demand for assets that increase water use efficiency, resulting in an increase in the volume of investment opportunities available to us.
|
|
Assumption
|
|
Qualitative impacts
|
|
Quantitative impacts
|
|
Considerations of and impact to our management strategy
|
Increased (i) flooding events due to heavier rainfalls and increased storm surge due to rising sea levels, (ii) the probability and severity of wildfires and (iii) increased frequency and severity of storms and other weather-related events
|
|
Our existing investments in low lying areas are exposed to potential flooding events and other storm damage and such events may cause construction delays, operational shutdowns, and more significant site damage.
|
|
We would not expect a material risk to the cash flows from our investments as we typically require insurance coverage for these events where the project owner bears this cost. Refer to later discussion on the impacts of the increase in insurance costs.
|
|
When underwriting our investments we negotiate structural protections to mitigate any loss we may incur from operations or inability of the projects to operate (this includes project insurance). For any new investment opportunities we would evaluate the exposure to rising sea levels and structure our investment terms such that we protect our invested capital.
|
|
|
A portion of our investments are located in high wildfire risk regions and are exposed to catastrophic damage from wildfire events.
|
|
We would not expect a material risk to the cash flows from our investments.
|
|
When underwriting our investments we negotiate structural protections to mitigate any loss we may incur from operations or inability of the projects to operate (this includes project insurance). For any new investment opportunities we would evaluate the exposure to wildfires and structure our investment terms such that we protect our invested capital.
|
|
|
Solar energy assets that are not in the direct path of wildfires but are within the proximity thereof may have reduced power production due to ash soiling on the panels or reduced solar insolation due to ash clouds.
|
|
The potential impact of additional soiling of panels or ash clouds was assessed is not expected to have a material impact on the cashflows and value of our portfolio.
|
|
To the extent this became a material issue we would seek out protections to mitigate any impact of this, such as adding panel washing requirements to contracts.
|
|
|
If the events above were to occur, we may experience reduced cash flows and financial returns from these investments, which may cause us to reduce the amount of financial leverage we utilize and cause a decline in our overall profitability.
|
|
|
|
|
Assumption
|
|
Qualitative impacts
|
|
Quantitative impacts
|
|
Considerations of and impact to our management strategy
|
Operational performance of the projects in which we invest are impacted by the global temperature increase
|
|
A decrease in performance and power generation of the solar and wind energy assets related to our investments, as the performance of these assets vary based upon the ambient temperatures (in the case of solar) and air density (in the case of wind). Both conditions may be caused by increases in global temperatures.
|
|
Solar portfolio production can be affected by an increase in global temperature depending on the geography. If solar production decreases by 5% we may expect there to be a 14% decrease in expected cash flows from our solar equity investments.
High temperatures have a significant efficiency impact on wind turbines as high temperature faults create more wear and tear on equipment. If wind production decreases by 5% we would not expect a material impact to our wind equity investments. We would not expect a material impact on our renewable energy debt, solar real estate and energy efficiency investments.
|
|
When underwriting our investment opportunities we make conservative assumptions regarding performance and operational expenses that protect our returns from some level of unexpected performance or operation issues in the future. We will continue to adjust our assumptions as additional risks and severity of climate risk are assessed. We actively manage our existing portfolio to preemptively and proactively address any operational or maintenance issues.
|
|
Increased wind variability and increased wear on wind turbine components, which may increase operating costs.
|
|
An increase in operating expenses would result and if there was 5% higher operating expenses the cash flows from our wind equity investments would be expected to decrease by 2%.
|
|
||
|
Increased operating costs and lower generation from the increase in temperatures may reduce our expected cash flows and financial returns from our investments, which may cause us to reduce the amount of financial leverage we utilize and cause a decline in our overall profitability.
|
|
If there were both a decrease in production of 5% and higher operating expenses of 5% our cash flows from our wind equity and solar equity investments would be expected to decline by 5% and 16%, respectively.
We would not expect a material impact on our renewable energy debt, solar real estate and energy efficiency investments.
|
|
Assumption
|
|
Qualitative impacts
|
|
Quantitative impacts
|
|
Considerations of and impact to our management strategy
|
An increase in water scarcity potentially resulting in an increase in the price of water
|
|
Water is used to clean the panels on solar energy assets to maintain their efficiency. An increase in water prices may reduce the cash flows and financial returns from our related investments, which may cause us to reduce the amount of financial leverage we utilize and cause a decline in our overall profitability.
|
|
The impact of water scarcity and increased prices to our existing portfolio is not expected to have a material impact on the cash flows of our investments.
|
|
To the extent this becomes a material matter we would seek out protections to mitigate any impact of additional water related costs.
|
|
Climate change related impacts to the amount of potable water supplies, such as irregular rainfall and salt water intrusion, may drive increases in the price of water. These increases in cost may increase the demand for assets that increase water use efficiency resulting in an increase in the volume of investment opportunities available to us.
|
|
|
The increased demand in these projects may increase competition and influence our pricing strategy.
|
||
An increase in the cost, or a change in the availability of insurance
|
|
In anticipation of climate change related physical risks, projects related to our investments in particularly vulnerable regions, such as low-lying coastal areas, may face increases in insurance costs. An increase in insurance costs may reduce the cash flows and financial returns from these investments and may cause us to reduce the amount of financial leverage we utilize and cause a decline in our overall profitability.
|
|
Insurance policies are executed on an annual basis and in some regions the price of insurance could increase such that the cashflow and value of our projects in high risk geographic regions are affected. This increase in insurance cost would drive an increase in total operating expenses. We have estimated that an increase in operating expenses of 5% would be expected to reduce our cash flows from wind equity and solar equity projects by 2%.
We would not expect a material impact on our renewable energy debt, solar real estate and energy efficiency investments.
|
|
We require that the projects in which we invest are insured against casualty events that could impact our cash distributions. We continually evaluate whether there are superior asset or portfolio level policies that are available that optimize our insurance coverage and premium costs.
|
•
|
Equity investments in either preferred or common structures in unconsolidated entities;
|
•
|
Government and commercial receivables, such as loans for renewable energy and energy efficiency projects;
|
•
|
Real estate, such as land or other assets leased for use by sustainable infrastructure projects typically under long-term operating leases; and
|
•
|
Investments in debt securities of renewable energy or energy efficiency projects.
|
|
Balance
|
|
Maturity
|
||
|
(in millions)
|
|
|
||
Fixed-rate receivables, interest rates of less than 5.00% per annum
|
$
|
255
|
|
|
2020 to 2045
|
Fixed-rate receivables, interest rates from 5.00% to 6.50% per annum
|
107
|
|
|
2020 to 2056
|
|
Fixed-rate receivables, interest rates greater than 6.50% per annum
|
805
|
|
|
2020 to 2069
|
|
Receivables
|
1,167
|
|
|
|
|
Less: Allowance for credit losses
|
(8
|
)
|
|
|
|
Receivables, net of allowance
|
1,159
|
|
|
|
|
Fixed-rate investments, interest rates of less than 5.00% per annum
|
64
|
|
|
2027 to 2046
|
|
Fixed-rate investments, interest rates from 5.00% to 6.50% per annum
|
11
|
|
|
2030 to 2051
|
|
Total receivables and investments
|
$
|
1,234
|
|
|
|
|
Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(dollars in millions)
|
||||||||||
Interest income, receivables
|
$
|
68
|
|
|
$
|
68
|
|
|
$
|
57
|
|
Average monthly balance of receivables
|
$
|
930
|
|
|
$
|
1,001
|
|
|
$
|
1,062
|
|
Average interest rate of receivables
|
7.3
|
%
|
|
6.8
|
%
|
|
5.3
|
%
|
|||
Interest income, investments
|
$
|
6
|
|
|
$
|
7
|
|
|
$
|
5
|
|
Average monthly balance of investments
|
$
|
148
|
|
|
$
|
163
|
|
|
$
|
122
|
|
Average interest rate of investments
|
4.3
|
%
|
|
4.1
|
%
|
|
4.2
|
%
|
|||
Rental income
|
$
|
26
|
|
|
$
|
25
|
|
|
$
|
20
|
|
Average monthly balance of real estate
|
$
|
364
|
|
|
$
|
350
|
|
|
$
|
284
|
|
Average yield on real estate
|
7.1
|
%
|
|
7.0
|
%
|
|
7.0
|
%
|
|||
Average monthly balance of receivables, investments, and real estate
|
$
|
1,442
|
|
|
$
|
1,514
|
|
|
$
|
1,468
|
|
Average yield from receivables, investments, and real estate
|
6.9
|
%
|
|
6.5
|
%
|
|
5.6
|
%
|
|||
Interest expense (1)
|
$
|
55
|
|
|
$
|
62
|
|
|
$
|
49
|
|
Average monthly balance of debt (1)
|
$
|
1,135
|
|
|
$
|
1,275
|
|
|
$
|
1,079
|
|
Average interest rate of debt (1)
|
4.9
|
%
|
|
4.9
|
%
|
|
4.6
|
%
|
|||
Average interest spread (1)
|
2.1
|
%
|
|
1.6
|
%
|
|
1.0
|
%
|
|||
Net investment margin (1)
|
3.1
|
%
|
|
2.4
|
%
|
|
2.2
|
%
|
(1)
|
Excludes amounts related to the non-recourse debt used to finance the equity method investments in the renewable energy projects because our earnings from these equity investments are not included in total revenue.
|
|
Payment due by Period
|
||||||||||||||||||
|
Total
|
|
Less than
1 year
|
|
1-5 years
|
|
5-10 years
|
|
More than
10 years
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Receivables
|
$
|
1,159
|
|
|
$
|
116
|
|
|
$
|
203
|
|
|
$
|
149
|
|
|
$
|
691
|
|
Investments
|
75
|
|
|
1
|
|
|
6
|
|
|
14
|
|
|
54
|
|
•
|
the anticipated maturity dates of our receivables and investments and the weighted average yield for each range of maturities as of December 31, 2019,
|
•
|
the term of our leases and a schedule of our future minimum rental income under our land lease agreements as of December 31, 2019,
|
•
|
the credit quality of our Portfolio, and
|
•
|
the receivables on non-accrual status.
|
|
Years ended
December 31,
|
|
$ Change
|
|
% Change
|
|||||||||
|
2019
|
|
2018
|
|
||||||||||
|
(dollars in millions)
|
|
|
|||||||||||
Revenue
|
|
|
|
|
|
|
|
|||||||
Interest income
|
$
|
76
|
|
|
$
|
76
|
|
|
$
|
—
|
|
|
—
|
%
|
Rental income
|
26
|
|
|
25
|
|
|
1
|
|
|
4
|
%
|
|||
Gain on sale of receivables and investments
|
24
|
|
|
33
|
|
|
(9
|
)
|
|
(27
|
)%
|
|||
Fee income
|
16
|
|
|
6
|
|
|
10
|
|
|
167
|
%
|
|||
Total revenue
|
142
|
|
|
140
|
|
|
2
|
|
|
1
|
%
|
|||
Expenses
|
|
|
|
|
|
|
|
|||||||
Interest expense
|
64
|
|
|
77
|
|
|
(13
|
)
|
|
(17
|
)%
|
|||
Provision for loss on receivables
|
8
|
|
|
—
|
|
|
8
|
|
|
NM
|
|
|||
Compensation and benefits
|
29
|
|
|
26
|
|
|
3
|
|
|
12
|
%
|
|||
General and administrative
|
15
|
|
|
15
|
|
|
—
|
|
|
—
|
%
|
|||
Total expenses
|
116
|
|
|
118
|
|
|
(2
|
)
|
|
(2
|
)%
|
|||
Income before equity method investments
|
26
|
|
|
22
|
|
|
4
|
|
|
18
|
%
|
|||
Income (loss) from equity method investments
|
64
|
|
|
22
|
|
|
42
|
|
|
191
|
%
|
|||
Income (loss) before income taxes
|
90
|
|
|
44
|
|
|
46
|
|
|
105
|
%
|
|||
Income tax (expense) benefit
|
(8
|
)
|
|
(2
|
)
|
|
(6
|
)
|
|
300
|
%
|
|||
Net income (loss)
|
$
|
82
|
|
|
$
|
42
|
|
|
$
|
40
|
|
|
95
|
%
|
•
|
Net income increased by approximately $40 million as a result of a $2 million increase in total revenue, a $2 million decrease in total expenses, a $42 million increase in income from equity method investments, and a $6 million increase in income tax expense. These results do not include the Non-GAAP core earnings adjustment related to equity method investments, which is discussed in the Non-GAAP Financial Measures section.
|
•
|
Interest and rental income increased by $1 million due to higher yielding assets offset by lower average balances.
|
•
|
Interest income in the prior year included $13 million in income from asset repayments on a residential solar transaction that did not recur in the current year. Adjusting for this one-time event, interest and rental income would increase by $14 million due to higher yielding assets that were offset by lower total average balances.
|
•
|
Interest expense for the year decreased by approximately $13 million as a result of lower cost and outstanding balance of debt during the year.
|
•
|
Provision for loss on receivables increased by $8 million due to a 2019 court ruling related to receivables that were previously placed on non-accrual status in 2017.
|
•
|
Compensation and benefits increased by $3 million due to an increase in equity-based compensation expense resulting from the timing of vesting and higher award valuations.
|
•
|
Income from equity method investments increased by $42 million primarily due to the GAAP gain of $28 million recognized from the sale of a portfolio of wind projects in the fourth quarter of 2019 and additional income resulting from the realization of tax attributes by our co-investors.
|
•
|
Income tax expense increased by $6 million as a result of higher taxable income largely due to the gain on the sale of the portfolio of wind projects discussed above.
|
|
For the years ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(dollars in millions)
|
||||||||||
Income under GAAP
|
$
|
64
|
|
|
$
|
22
|
|
|
$
|
22
|
|
|
|
|
|
|
|
||||||
Core earnings
|
$
|
41
|
|
|
$
|
41
|
|
|
$
|
43
|
|
Return of capital
|
$
|
60
|
|
|
$
|
74
|
|
|
$
|
47
|
|
Cash collected
|
$
|
101
|
|
|
$
|
115
|
|
|
$
|
90
|
|
|
For the Years Ended December 31,
|
||||||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||||||||||||||
|
$
|
|
Per Share
|
|
$
|
|
Per Share
|
|
$
|
|
Per Share
|
||||||||||||
|
(dollars in thousands, except per share amounts)
|
||||||||||||||||||||||
Net income attributable to controlling stockholders
|
$
|
81,564
|
|
|
$
|
1.24
|
|
|
$
|
41,577
|
|
|
$
|
0.75
|
|
|
$
|
30,856
|
|
|
$
|
0.57
|
|
Core earnings adjustments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Reverse GAAP income from equity method investments
|
(64,174
|
)
|
|
|
|
(22,162
|
)
|
|
|
|
(22,289
|
)
|
|
|
|||||||||
Add back core equity method investments earnings
|
41,437
|
|
|
|
|
40,923
|
|
|
|
|
42,707
|
|
|
|
|||||||||
Non-cash equity-based compensation charges
|
14,160
|
|
|
|
|
10,066
|
|
|
|
|
11,304
|
|
|
|
|||||||||
Non-cash provision for loss on receivables
|
8,027
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|||||||||
Amortization of intangibles
|
3,285
|
|
|
|
|
3,207
|
|
|
|
|
2,622
|
|
|
|
|||||||||
Non-cash provision (benefit) for taxes
|
8,091
|
|
|
|
|
1,968
|
|
|
|
|
756
|
|
|
|
|||||||||
Current year earnings attributable to non-controlling interest
|
356
|
|
|
|
|
221
|
|
|
|
|
179
|
|
|
|
|||||||||
Core earnings (1)
|
$
|
92,746
|
|
|
$
|
1.40
|
|
|
$
|
75,800
|
|
|
$
|
1.38
|
|
|
$
|
66,135
|
|
|
$
|
1.27
|
|
(1)
|
Core earnings per share is based on 66,046,401 shares, 54,742,869 shares and 52,231,030 shares for the years ended December 31, 2019, 2018 and 2017, respectively, which represents the weighted average number of fully-diluted shares outstanding including our restricted stock awards and restricted stock units and the non-controlling interest in our Operating Partnership. We include any potential common stock issuance in this calculation related to our convertible notes using the treasury stock method and any potential common stock issuances related to share based compensation units in the amount we believe is reasonably certain to vest.
|
|
As of December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(dollars in millions)
|
||||||||||
Equity method investments
|
$
|
499
|
|
|
$
|
471
|
|
|
$
|
523
|
|
Government receivables (1)
|
263
|
|
|
497
|
|
|
535
|
|
|||
Commercial receivables (2)
|
896
|
|
|
447
|
|
|
477
|
|
|||
Real estate
|
362
|
|
|
365
|
|
|
341
|
|
|||
Investments
|
75
|
|
|
170
|
|
|
151
|
|
|||
Assets held in securitization trusts
|
4,101
|
|
|
3,334
|
|
|
2,709
|
|
|||
Managed assets
|
$
|
6,196
|
|
|
$
|
5,284
|
|
|
$
|
4,736
|
|
Credit losses as a percentage of assets under management
|
0.1
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
(1)
|
Includes receivables held-for-sale of $16 million in 2017.
|
(2)
|
Includes receivables held-for-sale of $3 million in 2017.
|
|
Years Ended
December 31,
|
|||||||
|
2019
|
|
2018
|
|
2017
|
|||
Return on assets
|
3.6
|
%
|
|
1.9
|
%
|
|
1.5
|
%
|
Return on equity
|
9.4
|
%
|
|
5.7
|
%
|
|
5.1
|
%
|
Average equity to average total assets ratio
|
38.4
|
%
|
|
32.9
|
%
|
|
30.5
|
%
|
•
|
Scope 1 GHG emissions - Direct emissions - Emissions from operations that are owned or controlled by the reporting company.
|
•
|
Scope 2 GHG emissions - Indirect emissions - Emissions from the generation of purchased or acquired energy such as electricity, steam, heating or cooling, consumed by the reporting company.
|
•
|
Scope 3 GHG emissions - Indirect emissions - All other indirect emissions that occur in the value chain of the reporting company, including both upstream and downstream emissions.
|
Category
|
|
Goal
|
|
Performance
|
Scope 1 GHG emissions
|
|
0 MT
|
|
0 MT
|
Scope 2 GHG emissions
|
|
0 MT
|
|
0 MT1
|
Scope 3 GHG emissions
|
|
0 MT2
|
|
< 600 MT2
|
(1)
|
Performance stated is market-based which includes the impact of purchasing carbon offsets.
|
(2)
|
Our stated actual performance for Scope 3 GHG emissions does not include the carbon emissions reductions as a result of our investments. The first year carbon emissions reductions as a result of our investments originated in 2019 are 385 thousand MT.
|
|
December 31, 2019
|
|
% of Total
|
|
December 31, 2018
|
|
% of Total
|
||||||
|
(dollars in millions)
|
|
|
|
(dollars in millions)
|
|
|
||||||
Floating-rate borrowings
|
$
|
33
|
|
|
2
|
%
|
|
$
|
317
|
|
|
26
|
%
|
Fixed-rate debt
|
1,360
|
|
|
98
|
%
|
|
925
|
|
|
74
|
%
|
||
Total debt (1)
|
$
|
1,393
|
|
|
100
|
%
|
|
$
|
1,242
|
|
|
100
|
%
|
Equity
|
$
|
940
|
|
|
|
|
$
|
805
|
|
|
|
||
Leverage
|
1.5 to 1
|
|
|
|
|
1.5 to 1
|
|
|
|
(1)
|
Floating-rate borrowings include borrowings under our floating-rate credit facilities and approximately $2 million and approximately $58 million of non-recourse debt with floating rate exposure as of December 31, 2019 and December 31, 2018, respectively. Fixed-rate debt includes the present notional value of non-recourse debt that is hedged using interest rate swaps. Debt excludes securitizations that are not consolidated on our balance sheet.
|
|
Payment due by Period
|
|||||||||||||||||||
Contractual Obligations
|
Total
|
|
Less than
1 year
|
|
1 - 3 Years
|
|
3 - 5 Years
|
|
More than
5 years
|
|||||||||||
|
(in millions)
|
|||||||||||||||||||
Credit facilities
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
23
|
|
|
$
|
—
|
|
|
Interest on credit facilities (1)
|
3
|
|
|
—
|
|
|
2
|
|
|
1
|
|
|
—
|
|
||||||
Non-recourse debt (2)
|
716
|
|
|
88
|
|
|
52
|
|
|
91
|
|
|
485
|
|
||||||
Interest on non-recourse debt (2)
|
258
|
|
|
27
|
|
|
51
|
|
|
44
|
|
|
136
|
|
||||||
Senior unsecured notes (3)
|
500
|
|
|
—
|
|
|
—
|
|
|
500
|
|
—
|
|
—
|
|
|||||
Interest on senior unsecured notes
|
133
|
|
|
27
|
|
|
53
|
|
|
53
|
|
|
—
|
|
||||||
Convertible notes (4)
|
150
|
|
|
—
|
|
|
150
|
|
|
—
|
|
|
—
|
|
||||||
Interest on convertible notes
|
18
|
|
|
6
|
|
|
12
|
|
|
—
|
|
|
—
|
|
||||||
Operating lease obligations
|
4
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
||||||
Total
|
$
|
1,813
|
|
|
$
|
149
|
|
|
$
|
329
|
|
|
$
|
713
|
|
|
$
|
622
|
|
(1)
|
Interest is calculated based on the interest rate in effect at December 31, 2019, and includes all interest expense incurred and expected to be incurred in the future based on the current principal balance through the contractual maturity of the credit facilities.
|
(2)
|
These amounts exclude $16 million of unamortized debt issuance costs. Interest is calculated based on the interest rate in effect at December 31, 2019, including the effect of interest rate hedges as applicable.
|
(3)
|
Excludes $8 million of unamortized debt issuance costs and $7 million of unamortized issuance premium.
|
(4)
|
Excludes $2 million of unamortized debt issuance costs.
|
Item 7A.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 8.
|
Financial Statements and Supplementary Data
|
Accounting for Equity Investments in Renewable Energy and Energy Efficiency Projects
|
|
Description of the Matter
|
As discussed in Note 2 to the consolidated financial statements, the Company makes equity investments in renewable energy and energy efficiency projects that are accounted for under the equity method of accounting. During the year ended December 31, 2019, the Company made new equity investments in renewable energy and energy efficiency projects amounting to $152 million and held $499 million of equity investments in renewable energy and energy efficiency projects as of December 31, 2019. 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 cash flow preferences 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.
Auditing the Company’s determination of whether it has power 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 the 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.
|
How We Addressed the Matter in our Audit
|
We tested 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 and ii) the recognition of its share of investees’ profits and losses through use of the HLBV method. For example, we tested 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 the liquidation provisions.
To evaluate whether the Company has power over each investee, our audit procedures included, among others, inspecting 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 the 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 both new and existing 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 inputs to 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 recalculating the stated preferred returns, allocations of tax attributes, and the Company’s share of profits and losses of the investee.
|
|
December 31, 2019
|
|
December 31, 2018
|
||||
Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
6,208
|
|
|
$
|
21,418
|
|
Equity method investments
|
498,631
|
|
|
471,044
|
|
||
Government receivables
|
263,175
|
|
|
497,464
|
|
||
Commercial receivables, net of allowance
|
896,432
|
|
|
447,196
|
|
||
Real estate
|
362,265
|
|
|
365,370
|
|
||
Investments
|
74,530
|
|
|
169,793
|
|
||
Securitization assets
|
123,979
|
|
|
71,601
|
|
||
Other assets
|
162,054
|
|
|
111,027
|
|
||
Total Assets
|
$
|
2,387,274
|
|
|
$
|
2,154,913
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Accounts payable, accrued expenses and other
|
$
|
53,538
|
|
|
$
|
36,509
|
|
Deferred funding obligations
|
813
|
|
|
72,100
|
|
||
Credit facilities
|
31,199
|
|
|
258,592
|
|
||
Non-recourse debt (secured by assets of $921 million and $1,105 million, respectively)
|
700,225
|
|
|
834,738
|
|
||
Senior unsecured notes
|
512,153
|
|
|
—
|
|
||
Convertible notes
|
149,434
|
|
|
148,451
|
|
||
Total Liabilities
|
1,447,362
|
|
|
1,350,390
|
|
||
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, 66,338,120 and 60,510,086 shares issued and outstanding, respectively
|
663
|
|
|
605
|
|
||
Additional paid in capital
|
1,102,303
|
|
|
965,384
|
|
||
Accumulated deficit
|
(169,786
|
)
|
|
(163,205
|
)
|
||
Accumulated other comprehensive income (loss)
|
3,300
|
|
|
(1,684
|
)
|
||
Non-controlling interest
|
3,432
|
|
|
3,423
|
|
||
Total Stockholders’ Equity
|
939,912
|
|
|
804,523
|
|
||
Total Liabilities and Stockholders’ Equity
|
$
|
2,387,274
|
|
|
$
|
2,154,913
|
|
|
Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Revenue
|
|
|
|
|
|
||||||
Interest income
|
$
|
76,200
|
|
|
$
|
75,935
|
|
|
$
|
62,227
|
|
Rental income
|
25,884
|
|
|
24,606
|
|
|
19,831
|
|
|||
Gain on sale of receivables and investments
|
24,423
|
|
|
32,928
|
|
|
20,956
|
|
|||
Fee income
|
15,074
|
|
|
5,927
|
|
|
2,973
|
|
|||
Total revenue
|
141,581
|
|
|
139,396
|
|
|
105,987
|
|
|||
Expenses
|
|
|
|
|
|
||||||
Interest expense
|
64,241
|
|
|
76,874
|
|
|
65,472
|
|
|||
Provision for loss on receivables
|
8,027
|
|
|
—
|
|
|
—
|
|
|||
Compensation and benefits
|
28,777
|
|
|
25,651
|
|
|
19,708
|
|
|||
General and administrative
|
14,693
|
|
|
15,091
|
|
|
11,176
|
|
|||
Total expenses
|
115,738
|
|
|
117,616
|
|
|
96,356
|
|
|||
Income before equity method investments
|
25,843
|
|
|
21,780
|
|
|
9,631
|
|
|||
Income (loss) from equity method investments
|
64,174
|
|
|
22,162
|
|
|
22,289
|
|
|||
Income (loss) before income taxes
|
90,017
|
|
|
43,942
|
|
|
31,920
|
|
|||
Income tax (expense) benefit
|
(8,097
|
)
|
|
(2,144
|
)
|
|
(885
|
)
|
|||
Net income (loss)
|
81,920
|
|
|
41,798
|
|
|
31,035
|
|
|||
Net income (loss) attributable to non-controlling interest holders
|
356
|
|
|
221
|
|
|
179
|
|
|||
Net income (loss) attributable to controlling stockholders
|
$
|
81,564
|
|
|
$
|
41,577
|
|
|
$
|
30,856
|
|
Basic earnings (loss) per common share
|
$
|
1.25
|
|
|
$
|
0.75
|
|
|
$
|
0.57
|
|
Diluted earnings (loss) per common share
|
$
|
1.24
|
|
|
$
|
0.75
|
|
|
$
|
0.57
|
|
Weighted average common shares outstanding—basic
|
63,916,440
|
|
|
52,780,449
|
|
|
50,361,672
|
|
|||
Weighted average common shares outstanding—diluted
|
64,771,491
|
|
|
52,780,449
|
|
|
50,361,672
|
|
|
Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Net income (loss)
|
$
|
81,920
|
|
|
$
|
41,798
|
|
|
$
|
31,035
|
|
Unrealized gain (loss) on available-for-sale securities, net of tax (provision) benefit of $(0.6) million, $0.1 million and $0.1 million in 2019, 2018, and 2017 respectively
|
11,249
|
|
|
(1,177
|
)
|
|
1,275
|
|
|||
Unrealized gain (loss) on interest rate swaps, net of tax (provision) benefit of $1.8 million in 2019 and $0.0 million in 2018 and 2017
|
(6,243
|
)
|
|
555
|
|
|
(1,233
|
)
|
|||
Comprehensive income (loss)
|
86,926
|
|
|
41,176
|
|
|
31,077
|
|
|||
Less: Comprehensive income (loss) attributable to non-controlling interest holders
|
378
|
|
|
218
|
|
|
178
|
|
|||
Comprehensive income (loss) attributable to controlling stockholders
|
$
|
86,548
|
|
|
$
|
40,958
|
|
|
$
|
30,899
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Non-controlling
Interest
|
|
Total
|
|||||||||||||||
|
Shares
|
|
Amount
|
|
||||||||||||||||||||||
Balance at December 31, 2016
|
46,493
|
|
|
$
|
465
|
|
|
$
|
663,744
|
|
|
$
|
(92,213
|
)
|
|
$
|
(1,388
|
)
|
|
$
|
3,731
|
|
|
$
|
574,339
|
|
Net income
|
|
|
|
|
|
|
30,856
|
|
|
|
|
179
|
|
|
31,035
|
|
||||||||||
Unrealized gain (loss) on available-for-sale securities
|
|
|
|
|
|
|
|
|
1,269
|
|
|
6
|
|
|
1,275
|
|
||||||||||
Unrealized gain (loss) on interest rate swaps
|
|
|
|
|
|
|
|
|
(1,226
|
)
|
|
(7
|
)
|
|
(1,233
|
)
|
||||||||||
Impact of adoption of ASU 2017-12
|
|
|
|
|
|
|
(280
|
)
|
|
280
|
|
|
|
|
—
|
|
||||||||||
Issued shares of common stock
|
5,023
|
|
|
50
|
|
|
97,886
|
|
|
|
|
|
|
|
|
97,936
|
|
|||||||||
Equity-based compensation
|
|
|
|
|
11,065
|
|
|
|
|
|
|
64
|
|
|
11,129
|
|
||||||||||
Issuance (repurchase) of vested equity-based compensation shares
|
149
|
|
|
2
|
|
|
(1,712
|
)
|
|
|
|
|
|
|
|
(1,710
|
)
|
|||||||||
Dividends and distributions
|
|
|
|
|
|
|
(69,614
|
)
|
|
|
|
(376
|
)
|
|
(69,990
|
)
|
||||||||||
Balance at December 31, 2017
|
51,665
|
|
|
$
|
517
|
|
|
$
|
770,983
|
|
|
$
|
(131,251
|
)
|
|
$
|
(1,065
|
)
|
|
$
|
3,597
|
|
|
$
|
642,781
|
|
Net income
|
|
|
|
|
|
|
41,577
|
|
|
|
|
221
|
|
|
41,798
|
|
||||||||||
Unrealized gain (loss) on available-for-sale securities
|
|
|
|
|
|
|
|
|
(1,171
|
)
|
|
(6
|
)
|
|
(1,177
|
)
|
||||||||||
Unrealized gain (loss) on interest rate swaps
|
|
|
|
|
|
|
|
|
552
|
|
|
3
|
|
|
555
|
|
||||||||||
Issued shares of common stock
|
8,611
|
|
|
86
|
|
|
186,808
|
|
|
|
|
|
|
|
|
186,894
|
|
|||||||||
Equity-based compensation
|
|
|
|
|
10,715
|
|
|
|
|
|
|
57
|
|
|
10,772
|
|
||||||||||
Issuance (repurchase) of vested equity-based compensation shares
|
226
|
|
|
2
|
|
|
(3,055
|
)
|
|
|
|
|
|
|
|
(3,053
|
)
|
|||||||||
Redemption of OP units
|
8
|
|
|
|
|
(67
|
)
|
|
|
|
|
|
(79
|
)
|
|
(146
|
)
|
|||||||||
Dividends and distributions
|
|
|
|
|
|
|
(73,531
|
)
|
|
|
|
(370
|
)
|
|
(73,901
|
)
|
||||||||||
Balance at December 31, 2018
|
60,510
|
|
|
$
|
605
|
|
|
$
|
965,384
|
|
|
$
|
(163,205
|
)
|
|
$
|
(1,684
|
)
|
|
$
|
3,423
|
|
|
$
|
804,523
|
|
Net income
|
|
|
|
|
|
|
81,564
|
|
|
|
|
356
|
|
|
81,920
|
|
||||||||||
Unrealized gain (loss) on available-for-sale securities
|
|
|
|
|
|
|
|
|
11,200
|
|
|
49
|
|
|
11,249
|
|
||||||||||
Unrealized gain (loss) on interest rate swaps
|
|
|
|
|
|
|
|
|
(6,216
|
)
|
|
(27
|
)
|
|
(6,243
|
)
|
||||||||||
Issued shares of common stock
|
5,399
|
|
|
54
|
|
|
138,347
|
|
|
|
|
|
|
|
|
138,401
|
|
|||||||||
Equity-based compensation
|
|
|
|
|
12,355
|
|
|
|
|
|
|
55
|
|
|
12,410
|
|
||||||||||
Issuance (repurchase) of vested equity-based compensation shares
|
425
|
|
|
4
|
|
|
(9,173
|
)
|
|
|
|
|
|
|
|
(9,169
|
)
|
|||||||||
Redemption of OP units
|
4
|
|
|
|
|
(61
|
)
|
|
|
|
|
|
(43
|
)
|
|
(104
|
)
|
|||||||||
Tax basis difference on contributed asset
|
|
|
|
|
(4,549
|
)
|
|
|
|
|
|
|
|
(4,549
|
)
|
|||||||||||
Dividends and distributions
|
|
|
|
|
|
|
(88,145
|
)
|
|
|
|
(381
|
)
|
|
(88,526
|
)
|
||||||||||
Balance at December 31, 2019
|
66,338
|
|
|
$
|
663
|
|
|
$
|
1,102,303
|
|
|
$
|
(169,786
|
)
|
|
$
|
3,300
|
|
|
$
|
3,432
|
|
|
$
|
939,912
|
|
|
Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
81,920
|
|
|
$
|
41,798
|
|
|
$
|
31,035
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Provision for loss on receivables
|
8,027
|
|
|
—
|
|
|
—
|
|
|||
Depreciation and amortization
|
3,593
|
|
|
4,526
|
|
|
3,550
|
|
|||
Amortization of deferred financing costs
|
6,435
|
|
|
10,727
|
|
|
9,621
|
|
|||
Equity-based compensation
|
14,160
|
|
|
10,066
|
|
|
11,304
|
|
|||
Equity method investments
|
(34,392
|
)
|
|
4,312
|
|
|
(7,746
|
)
|
|||
Non-cash gain on securitization
|
(56,717
|
)
|
|
(25,728
|
)
|
|
(28,915
|
)
|
|||
Gain on sale of receivables and investments
|
13,241
|
|
|
—
|
|
|
2,137
|
|
|||
Changes in receivables held-for-sale
|
—
|
|
|
12,685
|
|
|
(3,338
|
)
|
|||
Loss on debt extinguishment
|
—
|
|
|
9,245
|
|
|
—
|
|
|||
Changes in accounts payable and accrued expenses
|
5,184
|
|
|
6,882
|
|
|
(327
|
)
|
|||
Other
|
(11,962
|
)
|
|
(15,720
|
)
|
|
(5,604
|
)
|
|||
Net cash provided by operating activities
|
29,489
|
|
|
58,793
|
|
|
11,717
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Equity method investments
|
(152,096
|
)
|
|
(76,349
|
)
|
|
(232,811
|
)
|
|||
Equity method investment distributions received
|
71,183
|
|
|
88,160
|
|
|
75,114
|
|
|||
Proceeds from sales of equity method investments
|
81,297
|
|
|
35,849
|
|
|
6,044
|
|
|||
Purchases of and investments in receivables
|
(497,866
|
)
|
|
(292,834
|
)
|
|
(111,161
|
)
|
|||
Principal collections from receivables
|
57,670
|
|
|
345,956
|
|
|
98,482
|
|
|||
Proceeds from sales of receivables
|
134,932
|
|
|
—
|
|
|
78,857
|
|
|||
Purchases of real estate
|
—
|
|
|
(27,549
|
)
|
|
(170,982
|
)
|
|||
Purchases of investments
|
(45,830
|
)
|
|
(25,308
|
)
|
|
(22,115
|
)
|
|||
Principal collections from investments
|
6,626
|
|
|
5,252
|
|
|
3,733
|
|
|||
Proceeds from sales of investments and securitization assets
|
139,230
|
|
|
—
|
|
|
—
|
|
|||
Funding of escrow accounts
|
(28,953
|
)
|
|
(34,980
|
)
|
|
(37,613
|
)
|
|||
Withdrawal from escrow accounts
|
30,707
|
|
|
33,108
|
|
|
15,986
|
|
|||
Other
|
1,959
|
|
|
(505
|
)
|
|
(1,414
|
)
|
|||
Net cash provided by (used in) investing activities
|
(201,141
|
)
|
|
50,800
|
|
|
(297,880
|
)
|
|||
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Proceeds from credit facilities
|
101,500
|
|
|
171,783
|
|
|
302,612
|
|
|||
Principal payments on credit facilities
|
(328,465
|
)
|
|
(46,604
|
)
|
|
(515,777
|
)
|
|||
Proceeds from issuance of non-recourse debt
|
130,988
|
|
|
69,255
|
|
|
609,332
|
|
|||
Principal payments on non-recourse debt
|
(206,705
|
)
|
|
(390,537
|
)
|
|
(79,459
|
)
|
|||
Proceeds from issuance of senior unsecured notes
|
507,313
|
|
|
—
|
|
|
—
|
|
|||
Proceeds from issuance of convertible notes
|
—
|
|
|
—
|
|
|
150,000
|
|
|||
Payments on deferred funding obligations
|
(18,791
|
)
|
|
(73,946
|
)
|
|
(124,785
|
)
|
|||
Net proceeds of common stock issuances
|
138,383
|
|
|
187,265
|
|
|
96,899
|
|
|||
Payments of dividends and distributions
|
(86,406
|
)
|
|
(70,989
|
)
|
|
(68,234
|
)
|
|||
Other
|
(18,932
|
)
|
|
(14,644
|
)
|
|
(25,392
|
)
|
|||
Net cash provided by (used in) financing activities
|
218,885
|
|
|
(168,417
|
)
|
|
345,196
|
|
|||
Increase (decrease) in cash, cash equivalents, and restricted cash
|
47,233
|
|
|
(58,824
|
)
|
|
59,033
|
|
|||
Cash, cash equivalents, and restricted cash at beginning of period
|
59,353
|
|
|
118,177
|
|
|
59,144
|
|
|||
Cash, cash equivalents, and restricted cash at end of period
|
$
|
106,586
|
|
|
$
|
59,353
|
|
|
$
|
118,177
|
|
Interest paid
|
$
|
48,056
|
|
|
$
|
72,078
|
|
|
$
|
48,865
|
|
Non-cash changes in deferred funding obligations and non-recourse debt (financing activity)
|
(112,027
|
)
|
|
(6,973
|
)
|
|
101,324
|
|
|||
Non-cash changes in receivables and investments (investing activity)
|
93,730
|
|
|
(248
|
)
|
|
(85,933
|
)
|
|||
Non-cash changes in residual assets (investing activity)
|
(61,001
|
)
|
|
(25,827
|
)
|
|
(28,777
|
)
|
•
|
Equity in either preferred or common structures in unconsolidated entities;
|
•
|
Government and commercial receivables, such as loans for renewable energy and energy efficiency projects;
|
•
|
Real estate, such as land or other assets leased for use by sustainable infrastructure projects typically under long-term leases; and
|
•
|
Investments in debt securities of renewable energy or energy efficiency projects.
|
•
|
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.
|
|
As of December 31, 2019
|
||||||||
|
Fair
Value
|
|
Carrying
Value
|
|
Level
|
||||
|
(in millions)
|
|
|
||||||
Assets
|
|
|
|
|
|
||||
Government receivables
|
$
|
278
|
|
|
$
|
263
|
|
|
Level 3
|
Commercial receivables
|
906
|
|
|
896
|
|
|
Level 3
|
||
Investments (1)
|
75
|
|
|
75
|
|
|
Level 3
|
||
Securitization residual assets (2)
|
122
|
|
|
122
|
|
|
Level 3
|
||
Liabilities
|
|
|
|
|
|
||||
Credit facilities (3)
|
$
|
31
|
|
|
$
|
31
|
|
|
Level 3
|
Non-recourse debt (3)
|
739
|
|
|
716
|
|
|
Level 3
|
||
Senior unsecured notes (3)
|
540
|
|
|
520
|
|
|
Level 2
|
||
Convertible notes (3)
|
185
|
|
|
152
|
|
|
Level 2
|
(1)
|
The amortized cost of our investments as of December 31, 2019, was $74 million.
|
(2)
|
Included in the securitization assets line of our consolidated balance sheets. This amount excludes securitization servicing assets, which are carried at amortized cost.
|
(3)
|
Fair value and carrying value exclude unamortized debt issuance costs.
|
|
As of December 31, 2018
|
||||||||
|
Fair
Value
|
|
Carrying
Value
|
|
Level
|
||||
|
(in millions)
|
|
|
||||||
Assets
|
|
|
|
|
|
||||
Government receivables
|
$
|
487
|
|
|
$
|
497
|
|
|
Level 3
|
Commercial receivables
|
443
|
|
|
447
|
|
|
Level 3
|
||
Investments (1)
|
170
|
|
|
170
|
|
|
Level 3
|
||
Securitization residual assets (2)
|
71
|
|
|
71
|
|
|
Level 3
|
||
Liabilities
|
|
|
|
|
|
||||
Credit facilities (3)
|
$
|
259
|
|
|
$
|
259
|
|
|
Level 3
|
Non-recourse debt (3)
|
835
|
|
|
852
|
|
|
Level 3
|
||
Convertible notes (3)
|
139
|
|
|
152
|
|
|
Level 2
|
(1)
|
The amortized cost of our investments as of December 31, 2018, was $173 million.
|
(2)
|
Included in the securitization assets line of our consolidated balance sheets. This amount excludes securitization servicing assets which are carried at amortized cost.
|
(3)
|
Fair value and carrying value exclude unamortized debt issuance costs.
|
|
For the year ended
December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Balance, beginning of period
|
$
|
170
|
|
|
$
|
151
|
|
Purchases of investments
|
46
|
|
|
25
|
|
||
Payments on investments
|
(4
|
)
|
|
(5
|
)
|
||
Sale of investments
|
(146
|
)
|
|
—
|
|
||
Realized gains on investments recorded in gain on sale of receivables and investments
|
5
|
|
|
—
|
|
||
Unrealized gains (losses) on investments recorded in OCI
|
4
|
|
|
(1
|
)
|
||
Balance, end of period
|
$
|
75
|
|
|
$
|
170
|
|
|
Estimated Fair Value
|
|
Unrealized Losses (1)
|
||||||||||||
|
Securities with a loss shorter than 12 months
|
|
Securities with a loss longer than 12 months
|
|
Securities with a loss shorter than 12 months
|
|
Securities with a loss longer than 12 months
|
||||||||
|
(in millions)
|
||||||||||||||
December 31, 2019
|
$
|
25
|
|
|
$
|
8
|
|
|
$
|
0.4
|
|
|
$
|
0.7
|
|
December 31, 2018
|
82
|
|
|
67
|
|
|
1.1
|
|
|
3.3
|
|
|
For the year ended
December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Balance, beginning of period
|
$
|
71
|
|
|
$
|
45
|
|
Accretion of securitization residual assets
|
4
|
|
|
3
|
|
||
Additions to securitization residual assets
|
59
|
|
|
25
|
|
||
Collections of securitization residual assets
|
(7
|
)
|
|
(3
|
)
|
||
Sales of securitization residual assets
|
(13
|
)
|
|
—
|
|
||
Unrealized gains (losses) on securitization residual assets recorded in OCI
|
8
|
|
|
1
|
|
||
Balance, end of period
|
$
|
122
|
|
|
$
|
71
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Cash deposits
|
$
|
6
|
|
|
$
|
21
|
|
Restricted cash deposits (included in other assets)
|
101
|
|
|
38
|
|
||
Total cash deposits
|
$
|
107
|
|
|
$
|
59
|
|
Amount of cash deposits in excess of amounts federally insured
|
$
|
105
|
|
|
$
|
57
|
|
|
As of and for the year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Gains on securitizations
|
$
|
24
|
|
|
$
|
33
|
|
|
$
|
21
|
|
Cost of financial assets securitized
|
853
|
|
|
688
|
|
|
466
|
|
|||
Proceeds from securitizations
|
877
|
|
|
721
|
|
|
487
|
|
|||
Residual and servicing assets
|
124
|
|
|
72
|
|
|
46
|
|
|||
Cash received from residual and servicing assets
|
7
|
|
|
3
|
|
|
4
|
|
|
Investment Grade
|
|
Commercial
Non-Investment
Grade (3)
|
|
Subtotal,
Debt
and Real
Estate
|
|
Equity
Method
Investments
|
|
Total
|
||||||||||||||
|
Government (1)
|
|
Commercial (2)
|
|
|
|
|
||||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||
Equity investments in renewable energy and energy efficiency projects
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
477
|
|
|
$
|
477
|
|
Receivables (4)
|
263
|
|
|
209
|
|
|
687
|
|
|
1,159
|
|
|
—
|
|
|
1,159
|
|
||||||
Real estate (5)
|
—
|
|
|
362
|
|
|
—
|
|
|
362
|
|
|
22
|
|
|
384
|
|
||||||
Investments
|
33
|
|
|
42
|
|
|
—
|
|
|
75
|
|
|
—
|
|
|
75
|
|
||||||
Total
|
$
|
296
|
|
|
$
|
613
|
|
|
$
|
687
|
|
|
$
|
1,596
|
|
|
$
|
499
|
|
|
$
|
2,095
|
|
% of Debt and real estate portfolio
|
19
|
%
|
|
38
|
%
|
|
43
|
%
|
|
100
|
%
|
|
N/A
|
|
|
N/A
|
|
||||||
Average remaining balance (6)
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
20
|
|
|
$
|
10
|
|
|
$
|
19
|
|
|
$
|
11
|
|
(1)
|
Transactions where the ultimate obligor is the U.S. federal government or state or local governments where the obligors are rated investment grade (either by an independent rating agency or based upon our internal credit analysis). This amount includes $186 million of U.S. federal government transactions and $110 million of transactions where the ultimate obligors are state or local governments. Transactions may have guaranties of energy savings from third party service providers, which typically are entities rated investment grade by an independent rating agency.
|
(2)
|
Transactions where the projects or the ultimate obligors are commercial entities that have been rated investment grade (either by an independent rating agency or based on our internal credit analysis). Of this total, $8 million of the transactions have been rated investment grade by an independent rating agency. This total includes $89 million of lease agreements where we hold legal title to the underlying real estate which are treated under GAAP as receivables since they were deemed to be failed sale/leaseback transactions as described in Note 2.
|
(3)
|
Transactions where the projects or the ultimate obligors are commercial entities that either have ratings below investment grade (either by an independent rating agency or using our internal credit analysis) or where the nature of the subordination in the asset causes it to be considered non-investment grade. This category of assets includes $451 million of mezzanine loans made on a non-recourse basis to
|
(4)
|
Total reconciles to the total of the government receivables and commercial receivables lines of the consolidated balance sheets.
|
(5)
|
Includes the real estate and the lease intangible assets (including those held through equity method investments) from which we receive scheduled lease payments, typically under long-term triple net lease agreements.
|
(6)
|
Excludes approximately 140 transactions each with outstanding balances that are less than $1 million and that in the aggregate total $49 million.
|
Investment Date
|
|
Investee
|
|
Carrying Value
|
||
|
|
|
|
(in millions)
|
||
Various
|
|
2007 Vento I, LLC
|
|
$
|
79
|
|
December 2015
|
|
Buckeye Wind Energy Class B Holdings, LLC
|
|
73
|
|
|
Various
|
|
Vivint Solar Asset 1 Class B, LLC
|
|
60
|
|
|
December 2019
|
|
2019 K102 Investor LLC
|
|
48
|
|
|
October 2016
|
|
Invenergy Gunsight Mountain Holdings, LLC
|
|
35
|
|
|
December 2018
|
|
3D Energie, LLC
|
|
34
|
|
|
Various
|
|
Vivint Solar Asset 2 Class B, LLC
|
|
32
|
|
|
Various
|
|
Helix Fund I, LLC
|
|
26
|
|
|
Various
|
|
Other transactions
|
|
112
|
|
|
|
|
Total equity method investments
|
|
$
|
499
|
|
|
Total
|
|
Less than 1 year
|
|
1-5 years
|
|
5-10 years
|
|
More than 10
years
|
||||||||||
|
(dollars in millions)
|
||||||||||||||||||
Receivables
|
|
|
|
|
|
|
|
|
|
||||||||||
Maturities by period
|
$
|
1,159
|
|
|
$
|
6
|
|
|
$
|
175
|
|
|
$
|
182
|
|
|
$
|
796
|
|
Weighted average yield by period
|
7.8
|
%
|
|
7.0
|
%
|
|
7.2
|
%
|
|
7.6
|
%
|
|
8.0
|
%
|
|||||
Investments
|
|
|
|
|
|
|
|
|
|
||||||||||
Maturities by period
|
$
|
75
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
75
|
|
Weighted average yield by period
|
4.4
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
4.4
|
%
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Real estate
|
|
|
|
||||
Land
|
$
|
269
|
|
|
$
|
269
|
|
Lease intangibles
|
104
|
|
|
104
|
|
||
Accumulated amortization of lease intangibles
|
(11
|
)
|
|
(8
|
)
|
||
Real estate
|
$
|
362
|
|
|
$
|
365
|
|
Year Ending December 31,
|
|
Future
Amortization
Expense
|
|
Minimum
Rental
Payments
|
||||
|
|
(in millions)
|
||||||
2020
|
|
$
|
3
|
|
|
$
|
22
|
|
2021
|
|
3
|
|
|
22
|
|
||
2022
|
|
3
|
|
|
22
|
|
||
2023
|
|
3
|
|
|
23
|
|
||
2024
|
|
3
|
|
|
24
|
|
||
Thereafter
|
|
78
|
|
|
764
|
|
||
Total
|
|
$
|
93
|
|
|
$
|
877
|
|
|
Rep-Based Facility
|
|
Approval-Based Facility
|
||||
|
(dollars in millions)
|
||||||
Outstanding balance
|
$
|
—
|
|
|
$
|
31
|
|
Value of collateral pledged to credit facility
|
31
|
|
|
164
|
|
||
Weighted average short-term borrowing rate
|
N/A
|
|
|
3.2
|
%
|
|
|
Future Minimum Maturities
|
||
For the year ended December 31,
|
|
(in millions)
|
||
2020
|
|
$
|
—
|
|
2021
|
|
8
|
|
|
2022
|
|
8
|
|
|
2023
|
|
15
|
|
|
Total
|
|
$
|
31
|
|
|
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
|
|||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
||||||||||||||||||
|
(dollars in millions)
|
|||||||||||||||||||||||||
HASI Sustainable Yield Bond 2013-1 (1)
|
$
|
—
|
|
|
$
|
55
|
|
|
2.79
|
%
|
|
December
2019 |
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
76
|
|
|
Receivables
|
HASI Sustainable Yield Bond 2015-1A
|
85
|
|
|
90
|
|
|
4.28
|
%
|
|
October 2034
|
|
—
|
|
|
126
|
|
|
135
|
|
|
Receivables, real estate and real estate intangibles
|
|||||
HASI Sustainable Yield Bond 2015-1B Note
|
13
|
|
|
13
|
|
|
5.41
|
%
|
|
October 2034
|
|
—
|
|
|
126
|
|
|
135
|
|
|
Class B Bond of HASI Sustainable Yield Bond 2015-1
|
|||||
2017 Credit Agreement
|
61
|
|
|
112
|
|
|
4.12
|
%
|
|
January 2023
|
(2)
|
—
|
|
|
120
|
|
|
151
|
|
|
Equity interests in Strong Upwind Holdings I, II, III, and IV LLC, and Northern Frontier Wind, LLC
|
|||||
HASI SYB Loan Agreement 2015-2
|
28
|
|
|
32
|
|
|
6.01
|
%
|
(3)
|
December 2023
|
|
—
|
|
|
73
|
|
|
72
|
|
|
Equity interest in Buckeye Wind Energy Class B Holdings LLC, related interest rate swap
|
|||||
HASI SYB Trust 2016-2
|
72
|
|
|
77
|
|
|
4.35
|
%
|
|
April 2037
|
|
—
|
|
|
76
|
|
|
81
|
|
|
Receivables
|
|||||
2017 Master Repurchase Agreement
|
—
|
|
|
56
|
|
|
N/A
|
|
|
January 2021
|
|
—
|
|
|
2
|
|
|
67
|
|
|
Receivables and investments
|
|||||
HASI ECON 101 Trust
|
129
|
|
|
133
|
|
|
3.57
|
%
|
|
May 2041
|
|
—
|
|
|
135
|
|
|
137
|
|
|
Receivables and investments
|
|||||
HASI SYB Trust 2017-1
|
155
|
|
|
159
|
|
|
3.86
|
%
|
|
March 2042
|
|
—
|
|
|
206
|
|
|
208
|
|
|
Receivables, real estate and real estate intangibles
|
|||||
Lannie Mae Series 2019-1
|
96
|
|
|
—
|
|
|
3.68
|
%
|
|
January 2047
|
|
—
|
|
|
106
|
|
|
—
|
|
|
Receivables, real estate and real estate intangibles
|
|||||
Other non-recourse debt (4)
|
77
|
|
|
125
|
|
|
3.15% - 7.45%
|
|
|
2022 to 2032
|
|
18
|
|
|
77
|
|
|
178
|
|
|
Receivables
|
|||||
Debt issuance costs
|
(16
|
)
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Non-recourse debt (5)
|
$
|
700
|
|
|
$
|
835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
This bond was prepaid without penalty in the second quarter of 2019.
|
(2)
|
This loan was prepaid without penalty in January 2020 using the proceeds from the sale of our interest in Northern Frontier Wind, LLC, as described in Note 6.
|
(3)
|
Interest rate represents the current period’s LIBOR based rate plus the spread. We have hedged the LIBOR rate exposure using interest rate swaps fixed at 2.55% for HASI SYB Loan Agreement 2015-2.
|
(4)
|
Other non-recourse debt consists of various debt agreements used to finance certain of our receivables for their term. Debt service payment requirements, in a majority of cases, are equal to or less than the cash flows received from the underlying receivables.
|
(5)
|
The total collateral pledged against our non-recourse debt was $921 million and $1,105 million as of December 31, 2019 and December 31, 2018, respectively. In addition, $23 million and $35 million of our restricted cash balance was pledged as collateral to various non-recourse loans as of December 31, 2019 and December 31, 2018, respectively.
|
Year Ending December 31,
|
Future minimum
maturities
|
||
|
(in millions)
|
||
2020
|
$
|
88
|
|
2021
|
26
|
|
|
2022
|
27
|
|
|
2023
|
57
|
|
|
2024
|
34
|
|
|
Thereafter
|
484
|
|
|
Total minimum maturities
|
716
|
|
|
Deferred financing costs, net
|
(16
|
)
|
|
Total non-recourse debt
|
$
|
700
|
|
|
As of and for the year ended December 31, 2019
|
||
|
(in millions)
|
||
Principal
|
$
|
500
|
|
Accrued interest
|
13
|
|
|
Unamortized premium
|
7
|
|
|
Less: Unamortized financing costs
|
(8
|
)
|
|
Carrying value of 2024 Notes
|
$
|
512
|
|
Interest expense
|
$
|
12
|
|
|
As of and for the year ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Principal
|
$
|
150
|
|
|
$
|
150
|
|
Accrued interest
|
2
|
|
|
2
|
|
||
Less:
|
|
|
|
||||
Unamortized financing costs
|
(3
|
)
|
|
(4
|
)
|
||
Carrying value of convertible notes
|
$
|
149
|
|
|
$
|
148
|
|
Interest expense
|
$
|
7
|
|
|
$
|
7
|
|
|
2019
|
|
2018
|
|
2017
|
|||
Federal statutory income tax rate
|
21
|
%
|
|
21
|
%
|
|
35
|
%
|
Changes in rate resulting from:
|
|
|
|
|
|
|||
Share-based compensation
|
2
|
%
|
|
(1
|
)%
|
|
(8
|
)%
|
Equity method investments
|
(2
|
)%
|
|
(11
|
)%
|
|
(83
|
)%
|
Other
|
(1
|
)%
|
|
2
|
%
|
|
6
|
%
|
Valuation allowance
|
(15
|
)%
|
|
2
|
%
|
|
49
|
%
|
TCJA rate revaluation adjustment
|
—
|
%
|
|
—
|
%
|
|
1
|
%
|
Effective tax rate
|
5
|
%
|
|
13
|
%
|
|
—
|
%
|
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Net operating loss (NOL) carryforwards
|
31
|
|
|
34
|
|
||
Tax credit carryforwards
|
13
|
|
|
12
|
|
||
Share-based compensation
|
3
|
|
|
3
|
|
||
Other
|
3
|
|
|
—
|
|
||
Valuation allowance
|
—
|
|
|
(11
|
)
|
||
Gross deferred tax assets
|
50
|
|
|
38
|
|
||
Receivables basis difference
|
$
|
(12
|
)
|
|
$
|
(9
|
)
|
Equity method investments
|
(52
|
)
|
|
(31
|
)
|
||
Gross deferred tax liabilities
|
(64
|
)
|
|
(40
|
)
|
||
Net deferred tax liabilities
|
$
|
(14
|
)
|
|
$
|
(2
|
)
|
•
|
Reduced tax rates - the highest individual U.S. federal income tax rate on ordinary income is reduced from 39.6% to 37% (through taxable years ending in 2025), and the maximum corporate income tax rate is reduced from 35% to 21%. In addition, individuals, trust, and estates that own our stock are permitted to deduct up to 20% of dividends received from us (other than dividends that are designated as capital gain dividends or qualified dividend income), generally resulting in an effective maximum U.S. federal income tax rate of 29.6% on such dividends (through taxable years ending in 2025). Further, the amount that we are required to withhold on distributions to non-U.S. stockholders that are treated as attributable to gains from our sale or exchange of U.S. real property interests is reduced from 35% to 21%.
|
•
|
Net operating losses - we and our TRSs may not use NOLs generated beginning in 2018 to offset more than 80% of our or our TRSs’ taxable income (prior to the application of the dividends paid deduction). NOLs generated beginning in 2018 can be carried forward indefinitely but can no longer be carried back.
|
•
|
Limitation on interest deductions - the amount of net interest expense that certain taxpayers, including us and our TRSs, may deduct for a taxable year is limited to the sum of (i) the taxpayer’s business interest income for the taxable year, and (ii) 30% of the taxpayer’s “adjusted taxable income” for the taxable year. For taxable years beginning before January 1, 2022, adjusted taxable income means earnings before interest, taxes, depreciation, and amortization; for taxable years beginning on or after January 1, 2022, adjusted taxable income is limited to earnings before interest and taxes.
|
•
|
Alternative Minimum Tax - the corporate alternative minimum tax is eliminated.
|
•
|
Income accrual - we and our TRSs are required to recognize certain items of income for U.S. federal income tax purposes no later than we would report such items on our financial statements. Earlier recognition of income for U.S. federal income tax purposes could impact our ability to satisfy the REIT distribution requirements. However, recently released proposed Treasury Regulations generally would exclude, among other items, original issue discount (whether or not de minimis) and market discount from the applicability of this rule. Although the proposed Treasury Regulations generally will not be effective until taxable years beginning after the date on which they are issued in final form, we generally are permitted to elect to rely on the proposed Treasury Regulations currently.
|
•
|
Tax credits - the TCJA modifies the availability and the use by certain taxpayers of certain tax credits for investments in certain wind, solar, and other renewable energy assets.
|
Announced Date
|
|
Record Date
|
|
Pay Date
|
|
Amount per share
|
||
2/21/2018
|
|
4/4/2018
|
|
4/12/2018
|
|
$
|
0.330
|
|
5/31/2018
|
|
7/5/2018
|
|
7/12/2018
|
|
0.330
|
|
|
9/12/2018
|
|
10/3/2018
|
|
10/11/2018
|
|
0.330
|
|
|
12/12/2018
|
|
12/26/2018
|
(1)
|
1/10/2019
|
|
0.330
|
|
|
2/21/2019
|
|
4/3/2019
|
|
4/11/2019
|
|
0.335
|
|
|
6/6/2019
|
|
7/5/2019
|
|
7/12/2019
|
|
0.335
|
|
|
9/12/2019
|
|
10/3/2019
|
|
10/10/2019
|
|
0.335
|
|
|
12/13/2019
|
|
12/26/2019
|
(1)
|
1/10/2020
|
|
0.335
|
|
(1)
|
These dividends are treated as distributions in the following year for tax purposes.
|
Closing Date
|
|
Common Stock
Offerings
|
|
Shares
Issued (1)
|
|
Price
Per Share
|
|
Net
Proceeds (2)
|
|||
|
|
|
|
(amounts in millions, except per share amounts)
|
|||||||
5/18/2018 to 6/25/2018
|
|
ATM
|
|
0.834
|
|
|
18.76
|
|
(3)
|
15
|
|
11/15/2018 to 12/11/2018
|
|
ATM
|
|
2.777
|
|
|
23.37
|
|
(3)
|
64
|
|
12/17/2018 and 1/3/2019
|
|
Public Offering
|
|
5.465
|
|
|
21.60
|
|
(4)
|
117
|
|
1/23/2019 to 3/21/2019
|
|
ATM
|
|
1.603
|
|
|
23.39
|
|
(3)
|
37
|
|
5/7/2019 to 6/7/2019
|
|
ATM
|
|
1.926
|
|
|
26.33
|
|
(3)
|
50
|
|
12/12/2019
|
|
ATM
|
|
1.405
|
|
|
30.00
|
|
(3)
|
42
|
|
(1)
|
Includes shares issued in connection with the exercise of the underwriters’ option to purchase additional shares.
|
(2)
|
Net proceeds from the offerings are shown after deducting underwriting discounts, commissions and other offering costs.
|
(3)
|
Represents the average price per share at which investors in our ATM offerings purchased our shares.
|
(4)
|
Represents the price per share at which the underwriters in our public offerings purchased our shares.
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Equity-based compensation expense
|
$
|
14
|
|
|
$
|
10
|
|
|
$
|
11
|
|
Fair value of awards vested on vesting date
|
19
|
|
|
7
|
|
|
5
|
|
|
Restricted Shares of
Common Stock
|
|
Weighted Average Grant Date Fair Value
|
|
Value
|
|||||
|
|
|
(per share)
|
|
(in millions)
|
|||||
Ending Balance—December 31, 2017
|
1,399,593
|
|
|
$
|
18.73
|
|
|
$
|
26.2
|
|
Granted
|
454,106
|
|
|
19.72
|
|
|
9.0
|
|
||
Vested
|
(370,072
|
)
|
|
18.88
|
|
|
(7.0
|
)
|
||
Forfeited
|
(96,871
|
)
|
|
18.92
|
|
|
(1.8
|
)
|
||
Ending Balance—December 31, 2018
|
1,386,756
|
|
|
$
|
19.00
|
|
|
$
|
26.4
|
|
Granted
|
150,493
|
|
|
23.99
|
|
|
3.6
|
|
||
Vested
|
(781,218
|
)
|
|
18.91
|
|
|
(14.8
|
)
|
||
Forfeited
|
(5,789
|
)
|
|
20.62
|
|
|
(0.1
|
)
|
||
Ending Balance—December 31, 2019
|
750,242
|
|
|
20.08
|
|
|
15.1
|
|
|
Restricted Stock
Units (1)
|
|
Weighted Average Grant Date Fair Value
|
|
Value
|
|||||
|
|
|
(per share)
|
|
(in millions)
|
|||||
Ending Balance—December 31, 2017
|
255,706
|
|
|
$
|
18.99
|
|
|
$
|
4.9
|
|
Granted
|
176,128
|
|
|
20.24
|
|
|
3.5
|
|
||
Vested
|
(20,368
|
)
|
|
18.99
|
|
|
(0.4
|
)
|
||
Forfeited
|
(18,318
|
)
|
|
19.05
|
|
|
(0.3
|
)
|
||
Ending Balance—December 31, 2018
|
393,148
|
|
|
$
|
19.55
|
|
|
$
|
7.7
|
|
Granted
|
46,586
|
|
|
25.10
|
|
|
1.2
|
|
||
Vested
|
(1,380
|
)
|
|
21.68
|
|
|
—
|
|
||
Forfeited
|
(2,776
|
)
|
|
22.23
|
|
|
(0.1
|
)
|
||
Ending Balance—December 31, 2019
|
435,578
|
|
|
$
|
20.12
|
|
|
$
|
8.8
|
|
(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.
|
|
LTIP Units (1)
|
|
Weighted Average Grant Date Fair Value
|
|
Value
|
|||||
|
|
|
(per share)
|
|
(in millions)
|
|||||
Ending Balance—December 31, 2018
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Granted
|
209,330
|
|
|
25.84
|
|
|
5.4
|
|
||
Vested
|
(8,020
|
)
|
|
25.82
|
|
|
(0.2
|
)
|
||
Forfeited
|
—
|
|
|
—
|
|
|
—
|
|
||
Ending Balance—December 31, 2019
|
201,310
|
|
|
$
|
25.84
|
|
|
$
|
5.2
|
|
|
LTIP Units (1)
|
|
Weighted Average Grant Date Fair Value
|
|
Value
|
|||||
|
|
|
(per share)
|
|
(in millions)
|
|||||
Ending Balance—December 31, 2018
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Granted
|
180,500
|
|
|
26.70
|
|
|
4.8
|
|
||
Vested
|
—
|
|
|
—
|
|
|
—
|
|
||
Forfeited
|
—
|
|
|
—
|
|
|
—
|
|
||
Ending Balance—December 31, 2019
|
180,500
|
|
|
$
|
26.70
|
|
|
$
|
4.8
|
|
|
Year ended December 31,
|
||||||||||
Numerator:
|
2019
|
|
2018
|
|
2017
|
||||||
|
(dollars in millions, except share and per share data)
|
||||||||||
Net income (loss) attributable to controlling stockholders and participating securities
|
$
|
81.6
|
|
|
$
|
41.6
|
|
|
$
|
30.9
|
|
Less: Dividends on participating securities
|
(1.4
|
)
|
|
(1.8
|
)
|
|
(1.9
|
)
|
|||
Undistributed earnings attributable to participating securities
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net income (loss) attributable to controlling stockholders
|
$
|
80.2
|
|
|
$
|
39.8
|
|
|
$
|
29.0
|
|
Denominator:
|
|
|
|
|
|
||||||
Weighted-average number of common shares—basic
|
63,916,440
|
|
|
52,780,449
|
|
|
50,361,672
|
|
|||
Weighted-average number of common shares—diluted
|
64,771,491
|
|
|
52,780,449
|
|
|
50,361,672
|
|
|||
Basic earnings per common share
|
$
|
1.25
|
|
|
$
|
0.75
|
|
|
$
|
0.57
|
|
Diluted earnings per common share
|
$
|
1.24
|
|
|
$
|
0.75
|
|
|
$
|
0.57
|
|
|
|
|
|
|
|
||||||
Securities being allocated a portion of earnings:
|
|
|
|
|
|
||||||
Weighted-average number of OP units
|
279,135
|
|
|
281,106
|
|
|
284,992
|
|
|||
Participating securities:
|
|
|
|
|
|
||||||
Unvested restricted common stock and unvested LTIP Units with time-based vesting conditions outstanding at period end
|
951,552
|
|
|
1,386,756
|
|
|
1,399,593
|
|
|||
Potentially dilutive securities as of period end:
|
|
|
|
|
|
||||||
Unvested restricted common stock and unvested LTIP Units with time-based vesting conditions
|
951,552
|
|
|
1,386,756
|
|
|
1,399,593
|
|
|||
Restricted stock units
|
435,578
|
|
|
393,148
|
|
|
255,706
|
|
|||
LTIP Units with market-based vesting conditions
|
180,500
|
|
|
—
|
|
|
—
|
|
|||
Potential shares of common stock related to convertible notes
|
5,510,499
|
|
|
5,506,605
|
|
|
5,506,605
|
|
Balance Sheet
|
|
|
||
As of September 30, 2019
|
|
|
||
Current assets
|
|
$
|
480
|
|
Total assets
|
|
3,742
|
|
|
Current liabilities
|
|
264
|
|
|
Total liabilities
|
|
1,601
|
|
|
Members’ equity
|
|
2,141
|
|
|
As of December 31, 2018
|
|
|
||
Current assets
|
|
200
|
|
|
Total assets
|
|
3,136
|
|
|
Current liabilities
|
|
137
|
|
|
Total liabilities
|
|
1,059
|
|
|
Members’ equity
|
|
2,077
|
|
|
Income Statement
|
|
|
||
For the nine months ended September 30, 2019
|
|
|
||
Revenue
|
|
187
|
|
|
Income from continuing operations
|
|
(28
|
)
|
|
Net income
|
|
(28
|
)
|
|
For the year ended December 31, 2018
|
|
|
||
Revenue
|
|
152
|
|
|
Income from continuing operations
|
|
(44
|
)
|
|
Net income
|
|
(44
|
)
|
|
For the year ended December 31, 2017
|
|
|
||
Revenue
|
|
148
|
|
|
Income from continuing operations
|
|
(65
|
)
|
|
Net income
|
|
(65
|
)
|
|
For the Three-Months Ended
|
||||||||||||||
|
(in millions, except for per share data)
|
||||||||||||||
|
March 31, 2019
|
|
June 30, 2019
|
|
Sept. 30, 2019
|
|
Dec. 31, 2019
|
||||||||
Total revenue
|
$
|
33,143
|
|
|
$
|
31,268
|
|
|
$
|
38,842
|
|
|
$
|
38,328
|
|
Total expenses
|
26,211
|
|
|
25,258
|
|
|
35,518
|
|
|
28,751
|
|
||||
Income before equity method investments
|
6,932
|
|
|
6,010
|
|
|
3,324
|
|
|
9,577
|
|
||||
Income (loss) from equity method investments
|
4,506
|
|
|
7,624
|
|
|
5,984
|
|
|
46,060
|
|
||||
Income (loss) before income taxes
|
11,438
|
|
|
13,634
|
|
|
9,308
|
|
|
55,637
|
|
||||
Income tax (expense) benefit
|
2,270
|
|
|
(839
|
)
|
|
(132
|
)
|
|
(9,396
|
)
|
||||
Net income (loss)
|
13,708
|
|
|
12,795
|
|
|
9,176
|
|
|
46,241
|
|
||||
Net income (loss) attributable to controlling stockholders
|
$
|
13,646
|
|
|
$
|
12,740
|
|
|
$
|
9,102
|
|
|
$
|
46,076
|
|
Basic earnings (loss) per common share
|
$
|
0.22
|
|
|
$
|
0.20
|
|
|
$
|
0.14
|
|
|
$
|
0.70
|
|
Diluted earnings (loss) per common share
|
0.21
|
|
|
0.19
|
|
|
0.13
|
|
|
0.66
|
|
|
For the Three-Months Ended
|
||||||||||||||
|
(in millions, except for per share data)
|
||||||||||||||
|
March 31, 2018
|
|
June 30, 2018
|
|
Sept. 30, 2018
|
|
Dec. 31, 2018
|
||||||||
Total revenue
|
$
|
28,192
|
|
|
$
|
36,135
|
|
|
$
|
35,383
|
|
|
$
|
39,686
|
|
Total expenses
|
27,117
|
|
|
29,212
|
|
|
29,541
|
|
|
31,745
|
|
||||
Income before equity method investments
|
1,075
|
|
|
6,923
|
|
|
5,842
|
|
|
7,941
|
|
||||
Income (loss) from equity method investments
|
(2,285
|
)
|
|
10,583
|
|
|
11,671
|
|
|
2,192
|
|
||||
Income (loss) before income taxes
|
(1,210
|
)
|
|
17,506
|
|
|
17,513
|
|
|
10,133
|
|
||||
Income tax (expense) benefit
|
(18
|
)
|
|
(153
|
)
|
|
(939
|
)
|
|
(1,034
|
)
|
||||
Net income (loss)
|
(1,228
|
)
|
|
17,353
|
|
|
16,574
|
|
|
9,099
|
|
||||
Net income (loss) attributable to controlling stockholders
|
$
|
(1,222
|
)
|
|
$
|
17,261
|
|
|
$
|
16,483
|
|
|
$
|
9,055
|
|
Basic earnings (loss) per common share
|
$
|
(0.03
|
)
|
|
$
|
0.32
|
|
|
$
|
0.30
|
|
|
$
|
0.16
|
|
Diluted earnings (loss) per common share
|
(0.03
|
)
|
|
0.32
|
|
|
0.30
|
|
|
0.16
|
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
•
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of our company;
|
•
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
|
•
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
Item 9B.
|
Other Information
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Item 11.
|
Executive Compensation
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Item 13.
|
Certain Relationships and Related Transactions and Director Independence
|
Item 14.
|
Principal Accountant Fees and Services
|
Item 15.
|
Exhibits and Financial Statement Schedules
|
(3)
|
Exhibits Files:
|
Exhibit
number
|
Exhibit description
|
3.1
|
|
3.2
|
|
3.3
|
|
4.1
|
|
4.2*
|
|
4.3
|
|
4.4
|
|
4.5
|
|
10.1
|
|
10.2
|
|
10.3
|
|
10.4
|
|
10.5
|
10.6
|
|
10.7
|
|
10.8
|
|
10.9
|
|
10.10
|
|
10.11
|
|
10.12
|
|
10.13
|
|
10.14
|
|
10.15
|
|
10.16
|
|
10.17
|
|
10.18
|
|
10.19
|
|
10.20
|
|
10.21
|
Item 16.
|
Form 10-K Summary
|
|
HANNON ARMSTRONG SUSTAINABLE
|
|
INFRASTRUCTURE CAPITAL, INC.
|
|
(Registrant)
|
|
|
Date: February 24, 2020
|
/s/ Jeffrey W. Eckel
|
|
Jeffrey W. Eckel
|
|
Chairman, Chief Executive Officer and President
|
|
|
|
/s/ Charles W. Melko
|
|
Charles W. Melko
|
|
Chief Accounting Officer and Senior Vice President
|
Signatures
|
Title
|
|
|
|
|
|
|
By:
|
/s/ Jeffrey W. Eckel
|
Chairman of the Board, President
|
February 24, 2020
|
|
Jeffrey W. Eckel
|
and Chief Executive Officer
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
By:
|
/s/ Jeffrey A. Lipson
|
Chief Financial Officer and
|
February 24, 2020
|
|
Jeffrey A. Lipson
|
Executive Vice President
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
By:
|
/s/ Charles W. Melko
|
Chief Accounting Officer and
|
February 24, 2020
|
|
Charles W. Melko
|
Senior Vice President
|
|
|
|
(Principal Accounting Officer)
|
|
|
|
|
|
By:
|
/s/ Teresa M. Brenner
|
|
February 24, 2020
|
|
Teresa M. Brenner
|
|
|
|
|
|
|
By:
|
/s/ Michael T. Eckhart
|
|
February 24, 2020
|
|
Michael T. Eckhart
|
|
|
|
|
|
|
By:
|
/s/ Simone F. Lagomarsino
|
|
February 24, 2020
|
|
Simone F. Lagomarsino
|
|
|
|
|
|
|
By:
|
/s/ Charles M. O’Neil
|
|
February 24, 2020
|
|
Charles M. O’Neil
|
|
|
|
|
|
|
By:
|
/s/ Richard J. Osborne
|
|
February 24, 2020
|
|
Richard J. Osborne
|
|
|
|
|
|
|
By:
|
/s/ Steven G. Osgood
|
|
February 24, 2020
|
|
Steven G. Osgood
|
|
|
|
•
|
|
any person from beneficially or constructively owning, applying certain attribution rules of the Internal Revenue Code, shares of our stock that would result in our being “closely held” under Section 856(h) of the Internal Revenue Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise cause us to fail to qualify as a REIT; and
|
|
•
|
|
any person from transferring shares of our stock if such transfer would result in shares of our stock being owned by fewer than 100 persons (determined without reference to any rules of attribution).
|
|
•
|
|
to rescind as void any vote cast by a prohibited owner prior to our discovery that the shares have been transferred to the trust; and
|
|
•
|
|
to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary.
|
|
•
|
|
a classified board;
|
|
•
|
|
a two-thirds vote requirement for removing a director;
|
|
•
|
|
a requirement that the number of directors be fixed only by vote of the directors;
|
|
•
|
|
a requirement that a vacancy on the board be filled only by the remaining directors in office and (if the board is classified) for the remainder of the full term of the class of directors in which the vacancy occurred; and
|
|
•
|
|
a majority requirement for the calling of a stockholder-requested special meeting of stockholders.
|
|
•
|
|
the act or omission of the director or officer was material to the matter giving rise to the proceeding and (1) was committed in bad faith or (2) was the result of active and deliberate dishonesty;
|
|
•
|
|
the director or officer actually received an improper personal benefit in money, property or services; or
|
|
•
|
|
in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.
|
|
•
|
|
a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by us; and
|
|
•
|
|
a written undertaking by the director or officer or on the director’s or officer’s behalf to repay the amount paid or reimbursed by us if it is ultimately determined that the director or officer did not meet the standard of conduct.
|
|
•
|
|
any present or former director or officer who is made or threatened to be made a party to or witness in the proceeding by reason of his or her service in that capacity;
|
|
•
|
|
any individual who, while a director or officer of our company and at our request, serves or has served as a director, officer, partner, manager, managing member or trustee of another corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or any other enterprise and who is made or threatened to be made a party to or witness in the proceeding by reason of his or her service in that capacity; or
|
|
•
|
|
any individual who served any predecessor of our company, including Hannon Armstrong Capital, LLC, in a similar capacity, who is made or threatened to be made a party to or witness in the proceeding by reason of his or her service in such capacity.
|
754472-4-1764-v0.2
|
754472-4-1764-v0.2
|
754472-4-1764-v0.2
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Subsidiary
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Jurisdiction
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Cobalt Upwind Holdings LLC
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Delaware
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HA AllStrong LLC
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Delaware
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HA Antelope DSR 3 LLC
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Delaware
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HA Athena Capital Holdings LLC
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Delaware
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HA Blue Grass LLC
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Delaware
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HA Buckeye Holdings LLC
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Delaware
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HA Coy Hill Road LLC
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Delaware
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HA CLP Funding LLC
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Delaware
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HA C-PACE 2019-1 Issuer LLC
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Delaware
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HA C-PACE SAC LLC
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Delaware
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HA Daybreak Holdings LLC
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Delaware
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HA Driving Range A LLC
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Delaware
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HA Driving Range C LLC
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Delaware
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HA EECI Lender LLC
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Delaware
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HA EECI LLC
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Delaware
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HA EMaaS Lender LLC
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Delaware
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HA FMAC Holdings LLC
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Delaware
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HA FMAC K102 LLC
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Delaware
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HA FMAC KG02 LLC
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Delaware
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HA Fusion Holdings LLC
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Delaware
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HA Fusion LLC
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Delaware
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HA Galileo LLC
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Delaware
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HA Galileo 2 LLC
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Delaware
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HA Helix LLC
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Delaware
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HA Highlander LLC
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Delaware
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HA INV Buckeye LLC
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Delaware
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HA INV Gunsight LLC
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Delaware
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HA Juniper LLC
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Delaware
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HA Juniper II LLC
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Maryland
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HA Land Lease I LLC
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Delaware
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HA Land Lease II LLC
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Delaware
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HA Land Lease Holdings LLC
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Delaware
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HA Land Lease Holdings II LLC
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Delaware
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HA PACE Origination LLC
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Delaware
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HA PACE Warehouse LLC
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Delaware
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HA PanelCo Lender LLC
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Delaware
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HA Rooftop Holdings LLC
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Delaware
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HA Rooftop I LLC
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Delaware
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HA San Pablo Raceway LLC
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Delaware
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HA Spencer Road LLC
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Delaware
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HA SRC Holdings LLC
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Delaware
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HA SRC Lender LLC
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Delaware
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HA Sun Streams LLC
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Delaware
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HA Sunrise LLC
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Delaware
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HA SunStrong Capital LLC
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Delaware
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HA Thrive LLC
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Delaware
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HA Virginia Land LLC
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Delaware
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HA WG Funding LLC
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Maryland
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HA Wildcat LLC
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Delaware
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HA Wind I LLC
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Delaware
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HA Wind II LLC
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Delaware
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HA Wind IV LLC
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Delaware
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Hannie Mae Goco LLC
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Maryland
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Hannie Mae II LLC
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Maryland
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Hannie Mae IV LLC
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Maryland
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Hannie Mae V LLC
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Maryland
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Hannie Mae XI LLC
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Maryland
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Hannie Mae XII LLC
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Maryland
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Hannie Mae XIII LLC
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Maryland
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Hannie Mae XIV LLC
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Maryland
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Hannie Mae XVII LLC
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Maryland
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Hannie Mae XVIII LLC
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Maryland
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Hannie Mae LLC
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Virginia
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Hannie Mae SRS Funding LLC
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Maryland
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Hannon Armstrong Capital, LLC
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Maryland
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Hannon Armstrong KCS Funding LLC
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Maryland
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Hannon Armstrong Securities, LLC
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Maryland
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Hannon Armstrong Sustainable Infrastructure, L.P.
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Delaware
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HASI ECON 101 LLC
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Delaware
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HASI OBS OP A LLC
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Maryland
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HASI SYB I LLC
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Maryland
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HASI SYB 2017-1 LLC
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Delaware
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HASI SYB Trust 2016-2 Holdings LLC
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Delaware
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HAT Holdings I LLC
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Maryland
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HAT Holdings II LLC
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Maryland
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HAT OBS OP A LLC
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Maryland
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HAT OBS OP 5 LLC
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Maryland
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HAT Scorpio Capital Lender LLC
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Delaware
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HAT Solar Sail Capital Lender LLC
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Maryland
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HAT SYB I LLC
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Maryland
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HAT SYB Trust 2016-2 Holdings LLC
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Delaware
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HAT Terrier Acquisition LLC
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Delaware
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HAT Terrier Capital Lender LLC
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Maryland
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HAT Ultralight Capital Lender LLC
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Delaware
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Lannie Mae LLC
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Maryland
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Lannie Mae Depositor LLC
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Maryland
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Rhea Borrower (HASI) LLC
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Delaware
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Rhea Borrower (HAT I) LLC
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Delaware
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Rhea Borrower (HAT II) LLC
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Delaware
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Strong Upwind Holdings LLC
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Delaware
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Strong Upwind Holdings II LLC
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Delaware
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Strong Upwind Holdings III LLC
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Delaware
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Strong Upwind Residual LLC
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Delaware
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SunStrong Capital Lender Holdings LLC
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Maryland
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SunStrong Capital Lender LLC
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Maryland
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SunStrong Capital Lender 2 LLC
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Maryland
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SunStrong Capital Lender 3 LLC
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Maryland
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SunStrong Capital Lender 6 LLC
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Maryland
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Titan Borrower (HASI) LLC
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Delaware
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Titan Borrower (HAT I) LLC
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Delaware
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Titan-Rhea Holdings (HASI) LLC
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Delaware
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Titan-Rhea Holdings (HAT I) LLC
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Delaware
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Titan-Rhea Holdings (HAT II) LLC
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Delaware
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(1)
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Registration Statement (Form S-3 No. 333-198158) of Hannon Armstrong Sustainable Infrastructure Capital, Inc.,
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(2)
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Registration Statement (Form S-8 No. 333-230548) pertaining to the 2013 Hannon Armstrong Sustainable Infrastructure Capital, Inc. Equity Incentive Plan, and
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(3)
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Registration Statement (Form S-3ASR No. 333-230546) of Hannon Armstrong Sustainable Infrastructure Capital, Inc.
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1.
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I have reviewed this Annual Report on Form 10-K of Hannon Armstrong Sustainable Infrastructure Capital, Inc. (the “registrant”);
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
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c.
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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By:
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/s/ Jeffrey W. Eckel
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Name: Jeffrey W. Eckel
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Title: Chief Executive Officer and President
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1.
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I have reviewed this Annual Report on Form 10-K of Hannon Armstrong Sustainable Infrastructure Capital, Inc. (the “registrant”);
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
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c.
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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By:
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/s/ Jeffrey A. Lipson
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Name: Jeffrey A. Lipson
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Title: Chief Financial Officer and Executive Vice President
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1.
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The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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By:
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/s/ Jeffrey W. Eckel
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Name: Jeffrey W. Eckel
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Title: Chief Executive Officer and President
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1.
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The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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By:
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/s/ Jeffrey A. Lipson
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Name:
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Jeffrey A. Lipson
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Title:
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Chief Financial Officer and Executive Vice President
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