HA Sustainable Infrastructure Capital, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Our Portfolio (Tables)

Our Portfolio (Tables)

3 Months Ended

Mar. 31, 2020

Analysis of Portfolio by Type of Obligor and Credit Quality

The following is an analysis of the Performance Ratings of our Portfolio as of March 31, 2020, which is assessed quarterly:



	Portfolio Performance
	1⁽¹⁾						2 ⁽²⁾						3⁽³⁾						Total
	(dollars in millions)
Receivable vintage	Government			Commercial			Government			Commercial			Government			Commercial
2020	$	—		$	61		$	—		$	—		$	—		$	—		$	61
2019	2			447			—			—			—			—			449
2018	—			268			—			—			—			—			268
2017	39			5			—			—			—			—			44
2016	70			61			—			—			—			—			131
2015	92			1			—			—			—			—			93
Prior to 2015	56			48			—			—			—			8			112
Total receivables	259			891			—			—			—			8			1,158
Less: Allowance for loss on receivables	—			(18		)	—			—			—			(8		)	(26		)
Net receivables ⁽⁴⁾	259			873			—			—			—			—			1,132
Investments	35			28			—			—			—			—			63
Real estate	—			361			—			—			—			—			361
Equity method investments ⁽⁵⁾	—			559			—			23			—			—			582
Total	$	294		$	1,821		$	—		$	23		$	—		$	—		$	2,138
Percent of Portfolio	14		%	85		%	—		%	1		%	—		%	—		%	100		%
Average remaining balance ⁽⁶⁾	$	7		$	13		$	—		$	12		$	—		$	4		$	12


(1)	This category includes our assets where based on our credit criteria and performance to date we believe that our risk of not receiving our invested capital remains low.


(2)	This category includes our assets where based on our credit criteria and performance to date we believe there is a moderate level of risk to not receiving some or all of our invested capital.

(3)

This category includes our assets where based on our credit criteria and performance to date, we believe there is substantial doubt regarding our ability to recover some or all of our invested capital. Included in this category are two commercial receivables with a combined total carrying value of approximately $8 million as of March 31, 2020 which we consider impaired and have held on non-accrual status since 2017. We recorded an allowance for the entire asset amounts as described in our 2019 Form 10-K. We expect to continue to pursue our legal claims with regards to these assets.


(4)	Total reconciles to the total of the government receivables and commercial receivables lines of the consolidated balance sheets


(5)	Some of the individual projects included in portfolios that make up our equity method investments have government off-takers. As they are part of large portfolios, they are not classified separately.

(6)

Average remaining balance is calculated gross of allowance for loss on receivables and excludes approximately 130 transactions each with outstanding balances that are less than $1 million and that in the aggregate total $47 million.

Financing Receivable, Allowance for Credit Loss

Below is a summary of the carrying value and allowance by type of receivable or "Portfolio Segment", as defined by Topic 326, as of March 31, 2020 and January 1, 2020:



	March 31, 2020				January 1, 2020
	Carrying Value		Allowance		Carrying Value		Allowance
	(in millions)
Government ⁽¹⁾	$	259	$	—	$	270	$	—
Commercial ⁽²⁾	899		26		892		25
Total	$	1,158	$	26	$	1,162	$	25


(1)	As of March 31, 2020, our government receivables include $150 million of U.S. federal government transactions and $109 million of transactions where the ultimate obligors are state or local governments.

Risk characteristics of our government receivables include the energy savings or the power output of the projects and the ability of the government obligor to generate revenue for debt service, via taxation or other means. Transactions may have guarantees of energy savings or other performance support from third-party service providers, which typically are entities, directly or whose ultimate parent entity is, rated investment grade by an independent rating agency. All of our government receivables are included in Performance Rating 1 in the Portfolio Performance table above. Our allowance for government receivables is primarily calculated by using PD/LGD methods as discussed in Note 2. Our expectation of credit losses for these receivables is immaterial given the high credit-quality of the obligors.

(2)

This category of assets includes $453 million of mezzanine loans made on a non-recourse basis to special purpose subsidiaries of residential solar companies which are secured by residential solar assets where we rely on certain limited indemnities, warranties, and other obligations of the residential solar companies or their other subsidiaries. Approximately $367 million of our commercial receivables are loans made to entities in which we also have non-controlling equity investments of approximately $25 million. This total also includes $88 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.

Risk characteristics of our commercial receivables include a project’s operating risks, which include the impact of the overall economic environment, the sustainable infrastructure sector, the effect of local, industry, and broader economic factors, the impact of any variation in weather and trends in interest rates. We use assumptions related to these risks to estimate an allowance using a discounted cash flow analysis or the PD/LGD method as discussed in Note 2. All of our commercial receivables are included in Performance Rating 1 in the Portfolio Performance table above, except for the $8 million of receivables we have placed on non-accrual status which are included in Performance Rating 3. For those assets in Performance Rating 1, the credit worthiness of the obligor combined with the various structural protections of our assets cause us to believe we have a low risk we will not receive our invested capital, however we recorded an $18 million allowance on these $891 million in assets as a result of lower probability assumptions utilized in our Allowance methodology.

The following table reconciles our allowance for loss on receivables by type of receivable:



	Government		Commercial
	(in millions)
Beginning Balance - January 1, 2020	$	—	$	25
Provision for loss on receivables	—		1
Ending balance - March 31, 2020	$	—	$	26

Summary of Anticipated Maturity Dates of Financing Receivables and Investments and Weighted Average Yield

The following table provides a summary of our anticipated maturity dates of our receivables and the weighted average yield for each range of maturities as of March 31, 2020:



	Total			Less than 1 year			1-5 years			5-10 years			More than 10 years
	(dollars in millions)
Maturities by period (excluding allowance)	$	1,158		$	5		$	168		$	308		$	677
Weighted average yield by period	8.0		%	7.6		%	7.0		%	8.9		%	7.6		%

Investments

The following table provides a summary of our anticipated maturity dates of our investments and the weighted average yield for each range of maturities as of March 31, 2020:



	Total			Less than 1 year			1-5 years			5-10 years			More than 10 years
	(dollars in millions)
Maturities by period	$	63		$	—		$	—		$	—		$	63
Weighted average yield by period	4.3		%	—		%	—		%	—		%	4.3		%

Components of Real Estate Portfolio

The components of our real estate portfolio as of March 31, 2020 and December 31, 2019, were as follows:



	March 31, 2020			December 31, 2019
	(in millions)
Real estate
Land	$	269		$	269
Lease intangibles	104			104
Accumulated amortization of lease intangibles	(12		)	(11		)
Real estate	$	361		$	362

Schedule of Future Amortization Expense of Intangible Assets

As of March 31, 2020, the future amortization expense of the intangible assets and the future minimum rental income payments under our land lease agreements are as follows:



	Future Amortization Expense		Minimum Rental Income Payments
	(in millions)
From April 1, 2020 to December 31, 2020	$	2	$	17
2021	3		22
2022	3		22
2023	3		23
2024	3		24
2025	3		24
Thereafter	76		741
Total	$	93	$	873

Schedule of Equity Method Investments

As of March 31, 2020, we held the following equity method investments:



Investment Date	Investee	Carrying Value
		(in millions)
March 2020	University of Iowa Energy Collaborative Holdings LLC	$	115
Various	2007 Vento I, LLC	79
December 2015	Buckeye Wind Energy Class B Holdings, LLC	70
Various	Vivint Solar Asset 1 Class B, LLC	61
Various	Vivint Solar Asset 2 Class B, LLC	49
October 2016	Invenergy Gunsight Mountain Holdings, LLC	36
December 2018	3D Engie, LLC	30
Various	2019 K102 Investor LLC	29
Various	Other investees	113
	Total equity method investments	$	582

The following is a summary of the consolidated financial position and results of operations of the significant entities accounted for using the equity method.



	SunStrong Capital Holdings, LLC			Vivint Solar Asset 2 Class B, LLC			Other Investments ⁽¹⁾			Total
	(in millions)
Balance Sheet
As of December 31, 2019
Current assets	$	213		$	46		$	210		$	469
Total assets	1,330			183			2,604			4,117
Current liabilities	143			1			162			306
Total liabilities	1,008			81			764			1,853
Members' equity	322			102			1,840			2,264
As of December 31, 2018
Current assets	103			—			97			200
Total assets	972			—			2,164			3,136
Current liabilities	85			—			52			137
Total liabilities	745			—			314			1,059
Members' equity	226			—			1,851			2,077
Income Statement
For the twelve months ended December 31, 2019
Revenue	102			2			153			257
Income from continuing operations	(16		)	(1		)	(47		)	(64		)
Net income	(16		)	(1		)	(47		)	(64		)
For the twelve months ended December 31, 2018
Revenue	25			—			151			176
Income from continuing operations	(18		)	—			(24		)	(42		)
Net income	(18		)	—			(24		)	(42		)

(1) Represents aggregated financial statement information for investments not separately presented.