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)

9 Months Ended

Sep. 30, 2021

Schedule of Analysis of Portfolio by Type of Obligor and Credit Quality

The following is an analysis of the Performance Ratings of our Portfolio as of September 30, 2021, which is assessed quarterly:


	Portfolio Performance
	1 (1)						2 (2)			3 (3)			Total
	Government			Commercial			Commercial			Commercial
Receivable vintage	(dollars in millions)
2021	$	—		$	203		$	—		$	—		$	203
2020	—			190			—			—			190
2019	—			483			6			—			489
2018	—			260			—			—			260
2017	31			1			8			—			40
2016	14			59			—			—			73
Prior to 2016	81			46			—			8			135
Total receivables	126			1,242			14			8			1,390
Less: Allowance for loss on receivables	—			(26)			(5)			(8)			(39)
Net receivables (4)	126			1,216			9			—			1,351
Receivables held-for-sale	—			—			—			—			—
Investments	11			7			—			—			18
Real estate	—			357			—			—			357
Equity method investments (5)	—			1,442			26			—			1,468
Total	$	137		$	3,022		$	35		$	—		$	3,194
Percent of Portfolio	4		%	95		%	1		%	—		%	100		%
Average remaining balance (6)	$	6		$	13		$	10		$	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 September 30, 2021, which we have held on non-accrual status since 2017. We expect to continue to pursue our legal claims with regards to these assets. This category previously contained an equity method investment in a wind project with no book value due to our allocation of impairment losses recorded by the project sponsor. We sold this equity method investment in the third quarter for nominal proceeds.

(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 152 transactions each with outstanding balances that are less than $1 million and that in the aggregate total $72 million.

Schedule of Carrying Value, Expected Loan Funding Commitments, and Allowance by Type of Receivable

Below is a summary of the carrying value, expected loan funding commitments, and allowance by type of receivable or “Portfolio Segment”, as defined by Topic 326, as of September 30, 2021 and December 31, 2020:


	September 30, 2021						December 31, 2020
	Gross Carrying Value		Loan Funding Commitments		Allowance		Gross Carrying Value		Loan Funding Commitments		Allowance
	(in millions)
Government (1)	$	126	$	—	$	—	$	248	$	—	$	—
Commercial (2)	1,264		290		39		1,002		282		36
Total	$	1,390	$	290	$	39	$	1,250	$	282	$	36

(1)As of September 30, 2021, our government receivables include $28 million of U.S. federal government transactions and $98 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 to our financial statements in this Form 10-Q. Our expectation of credit losses for these receivables is immaterial given the high credit-quality of the obligors.

(2)As of September 30, 2021, this category of assets includes $742 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 $647 million of our commercial receivables are loans made to entities in which we also have non-controlling equity investments of approximately $76 million. This total also includes $47 million of lease agreements where we hold legal title to the underlying real estate which are treated under GAAP as receivables since they were deemed to be failed sale/leaseback transactions as described in Note 2 to our financial statements in this Form 10-Q.

Risk characteristics of our commercial receivables include a project’s operating risks, which include the impact of the overall economic environment, the climate solutions sector, the effect of local, industry, and broader economic factors, the impact of any variation in weather and trends in interest rates. We use assumptions related to these risks to estimate an allowance using a discounted cash flow analysis or the PD/LGD method as discussed in Note 2 to our financial statements in this Form 10-Q. All of our commercial receivables are included in Performance Rating 1 in the Portfolio Performance table above, except for $14 million of receivables included in Performance Category 2 and 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 a $26 million allowance on these $1.2 billion in assets as a result of lower probability assumptions utilized in our allowance methodology.

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


	Three months ended September 30, 2021				Three months ended September 30, 2020
	Government		Commercial		Government		Commercial
	(in millions)
Beginning balance	$	—	$	37	$	—	$	29
Provision for loss on receivables	—		2		—		2



Ending balance	$	—	$	39	$	—	$	31

	Nine months ended September 30, 2021				Nine months ended September 30, 2020
	Government		Commercial		Government		Commercial
	(in millions)
Beginning balance (1)	$	—	$	36	$	—	$	26
Provision for loss on receivables	—		3		—		5



Ending balance	$	—	$	39	$	—	$	31

(1)For the nine months ended September 30, 2020, the beginning balance represents January 1, 2020, the adoption date of Topic 326. The beginning balance includes the pre-tax allowance for loss on receivables of $17 million recorded upon adoption which reflects our estimated loss as of that date under the new standard as well as the $8 million of receivables which were previously on non-accrual status and fully reserved.

Schedule 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 September 30, 2021:


	Total			Less than 1 year			1-5 years			5-10 years			More than 10 years
	(dollars in millions)
Maturities by period (excluding allowance)	$	1,390		$	67		$	56		$	482		$	785
Weighted average yield by period	8.2		%	7.6		%	6.3		%	8.4		%	8.3		%

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 September 30, 2021:


	Total			Less than 1 year			1-5 years			5-10 years			More than 10 years
	(dollars in millions)
Maturities by period	$	18		$	—		$	—		$	—		$	18
Weighted average yield by period	4.1		%	—		%	—		%	—		%	4.1		%

Schedule of Components of Real Estate Portfolio

The components of our real estate portfolio as of September 30, 2021 and December 31, 2020, were as follows:


	September 30, 2021		December 31, 2020
	(in millions)
Real estate
Land	$	269	$	269
Lease intangibles	104		104
Accumulated amortization of lease intangibles	(16)		(14)
Real estate	$	357	$	359

Schedule of Future Amortization Expense of Intangible Assets

As of September 30, 2021, 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 October 1, 2021 to December 31, 2021	$	1	$	5
2022	3		22
2023	3		23
2024	3		24
2025	3		24
2026	3		24
Thereafter	72		717
Total	$	88	$	839

Schedule of Equity Method Investments

As of September 30, 2021, we held the following equity method investments:

Investment Date

Investee

Carrying Value

(in millions)

Various

Jupiter Equity Holdings LLC

540

Various

Lighthouse Partnerships (1)

211

March 2020

University of Iowa Energy Collaborative Holdings LLC

121

Various

Phase V Class A LLC

109

Various

Other investees

487

Total equity method investments

1,468

(1) Represents the total of three equity investments in a portfolio of renewable assets.

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		Rosie Target Co, LLC (1)		Lighthouse Renewable HoldCo LLC (1)		Summit Ridge Capital Holdings, LLC		Vivint Solar Asset 3 Holdco Parent LLC		Other Investments (2)		Total
	(in millions)
Balance Sheet
As of June 30, 2021
Current assets	$	87	$	11	$	11	$	51	$	60	$	636	$	856
Total assets	1,624		282		482		407		441		7,900		11,136
Current liabilities	63		5		41		58		8		587		762
Total liabilities	1,282		101		130		357		353		2,586		4,809
Members' equity	342		181		352		50		88		5,314		6,327
As of December 31, 2020
Current assets	92		25		22		18		86		539		782
Total assets	1,532		299		497		268		303		7,340		10,239
Current liabilities	48		19		22		43		3		518		653
Total liabilities	1,217		118		87		243		139		2,298		4,102
Members' equity	315		181		410		25		164		5,042		6,137
Income Statement
For the six months ended June 30, 2021
Revenue	67		6		(71)		6		11		4		23
Income (loss) from continuing operations	2		(3)		(88)		(5)		4		(283)		(373)
Net income (loss)	2		(3)		(88)		(5)		4		(283)		(373)
For the six months ended June 30, 2020
Revenue	61		—		—		1		—		118		180
Income (loss) from continuing operations	(4)		—		—		(2)		—		(1)		(7)
Net income (loss)	(4)		—		—		(2)		—		(1)		(7)

(1) Component of the Lighthouse Partnerships described in Note 6 to our financial statements in this Form 10-Q.

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