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

Annual report pursuant to Section 13 and 15(d)

Our Portfolio (Tables)

Our Portfolio (Tables)

12 Months Ended

Dec. 31, 2021

Schedule of Analysis of Portfolio Performance Ratings

The following is an analysis of the Performance Ratings of our Portfolio as of December 31, 2021, which is assessed quarterly:


	Portfolio Performance
	Government			Commercial
	1 (1)			1 (1)			2 (2)			3 (3)			Total
Receivable vintage	(dollars in millions)
2021	$	—		$	295		$	—		$	—		$	295
2020	—			200			—			—			200
2019	—			454			2			—			456
2018	—			263			—			—			263
2017	31			1			9			—			41
Prior to 2017	94			103			—			8			205
Total receivables held-for-investment	125			1,316			11			8			1,460
Less: Allowance for loss on receivables	—			(25)			(3)			(8)			(36)
Net receivables held-for-investment (4)	125			1,291			8			—			1,424
Receivables held-for-sale	—			22			—			—			22
Investments	11			7			—			—			18
Real estate	—			356			—			—			356
Equity method investments (5)	—			1,726			34			—			1,760
Total	$	136		$	3,402		$	42		$	—		$	3,580
Percent of Portfolio	4		%	95		%	1		%	—		%	100		%
Average remaining balance (6)	$	6		$	13		$	11		$	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 December 31, 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 174 transactions each with outstanding balances that are less than $1 million and that in the aggregate total $84 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 December 31, 2021 and 2020:


	December 31, 2021						December 31, 2020
	Gross Carrying Value		Loan Funding Commitments		Allowance		Gross Carrying Value		Loan Funding Commitments		Allowance
	(in millions)
Commercial (1)	$	1,335	$	184	$	36	$	1,002	$	282	$	36
Government (2)	125		—		—		248		—		—
Total	$	1,460	$	184	$	36	$	1,250	$	282	$	36

(1)As of December 31, 2021, this category of assets include $776 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 $684 million of our commercial receivables are loans made to entities in which we also have non-controlling equity investments of approximately $108 million. This total also includes $48 million of lease agreements where we hold legal title to the underlying real estate which are treated under GAAP as receivables since they were deemed to be failed sale/leaseback transactions as described in Note 2.

Risk characteristics of our commercial receivables include a project’s operating risks, which include the impact of the overall economic environment, the climate solutions sector, the effect of local, industry, and broader economic factors, the impact of any variation in weather and trends in interest rates. We use assumptions related to these risks to estimate an allowance using a discounted cash flow analysis or the PD/LGD method as discussed in Note 2. All of our commercial receivables are included in Performance Rating 1 in the Portfolio Performance table above, except for $11 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 $25 million allowance on these $1.3 billion in assets as a result of lower probability assumptions utilized in our allowance methodology.

(2)As of December 31, 2021, our government receivables include $28 million of U.S. federal government transactions and $97 million of transactions where the ultimate obligors are state or local governments.

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

The following table reconciles our beginning and ending allowance for loss on receivables by Portfolio Segment for the year ended December 31, 2021:


	Commercial		Government
	(in millions)
Beginning balance - January 1, 2020 (1)	$	26	$	—
Provision for loss on receivables	10		—



Ending balance - December 31, 2020	36		—
Provision for loss on receivables	—		—
Ending balance - December 31, 2021	$	36	$	—

(1)Balance as of the adoption of Topic 326, which 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 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 December 31, 2021:


	Total			Less than 1 year			1-5 years			5-10 years			More than 10 years
	(dollars in millions)
Maturities by period (excluding allowance)	$	1,460		$	49		$	49		$	538		$	824
Weighted average yield by period	8.1		%	7.4		%	5.8		%	8.2		%	8.2		%

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 December 31, 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 December 31, 2021 and 2020, were as follows:


	December 31,
	2021		2020
	(in millions)
Real estate
Land	$	269	$	269
Lease intangibles	104		104
Accumulated amortization of lease intangibles	(17)		(14)
Real estate	$	356	$	359

Schedule of Future Amortization Expenses Related to Intangible Assets and Future Minimum Rental Payments under Land Lease Agreements

As of December 31, 2021, the future amortization expense of the intangible assets and the future minimum rental income payments under our land lease agreements are as follows:


Year Ending December 31,	Future Amortization Expense		Minimum Rental Payments
	(in millions)
2022	$	3	$	22
2023	3		24
2024	3		24
2025	3		24
2026	3		24
Thereafter	72		723
Total	$	87	$	841

Schedule of Equity Method Investments

As of December 31, 2021, we held the following equity method investments:

Investment Date

Investee

Carrying Value

(in millions)

Various

Jupiter Equity Holdings, LLC

540

December 2020

Lighthouse Partnerships (1)

390

March 2020

University of Iowa Energy Collaborative Holdings LLC

123

Various

Other investees

707

Total equity method investments

1,760

(1)Represents the total of three equity investments in a portfolio of a renewable energy projects discussed below.

The following is a summary of the consolidated balance sheets and income statements of the entities in which we have a significant equity method investment. These amounts are presented on the underlying investees’ accounting basis. In certain instances, adjustment to these equity values may be necessary in order to reflect our basis in these investments. As described in Note 2, any difference between the amount of our investment and the amount of our share of underlying equity is generally amortized over the life of the assets and liabilities to which the differences relate.


	Vivint Solar Asset 3 Borrower, LLC		Rosie Targetco, LLC		Other Investments (1)		Total
Balance Sheet	in millions
As of September 30, 2021
Current assets	$	20	$	13	$	754	$	787
Total assets	406		282		11,188		11,876
Current liabilities	16		5		741		762
Total liabilities	383		101		4,558		5,042
Members’ equity	23		181		6,630		6,834
As of December 31, 2020
Current assets	86		25		671		782
Total assets	303		299		9,637		10,239
Current liabilities	3		19		631		653
Total liabilities	139		118		3,845		4,102
Members’ equity	164		181		5,792		6,137
Income Statement
For the nine months ended September 30, 2021
Revenue	20		11		65		96
Income from continuing operations	3		(2)		(493)		(492)
Net income	3		(2)		(493)		(492)
For the year ended December 31, 2020
Revenue	2		1		367		370
Income from continuing operations	(2)		(5)		(232)		(239)
Net income	(2)		(5)		(232)		(239)
For the year ended December 31, 2019
Revenue	—		—		273		273
Income from continuing operations	—		—		(97)		(97)
Net income	—		—		(97)		(97)

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