Hannon Armstrong Sustainable Infrastructure Capital(HASI) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the reporting period Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, fair value measurements, portfolio composition, debt structures, and equity-related activities for the periods ended June 30, 2025 and 2024 Condensed Consolidated Balance Sheets Presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific points in time Condensed Consolidated Balance Sheets (Dollars in Thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :------------------ | | Assets | | | | Cash and cash equivalents | $86,508 | $129,758 | | Equity method investments | $4,082,998 | $3,612,394 | | Receivables, net | $3,025,993 | $2,895,837 | | Total Assets | $7,596,166 | $7,080,245 | | Liabilities | | | | Total Liabilities | $5,007,531 | $4,675,170 | | Stockholders' Equity | | | | Total Stockholders' Equity | $2,588,635 | $2,405,075 | | Total Liabilities and Stockholders' Equity | $7,596,166 | $7,080,245 | - Total Assets increased by $515.9 million (7.3%) from December 31, 2024, to June 30, 2025, primarily driven by growth in equity method investments and receivables[15] - Total Liabilities increased by $332.3 million (7.1%) over the same period, mainly due to increases in senior unsecured notes and commercial paper notes, partially offset by a decrease in convertible notes[15] - Total Stockholders' Equity grew by $183.6 million (7.6%) from December 31, 2024, to June 30, 2025[15] Condensed Consolidated Statements of Operations Reports the company's revenues, expenses, and net income or loss over specific periods Condensed Consolidated Statements of Operations (Dollars in Thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $85,685 | $94,517 | $182,626 | $200,332 | | Total expenses | $105,412 | $84,101 | $208,258 | $177,723 | | Income (loss) from equity method investments | $157,680 | $26,874 | $245,667 | $185,424 | | Net income (loss) | $99,795 | $26,944 | $157,980 | $151,492 | | Net income (loss) attributable to controlling stockholders | $98,445 | $26,540 | $155,057 | $149,566 | | Basic earnings (loss) per common share | $0.80 | $0.23 | $1.28 | $1.31 | | Diluted earnings (loss) per common share | $0.74 | $0.23 | $1.18 | $1.22 | - Net income attributable to controlling stockholders significantly increased by $71.9 million (271%) for the three months ended June 30, 2025, compared to the same period in 2024, primarily driven by a substantial increase in income from equity method investments[17][206] - For the six months ended June 30, 2025, net income attributable to controlling stockholders increased by $5.5 million (3.7%) year-over-year[17][207] - Total revenue decreased by $8.8 million (9%) for the three months and $17.7 million (9%) for the six months ended June 30, 2025, mainly due to a decrease in gain on sale of assets[17][206][207] - Income from equity method investments surged by $130.8 million (487%) for the three months and $60.2 million (32%) for the six months ended June 30, 2025, compared to the prior year periods[17][206][207] Condensed Consolidated Statements of Comprehensive Income Details net income and other comprehensive income items, reflecting changes in equity from non-owner sources Condensed Consolidated Statements of Comprehensive Income (Dollars in Thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $99,795 | $26,944 | $157,980 | $151,492 | | Unrealized gain (loss) on available-for-sale securities and retained interests in securitization trusts | $1,877 | $(4,562) | $7,307 | $(9,650) | | Unrealized gain (loss) on interest rate swaps | $(8,945) | $16,666 | $(16,840) | $37,896 | | Comprehensive income (loss) | $92,727 | $39,048 | $148,447 | $179,738 | | Comprehensive income (loss) attributable to controlling stockholders | $91,507 | $38,482 | $145,694 | $177,452 | - Comprehensive income attributable to controlling stockholders increased by $53.0 million (137.5%) for the three months ended June 30, 2025, compared to the same period in 2024, primarily due to higher net income[20] - For the six months ended June 30, 2025, comprehensive income attributable to controlling stockholders decreased by $31.8 million (17.9%) year-over-year, mainly due to a significant unrealized loss on interest rate swaps[20] Condensed Consolidated Statements of Stockholders' Equity Shows changes in equity accounts, including common stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity (Amounts in Thousands) | Metric | Balance at June 30, 2025 | Balance at December 31, 2024 | | :-------------------------------- | :----------------------- | :--------------------------- | | Common Stock (Shares) | 123,578 | 118,960 | | Common Stock (Amount) | $1,236 | $1,190 | | Additional Paid-in Capital | $2,723,636 | $2,592,964 | | Accumulated Deficit | $(245,392) | $(297,499) | | Accumulated Other Comprehensive Income (Loss) | $30,738 | $40,101 | | Non-controlling interests | $78,417 | $68,319 | | Total Stockholders' Equity | $2,588,635 | $2,405,075 | - Total Stockholders' Equity increased by $183.6 million from December 31, 2024, to June 30, 2025, driven by net income and issued shares of common stock, partially offset by dividends and distributions[25] - Accumulated Deficit improved by $52.1 million, moving from $(297.5) million to $(245.4) million, primarily due to net income[25] - Additional Paid-in Capital increased by $130.7 million, reflecting issued shares of common stock and equity-based compensation[25] Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (Dollars in Thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $42,450 | $(3,886) | | Net cash provided by (used in) investing activities | $(384,161) | $185,205 | | Net cash provided by (used in) financing activities | $295,361 | $(95,053) | | Increase (decrease) in cash, cash equivalents, and restricted cash | $(46,350) | $86,266 | | Cash, cash equivalents, and restricted cash at end of period | $103,806 | $161,348 | - Net cash provided by operating activities significantly improved to $42.5 million for the six months ended June 30, 2025, compared to a net cash used of $(3.9) million in the prior year, an increase of $46.3 million[27][258] - Net cash used in investing activities was $(384.2) million for the six months ended June 30, 2025, a decrease of $569.4 million compared to net cash provided of $185.2 million in the prior year, primarily due to increased equity method investments and lower principal collections from receivables[27][259] - Net cash provided by financing activities was $295.4 million for the six months ended June 30, 2025, a $390.4 million increase from net cash used of $(95.1) million in the prior year, driven by higher net borrowings from credit facilities and senior unsecured notes, partially offset by convertible note repayments[27][260] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and additional information supporting the condensed consolidated financial statements 1. The Company Describes the company's business, investment strategy, and market listing - HA Sustainable Infrastructure Capital, Inc. (the "Company") partners with clients to deploy real assets facilitating the energy transition, investing in equity, joint ventures, land ownership, lending, and other financing transactions[30] - The Company generates recurring income from net investment income, residual ownership in securitization and co-investment structures, asset management, and gain-on-sale securitization transactions[30] - The Company's common stock is listed on the NYSE under the symbol "HASI" and operates to maintain its exemption from registration as an investment company under the 1940 Act[32] 2. Summary of Significant Accounting Policies Outlines the key accounting principles and methods used in preparing the financial statements - The Company accounts for equity method investments using the hypothetical liquidation at book value (HLBV) method, reflecting its share of profits and losses based on a hypothetical liquidation scenario[40] - Receivables are classified as held for investment at amortized cost, net of acquisition premiums/discounts, and evaluated quarterly for an allowance for credit losses under Topic 326, considering historical experience, current conditions, and future forecasts[43][45][46] - Transfers of financial assets to securitization trusts are accounted for as sales under ASC 860 when assets are isolated and control is surrendered, with retained interests carried at fair value in AOCI[49][52] - Derivative financial instruments, primarily interest rate swaps and collars, are used to manage interest rate risk and are designated as cash flow hedges, with changes in fair value recorded in AOCI[56][59] 3. Fair Value Measurements Details the fair value of financial instruments and the methodologies used for their measurement Fair Value of Financial Instruments (in millions) | Instrument | June 30, 2025 Fair Value | June 30, 2025 Carrying Value | Level | December 31, 2024 Fair Value | December 31, 2024 Carrying Value | Level | | :-------------------------------- | :----------------------- | :----------------------------- | :------ | :--------------------------- | :----------------------------- | :------ | | Receivables | $2,845 | $3,026 | Level 3 | $2,700 | $2,896 | Level 3 | | Receivables held-for-sale | $50 | $43 | Level 3 | $79 | $76 | Level 3 | | Debt securities | $13 | $13 | Level 3 | $7 | $7 | Level 3 | | Retained interests in securitization trusts | $272 | $272 | Level 3 | $249 | $249 | Level 3 | | Derivative assets | $21 | $21 | Level 2 | $72 | $72 | Level 2 | | Commercial paper notes | $356 | $356 | Level 3 | $100 | $100 | Level 3 | | Term loans payable | $403 | $403 | Level 3 | $415 | $415 | Level 3 | | Non-recourse debt | $129 | $130 | Level 3 | $132 | $136 | Level 3 | | Senior unsecured notes | $3,426 | $3,456 | Level 2 | $3,098 | $3,162 | Level 2 | | Convertible Notes | $472 | $409 | Level 2 | $684 | $626 | Level 2 | | Derivative liabilities | $7 | $7 | Level 2 | $3 | $3 | Level 2 | - The weighted average discount rate used for retained interests in securitization trusts was 7.0% as of June 30, 2025, down from 7.3% as of December 31, 2024[83] - Cash deposits in excess of federally insured amounts totaled $102 million as of June 30, 2025, indicating a concentration of credit risk[86] 4. Non-Controlling Interest Explains the nature and accounting for non-controlling interests and LTIP units - Non-controlling interest primarily consists of OP units owned by limited partners, representing approximately 1% of outstanding OP units, redeemable for cash or common stock[88] - During the six months ended June 30, 2025, 81,498 OP units were redeemed by non-controlling interest holders[88] - LTIP Units, granted to leadership and directors, qualify as profits interests in the Operating Partnership and achieve full parity with OP units upon equalization of capital accounts through 'book gains'[89] 5. Securitization of Financial Assets Discusses the company's securitization activities and related financial impacts Securitization Transactions (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gains on securitizations | $8 | $26 | $28 | $55 | | Cost of financial assets securitized | $84 | $299 | $278 | $758 | | Proceeds from securitizations | $92 | $325 | $306 | $813 | | Cash received from retained interests and servicing | $7 | $3 | $11 | $6 | - Managed assets totaled $14.6 billion as of June 30, 2025, an increase from $13.7 billion as of December 31, 2024, with $7.4 billion and $7.1 billion, respectively, held in unconsolidated securitization trusts or co-investment structures[91] - The allowance for losses on retained interests in securitization trusts remained at $3 million for commercial assets as of June 30, 2025, with no material payments greater than 90 days past due[24][93] 6. Our Portfolio Provides an overview of the company's investment portfolio, including asset composition and performance ratings - The Company's Portfolio totaled approximately $7.2 billion as of June 30, 2025, comprising equity method investments, receivables, real estate, and debt securities in energy transition projects[95] Portfolio Performance Ratings as of June 30, 2025 (dollars in millions) | Category | Commercial | Government | Total | | :-------------------------------- | :--------- | :--------- | :---- | | Performance Rating 1 | $7,068 | $38 | $7,106 | | Performance Rating 2 | $62 | $0 | $62 | | Performance Rating 3 | $0 | $0 | $0 | | Total Portfolio | $7,130 | $38 | $7,168 | | Percent of Portfolio | 99% | 1% | 100% | - The allowance for losses on receivables was $55 million as of June 30, 2025, with a $1 million increase during the three months ended June 30, 2025, due to project-specific operational challenges[101] Equity Method Investments as of June 30, 2025 (in millions) | Investee | Carrying Value | | :-------------------------- | :------------- | | Jupiter Equity Holdings LLC | $627 | | CarbonCount Holdings 1 LLC | $559 | | Daggett Renewable HoldCo LLC | $439 | | Lighthouse Renewable HoldCo 2 LLC | $341 | | Other equity method investments | $2,117 | | Total equity method investments | $4,083 | - The Company and KKR Hoops have each committed $1 billion to CarbonCount Holdings 1 LLC (CCH1), with $524 million funded by each party as of June 30, 2025, and an investment period extended to 30 months[118][122] 7. Credit facility and commercial paper notes Details the company's short-term and revolving credit facilities and commercial paper programs - The unsecured revolving credit facility was increased to $1.55 billion and matures in April 2028, with no outstanding borrowings as of June 30, 2025[126] - The Credit-Enhanced Commercial Paper Note Program has a capacity of up to $125 million, maturing in April 2026, with no outstanding notes as of June 30, 2025[128][130] - The Standalone Commercial Paper Program had $357 million principal amount outstanding as of June 30, 2025, bearing an average borrowing cost of 5.46% and maturing in 2025[133] 8. Long-term Debt Describes the company's long-term debt instruments, including senior unsecured notes and term loans - In June 2025, the Company issued $600 million of 2031 Notes (6.150%) and $400 million of 2035 Notes (6.750%), using proceeds to repurchase $400 million of 2026 Notes and $300 million of 2027 Notes[136][137][138] Senior Unsecured Notes Outstanding as of June 30, 2025 (in millions) | Note Type | Outstanding Principal Amount | Maturity Date | Stated Interest Rate | | :---------------- | :--------------------------- | :------------ | :------------------- | | 2026 Notes | $600 | June 15, 2026 | 3.375% | | 2027 Notes | $450 | June 15, 2027 | 8.000% | | 2030 Notes | $375 | September 15, 2030 | 3.750% | | 2031 Notes | $600 | January 15, 2031 | 6.150% | | 2034 Notes | $1,000 | July 1, 2034 | 6.375% | | 2035 Notes | $400 | July 15, 2035 | 6.750% | | Total Principal | $3,425 | | | - The 2025 Exchangeable Senior Notes were repaid at maturity in the second quarter of 2025 using $220 million from the unsecured revolving line of credit[142] - The Unsecured Term Loan Facility has an outstanding principal and accrued interest of $241 million, maturing in 2027, with an interest rate of 6.25% as of June 30, 2025[146] - Non-recourse debt totaled $126 million as of June 30, 2025, secured by $305 million in pledged assets, with no recourse to other corporate assets for shortfalls[151][152][153] Interest Rate Swaps Designated as Cash Flow Hedges as of June 30, 2025 (in millions) | Instrument Type | Notional Value | Fair Value | | :---------------- | :------------- | :--------- | | Interest rate swap | $200 | $(4) | | Interest rate swap | $150 | $5 | | Interest rate swap | $600 | $16 | | Interest rate collar | $250 | $0 | | Interest rate swaps | $165 | $(7) | | Interest rate swap | $375 | $4 | | Total | $1,740 | $14 | 9. Commitments and Contingencies Outlines the company's legal commitments, guarantees, and potential contingent liabilities - The Company is not currently subject to any legal proceedings probable of having a material adverse effect on its financial position, results of operations, or cash flows[164] - Guarantees include support for working capital needs of Jupiter project companies (maximum $53 million) and obligations related to financing joint venture entities (maximum $87 million), with no liability recorded as performance is not probable[166][167] 10. Income Tax Presents the company's income tax expense and the applicable tax rates for the reporting periods Income Tax Expense (in millions) | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three months ended June 30, | $38 | $10 | | Six months ended June 30, | $62 | $57 | - Income tax expense for the three and six months ended June 30, 2025, was determined using a statutory federal tax rate of 21% and combined state tax rates of approximately 5% for 2025 and 4% for 2024[168] 11. Equity Details the company's equity activities, including dividends declared and common stock offerings Dividends Declared (per share) | Announced Date | Record Date | Pay Date | Amount per share | | :------------- | :---------- | :--------- | :--------------- | | 2/15/2024 | 4/5/2024 | 4/19/2024 | $0.415 | | 5/7/2024 | 7/3/2024 | 7/12/2024 | $0.415 | | 8/1/2024 | 10/4/2024 | 10/18/2024 | $0.415 | | 11/7/2024 | 12/30/2024 | 01/10/2025 | $0.415 | | 2/13/2025 | 4/4/2025 | 04/18/2025 | $0.420 | | 5/7/2025 | 7/2/2025 | 7/11/2025 | $0.420 | | 8/7/2025 | 10/3/2025 | 10/17/2025 | $0.420 | Common Stock Offerings (ATM Issuances) (in millions, except per share amounts) | Period | Shares Issued | Price Per Share | Net Proceeds | | :------- | :------------ | :-------------- | :----------- | | Q1 2024 | 1.193 | $25.89 | $31 | | Q2 2024 | 1.662 | $31.42 | $52 | | Q3 2024 | 3.040 | $32.55 | $98 | | Q4 2024 | 0.753 | $32.01 | $24 | | Q1 2025 | 1.629 | $29.07 | $47 | | Q2 2025 | 2.755 | $26.91 | $73 | - Total unrecognized compensation expense related to equity awards was approximately $29 million as of June 30, 2025, expected to be recognized over a weighted-average term of approximately 2 years[174] 12. Earnings per Share of Common Stock Provides a breakdown of basic and diluted earnings per common share calculations Earnings Per Common Share (in millions, except share and per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to controlling stockholders — basic | $97.5 | $26.2 | $153.6 | $148.4 | | Net income (loss) attributable to controlling stockholders — dilutive | $101.4 | $26.2 | $162.1 | $161.3 | | Basic earnings per common share | $0.80 | $0.23 | $1.28 | $1.31 | | Diluted earnings per common share | $0.74 | $0.23 | $1.18 | $1.22 | | Weighted-average number of common shares — basic | 121,515,164 | 114,329,692 | 120,454,366 | 113,473,750 | | Weighted-average number of common shares — diluted | 137,740,850 | 114,433,285 | 137,830,564 | 131,922,504 | - Basic EPS increased to $0.80 for Q2 2025 from $0.23 for Q2 2024, while diluted EPS increased to $0.74 from $0.23[17][180] - For the six months ended June 30, 2025, basic EPS decreased to $1.28 from $1.31, and diluted EPS decreased to $1.18 from $1.22, compared to the prior year[17][180] 13. Equity Method Investments Summarizes the company's equity method investments and their financial impact - As of June 30, 2025, the Company had 47 equity method investments, primarily in limited liability companies taxed as partnerships, with cash distributions and tax attributes allocated based on pre-negotiated profit-sharing arrangements[182] Summary of Consolidated Balance Sheets of Equity Method Investees (in millions) | Metric | As of March 31, 2025 | As of December 31, 2024 | | :---------------- | :------------------- | :---------------------- | | Current assets | $912 | $1,034 | | Total assets | $22,362 | $21,648 | | Current liabilities | $1,568 | $1,405 | | Total liabilities | $9,672 | $9,304 | | Members' equity | $12,690 | $12,344 | Summary of Consolidated Income Statements of Equity Method Investees (in millions) | Metric | For the three months ended March 31, 2025 | For the three months ended March 31, 2024 | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | | Revenue | $306 | $257 | | Net income (loss) | $(191) | $(133) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a detailed analysis of the Company's financial condition, results of operations, and liquidity, including a review of its investment strategy, portfolio performance, and key financial metrics. It also discusses non-GAAP financial measures used by management and investors to evaluate performance Our Business Describes the company's investment focus, market segments, and strategic pipeline - The Company is an investor in sustainable infrastructure assets, focusing on long-lived real assets supported by long-term recurring cash flows, with over $14 billion in managed assets[187] - Investments are concentrated in three markets: Behind-the-Meter (BTM), Grid-Connected (GC), and Fuels, Transport, and Nature (FTN), with a primary objective of earning attractive risk-adjusted returns[189] - The pipeline of potential new opportunities for the next 12 months exceeds $6.0 billion, with approximately 43% in BTM, 27% in GC, and 22% in FTN assets[194] Factors Impacting our Operating Results Identifies key internal and external factors influencing the company's financial performance - Operating results are influenced by portfolio size and transaction mix, income from securitizations and services, credit risk profile, market interest rates, commodity prices, governmental policies, and general market conditions[196] Critical Accounting Policies and Use of Estimates Highlights the significant accounting policies and estimates requiring management judgment - Critical accounting policies requiring significant judgments and assumptions include Consolidation, Equity Method Investments, Impairment or allowance under Topic 326 for the Portfolio, and Securitization of Financial Assets[198] Financial Condition and Results of Operations Analyzes the company's overall financial health, portfolio composition, and performance metrics - The Portfolio totaled approximately $7.2 billion as of June 30, 2025, consisting of 55% equity method investments, 38% fixed-rate receivables and debt securities, 5% floating-rate receivables, and 2% real estate[199] - The weighted average remaining life of the Portfolio (excluding match-funded transactions) was approximately 16 years as of June 30, 2025[199] Average Yields and Costs (Dollars in Millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Average yield from receivables, debt securities, and real estate | 8.4% | 8.3% | 8.5% | 8.3% | | Average cost of debt | 5.8% | 5.6% | 5.7% | 5.6% | Results of Operations Compares revenue, expenses, and net income across different reporting periods, explaining key drivers Revenue and Expense Comparison (Dollars in Thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenue | $85,685 | $94,517 | $182,626 | $200,332 | | Total Expenses | $105,412 | $84,101 | $208,258 | $177,723 | | Income (loss) from equity method investments | $157,680 | $26,874 | $245,667 | $185,424 | | Net income (loss) | $99,795 | $26,944 | $157,980 | $151,492 | - Net income increased by $73 million for the three months ended June 30, 2025, primarily due to a $131 million increase in income from equity method investments, partially offset by a $9 million decrease in revenue and a $21 million increase in total expenses[206] - For the six months ended June 30, 2025, net income increased by $6 million, driven by a $60 million increase in income from equity method investments, offset by an $18 million decrease in total revenue and a $31 million increase in total expenses[209] - Interest expense increased by $20 million for the three months and $23 million for the six months ended June 30, 2025, due to debt repurchase costs, a larger average outstanding debt balance, and higher average interest rates[206][209] Non-GAAP Financial Measures Presents and reconciles non-GAAP financial measures used by management to evaluate performance Adjusted Earnings (dollars in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to controlling stockholders | $98,445 | $26,540 | $155,057 | $149,566 | | Adjusted earnings | $74,988 | $73,683 | $153,056 | $152,589 | | Adjusted earnings per share | $0.60 | $0.63 | $1.23 | $1.31 | Adjusted Recurring Net Investment Income (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | GAAP-based net investment income (loss) | $(3,317) | $8,550 | $5,481 | $22,100 | | Adjusted recurring net investment income | $85,324 | $67,733 | $163,559 | $136,900 | Managed Assets (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | GAAP-based Portfolio | $7,168 | $6,594 | | Assets held in securitization trusts | $6,901 | $6,809 | | Assets held in co-investment structures | $550 | $300 | | Managed Assets | $14,619 | $13,703 | - Unlevered portfolio yield was 8.3% as of both June 30, 2025, and December 31, 2024[237] - Average Annual Realized Loss on Managed Assets was 0.07% for the ten-year period ending June 30, 2025, compared to 0.12% for Average Annual Recognized Loss (GAAP)[239] Liquidity and Capital Resources Assesses the company's ability to meet its financial obligations and fund operations through available capital Available Liquidity (in millions) | Source | As of June 30, 2025 | | :------------------------------------------------ | :------------------ | | Unrestricted cash | $87 | | Unused capacity under unsecured revolving credit facility | $1,185 | | Unused capacity under Credit-enhanced Commercial Paper Program | $125 | | Total liquidity | $1,397 | - During the six months ended June 30, 2025, the Company increased its unsecured revolving credit facility to $1.55 billion, issued $1 billion in senior unsecured notes, and repaid $220 million of Convertible Notes[243] - The debt to equity ratio was approximately 1.8 to 1 as of June 30, 2025, remaining below the board-approved leverage limit of up to 2.5 to 1[251] - The percentage of fixed-rate debt, including the impact of interest rate derivatives, was approximately 97% as of June 30, 2025, at the upper end of the targeted range of 75% to 100%[251] Off-Balance Sheet Arrangements Describes the company's relationships with non-consolidated entities and associated risks - The Company has relationships with non-consolidated entities, primarily securitization trusts, and holds retained interests of approximately $272 million as of June 30, 2025, which are at risk in the event of defaults or prepayments[262] - Limited guarantees have been provided for certain transactions, covering representations, warranties, covenants, and indemnities against 'bad acts' or tax matters, with no material claims to date[263] Dividends Discusses the company's dividend policy and factors influencing distributions - Dividend distributions are at the discretion of the board of directors and depend on operating results, net interest and other income, operating expenses, and other expenditures[264] Book Value Considerations Explains the limitations of book value as a measure of true asset worth - Book value does not necessarily represent net realizable value, liquidation value, or fair market value, as only debt securities, retained interests in securitization trusts, and derivatives are carried at fair value[266] - The carrying value of most assets and liabilities is based on a cost basis in accordance with GAAP, adjusted for income/loss and cash collected, without incorporating changes in economic conditions or interest rates since initial recording[266] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section outlines the Company's primary market risks, including credit, interest rate, liquidity, concentration, commodity, and environmental attribute price risks, and describes the strategies employed to manage these exposures Credit Risks Identifies and describes the company's exposure to credit risk and its management strategies - The Company is exposed to credit risk from project off-takers, suppliers, and operators, as well as in mezzanine loans, which is managed through rigorous underwriting, structural protections, and active asset management[268] - A risk rating system evaluates projects based on off-taker credit ratings, probability of default, recovery rates, and ongoing project performance monitoring[269] Interest Rate and Borrowing Risks Outlines the company's exposure to interest rate fluctuations and borrowing costs, along with mitigation efforts - The Company is subject to interest rate risk from new asset originations and floating-rate borrowings, with strategies to mitigate this through fixed-rate financing, matching debt maturities with assets, and using interest rate swaps or collars[271] - As of June 30, 2025, $140 million of debt had variable interest rates; a 50 basis point increase in benchmark rates would increase quarterly interest expense by $175 thousand on these borrowings[273] Liquidity and Concentration Risk Addresses the risks associated with asset illiquidity and portfolio concentration - The illiquidity of the Company's non-publicly traded assets may hinder sales in response to changing market conditions[275] - Many assets are concentrated in specific geographic areas, increasing susceptibility to market or environmental disruptions[275] Commodity and Environmental Attribute Price Risk Details the company's exposure to price volatility in energy and environmental markets - The Company is exposed to volatility in prices for energy commodities (electricity, coal, natural gas) and environmental attributes, particularly for Grid-Connected utility-scale projects[276][277] - Mitigation strategies include focusing on projects with long-term PPAs or leases and using structural protections like preferred return mechanisms[278] Risk Management Describes the comprehensive strategies and oversight mechanisms for managing various business risks - Risk management involves active asset management, portfolio monitoring, interest rate management techniques, thorough due diligence for credit risk, and oversight by the Finance and Risk Committee[279] - Environmental risks are an integral consideration in investment parameters, with mitigation through third-party experts for engineering, weather analysis, and insurance reviews[279] Item 4. Controls and Procedures The Company's CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely information collection and disclosure, with no material changes in internal controls over financial reporting during the period - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely collection, evaluation, and disclosure of information[280] - There have been no changes in the Company's internal control over financial reporting during the three-month period ended June 30, 2025, that have materially affected, or were reasonably likely to materially affect, internal control over financial reporting[282] PART II. OTHER INFORMATION Provides additional disclosures including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The Company is not currently involved in any legal proceedings that are likely to have a material adverse effect on its financial position, results of operations, or cash flows as of June 30, 2025 - As of June 30, 2025, the Company is not subject to any legal proceedings that are probable of having a material adverse effect on its financial position, results of operations, or cash flows[284] Item 1A. Risk Factors For a comprehensive discussion of potential risks and uncertainties, investors are directed to Item 1A. "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - For a discussion of potential risks and uncertainties, refer to Item 1A. "Risk Factors" in the Company's 2024 Form 10-K[285] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the six months ended June 30, 2025, the Company repurchased common stock from employees to cover tax obligations related to restricted stock vesting and saw 81,498 OP units exchanged for common stock by non-controlling interest holders Common Stock Repurchases (2025) | Period | Total number of shares purchased | | :------- | :------------------------------- | | 2/3/2025 | 615 | | 3/5/2025 | 13,191 | | 4/3/2025 | 462 | | 5/15/2025 | 20,651 | - During the six months ended June 30, 2025, 81,498 OP units held by non-controlling interest holders were exchanged for shares of the Company's common stock[288] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported for the period - No defaults upon senior securities were reported[289] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[290] Item 5. Other Information This section contains no additional information for the reporting period Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, specimen stock certificates, indentures for various debt securities, and certifications - Key exhibits include the Certificate of Incorporation, Bylaws, Specimen Common Stock Certificate, Description of Securities, and various Indentures for Senior Unsecured Notes and Exchangeable Senior Notes[292] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002 are also included[293] SIGNATURES Confirms the official signing and certification of the report by key executives - The report is duly signed on August 8, 2025, by Jeffrey A. Lipson (Chief Executive Officer and President), Charles W. Melko (Chief Financial Officer, Treasurer and Executive Vice President), and Michelle E. Whicher (Chief Accounting Officer and Senior Vice President)[297]