HA Sustainable Infrastructure Capital, Inc.

HA Sustainable Infrastructure Capital, Inc. Annual Report Summary (Year Ending December 31, 2025)

HA Sustainable Infrastructure Capital, Inc. champions the transition to a sustainable future by investing in and financing critical infrastructure projects, primarily in renewable energy and energy efficiency. This summary offers a clear overview of the company's operations, investment strategy, and financial structure for the year ending December 31, 2025, as detailed in its latest SEC 10-K filing.

1. Business Overview

HA Sustainable Infrastructure Capital, Inc. generates returns through a diversified strategy, investing in a range of sustainable infrastructure assets and financing solutions.

Key Investment Areas:

• Equity Investments: The company holds strategic equity stakes in businesses developing sustainable infrastructure. Key examples include:
  • CarbonCount Holdings 1 LLC: A joint venture with Kohlberg Kravis Roberts & Co. L.P. (KKR), demonstrating a partnership with a major investment firm to combine expertise and capital.
  • Jupiter Equity Holdings LLC: Focuses specifically on onshore wind and solar projects, aligning with the company's renewable energy goals.
  • Daggett Renewable HoldCo LLC: Another holding company involved in renewable energy assets.
• Receivables Portfolio: A significant part of the company's assets consists of income-generating receivables, reflecting its strategy to provide financing and acquire future cash flows. These include:
  • Commercial Receivables: Payments owed by businesses for sustainable infrastructure services or products.
  • Government Receivables: Funds owed by U.S. federal, state, and local government entities, often for energy efficiency upgrades or renewable projects.
  • Residential Solar Loans: Direct loans to homeowners for installing solar energy systems.
• Securitized Assets: The company actively uses securitization, packaging loans or receivables into asset-backed securities. This strategy enables it to sell these securities to investors, generating liquidity and freeing up capital for new investments, while often retaining an interest in the securitization trusts.
• Revenue Streams: The company generates income from diverse sources, including interest from real estate investments, repayments from various financing arrangements, and potentially from installing energy efficiency and other sustainable technologies, either directly or through its portfolio companies.

2. Risk Factors

Investing in HA Sustainable Infrastructure Capital, Inc. carries several risks inherent to its business model and the sustainable infrastructure sector:

• Credit Risk: Borrowers (commercial, government, or residential) may default on their loan or receivable obligations.
• Interest Rate Risk: Fluctuations in interest rates can affect the value of existing debt, the cost of new financing, and the profitability of interest-bearing assets.
• Project Development and Operational Risk: Risks tied to the successful development, construction, and operation of sustainable infrastructure projects (e.g., delays, cost overruns, technological failures, regulatory changes).
• Regulatory and Policy Risk: Changes in government policies, incentives, or regulations for renewable energy and sustainable infrastructure could negatively affect the company's investments and profitability.
• Market Risk: Overall market demand for sustainable infrastructure projects and related financing may fluctuate.
• Liquidity Risk: Difficulty efficiently selling certain assets or raising capital when needed.
• Securitization Risk: Risks related to the performance of underlying assets in securitization trusts and the market for asset-backed securities.
• Leverage Risk: Extensive use of debt in the capital structure, while enabling growth, also amplifies both returns and potential losses.

3. Financial Health

The company uses a sophisticated and diversified capital structure to fund its investments and operations, balancing flexibility, cost, and risk.

Key Funding Mechanisms (Debt and Capital Structure):

• Revolving Credit Facilities: Access to both unsecured and secured revolving credit lines provides flexible, short-term liquidity for ongoing operations and new opportunities.
• Commercial Paper Programs: The company issues short-term debt instruments to efficiently raise capital for immediate needs.
• Senior Unsecured Notes: Longer-term debt instruments maturing between 2026 and 2035, which provide stable, long-term funding without specific asset collateral.
• Green Junior Subordinated Notes: These notes, maturing in 2056, specifically fund environmentally friendly projects, demonstrating the company's commitment to sustainable finance. As "subordinated" debt, they carry higher risk for investors because the company repays them after senior debt in the event of liquidation.
• Convertible Notes: Debt instruments convertible into company stock under specific conditions, with maturities in 2025 and 2028. These offer investors potential equity upside and can reduce future debt obligations for the company.
• Non-Recourse Debt: A portion of the company's debt is non-recourse, meaning lenders can only claim specific assets tied to that debt in case of default, rather than the entire company's assets. This strategy limits overall corporate risk exposure.
• Specific Facilities: The company uses dedicated financing arrangements, such as the unsecured "CarbonCount Term Loan Facility" and a secured "Approval Based Facility," for particular projects or investment vehicles.

Credit Quality and Risk Management: The company uses an internal credit rating system (ratings 1, 2, and 3) to assess the risk profile of its commercial and government receivables, showing a structured approach to managing credit risk within its portfolio.