{
  "docId": "019dd923-622c-750b-8b97-386a39fe2e3c",
  "docSlug": "5f1b43d262e5",
  "documentTitle": "Hannon Armstrong Sustainable Infrastructure Capital (HASI)",
  "authorId": "51_Muddy_Waters",
  "authorName": "Carson Block",
  "documentKindSlug": "research-note",
  "documentKindLabel": "Research note",
  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2022-07-12 00:00:00",
  "orientation": "portrait",
  "aspectRatio": 0.77272725,
  "pageNumber": 13,
  "pageCount": 27,
  "prevPage": 12,
  "nextPage": 14,
  "slideType": "appendix_methodology",
  "function": "expose_contradiction",
  "density": "dense",
  "nDataPoints": 0,
  "notes": "This slide provides a technical critique of HASI's accounting practices, specifically focusing on HLBV (Hypothetical Liquidation at Book Value) and its impact on reported income and cash flow classification.",
  "elementsJson": [
    "paragraph",
    "footnote"
  ],
  "metadataConfidence": 0.9,
  "imagePath": null,
  "slideHref": "/slides/019dd923-622c-750b-8b97-386a39fe2e3c/13",
  "deckHref": "/decks/019dd923-622c-750b-8b97-386a39fe2e3c",
  "deckJsonHref": "/decks/019dd923-622c-750b-8b97-386a39fe2e3c.json",
  "deckAnchorHref": "/decks/019dd923-622c-750b-8b97-386a39fe2e3c#slide-13",
  "components": [
    {
      "bbox": null,
      "kind": "callout",
      "text": "The reversal of non-cash HLBV income creates an incentive for HASI to continually invest in questionable projects to report growing HLBV income.",
      "attrs": null,
      "subkind": null,
      "toolName": "Visual emphasis",
      "toolSlug": "visual-emphasis",
      "confidence": null,
      "componentId": "019dd953-0931-74b9-a332-5a77d0a46117",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.15,
        "w": 0.8,
        "x": 0.1,
        "y": 0.1
      },
      "kind": "paragraph",
      "text": "The large amounts of non-cash, unrealizable income HASI books through HLBV stem from the newness of the assets HASI is investing in and the associated tax incentives. HLBV accounting, while not the GAAP standard, is a convention that recognizes earnings based on the change in each party’s claim on net assets of an investee entity.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "0974dd15-27c1-4986-89a1-6c6d57f68bc7",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.05,
        "w": 0.8,
        "x": 0.1,
        "y": 0.75
      },
      "kind": "paragraph",
      "text": "In addition, as we discuss infra, HLBV income also allows HASI to classify cash receipts as operating cash flow, which helps flatter the cash flow statement even when cash distributions from EMIs are returns of capital, not returns on capital.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "824aacb2-9290-464c-9d07-4ffd925f3bd0",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.2,
        "w": 0.8,
        "x": 0.1,
        "y": 0.55
      },
      "kind": "paragraph",
      "text": "The HLBV method works well for the Project Sponsor, which collects cash when it sells assets to the fund and before recognizing HLBV income related to the ITC. However, because HASI is not a seller or builder of the equipment, HASI never receives cash for tax benefit-related HLBV income as a Project Sponsor does. Nevertheless, HASI books non-cash HLBV income that it will never realize in cash. HASI then reverses this income over the life of the project assets, which is generally 20 or more years. The reversal of non-cash HLBV income creates an incentive for HASI to continually invest in questionable projects to report growing HLBV income.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "d0bdc599-d087-404b-80e9-15e0c6a3b136",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.15,
        "w": 0.8,
        "x": 0.1,
        "y": 0.35
      },
      "kind": "paragraph",
      "text": "When the Tax Equity Partner realizes its tax benefits, the Tax Equity Partner’s claims to the net assets of the investee drop approximately one dollar for each dollar of tax benefit used. The other equity investors’ claims therefore increase roughly proportionally. This means that regardless of whether a renewables project makes any operating profit, the Cash Equity Partner may book a large HLBV gain when the ITC is realized by the Tax Equity Partner.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "d7195be6-78c5-47b5-a4c0-ae739e56ac7d",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.1,
        "w": 0.8,
        "x": 0.1,
        "y": 0.85
      },
      "kind": "source-note",
      "text": "Footnotes 53-59 detailing accounting standards, definitions, and conversations with HASI Investor Relations.",
      "attrs": null,
      "subkind": null,
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "13554843-972b-4036-95cb-d744771a95bb",
      "frameworkName": null,
      "frameworkSlug": null
    }
  ],
  "metrics": [],
  "tools": [],
  "frameworks": [],
  "arcBeats": [],
  "loops": [],
  "imagePathAlt": null,
  "thumbSrc": null,
  "thumbSrcAlt": null,
  "locked": true
}