Greenbacker Renewable Energy Co LLC - FORM 10-Q

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - Greenbacker Renewable Energy Co LLC	s113559_ex32-2.htm
EX-32.1 - EXHIBIT 32.1 - Greenbacker Renewable Energy Co LLC	s113559_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - Greenbacker Renewable Energy Co LLC	s113559_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - Greenbacker Renewable Energy Co LLC	s113559_ex31-1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-55610

GREENBACKER RENEWABLE ENERGY COMPANY LLC

(Exact Name of Registrant as Specified in its Charter)

Delaware		80-0872648
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

11 East 44^th Street, 12^th Floor

New York, NY 10017

Tel (646) 237-7884

(Address, including zip code and telephone number, including area code, of registrants Principal Executive Office)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐

Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☐

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 2, 2018, the registrant had 34,940,803 shares of common stock, $0.001 par value, outstanding.

TABLE OF CONTENTS

		PAGE

PART I.	FINANCIAL INFORMATION	2

Item 1.	Consolidated Financial Statements	2

	Consolidated Statements of Assets and Liabilities as of September 30, 2018 (unaudited) and December 31, 2017	2

	Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017 (unaudited)	3

	Consolidated Statements of Changes in Net Assets for the nine months ended September 30, 2018 and 2017 (unaudited)	4

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 (unaudited)	6

	Consolidated Schedules of Investments as of September 30, 2018 (unaudited) and December 31, 2017	7

	Notes to Consolidated Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	66

Item 4.	Controls and Procedures	67

PART II.	OTHER INFORMATION	67

Item 1.	Legal Proceedings	67

Item 1A.	Risk Factors	67

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67

Item 3.	Defaults Upon Senior Securities	68

Item 4.	Mine Safety Disclosures	68

Item 5.	Other Information	68

Item 6.	Exhibits	68

Signatures		69

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

GREENBACKER RENEWABLE ENERGY COMPANY LLC AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

	September 30, 2018			December 31, 2017
	(unaudited)
ASSETS
Investments, at fair value (cost of $246,314,007 and $212,361,027, respectively)	$	255,371,864		$	218,386,174
Swap contracts, at fair value		1,621,477			156,068
Cash and cash equivalents		66,736,375			10,144,014
Shareholder receivable		—			225,509
Dividend receivable		1,407,581			—
Deferred tax assets, net of allowance		6,291,229			4,524,038
Other assets		187,410			74,242
Total assets	$	331,615,936		$	233,510,045

LIABILITIES
Payable for investments purchased	$	—		$	15,414,205
Term note payable, net of financing costs		29,469,894			12,910,364
Management fee payable		531,208			57,291
Accounts payable and accrued expenses		802,836			400,144
Shareholder distributions payable		1,097,317			711,306
Interest payable		10,521			112,245
Due to advisor		21,332			10,417
Payable for repurchases of common stock		1,720,177			969,448
Deferred sales commission payable		206,862			249,858
Total liabilities	$	33,860,147		$	30,835,278

Commitments and contingencies (See Note 2, Note 5 and Note 9)

MEMBERS’ EQUITY (NET ASSETS)
Preferred stock, par value, $.001 per share, 50,000,000 authorized; none issued and outstanding	$	—		$	—
Common stock, par value, $.001 per share, 350,000,000 authorized; 33,835,032 and 23,189,229 shares issued and outstanding, respectively		33,835			23,189
Paid-in capital in excess of par value		293,903,364			200,510,790
Accumulated deficit		(14,145,798	)		(10,216,279	)
Accumulated net realized gain on investments		698,460			698,460
Accumulated unrealized appreciation (depreciation) on:
Investments, net of deferred taxes		13,639,237			10,356,379
Foreign currency translation		(130,653	)		(90,083	)
Swap contracts		1,621,477			156,068
Total common stockholders’ equity		295,619,922			201,438,524
Special unitholder’s equity		2,135,867			1,236,243
Total members’ equity (net assets)		297,755,789			202,674,767
Total liabilities and equity (net assets)	$	331,615,936		$	233,510,045

Net assets, Class A (shares outstanding of 15,992,764 and 13,857,830, respectively)	$	138,972,856		$	120,344,517
Net assets, Class C (shares outstanding of 1,973,308 and 1,431,999, respectively)		16,725,916			12,053,349
Net assets, Class I (shares outstanding of 5,778,033 and 4,511,832, respectively)		50,209,569			39,181,769
Net assets, Class P-A (shares outstanding of 6,705 and nil, respectively)*		58,422			—
Net assets, Class P-I (shares outstanding of 10,084,222 and 3,387,568, respectively)		89,653,159			29,858,889
Total common stockholders’ equity	$	295,619,922		$	201,438,524

*Class P-A shares were reinstated for sale as of April 16, 2018.

The accompanying notes are an integral part of these consolidated financial statements.

GREENBACKER RENEWABLE ENERGY COMPANY LLC AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the three months ended September 30, 2018			For the three months ended September 30, 2017			For the nine months ended September 30, 2018			For the nine months ended September 30, 2017
Investment income:
Dividend income	$	4,786,395		$	3,598,753		$	14,374,691		$	8,802,929
Interest income		316,941			64,882			632,312			164,075
Total investment income	$	5,103,336		$	3,663,635		$	15,007,003		$	8,967,004

Operating expenses:
Management fee expense		1,571,737			873,961			4,090,466			2,330,599
Audit and tax expense		356,378			108,821			688,483			389,816
Interest and financing expenses		179,447			221,222			1,378,467			540,940
General and administration expenses		86,052			73,001			253,740			316,856
Legal expenses		(289	)		45,369			102,153			171,086
Directors fees and expenses		25,257			25,366			74,951			76,234
Insurance expense		31,298			17,839			61,634			40,724
Transfer Agent Expense		115,740			—			294,260			—
Other expenses		32,213			13,951			100,422			96,507
Total expenses		2,397,833			1,379,530			7,044,576			3,962,762
Net investment income before taxes		2,705,503			2,284,105			7,962,427			5,004,242
Deferred tax (benefit) expense		653,179			1,176,540			(657,989	)		402,612
Franchise tax expense		63,946			(42,412	)		101,243			23,415
Net investment income		1,988,378			1,149,977			8,519,173			4,578,215

Net change in realized and unrealized gain (loss) on investments, foreign currency translation and deferred tax assets:
Net realized gain on investments		—			693,882			—			693,882
Net change in unrealized appreciation (depreciation) on:
Investments		(811,752	)		873,352			3,073,280			2,358,498
Foreign currency translation		24,289			58,013			(40,570	)		109,937
Swap contracts		491,409			(45,628	)		1,465,409			(105,632	)
Change in benefit/expense from deferred taxes on unrealized appreciation (depreciation) on investments		2,275,076			680,969			1,109,202			(234,466	)
Net increase in net assets resulting from operations		3,967,400			3,410,565			14,126,494			7,400,434
Net increase (decrease) in net assets attributed to special unitholder		59,210			(310,362	)		(899,624	)		(617,776	)
Net increase in net assets attributed to common stockholders	$	4,026,610		$	3,100,203		$	13,226,870		$	6,782,658

Common stock per share information —basic and diluted:
Net investment income	$	0.06		$	0.06		$	0.31		$	0.26
Net increase in net assets attributed to common stockholders	$	0.13		$	0.16		$	0.47		$	0.38
Weighted average common shares outstanding		31,977,784			19,915,778			27,925,977			17,882,948

The accompanying notes are an integral part of these consolidated financial statements.

GREENBACKER RENEWABLE ENERGY COMPANY LLC AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF NET ASSETS

For the nine months ended September 30, 2018

(Unaudited)

	Common Stockholders
	Shares		Par Value			Paid-in capital in excess of par value			Accumulated deficit			Accumulated net realized gain on investments		Accumulated unrealized appreciation (depreciation) on investments, net of deferred taxes		Accumulated unrealized appreciation (depreciation) on foreign currency translation			Accumulated unrealized appreciation (depreciation) on swap contracts		Common stockholders’ equity			Special unitholder		Total members’ equity (net assets)
Balances December 31, 2017	23,189,229		$	23,189		$	200,510,790		$	(10,216,279	)	$	698,460	$	10,356,379	$	(90,083	)	$	156,068	$	201,438,524		$	1,236,243	$	202,674,767

Proceeds from issuance of common stock, net	10,505,148			10,505			92,704,908			—			—		—		—			—		92,715,413					92,715,413

Issuance of common stock under distribution reinvestment plan	504,987			505			4,453,495			—			—		—		—			—		4,454,000					4,454,000

Repurchases of common stock	(364,332	)		(364	)		(3,224,299	)		—			—		—		—			—		(3,224,663	)				(3,224,663	)

Offering costs	—			—			(541,530	)		—			—		—		—			—		(541,530	)				(541,530	)

Shareholder distributions	—			—			—			(12,448,692	)		—		—		—			—		(12,448,692	)				(12,448,692	)

Net investment income	—			—			—			8,519,173			—		—		—			—		8,519,173					8,519,173

Net change in unrealized appreciation on investments	—			—			—			—			—		2,173,656		—			—		2,173,656			899,624		3,073,280

Net change in unrealized depreciation on foreign currency translation	—			—			—			—			—		—		(40,570	)		—		(40,570	)				(40,570	)

Net change in unrealized appreciation on swap contracts	—			—			—			—			—		—		—			1,465,409		1,465,409					1,465,409

Change in benefit from deferred taxes on unrealized appreciation on investments	—			—			—			—			—		1,109,202		—			—		1,109,202					1,109,202
Balances at September 30, 2018	33,835,032		$	33,835		$	293,903,364		$	(14,145,798	)	$	698,460	$	13,639,237	$	(130,653	)	$	1,621,477	$	295,619,922		$	2,135,867	$	297,755,789

GREENBACKER RENEWABLE ENERGY COMPANY LLC AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF NET ASSETS

For the nine months ended September 30, 2017

(Unaudited)

	Common Stockholders
	Shares		Par Value			Paid-in capital in excess of par value			Accumulated deficit			Accumulated net realized gain on investments		Accumulated unrealized appreciation (depreciation) on investments, net of deferred taxes			Accumulated unrealized appreciation (depreciation) on foreign currency translation			Accumulated unrealized appreciation on swap contracts			Common stockholders’ equity			Special unitholder		Total members’ equity (net assets)
Balances December 31, 2016	14,921,922		$	14,922		$	128,425,800		$	(3,629,220	)	$	4,578	$	4,699,283		$	(187,846	)	$	90,697		$	129,418,214		$	586	$	129,418,800

Proceeds from issuance of common stock, net	5,903,498			5,903			52,419,658			—			—		—			—			—			52,425,561			—		52,425,561

Issuance of common stock under distribution reinvestment plan	382,840			383			3,425,214			—			—		—			—			—			3,425,597			—		3,425,597

Repurchases of common stock	(345,941	)		(346	)		(3,087,904	)		—			—		—			—			—			(3,088,250	)		—		(3,088,250	)

Offering costs	—			—			(719,935	)																(719,935	)		—		(719,935	)

Shareholder distributions	—			—			—			(8,076,268	)		—		—			—			—			(8,076,268	)		—		(8,076,268	)

Net investment income	—			—			—			4,578,215			—		—			—			—			4,578,215			—		4,578,215

Net realized gain on investments	—			—			—			—			693,882		—			—			—			693,882			—		693,882

Net change in unrealized depreciation on investments	—			—			—			—			—		1,740,722			—			—			1,740,722			617,776		2,358,498

Net change in unrealized appreciation on foreign currency translation	—			—			—			—			—		—			109,937			—			109,937			—		109,937

Net change in unrealized depreciation on swap contracts	—			—			—			—			—		—			—			(105,632	)		(105,632	)		—		(105,632	)

Change in benefit from deferred taxes on unrealized depreciation on investments	—			—			—			—			—		(234,466	)		—			—			(234,466	)		—		(234,466	)

Balances at September 30, 2017	20,862,319		$	20,862		$	180,462,833		$	(7,127,273	)	$	698,460	$	6,205,539		$	(77,909	)	$	(14,935	)	$	180,167,577		$	618,362	$	180,785,939

GREENBACKER RENEWABLE ENERGY COMPANY LLC AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the nine months ended September 30, 2018			For the nine months ended September 30, 2017

Operating activities:
Net increase (decrease) in net assets from operations	$	14,126,494		$	7,400,434
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:
Amortization of deferred financing costs		165,242			150,317
Amortization and accretion of premium and discount		(35,487	)		—
Purchase of investments		(38,425,640	)		(67,675,569	)
Proceeds from principal payments and sales of investments		4,593,731			7,927,959
Net realized (gain) on investments		—			(693,882	)
Net change in unrealized (appreciation) on investments		(3,073,280	)		(2,358,498	)
Net change in unrealized (appreciation) depreciation on foreign currency translation		40,570			(109,937	)
Net change in unrealized (appreciation) depreciation on swap contracts		(1,465,409	)		105,632
(Increase) decrease in other assets:
Dividend receivable		(1,407,581	)		—
Deferred tax assets, net of allowance		(1,767,191	)		637,078
Other assets		(113,168	)		35,037
Increase (decrease) in other liabilities:
Payable for investments purchased		(15,414,205	)		—
Due to advisor, net		10,915			(56,183	)
Management fee payable		473,917			77,268
Accounts payable and accrued expenses		402,692			25,714
Interest payable		(101,724	)		61,085
Net cash used in operating activities		(41,990,124	)		(54,473,545	)

Financing activities:
Borrowings on Credit facility and term note		30,665,460			15,800,000
Paydowns on Credit facility and term note		(13,655,794	)		(6,074,523	)
Payments of financing costs		(615,378	)		—
Proceeds from issuance of shares of common stock, net		92,897,892			52,766,604
Distributions paid		(7,608,681	)		(4,450,781	)
Offering costs		(541,530	)		(719,935	)
Repurchases of common stock		(2,559,484	)		(2,934,815	)
Due to dealer manager re: Offering costs		—			(14,330	)
Net cash provided by financing activities		98,582,485			54,372,220
Net increase (decrease) in cash and cash equivalents		56,592,361			(101,325	)
Cash and cash equivalents, beginning of period		10,144,014			13,055,090
Cash and cash equivalents, end of period	$	66,736,375		$	12,953,765

Supplemental disclosure of cash flow information:
Shareholder distributions payable	$	1,097,317		$	603,879
Shareholder distributions reinvested in common stock	$	4,454,000		$	3,425,597
Payable for repurchases of common stock	$	1,720,177		$	1,099,205
Cash interest paid during the period	$	889,590		$	—

Non cash financing activities
Shareholder receivable from sale of common stock	$	—		$	141,680
Investments disposed of/received through in-kind transactions	$	—		$	1,920,306

The accompanying notes are an integral part of these consolidated financial statements.

GREENBACKER RENEWABLE ENERGY COMPANY LLC AND SUBSIDIARY

CONSOLIDATED SCHEDULES OF INVESTMENTS

September 30, 2018

(unaudited)

Investments	Industry	Interest			Maturity	Shares or Principal Amount		Cost		Fair Value		Percentage of Net Assets ^(a)
United States:

Limited Liability Company Member Interests - Not readily marketable

Alternative Energy - Biomass

EVCE BioMass Portfolio	Alternative Energy - Biomass						(d)	$	74,664	$	74,664		0.0	%(c)

Total Alternative Energy - Biomass - 0.0%								$	74,664	$	74,664		0.0	%

Colorado CSG Solar Portfolio	Alternative Energy - Solar						100% Ownership	$	10,240,000	$	10,162,554		3.4	%

East to West Solar Portfolio	Alternative Energy - Solar						100% Ownership		37,149,876		33,907,277		11.4	%

Enfinity Colorado DHA Portfolio	Alternative Energy - Solar						100% Ownership		1,400,000		1,941,185		0.7	%

Foresight Solar Portfolio	Alternative Energy - Solar						Managing Member, Majority Equity Owner		13,650,000		13,183,960		4.4	%

Golden Horizons Solar Portfolio	Alternative Energy - Solar						100% Ownership		9,300,000		14,027,305		4.7	%

Greenbacker Residential Solar Portfolio	Alternative Energy - Solar						100% Ownership or Managing Member, Majority Equity Owner		28,100,000		27,132,027		9.1	%

Greenbacker Residential Solar Portfolio II	Alternative Energy - Solar						Managing Member, Majority Equity Owner		6,400,000		11,122,311		3.7	%

Green Maple Portfolio	Alternative Energy - Solar						100% Ownership		17,582,823		15,423,713		5.2	%

Magnolia Sun Portfolio	Alternative Energy - Solar						100% Ownership		10,775,000		8,626,544		2.9	%

Midway III Solar Portfolio	Alternative Energy - Solar						100% Ownership		11,567,853		13,817,326		4.6	%

Raleigh Portfolio	Alternative Energy - Solar						Managing Member, Majority Equity Owner		20,822,198		21,003,989		7.1	%

Six States Solar Portfolio	Alternative Energy - Solar						100% Ownership		12,470,306		14,386,779		4.8	%

Sunny Mountain Portfolio	Alternative Energy - Solar						100% Ownership		884,578		1,117,897		0.4	%

Tar Heel Solar II Portfolio	Alternative Energy - Solar						100% Ownership		359,918		354,684		0.1	%

Total Alternative Energy - Solar - 62.5%								$	180,702,552	$	186,207,551		62.5	%

Alternative Energy - Wind

Greenbacker Wind Portfolio - California	Alternative Energy - Wind						100% Ownership or Managing Member, Equity Owner	$	9,500,000	$	8,589,868		2.9	%

Greenbacker Wind Portfolio - Idaho	Alternative Energy - Wind						100% Ownership or Managing Member, Equity Owner		7,320,000		6,713,445		2.2	%

Greenbacker Wind Portfolio - Montana	Alternative Energy - Wind						100% Ownership or Managing Member, Equity Owner		21,159,487		21,920,532		7.4	%

Greenbacker Wind Portfolio - Vermont	Alternative Energy - Wind						100% Ownership or Managing Member, Equity Owner		24,917,193		28,600,003		9.6	%

Total Alternative Energy - Wind - 22.1%								$	62,896,680	$	65,823,848		22.1	%

Energy Efficiency - Lighting Replacement

GREC Energy Efficiency Portfolio	Energy Efficiency - Lighting Replacement						100% Ownership	$	457,835	$	489,946		0.2	%

Total Energy Efficiency - Lighting Replacement - 0.2%								$	457,835	$	489,946		0.2	%

Total Limited Liability Company Member Interests - Not readily marketable: 84.8%								$	244,131,731	$	252,596,009		84.8	%

Energy Efficiency Secured Loans - Not readily marketable

Renew AEC One, LLC	Energy Efficiency - Lighting Replacement		10.25	%(b)	2/24/2025		$ 579,140	$	579,140	$	579,140		0.2	%

Total Energy Efficiency Secured Loans - Not readily marketable: 0.2%								$	579,140	$	579,140		0.2	%

Total United States Investments: 85.0%								$	244,710,871	$	253,175,149		85.0	%

Canada:
Capital Stock - Not readily marketable
Canadian Northern Lights Portfolio	Alternative Energy - Solar						100% Ownership	$	1,603,136	$	2,196,715		0.7	%
Total Canadian Investments: 0.7%								$	1,603,136	$	2,196,715		0.7	%

INVESTMENTS: 85.7%								$	246,314,007	$	255,371,864		85.7	%

ASSETS IN EXCESS OF OTHER LIABILITIES: 14.3%											42,383,925		14.3	%

TOTAL NET ASSETS: 100.0%										$	297,755,789		100.0	%

(a)

Percentages are based on net assets of $297,755,789 as of September 30, 2018.

(b)

Per the loan agreement, interest commenced on January 24, 2016.

(c)

Amount less than 0.005%

(d)

Includes pre-acquisition and due diligence expenses.

Interest Rate Swaps

Counterparty	Pay / Receive Floating Rate	Floating Rate Index	Fixed Pay Rate		Payment Frequency	Maturity Date	Notional Amount		Value		Upfront Premiums Paid (Received)

Fifth Third Financial Risk Solutions	Receive	1-MO-USD-LIBOR	1.110	%	Monthly	7/9/2021		3,822,222	$	152,193	$	—
Fifth Third Financial Risk Solutions	Receive	1-MO-USD-LIBOR	2.261	%	Monthly	2/29/2032		20,900,650		826,071		—
Fifth Third Financial Risk Solutions	Receive	1-MO-USD-LIBOR	2.648	%	Monthly	12/31/2038		29,624,945		637,819		—
Fifth Third Financial Risk Solutions	Receive	1-MO-USD-LIBOR	2.965	%	Monthly	12/31/2038		4,180,063		5,394		—
									$	1,621,477	$	—

The accompanying notes are an integral part of these consolidated financial statements.

GREENBACKER RENEWABLE ENERGY COMPANY LLC AND SUBSIDIARY
CONSOLIDATED SCHEDULES OF INVESTMENTS
December 31, 2017


Investments	Industry	Interest			Maturity	Shares or Principal Amount		Cost		Fair Value			Percentage of Net Assets ^(a)
United States:
Limited Liability Company Member Interests - Not readily marketable

Alternative Energy - Solar

East to West Solar Portfolio	Alternative Energy - Solar						100% Ownership	$	27,934,875	$	27,200,000			13.4	%

Enfinity Colorado DHA Portfolio	Alternative Energy - Solar						100% Ownership		1,400,000		1,671,317			0.8	%

Foresight Solar Portfolio	Alternative Energy - Solar						Managing Member, Majority Equity Owner		13,200,071		13,200,071			6.5	%

Golden Horizons Solar Portfolio	Alternative Energy - Solar						100% Ownership		9,450,000		9,482,075			4.7	%

Greenbacker Residential Solar Portfolio	Alternative Energy - Solar						100% Ownership or Managing Member, Majority Equity Owner		28,100,000		28,373,526			14.0	%

Greenbacker Residential Solar Portfolio II	Alternative Energy - Solar						Managing Member, Majority Equity Owner		6,400,000		7,986,014			3.9	%

Green Maple Portfolio	Alternative Energy - Solar						100% Ownership		13,075,000		11,956,821			5.9	%

Magnolia Sun Portfolio	Alternative Energy - Solar						100% Ownership		10,775,000		9,635,508			4.8	%

Midway III Solar Portfolio	Alternative Energy - Solar						100% Ownership		10,093,861		10,093,861			5.0	%

Raleigh Portfolio	Alternative Energy - Solar						Managing Member, Majority Equity Owner		20,672,198		22,850,465			11.3	%

Six States Solar Portfolio	Alternative Energy - Solar						100% Ownership		4,770,306		4,756,893			2.3	%

Sunny Mountain Portfolio	Alternative Energy - Solar						100% Ownership		884,578		1,205,439			0.6	%

Total Alternative Energy - Solar - 73.2%								$	146,755,889	$	148,411,990			73.2	%

Alternative Energy - Wind

Greenbacker Wind Portfolio - California	Alternative Energy - Wind						100% Ownership	$	9,500,000	$	9,506,752			4.7	%

Greenbacker Wind Portfolio - Idaho	Alternative Energy - Wind						100% Ownership		7,320,000		6,799,153			3.4	%

Greenbacker Wind Portfolio - Montana	Alternative Energy - Wind						100% Ownership or Managing Member, Equity Owner		21,609,488		23,228,136			11.5	%

Greenbacker Wind Portfolio - Vermont	Alternative Energy - Wind						100% Ownership		24,417,193		27,168,808			13.4	%

Total Alternative Energy - Wind - 33.0%								$	62,846,681	$	66,702,849			33.0	%

Energy Efficiency - Lighting Replacement

GREC Energy Efficiency Portfolio	Energy Efficiency - Lighting Replacement						100% Ownership	$	482,450	$	504,637			0.2	%

Total Energy Efficiency - Lighting Replacement - 0.2%								$	482,450	$	504,637			0.2	%

Total Limited Liability Company Member Interests - Not readily marketable: 106.4%								$	210,085,020	$	215,619,476			106.4	%

Energy Efficiency Secured Loans - Not readily marketable

Renew AEC One, LLC	Energy Efficiency - Lighting Replacement		10.25	%(b)	2/24/2025		$672,871	$	672,871	$	672,871			0.3	%

Total Energy Efficiency Secured Loans - Not readily marketable: 0.3%								$	672,871	$	672,871			0.3	%

Total United States Investments: 106.7%								$	210,757,891	$	216,292,347			106.7	%

Canada:
Capital Stock - Not readily marketable

Canadian Northern Lights Portfolio	Alternative Energy - Solar						100% Ownership	$	1,603,136	$	2,093,827			1.1	%
Total Canadian Investments: 1.1%								$	1,603,136	$	2,093,827			1.1	%

INVESTMENTS: 107.8%								$	212,361,027	$	218,386,174			107.8	%

LIABILITIES IN EXCESS OF OTHER ASSETS: (7.8)%											(15,711,407	)		(7.8	)%

TOTAL NET ASSETS: 100.0%										$	202,674,767			100.0	%

(a)

Percentages are based on net assets of $202,674,767 as of December 31, 2017.

(b)

Per the loan agreement, interest commenced on January 24, 2016.

Interest Rate Swaps

Counterparty	Pay / Receive Floating Rate	Floating Rate Index	Fixed Pay Rate		Payment Frequency	Maturity Date	Notional Amount		Value		Upfront Premiums Paid (Received)

Fifth Third Financial Risk Solutions	Receive	1-MO-USD-LIBOR	1.110	%	Monthly	7/9/2021		3,893,889	$	108,518	$	—
Fifth Third Financial Risk Solutions	Receive	1-MO-USD-LIBOR	2.261	%	Monthly	2/29/2032		20,900,650		47,550		—
									$	156,068	$	—

The accompanying notes are an integral part of these consolidated financial statements.

GREENBACKER RENEWABLE ENERGY COMPANY LLC AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018 (unaudited)

Note 1. Organization and Operations of the Company

Greenbacker Renewable Energy Company LLC (the “LLC”), a Delaware limited liability company, formed in December 2012, is an externally managed energy company that acquires and manages income-generating renewable energy and energy efficiency projects, and other energy-related businesses, as well as finances the construction and/or operation of these and sustainable development projects and businesses. The LLC conducts substantially all of its operations through its wholly-owned subsidiary, Greenbacker Renewable Energy Corporation (“GREC”). GREC is a Maryland corporation formed in November 2011 and the LLC currently holds all of the outstanding shares of capital stock of GREC. GREC Entity Holdco LLC, a wholly owned subsidiary of GREC, was formed in Delaware, in June 2016 (“GREC Holdco”). The LLC, GREC and GREC Holdco (collectively “we”, “us”, “our”, and the “company”) are externally managed and advised by Greenbacker Capital Management LLC (the “advisor” or “GCM”), a renewable energy, energy efficiency and sustainability related project acquisition, consulting and development company. The LLC’s fiscal year end is December 31.

Pursuant to an initial Registration Statement on Form S-1 (File No. 333-178786-01), the company offered up to $1,500,000,000 in shares of limited liability company interests, or the shares, including up to $250,000,000 pursuant to a distribution reinvestment plan (“DRP”), through SC Distributors, LLC, the dealer manager. The offering pursuant to that initial Registration Statement terminated on February 7, 2017. Pursuant to a Registration Statement on Form S-1 (File No. 333-211571), the company is offering on a continuous basis up to $1,000,000,000 in shares of limited liability company interests, or the shares, including up to $200,000,000 of shares pursuant to the DRP, on a “best efforts” basis through the dealer manager, meaning it is not required to sell any specific number or dollar amount of shares. The company is publicly offering three classes of shares: Class A, C and I shares in any combination with a dollar value up to the maximum offering amount. In addition, the company is privately offering Class P-A and P-I shares. The share classes have different selling commissions, dealer manager fees and there is an ongoing distribution fee with respect to Class C shares. The company has adopted a DRP pursuant to which a shareholder owning publicly offered share classes may elect to have the full amount of cash distributions reinvested in additional shares. The company reserves the right to reallocate the offered shares within each offering between each and any share class and between its public offering and the DRP. On September 25, 2018 the company announced it will terminate its public offering of securities on or about January 31, 2019. While the Company will only accept subscriptions for its’ public shares until on or about January 31, 2019, the dividend reinvestment plan and the share repurchase plan will continue to be available to investors.

Each quarter, our advisor, utilizing the services of an independent valuation firm when necessary, reviews and approves the net asset value for each class of shares, subject to the oversight of the company’s board of directors. The company expects such determination will ordinarily be made within 30 days after each such completed fiscal quarter. To the extent that the net asset value per share on the most recent valuation date increases above or decreases below the net proceeds per share, the company will adjust the offering prices of all classes of shares. The adjustments to the per share offering prices, which will become effective five business days after such determination is published, will ensure that after the effective date of the new offering prices, the offering prices per share, after deduction of selling commissions, dealer manager fees and organization and offering expenses, are not above or below net asset value per share as of the most recent valuation date. The purchase price per share to be paid by each investor will be equal to the price that is in effect on the date such investor submits his or her completed subscription agreement. The company’s shares are offered in the primary offering at a price based on the most recent valuation, plus related selling commissions, dealer manager fees and organization and offering expenses. Five days after the completion of each quarter end valuation, shares will be offered pursuant to the DRP at a price equal to the current offering price per each class of shares, less the sales selling commissions and dealer manager fees associated with that class of shares in the primary offering.

As of September 30, 2018, the company has made solar, wind and energy efficiency investments in 21 portfolios, 20 domiciled in the United States and one in Canada, as well as one energy efficiency secured loan in the United States (See Note 3). As of December 31, 2017, the company has made solar, wind and energy efficiency investments in 18 portfolios, 17 domiciled in the United States and one in Canada, as well as one energy efficiency secured loan in the United States.

Note 2. Significant Accounting Policies

Basis of Presentation

The company’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which requires the use of estimates, assumptions and the exercise of subjective judgment as to future uncertainties. Actual results could differ from those estimates, assumptions, and judgments. Significant items subject to such estimates will include determining the fair value of investments, revenue recognition, income tax uncertainties, and other contingencies. The consolidated financial statements of the company include the accounts of the LLC and its consolidated subsidiaries, GREC and GREC Holdco. All intercompany accounts and transactions have been eliminated.

The company’s consolidated financial statements are prepared using the specialized accounting principles of Accounting Standards Codification Topic 946, Financial Services—Investment Companies (“ASC 946”). In accordance with this specialized accounting guidance, the company recognizes and carries all of its investments at fair value with changes in fair value recognized in earnings. Additionally, the company will not apply the consolidation or equity method of accounting to its investments. The company carries its liabilities at amounts payable, net of unamortized premiums or discounts. The company does not currently plan to elect to carry its non-investment liabilities at fair value. Net assets are calculated as the carrying amounts of assets, including the fair value of investments, less the carrying amounts of its liabilities.

The financial information associated with the September 30, 2018 consolidated financial statements has been prepared by management and, in the opinion of management, contains all adjustments and eliminations, consisting of only normal recurring adjustments, necessary for a fair presentation in accordance with GAAP. The September 30, 2018 financial information has been reviewed, but not audited by the independent registered public accounting firm and they do not express an opinion thereon.

Cash and Cash Equivalents

Cash consists of demand deposits at a financial institution. Such deposits may be in excess of the Federal Deposit Insurance Corporation insurance limits. The company has not experienced any losses in any such accounts.

The company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Short-term investments that are cash equivalents are categorized as Level 1 investments, and stated at cost, which approximates fair value. There are no restrictions on the use of the company’s cash as of September 30, 2018 and December 31, 2017.

Foreign Currency Translation

The accounting records of the company are maintained in U.S. Dollars. The fair value of investments and other assets and liabilities denominated in non-U.S. currencies are translated into U.S. Dollars using the exchange rate at the end of each reporting period. Amounts related to the purchases and sales of investments, investment income and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions.

Net unrealized currency gains and losses arising from valuing foreign currency denominated assets and liabilities at the current exchange rate are reflected as part of net change in unrealized appreciation (depreciation) on translation of assets and liabilities denominated in foreign currencies in the consolidated statements of operations.

Foreign security and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices more volatile than those of comparable U.S. companies or U.S. government securities.

Valuation of Investments at Fair Value

Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures (“ASC 820”) defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosures about fair value. The company recognizes and accounts for its investments at fair value. The fair value of the investments does not reflect transaction costs that may be incurred upon disposition of the investments.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is an exchange price notion under which fair value is the price in an orderly transaction between market participants to sell an asset or transfer a liability in the market in which the reporting entity would transact for the asset or liability.

The advisor has established procedures to estimate the fair value of its investments which the company’s board of directors has reviewed and approved. The company will use observable market data to estimate the fair value of investments to the extent that such market data is available. In the absence of quoted prices in active markets, or quoted prices for similar assets in illiquid markets, the company will use the valuation methodologies described below with unobservable data based on the best available information in the circumstances, which incorporates the company’s assumptions about the factors that a market participant would use to value the asset in an arms length market transaction.

For investments for which quoted market prices are not available, which will comprise most of our investment portfolio, fair value will be estimated by using the income or market approach. The income approach assumes that value is created by the expectation of future benefits discounted to a current value and the fair value estimate is the amount an investor would be willing to pay to receive those future benefits. The market approach compares recent comparable transactions to the investment being valued. Adjustments are made for any dissimilarity between the comparable transactions and the investments. These valuation methodologies involve a significant degree of judgment on the part of our advisor.

In determining the appropriate fair value of an investment using these approaches, the most significant information and assumptions may include, as applicable: available current market data, including relevant and applicable comparable market transactions, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the investment’s ability to make payments, its earnings and discounted cash flows, the markets in which it operates, comparisons of financial ratios of peer companies that are public, comparable merger and acquisition, the principal market and enterprise values, environmental factors, among other factors.

The estimated fair values will not necessarily represent the amounts that may be ultimately realized due to the occurrence or nonoccurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of the valuation of the investments, the estimate of fair values may differ significantly from the value that would have been used had a broader market for the investments existed.

The authoritative accounting guidance prioritizes the use of market-based inputs over entity-specific inputs and establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation. The three levels of valuation hierarchy are defined as follows:

Level 1:

Unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2:

Other significant observable inputs that are sourced either directly or indirectly from publications or pricing services, including dealer or broker markets, for identical or comparable assets or liabilities. Generally, these inputs should be widely accepted and public, non-proprietary and sourced from an independent third party.

Level 3:

Inputs derived from a significant amount of unobservable market data and derived primarily through the use of internal valuation methodologies.

In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls will be determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of an input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment.

Calculation of Net Asset Value

Net asset value by share class is calculated by subtracting total liabilities for each class from the total carrying amount of all assets for that class, which includes the fair value of investments. Net asset value per share is calculated by dividing net asset value for each class by the total number of outstanding common shares for that class on the reporting date.

Earnings (Loss) per Share

In accordance with the provisions of ASC Topic 260 — Earnings per Share (“ASC 260”), basic earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis.

The following information sets forth the computation of the weighted average basic and diluted net increase in net assets attributed to common stockholders per share for the three and nine months ended September 30, 2018 and September 30, 2017.

	For the three months ended September 30, 2018		For the three months ended September 30, 2017		For the nine months ended September 30, 2018		For the nine months ended September 30, 2017
Basic and diluted
Net increase in net assets attributed to common stockholders	$	4,026,610	$	3,100,203	$	13,226,870	$	6,782,658
Weighted average common shares outstanding		31,977,784		19,915,778		27,925,977		17,882,948
	$	0.13	$	0.16	$	0.47	$	0.38

Revenue Recognition

Interest income is recorded on an accrual basis to the extent the company expects to collect such amounts. Interest receivable on loans and debt securities is not accrued for accounting purposes if there is reason to doubt an ability to collect such interest. Original issue discounts, market discounts or market premiums are accreted or amortized using the effective interest method as interest income. Prepayment premiums on loans and debt securities are recorded as interest income when received. Any application, origination or other fees earned by the company in arranging or issuing debt are amortized over the expected term of the loan.

Loans are placed on non-accrual status when principal and interest are past due 90 days or more or when there is a reasonable doubt that principal or interest will be collected. Accrued interest is generally reversed when a loan is placed on non-accrual. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are generally restored to accrual status when past due and principal and interest is paid and, in management’s judgment, is likely to remain current.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation on Investments

Realized gains or losses will be measured as the difference between the net proceeds from the sale, repayment, or disposal of an asset and the adjusted cost basis of the asset, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation will reflect the change in investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

Payment-in-Kind Interest

For loans and debt securities with contractual payment-in-kind interest, any interest will be added to the principal balance of such investments and be recorded as income, if the valuation indicates that such interest is collectible.

Distribution Policy

Distributions to members, if any, will be authorized and declared by our board of directors quarterly in advance and paid monthly. From time to time, we may also pay interim special distributions in the form of cash or shares, with the approval of our board of directors. Distributions will be made on all classes of shares at the same time. The cash distributions with respect to the Class C shares will be lower than the cash distributions with respect to the company’s other share classes because of the distribution fee associated with the Class C shares, which is allocated specifically to Class C net assets. Amounts distributed to each class are allocated amongst the holders of the shares in such class in proportion to their shares. Distributions declared by our board of directors are recognized as distribution liabilities on the ex-dividend date.

Organization and Offering Costs

Organization and offering costs (“O&O costs”), other than sales commissions and the dealer manager fee, are initially being paid by our advisor and/or dealer manager on behalf of the company. These O&O costs include all costs previously paid or to be paid by the company in connection with its formation and the offering of its shares pursuant to now terminated Registration Statement on Form S-1 (File No. 333-178786-01), the current Registration Statement on Form S-1 (File No. 333-211571) and a private placement memorandum, including legal, accounting, printing, mailing and filing fees, charges of the company’s escrow holder, transfer agent fees, due diligence expense reimbursements to participating broker-dealers included in detailed and itemized invoices and costs in connection with administrative oversight of the offering and marketing process, and preparing supplemental sales materials, holding educational conferences, and attending retail seminars conducted by broker-dealers. While the total O&O costs for each public offering shall be reasonable and shall in no event exceed an amount equal to 15% of the gross proceeds of such offering and the DRP, the company is targeting no more than 4.0% of the gross proceeds for O&O costs other than sales commissions and dealer manager fees in the current Registration Statement. The company is obligated to reimburse our advisor for O&O costs that it incurs on behalf of the company, in accordance with the advisory agreement, but only to the extent that the reimbursement would not cause the selling commissions, the dealer manager fee and the other organization and offering expenses borne by the company to exceed 15% of gross offering proceeds as of the date of reimbursement. Total O&O costs related to the terminated Registration Statement amounted to approximately $7,556,000 or 4.8% of gross offering proceeds raised pursuant to such Registration Statement.

The costs incurred by our advisor and/or dealer manager are recognized as a liability of the company to the extent that the company is obligated to reimburse our advisor and/or dealer manager, subject to the 15% of gross offering proceeds limitation described above. When recognized by the company, organizational costs are expensed and offering costs, excluding selling commissions and dealer manager fees, are recognized as a reduction of the proceeds from the offering.

The following table provides information in regard to the status of O&O costs (in 000’s) as of September 30, 2018 and December 31, 2017:

	September 30, 2018		December 31, 2017
Total O&O Costs Incurred by the Advisor and Dealer Manager	$	9,277	$	8,671
Amounts previously reimbursed to the Advisor/Dealer Manager by the company		8,911		8,381
Amounts payable to Advisor/Dealer Manager by the company		21		10
Amounts of the contingent liability subject to payment by the company only upon adequate gross offering proceeds being raised		345		280

Financing Costs

Financing costs related to debt liabilities incurred by the company, GREC or any wholly-owned holding company formed specifically to be a credit agreement counterparty are presented on the consolidated statements of assets and liabilities as a direct deduction from the carrying amount of that debt liability. Financing costs are deferred and amortized using the straight-line method over the life of the debt liability.

Capital Gains Incentive Allocation and Distribution

Pursuant to the terms of the LLC’s amended and restated limited liability company agreement, a capital gains incentive fee will be earned by an affiliate of our advisor on realized gains (net of realized and unrealized losses) since inception from the sale of investments from the company’s portfolio during operations prior to a liquidation of the company. While the terms of the advisory agreement neither include nor contemplate the inclusion of unrealized gains in the calculation of the capital gains incentive fee, the company will include unrealized gains in the calculation of the capital gains incentive distribution pursuant to an interpretation of an American Institute for Certified Public Accountants Technical Practice Aid for investment companies. This amount reflects the incentive distribution that would be payable if the company’s entire portfolio was liquidated at its fair value as of the consolidated statements of assets and liabilities date even though the advisor is not entitled to an incentive distribution with respect to unrealized gains unless and until such gains are realized. Thus, on each date that net asset value is calculated, the company calculates for the capital gains incentive distribution by calculating such distribution as if it were due and payable as of the end of such period and reflected as an allocation of equity between common stockholders and special unitholder. As of September 30, 2018, and December 31, 2017, a capital gains incentive distribution allocation in the amounts of $2,135,867 and $1,236,243, respectively, was recorded in the consolidated statements of assets and liabilities as special unitholder’s equity.

Deferred Sales Commissions

The company defers certain costs, principally sales commissions and related compensation, which are paid to the dealer manager and may be reallowed to financial advisors and broker/dealers in the future in connection with the sale of Class C shares sold with a reduced front-end load sales charge. The costs expected to be incurred at the time of the sale of Class C shares are recorded as a liability on the date of sale and are amortized on a straight-line basis over the period beginning at the time of sale and ending on the date which approximates an expected liquidity event for the company. As of September 30, 2018, and December 31, 2017, the company recorded a liability for deferred sales commissions in the amount of $206,862 and $249,858, respectively.

Reclassifications

Certain prior year amounts have been reclassified to conform with current year presentation.

Derivative Instruments

The company may utilize interest rate swaps to modify interest rate characteristics of existing debt obligations to manage interest rate exposure. These are recorded at fair value either as assets or liabilities in the accompanying consolidated statements of assets and liabilities with changes in the fair value of interest rate swaps during the period recognized as either an unrealized gain or loss in the accompanying consolidated statements of operations.

The fair value of interest rate swap contracts open as of September 30, 2018 is included on the schedules of investments by contract. For the nine months ended September 30, 2018, the company’s notional exposure to interest rate swap contracts was $58,527,880.

Consolidated Statement of Assets and Liabilities - Values of Derivatives at September 30, 2018

	Asset Derivatives			Liability Derivatives

Risk Exposure	Consolidated Statement of Assets and Liabilities Location	Fair Value		Consolidated Statement of Assets and Liabilities Location	Fair Value
Swaps
Interest Rate Risk	Swap contracts, at fair value	$	1,621,477	Swap contracts, at fair value	$	—
		$	1,621,477		$	—

The effect of derivative instruments on the Consolidated Statement of Operations

Risk Exposure	Change in net unrealized appreciation on derivative transactions for the three months ended September 30, 2018		Change in net unrealized appreciation on derivative transactions for the nine months ended September 30, 2018
Swaps
Interest Rate Risk	$	491,409	$	1,465,409
	$	491,409	$	1,465,409

By using derivative instruments, the company is exposed to the counterparty’s credit risk — the risk that derivative counterparties may not perform in accordance with the contractual provisions offset by the value of any collateral received. The company’s exposure to credit risk associated with counterparty non-performance is limited to collateral posted and the unrealized gains that are recognized in the consolidated statement of assets and liabilities. The company minimizes counterparty credit risk through credit monitoring procedures and managing margin and collateral requirements, as appropriate.

In regard to our investment in the Canadian Northern Lights Portfolio, we have foreign currency exposure related to our revenue and operating expenses which are denominated in the Canadian Dollars. While we are currently of the opinion that the currency fluctuation between the Canadian and U.S. Dollar will not have a material impact on our operating results, we may in the future hedge this risk through the use of foreign exchange swap transactions or other financial instruments if the impact on our results of operations becomes material.

Income Taxes

The LLC intends to operate so that it will qualify to be treated as a partnership for U.S. federal income tax purposes under the Internal Revenue Code. As such, it will not be subject to any U.S. federal and state income taxes. In any year, it is possible that the LLC will not meet the qualifying income exception and will not qualify to be treated as a partnership. If the LLC does not meet the qualifying income exception, the members would then be treated as stockholders in a corporation and the company would become taxable as a corporation for U.S. federal income tax purposes under the Internal Revenue Code. The LLC would be required to pay income tax at corporate rates on its net taxable income. Distributions to members from the LLC would constitute dividend income taxable to such members, to the extent of the company’s earnings and profits and the payment of the distributions would not be deductible by the LLC.

The LLC plans to conduct substantially all its operations through its wholly-owned subsidiary, GREC, which is a corporation that is subject to U.S. federal, state and local income taxes. Accordingly, most of its operations will be subject to U.S. federal, state and local income taxes.

Income taxes are accounted for under the assets and liabilities method. Deferred tax assets and liabilities are recorded for the estimated future tax consequences attributable to differences between items that are recognized in the consolidated financial statements and tax returns in different years. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. For income tax benefits to be recognized including uncertain tax benefits, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of the benefit that is more likely than not to be realized upon ultimate settlement. A valuation allowance is established against net deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the net deferred tax assets will not be realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Interest and penalties associated with income taxes, if any, will be recognized in general and administrative expense.

The company does not consolidate its investments for financial statements, rather it accounts for its investments at fair value under ASC 946. The tax attributes of the individual investments will be considered and incorporated in the company’s fair value estimates for those investments. The amounts recognized in the consolidated financial statements for unrealized appreciation and depreciation will result in a difference between the consolidated financial statements and the cost basis of the assets for tax purposes. These differences will be recognized as deferred tax assets and liabilities. Generally, the entities that hold the company’s investments will be included in the consolidated tax return of GREC and the differences between the amounts recognized for financial statement purposes and the tax return will be recognized as additional deferred tax assets and liabilities.

The company follows the authoritative guidance on accounting for uncertainty in income taxes and concluded it has no material uncertain tax positions to be recognized at this time.

The company assessed its tax positions for all open tax years as of September 30, 2018 for all U.S. federal and state tax jurisdictions for the years 2014 through 2017. The results of this assessment are included in the company’s tax provision and deferred tax assets as of September 30, 2018.

Tax Reform

New tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Act”), was enacted on December 22, 2017. ASC 740, Accounting for Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment even though the effective date for most provisions is for tax years beginning after December 31, 2017, or in the case of certain other provisions, January 1, 2018.

Given the significance of the legislation, the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118), which allows registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations. However, the measurement period is deemed to have ended earlier when the registrant has obtained, prepared and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared or analyzed.

SAB 118 summarizes a three-step process to be applied at each reporting period to account for and qualitatively disclose: (1) the effects of the change in tax law for which accounting is complete; (2) provisional amounts (or adjustments to provisional amounts) for the effects of the tax law where accounting is not complete, but that a reasonable estimate has been determined; and (3) a reasonable estimate cannot yet be made and therefore taxes are reflected in accordance with law prior to the enactment of the Act.

The major provisions under the Act are discussed below:

Corporate Tax Rate

The law reduces the corporate tax rate to 21% effective January 1, 2018. A company must remeasure its deferred tax assets and liabilities to reflect the effects of enacted changes in tax laws or rates at the date of enactment, i.e., the date the President signed the law, even though the changes may not be effective until future periods. The effect of the remeasurement is reflected entirely in the interim period that includes the enactment date and allocated directly to income tax expense (benefit) from continuing operations.

Repatriation of existing earnings and profits

Under the Act, a company’s foreign earnings and profits (E&P) accumulated in controlled foreign corporations (CFCs) under legacy tax laws are deemed repatriated for the last taxable year of a CFC that begins before January 1, 2018. E&P are determined as the higher of the balance at November 2 or December 31, 2017. The tax on those deemed repatriated earnings is no longer indefinitely deferred but may be paid over eight years with no interest charged:

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8% in each of Years 1 to 5;

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15% in Year 6;

—

20% in Year 7; and

—

25% in Year 8.

The Company has one Canadian CFC. This CFC has negative E&P at the end of December 31, 2017. As such, no mandatory repatriation is required.

Cost Recovery

Under the Act, a company can expense 100% of investments in depreciable property other than real property or certain utility property and certain businesses with floor plan indebtedness. The new rules apply to original or used property. The new rules apply to investments made after September 27, 2017 and before January 1, 2023. The phase-out period begins on January 1, 2023 and ends on December 31, 2026.

The Company expects to opt out of the 100% deduction on its eligible assets acquired in 2017 and 2018.

Interest Expense Limitation

Under the Act, effective January 1, 2018, a company can only deduct interest expense up to 30% of “adjusted taxable income”. For taxable years beginning after December 31, 2017 and before January 1, 2022, the definition of adjusted taxable income is computed without regard to the deduction for depreciation, amortization, or depletion. Beginning in 2022, depreciation, amortization, and depletion must be considered when calculating adjusted taxable income. The disallowed interest expense can be carried forward indefinitely. Certain businesses with average gross receipts of $25 million or less are exempt from the rule.

Net Operating Losses (NOL)

Under the Act, NOL generated after December 31, 2017 can only offset up to 80% of taxable income. The unused NOL can be carried forward indefinitely. The NOL generated before January 1, 2018 remains subject to the old rules (i.e., 100% utilization and 20-year expiration). When scheduling out future NOL utilization for the valuation reserve analysis, the Company applied the NOL limitation rules.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 outlines a new model for accounting by lessees, whereby their rights and obligations under substantially all leases, existing and new, would be capitalized and recorded on the balance sheet. For lessors, however, the accounting remains largely unchanged from the current model, with the distinction between operating and financing leases retained, but updated to align with certain changes to the lessee model and the new revenue recognition standard. The new standard also replaces existing sale-leaseback guidance with a new model applicable to both lessees and lessors. Additionally, the new standard requires extensive quantitative and qualitative disclosures. ASU 2016-02, as amended by ASU 2017-13, is effective for U.S. GAAP public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years; for all other entities, the final lease standard will be effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early application will be permitted for all entities. The new standard must be adopted using a modified retrospective transition of the new guidance and provides for certain practical expedients. Transition will require application of the new model at the beginning of the earliest comparative period presented. At this time, management is evaluating the impact of ASU No. 2016-02 on its consolidated financial statements and disclosures.

In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606-Revenue from Contracts with Customers (ASU 2014-09). The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. The ASU will replace most of the existing revenue recognition guidance under US GAAP. The amendments in ASU 2014-09 are effective for public companies for interim and annual periods in fiscal years beginning after December 15, 2017, with early adoption permitted for interim and annual periods in fiscal years beginning after December 15, 2016. The Company adopted the standard on January 1, 2018 utilizing the cumulative effective transition method. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements and disclosures. See Revenue Recognition section for additional information on the Company’s revenue recognition accounting policies.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”, which modifies the disclosure requirements on fair value measurements. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (fiscal 2020 for the Company). Upon the effective date, certain provisions are to be applied prospectively, while others are to be applied retrospectively to all periods presented. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. We are currently evaluating the impact of the amendments on our consolidated financial statement disclosures. Since the amendments impact only disclosure requirements, we do not expect the amendments to have an impact on our consolidated financial statements.

In August 2018, the SEC issued a final rule to amend certain disclosure requirements that were redundant, duplicative, overlapping or superseded by other SEC disclosure requirements, US GAAP or IFRS. The amendments generally eliminated or otherwise reduced certain disclosure requirements of various SEC rules and regulations. However, in some cases, the amendments require additional information to be disclosed, including changes in stockholders’ equity in interim periods. The adoption of the requirement will not have a material impact on the Company’s consolidated financial statements and disclosures. The Company will be adopting the requirements during the first quarter of 2019.

Note 3. Investments

The composition of the company’s investments as of September 30, 2018 by geographic region, at fair value, were as follows:

	Investments at Cost		Investments at Fair Value		Fair Value Percentage of Total Portfolio
United States:
East Region	$	65,110,173		66,714,873		26.1	%
Mid-West Region		1,797,803		1,945,921		0.8
Mountain Region		51,736,540		52,435,084		20.5
South Region		70,791,282		67,194,413		26.3
West Region		55,275,073		64,884,858		25.4
Total United States	$	244,710,871		253,175,149		99.1	%
Canada:		1,603,136		2,196,715		0.9
Total	$	246,314,007		255,371,864		100.0	%

The composition of the company’s investments as of December 31, 2017 by geographic region, at fair value, were as follows:

	Investments at Cost		Investments at Fair Value		Fair Value Percentage of Total Portfolio
United States:
East Region	$	59,828,924		61,876,000		28.3	%
Mid-West Region		1,022,813		1,010,292		0.5
Mountain Region		40,588,577		42,220,262		19.3
South Region		57,033,202		57,716,376		26.4
West Region		52,284,375		53,469,417		24.5
Total United States	$	210,757,891		216,292,347		99.0	%
Canada:		1,603,136		2,093,827		1.0
Total	$	212,361,027		218,386,174		100.0	%

The composition of the company’s investments as of September 30, 2018 by industry, at fair value, were as follows:

	Investments at Cost		Investments at Fair Value		Fair Value Percentage of Total Portfolio
Alternative Energy – Biomass	$	74,664	$	74,664		0.0	%
Alternative Energy – Commercial Solar		144,802,552		146,012,028		57.2
Alternative Energy – Residential Solar		37,503,136		42,392,238		16.6
Alternative Energy – Wind		62,896,680		65,823,848		25.8
Energy Efficiency – Lighting Replacement		1,036,975		1,069,086		0.4
Total	$	246,314,007	$	255,371,864		100.0	%

The composition of the company’s investments as of December 31, 2017 by industry, at fair value, were as follows:

	Investments at Cost		Investments at Fair Value		Fair Value Percentage of Total Portfolio
Alternative Energy – Commercial Solar	$	110,855,889	$	110,381,133		50.5	%
Alternative Energy – Residential Solar		37,503,136		40,124,684		18.5
Alternative Energy – Wind		62,846,681		66,702,849		30.5
Energy Efficiency – Lighting Replacement		1,155,321		1,177,508		0.5
Total	$	212,361,027	$	218,386,174		100.0	%

Investments held as of September 30, 2018 and December 31, 2017 are considered Control Investments, which are defined as investments in companies in which the company owns 25% or more of the voting securities of such company or have greater than 50% representation on such company’s board of directors or investments in limited liability companies for which the company serves as managing member.

Note 4. Fair Value Measurements - Investment

The following table presents fair value measurements of investments, by major class, as of September 30, 2018, according to the fair value hierarchy:

	Valuation Inputs
	Level 1		Level 2		Level 3		Fair Value
Limited Liability Company Member Interests	$	—	$	—	$	252,596,009	$	252,596,009
Capital Stock		—		—		2,196,715		2,196,715
Energy Efficiency Secured Loans		—		—		579,140		579,140
Total	$	—	$	—	$	255,371,864	$	255,371,864
Other Financial Instruments*
Unrealized appreciation on open swap contracts	$	—	$	1,621,477	$	—	$	1,621,477
Unrealized depreciation on open swap contracts		—		—		—		—
Total	$	—	$	1,621,477	$	—	$	1,621,477

*Other financial instruments are derivatives, such as futures, forwards and swaps. These instruments are reflected at the unrealized appreciation (depreciation) on the instrument.

The following table presents fair value measurements of investments, by major class, as of December 31, 2017, according to the fair value hierarchy:

	Valuation Inputs
	Level 1		Level 2		Level 3		Fair Value
Limited Liability Company Member Interests	$	—	$	—	$	215,619,476	$	215,619,476
Capital Stock		—		—		2,093,827		2,093,827
Energy Efficiency Secured Loans		—		—		672,871		672,871
Total	$	—	$	—	$	218,386,174	$	218,386,174

Other Financial Instruments*
Unrealized appreciation on open swap contracts	$	—	$	156,068	$	—	$	156,068
Total	$	—	$	156,068	$	—	$	156,068

*Other financial instruments are derivatives, such as futures, forward currency contracts and swaps. These instruments are reflected at the unrealized appreciation (depreciation) on the instrument.

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the nine months ended September 30, 2018:

	Balance as of December 31, 2017		Net change in unrealized appreciation on investments		Translation of assets and liabilities denominated in foreign currencies			Purchases and other adjustments to cost ⁽¹⁾		Sales and Repayments of investments ⁽²⁾			Balance as of September 30, 2018
Limited Liability Company Member Interests	$	215,619,476	$	2,929,822	$	—		$	38,546,711	$	(4,500,000	)	$	252,596,009
Capital Stock		2,093,827		143,458		(40,570	)		—		—			2,196,715
Energy Efficiency - Secured Loans		672,871		—		—			—		(93,731	)		579,140
Total	$	218,386,174	$	3,073,280	$	(40,570	)	$	38,546,711	$	(4,593,731	)	$	255,371,864

(1)	Includes purchases of new investments, capitalized deal costs, effects of purchase price adjustments, paid-in-kind interest, return of capital and additional investments in existing investments, if any.

(2)	Includes principal repayments on loans.

The total change in unrealized appreciation included in the consolidated statements of operations within net change in unrealized appreciation (depreciation) on investments for the three and nine months ended September 30, 2018 attributable to Level 3 investments still held at September 30, 2018 was $(811,752) and $3,073,280, respectively. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in or out of the Level 3 as of the beginning of the period which the reclassifications occur. There were no reclassifications attributable to Level 3 investments during the three months ended September 30, 2018.

Net change in unrealized appreciation (depreciation) on investments at fair value for the three months and nine months ended September 30, 2018 was $(811,752) and $3,073,280, respectively, included within net change in unrealized appreciation (depreciation) on investments in the consolidated statements of operations. There were no net realized gains or losses on investments at fair value for the three and nine months ended September 30, 2018. For the three and nine months ended September 30, 2018, net unrealized currency gains (losses) arising from valuing foreign currency-denominated assets and liabilities at the current exchange rate were $24,289 and $(40,570), respectively, and included within net change in unrealized appreciation (depreciation) on foreign currency translation in the consolidated statements of operations.

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the nine months ended September 30, 2017:

	Balance as of December 31, 2016		Net change in unrealized appreciation on investments		Realized gain		Translation of assets and liabilities denominated in foreign currencies		Purchases and other adjustments to cost ⁽¹⁾		Sales and Repayments of investments ⁽²⁾			Balance as of September 30, 2017
Limited Liability Company Member Interests	$	112,536,561	$	2,157,465	$	693,882	$	—	$	71,192,051	$	(11,378,441	)	$	175,201,518
Capital Stock		1,815,169		201,033		—		109,937		—		—			2,126,139
Energy Efficiency - Secured Loans		771,371		—		—		—		—		(66,000	)		705,371
Total	$	115,123,101	$	2,358,498	$	693,882	$	109,937	$	71,192,051	$	(11,444,441	)	$	178,033,028

(1)	Includes purchases of new investments, capitalized deal costs, effects of purchase price adjustments, paid-in-kind interest, return of capital and additional investments in existing investments, if any.
(2)	Includes principal repayments on loans.

The total change in unrealized appreciation included in the consolidated statements of operations within net change in unrealized appreciation on investments for the three and nine months ended September 30, 2017 attributable to Level 3 investments still held at September 30, 2017 was $873,352 and $2,358,498, respectively. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in or out of the Level 3 as of the beginning of the period which the reclassifications occur. There were no reclassifications attributable to Level 3 investments during the nine months ended September 30, 2017.

Net change in unrealized appreciation on investments at fair value for the three and nine months ended September 30, 2017 was $873,352 and $2,358,498, respectively, included within net change in unrealized appreciation (depreciation) on investments in the consolidated statements of operations. Net realized gains on investments for the three and nine months ended September 30, 2017 was $693,882 and $693,882. For the three and nine months ended September 30, 2017, net unrealized currency gains arising from valuing foreign currency-denominated assets and liabilities at the current exchange rate were $58,013 and $109,937, respectively, and included within net change in unrealized appreciation on foreign currency translation in the consolidated statements of operations.

As of September 30, 2018, certain company investments utilized Level 3 inputs. The following table presents the quantitative information about Level 3 fair value measurements of the company’s investments as of September 30, 2018:

	Fair Value		Valuation Techniques	Unobservable Inputs	Rates/Assumptions
Alternative Energy – Biomass	$	74,664	Transaction cost	N/A	N/A
Alternative Energy – Commercial Solar	$	144,724,954	Income approach	Discount rate, future kWh Production, potential leverage and estimated remaining useful life	7.75% - 8.50%, 0.50% annual degradation in production, 22.5 – 35 years
Alternative Energy – Commercial Solar	$	1,287,074	Transaction cost	N/A	N/A
Alternative Energy – Residential Solar	$	42,392,238	Income approach	Discount rate, future kWh Production, potential leverage and estimated remaining useful life	7.25% - 11.00%, 0.50% annual degradation in production, 12.5 – 33.3 years
Alternative Energy – Wind	$	65,823,848	Income approach	Discount rate, future kWh Production, potential leverage and estimated remaining useful life	8.50%, no annual degradation in production, 24.3 – 28 years
Energy Efficiency- Secured Loans and Leases– Lighting Replacement	$	1,069,086	Income and collateral based approach	Market yields and value of collateral	10.25% - 20.40%

As of December 31, 2017, all of the company’s portfolio investments utilized Level 3 inputs. The following table presents the quantitative information about Level 3 fair value measurements of the company’s investments as of December 31, 2017:

	Fair Value		Valuation Techniques	Unobservable Inputs	Rates/Assumptions
Alternative Energy – Commercial Solar	$	87,087,201	Income approach	Discount rate, future kWh Production, potential leverage and estimated remaining useful life	7.0% - 9.25%, 0.50% annual degradation in production, 13.5 – 34.3 years
Alternative Energy – Commercial Solar	$	23,293,932	Transaction cost	N/A	N/A
Alternative Energy – Residential Solar	$	40,124,684	Income approach	Discount rate, future kWh Production, potential leverage and estimated remaining useful life	7.0% - 9.25%, 0.50% annual degradation in production, 13.5 – 34.3 years
Alternative Energy – Wind	$	66,702,849	Income approach	Discount rate, future kWh Production, potential leverage and estimated remaining useful life	8.50%, no annual degradation in production, 27.9 – 29.0 years
Energy Efficiency- Secured Loans and Leases – Lighting Replacement	$	1,177,508	Income and collateral based approach	Market yields and value of collateral	10.25% - 20.40%

GREC utilizes primarily proprietary discounted cash flow pricing models in the fair value measurement of the company’s investments. Significant unobservable inputs include discount rates and estimates related to the future production of electricity. Significant increases or decreases in discount rates used or actual kilowatt hour (“kWh”) production can significantly increase or decrease the fair value measurement.

Note 5. Related Party Agreements and Transactions Agreements

The company has executed advisory and administration agreements with the advisor and Greenbacker Administration, LLC, our administrator, respectively, as well as a dealer manager agreement with the dealer manager, which entitles the advisor, certain affiliates of the advisor, and the dealer manager to specified fees upon the provision of certain services with regard to the offering of the company’s shares and the ongoing management of the company as well as reimbursement of O&O costs incurred by the advisor and the dealer manager on behalf of the company (as discussed in Note 2) and certain other operating costs incurred by the advisor on behalf of the company. The term “Special Unitholder” refers to GREC Advisors, LLC, a Delaware limited liability company, which is a subsidiary of our advisor and “special unit”, refers to the special unit of limited liability company interest in GREC entitling the Special Unitholder to an incentive allocation and distribution. In addition, the company and the advisor entered into an expense reimbursement agreement whereby the advisor agreed to reimburse the company for certain expenses above certain limits and be repaid when the company’s expenses are reduced below that threshold. The expense reimbursement agreement expired and was not renewed as of December 31, 2016. The fees and reimbursement obligations are as follows:

Type of Compensation and Recipient		Determination of Amount
Selling Commissions — Dealer Manager		Up to 7% of gross offering proceeds from the sale of Class A shares, up to 3% of gross offering proceeds from the sale of Class C shares and up to 6% of gross offering proceeds for the sale of Class P-A shares. No selling commission will be paid with respect to Class I and Class P-I shares or for sales pursuant to the dividend reinvestment plan. All of its selling commissions are expected to be re-allowed to participating broker-dealers.

Dealer Manager Fee — Dealer Manager		Up to 2.75% of gross offering proceeds from the sale of Class A and C shares, up to 1.75% of gross offering proceeds from the sale of Class I shares and up to 2.50% of gross offering proceeds from the sale of Class P-A shares. No dealer manager fee will be paid for sales pursuant to the dividend reinvestment plan. The dealer manager may re-allow a portion of its dealer manager fee to selected broker-dealers.

Distribution Fee — Dealer Manager		With respect to Class C shares only, the company will pay the dealer manager a distribution fee that accrues daily in an amount equal to 1/365th of 0.80% of the amount of the net asset value for the Class C shares for such day on a continuous basis from year to year. The company will stop paying distribution fees at the earlier of a listing of the Class C shares on a national securities exchange, following the completion of this offering, total underwriting compensation in this offering equals 10% of the gross proceeds from the primary offering or Class C shares are no longer outstanding. The dealer manager may re-allow all or a portion of the distribution fee to participating broker-dealers and servicing broker dealers Commencing as of June 30, 2016, the company estimates the amount of distribution fees expected to be paid and records that liability at the time of sale.

O&O costs — Advisor		The company reimburses the advisor for the O&O costs (other than selling commissions and dealer manager fees) it has incurred on the company’s behalf only to the extent that the reimbursement would not cause the selling commissions, dealer manager fee and the other O&O costs borne by the company to exceed 15.0% of the gross offering proceeds as the amount of proceeds increases. While the company has targeted an offering expense ratio of 4.0% for O&O costs over the term of the current offering, 4.8% was charged on the offering that terminated as of February 7, 2017.

Base Management Fees — Advisor		The base management fee payable to GCM will be calculated at a monthly rate of 0.167% (2.00% annually) of our gross assets (including amounts borrowed). For services rendered under the advisory agreement, the base management fee will be payable monthly in arrears. The base management fee will be calculated based on the average of the values of our gross assets for each day of the prior month. Base management fees for any partial period will be appropriately pro-rated. The base management fee may be deferred or waived, in whole or part, at the election of the advisor. All or any part of the deferred base management fee not taken as to any period shall be deferred without interest and may be taken in any period prior to the occurrence of a liquidity event as the advisor shall determine in its sole discretion.

Incentive Allocation and Distribution — Special Unitholder		The incentive distribution to which the Special Unitholder is be entitled to will be calculated and payable quarterly in arrears based on the pre-incentive distribution net investment income for the immediately preceding fiscal quarter. For this purpose, pre-incentive distribution net investment income means interest income, dividend and distribution income from equity investments (excluding that portion of distributions that are treated as return of capital) and any other income (including any other fees, such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive, but excluding any fees for providing managerial assistance) accrued during the fiscal quarter, minus the operating expenses for the fiscal quarter (including the base management fee, expenses payable under the administration agreement with the company’s Administrator, and any interest expense and distributions paid on any issued and outstanding indebtedness and preferred units of limited liability company interest, but excluding the incentive distribution). Pre-incentive distribution net investment income does not include any realized capital gains, realized capital losses, unrealized capital appreciation or depreciation or any accrued income taxes and other taxes including, but not limited to, franchise, property, and sales taxes.

		Pre-incentive distribution net investment income, expressed as a rate of return on the value of the company’s average adjusted capital at the end of the immediately preceding fiscal quarter, will be compared to a “hurdle rate” of 1.75% per fiscal quarter (7.00% annualized). Adjusted capital shall mean: cumulative gross proceeds before sales and commission and dealer fees, generated from sales of the company’s shares and preferred units of limited liability company interests (including the DRP) reduced for distributions to members of proceeds from non-liquidation dispositions of asset and amount paid for share repurchases pursuant to the Share Repurchase Program. Average adjusted capital shall mean: the average value of the adjusted capital for the two most recently completed fiscal quarters. The Special Unitholder shall receive an incentive distribution with respect to the pre-incentive distribution net investment income in each fiscal quarter as follows:

		● no incentive distribution in any fiscal quarter in which the pre-incentive distribution net investment income does not exceed the “hurdle rate” of 1.75%;

● 100% of the pre-incentive distribution net investment income with respect to that portion of such pre-incentive distribution net investment income, if any, that exceeds the hurdle but is less than 2.1875% in any fiscal quarter (8.75% annualized with a 7% annualized hurdle rate). The company refers to this portion of the pre-incentive distribution net investment income (which exceeds the hurdle but is less than 2.1875%) as the “catch-up.” The “catch-up” is meant to provide the advisor with 20% of the pre-incentive distribution net investment income as if a hurdle did not apply if the net investment income exceeds 2.1875% in any fiscal quarter; and

● 20% of the amount of the pre-incentive distribution net investment income, if any, that exceeds 2.1875% in any fiscal quarter (8.75% annualized with a 7% annualized hurdle rate) is payable to the Special Unitholder (once the hurdle is reached and the catch-up is achieved, 20% of all pre-incentive distribution investment income thereafter is allocated to the Special Unitholder).

Capital Gains Incentive Distribution — Special Unitholder		The capital gains incentive distribution will be determined and payable to the Special Unitholder in arrears as of the end of each fiscal quarter (or upon termination of the advisory agreement, as of the termination date) to the Special Unitholder, and will equal 20.0% of the company’s realized capital gains, if any, on a cumulative basis from inception through the end of each fiscal quarter, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any capital gain incentive distributions.

Liquidation Incentive Distribution — Special Unitholder		The liquidation incentive distribution payable to the Special Unitholder will equal 20.0% of the net proceeds from a liquidation of the company (other than in connection with a listing, as described below) in excess of adjusted capital, as measured immediately prior to liquidation. Adjusted capital shall mean: cumulative gross proceeds generated from sales of shares (including the DRP) reduced for distributions to members of proceeds from non-liquidation dispositions of our assets and amounts paid for share repurchases pursuant to the Share Repurchase Program. In the event of any liquidity event that involves a listing of the company’s shares, or a transaction in which the company’s members receive shares of a company that is listed, on a national securities exchange, the liquidation incentive distribution will equal 20% of the amount, if any, by which the company’s listing value following such liquidity event exceeds the adjusted capital, as calculated immediately prior to such listing (the “listing premium”). Any such listing premium and related liquidation incentive distribution will be determined and payable in arrears 30 days after the commencement of trading following such liquidity event.

Operating Expense and Expense Assumption and Reimbursement Agreement

The company will reimburse the advisor’s cost of providing administrative services, legal, accounting and printing. The company will not reimburse the advisor for the salaries and benefits to be paid to the named executive officers. For the year ended December 31, 2015, the advisor assumed operating expenses for the company in an amount sufficient to keep total annual operating expenses (exclusive of interest, taxes dividend expense, borrowing costs, organizational and extraordinary expenses) of the company (“Expenses”) at percentages of average net assets of such class for any calculation period no higher than 5.0% (the “Maximum Rates”). During the year ended December 31, 2016, Expenses as a percentage of net assets were less than the Maximum Rates allowing the advisor to be fully reimbursed for past assumed operating expenses. The expense reimbursement agreement expired and was not renewed as of December 31, 2016 as Expenses are expected to continue in an amount less than the Maximum Rates.

For the three and nine months ended September 30, 2018, the company incurred $2,397,833 and $7,044,576, respectively, in operating expenses, including the management fees earned by the advisor. For the three and nine months ended September 30, 2017, the company incurred $1,379,530 and $3,962,762, respectively, in operating expenses, including the management fees earned by the advisor. Since January 1, 2015, the advisor has elected to limit the company’s Expenses to no higher than 5% annually of the company’s average net assets.

For the three and nine months ended September 30, 2018, the advisor earned $1,571,737 and $4,090,466, respectively, in management fees. For the three and nine months ended September 30, 2017, the advisor earned $873,961 and $2,330,599, respectively, in management fees. For the three and nine months ended September 30, 2018, a $59,210 and $(899,624) increase (decrease) in net assets attributed to the special unitholder, respectively, was recorded based primarily upon unrealized appreciation on investments. For the three and nine months ended September 30, 2017, a $310,362 decrease and $617,776 increase in net assets attributed to the special unitholder, respectively, was recorded based primarily upon unrealized appreciation on investments.

As of September 30, 2018 and December 31, 2017, due to advisor on the consolidated statements of assets and liabilities in the amount of $21,332 and $ 10,417, respectively, are solely comprised of a payable to the advisor for reimbursable Organization and Offering Costs.

For the three and nine months ended September 30, 2018, the company paid $180,797 and $605,726, respectively, in dealer manager fees and $507,094 and $1,777,239, respectively, in selling commissions to the dealer manager. For the three and nine months ended September 30, 2017, the company paid $208,977 and $590,030, respectively, in dealer manager fees and $538,779 and $1,733,704, respectively, in selling commissions to the dealer manager. These fees and commissions were paid in connection with the sales of the company’s shares to investors and, as such, were recorded against the proceeds from the issuance of shares and are not reflected in the company’s consolidated statements of operations.

For the three months ended March 31, 2017, Greenbacker Administration, LLC invoiced the company $115,983 for expenses, at cost, for services related to asset management and accounting services related to the company’s investments. Effective on April 1, 2017, these expenses were invoiced directly to the company’s investments.

As of September 30, 2018, and December 31, 2017, the advisor owned 23,601 Class A shares.

The company entered into secured loans to finance the purchase and installation of energy efficient lighting with LED Funding LLC and Renew AEC One LLC (“AEC Companies”). All loans with LED Funding LLC, an AEC Company, converted to operating leases on the day the energy efficiency upgrades became operational. AEC Companies are considered related parties as the members of these entities own an indirect, non-controlling ownership interest in the company’s advisor. The loans outstanding between the AEC Companies and the company, and the subsequent operating leases, were negotiated at an arm’s length and contain standard terms and conditions that would be included in third party lending agreements including required security and collateral, interest rates based upon risk of the specific loan, and term of the loan. As of September 30, 2018, all loans and operating losses are considered current per their terms.

Note 6. Borrowings

On January 5, 2018, the company, through GREC HoldCo, entered into a credit agreement by and among the Company, the Company’s wholly owned subsidiary, GREC, the lenders party thereto and Fifth Third Bank, as administrative agent, as sole lead arranger and sole lead bookrunner, as well as swap counterparty. The new credit facility (the “Credit Facility”) consists of a loan of up to the lesser of $60,000,000 or a borrowing base amount based on various solar projects that act as collateral for the credit facility, of which approximately $25.7 million was drawn down at closing. The Credit Facility allows for additional drawdowns through December 31, 2018, at which point the outstanding balance converts to a term loan that matures on January 5, 2024. With additional drawdowns through September 30, 2018, the outstanding balance is approximately $30.7 million. Financing costs of $1,341,038 related to the Credit Facility, and the previous Facility 1 and Facility 2 Term Loans, have been capitalized and are being amortized over the current term of the Credit Facility, and are included within Term note payable, net of financing costs on the Consolidated Statement of Assets and Liabilities.

Interest on the Credit Facility, which bears interest at one-month LIBOR plus 2.125%, is payable on the last day of each month commencing January 31, 2018. Commitment fees on the average daily unused portion of the Credit Facility are payable at a rate per annum of 0.50% through December 31, 2018.

Principal on the Credit Facility is payable, commencing on January 31, 2019, at a fixed amount on the last day of each month based upon an amortization period equal to the weighted average power purchase agreement (“PPA”) term less one year. Borrowings under the Credit Facility are secured by the assets, cash, agreements and equity interests in the Borrower and its subsidiaries. The company is a guarantor of the Borrower’s obligations under the Credit Facility.

In regard to the Credit Facility, the company has entered into four separate interest rate swap agreements. The first swap (“Swap 1”), effective July 29, 2016, has an initial notional amount of $4,300,000 to swap the floating rate interest payments on the original Facility 1 Term Loan for a corresponding fixed payment. The fixed swap rate is 1.11%. The second swap (“Swap 2”), with a trade date of June 15, 2017 and an effective date of June 18, 2018 and an initial notional amount of $20,920,650, was used to swap the floating rate interest payments on an additional principal amount of the Credit Facility, for a corresponding fixed payment. The fixed swap rate is 2.261%. The third swap (“Swap 3”), with a trade date of January 11, 2018 and an effective date of December 31, 2018 and an initial notional amount of $29,624,945 was used to swap the floating rate interest payments on the remaining unhedged portion of the Credit Facility, as well as the estimated additional drawdowns, for a corresponding fixed payment. The fixed swap rate is 2.65%. The fourth swap (“Swap 4”), with a trade date of February 7, 2018 and an effective date of December 31, 2018 and an initial notional amount of $4,180,063 was used to swap the floating rate interest payments on the remaining unhedged portion of the Credit Facility, as well as the estimated additional drawdowns, for a corresponding fixed payment. The fixed swap rate is 2.97%.

If an event of default shall occur and be continuing under the Credit Facility, the commitments under the Credit Facility may be terminated and the principal amount outstanding under the Credit Facility, together with all accrued unpaid interest and other amounts owing in respect thereof, may be declared immediately due and payable.

On July 11, 2016, the company, through a wholly owned subsidiary, GREC HoldCo (the “Borrower”), entered into a Credit Agreement by and among the Borrower, the lenders party thereto and Fifth Third Bank, as administrative agent, as well as swap counterparty. The credit facility consisted of an initial term loan of $4,300,000 (the “Facility 1 Term Loan”) as well as a revolving credit facility in the aggregate principal amount of up to $33,250,000 (the “Revolver”). The amount outstanding on the Revolver, based upon the modified conversion date of September 9, 2017, was converted to an additional term loan facility in the amount of $10,000,000 (the “Facility 2 Term Loan”). The Facility 1 Term Loan and Facility 2 Term Loan in the amount of approximately $14,100,000 were repaid as part of the Credit Facility closing.

The company’s outstanding debt as of September 30, 2018 and December 31, 2017 was as follows:

	September 30, 2018										December 31, 2017

	Aggregate Principal Amount Available		Principal Amount Outstanding		Carrying Value		Deferred Financing Costs		Term Note Payable, Net of Financing Costs		Aggregate Principal Amount Available		Principal Amount Outstanding		Carrying Value		Deferred Financing Costs		Term Note Payable, Net of Financing Costs
Credit Facility	$	60,000,000	$	30,665,460	$	30,665,460	$	1,195,566	$	29,469,894		—		—		—		—		—
Facility 1 Term Loan		—		—		—		—		—	$	—	$	3,893,889	$	3,893,889	$	745,430	$	3,148,459
Facility 2 Term Loan		—		—		—		—		—		—		9,761,905		9,761,905		—		9,761,905
Total	$	60,000,000	$	30,665,460	$	30,665,460	$	1,195,566	$	29,469,894	$	—	$	13,655,794	$	13,655,794	$	745,430	$	12,910,364

The following table shows the components of interest expense, commitment fees related to the Revolving Facility, amortized deferred financing costs, weighted average stated interest rate and weighted average outstanding debt balance for the credit facility for the three and nine months ended September 30, 2018:

	For the three months Ended September 30, 2018			For the nine months Ended September 30, 2018
Credit Facility commitment fee	$	10,861		$	31,755
Credit Facility Loan interest		319,133			889,590
Amortization of deferred financing costs		57,032			165,242
Other*		(207,579	)		291,880
Total		179,447			1,378,467
Weighted average interest rate on credit facility		4.28	%		4.11	%
Weighted average outstanding balance of credit facility	$	30,665,460		$	29,690,434

*Primarily includes financing costs of credit facility and swap interest hedged against the credit facility.

	For the year Ended December 31, 2017
Revolver interest	$	444,303
Revolver commitment fee		81,109
Credit Facility Loan Interest		157,811
Amortization of deferred financing costs		164,725
Total		847,948
Weighted average interest rate on credit facility		4.87	%
Weighted average outstanding balance of credit facility	$	8,481,848

The principal payments due on borrowings for each of the next five years ending December 31 and thereafter, are as follows:

Year ending December 31:	Principal Payments
2018	$	—
2019		2,519,220
2020		2,610,193
2021		2,570,228
2022		2,198,372
Thereafter		20,767,447
	$	30,665,460

Note 7. Members’ Equity

General

Pursuant to the terms of the LLC Agreement, the LLC may issue up to 400,000,000 shares, of which 350,000,000 shares are designated as Class A, C, I, P-A and P-I shares (collectively, common shares), and 50,000,000 are designated as preferred shares and one special unit. Each class of common shares will have the same voting rights.

The following are the current commissions and fees for each common share class in connection with the company’s continuous public offering pursuant to a Registration Statement on Form S-1 (File No. 333-211571) as well as the private offering of certain share classes.

Class A: Each Class A share is subject to a selling commission of up to 7.00% per share and a dealer manager fee of up to 2.75% per share. No selling commissions or dealer manager fees are paid for sales pursuant to the dividend reinvestment plan.

Class C: Each Class C share issued in the primary offering is subject to a selling commission of up to 3.00% per share and a dealer manager fee of up to 2.75% per share. In addition, with respect to Class C shares, the company pays the dealer manager a monthly distribution fee, or “distribution fee”, that accrues daily equal to 1/365th of 0.80% of the amount of the daily net asset value for the Class C shares on a continuous basis from year to year. No selling commissions or dealer manager fees are paid for sales pursuant to the DRP.

Class P-A : Class P-A shares were converted into Class P-I shares during the quarter ended June 30, 2017 and were not offered for sale for the period through April 15, 2018. Effective April 16, 2018 Class P-A shares are again offered with a selling commission of up to 6% and a dealer manager fee of up to 2.50%.

Class I and Class P-I: No selling commission or distribution fee will be paid for sales of any Class I and Class P-I shares. Each Class I share is subject to a dealer manager fee of up to 1.75% per share.

The following table is a summary of the shares issued and repurchased during the period and outstanding as of September 30, 2018:

	Shares Outstanding as of December 31, 2017		Shares Issued During the Period		Shares Repurchased During the Period			Shares Outstanding as of September 30, 2018
Class A shares		13,857,830		2,427,260		(292,326	)		15,992,764
Class C shares		1,431,999		545,536		(4,227	)		1,973,308
Class I shares		4,511,832		1,318,499		(52,298	)		5,778,033
Class P-A shares		—		6,705		—			6,705
Class P-I shares		3,387,568		6,712,135		(15,481	)		10,084,222
Total		23,189,229		11,010,135		(364,332	)		33,835,032

The following table is a summary of the shares issued during the period and outstanding as of December 31, 2017:

	Shares Outstanding as of December 31, 2016		Shares Issued During the Period		Shares Converted During the Period			Shares Repurchased During the Period			Shares Outstanding as of December 31, 2017
Class A shares		10,878,502		3,348,253		—			(368,925	)		13,857,830
Class C shares		1,041,836		396,204		—			(6,041	)		1,431,999
Class I shares		2,754,491		1,838,656		—			(81,315	)		4,511,832
Class P-A shares		47,774		3,092		(50,866	)		—			—
Class P-I shares		199,319		3,147,692		50,866			(10,309	)		3,387,568
Total		14,921,922		8,733,897		—			(466,590	)		23,189,229

The proceeds from shares sold and the value of shares issued through the reinvestment of distributions for each class of shares for the nine months ended September 30, 2018 and September 30, 2017 were as follows:

	Class A Shares		Class C Shares		Class I Shares		Class P-A Shares		Class P-I Shares		Total
For the nine months ended September 30, 2018:
Proceeds from Shares Sold	$	18,658,573	$	4,334,381	$	10,338,796	$	58,663	$	59,325,000	$	92,715,413
Proceeds from Shares Issued through Reinvestment of Distributions	$	2,793,963	$	352,159	$	1,307,878	$	—	$	—	$	4,454,000
For the nine months ended September 30, 2017:
Proceeds from Shares Sold	$	18,846,412	$	1,778,400	$	11,618,598	$	27,075	$	20,155,077	$	52,425,562
Proceeds from Shares Issued through Reinvestment of Distributions	$	2,283,310	$	265,082	$	877,204	$	—	$	—	$	3,425,596
Capital transfers from the conversion of Shares	$	—	$	—	$	—	$	(441,005)	$	441,005	$	—

As of September 30, 2018, and December 31, 2017, none of the LLC’s preferred shares were issued and outstanding.

The LLC Agreement authorizes the board of directors, without approval of any of the members, to increase the number of shares the company is authorized to issue and to classify and reclassify any authorized but unissued class or series of shares into any other class or series of shares having such designations, preferences, right, power and duties as may be specified by the board of directors. The LLC Agreement also authorizes the board of directors, without approval of any of the members, to issue additional shares of any class or series for the consideration and on the terms and conditions established by the board of directors. In addition, the company may also issue additional limited liability company interests that have designations, preferences, right, powers and duties that are different from, and may be senior to, those applicable to the common shares. The Special Unitholder will hold the special unit in the company. Refer to Note 5 for the terms of the special unit.

Distribution Reinvestment Plan

The company adopted a distribution reinvestment plan (“DRP”) through which the company’s Class A, C and I shareholders may elect to purchase additional shares with distributions from the company rather than receiving the cash distributions. The board of directors may reallocate the shares between the public offering and the DRP. Shares issued pursuant to the DRP will have the same voting rights as shares offered pursuant to the public offering. As of September 30, 2018, and December 31, 2017, $50,000,000 in shares were allocated for use in the DRP. During this offering, the purchase price of shares purchased through the DRP will be at a price equal to the then current net offering price per share. No dealer manager fees, selling commissions or other sales charges will be paid with respect to shares purchased pursuant to the DRP except for distribution fees on Class C shares issued under the DRP. At its discretion, the board of directors may amend, suspend, or terminate the DRP. A participant may terminate participation in the DRP by written notice to the plan administrator, received by the plan administrator at least 10 days prior to the distribution payment date.

As of September 30, 2018, and December 31, 2017, 1,513,935 and 1,008,948 shares, respectively, were issued under the DRP.

Share Repurchase Program

During the quarter ended September 30, 2015, the company commenced a share repurchase program, or “share repurchase program”, pursuant to which quarterly share repurchases will be conducted, on up to approximately 5% of the weighted average number of outstanding shares in any 12-month period, to allow members who hold Class A, C, I, P-A (commencing as of April 16, 2018) or P-I shares (commencing as of October 1, 2017) to sell shares back to the company at a price equal to the then current offering price less the selling commissions and dealer manager fees associated with that class of shares. The company is not obligated to repurchase shares and the board of directors may terminate the share repurchase program at its sole discretion. The share repurchase program includes numerous restrictions that will limit a shareholder’s ability to sell shares. Unless the board of directors determines otherwise, the company limits the number of shares to be repurchased during any calendar year to the number of shares the company can repurchase with the proceeds received from the sale of shares under the DRP. At the sole discretion of the board of directors, the company may also use cash on hand, cash available from borrowings and cash from liquidation of investments to repurchase shares. In addition, the company plans to limit repurchases in each fiscal quarter to 1.25% of the weighted average number of shares outstanding in the prior four fiscal quarters. For the nine months ended September 30, 2018, the company repurchased 292,326 Class A shares, 4,227 Class C shares, 52,298 Class I shares, nil Class P-A shares, and 15,481 Class P-I shares at a total purchase price of $2,588,806, $36,240, $462,772, $0, and $136,845, respectively, pursuant to the company’s share repurchase program. For the nine months ended September 30, 2017, the company repurchased 284,438 Class A shares and 61,502 Class I shares at a total purchase of $2,538,267 and $549,983, respectively, pursuant to the company’s share repurchase program, including 93,192 shares from an affiliate of the advisor.

We have received an order for our repurchase program from the SEC under Rule 102(a) of Regulation M under the Exchange Act. In addition, our repurchase program is substantially similar to repurchase programs for which the SEC has stated it will not recommend enforcement action under Rule 13e-4 and Regulation 14E under the Exchange Act.

Note 8. Distributions

On the last business day of each month, with the authorization of the company’s board of directors, the company declares distributions on each outstanding Class A, C, I, P-A and P-I share. These distributions are calculated based on shareholders of record for each day in amounts equal to that exhibited in the table below based upon distribution period and class of share.

Distribution Period		A		C		I		P-A		P-I
1-Jan-15	31-Oct-15	$	0.0016438	$	0.0016438	$	0.0016438		—		—
1-Nov-15	31-Jan-16	$	0.0016478	$	0.0016478	$	0.0016478		—		—
1-Feb-16	30-Apr-16	$	0.0016551	$	0.0016551	$	0.0016551		—		—
1-May-16	31-Jul-16	$	0.0016617	$	0.0016617	$	0.0016617	$	0.0015826	$	0.0015826
1-Aug-16	31-Oct-16	$	0.0016766	$	0.0016766	$	0.0016766	$	0.0015968	$	0.0015968
1-Nov-16	31-Jan-17	$	0.0016856	$	0.0016402	$	0.0016856	$	0.0016036	$	0.0016036
1-Feb-17	31-Apr-17	$	0.0016807	$	0.0016350	$	0.0016807	$	0.0015952	$	0.0015952
1-May-17	31-Jul-17	$	0.0016710	$	0.0016273	$	0.0016710	$	0.0015952	$	0.0015828
1-Aug-17	31-Oct-17	$	0.0016690	$	0.0016265	$	0.0016690		—	$	0.0015901
1-Nov-17	31-Jan-18	$	0.0016690	$	0.0016265	$	0.0016690		—	$	0.0015828
1-Feb-18	31-Apr-18	$	0.0016690	$	0.0016265	$	0.0016690		—	$	0.0015828
1-May-18	31-Jul-18	$	0.0016690	$	0.0016265	$	0.0016690	$	—	$	0.0015828
1-Aug-18	30-Sep-18	$	0.0016690	$	0.0016265	$	0.0016690	$	0.0016479	$	0.0015828

The following table reflects the distributions declared during the nine months ended September 30, 2018:

Pay Date	Paid in Cash		Value of Shares Issued under DRP		Total
February 1, 2018	$	728,738	$	464,821	$	1,193,559
March 1, 2018		682,038		428,310		1,110,348
April 2, 2018		790,925		474,370		1,265,295
May 1, 2018		792,185		475,874		1,268,059
June 1, 2018		883,662		507,728		1,391,390
July 2, 2018		927,638		502,334		1,429,972
August 1, 2018		1,013,883		529,333		1,543,216
September 4, 2018		1,078,310		541,479		1,619,789
October 1, 2018		1,097,313		529,751		1,627,064
Total	$	7,994,692	$	4,454,000	$	12,448,692

The following table reflects the distributions declared during the nine months ended September 30, 2017:

Pay Date	Paid in Cash		Value of Shares Issued under DRP		Total
February 1, 2017	$	431,686	$	349,842	$	781,528
March 1, 2017		413,270		332,761		746,031
April 3, 2017		482,113		371,902		854,015
May 1, 2017		486,864		370,463		857,327
June 1, 2017		524,909		383,585		908,494
July 3, 2017		534,165		382,339		916,504
August 1, 2017		572,833		406,993		979,826
September 1, 2017		600,962		415,864		1,016,826
October 1, 2017		603,869		411,848		1,015,717
Total	$	4,650,671	$	3,425,597	$	8,076,268

Cash distributions paid during the periods presented were funded from the following sources noted below:

	For the nine months ended September 30, 2018		For the nine months ended September 30, 2017
Cash from operations	$	7,608,681	$	4,450,781
Offering proceeds		—		—
Total Cash Distributions	$	7,608,681	$	4,450,781

All distributions paid for the nine months ended September 30, 2018 are expected to be reported as a return of capital to stockholders for tax reporting purposes and all distributions paid for the nine months ended September 30, 2017 were reported as a return of capital to stockholders for tax purposes.

The company expects to continue to fund distributions from a combination of cash from operations as well as offering proceeds until a minimum of $250,000,000 in net assets is reached, the portfolio is leveraged by at least 33% as well as being fully invested in operating assets.

Note 9. Commitments and Contingencies

Legal proceedings: The company may become involved in legal proceedings, administrative proceedings, claims and other litigation that arise in the ordinary course of business. Individuals and interest groups may sue to challenge the issuance of a permit for a renewable energy project or seek to enjoin construction of a wind energy project. In addition, we may be subject to legal proceedings or claims contesting the construction or operation of our renewable energy projects. In defending ourselves in these proceedings, we may incur significant expenses in legal fees and other related expenses, regardless of the outcome of such proceedings. Unfavorable outcomes or developments relating to these proceedings, such as judgments for monetary damages, injunctions or denial or revocation of permits, could have a material adverse effect on our business, financial condition and results of operations. In addition, settlement of claims could adversely affect our financial condition and results of operations. As of September 30, 2018, management is not aware of any legal proceedings that might have a significant adverse impact on the company.

Investment in to be constructed assets: Pursuant to various engineering, procurement and construction contracts to which three operating entities of the company are individually a party, the operating entities, and indirectly the company, has committed and outstanding balance of approximately $39.8 million to complete construction of the facilities. Based upon current construction schedules, the expectation is these commitments will be fulfilled early in 2019.

Pledge of collateral and unsecured guarantee of loans to subsidiaries: Pursuant to various project loan agreements between the operating entities of the company, subsidiary holding companies and various lenders, the operating entities and the subsidiary holding companies have pledged all solar operating assets as well as the membership interests in various operating subsidiaries as collateral for the term loans with maturity dates ranging from March 2021 through March 2032. Pursuant to a credit agreement between GREC Holdco and a financial institution, Holdco has pledged all solar operating assets as well as all membership interests in operating subsidiaries owned by GREC Holdco as collateral for the loan. GREC and the company have provided an unsecured guaranty (“Guarantors”) on the outstanding principal of certain subsidiary loans, which is approximately $82,457,599, as of September 30, 2018. The Guarantors would only have to perform under the guarantee if the cash flow or the liquidation of collateral at the operating entities or subsidiary holding companies was inadequate to fully liquidate the remaining loan balance.

Unsecured guarantee of subsidiary renewable energy credit (“REC”) forward contracts: For the majority of the forward REC contracts currently effective as of September 30, 2018 where a subsidiary of the company is the principal, the company has provided an unsecured guarantee related to the delivery obligations. The amount of the unsecured guaranty related to REC delivery performance obligations is approximately $690,350 as of September 30, 2018.

See Note 1 — Organization and Operations of the Company and Note 5 — Related Party Agreements and Transactions Agreements for an additional discussion of the company’s commitments and contingencies.

Note 10. Financial Highlights

	For the nine months ended September 30, 2018
	Class A Shares			Class C Shares			Class I Shares			Class P-A Shares (5)			Class P-I Shares
Per share data attributed to common shares (1):
Net Asset Value at beginning of period	$	8.68		$	8.42		$	8.68		$	8.75		$	8.81
Net investment income (3)		0.30			0.30			0.30			0.09			0.30
Net realized and unrealized gain on investments, net of incentive allocation to special unitholder		0.17			0.17			0.17			—			0.17
Change in translation of assets and liabilities denominated in foreign currencies (4)		—			—			—			—			—
Change in benefit from deferred taxes on unrealized appreciation on investments		0.03			0.03			0.03			0.07			0.03
Net increase in net assets attributed to common stockholders		0.50			0.50			0.50			0.16			0.50
Shareholder distributions:
Distributions from net investment income		(0.28	)		(0.28	)		(0.29	)		(0.07	)		(0.29	)
Distributions from offering proceeds		(0.18	)		(0.16	)		(0.17	)		—			(0.14	)
Offering costs and deferred sales commissions		(0.02	)		(0.06	)		(0.03	)		(0.10	)		—
Other (2)		(0.01	)		0.06			—			(0.03	)		0.01
Net increase (decrease) in members’ equity attributed to common shares		0.01			0.06			0.01			(0.04	)		0.08
Net asset value for common shares at end of period	$	8.69		$	8.48		$	8.69		$	8.71		$	8.89
Common shareholders’ equity at end of period	$	138,972,856		$	16,725,916		$	50,209,569		$	58,422		$	89,653,159
Common shares outstanding at end of period		15,992,764			1,973,308			5,778,033			6,705			10,084,222

Ratio/Supplemental data for common shares (annualized):
Total return attributed to common shares based on net asset value		5.42	%		6.00	%		5.41	%		0.60	%		6.09	%
Ratio of net investment income to average net assets		4.69	%		4.84	%		4.69	%		6.42	%		4.81	%
Ratio of operating expenses to average net assets		3.92	%		4.03	%		3.92	%		3.10	%		3.76	%
Portfolio turnover rate		0.04	%		0.04	%		0.04	%		0.04	%		0.04	%

(1) The per share data for Class A, C, I, P-A and P-I Shares were derived by using the weighted average shares outstanding during the period ended September 30, 2018, which were 14,983,676, 1,709,953, 5,178,847, 6,263 and 6,052,216, respectively.

(2) Represents the impact of different share amounts used in calculating certain per share data based on weighted average shares outstanding during the period and the impact of shares at a price other than the net asset value.

(3) Does not reflect any incentive fees that may be payable to the Special Unitholder.

(4) Amount is less than $0.01 per share.

(5) Class P-A shares were reinstated for sale as of April 16, 2018 and first sold on August 6, 2018.

	For the nine months ended September 30, 2017
	Class A Shares			Class C Shares			Class I Shares			Class P-I Shares
Per share data attributed to common shares (1):
Net Asset Value at beginning of period	$	8.69		$	8.44		$	8.69		$	8.67
Net investment income (3)		0.26			0.26			0.26			0.26
Net unrealized appreciation on investments, net of incentive allocation to special unitholder		0.13			0.13			0.13			0.13
Change in translation of assets and liabilities denominated in foreign currencies		0.01			0.01			0.01			0.01
Change in benefit from deferred taxes on unrealized depreciation on investments		(0.01	)		(0.01	)		(0.01	)		(0.01	)
Net increase in net assets attributed to common stockholders		0.39			0.39			0.39			0.39
Shareholder distributions:
Distributions from net investment income		(0.28	)		(0.28	)		(0.28	)		(0.28	)
Distributions from offering proceeds		(0.18	)		(0.17	)		(0.18	)		(0.16	)
Offering costs and deferred sales commissions		(0.03	)		(0.02	)		(0.07	)		(0.02	)
Other (2)		0.05			0.06			0.09			0.15
Net decrease in members’ equity attributed to common shares		(0.05	)		(0.02	)		(0.05	)		0.08
Net asset value for common shares at end of period	$	8.64		$	8.42		$	8.64		$	8.75
Common shareholders’ equity at end of period	$	111,696,726		$	10,708,518		$	35,366,285		$	22,396,048
Common shares outstanding at end of period		12,934,710			1,271,964			4,095,489			2,560,156

Ratio/Supplemental data for common shares (annualized):
Total return attributed to common shares based on net asset value		4.61	%		4.97	%		4.61	%		6.12	%
Ratio of net investment income to average net assets		3.98	%		4.09	%		3.98	%		3.95	%
Ratio of operating expenses to average net assets		3.45	%		3.54	%		3.45	%		3.42	%
Portfolio turnover rate		7.84	%		7.84	%		7.84	%		7.84	%

(1) The per share data for Class A, C, I and P-I Shares were derived by using the weighted average shares outstanding during the nine months ended September 30, 2017, which were 12,042,633, 1,147,093, 3,279,524 and 1,385,938, respectively.

(3) Does not reflect any incentive fees that may be payable to the Special Unitholder.

Note 11. Subsequent Events

The company’s management has evaluated subsequent events through the date of issuance of the consolidated financial statements. There have been no subsequent events that occurred during such period that would require disclosure in the consolidated financial statements or would be required to be recognized in the consolidated financial statements as of and for the nine months ended September 30, 2018 (unaudited), except as noted below.

On November 2, 2018, the Company announced, through a wholly-owned subsidiary, it recently acquired all of the outstanding equity of SunFarm V, LLC and Sun Farm VI (“SunFarm Portfolio”). The SunFarm Portfolio consists of 2 operating solar photovoltaic (“PV”) systems comprising 13.9 megawatts located in Perquimans County, North Carolina. The projects were placed in service in the fourth quarter of 2018 through a 15-year fixed price power purchase agreement (“PPA”).

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the company’s consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly report on Form 10-Q.

Except as otherwise specified, references to “we,” “us,” “our,” or the “company,” refer to Greenbacker Renewable Energy Company LLC.

Forward Looking Statements

Various statements in this quarterly report, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects, revenues, income and capital spending. We generally identify forward-looking statements with the words “believe,” “intend,” “expect,” “seek,” “may,” “will,” “should,” “would,” “anticipate,” “could,” “estimate,” “plan,” “predict,” “project” or their negatives, and other similar expressions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to our expectations regarding future industry trends are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected. The forward-looking statements contained in this report are largely based on our expectations, which reflect many estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors and it is impossible for us to anticipate all factors that could affect our actual results. In addition, our advisor’s assumptions about future events may prove to be inaccurate. We caution all readers that the forward-looking statements contained in this report are not guarantees of future performance, and we cannot assure any reader that such statements will prove correct or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to the numerous risks and uncertainties as described under “Risk Factors” and elsewhere in this report. All forward-looking statements are based upon information available to us on the date of this report. We undertake no obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, except as otherwise required by law. You are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. These cautionary statements qualify all forward-looking statements attributable to us, or persons acting on our behalf. The risks, contingencies and uncertainties associated with our forward-looking statements relate to, among other matters, the following:

●

changes in the economy;

●

the ability to complete the renewable energy projects in which we invest;

●

our relationships with project developers, lawyers, investment and commercial banks, individual and institutional investors, consultants, diligence specialists, EPC companies, contractors, renewable energy technology manufacturers (such as panel manufacturers), solar insurance specialists, component manufacturers, software providers and other industry participants in the renewable energy, capital markets and project finance sectors;

●

fluctuations in supply, demand, prices and other conditions for electricity, other commodities and renewable energy certificates (“RECs”);

●

public response to and changes in the local, state and federal regulatory framework affecting renewable energy projects, including the potential expiration or extension of the production tax credit (“PTC”), investment tax credit (“ITC”) and the related U.S. Treasury grants and potential reductions in renewable portfolio standards (“RPS”) requirements;

●

competition from other energy developers;

●

the worldwide demand for electricity and the market for renewable energy;

●

the ability or inability of conventional fossil fuel-based generation technologies to meet the worldwide demand for electricity;

●

our competitive position and our expectation regarding key competitive factors;

●

risks associated with our hedging strategies;

●

potential environmental liabilities and the cost of compliance with applicable environmental laws and regulations, which may be material;

●

our electrical production projections (including assumptions of curtailment and facility availability) for our renewable energy projects;

●

our ability to operate our business efficiently, manage costs (including general and administrative expenses) effectively and generate cash flow;

●

availability of suitable renewable energy resources and other weather conditions that affect our electricity production;

●

the effects of litigation, including administrative and other proceedings or investigations relating to our renewable energy projects;

●

non-payment by customers and enforcement of certain contractual provisions;

●

risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; and

●

future changes in laws or regulations and conditions in our operating areas.

Overview

Greenbacker Renewable Energy Company LLC, (the “LLC”) a Delaware limited liability company, formed in December 2012, is an externally managed energy company that acquires and manages income-generating renewable energy and energy efficiency projects and other energy-related businesses as well as finances the construction and/or operation of these and sustainable development projects and businesses. The LLC conducts substantially all its operations through its wholly-owned subsidiary, Greenbacker Renewable Energy Corporation (“GREC”). GREC is a Maryland corporation formed in November 2011 and the LLC currently holds all the outstanding shares of capital stock of GREC. GREC Entity Holdco LLC, a wholly owned subsidiary of GREC, was formed in Delaware, in June 2016 (“GREC Holdco”). The LLC, GREC and GREC Holdco. (collectively “we”, “us”, “our”, and the “company”) are managed and advised by Greenbacker Capital Management LLC (the “advisor” or “GCM”), a renewable energy, energy efficiency, sustainability and other energy related project acquisition, consulting and development company that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (“Advisers Act”). The LLC’s fiscal year end is December 31.

Our business objective is to generate attractive risk-adjusted returns for our members, consisting of both current income and long-term capital appreciation, by acquiring, and financing the construction and/or operation of income-generating renewable energy, energy efficiency and sustainable development projects, primarily within but also outside of North America. We expect the size of our investments to generally range between approximately $1 million and $100 million. We will seek to maximize our risk-adjusted returns by: (1) capitalizing on market opportunities; (2) focusing on hard assets that produce dependable cash flows; (3) efficiently utilizing government incentives where available; (4) employing creative deal structuring to optimize capital and ownership structures; (5) partnering with experienced financial, legal, engineering and other professional firms; (6) employing sound due diligence and risk mitigation processes; and (7) monitoring and managing our portfolio of assets on an ongoing basis.

Our goal is to assemble a diversified portfolio of renewable energy, energy efficiency and other sustainability related projects and businesses. Renewable energy projects generally earn revenue through the sale of generated electricity as well as frequently through the sale of other commodities such as RECs and EECs, which are generated by the projects and the sale of by-products such as organic compost materials. We initially have focused on solar energy and wind energy projects as well as energy efficiency projects. We believe solar energy projects generally offer more predictable power generation characteristics, due to the relative predictability of sunlight over the course of time compared to other renewable energy classes and therefore we expect they will provide more stable income streams. However, technological advances in wind turbines and other energy generation technologies, as well as government incentives make wind energy and other types of projects attractive as well. Solar energy projects provide maximum energy production during the middle of the day and in the summer months when days are longer and nights shorter. Solar energy projects tend to have minimal environmental impact enabling such projects to be developed close to areas of dense population where electricity demand is highest. Since solar technology is scalable and well-established, it is expected to be a relatively straightforward process to integrate new acquisitions and projects into our portfolio. Over time, we expect to broaden our strategy to include other types of renewable energy projects and energy efficiency projects and businesses, which may include hydropower assets, geothermal plants, biomass and biofuel assets, combined heat and power technology assets, fuel cell assets and other energy efficiency assets, among others, and to the extent we deem the opportunity attractive, other energy and sustainability related assets and businesses.

Our preferred investment strategy is to acquire controlling equity stakes in our target assets or to be named the managing member of a limited liability company to oversee and supervise their operations. We define controlling equity stakes as companies in which we own 25% or more of the voting securities of such company or have greater than 50% representation on such company’s board of directors. However, we will also provide financing to projects owned by GREC or others, including through the provision of secured loans which may or may not include some form of equity participation. We may also provide projects with senior unsecured debt, subordinated secured debt, subordinated unsecured debt, mezzanine debt, convertible debt, convertible preferred equity, and preferred equity, and make minority equity investments. We may also participate in projects by acquiring contractual payment rights or rights to receive a proportional interest in the operating cash flow or net income of a project. We may also make equity investments in or loans to parties financing the supply of renewable energy and energy efficiency to residential and commercial customers or the adoption of strategies to reduce the consumption of energy by those customers. Our strategy will be tailored to balance long-term cash flow certainty, which we can achieve through long-term agreements for our products, with shorter term arrangements that allow us to potentially generate higher risk-adjusted returns.

Our renewable energy projects generate revenue primarily by selling (1) generated electric power to local utilities and other high quality, utility, municipal, corporate and individual residential counterparties, and (2) in some cases, RECs, EECs, and other commodities associated with the generation or savings of power. We seek to acquire or finance projects that contain transmission infrastructures and access to power grids or networks that will enable the generated power to be sold. We generally expect our projects will have PPAs with one or more counterparties, including local utilities or other high credit quality counterparties, who agree to purchase the electricity generated from the project. We refer to these PPAs as “must-take contracts,” and we refer to these other counterparties as “off-takers.” These must-take contracts guarantee that all electricity generated by each project will be purchased. Although we intend to work primarily with high credit quality counterparties, if an off-taker cannot fulfill its contractual obligation to purchase the power, we generally can sell the power to the local utility or other suitable counterparty, which would potentially ensure revenue is generated for all solar electricity generation. We may also generate revenue from the receipt of interest, fees, capital gains and distributions from investments in our target assets.

We employ a rigorous credit underwriting process for each of our contractual counterparties that involves (i) identification of high credit quality counterparties with appropriate bonding and insurance capacity; (ii) where available, the review of counterparty financial statements and/or publicly available credit rating reports (iii) worst-case analysis testing of assets; (iv) ongoing monitoring of acquired assets and counterparty creditworthiness, including monitoring the public credit ratings reports issued by Moody’s and Standard and Poor’s, and (v) in regard to residential solar where the homeowner is the counterparty, individual FICO scores.

The following table illustrates the allocation by percentage of the company’s contracted revenue by counterparty type and creditworthiness for the nine months ended September 30, 2018 and the year ended December 31, 2017.

	For the nine months ended September 30, 2018			For the year ended December 31, 2017
Investment grade:
Utility		70.7	%		61.9	%
Municipality		6.1			6.1
Corporation		0.6			0.3
Subtotal investment grade		77.4	%		68.3	%

Non-investment grade or no rating:
Utility		0.3	%		0.4	%
Municipality		2.8			3.3
Residential		18.1			25.7
Corporation		1.4			2.3
Subtotal non-investment grade or no rating		22.6	%		31.7	%

Total		100.0	%		100.0	%

Our power purchase agreements, when structured with utilities and other large commercial users of electricity, are generally long-term in nature, tied to 100% of the output of the specific generating asset, and priced at a rate established pursuant to a formula set by the contract. The formula is often dependent upon the type of subsidies, if any, offered by the local and state governments for project development. Although we focus on projects with long-term contracts that ensure price certainty, we also look for projects with shorter term arrangements that will allow us to participate in market rate changes which may lead to higher current income.

Certain of the power purchase agreements for our projects are structured as “behind the meter” agreements with residential, commercial or government entities. Under the agreements, all electricity generated by a project will be purchased by the off taker at an agreed upon rate that may be set at a slight discount to the retail electric tariff rate for the off-taker. These agreements also typically provide for annual rate increases over the term of the agreement although that is not a necessary requirement. The behind the meter agreement is generally long-term in nature and further typically provides that, should the off-taker fail to fulfill its contractual obligation, any electricity that is not purchased by the off-taker may be sold to the local utility, usually at an equivalent wholesale spot electric rate.

We have structured some of our investments in residential solar with a similar commercial arrangement to that of the power purchase agreements with utilities and other large commercial users of electricity for our energy projects, as described above. Recently, we acquired residential solar assets which have a private purchase agreement with the residential homeowner as counterparty as well as leasing the solar assets to a residential owner on a long-term basis where the residential owner directly receives the benefit of the electricity generated.

We currently finance energy efficiency projects, which seek to enable residential customers, businesses and governmental organizations to consume less energy while at the same time providing the same or greater level of amenity. Financing for energy efficiency projects is generally used to pay for energy efficiency retrofits of buildings, homes, businesses, and replacement of other inefficient energy consuming assets with more modern technologies. These projects are structured to provide predictable long-term cash flows by receiving a portion of the energy savings and the potential sale of associated RECs and EECs generated by such installations. In each of our renewable energy and energy efficiency investments, we intend, where appropriate, to maximize the benefits of renewable portfolio standards or RPS as well as other U.S. federal, state and local government support and incentives for the renewable energy industry.

The table below sets forth the company’s investments in alternative energy generation portfolios as of September 30, 2018.

Acquisition
Date

Industry

Location(s)

Form of
Investment***

Cost**/
Principal
Amount*

Assets

Generation
Capacity in
(MW)*

Canadian Northern Lights Portfolio

Fourth quarter 2014, Fourth quarter 2015

Alternative Energy – Residential Solar

Ontario, Canada

100% equity ownership

1,603,136

Residential rooftop mounted solar photovoltaic systems

Colorado CSG Solar Portfolio

First quarter 2018

Alternative Energy – Commercial Solar

Colorado

100% equity ownership

10,240,000

Ground and roof mounted solar systems

25.200

EVCE Biomass

Third quarter 2018

Alternative Energy – Biomass

Colorado

****

74,664

Biomass-wood fired power generating facility

12.0

East to West Solar Portfolio

First quarter 2015, Second quarter 2015, Fourth quarter 2015, Second quarter 2018

Alternative Energy – Commercial Solar

Colorado, Connecticut, Florida, Hawaii, Indiana and North Carolina

100% equity ownership

37,149,876

Commercial ground and roof mounted solar photovoltaic systems

26.203

Enfinity Colorado DHA Portfolio

First quarter 2017

Alternative Energy – Residential Solar

Colorado

100% equity ownership

1,400,000

Residential rooftop mounted solar photovoltaic systems

2.508

Foresight Solar Portfolio

Fourth quarter 2017

Alternative Energy – Commercial Solar

California, Colorado

Managing member, majority equity owner

13,650,000

Commercial ground mounted solar photovoltaic systems

10.0

Golden Horizons Solar Portfolio

Fourth quarter 2017

Alternative Energy – Solar

California

100% equity ownership

9,300,000

Commercial ground mounted solar photovoltaic systems

7.792

GREC Energy Efficiency Portfolio

Third quarter 2015

Energy Efficiency – Lighting Replacement

Puerto Rico

Capital lease

457,835

Energy efficiency LED lighting

—

Green Maple Portfolio

Fourth quarter 2014, Fourth quarter 2015

Alternative Energy – Commercial Solar

Vermont

100% equity ownership

17,582,823

Commercial ground mounted solar photovoltaic systems

7.393

Greenbacker Residential Solar Portfolio

Third quarter 2016, First quarter 2017, Second quarter 2017

Alternative Energy – Residential Solar

Arizona, California, Connecticut, Hawaii, Maryland, Massachusetts, New Jersey and New York

100% equity ownership or managing member, majority equity owner

28,100,000

Residential rooftop mounted solar photovoltaic systems

18.559

Greenbacker Residential Solar Portfolio II

Second quarter 2017

Alternative Energy – Residential Solar

Arizona, California, Connecticut, Maryland, Massachusetts, Nevada, New Jersey and New York

Managing member, majority equity owner

6,400,000

Residential rooftop mounted solar photovoltaic systems

10.221

Greenbacker Wind – California

Fourth quarter 2017

Alternative Energy – Wind

California

100% equity ownership

9,500,000

Operating wind power facilities

6.0

Greenbacker Wind – Idaho

Second quarter 2017

Alternative Energy – Wind

Idaho

100% equity ownership

7,320,000

Operating wind power facilities

10.5

Greenbacker Wind – Montana

Fourth quarter 2015, Fourth quarter 2016

Alternative Energy – Wind

Montana

Managing member, equity owner

21,159,487

Operating wind power facilities

35.0

Greenbacker Wind – Vermont

Fourth quarter 2017

Alternative Energy – Wind

Vermont

100% equity ownership

24,917,193

Operating wind power facilities

10.0

Magnolia Sun Portfolio

Third quarter 2015, First quarter 2016

Alternative Energy – Commercial Solar

California, Massachusetts and Tennessee

100% equity ownership

10,775,000

Commercial ground and roof mounted solar photovoltaic systems

5.302

Midway III Portfolio

Fourth quarter 2017

Alternative Energy – Commercial Solar

California

Managing member, majority equity owner

11,567,853

Commercial ground mounted solar photovoltaic systems

26.0

Raleigh Portfolio

Third quarter 2017

Alternative Energy – Commercial Solar

North Carolina

Managing member, majority equity Owner

20,822,198

Commercial ground mounted solar photovoltaic systems

27.829

Renew AEC One, LLC

Fourth quarter 2015

Energy Efficiency – Lighting Replacement

Pennsylvania

Secured loan

579,140

Energy efficiency LED lighting

—

Six States Solar Portfolio

Fourth quarter 2015, Third quarter 2017

Alternative Energy – Commercial Solar

Arizona, California, Colorado, Connecticut, Indiana and North Carolina

100% equity ownership

12,470,306

Ground and roof mounted solar systems

12.973

Sunny Mountain Portfolio

Third quarter 2014

Alternative Energy – Commercial Solar

Colorado

100% equity ownership

884,578

Commercial and residential ground and roof mounted solar photovoltaic systems

0.801

Tar Heel Solar
II Portfolio

Second quarter 2018

Alternative Energy – Commercial Solar

North Carolina

100% equity ownership

359,918

Commercial and residential ground and roof mounted solar photovoltaic systems

N/A

* Approximate.

** Does not include assumed project level debt.

*** 100% Equity ownership, majority equity owner (>50%), equity owner (<50%), Managing Member of the Limited Liability Company, secured loan or a capital lease

**** Includes pre-acquisition and due diligence expenses.

The investments described above have allowed us to execute on our strategy of constructing a portfolio of projects offering predictable power generation characteristics and generally stable income streams which includes seasonal solar generation income (generally stronger in the summer months), wind generation income (generally stronger in the winter months), and energy efficiency lights investments.

The LLC conducts a significant portion of its operations through GREC, of which the LLC is the sole shareholder, holding both shares of common stock and the special preferred stock. We intend to continue to operate our business in a manner permitting us to maintain our exemption from registration under the Investment Company Act of 1940, as amended (the “Investment Company Act”). We are not a blank check company within the meaning of Rule 419 of the Securities Act of 1933, as amended (the “Securities Act”) and have no specific intent to engage in a merger or acquisition in the next 12 months.

Pursuant to a Registration Statement on Form S-1 (File No. 333-211571), we are offering on a continuous basis up to $1,000,000,000 in shares of our limited liability company interests, consisting of up to $800,000,000 of shares in the Primary Offering and up to $200,000,000 of shares pursuant to the Distribution Reinvestment Plan. SC Distributors, LLC is the dealer manager for the current offering. The company’s initial offering pursuant to a Registration Statement on Form S-1 (File No. 333-178786-01) terminated on February 7, 2017.

After the finalization of the September 30, 2018 net asset value, the current offering price of the Class A shares is $9.791 per share, the current offering price of the Class C shares is $9.149 per share, the current offering price of the Class I shares is $8.994 per share the current offering price of the Class P-A shares is $9.683, and the current offering price of the Class P-I shares is $8.890 per share.

As of September 30, 2018, and December 31, 2017, through initial purchases of shares and participation in the DRP program, our advisor owned 23,601 shares. The affiliate of our advisor redeemed all of its shares during the year ended December 31, 2017 and no longer owns shares.

As of September 30, 2018, we had received subscriptions for and issued 35,009,184 of our shares (including shares issued under the DRP) for gross proceeds of $330,231,911 (before dealer-manager fees of $3,848,165 and selling commissions of $12,935,336 for net proceeds of $313,445,664). As of December 31, 2017, we had received subscriptions for and issued 24,008,372 of our shares (including shares issued under the DRP) for gross proceeds of $230,720,821 (before dealer-manager fees of $3,242,439 and selling commissions of $11,160,498 for net proceeds of $216,317,884).

Current Competition in the Alternative Energy - Solar Marketplace

The solar financing market started as a cottage industry where developers would bring together high net worth investors to fund single solar and wind transactions. While successful in jump starting the industry, true capital formation is a relatively new phenomenon and is not as well developed as in other asset classes. Currently in the alternative energy — solar marketplace, there are several sources of capital:

●

Developer/Owner Operators. The major competition we face in the market for the assets we target comes from privately backed developer/owner operators. The capital from these organizations has generally been sourced from a combination of family offices/private equity funds and hedge funds. These organizations are generally set up as developers, with investment return expectations in the 20-30% range. However, to facilitate the most favorable exit for the sponsors, the developer/owner operators seek to accumulate a significant portfolio of operating assets to provide a base level of stable and predictable earnings for the enterprise. Through a combination of developer profits and leverage they are able to generate satisfactory ongoing returns with the bulk of the upside being generated for the sponsors through the exit. We are of the opinion this group of buyers will ultimately be capital constrained particularly in circumstances where equity markets experience a downturn.

●

Single Purpose Limited Partnerships. These entities are typically funded by high net worth individuals or family offices and are generally focused on a small number of deals as they have a limited amount of capital to invest.

●

Utilities. Institutional investors (including large life insurance companies), pension funds and infrastructure funds. This sector dominates investment in the larger projects (i.e. $100,000,000 or greater). Because scale is always an important consideration for larger institutions we tend not to encounter this group in the markets we target.

In management’s view, the company has been competitive in bidding for solar assets against all of these sources of capital and maintains a significant pipeline of deals which can be consummated as offering proceeds are raised.

Opportunities in Solar Power Today

We believe that the greatest opportunity exists within the Small Utility Scale segment of the market where the company can buy assets with similar commercial attributes to the Large Utility Scale projects (Investment Grade off-taker, same equipment and warrantees, same operations and maintenance service provider, etc.) but where returns are higher. In our view, there is a significant opportunity to aggregate portfolios of high quality Small Utility Scale projects working with experienced developers looking for a reliable and sustainable source of capital to increase the certainty of them closing transactions. As a result, we have been focusing on building relationships with respected developers with a view to acquiring pipelines of projects rather than one-off deals. By working closely with developers to efficiently close their transactions, we are seeking to create a sustainable competitive advantage which will lead to recurring and consistent deal flow. Recently, we have been working with developers of residential rooftop solar assets as we believe a significant opportunity exists to securitize residential solar assets once significant scale is achieved resulting in increased value and return. Importantly our strategy is differentiated from the developer/owner operators mentioned above because we do not ever seek to compete with the developers but rather to work in lock-step with them so that they can achieve sustainable development profits and we have access to pipelines of transactions, which align with our current investment strategy and focus.

Factors Impacting Our Operating Results

The results of our operations are affected by a number of factors and will primarily depend on, among other things, the supply of renewable energy assets in the marketplace, the revenues we receive from renewable energy and energy efficiency projects and businesses, the market price of electricity, the availability of government incentives, local, regional and national economies and general market conditions. Additionally, our operations are impacted by interest rates and the cost of financing provided by other financial market participants. Many of the factors that affect our operating results are beyond our control.

Size of portfolio. The size of our portfolio of investments is a key revenue driver. Generally, as the size of our portfolio grows, the amount of income we receive will increase. In addition, our portfolio of investments may grow at an uneven pace as opportunities to make investments in our target assets may be irregularly timed, and the timing and extent of GCM’s success in identifying such assets, and our success in acquiring such assets, cannot be predicted. Lastly, other than management fees, the majority of our expenses are of a fixed nature so expenses as a percentage of net assets are reduced as the net assets of the company increase.

Credit risk. We have potential exposure due to changes in credit ratings for our (1) counterparties to the electricity and environmental credit sales agreements (including PPAs) for our projects, (2) counterparties responsible for project construction and hedging arrangements, (3) companies in which we may invest and (4) any potential debt financing we or our projects may obtain. We seek to mitigate credit risk by entering into contracts with high quality counterparties. However, it is still possible that these counterparties may be unable to fulfill their contractual obligations to us. If counterparties to the electricity sales agreements for our projects or the companies in which we invest are unable to make payments to us when due, or at all, our financial condition and results of operations could be materially adversely affected. While we seek to mitigate construction-related credit risk by entering into contracts with high quality EPC companies with appropriate bonding and insurance capacity, if EPCs to the construction agreements for our projects are unable to fulfill their contractual obligations to us, our financial condition and results of operation could be materially adversely affected. We seek to mitigate credit risk by deploying a comprehensive review and asset selection process, including worst case analysis, and careful ongoing monitoring of acquired assets as well as mitigation of negative credit effects through back up planning. Nevertheless, unanticipated credit losses may occur which could adversely impact our operating results.

Electricity prices. All of our projects benefit from take-or-pay agreements with terms structured to take 100% of the power output. On average the contracts in our existing portfolio have approximately 16 years remaining prior to exposure to market prices. The credit standing of the contract counterparty is a particular focus in situations where the contracts have a price escalator as such contracts create an incentive for the counterparty to not continue to perform if the contract pricing deviates materially from the market price. If the contract is with a public or investment grade entity, we have generally been confident that the contract terms will be honored. The only exception might apply in situations where rising electricity prices could create pressure around a political change in a particular state or locale.

Due to the take-or-pay nature of the contracts, management believes that the company is largely insulated from the day to day volatility of electricity market prices. With that said, it would be imprudent of us not to keep an eye to what is happening across these markets and to stay abreast of developments in the industry as they occur. Over recent years, we have seen a lot of volatility in gas prices and yet that volatility has been slow to translate into movements in the electricity prices. Electricity pricing is a function of a range of factors and the price of gas is just one component. Electricity prices also include a recovery of the cost of the generation plant, the labor to operate it, the cost to transport the fuel to the plant, the cost to wheel the power to the customer, the cost to administer the utility, etc., so gas price volatility is less impactful on the delivered price of electricity than one might expect.

The U.S. Energy Information Agency of the Department of Energy anticipates that electricity prices will rise annually by between 2.5% and 3.0% nationally for the next 20 years (on a nominal basis). Assuming the price at which we sell the power under our contracts is set at a discount to the current electricity price and the escalator (to the extent there is one) is less than 2.5% per annum, we expect the contracted price will remain close to, if not below, the market price of the electricity throughout the entire term of the contract.

Changes in market interest rates. With respect to our current business operations, to the extent that we use debt financing with unhedged floating interest rates or in the case of any refinancing, general increases in interest rates over time may cause the interest expense associated with our borrowings to increase, and the value of our debt investments to decline. Conversely, general decreases in interest rates over time may cause the interest expense associated with our borrowings to decrease, and the value of our debt investments to increase.

Market conditions. We believe that demand for alternative forms of energy from traditional fossil-fuel energy will continue to grow as countries seek to reduce their dependence on outside sources of energy and as the political and social climate continues to demand social responsibility on environmental matters. Notwithstanding this growing demand, we believe that a significant shortage of capital currently exists in the market to satisfy the demands of the renewable energy sector in the United States and around the world, particularly with respect to small and mid-sized projects and businesses that are newly developed. Many of the traditional sources of equity capital for the renewable energy marketplace were attracted to renewable energy projects based on their ability to utilize ITCs and tax deductions. We believe that due to changes in their taxable income profiles that have made these tax incentives less valuable, these traditional sources of equity capital have withdrawn from the market. In addition, much of the capital that is available is focused on larger projects that have long-term off-take contracts in place, and does not allow project owners to take any “merchant” or investment risk with respect to RECs. We believe many project developers are not finding or are encountering delays in accessing capital for their projects. As a result, we believe a significant opportunity exists for us to provide new forms of capital to meet this demand.

Regulatory matters. Regulatory and tax policy at the federal and state levels tends to be forward looking rather than retrospective. As a result, we do not see many regulatory or tax issues impacting any assets we already own or buy during the operation of a particular regulatory or tax regime.

With that said, there may be changes in the future which could impact the returns on future transactions, all of which will be factored into our buying decisions at that time. In the past, we have seen government policy drive a lot of development activity. For example, when the government announces the phasing out of a tax incentive, developers race to get projects to a stage that ensures the project qualifies for the incentive. That kind of activity is generally short lived but can skew the investment supply and demand dynamic.

From the federal perspective, changes in tax and regulatory policy could negatively affect prospective returns. Federal tax incentives are comprised of MACRS depreciation and the ITC. MACRS results in accelerated depreciation of renewable assets over a 5.5-year period but given the wide application of MACRS to other asset classes we believe it is less susceptible to change than the ITC. The ITC is a tax incentive that allows an investor to take up to 30% of the installed cost of a solar system as a federal tax credit. This rule was extended at the end of 2015 with the credit amounts incrementally lowered over the next few years from 30% in 2016 to 10% in 2022 and beyond.

Other kinds of regulatory changes that could negatively impact returns include the introduction of some kind of value added tax either at the federal or state level, changes to property tax regimes, any kind of targeted tax on the income of renewable energy generation assets, etc. None of these possible changes appear likely any time soon but it is impossible to predict the future with any real certainty.

Generally speaking, the policy changes that have occurred over the past decade at the U.S. Environmental Protection Agency and U.S. Department of Energy have been very positive for renewables with stronger emission regulations and other mandates improving the case for renewable energy assets. In addition, the U.S. Energy Information Association forecasts that approximately 65,000 MW of older generating capacity will be retired and go offline by 2020 all of which will need to be replaced by new energy sources. Their current prediction is that at least 50% of that replacement will come from new renewable generating capacity (approximately 25% by wind and 25% by solar). While the current U.S. administration has indicated greater support for traditional sources of energy and the potential reduction in support for alternative energy production, management is of the opinion that any changes enacted by the current U.S. administration will not have a material impact on our operations. In addition, a recent preliminary ruling issued by the U.S. International Trade Commission could result in the placement of tariffs or minimum import prices on PV panels imported to the U.S. that could have an impact on overall U.S. demand.

The regulatory market for electric power is highly fragmented with each state having significant influence over the functioning of their respective electricity markets. The states are the primary regulator for the utilities and therefore you see widely divergent policies at the state level. Some states, for example, allow utilities to be vertically integrated producers of power as well as operators of the grid while others have separated those functions entirely. We believe that this diversity is a benefit for our program as the states have been highly adept at advancing programs designed to benefit renewable energy with or without federal government support. There are currently 29 states that have developed a renewable portfolio standard. As a result, we see state regulatory issues as a shifting mosaic of opportunities where some markets will present opportunities while others become less attractive on a prospective basis.

Critical Accounting Policies and Use of Estimates

The following discussion addresses the accounting policies utilized based on our current operations. Our most critical accounting policies involve decisions and assessments that affect our reported assets and liabilities, as well as our reported revenues and expenses. We believe that all of the decisions and assessments upon which our consolidated financial statements are based are reasonable at the time made and based upon information available to us at that time. Our critical accounting policies and accounting estimates may be expanded over time as we continue to implement our business and operating strategy. The material accounting policies and estimates that are most critical to an investor’s understanding of our financial results and condition, as well as those that require complex judgment decisions by our management, are discussed below.

Basis of Presentation

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) which requires the use of estimates, assumptions and the exercise of subjective judgment as to future uncertainties.

Although we are organized and intend to conduct our business in a manner so that we are not required to register as an investment company under the Investment Company Act, our consolidated financial statements are prepared using the specialized accounting principles of Accounting Standards Codification Topic 946, Financial Services — Investment Companies (“ASC Topic 946”). Overall, we believe that the use of investment company accounting makes our consolidated financial statements more useful to investors and other financial statement users since it allows a more appropriate basis of comparison to other entities with similar investment objectives.

Investment Classification

We classify our investments by level of control. “Control Investments” are investments in companies in which we own 25% or more of the voting securities of such company, have greater than 50% representation on such company’s board of directors or that are limited liability companies for which we are the managing member. “Affiliate Investments” are investments in companies in which we own 5% or more and less than 25% of the voting securities of such company. “Non-Control/Non-Affiliate Investments” are investments that are neither Control Investments nor Affiliate Investments. Because our consolidated financial statements are prepared in accordance with ASC Topic 946, we do not consolidate companies in which we have Control Investments nor do we apply the equity method of accounting to our Control Investments or Affiliate Investments.

Valuation of Investments

Our advisor, in conjunction with an independent valuation firm when necessary, subject to the review and approval of the board of directors, is ultimately responsible for the determination, in good faith, of the fair value of investments. In that regard, the advisor has established policies and procedures which have been reviewed and approved by our board of directors, to estimate the fair value of our investments which are detailed below. Any changes to these policies and procedures are required to be approved by our board of directors, including a majority of our independent directors.

Investments for which market quotations are readily available are valued at such market quotations.

For most of our investments, market quotations will not be available. With respect to investments for which market quotations are not readily available, our board of directors has approved a multi-step valuation process each fiscal quarter, as described below:

each investment will be valued by GCM. As part of the valuation process, GCM will prepare the valuations and associated supporting materials for review and approval by the board of directors;

our board of directors has approved the selection of an independent valuation firm to assist with the review of the valuations prepared by GCM. At the direction of our board of directors, the independent valuation firm will review valuations prepared by GCM for the appropriate application of its valuation policies and the appropriateness of significant inputs used in the valuation models by performing certain limited procedures, which will include a review of GCM’s estimates of fair value for each investment and providing an opinion that GCM’s estimate of fair value for each investment is reasonable. The independent valuation firm may also provide direct assistance to GCM in preparing fair value estimates if the board of directors approves such assistance. In the event that the independent valuation firm is directly involved in preparing the fair value estimate, our board of directors has the authority to hire a separate valuation firm to review that opinion of value;

the audit committee of our board of directors reviews and discusses the preliminary valuation prepared by GCM and the report of the independent valuation firm, if any; and

our board of directors reviews the valuations and approves the fair value of each investment in our portfolio in good faith by GCM.

Loan investments are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts (for example, interest and amortization payments) to a single present value amount (discounted) calculated based on an appropriate discount rate. The measurement is based on the net present value using current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in determining the fair value of our loans include as applicable: debt covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the project’s ability to make payments, its earnings and discounted cash flows, the markets in which the project does business, comparisons of financial ratios of peer business entities that are public, mergers and acquisitions comparables, the principal market and enterprise values, among other factors.

Equity investments are also valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts (for example net cash flows or earnings) to a single present value amount (discounted) calculated based on an appropriate discount rate. The measurement is based on the net present value using current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in determining the fair value of our equity investments include, as applicable: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, the project’s earnings and discounted cash flows, the markets in which the project does business, comparisons of financial ratios of peer business entities that are public, mergers and acquisitions comparables, the principal market and enterprise values, among other factors.

OTC derivatives including swap contracts are valued on a daily basis using observable inputs, such as quotations provided by an independent pricing service, the counterparty, broker-dealers, whenever available and considered reliable.

We have adopted ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”), which defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosures about fair value measurements.

ASC Topic 820 clarifies that the fair value price is the price in an orderly transaction between market participants to sell an asset or transfer a liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability. The transaction to sell the asset or transfer the liability is a hypothetical transaction at the measurement date, considered from the perspective of a market participant that holds the asset or owes the liability. ASC Topic 820 provides a consistent definition of fair value which focuses on exit price and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specific inputs. In addition, ASC Topic 820 provides a framework for measuring fair value and establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels of valuation hierarchy established by ASC Topic 820 are defined as follows:

Level 1: Unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2: Other significant observable inputs that are sourced either directly or indirectly from publications or pricing services, including dealer or broker markets, for identical or comparable assets or liabilities. Generally, these inputs should be widely accepted and public, non-proprietary and sourced from an independent third party.

Level 3: Inputs derived from a significant amount of unobservable market data and derived primarily through the use of internal valuation methodologies.

In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls will be determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment.

Our board of directors has approved the selection of an independent valuation firm to review our advisor’s valuation methodology and to work with our advisor and officers to provide additional inputs for consideration by our audit committee and to work directly with our full board of directors, at the board of directors’ request, with respect to the fair value of investments. For example, our board of directors may determine to engage more than one independent valuation firm in circumstances in which specific expertise of a particular asset or asset class is needed in connection with the valuation of an investment. In addition, GCM will recommend to our board of directors that one quarter of our investments be valued by an independent valuation firm each quarter, on a rotating quarterly basis. Accordingly, each such investment would be reviewed by an independent valuation firm at least once per year.

Our board of directors will have the ability to review our advisor’s valuation methodologies each quarter in connection with GCM’s presentation of its valuation recommendations to the audit committee. If during the period between quarterly board meetings, GCM determines that significant changes have occurred since the prior meeting of the board of directors at which it presented its recommendations on the valuation methodology, then GCM will also prepare and present recommendations to the audit committee of the board of directors of its proposed changes to the current valuation methodology. Any such changes to our valuation methodologies will require the approval of our board of directors, including a majority of our independent directors. We will disclose any change in our valuation methodologies, or any change in our investment criteria or strategies, that would constitute a fundamental change in a registration statement amendment prior to its implementation.

Foreign Currency Translation

The accounting records of the company are maintained in U.S. Dollars. The fair value of investments and other assets and liabilities denominated in non-U.S. currencies are translated into U.S. Dollars using the exchange rate at 4:00 p.m., Eastern Time, at each quarter end. Amounts related to the purchases and sales of investments, investment income and expenses are translated at the rates of exchange prevailing on the respective dates of such transactions.

Net unrealized currency gains and losses arising from valuing foreign currency-denominated assets and liabilities at the current exchange rate are reflected separately as unrealized appreciation/depreciation on translation of assets and liabilities denominated in foreign currencies.

Calculation of Net Asset Value

We calculate our net asset value per share by subtracting all liabilities from the total carrying amount of our assets, which includes the fair value of our investments, and dividing the result by the total number of outstanding shares on the date of valuation. For purposes of calculating our net asset value, we expect to carry all liabilities at cost.

The determination of the fair value of our investments requires judgment, especially with respect to investments for which market quotations are not available. For most of our investments, market quotations will not be available. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material. Because the calculation of our net asset value is based, in part, on the fair value of our investments as determined by our advisor, which is an affiliated entity of the company, our calculation of net asset value is to a degree subjective and could be adversely affected if the determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal of such investments. Furthermore, the fair value of our investments, as reviewed and approved by our board of directors, may be materially different from the valuation as determined by an independent valuation firm.

Revenue Recognition

We record interest income on an accrual basis to the extent that we expect to collect such amounts. We do not accrue as a receivable interest on loans and debt securities for accounting purposes if we have reason to doubt our ability to collect such interest. Original issue discounts, market discounts or premiums are accreted or amortized using the effective interest method as interest income. We record prepayment premiums on loans and debt securities as interest income. Any application, origination or other fees earned by the company in arranging or issuing debt are amortized over the expected term of the loan.

We place loans on non-accrual status when principal and interest are past due 90 days or more or when there is a reasonable doubt that we will collect principal or interest. Accrued interest is generally reversed when a loan is placed on non-accrual. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are generally restored to accrual status when past due and principal and interest is paid and, in our management’s judgment, is likely to remain current.

Dividend income is recorded (1) on the ex-dividend date for publicly issued securities and (2) when received from private investments. Dividends received from the company’s private investments, which generally reflect net cash flow from operations, are declared, accrued and paid on a quarterly basis at a minimum. The proceeds related to the dividend receivable amount of $1,407,581 presented on the consolidated statements of assets and liabilities as of September 30, 2018 were subsequently collected by October 5, 2018.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation on Investments

We measure realized gains or losses by the difference between the net proceeds from the sale, repayment, or disposal of an asset and the adjusted cost basis of the asset, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation will reflect the change in investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

Organization Costs

Organization costs are expensed on the company’s consolidated statements of operations as incurred.

Offering Costs

Offering costs include all costs to be paid by the company in connection with the offering of its shares, including legal, accounting, printing, mailing and filing fees, charges of the company’s escrow holder, transfer agent fees, due diligence expense reimbursements to participating broker-dealers included in detailed and itemized invoices and costs in connection with administrative oversight of the offering and marketing process, and preparing supplemental sales materials, holding educational conferences, and attending retail seminars conducted by broker-dealers. When recognized by the company, offering costs will be recognized as a reduction of the proceeds from the offering.

Deferred Sales Commissions

The company defers certain costs, principally sales commissions and related compensation, which are paid to the dealer manager and may be reallowed to financial advisors and broker/dealers in the future in connection with the sale of Class C shares sold with a reduced front-end load sales charge. The costs expected to be incurred at the time of the sale of Class C shares are recorded as a liability on date of sale and are amortized on a straight-line basis over the period beginning on the time of sale and ending on the date which approximates an expected liquidity event for the company. As of September 30, 2018, and December 31, 2017, the company recorded a liability for deferred sales commissions in the amount of $206,862 and $249,858, respectively.

Financing Costs

Recently Issued Accounting Pronouncements

JOBS Act

We qualify as an “emerging growth company” pursuant to the provisions of the JOBS Act, enacted on April 5, 2012. For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation.

Under the JOBS Act, we will remain an “emerging growth company” until the earliest of:

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the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more;

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the last day of the fiscal year following the fifth anniversary of the completion of this offering;

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the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; and

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the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We will qualify as a large accelerated filer as of the first day of the first fiscal year after we have (i) more than $700,000,000 in outstanding common equity held by our non-affiliates as of the last day of our most recently completed second fiscal quarter, (ii) been a public company for at least 12 months and (iii) filed at least one annual report with the SEC. The value of our outstanding common equity will be measured each year on the last day of our second fiscal quarter.

The JOBS Act also provides that an “emerging growth company” can utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. However, we are choosing to opt out of that extended transition period, and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for companies that are not “emerging growth companies.” Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Portfolio and Investment Activity

As of September 30, 2018, the company invested in numerous solar, wind, biomass, and energy efficiency projects included in 21 investment portfolios, as well as one energy efficiency secured loan, as follows:

EVCE BioMass Portfolio

The EVCE Biomass Portfolio is currently comprised of acquisition costs related to a biomass facility being acquired in Colorado.

Colorado CSG Solar Portfolio

The Colorado CSG portfolio, consists of 13 to-be-constructed community solar projects located in the State of Colorado with a combined generating capacity of approximately 25.2MW. The individual projects are expected to reach commercial operation at varying dates ranging from Q4 2018 to Q1 of 2019. The Projects are part of Xcel Energy’s Community Solar Garden (“CSG”) program.

East to West Solar Portfolio

The company owns 9.789 MWs of operating solar power facilities located on 13 sites in the states of Colorado, Connecticut, Florida, Hawaii, Indiana and North Carolina (the “East to West Solar Portfolio”). The East to West Solar Portfolio consists of ground and roof mounted solar systems (each, a “System”) located on municipal and commercial properties as follows:

Denver International Airport - The Denver International Airport System has a generation capacity of 1,587.6 kW and is located in Denver, Colorado. The System sells power directly to the City and County of Denver Department of Aviation, under a 25-year variable rate PPA. The System also sells SRECs directly to the local utility, Xcel Energy, under a 20-year contract.

Progress Energy I – The Progress Energy I System has a generation capacity of 2,479.0 Kw and is located in Laurinburg, North Carolina. The system sells power directly to the local utility Duke Energy (Progress Energy) under a 20-year fixed rate PPA.

Progress Energy II – The Progress Energy II System has a generation capacity of 2,499.2 Kw and is located in Laurinburg, North Carolina. The system sells power directly to the local utility, Duke Energy/Progress Energy under a 15-year fixed rate PPA and also sells RECs to the same off-taker under a 15-year contract.

SunSense I - The SunSense I System has a generation capacity of 500.0 Kw and is located in Raleigh, North Carolina. The system sells power directly to the local utility, Duke Energy/Progress Energy Carolinas, Inc., under a 20-year fixed rate PPA.

SunSense II – The SunSense II System has a generation capacity of 497.0 Kw and is located in Clayton, North Carolina. The system sells power directly to the local utility, Duke Energy/Progress Energy Carolinas, Inc., under a 20-year fixed rate PPA.

SunSense III – The SunSense III System has a generation capacity of 497.0 Kw and is located in Fletcher, North Carolina. The system sells power directly to the local utility, Duke Energy/Progress Energy Carolinas, Inc. under a 20-year fixed rate PPA.

NIPSCO III – The NIPSCO “Turtle Top” System has a generation capacity of 375.2 Kw and is located in New Paris, Indiana. The system sells power directly to the local utility, Northern Indiana Public Service Company (NIPSCO), under a 15-year escalating fixed rate PPA.

OUC I – The OUC I System has a generation capacity of 417.0 Kw and is located in Orlando, Florida. The system sells power directly to the local utility, Orlando Utilities Commission, under a 25-year fixed rate PPA.

KIUC – The KIUC System has a generation capacity of 383.0 kW and is located in Koloa, Hawaii. The system sells power directly to the local utility, the Kauai Island Utility Cooperative, under a 20-year fixed rate PPA.

10.

TJ Maxx – The TJ Maxx System has a generation capacity of 249.9 kW and is located in Bloomfield, Connecticut. The system sells power directly to the H.G. Conn. Realty Corp under a 15-year escalating fixed rate PPA.

11.

Denver Public Schools (Green Valley) – The Green Valley System has a generation capacity of 101.2 kW and is located in Denver, Colorado. The system sells power directly to the Denver Public Schools under a 20-year escalating fixed rate PPA. The System also sells SRECs directly to the local utility, Xcel Energy, under a 20-year fixed rate contract.

12.

Denver Public Schools (Rachel B. Noel) – The Rachel B. Noel System has a generation capacity of 101.2 kW and is located in Denver, Colorado. The system sells power directly to the Denver Public Schools under a 20-year escalating fixed rate PPA. The System also sells SRECs to the local utility, Xcel Energy, under a 20-year fixed rate contract.

13.

Denver Public Schools (Greenwood) – The Greenwood System has a generation capacity of 101.2 kW and is located in Denver, Colorado. The system sells power directly to the Denver Public Schools under a 20-year escalating fixed rate PPA. The System also sells SRECs directly to the local utility, Xcel Energy, under a 20-year fixed rate contract.

Separately, the company owns two additional operating solar PV systems, each with approximately 1.0 MW in power generation and together comprising a total of 2.05 MW, located in Gainesville, Florida (the “Gainesville Solar” facilities). Details of Gainesville Solar, which are included in the East to West Solar Portfolio, are as follows:

MLH2 - The MLH2 System has a generation capacity of 1,000 kW and is located in Gainesville, Florida, on land owned by the company. The system sells power directly to the local utility, Gainesville Regional Utility, under a 20-year fixed rate PPA.

MLH3 – The MLH3 System has a generation capacity of 1,050 kW and is located in Gainesville, Florida. The system sells power directly to the local utility, Gainesville Regional Utility, under a 20-year fixed rate PPA.

The company owns two operating solar PV systems comprising a total of 7.621 MW (the “NC Tar Heel” facilities) located in North Carolina through an equity investment of approximately $8,400,000 plus working capital.

Details of the NC Tar Heel facilities, which is included in the East to West Solar Portfolio, are as follows:

1. Person County Solar Park 2 (PCIP) – The PCIP System has a generation capacity of 1,250 kW and is located in Timberlake, North Carolina. The system sells power directly to the local utility, Duke Energy/Progress Energy under a 20-year escalating fixed rate PPA.

2. South Robeson – The South Robeson System has a generation capacity of 6,371 kW and is located in Rowland, North Carolina. The system sells power directly to the local utility, Duke Energy/Progress Energy, under a 15-year fixed rate PPA. The System also sells RECs to the same off-taker under a 15-year fixed price contract.

Lastly, the company owns Phelps 158 Solar Farm, LLC a solar photovoltaic system with capacity of approximately 6.75 MW (DC) located in Conway, North Carolina. Phelps 158 Solar Farm, LLC is included in the East to West Solar Portfolio, and has approximately 15 years remaining on the PPA.

Foresight Solar Portfolio

The Foresight Solar Portfolio is a 10 MW portfolio of operating solar projects located in California and Colorado. The portfolio consists of six operating ground mount systems between 0.5 MW and 2 MW which have been operational for an average of three years, with approximately 17 years remaining on the PPAs.

Golden Horizons Portfolio

The Golden Horizons Portfolio consists of two operating solar photovoltaic (“PV”) systems comprising 7.7 MW located in North Palm Springs, California. The projects were placed in service throughout 2011 and sell power to California utility through a 20-year power purchase agreement (“PPA”) with 14 years currently remaining. Since the acquisition, the company has invested approximately $1 million in upgrades to the tracker mechanisms as well as other aspects.

Green Maple Portfolio

The company owns nine solar power facilities in various locations in the state of Vermont (the “Green Maple Portfolio”). A brief summary of each project is as follows:

Charter Hill Solar – The Charter Hill System has a generation capacity of 1.044 MW and is located in Rutland, Vermont. The system sells power directly to the local utility, Green Mountain Power, under a 25-year fixed rate PPA.

Williamstown Solar – The Williamstown System has a generation capacity of 732 kW and is located in Williamstown, Vermont. The system sells power to a commercial off-taker under a 20-year fixed rate PPA.

GLC Chester Solar – The GLC Chester System has a generation capacity of 732 kW and is located in Chester Township, Vermont. The system sells power to various municipal off-takers under 20-year fixed rate PPAs.

Pittsford Solar – The Pittsford system has a generation capacity of 686 kW and is located in Pittsford Township, Vermont. The system sells power to various commercial off-takers under 20-year fixed rate PPAs.

Novus Royalton Solar – The Novus Royalton system has a generation capacity of 686 kW and is located in Royalton, Vermont. The system sells power to various municipal off-takers under 20-year fixed rate PPAs.

Proctor GLC Solar LLC – The Proctor GLC system has a generation capacity of 708.75 kW and is located in Proctor, Vermont. The system sells power to a municipal off-taker under a 20-year fixed rate PPA.

Hartford Solarfield LLC – The Hartford Solarfield system has a generation capacity of 748.44 kW and is located in Hartford, Vermont. The system sells power to a municipal off-taker under a 20-year fixed rate PPA.

46 Precision Drive LLC – The 46 Precision Drive system has a generation capacity of 748.44 kW and is located in North Springfield, Vermont. The system sells power to a municipal off-taker under a 20-year fixed rate PPA.

City Garden Solar LLC – The City Garden system has a generation capacity of 1.0 MW and is located in Rutland, Vermont. The system sells power directly to the local utility, Green Mountain Power, under a 25-year fixed rate PPA.

Magnolia Sun Portfolio

Powerhouse One — The company owns four solar facilities located in Tennessee, with a total generation capacity of 3.0 MW. The facilities consist of commercial grade, ground mounted solar systems located on leased property within a five-mile radius in Fayetteville, Tennessee. The systems sell power directly to two local utilities; Tennessee Valley Authority and Fayetteville Public Utilities under long term PPAs.

CaMa Solar — The company owns two solar facilities in California, and one in Massachusetts, with a total generation capacity of 566.62 kW. The California systems sell power to municipal off-takers; Santa Cruz City Schools, and Petaluma City Schools of Sonoma County, under long-term PPAs. The Massachusetts systems sells power to the WGBH Educational Foundation, located in Boston, MA, under a long-term PPA.

SolaVerde — The company owns eleven solar facilities in Tennessee with a total capacity of 1.75 MW Eight of the systems sell power directly to the local utility, Tennessee Valley Authority, under a long-term PPA. Three of the systems sell power to municipal off-takers.

Midway III Portfolio

The Midway III portfolio, located in California, is operational as of September 6, 2018. It encompasses an approximate generation capacity of 26 MW, with all power sold to large utility company in California.

Raleigh Portfolio

The Raleigh Portfolio consists of five operating solar PV systems located in eastern North Carolina with total generation capacity of 27.8 MW. The systems are generally described as follows:

Faison — This system has generation capacity of 2.3 MW and is located in Faison, North Carolina. The system sells power to Duke Energy Progress, Inc. under a fifteen (15) year power purchase agreement which commenced in 2015.

Four Oaks — This system has generation capacity of 6.5 MW and is located in Four Oaks, North Carolina. The system sells power to Duke Energy Progress, Inc. under a fifteen (15) year power purchase agreement which commenced in 2015.

Nitro — This system has generation capacity of 6.22 MW and is located in Smithfield, North Carolina. The system sells power to Duke Energy Progress, Inc. under a fifteen (15) year power purchase agreement which commenced in 2015.

Sarah — This system has generation capacity of 6.04 MW and is located in Louisburg, North Carolina. The system sells power to Duke Energy Progress, Inc. under a fifteen (15) year power purchase agreement which commenced in 2015.

Princeton — This system has generation capacity of 6.50 MW and is located in Princeton, North Carolina. The system sells power to Duke Energy Progress, Inc. under a fifteen (15) year power purchase agreement which commenced in 2015.

Six States Solar Portfolio

The company previously leased 12.973 MW of operating solar power facilities located on 27 sites in the states of Arizona, California, Colorado, Connecticut, Indiana, and North Carolina under a master lease agreement. During the remaining term of the lease, which is approximately 17 years, there is the potential for the company to purchase these assets directly upon agreement and consent of the parties. With over 82% of the contracted revenues from investment grade counterparties, the average remaining life of the PPA is approximately 13.6 years. During June 2018 the company acquired twelve solar systems comprising 4.55 MW that were previously leased. The Six States Solar Portfolio now consists of these 13 facilities plus the remaining fourteen facilities that continue to be leased. The projects that were purchased have an average life remaining of approximately 15 years under various power purchase agreements.

The owned Six States Solar Portfolio (the owned “SSS Portfolio”) consists of ground and roof mounted solar units located on municipal and commercial properties generally described as follows:

The Town of Newington — Newington Public Schools - Newington Public Schools (“Newington”). This system has generation capacity of 180 kW and is located in the Town of Newington, CT. The system sells power to the Town of Newington, which encompasses seven schools that serve approximately 4,200 students from kindergarten through 12th grade, which are accredited by the New England Association of Schools & Colleges.

Regional School Department — Northwestern Regional School District #7 — Northwestern Regional School District (“Northwestern”). This system has generation capacity of 445.51 kW and is located in Winsted, Connecticut. The system sells power to the Northwestern Regional School District which serves the total Regional Community with emphasis on middle school and high school students.

City of Winters — The City of Winters (“Winters”). This system has generation capacity of 251 kW and is located in Winters, California. The system sells power to the City of Winters which is part of the Sacramento-Arden-Arcade-Yuba City, California-Nevada region.

Adams State College — Adams State College (“Adams”). This system has generation capacity of 299.52 kW and is located in Alamosa, CO. The system sells power to Adams State College, a state-supported liberal arts university established in 1921. Additionally, RECs are sold to the local utility, Xcel Energy

Sacramento County Water Agency — Sacramento County Water Agency (“SCWA”). This system has generation capacity of 921.2 kW and is located in Sacramento, California. The system sells power to the Sacramento County Waste Authority (“SCWA”) which was established in 1952 with the passage of the Sacramento County Water Agency Act and a commitment to providing safe and reliable drinking water to over 55,000 homes and businesses. Additionally, performance-based incentives are sold to the Sacramento Municipality Utility District (“SMUD”).

Tanque Verde School District — Tanque Verde School District (“TVSD”). This is comprised of four systems located in Tucson, AZ with a total generation capacity of 1.51 MW. The systems sell power to the Tanque Verde School District (“TVSD”), that encompasses four schools. Additionally, RECs are sold to the local utility, Tuscan Electric Power.

Northern Indiana Public Service Company — Northern Indiana Public Service Company (“NIPSCO”). This is comprised of three systems located in Goshen, Milford, and Topeka, Indiana with a total generation capacity of 1.32 MW. The systems sell power to NIPSCO, Indiana’s largest natural gas distributor and second-largest distributor of electricity serving more than one million customers.

The leased Six States Solar Portfolio consists of approximately 8.423 MW of ground and roof mounted solar units located on municipal and commercial properties generally described as follows:

South Adams County Water and Sanitation District — The South Adams County Water and Sanitation District (“South Adams”). This system has generation capacity of 165 kW and is located in Commerce City, CO. The system sells power under a long-term PPA to the South Adams County Water and Sanitation District, formed in 1953 under the State of Colorado Special District provisions to serve nearly 50,000 customers. Additionally, RECs are sold to the local utility, Xcel Energy.

Floyd Road Solar Portfolio — This system has generation capacity of 6.75 MW and is located in Gaston, NC. The system sells power directly to the local utility, Dominion Energy, under a 15-year PPA. Additionally, RECs are sold to a third-party. The system achieved commercial operation in the second quarter of 2017. On July 14, 2017, the company sold Floyd Road for approximately $11,400,000 and leased the facility back for a period of 24 years. De Lage Landen Financial Services was the sale/leaseback entity.

Denver Public Schools — Denver Public Schools (“DPS”). This is comprised of 13 systems located in Denver, CO with a total generation capacity of 1.49 MW. The systems sell power to DPS, which encompasses 185 schools that serve 90,150 students. Additionally, RECs are sold to the local utility, Xcel Energy.

Sunny Mountain Portfolio

The Residential portion of the Sunny Mountain portfolio is comprised of twelve systems located across 8 towns in Colorado with a total generation capacity of 76.49 kW while the commercial portion of the portfolio is comprised of nine systems located in Boulder and Broomfield, CO with a total generation capacity of 736.6 kW. The systems sell power to various commercial and municipal off-takers under long-term PPAs.

Tar Heel Solar II

The Tar Heel Solar II portfolio is currently comprised of acquisition costs related to solar farms being acquired in North Carolina.

With the inclusion of owned, under construction and leased assets, the company operates approximately 148.35 MW of operating commercial solar power facilities throughout the United States as of September 30, 2018.

Canadian Northern Lights Portfolio

The company owns a portfolio of seventy-nine (79) rooftop solar photovoltaic systems located within a 60-mile radius of Toronto, Ontario, Canada with a combined generation capacity of approximately 581.4 kW. The Company sold one of the locations in June 2017. Standardized lease agreements are in place and the systems sell power directly to the local utility, Ontario Power Authority (“OPA”) under their microFIT solar program at a fixed rate.

There is a standardized lease that is signed with each of the home/building owners that allows the system to be generally operated and maintained during the term of each OPA contract. The lease has been designed to survive the sale of the home/building and there is a non-disturbance provision which will allow the owner of the system, the company, to operate the system for the entirety of the term. The home/building owner receives a modest annual rental payment for use of the rooftop.

Enfinity Colorado DHA Portfolio

The Enfinity Colorado DHA Portfolio consists of a 2.5 MW portfolio of 666 residential rooftop solar systems located in and around Denver, CO. All energy generated by the systems is sold to the Denver Housing Authority under a 20-year PPA and RECs are sold to the local utility, Xcel Energy. These systems were originally purchased from a subsidiary of TERP and certain direct and indirect subsidiaries in 2017.

Greenbacker Residential Solar Portfolio

This portfolio consists of an 18.307 MW portfolio of approximately 2,350 residential rooftop solar systems located across 8 states including Arizona, California, Connecticut, Hawaii, Maryland, Massachusetts, New Jersey and New York. The energy generated by the systems has been sold under a mix of 20-year PPAs and operating leases to the various residential customers who on average have above average FICO Score Ratings. These systems were originally purchased from OneRoof Energy Inc. (“ORE”) and certain direct and indirect subsidiaries in 2016 and 2017.

Greenbacker Residential Solar II Portfolio

This portfolio consists of an 9.149 MW portfolio of approximately 1,350 residential rooftop solar systems located across 8 states including Arizona, California, Connecticut, Massachusetts, Maryland, Nevada, New Jersey and New York. The energy generated by the systems has been sold under 20-year PPAs. These systems were originally purchased from a subsidiary of Terraform Power Inc. (“TERP”) and certain direct and indirect subsidiaries in 2017.

The company operates approximately 31.54 MW of operating residential solar power facilities throughout the United States and Canada as of September 30, 2018.

Greenbacker Wind — California Portfolio

Wagner Wind, purchased on December 26, 2017, is a 6 MW project located in Riverside, California that sells power directly to the City of Riverside California under a 15-year escalating fixed-rate PPA. The project consists of two 3.0 MW Vestas V90 turbines. The project was originally placed in service in the fourth quarter of 2012.

Greenbacker Wind — Idaho Portfolio

The Fossil Gulch Wind Park is a 10.5 MW Wind Farm located in Hagerman, Idaho. The project sells power directly to the local public utility, Idaho Power Company under a 20-year escalating PPA. Additionally, RECs are sold to a third party under a fixed-rate contract. The facility originally commenced operations in the third quarter of 2005 and it has been operated continuously since that date.

Greenbacker Wind — Montana Portfolio

The Fairfield Wind Project is a 10.0 MW facility located in Teton County, MT. The project sells power to NorthWestern Energy under a 20-year fixed-rate PPA. Additionally, RECs are sold to NorthWestern Energy under an escalating capped fixed-rate contract. The facility originally commenced operations in the second quarter of 2014.

The Greenfield Wind Project is a 25 MW facility located in Teton County, MT. The project sells power to NorthWestern Energy under a 25-year fixed-rate PPA, which includes the sale of RECs. The facility originally commenced operation in the fourth quarter of 2016.

Greenbacker Wind — Vermont Portfolio

Georgia Mountain Community Wind, purchased on December 21, is a 10 MW project located in Mendon, Vermont that sells power directly to the City of Burlington Electric Department (“BED”) under a 25-year escalating fixed-rate PPA. The project consists of four 2.5 MW Goldwind turbines. The project was originally placed in service in the fourth quarter of 2012.

The company currently operates approximately 61.5 MW of operating wind power facilities throughout the United States.

GREC Energy Efficiency Portfolio

The company maintains three capital leases with AEC-LEDF, LLC related to the ownership of energy efficient lighting fixtures in three commercial locations in Puerto Rico, United States. The lease period under each of the master lease agreements correspond with underlying equipment service agreements between LED Funding LLC, the seller of the equipment to GREC Energy Efficiency Portfolio, and the owners of the commercial locations. The equipment service agreement terms range from seven to ten years. At the end of each of the lease terms, ownership of the fixtures is retained by the owners of the commercial locations.

Renew AEC One, LLC

In September 2015, the company entered into a secured loan agreement with Renew AEC One, LLC to fund the installation and purchase of energy efficiency lighting in a warehouse in Pennsylvania. The loan bears an interest rate of 10.25% per annum with principal amortization over a ten year period ending in February 2025.

LED Funding LLC and Renew AEC One LLC (the “AEC Companies”) are considered related parties as the members of these entities own an indirect, non-controlling ownership interest in the company’s advisor. The loans and capital leases outstanding between the AEC Companies and the company were negotiated at an arm’s length and contain standard terms and conditions that would be included in third party lending agreements including required security and collateral, interest rates based upon risk of the specific loan, and term of the loan. As of September 30, 2018, all loans and capital leases were considered current per their terms.

Investment Summary

The following table presents the purchases of new investments or the funding of additional capital for existing investments for the nine months ended September 30, 2018 and September 30, 2017:

	For the nine months ended September 30, 2018		For the nine months ended September 30, 2017
Alternative Energy – Biomass
EVCE BioMass Portfolio	$	74,664	$	—
Alternative Energy - Commercial Solar
Colorado CSG Solar Portfolio		10,240,000		—
East to West Solar Portfolio		13,715,000		4,678,000
Floyd Road Solar Farm Portfolio		—		10,684,559
Foresight Solar Portfolio		449,929		—
Golden Horizons Solar Portfolio		100,000		8,050,000
Green Maple Portfolio		4,507,823		180,000
Midway III Solar Portfolio		31,060,658		—
Raleigh Portfolio		150,000		20,614,598
Six States Solar Portfolio		9,250,000		2,320,306
Tar Heel Solar II Portfolio		385,000		—
Alternative Energy - Residential Solar
Enfinity Colorado DHA Portfolio		—		1,400,000
Greenbacker Residential Solar Portfolio		—		8,250,000
Greenbacker Residential Solar II		—		6,400,000
Alternative Energy – Wind
Greenbacker Wind Portfolio – Montana		—		8,645,000
Greenbacker Wind Portfolio – Vermont		500,000		—
Energy Efficiency Secured Loans
GREC Energy Efficiency LLC Portfolio		1,500		—
	$	70,434,574	$	71,222,463

The composition of the company’s investments as of September 30, 2018, at fair value, were as follows:

	Investments at Cost		Investments at Fair Value		Fair Value Percentage of Total Portfolio
Alternative Energy – Biomass:
EVCE BioMass Portfolio	$	74,664	$	74,664		0.0	%
Subtotal	$	74,664	$	74,664		0.0	%
Alternative Energy – Commercial Solar:
Colorado CSG Solar Portfolio	$	10,240,000	$	10,162,554		4.0	%
East to West Solar Portfolio		37,149,876		33,907,277		13.3
Foresight Solar Portfolio		13,650,000		13,183,960		5.2
Golden Horizons Solar Portfolio		9,300,000		14,027,305		5.5
Green Maple Portfolio		17,582,823		15,423,713		6.1
Magnolia Sun Portfolio		10,775,000		8,626,544		3.4
Midway III Solar Portfolio		11,567,853		13,817,326		5.4
Raleigh Portfolio		20,822,198		21,003,989		8.2
Six States Solar Portfolio		12,470,306		14,386,779		5.6
Sunny Mountain Portfolio		884,578		1,117,897		0.4
Tar Heel Solar II Portfolio		359,918		354,684		0.1
Subtotal	$	144,802,552	$	146,012,028		57.2	%
Alternative Energy – Residential Solar:
Canadian Northern Lights Portfolio	$	1,603,136	$	2,196,715		0.9	%
Enfinity Colorado DHA Portfolio		1,400,000		1,941,185		0.8
Greenbacker Residential Solar Portfolio		28,100,000		27,132,027		10.6
Greenbacker Residential Solar Portfolio II		6,400,000		11,122,311		4.3
Subtotal	$	37,503,136	$	42,392,238		16.6	%
Alternative Energy – Wind:
Greenbacker Wind Portfolio – California	$	9,500,000	$	8,589,868		3.4	%
Greenbacker Wind Portfolio – Idaho		7,320,000		6,713,445		2.6
Greenbacker Wind Portfolio – Montana		21,159,487		21,920,532		8.6
Greenbacker Wind Portfolio – Vermont		24,917,193		28,600,003		11.2
Subtotal	$	62,896,680	$	65,823,848		25.8	%
Energy Efficiency:
GREC Energy Efficiency Portfolio	$	457,835	$	489,946		0.2	%
Renew AEC One, LLC		579,140		579,140		0.2
Subtotal	$	1,036,975	$	1,069,086		0.4	%
Total	$	246,314,007	$	255,371,864		100.0	%

The composition of the company’s investments as of December 31, 2017, at fair value, were as follows:

	Investments at Cost		Investments at Fair Value		Fair Value Percentage of Total Portfolio
Alternative Energy – Commercial Solar:
Sunny Mountain Portfolio	$	884,578	$	1,205,439		0.6	%
East to West Solar Portfolio		27,934,875		27,200,000		12.4
Green Maple Portfolio		13,075,000		11,956,821		5.5
Magnolia Sun Portfolio		10,775,000		9,635,508		4.4
Six States Solar Portfolio		4,770,306		4,756,893		2.3
Foresight Solar Portfolio		13,200,071		13,200,071		6.0
Midway III Solar Portfolio		10,093,861		10,093,861		4.6
Raleigh Portfolio		20,672,198		22,850,465		10.4
Golden Horizons Solar Portfolio		9,450,000		9,482,075		4.3
Subtotal	$	110,855,889	$	110,381,133		50.5	%
Alternative Energy – Residential Solar:
Canadian Northern Lights Portfolio	$	1,603,136	$	2,093,827		1.0	%
Enfinity Colorado DHA Portfolio		1,400,000		1,671,317		0.8
Greenbacker Residential Solar Portfolio		28,100,000		28,373,526		13.0
Greenbacker Residential Solar II		6,400,000		7,986,014		3.7
Subtotal	$	37,503,136	$	40,124,684		18.5	%
Alternative Energy – Wind:
Greenbacker Wind Portfolio – California	$	9,500,000	$	9,506,752		4.3	%
Greenbacker Wind Portfolio – Idaho		7,320,000		6,799,153		3.0
Greenbacker Wind Portfolio – Montana		21,609,488		23,228,136		10.6
Greenbacker Wind Portfolio – Vermont		24,417,193		27,168,808		12.6
Subtotal	$	62,846,681	$	66,702,849		30.5	%
Energy Efficiency:
GREC Energy Efficiency Portfolio	$	482,450	$	504,637		0.2	%
Renew AEC One, LLC		672,871		672,871		0.3
Subtotal	$	1,155,321	$	1,177,508		0.5	%
Total	$	212,361,027	$	218,386,174		100.0	%

Results of Operations

A discussion of the results of operations for the three and nine months ended September 30, 2018 and three and nine months ended September 30, 2017 are as follows:

Revenues. As the majority of our assets consist of equity investments in renewable energy projects, the majority of our revenue is generated in the form of dividend income. The timing and amount of dividend income is determined on at least a quarterly basis by GREC. This process includes an analysis at the individual SPV level based on cash available from operations and working capital ratios needed for the SPVs daily operations. Dividend income from our privately held, equity investments are recognized when approved. The other major component of our revenue is interest income earned on our debt investments, including loans to developers and loans made directly or indirectly to renewable energy projects. Dividend income for the three and nine months ended September 30, 2018 totaled $4,786,395 and $14,374,691, respectively, while dividend income for the three and nine months ended September 30, 2017 totaled $3,598,753 and $8,802,929, respectively. Interest income earned on our cash, cash equivalents and secured loans (including the amortization of origination and other fees for the three and nine months ended September 30, 2018 totaled $316,941 and $632,312, respectively, while interest income for the three and nine months ended September 30, 2017 totaled $64,882 and $164,075, respectively.

The increase in dividend income from the prior three and nine-month periods ended September 30, 2018 was primarily attributed to the acquisition of renewable energy projects throughout the past year as investments increased from $178 million as of September 30, 2017 to $255 million as of September 30, 2018, or an 43% increase. As new projects were purchased by the company, the volume of overall electricity generated by our project investments increased which increased net income available for distribution to the company. The increase in interest income from the prior three and nine-month periods ended September 30, 2017 was primarily attributed to interest earned on significant cash balances waiting to be invested. During Q3 2018 Hurricane Florence had a minimal impact on our projects’ production and results of operations.

Expenses. For the three and nine months ended September 30, 2018, the company incurred $2,397,833 and $7,044,576 in operating expenses, respectively, including the management fees earned by the advisor. For the three and nine months ended September 30, 2017, the company incurred $1,379,530 and $3,962,762 in operating expenses, respectively, including management fees earned by the advisor. The increase in management fees is directly related to the increase in assets under management as of September 30, 2018 compared to September 30, 2017.

For the three and nine months ended September 30, 2018, the advisor earned $1,571,737 and $4,090,466, respectively, in management fees. The consolidated financial statements reflect a $59,210 increase in incentive allocation for the three months ended September 30, 2018 and a $899,624 decrease in incentive allocation for the nine months ended September 30, 2018, based primarily upon net unrealized appreciation (depreciation).

For the three and nine months ended September 30, 2017, the advisor earned $873,961 and $2,330,599, respectively, in management fees. The consolidated financial statements reflect a $310,362 increase in incentive allocation for the three months ended September 30, 2017 and a $617,776 increase in incentive allocation for the nine months ended September 30, 2017, based primarily upon net unrealized appreciation.

For the three and nine months ended September 30, 2017, Greenbacker Administration, LLC invoiced the company $0 and $115,983, respectively, for expenses, at cost, for services related to asset management and accounting services related to the company’s investments. Effective on April 1, 2017, these expenses were invoiced directly to the company’s investments.

Lastly, for the three and nine months ended September 30, 2018, the company recognized a tax (benefit) expense from operations in the amount of $653,179 and $(657,989), respectively, while similarly, there was a deferred tax expense in the amount of $1,176,540 and $402,612, respectively, for the three and nine months ended September 30, 2017. The deferred tax (benefit)/expense is mainly derived from net operating losses incurred and investment tax credit carryforwards related to the company’s investments which, unlike financial statement purposes under GAAP, are consolidated for tax purposes and offset by unrealized tax basis gains on the company’s investments. The increase in the tax benefit was driven primarily by an unrealized loss on investments for tax purposes. Thus, for the three and nine months ended September 30, 2018, the net investment income was $1,988,378 and $8,519,173, respectively, or $0.06 and $0.31, respectively, per share. For the three and nine months ended September 30, 2017, the net investment income was $1,149,977 and $4,578,215, respectively, or $0.06 and $0.26, respectively, per share.

Going forward, our primary expense will continue to be the payment of asset management fees under our advisory agreement with the advisor. We continue to bear other operating expenses, which include, but are not limited to the following:

●

the cost of calculating our net asset value, including the related fees and cost of retaining third-party valuation services;

●

the cost of effecting sales and repurchases of units;

●

fees payable to third parties relating to, or associated with our financial and legal affairs, making investments, and valuing investments, including fees and expenses associated with performing due diligence reviews of prospective investments and sub-advisors;

●

fees payable to our advisor;

●

interest payable on debt incurred to finance our investments;

●

transfer agent and custodial fees;

●

federal and state registration fees;

●

costs of board meetings, unitholders’ reports and notices and any proxy statements;

●

directors and officers errors and omissions liability insurance and other types of insurance;

●

direct costs, including those relating to printing of unitholder reports and advertising or sales materials, mailing, telephone and staff;

●

fees and expenses associated with independent audits and outside legal costs, including compliance with the Sarbanes-Oxley Act of 2002 and applicable federal and state securities laws; and

●

all other expenses incurred by us or the advisor, sub-advisors or administrator in connection with administering our investment portfolio, including expenses incurred by our advisor in performing certain of its obligations under the advisory agreement.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation on Investments and Translation of Assets and Liabilities Denominated in Foreign Currencies. Net realized and unrealized gains and losses from our investments and net realized and unrealized foreign currency gains and losses on translation of assets and liabilities denominated in foreign currencies are reported separately on the consolidated statements of operations. We measure realized gains or losses as the difference between the net proceeds from the sale, repayment, or disposal of an asset and the adjusted cost basis of the asset, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation will reflect the change in investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized. For the three and nine months ended September 30, 2018, we recognized no realized gains or losses on the sale of investments, a net change in unrealized appreciation (depreciation) of $(787,463) and $3,032,710, respectively, was recorded of which $(811,752) and $3,073,280 of unrealized appreciation (depreciation), respectively, related to the change in value of investments and $24,289 and $(40,570) of unrealized appreciation (depreciation), respectively, related to the change in value based upon changes in foreign currency exchange rates. For the three and nine months ended September 30, 2017, we recognized a gain on sale of an investment of $693,882, and $693,882, respectively, a net change in unrealized appreciation of $931,365 and $2,468,435, respectively, was recorded of which $873,352 and $2,358,498 of unrealized appreciation, respectively, related to the change in value of investments and $58,013 and $109,937 of unrealized appreciation, respectively, related to the change in value based upon changes in foreign currency exchange rates.

Changes in Net Assets from Operations. For the three and nine months ended September 30, 2018, we recorded a net increase in net assets resulting from operations of $3,967,400 and $14,126,494, respectively. For the three and nine months ended September 30, 2017, we recorded a net increase in net assets resulting from operations of $3,410,565 and $7,400,434, respectively.

Changes in Net Assets, Net Asset Value and Offering Prices. For the nine months ended September 30, 2018 and September 30, 2017, we recorded a net increase in net assets of $13,226,870 and $6,782,658, respectively. The increase in net assets primarily relates to our net investment income earned during the period and the positive effect of our deferred tax benefit due to a significant loss for tax purposes at GREC, mainly generated by accelerated depreciation on our solar and wind investments.

Based on the net asset value for each quarter ended since the Commencement of Operations, the offering price of our shares was adjusted to ensure that the net proceeds per share are no more or less than the then current net asset value per share. The offering prices since inception, and the dates they were effective, are as follows:

Period			Class
From	To		A		C		I		P-A			P-I
25-Apr-14		4-Nov-15	$	10.000	$	9.576	$	9.186		NA			NA
5-Nov-15		4-Feb-16	$	10.024	$	9.599	$	9.208		NA			NA
5-Feb-16		5-May-16	$	10.048	$	9.621	$	9.230		NA			NA
6-May-16		3-Aug-16	$	10.068	$	9.640	$	9.248	$	9.589		$	8.808
4-Aug-16		6-Nov-16	$	10.227	$	9.791	$	9.394	$	9.739		$	8.946
7-Nov-16		7-Feb-17	$	10.282	$	9.581	$	9.445	$	9.782		$	8.828
8-Feb-17		4-May-17	$	10.224	$	9.526	$	9.391	$	9.704		$	8.758
5-May-17		17-May-17	$	10.165	$	9.479	$	9.337	$	9.704		$	8.690
18-May-17		03-Aug-17	$	9.735	$	9.067	$	8.942	$	9.704		$	8.690
04-Aug-17		02-Nov-17	$	9.724	$	9.078	$	8.932		N/A		$	8.730
03-Nov-17		05-Feb-18	$	9.735	$	9.089	$	8.943		N/A		$	8.750
06-Feb-18		06-May-18	$	9.780	$	9.089	$	8.984	$	9.646	*	$	8.810
07-May-18		02-Aug-18	$	9.803	$	9.122	$	9.006	$	9.679		$	8.840
03-Aug-18		31-Oct-18	$	9.829	$	9.172	$	9.029	$	9.694		$	8.900
01-Nov- 18			$	9.791	$	9.149	$	8.994	$	9.683		$	8.890

* Effective April 16, 2018

Liquidity and Capital Resources

As of September 30, 2018, and December 31, 2017, the company had $66,736,375 and $10,144,014 in cash and cash equivalents, respectively. During the quarter the Company’s cash position has increased in anticipation of several investment transactions expected to close in the fourth quarter, which has typically been the busiest time of the year in our industry. Due to some delays transaction closings will now largely be concentrated in the fourth quarter of the year rather than spread over the third and fourth quarters. Since October 1, 2018, the Company has deployed approximately $25 million into new investments. We anticipate to reduce our cash balance through the closing of several investment transactions by the end of 2018. We use our cash to fund the acquisition, construction and operation of renewable energy and energy efficiency and sustainable development projects, make investments in renewable energy businesses, repay principal and interest on our borrowings, make distributions to our members and fund our operations. Our primary sources of cash generally consist of:

●

the net proceeds from share offerings;

●

dividends, fees, and interest earned from our portfolio of investments, as a result of, among other things, cash flows from a project’s power sales;

●

proceeds from sales of assets and capital repayments from investments;

●

financing fees, retainers and structuring fees;

●

borrowing capacity under current and future financing sources.

Operating entities of the company, which are accounted for as investments using fair value in the company’s consolidated financial statements under ASC 820, had approximately $62,522,759 and $47,284,162 in outstanding notes payable collateralized by certain solar assets and membership interests in limited liability companies included in various portfolios as of September 30, 2018 and December 31, 2017, respectively.

As part of the acquisition of the Enfinity Colorado DHA Portfolio (“DHA Portfolio”), a mortgage note dated April 20, 2012 (the “Note”), funded with bond proceeds from the Colorado Housing Finance Authority of Denver, Colorado in the amount of $6,775,000 (Taxable Qualified Energy Conservation Bonds) pursuant to a trust indenture, was assumed. The Note, whose remaining balance as of September 30, 2018 is $4,005,780 bears gross interest at an effective annual rate of 5%, and requires semiannual interest payments, payable on April 1 and October 1 of each year. The note has a final maturity date of April 1, 2032. Pursuant to the Series 2012 bonds, the DHA Portfolio receives interest subsidy payments from the United States Treasury semiannually on April 1 and October 1 of each year. The semiannual interest subsidy receivable is 3.255% of the outstanding bond principal. The Note is secured by the personal property, land improvements, and income of the DHA Portfolio. Lastly, pursuant to the Note agreement, the DHA portfolio has agreed that it will not take any action which jeopardizes the tax-exempt status of the mortgage.

As part of the acquisition of Fairfield Wind Manager LLC (“FWM LLC”) by Greenbacker Wind LLC, an indirect, wholly owned subsidiary of the company, the company is indirectly responsible for notes payable collateralized by wind assets held by Fairfield Wind Owner, LLC (“FWO LLC”), an entity which FWM LLC owns 50.01%. The loan earns interest at a variable base rate plus the applicable margin (4.60% as of September 30, 2018), as such terms are defined in the financing agreement. As of September 30, 2018, the outstanding notes payable balance was $10,919,949.

On December 26, 2017, Greenfield Wind Manager LLC “(GWM LLC”) entered into a Financing Agreement for a term loan not to exceed $23,562,443. The loan bears interest at 2.125% in excess of one-month LIBOR plus 1.0% through the end of the fourth anniversary of the loan and 2.375% thereafter. The company is indirectly responsible for outstanding notes payable collateralized by wind assets held by GWM LLC. As of September 30, 2018, the outstanding notes payable balance was $23,258,789. The company and GREC provided an unsecured guarantee on the repayment of FWM LLC and the GWM LLC loans.

As part of the acquisition of the Foresight Solar Portfolio (“Foresight”) by East to West Solar LLC, an indirect, wholly owned subsidiary of the company, the company is indirectly responsible for notes payable collateralized by solar assets held by Fresh Air Energy IV LLC, Fresh Air Energy VII LLC and Fresh Air Energy VIII. The Fresh Air Energy VII and Fresh Air Energy VIII loans are fixed rate (6.0%) and the Fresh Air Energy IV loan is a variable rate loan (5.50% as of September 30, 2018), as defined in the relevant financing agreements. As of September 30, 2018, the combined outstanding notes payable balance related to the Foresight Solar Portfolio was $5,531,572.

As part of the construction of the Midway III Portfolio (“Midway”) by GREC LLC, Midway an indirect, wholly owned subsidiary of the company, the company is indirectly responsible for notes payable collateralized by solar assets held by Midway Manager LLC. The Midway Manager loan is a variable rate loan (3.59% as of September 30, 2018), as defined in the relevant financing agreements. As of September 30, 2018, the combined outstanding notes payable balance related to the Midway Portfolio was $17,613,401.

Since the company maintains operating control over all entities with project level debt outstanding, we have included the total amount of the debt outstanding in the below table summarizing notes payable associated with the company’s operating subsidiaries as well as GREC and the Company.

On January 5, 2018, the company, through GREC HoldCo, entered into a credit agreement by and among the Company, the Company’s wholly owned subsidiary, GREC, the lenders party thereto and Fifth Third Bank, as administrative agent, as sole lead arranger and sole lead bookrunner, as well as swap counterparty. The new credit facility (the “Credit Facility”) consists of a loan of up to the lesser of $60,000,000 or a borrowing base amount based on various solar projects that act as collateral for the credit facility, of which approximately $25.7 million was drawn down at closing. The Credit Facility allows for additional drawdowns through December 31, 2018, at which point the outstanding loans shall convert to a term loan and matures on January 5, 2024. With additional drawdowns through September 30, 2018, the outstanding balance is approximately $30.7 million. Financing costs of $1,195,506 related to the Credit Facility, and the previous Facility 1 and Facility 2 Term Loans, have been capitalized and are being amortized over the current term of the Credit Facility

Interest on the Credit Facility, which bears interest at 2.125% in excess of one-month LIBOR, is payable on the last day of each month commencing January 31, 2018. Commitment fees on the average daily unused portion of the Credit Facility are payable at a rate per annum of 0.50% through December 31, 2018. Principal on the Credit Facility is payable, commencing on January 31, 2019, at a fixed amount on the last day of each month based upon an amortization period equal to the weighted average power purchase agreement (“PPA”) term less one year. Borrowings under the Credit Facility are secured by the assets, cash, agreements and equity interests in the Borrower and its subsidiaries. The company is a guarantor of the Borrower’s obligations under the Credit Facility.

While Williamstown Old Town Road LLC, Novus Royalton LLC, GLC Chester Community Solar LLC Charter Hill Solar LLC., Pittsford GLC Solar LLC, Hartford Solarfield, LLC and Proctor GLC Solar LLC, all indirect, wholly owned subsidiaries included in the Green Maple Portfolio, had individually entered into loan agreements with the Vermont Economic Development Authority in prior years, all outstanding balances were repaid as part of the Credit Agreement.

The weighted average interest rate on all notes payable outstanding at the company’s operating entities was 3.88% as of September 30, 2018.

The following table summarizes the notes payable balances of the company’s operating entities as of September 30, 2018:

	Interest Rates
	Range		Weighted Average		Maturity Dates	September, 2018
Fixed rate notes payable	1.775%–6.25	%	3.57	%	03/31/2021-04/01/2032	$	9,023,832
Floating rate notes payable	3.75%–6.11	%	3.83	%	12/31/2024-10/31/2037		84,164,387
						$	93,188,219

The principal payments due on the notes payable for each of the next five years ending December 31 and thereafter are as follows:

Year ending December 31:		Principal Payments
	2018		556,579
	2019		5,306,123
	2020		5,571,785
	2021		7,803,078
	2022		5,139,425
	Thereafter		68,811,229
		$	93,188,219

In the future, we expect that our ongoing sources of financing will be through corporate-level credit facilities or other secured and unsecured borrowings. In addition, we expect to use other financing methods at the project level as necessary, including joint venture structures, construction loans, property mortgages, letters of credit, sale and leaseback transactions, other lease transactions and other arrangements, any of which may be unsecured or may be secured by mortgages or other interests in our assets. In addition, other sources of capital may include tax equity financings, whereby an investor receives an allocation of tax benefits as well as cash distribution and governmental grants. Tax equity investors are passive investors, usually large tax-paying financial entities such as banks, insurance companies and utility affiliates that use these investments to reduce future tax liabilities. Depending on the arrangement, until the tax equity investors achieve their agreed upon rate of return, they may be entitled to substantially all of the applicable project’s operating cash flow, as well as substantially all of the project’s ITCs, accelerated depreciation and taxable income or loss. Typically, tax equity financing transactions are structured so that the tax equity investors reach their target return between 5 and 10 years after the applicable project achieves commercial operation. As a result, a tax equity financing may substantially reduce the cash distributions from the applicable project available for debt service and the period during which the tax equity investors receive most of the cash distributions may last longer than expected if the portfolio company’s energy projects perform below our expectations. While the terms of a tax equity financing may cause cash to be diverted away from the company to the tax equity investor for certain periods specified in the financing arrangement (often five to ten years, measured from commencement of the tax equity financing), then we expect to couple investments where cash is so restrained with other cash flowing investments so as to provide cash for distributions to investors. Our investment strategy will involve a combination of several types of investments, so as to maintain a mix of cash flowing and non-cash flowing investments.

Hedging Activities

We may seek to stabilize our financing costs as well as any potential decline in our investments by entering into swap or other financial transactions to hedge our interest rate risk. In connection with the FWO LLC note payable, FWO LLC entered into two interest rate swap transactions in notional amounts of $9,175,561 and $11,370,437, respectively, to swap a floating interest rate to a fixed interest rate. The swap transactions have an effective interest rate of 5.07%, and 2.86%, respectively, and a notional amount that matches the principal amount of the loan. The value of the swap agreements as of September 30, 2018 was a total liability in the amount $983,577. FWO LLC does not designate the swap transaction as a hedge for accounting purposes and, accordingly, accounts for the interest rate swap at fair value, with adjustments to fair value recorded as interest expense concurrent with the recording of interest expense associated with the underlying loan payments.

In connection with the GWM LLC note payable, GWM LLC entered into two interest rate swap transactions in notional amounts of $20,284,441 and $921,758, respectively, to swap a floating interest rate to a fixed interest rate. The swap transactions have an effective interest rate of 2.1725%, and 2.454%, respectively, and a notional amount that matches the principal amount of the loan. The value of the swap agreements as of September 30, 2018 was a total asset in the amount $1,285,632. GWM LLC does not designate the swap transaction as a hedge for accounting purposes and, accordingly, accounts for the interest rate swap at fair value, with adjustments to fair value recorded as interest expense concurrent with the recording of interest expense associated with the underlying loan payments.

In connection with the Midway note payable, Midway Manager LLC entered into two interest rate swap transactions in notional amounts of $17,613,401 and $12,440,392, respectively, to swap a floating interest rate to a fixed interest rate. The value of the swap agreements as of September 30, 2018 was a total liability in the amount $137,0472. Midway III Manager does not designate the swap transaction as a hedge for accounting purposes and, accordingly, accounts for the interest rate swap at fair value, with adjustments to fair value recorded as interest expense concurrent with the recording of interest expense associated with the underlying loan payments.

In regard to our investment in the Canadian Northern Lights Portfolio, with 79 solar assets located in and around Toronto, Ontario, Canada, we have foreign currency risk related to our revenue and operating expenses which are denominated in the Canadian Dollars as opposed to the U.S. Dollars. While we are currently of the opinion that the currency fluctuation between the Canadian and U.S. Dollar will not have a material impact on our operating results, we may in the future hedge this risk through the use of currency swap transactions or other financial instruments if the impact on our results of operations becomes material.

Contractual Obligations

While the company does not include a contractual obligations table herein as all obligations of the company are short-term, we have included the following information related to commitments of the company to further assist investors in understanding our outstanding commitments.

Advisory Agreement - GCM, a private firm that is registered as an investment adviser under the Advisers Act serves as our advisor. Under the direction of our board of directors, GCM manages our day-to-day operations and provides advisory and management services to us. The advisory agreement was previously approved by our board of directors and became effective on April 25, 2014. Unless earlier terminated, the advisory agreement will remain in effect for successive one-year periods if approved annually by a majority of our independent directors. The advisory agreement was most recently re-approved in February 2018, for the one-year period commencing April 24, 2018.

Pursuant to the advisory agreement, GCM is authorized to retain one or more sub-advisors with expertise in our target assets to assist GCM in fulfilling its responsibilities under the advisory agreement. However, GCM will be required to monitor any sub-advisor to ensure that material information discussed by management of any sub-advisor is communicated to our board of directors, as appropriate. If GCM retains any sub-advisor, our advisor will pay such sub-advisor a portion of the fees that it receives from us. We will not pay any additional fees to a sub-advisor. While our advisor will oversee the performance of any sub-advisor, our advisor will remain primarily liable to us to perform all of its duties under the advisory agreement, including those delegated to any sub-advisor. As of September 30, 2018, no sub-advisors have been retained by GCM.

We pay GCM a base management fee for advisory and management services. The base management fee is calculated at a monthly rate of 0.167% (2.00% annually) of our gross assets (including amounts borrowed). The Special Unitholder, an entity affiliated with our advisor, will hold the special unit in our company entitling it to an incentive allocation and distribution. Pursuant to our LLC Agreement, the incentive allocation and distribution, or incentive distribution, will have three parts as follows: the Income Incentive Distribution, Capital Gains Incentive Distribution and the Liquidation Incentive Distribution.

Administration Agreement - Greenbacker Administration LLC, a Delaware limited liability company and an affiliate of our advisor, serves as our Administrator. Since commencement of operations, Greenbacker Administration LLC delegated certain of its administrative functions to U.S. Bancorp Fund Services, LLC. Greenbacker Administration LLC may enter into similar arrangements with other third-party administrators, including with respect to fund accounting and administrative services. Greenbacker Administration LLC performs certain asset management, compliance and oversight services, as well as asset accounting and administrative services, for many of the company’s investments. The fee for these services, which is billed at cost to the company’s individual investments, was $636,724 for the quarter ended September 30, 2018.

Pledge of Collateral and Unsecured Guarantee of Loans to Subsidiaries: Borrowings under the Credit Facility are secured by the assets, cash, agreements and equity interests in the GREC Holdco and its subsidiaries. The company is a guarantor of GREC Holdco’s obligations under the Credit Facility. The amount of the unsecured guaranty on the outstanding principal of the Credit Facility is approximately $30,665,000 as of September 30, 2018. Per the loan and security agreements between and among Key Bank N.A., Greenbacker Wind LLC, Fairfield Wind Manager LLC, Greenfield Wind LLC, and Midway Manager LLC, operating subsidiaries of the company, GREC and the company have provided an unsecured guaranty on the outstanding principal of loans, which is approximately $51,800,000 as of September 30, 2018.

Renewable Energy Credits: For certain solar power systems in the Green Maple Portfolio, Greenbacker Residential Solar Portfolio and the Greenbacker Residential Solar II Portfolio (the “Portfolios”), the company has received incentives in the form of RECs. In certain cases, the Portfolios have entered into fixed price, fixed volume forward sale transactions to monetize these RECs for specific entities. If we are unable to satisfy the transaction requirements due to lack of production, we may have to purchase RECs on the spot market and/or pay specified replacement cost damages. Based upon current production projection, we do not expect a requirement to purchase RECs to fulfill our current REC sales contracts. If RECs earned by the Portfolios are not sold on a forward basis, they are sold in the spot market with revenue recorded in the accounts of the underlying investment when received.

Recording of a sale of RECs under GAAP is accounted for under Accounting Standards Codification Topic 605, Revenue Recognition. There are no differences in the process and related revenue recognition between REC sales to utilities and non-utility customers. Revenue is recorded in our wholly owned, single member LLCs when all revenue recognition criteria are met, including that: there is persuasive evidence that an arrangement exists (typically through a contract), services rendered through the production of electricity, pricing is fixed and determinable under the contract and collectability is reasonably assured. The accounting policy adopted by our wholly owned, single member LLC related to RECs is that the revenue recognition criteria are met when the energy is produced and a REC is created and transferred to a third party.

If any of our REC counterparties fail to satisfy their contractual obligations, our costs may increase under replacement agreements that may be required. We would also likely incur expenses in locating alternative parties to provide the services we expect to receive under our advisory agreement. For the majority of the forward REC contracts currently effective as of September 30, 2018, GREC and/or the company has provided an unsecured guarantee related to the delivery obligations under these contracts. The amount of the unsecured guaranty on REC contracts is approximately $182,700 as of September 30, 2018.

We currently have no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.

Distributions

Subject to the board of directors’ review and approval and applicable legal restrictions, we intend to authorize and declare distributions on a quarterly basis and pay distributions on a monthly basis. We will calculate each member’s specific distribution amount for the period using record and declaration dates, and each member’s distributions will begin to accrue on the date we accept each member’s subscription for shares. From time to time, we may also pay interim special distributions in the form of cash or shares, with the approval of our board of directors.

Distributions will be made on all classes of our shares at the same time. The cash distributions with respect to the Class C shares are lower than the cash distributions with respect to Class A, I, P-A and P-I shares because of the distribution fee relating to Class C shares, which will be allocated as a Class C-specific charge. Amounts distributed to each class will be allocated among the holders of our shares in such class in proportion to their shares.

Cash distributions paid during the periods presented were funded from the following sources noted below:

	For the nine months ended September 30, 2018		For the nine months ended September 30, 2017
Cash from operations	$	7,608,681	$	4,450,781
Offering proceeds		—		—
Total Cash Distributions	$	7,608,681	$	4,450,781

The company expects to continue to fund distributions from a combination of cash from operations as well as offering proceeds until a minimum of $250 million in net assets is reached, the portfolio is leveraged by at least 33% as well as being fully invested in operating assets. We expect distributions to continue at the current level once we achieve this minimum and we do not anticipate significant changes in the level of distributions in future periods.

Inflation

We do not anticipate that inflation will have a significant effect on our results of operations. However, in the event of a significant increase in inflation, interest rates could rise and our projects and investments may be materially adversely affected.

Seasonality

Certain types of renewable power generation may exhibit seasonal behavior. For example, wind power generation is generally stronger in winter than in summer as wind speeds tend to be higher when the weather is colder. In contrast, solar power generation is typically stronger in the summer than in the winter. This is primarily due to the brighter sunshine, longer days and shorter nights of the summer months, which generally result in the highest power output of the year for solar power. Because these seasonal variations are relatively predictable for these types of assets, we factor in the effects of seasonality when analyzing a potential investment in these target assets. Therefore, the impact that seasonality may have on our business, including the cash flows from our investments in our target assets, will depend on the diversity of our investments in renewable energy, energy efficiency and other sustainability related projects in our overall portfolio at such time as we have fully invested the proceeds from this offering. However, in the early stages of our operations, or to the extent our initial investments are concentrated in either solar or wind power, we expect our business to be seasonal based on the type of investment, as discussed above.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The following qualitative disclosures regarding our market risk exposures — except for (i) those disclosures that are statements of historical fact and (ii) the descriptions of how we, along with our advisor, manage our primary market risk exposures, constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Our primary market risk exposures as well as the strategies used and to be used by the advisor managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of our risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to our risk exposures and risk management strategies. There can be no assurance that our current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short or long term. Investors must be prepared to lose all or substantially all their investment in the shares.

We anticipate that our primary market risks will be related to commodity prices, the credit quality of our counterparties and project companies and market interest rates. We will seek to manage these risks while, at the same time, seeking to provide an opportunity for members to realize attractive returns through ownership of our shares.

Commodity price risk. Investments in renewable energy and energy efficiency projects and businesses expose us to volatility in the market prices of electricity. To stabilize our revenue, we generally expect our projects will have PPAs with local utilities and off-takers that ensure that all or most of electricity generated by each project will be purchased at the contracted price. In the event any electricity is not purchased by the off-taker or the energy produced exceeds the off-taker’s capacity, we generally will sell that excess energy to the local utility or another suitable counterparty, which would ensure revenue is generated for all electricity produced. We may be exposed to the risk that the off-taker will fail to perform under the PPA, with the result that we will have to sell our electricity at the market price, which could be disadvantageous.

In regard to the market price of oil, our investments are little effected by the volatility in this market as most oil consumed in the U.S. today is used for transportation infrastructure and not for the generation of electricity.

Credit risk. Through our investments in our target assets, we expect to be indirectly exposed to credit risk relating to counterparties to the electricity sales agreements (including PPAs) for our projects as well as the businesses in which we invest. If counterparties to the electricity sales agreements for our projects or the businesses in which we invest are unable to make payments to us when due, or at all, our financial condition and results of operations could be materially adversely affected. GCM will seek to mitigate this risk by deploying a comprehensive review and asset selection process and careful ongoing monitoring of acquired assets. In addition, we expect our projects will seek contracts with high credit quality counterparties. Nevertheless, unanticipated credit losses could occur which could adversely impact our operating results.

Changes in market interest rates. With respect to our proposed business operations, general increases in interest rates over time may cause the interest expense associated with our borrowings to increase, and the value of our debt investments to decline. Conversely, general decreases in interest rates over time may cause the interest expense associated with our borrowings to decrease, and the value of our debt investments to increase.

Changes in government incentives. Retrospective changes in the levels of government incentives may have a negative impact on current investments. Prospective changes in the levels of government incentives, including renewable energy credits and investment tax credits, may impact the relative attractiveness of future investments in various renewable energy projects, which could make it difficult for GCM to find suitable investments in the sector.

Item 4. Controls and Procedures

Disclosure Controls

In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and determined that the disclosure controls and procedures are effective. Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act are recorded, processed and summarized and reported within the time period specified in the applicable rules and forms.

Change in Internal Control Over Financial Reporting

No change occurred in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the period ended September 30, 2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Any control system, no matter how well designed and operated, can only provide reasonable (but not absolute) assurance that its objectives will be met. Furthermore, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None of us, GCM, or the Administrator, is currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, or against GCM or the Administrator.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed under the heading “Risk Factors” in the LLC’s annual report on Form 10-K for the year ended December 31, 2017.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the nine months ended September 30, 2018, the company sold 6,712,135 Class P-I shares under a private placement memorandum. During the years ended December 31, 2017 and 2016, the company sold 3,092 and 47,774 Class P-A shares and 3,147,692 and 199,319 Class P-I shares, respectively, under a private placement memorandum. During the year ended December 31, 2015, there were no unregistered sales of securities by the company. While Class P-A shares were converted into Class P-I shares during the quarter ended June 30, 2017, they were reinstated for sale as of April 16, 2018. There were 6,705 Class P-A shares sold since reinstatement.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other information

Not applicable.

Item 6. Exhibits

Exhibit Number		Description of Document

3.1*		Certificate of Formation of Greenbacker Renewable Energy Company LLC (Incorporated by reference from Exhibit 3.1 of Pre-Effective Amendment No. 1 to the Registrant’s Registration Statement on Form S-1 (File No. 333- 178786-01) filed on December 11, 2012)

3.2*		Third Amended and Restated Limited Liability Company Operating Agreement of Greenbacker Renewable Energy Company LLC dated June 27, 2014 (Incorporated by reference from Exhibit 3.2 of the Registrant’s Annual Report on Form 10-K (File No. 333-178786-01) filed on March 20, 2015)

10.1*		Form of Participating Broker-Dealer Agreement between SC Distributors, LLC and the participating dealers (Incorporated by reference from Exhibit 10.1 of the Registrant’s Pre-Effective Amendment No. 5 to the Registration Statement on Form S-1 (File No. 333-178786-01) filed on July 11, 2013)

10.2*		Amended and Restated Advisory Agreement between Registrant, Greenbacker Renewable Energy Corporation and Greenbacker Capital Management LLC dated October 9, 2013 (Incorporated by reference from Exhibit 10.2 of the Registrant’s Post-Effective Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-178786-01) filed on October 9, 2013)

10.3*		Form of Dealer Management Agreement by and among Registrant, Greenbacker Capital Management LLC and SC Distributors, LLC (Incorporated by reference from Exhibit 10.3 of the Registrant’s Pre-Effective Amendment No. 5 to the Registration Statement on Form S-1 (File No. 333-178786-01) filed on July 11, 2013)


10.4*		Form of Administration Agreement by and among Registrant, Greenbacker Renewable Energy Corporation and Greenbacker Administration, LLC (Incorporated by reference from Exhibit 10.5 of the Registrant’s Pre-Effective Amendment No. 5 to the Registration Statement on Form S-1 (File No. 333-178786-01) filed on July 11, 2013)

10.5*		Form of Expense Assumption and Reimbursement Agreement by and among Registrant, Greenbacker Renewable Energy Corporation and Greenbacker Capital Management, LLC (Incorporated by reference from Exhibit 10.6 of the Registrant’s Form 10-Q (File No. 333-178786-01) filed on August 11, 2014)

10.6*		Credit Agreement among GREC Entity Holdco LLC, as Borrower, Greenbacker Renewable Energy Corporation, as Intermediate Holdco, Greenbacker Renewable Energy Company LLP, as Parent, the lenders named therein, and Fifth Third Bank, as Administrative Agent, dated July 11, 2016 (Incorporated by reference from Exhibit 10.1 of the Registrant’s Form 8-K (File No. 333-178786-01) filed on July 14, 2016)

24.1*		Power of attorney

31.1**		Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended

31.2**		Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended

32.1**		Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes- Oxley Act of 2002

32.2**		Certification of Chief Financial Officer pursuant to section 906 of the Sarbanes- Oxley Act of 2002

101		The following materials from Greenbacker Renewable Energy Company LLC’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, filed on November 9, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Assets and Liabilities, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Changes in Net Assets, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Schedules of Investments and (vi) Notes to the Consolidated Financial Statements

*	Filed previously.

**	Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 9, 2018	By	/s/ Charles Wheeler
		Charles Wheeler
		Chief Executive Officer and Director
		(Principal Executive Officer)
		Greenbacker Renewable Energy Company LLC

Date: November 9, 2018	By	/s/ Richard C. Butt
		Richard C. Butt
		Chief Financial Officer and Principal Accounting Officer
		(Principal Financial and Accounting Officer)
		Greenbacker Renewable Energy Company LLC

Greenbacker Renewable Energy Co LLC - FORM 10-Q - November 9, 2018

Attached files

Greenbacker Renewable Energy Co LLC Reports