Hannon Armstrong Sustainable Infrastructure Capital (HASI) 16 Feb 232022 Q4 Earnings call transcript

Greetings. Welcome to the Hannon Armstrong Fourth Quarter and Full Year Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

pleasure Relations your and my Senior Neha now Investor Director, Corporate is to host, introduce Gaddam, It Finance.

page be our a Thank and you, copy will on This a release of distributed our available results. webcast live conference welcome. everyone where today. and Relations' detailing press later replay website. Earlier this which our year operator. afternoon, of Hannon A Good XXXX website, fourth available quarter afternoon call our on being full is Armstrong Investor is

Some which comments with risk filings Form made described risks forward-looking of company's in the other the this are and the are SEC. call factors in the the and statements, section of subject to XX-K uncertainties

include non-GAAP financial GAAP and Actual reconciliation of is some measures slide A results posted differ discussions non-GAAP presentation. from may measures. earnings to materially on those available our stated. release also Today's

Marc and and and Joining CFO and me company's the on and Chairman Executive Eckel, today's are Lipson, Jeff Investment Jeff Officer Pangburn, Vice CEO; call COO; Co-Chief President

the investors more turning leadership the company we I'd on More like Day Investor which to call to analysts will and XXst, event Jeff, our forthcoming. that during an hosting detail allow more will March be discuss are in we members to the on of and meet announce over team. Before details

slide begin With that, I'd like to over to three. Jeff? on turn who will the Jeff, call

growth execute dividend continues XX% reaffirm XXXX growth same up and our annual Neha, XXXX share, XX% our EPS to company you, good distributable X% Thank X% in distributable to of for that the earnings pleased afternoon, and guidance I'm We annual and $X.XX through report in with everyone. year-over-year. period. for XX% per to of to

share, faster anticipating. capital investments the provide quarterly dividend retain has an more to earnings Please is for X.X%. declared per Board note and we the dividend than are intentional, Our order that growing increase in $X.XXX of of a growth

the in for over million strong prior billion. execut $XXX total in we calls, fourth As in quarter transactions, on volume $X.X signaled volume to bringing with XXXX

on X% newly was investments for X.X%. yield of over a yield portfolio than of sheet will balance notable closed more average transactions average course new to fund quarter, of The yield compared transactions XXXX. the These increase in new the last

will announced our I a his and of become a finance the years. leadership simply role the job we remarkable March done Finally, and two well transition, Xst. corporate thus as operations as as The which Jeff has Board our years have capabilities, and four CEO separate and Lipson CEO arrived running last highest Chairman out former company. on President the will conviction ago CEO assets bank and for the in of building Jeff leadership

company. promoted with since people CFO Officer. after highly the XXXX out have company's from right and IPO Marc promotions lead Marc investment the portfolio company Pangburn their has in and to will the his the has role client confident Co-Chief to as congratulate be I'm Jeff Marc on the instrumental base. been I we Investment and current been just building and in

S&P this since the the total per outperformed of returning more return, almost years to the investing. measuring and shareholder on half climate the solution XX IPO, nearly XX% for pleased that impact setting We we annualized have side investing the change times XXX In the I'm year. climate than report a right standard on did and one by while line,

supportive rest and measurable Marc and while confidant highly overwhelmingly to making leadership to team growth the a of our risk and deep Most as importantly, impact adjusted of returns, policy to emissions. professional execute that's we've continue my team's backdrop. built I'm Jeff, excited produce role focus carbon on a superior to the skilled the ability on and mission-driven Chairman public

on certainty Reduction backdrop increasing tax the affect projects policy Act ITC/PTC their that due business, investable and of provide new asset available credits for example conducive us. will as accelerating expand policy clients evidenced well Inflation to The X. renewable our tax long-term by transferability and in investment pipeline for for Tax standalone Let's transactions. positively participate those classes will talk the has us for storage for our for as slide projects, about policy tax fuels. battery credits made opportunity an capacity as credits to renewable

provide policy new I Act support manufacturing. career for transmission finally, on-shoring HASI. level is Infrastructure constructive transition. of imagined the energy unmitigated policy and length for for plus year news This Bill the And and My CHIPS XX never backdrop this

With Lipson. that, Jeff I will turn Jeff. it over to

Thanks, Jeff.

that time, and leader superior have significant a recognize has and a industry like his the has proven would and Jeff’s have ahead with that moment focus. to of which but Trailblazer, take tenure. on leadership its our investment forward the a a that be in he The durable talented well to this moved climate of Jeff thesis we developed built overseen from legacy. under Jeff Now into transition, a small it's achievements growth was carry team occurred solutions. company enterprise enormous I will strategic

Personally, I Jeff, am the to honored look next executive forward to with to as as continuing be work and CEO selected closely chairman.

succession change plan. a we are part strategic of not I note the will as announcing

grow the this Our adapting is approach to continue necessary. a as business will strategy similar with strategy and current working we

discuss to I Marc our for integral has Before our quarter to an discussing volume, team new work of incoming Marc our with investment Marc forward been Marc. to And in recognize fourth our years. part results, continuing Pangburn. him many look role. investment CFO, I'd will like his

you thank the in to spent company And and I've opportunity with to the both I is and growth with nine a to-date best past on with ahead. our look building support the It clients building years of similar capitalization relationships investors privilege the Jeff. in you, our business. the deep forward Jeff. you, relationships the Thank analysts.

yields A a report close pleased trend significant on balance great of discussed to remain highlighting yield are in $XXX with sheet majority X% above calls. quarter will on we these investments markets. X, with previous across slide million an the average of our approximately on Now, upward transactions

The diversity noteworthy with the client. to come. with existing transactions a of business. in our fourth expanded and clients drive clients, of the new XX clients, asset These feature and whom quarter, asset we've In two eight our and two will new relationships, classes multiple we programmatic to business forward is continue closed one years classes clients

of of quarter. I'd our reported an than the difference CarbonCount with equity we to with closed and calculate portfolio last driven of on average projects across the highlight AES we It also one six of a X.X of by carbon CarbonCount And like gigawatt transactions count assets. significantly states. a X.X, specific XX X.X underlying was investment location being the higher portfolio the the

As count the larger dollar emissions amount of by is a carbon carbon of heavily a mix the applicable invested. energy displacing reminder, are grid. per assets influenced These

by strong income conclude volume the trend represents an role that on fourth yield and classes. markets, upward key will I provide a clients, long-term play diversity restating quarter recurring of asset with a They energy transition. and in

I'll turn back With to Eckel. Jeff that,

recent of our Slide XXXX, Thank X.X with consistent displays in six history. billion volume you, Marc.

incorporates have One our portfolio key multiple grown that successfully we of reasons our asset strategy the classes. that is

of unlikely as was our single solar evenly and growth the If also volume. In wins XXXX, class, would XXXX, we grid strong resi solar, consistent. led XXXX, and public reliant connected transactions sector volume in were growth. asset And sector in In spread be across on made primary connected connected was volume progress infrastructure. and public solar, we grid sustainable a grid driver a

a multiple of with, result a significant clients we involved is pivot classes, as opportunities diversity ability in to asset well as that work our closely towards This number them of of quickly. many

rates. transportation our X.X renewable pipe is pipeline of XX-month is diverse more business Likewise, greater billion recent even and gas well-balanced indicate. transactions also becoming is our benefiting Our than increasing in from as pipeline behind-the-meter as utility natural

our Our is grid entire infrastructure opportunities pipeline pipeline nature-based profile and solar balanced is connected across energy allows participate and to fuels, clean market. the transportation, transition clean solutions. primarily investors This mostly sustainable

growth from as prior XX% XXXX, Turning $X.X balance third of year. investments we to portfolio is slightly the the our over The yield seven, our slide up sheet year-end which show of of represents quarter. X.X%, billion average

XX investments market. related investments over infrastructure the projects gigawatts to underlying sustainable in the energy, in clean non-power these addition of The represent

assets non-cyclical, economic are and across investments generation. cycles, resilient income long-term real with represent Our

The On now announced first expectations Funding the right increased nearly fund we we investment, reconciliation. for detailed grid-connected expect million, AES to portfolio the XX% quarter. investments. is the side recently funded the including quarter as of closed which portfolio our the transactions over $XXX of in page, million of we $XXX previously

investment range. a XX% results income, $X.XX we growth and $XXX distributable XXXX is distributable million our larger primarily report guidance The grew portfolio eight, margins. XXXX, on consistent rate of reflecting with XX% Summarizing driven by by EPS net strong in and versus to XXXX growth which and slide our

assets, fees primarily by on market. or resulting gains We fees sale in the with million asset had are another in year outstanding and rate on These ABS changes of mix very by driven XXXX, XXXX. consistent interest unaffected $XX securitizing

our to roughly we in to the We expect revenue a net our remain and range XXXX for as sale of grow on represent income. overtime gain and continue percentage fees lower same investment to

level. for losses This I XXXX. will price swaps lower on substantially EPS mark-to-market note XXXX, our power driven $X.XX a project by the was GAAP in was result at

but the not was prices energy in incur losses swaps result value non-cash which increased, As does show rose, in the unrealized up numbers, which does GAAP the losses. project's

GAAP investors is As our better a non economics, of not which good measures. represented HLBV we indicator accounting this level is remind period consistently, project by our

business Slide X the of utilizing metrics. long-term success variety summarizes of a consistent the

for XXXX. average has the Our the chain experienced XX% rates, build last despite an five sheet to of distributable growth years five over last with including as few supply distributable and we EPS average investments. rate have the growth ending compound the the rate has of XX% an the years, Likewise, balance creative continued our years, growth achieving NII experienced interest challenges consistent the all pandemic,

which strong the us manage a Our our continue as market XX, XX% years. growth challenges pay, to this to our investment despite which the demonstrated macroeconomic we and multi-year have represented Slide and XX% five volatility. on of margins assets healthy affirm to EPS experienced brings success as reflecting over last as that slide on The to portfolio foundation our also represents guidance, business well

the growing next achieve guidance to years. XXXX EPS over radically expect We two approximately our

According to platform. discussed we funding our Slide XX,

Our liquidity the note, the we million, fourth end In creative making at successful upper been sources of in over raising as from even all XXXX diverse the over after we've raised focused investments prominently more billion aforementioned XXXX, on quarter. year $XXX right, and stands approximately from our two term loan equity, convertible In unsecured XXXX, bonds. paper, A, unsecured revolver, we $X.X we on debt the commercial years. in last our capital whereas

our support unsecured plus to XXXX, continue expect capital In debt utilizing revolver leverage. sources, and we to diverse maintain incremental secured, our funding to securitization, issuance and growth convertible raise to including utilization, equity

fixed We began In providing have XXXX. flow with our remained risk ranges. we historical no also the note appendix refinancing the quarter. with and material cash we percentage the consistent our disclosure rate debt I second included in leverage in consistent will reconciliation until

our provide liquidity. ongoing sources growth outstanding. while we're track positioned been growth, conclusion, has platform our earnings diverse of further capital-owned And record to In for funding of well continues

And call with over that, turn I'll to back Jeff. the

Jeff in great leadership. under Thanks, congratulations. your Company is and hands

investor projects to Turning quantified focusing HASI well as XXXX beyond professionals. -- founded water we improve social Foundation fellowships with some and nonprofits, non-profit the collaboration a partnership those ESG quarter more for accounting number and communities, matching emissions as disadvantaged the for and include focused carbon emissions a first disclosures. count initiatives climate scholarships to projects impact. We justice of note dividend hour to corporates, in periodic to slide Last on resilience megawatt efficiency corporate declared co climate XX, hubs by support for leading energy accomplishments moving in and and other we emissions of our

Finally, roles separate we succession protocol governance have would our the enhanced of CEO. that announcement executive the the with and Chairman

well Bill Because our top We Act. for Infrastructure accelerating. is ever public CHIPS is The business believe has been with to our Bipartisan this the support investments this, on will participation lower-carbon aspirations programmatic us policy client transition conclude XX. long on in continued base. The brightest outlook company's it the our are We the history. The a in tier IRA, clients positions this of and the energy expanding. world of slide industry

to have prosper our by mission-driven sets next leadership chapter. team company up our and We proven a its executed the strategy, succession in

this Directors I honor. who succession which me me doing process, been has engineering who will who this whom close hard work an our them the and appreciated HASI with day-to-day gotten through have working investors energy to my the for the by fellow are this thanking our business, team, and transition, and opportunity clients for have inspire continue analysts finally,

With questions. operator for the that, line the I'll to ask Operator? open

a Thank Oppenheimer. question-and-answer Noah proceed line [Operator you. first Thank the be questions. We'll from our Instructions] session. is conducting now Please you. Kaye question with of And with your

the first you the and much questions the guess the wishing all success. you to all congratulate analysts me I me best of for taking very Thanks and be transitions the let leadership for

Thanks.

why to hear take can perspectives? I'm sure love not each a high some attention from time this. the time is transition? you any of guess away now leadership right talking But analysts, because talk at you'll about to I about spend level, for just We'd your

for working be and But policy business this But there that. seems and real client much a about really XX me to on in two public be Great company Jeff people the I'll that on. for there's much, the to XX thinking is and Marc symmetry strategies and is in opportunity going be carbon. growth some question. take doing No, this are around April such to a Chairman, right public role issues, years. bigger we've been more a as as this and

left, I that's with stay for When me space XXXX, Hannon to And feel sent true. Armstrong have I more saying in created note Mike Hannon I a you us. should

so there's and way much good that for grow. the do I to this And is it's think, organization to Now, evolve that. best opportunity this

on a add we will our to opportunity the one Marc have of Investor to meet you'll And Noah, team of themes and deep I would team, how an think be members more myself. get in just I addition Day and

all he for was hired and time able right was talent And given to think it the I so when we're decided now particularly of this make this Jeff's we unilateral effectively entirely transition him. the decision

I out well really think worked it's So, for everybody.

it equity switch sequentially, looking you with it GAAP sequentially, reflect? looks you it. and a non-GAAP color It around little more can the non And question, forward on equity mark-to-market economics last know consistent us just swaps remind like that now income market to method to weeds increased how us was And but a appreciate method, just very what losses? on Okay, the the -- bit the pretty actually give represented price to a actually over grew was in the quarter, underlying just basis the it impacted GAAP by income.

Sure.

analysts. investors the a for for helpful accounting But equity for we the investments the taken investment, time that other stay the why is that the So, of fundamentally is IRR project, accruing to quarter the XXXX. in first changes very than fundamentally did non-GAAP of basis, the of do which method achieve and reflects tends place to on long do in our that the non-GAAP changes and incremental to IRR rate projects, very for reiterate believe we for a measure expect the is economics in and we life and level ratable adjust we earn investments in as over accruing

GAAP are But that. of project you the these but project that associated level, we're price the that basis less the does the there's power increased less immediate do, swaps the they HLBV accounting no know, levels. valuable that required mentioned to hedge worth actual one with At of doing we items they're on occurs are have more use exact more as and there as now price the the designed but out become valuable, they're immediate themselves down accounting. mark-to-market project money as remarks swaps the itself in level, prepared I and becomes have power the at so And the to

at of losses become of have part that the calculation you those project the GAAP the HLBV earnings level on part then projects. and So

and Likewise, to this in lot HLBV scale ITC put tends a is there XXXX, XXXX also those financials one-time GAAP -- our through there if utility to mention service, are item there through and an be projects when also are that were a immediate which flows in more second to income. solar of affects increase the

GAAP for that's helpful equity the non-GAAP understand way method hopefully, the between a difference and to So, investments.

Yes.

have just associated so valuable revenue back, regardless. are Is projects fundamentally, higher, to IRR because and these them And assumptions are higher they with prices haven't changed you that…. now more energy your reflect

good a That's thing.

I'll very All turn it right. Thanks much. over.

Thanks, Noah.

is The Chris line your from B. Souther of next the Please with question with proceed Riley. question.

Hi, questions guys. here all the Thanks around taking my and on here. for congrats new roles

Chris. Thanks,

it curious that's just pretty on public was sector hasn't looks the recently, the and It's in end, Maybe by gain kind down, you yes. I them on just days? of sale, assume of And gain that sector receivables about I the like held-for-sale not how looking is Maybe been. in spreads of there's obviously, both been for wanted a portion change lumpy low how in volumes term, could segment in quarter a quarter meter market until the it talk like public -- near and really to and particular that this sense the function at business. the I'm just steady any and stuff quarter sale looks is a that it's a activity historically, if these get high on fact, the of

picked get report spill the quarter in to as didn't There's there that think you get can next up will and there. on things Chris, no trend real securitize quarter know, chance lumpy into think some Sure. I are year. fourth to a we by you that I

one that anything read quarter next. So from I other than into won't to the

remains pipeline, consistent. public the it of very terms In sector

investments include securitize. in side are will on not the several that transactions public that there sector and the several sector transactions are public the There in pipeline also

I on sale be to in was we similar XXXX. gain prepared saying our So, remarks, my again very in that's comfortable where expect

had in so, of hover the obviously, have sense. liquidity or at guys do it looking have any the guys I quarter forward, half was in the seemed Makes kind or up. now, first you'd that then going kind you've just of given liquidity kind where of around curious, Thanks. deal trending several AES closing kind for it. current is a got have curious, and that quarters. target cuts But you taking around it to of you been highlighting significant liquidity And at probably like that point it Okay,

that we if I'm metric as curious at a continue So, there's looking are to you like -- if guys watch. should

We Board. agreed We've that liquidity a them a expect, are disclosed pipeline. our our we not of But items we've closings upon including have of that targets couple on you availability and near-term with function internally expect our do might formally. they that in revolver

And in going conservative years, pandemic even trends we the a When back have obviously than post-pandemic had we even to more say I previously measure way quite settled would to of the more XXXX that hit, we bit maintain and maintained way. as a to and XXXX. much started liquidity, it's very a tend in all and we've liquidity, markets hold previous

given very disclosing have confirm we I we specific minimum I we liquidity question, do suppose, your here will consider but -- a And internally. metric, may liquidity targets

maybe sector? Okay, out you had they that curious sense. what makes And client new my called last one, just a

me connected in Excuse the was that space. grid

in I the all I'll had. That's great. Okay, hop guys. queue. Thanks

the Mark Strauss our line is question. next question Please JPMorgan. with proceed with your of shouldn't

Well Yes, congratulations of to deserved. all you.

seeing the back the with market to mean, comments policy Can to as as my is see what about going Eckel? volume so opinion I you in Jeff good transaction impressive. can just start have I it. the far you you're talk -- So, pretty Just support, the

other more expectations some your we the whatever able it as hearing maybe as the for can counterparts been And getting we IRA, timing, from to material directly year? see are your progress what of guidelines a of tell the mean, be, that To passed? that as how of if you throughout more much or -- far uplift some to you're bills might the treasury, from can that to you IRA some specific have these I back tie extent

Mark. Thanks

had we can since and XXXX zero it on the in in IRA, I think hasn't our to really client's an XXXX passed development impact pipeline. attribute only

that impact, about a gigawatt optimism now come from two our clients they And well, when we've they're does our got gigawatts. in it think I it's say now development. saying,

projects see penciling that Now, weren't we, before. we penciling

our view, optimistic. And periodically clients just updates query we quite on and they're get really their and

know. Is XXXX I'm XXXX know. it or don't We not XXXX? our or sure actually clients

You treasury guidelines. about the asked

item out, Some gating still are you the actually coming can law. that's the but implement before

to have the guidance yet. You that's have done and not

with a But for I had. to it's certainty think XX big never that years say, important and tax take credit step industry’s this back

much I the for are said, Our to as it's, US businesses But the much, clients an in is able business. for larger plan always unmitigated timing and -- positive

it. Yes. Got

you. Okay. Thank

one quick follow Just up.

residential market just you like Just in state fully curious solar take are, year. said, how your the markets on your diversified appreciating, this the for of US

some that, commentary some Just participants the there of been far. so industry have mixed from

about year. Just curious how this of kind thinking that as your you're outlook for

I’ll that. answer Marc Pangburn have

IRA Thanks, US Along term by Jeff. utility market the taking the strong, both rates. of a step back, lines fundamentals very the of long the increasing believe remain residential we driven and just solar

to-date. Obviously, there But our some all been and as our cost which of which seeing much term headwinds, leases smaller we're majority been it identified. a focus a to the PPAs, impact increasing have of capital business, on relates have have short are

our expect PPAs. the focus this that and through will we work these from industry So to business on will benefit leasing continue

laws. Recent

Recent laws.

Yes.

sense. Right. Makes

you. Thank Okay.

Thanks, Mark.

Next?

gentlemen, for Thank you. thank Ladies your teleconference. participation. does today's conclude and This you

lines your have wonderful disconnect may You a and day.