Hannon Armstrong Sustainable Infrastructure Capital (HASI) 7 Nov 242024 Q3 Earnings call transcript

Greetings, and welcome to HASI's Third Quarter 2024 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Aaron Chew, Senior Vice President of Investor Relations.

Thank you, operator, and good afternoon to everyone joining us today for HASI's third quarter conference call. Earlier this afternoon, HASI distributed a press release reporting our third quarter 2024 results, a copy of which is available on our website, along with the slide presentation we will be referring to today. being website, on be where today. is page Investor available call our of a conference webcast the live Relations later This replay will

of and in differ stated. the are Factors section results this subject Some may company's materially risks with Risk made Form the the which Actual XX-K to described those statements, filings are call uncertainties and of comments the other from forward-looking on SEC.

non-GAAP financial discussion reconciliation to Today's includes of earnings our financial some is A measures. measures release also non-GAAP presentation. in available GAAP and

presentation. company's me and CFO; call Joining our will portion today's are on Susan our for as and Jeff Chief our Lipson, Pangburn, available the Officer, who Q&A be President Marc Client Nickey, CEO; the well of

turn over and like call Jeff? Lipson. I'd our Jeff to Now CEO, to President the

everyone Aaron, XXXX quarter on call. our you, thanks Thank and us Slide today for to third joining I'm begin X. going conference to

XXXX key ]. as of the $X.X for year-to-date new of including $X.X quarter, quarter billion of was new solid drive quarter start active year-to-date an at creation. And closed investments fourth value of X/XX [ that billion third today. long-term as elements are The We've another the investments on to HASI our

have Our now exceed last XX% $XX grown managed XX assets billion. the in months and

quarter the X.X%, XXXX. have of X% growth our approximately driven quarters to per quarters $X.XX, yields first adjusted representing and increased first in has X of yield XX.X% the been portfolio earnings the asset of our to New year-to-date, which over EPS overall have XXXX X share through $X.XX

through targeted with between of and guidance over between X% this our in dividend We and continue remain confident ratio annual adjusted to EPS period. XX% XX% payout growth XXXX XX% our

XX% reminder, our XXXX. ratio by payout a EPS for a and annual long-term As growth XX% is goal

reminded not we election new investors in and administrations are meeting. discussing over interest to forums Before we as certainly past lower. can pivot like us. successful XX when are the for HASI In administrations These today's are rate discussion that I have following rates Fed in Tuesday's interest the the higher rates more quarter during Democratic and be repeatedly I'd following are various when impact and investor to equally XX detail, months, to discuss topics results Republican

is already In during fact, the growth achieved in demonstrated. the earnings and higher this began that it first have of administration Trump just thrive not to theory, has XXXX. strong continued this been period rates in We

tend correlation more one Turning to a between Investors conclude a the energy the of industry. impact. success X, Page election strong sense. this few makes results election to clean hand, and On thoughts on the

involvement in taxes of policy, in general transition and the the in influence energy particular. the government Given incentives and of energy the on heavy markets

the as look energy that secular has hand, century a On some on political investment administrations. X, namely that interesting shown at undergone transcends closer growth this facts the other Slide reveals data in clean in

has administration been Obama but adjusted In last over for and factors. now market only to policy, how underscoring Bush public decades has energy Biden, in Trump from by economic increasingly propelled presidential investment every successive fact, clean to the X grown not by inflation the

comparatively preferred source the that is the cost incremental into which become energy truth have them not rapid transform lowest also but only helped levelized renewables of simple has offer of The energy. deployment,

across well. result will lines above across presidential also our this over corresponding supply the demand elevated all but power not the in for will energy of development country. several administrations, meet demand forecasted the inevitably investment to an ensure in extends The this as geographic strategy maintain dynamic next strong pipeline. clients decades in addition, This In only

states and, quite in at of the XXXX. renewable of country split in lean and power Republican in fact, deployments evenly are cumulative As indicate in this Democratic slightly table voted the slide of states between the favor bottom that Republican

Perhaps investment I projects years would ago, could resulted a since have used note announced of slide, of transition this viable data The we clean and economically variety skews they macro that few XXXX. was on heavily a of voted would enacted points IRA the same states have regardless in election the energy in in many that for continue trend results. more will Republican all an importantly, is in conclusion. energy decades, favor

on dependent Turning to our reminder is Page A rate. business X. that low not interest

the flat, or in that all prove business high, environment, inverted thesis steep rate to continue low, We thrive. our can

started XXXX basis low, points rates persistently in and XXXX rapid inverted. yield a interest period by and has XXXX, followed a Throughout unusually cycle again rate the this XXXX, and a XXXX, maintained the steepened. In raised has disciplined we cut which of curve have to and rate management. great curve the rates consistent during increase volatility, risk Fed interest and were approach XXX by was In

sustainable, at invest at business rate of our plus X.X%. we business. invested debt average to This investment-grade simply, consistently treasuries the increased margin of adequate plus treasuries is has generally slide, this an as our at the consistently Quite and of consistently X% Likewise, volatility. issuer, track attractive have as remained have profitable can debt And As our now predictable created margins we lengthy earnings throughout an have fund period an we resulting spread X% cost. noted that to adjusted a on we X%. ourselves to record

with our close outlook and would detailing our X, like as Slide I'd X.X%. continue a brief emphasize at other are the to like public double-digit quarters our to items. history X bonds trading Slide roughly on update next X, that margin also yield robust margins provide I over to several remains long-term for to from transactions Turning we

entirely CCHX with Our partnership continues expectations. progress to KKR within our

the modifications remain to to by have on fourth early no processes. our and number vehicle We with year-end complete ideal additional constructive the partner we investment XXXX. and in in billion be internal third a KKR track target the transactions closed quarter of of and continues an $X

bankruptcy. our and effectively as that of expected. has note has venture that transitioned, leases continues to would and SunPower the JV The XX% JV asset I have joint loans performing SunStrong the corresponding secured are new we following a partner our Finally, legacy the service purchased

And I the over pass that, will with Marc. call to

X. Thank on I'll Jeff. start Slide you,

additions billion XX highlight. at markets. clients Our and well client across to base diversified . X than across more pipeline items this onboarding drive investment our and anticipate markets. adding continue approximately notably, new summarized expanding the remains The year. X from growth are $X.X is right to primary we on all our is with year I'd have end like opportunities. clients These into are This will Growing future our X of our clients, new [indiscernible] our I previously existing coming events. Most this

investments the Grid a year in typically development our pipeline example, our X-plus Next, clients. have which requires cycle, from completed investment as an capital a Connected meaningful

into on both provides political and clarity development pipeline Our environment. investments entry derisk of delays regardless point near-term the these

primary growth. FTN in Finally, market, the as we driver continue RNG of see the to

We partnership continue RNG key as with like into off build weeks. leaders a other broaden Ameresco, players we few existing our to announced like Vision

U.S. by impacting today. demand, we forecast portfolio Our pipeline see our for growing which the and optimism positively is supported power

billion of Moving X. have closed transactions. Slide on to we $X.X Year-to-date,

assets. diversified you among underlying As table, are in can closings well see our the these

grown and to assets Managed to billion, $XX.X the increased portfolios $X.X have billion.

other yield reflects highlight, $X average $XXX at our the out expectations. sheet which asset weighted in For transaction closings, we than a where item billion have consistent more were rotated rotation growth expect of portfolio positive with exceed of balance of the investments, One like year, we than I'd X.X%. to initiative, our million on less to

lower-yielding with We also company drive these of a a higher-yielding future. into investments gain. investments the will these out rotated investments more Replacing profitable at

new our year. yield, but ago see On overall size from a that you Slide X, our portfolio with and rising portfolio, investments impact to are to of starting portfolio given and X.X% last X% takes quarter impact time the the X.X% yield it for to

In have the gain interest it's increased ROE of Meanwhile, to our X.X% of rates with in cost year-to-date to debt has sale worth QX on has XX.X%, incrementally 'XX. rise relative 'XX, addition, our supported by it higher from transaction. grown declined noting, while

Turning XX results. cover our to to Slide financial

of $XXX adjusted QX, reporting EPS are EPS $XX I'd like and recurring items million, income, capital-light EPS 'XX, of For Year-to-date we up we to XX%, $XX loss up $X.XX. GAAP up Year-to-date, adjusted further. a million, our X over versus XX%. grew NII million, explore adjusted $X.XX income, X% increased the are upfront has capital-light XX%; to and There period. year prior 'XX

investments. First, power These to some revenue mark-to-market project stability project. the contracts GAAP impacts by our loss was provide to power underlying of the related driven contracts,

but increase, power projects As are power are the the worth less. prices more, worth contracts

these projects mark-to-market the higher at time, will offsetting sell impact. power rates, Over

to track with will but when line seen [ Second, remain in as sale Wrapping ] around [ Gain on on consistent We on and levels. prior cycle, generally or has on being section viewed commentary in XX. sale 'XX been gain quarter-to-quarter exceed my Slide our QX. up vary annual meet 'XX ] in

Our an balance of At X.Xx, ratio range. growth debt-to-equity target XX, September our to the billion, achieve quarter position and leaves the was in remained sheet liquidity targets. excellent us comfortably our Xx end at our X.X near-term to at in $X.X our

on note been with with can profile maturities paid on and revolver. off significant there due right, changes no $XXX year million no the to see next have the chart convertible maturity As our the you latter can near-term be major our

and 'XX investment-grade bonds our status a longer 'XX to tenors. enable As us with expect refinance our reminder, to we

We capitalize well at very to have the on what busy traditionally a quarter year-end. positioned company is

Jeff pass it for closing that, to I'll back With remarks.

Mark. Thank you,

to XX. Turning Slide

an and Newsweek X and energy assessment our annual extraordinary benefit tons a attractive finally, always, market positioned capital. designation and to opportunity, transition avoided on in detail uniquely improvements and Finance sustainability returns. an As up the of S&P various continues sustainability XX. carbon recent addressable a given HASI Slide top-tier impact of Specialty and are Greenest remains annually. our wrapping enormous experience, And be including by million expertise we to providing metric reaching items, emissions from cost cumulative The access investment

another talented I for thank the forward outstanding please would closing for as look questions. out in our to line quarter another XXXX. year Operator, we like to open team successful

first is from Instructions] we of The Jack Mizuho have Hurley [Operator question Securities.

can a if any and relatively speaking? declines the just How the there's partners. and big I I if I quick And follow-up, have solar regarding technology RNG one support market? in question it FTN the wind may. had And then is market

and big future. The is that natural energy growing, part an going gas I to be acknowledgment of it's think is and large market very been RNG the a

business are to natural equity making gas. to of even a big gas private waste large big the large products So idea landfill and obviously, gas very has and and lot and renewable firms developers in natural converting a become dairy the investments of renewable

necessarily wouldn't compare a a business to solar. meaningful itself for ours of prides wind business. like and So it become that can it part I diversity, our on

From wind a but likely solar size and emerging think do to we'll as RNG, I large a very very continue perspective, it's market.

the you possible can the a earnings cost can you speaking? if your rate savings interest And OEM anything, of new SunStrong regarding there us for new on partner and on any impact rates rising And the of hedges you board? then power remind partner, relatively get provide as

Jack, thanks. This is Mark.

We in starting a are have for future that different place some And on and the have refinancing the primarily hedge floating forward styles of swaps rate our our hedges primarily 'XX. base of also liability liability, the out the revolver. implemented facilities, we TLA and 'XX of few our place namely portfolio, the the for rate to either then current

profile are and of more And we ensuring in and those our closely the terms that forward today earnings money then focused side hedges asset starting around program. earnings. rate in by just the floating supporting generally that swaps, on maintaining primarily power, are it's So in place are the duration 'XX fits facilities the with a 'XX on extending

bought partner to was was interest. and -- On the Jeff came SunStrong, the that equity in referring the

of from the servicing continue has on JV lease largely portfolio, and basis transitioned the to a [ will SunStrong do terms In . that away go-forward ]

Julien Jefferies. next Dumoulin-Smith of we question from have The is

on is Julian. This Hannah for

understand are the RIN transportation how exposure projects some you used the portfolio, as volatility about think of I associated for do the R&D these some credits of with of your limiting offtake? all So to

are I senior bit from the way ourselves is think RIN that we in risk primary our business, we insulate debt. a RNG

risk. risk, these any don't debt we've cash good from with and coverage, So by RIN we we cash RIN senior coverage think flow transactions somewhat mitigated I it's have that And flow a underwritten have being not but perspective. the

any JV late partnership, then you that And announce I really it. quick. the bit Got don't just question statements? the KKR would know you that on last call, of the or in we of all out a at one all so see projects funded I some maybe if talked about reflected if was how

quarter it in is exactly very vehicle fourth well. touch that partnership the and did the say additional have working quarter, is the that investments we the early designed We third added vehicle briefly to to on Sure. operating and as quite and

it gets the As larger, now, vehicle small. remains have we'll for relatively disclosure. But more

specific So vehicle there's we're of in just disclosures the not the a on yet lot [ ]. assets making

Noah is The Kaye of & next question have Company. from we Oppenhaim

on housekeeping one. follow-up a last that Maybe

the think press I there think of at from that million perspective a the line assets terms looking -- in around in a the release, that held be currently has Is right in $XX in is I vehicles. it's number co-investment vehicle? the to that co-investment are

commitments we'll that disclosed that's more no, in terms more over yet, of time. fair that's said not amount And the CCHX dollar said disclosure. a well. when rather I'll -- KKR amount. have balance I what what than the There's disclosure, in I we'll descriptive a more disclosure, make clarification that mentioned previous KKR -- the funded spent just so That's in the question. just of funded have that's of as a That's That's might I have I been when we a in portion there vehicle And the have table. and yes, that

Right.

a that, point. starting gives pointing us Just that out

done to portion sort So the talk you're already? $XXX substantial for to billion given to the doing of a this visibility about million What's reiterate us the of to that there? confidence $X the year just level of quarter able roughly where year-to-date, get originations

my was in moments of it early Sure, very script. the

You missed of at as that we're say may but have it, did I $X.X billion today.

of quite did November. So we have an October part active early and

visibility have the we to good closing rest think on $X that out get I So billion. amount of very to

the on Okay. guess one, think refi. I then the the Excellent. question I touching last And previous

that But credit further, see that have we the bonds bit at movements when notes to curve in of versus go some around go does How yield you to all change and little Just risk unpack longer-term certainly, your timing we the a duration up it the now seeing here. and showing higher. liability of asset you refi? market a a are bit about might managing investment-grade rating, thinking that the around as

be our times, XX Sure. moving think code. What but to focus curve flows we managing that generally around this It's fact The Thanks, interest Noah. long the mentioned approach doesn't necessarily the change we risk. I in Marc. we've end of years few on generally approach the might where rate of cash a -- duration our asset fall

that to like when the high-yield had in XX-year to on we forward extend attaching we're starting So tenors, these shorter market either issuing duration. swaps focus bonds or

of focusing that, the those goal Jeff approach X our X. And of impacts minimize investing of our T+ talked investing a So serve movements is TO on then to on average business. front-end side it's the as on that about T+ already on

curve we less around a relatively market, when to for timing managing attractive. flexibility have the on course, movements gives and revolver, that's And on our focused us liquidity. go which market market to terms the of is of more In sizable the rate

an So it's more opportunistic. of

Right. Maybe time think more XQ it's 'XX. one some apologies equity just last sneak gap been saw think for number I because a actually of it method I quarters and loss, since a was we folks,

fair from answer to yet. on, projects market way in to But that about later have but simple is and that a you're prices have contracts it? be here you essentially, valuable. method, our more should assets to because the now invested that worth Is power the So for more So loss HLBV recontract so all reflect up. of the a They just benefits, that there'll don't the more an revenue are think right? as have be gone

actual power like are are hedges the asset not. essentially our The contracts treated and Yes. whereas projects mark-to-market, underlying

in So of the prices those through time, power assets will period. and are the contracts higher flow benefit mark-to-market realize the over whereas

Lee Brian from question a Goldman have Sachs. We Instructions] [Operator of

from Tyler shift and the question you ], Bisset connected BTM anything looks one had [ out on on towards strong just shift I pipeline. It like on away that? to This Brian. grid driving a have is a call for

pipeline Not side connected on there. lumpy, some really. particularly larger at transactions the typically get little look The a can we grid as

So there's necessarily should quarter-to-quarter a -- some between think is interpreted grid anything I really connect much long-term read not and to as BTM movements don't be theme. of there. in

At conference. this time, no And this are further there that, for joining with us. questions. today's you Thank concludes

lines. your disconnect now may You