Earnings Presentation
First Quarter 2024
Forward Looking Statements
Some of the information contained herein are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used herein, words such as "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may," "target," or similar expressions, are intended to identify such forward-looking statements. Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward- looking statements. Factors that could cause actual results to differ materially from those described in the forward-looking statements include those discussed under the caption "Risk Factors" included in our Form 10-K filed for the year ended December 31, 2023 (the "Form 10-K") with the U.S. Securities and Exchange Commission ("SEC"), as well as in other reports that we file with the SEC.
Other important factors that we think could cause our actual results to differ materially from expected results are summarized below, including the impact of the Inflation Reduction Act ("IRA") and on the U.S., regional and global economies, the U.S. climate solutions market and the broader financial markets. Other factors besides those listed could also adversely affect us. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Forward-looking statements are based on beliefs, assumptions and expectations as of March 31, 2024. The guidance discussed herein reflects our estimates of
- yield on our existing portfolio; (ii) yield on incremental portfolio investments, inclusive of our existing pipeline; (iii) the volume and profitability of transactions;
- amount, timing, and costs of debt and equity capital to fund new investments; (v) changes in costs and expenses reflective of our forecasted operations; (vi) disruptions to the renewable energy supply chain that may result from changes in the regulatory environment and other factors; (vii) the general interest rate and market environment; (viii) the impact of the Inflation Reduction Act on our industry and our business; (ix) the impact of our revocation of our REIT election; (x) and our ability to expand into new climate solutions markets. All guidance is based on current expectations regarding economic conditions, the regulatory environment, the dynamics of the markets in which we operate and the judgment of our management team, among other factors. In addition, actual dividend distributions are subject to approval by our Board of Directors on a quarterly basis. We have not provided GAAP guidance as discussed in the Supplemental Financial Data slides of this presentation. We disclaim any obligation to update, or publicly release the results of any update or revisions to, these forward-looking statements, including to reflect new estimates, events or circumstances after the date of this presentation.
This presentation refers to certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). Additional information concerning these non-GAAP financial measures as well as reconciliations of such non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the Appendix herein. Estimated carbon emission savings are calculated using the estimated kilowatt hours, gallons of fuel oil, million British thermal units of natural gas and gallons of water saved as appropriate, for each project. The energy savings are converted into an estimate of metric tons of carbon dioxide equivalent emissions based upon the project's location and the corresponding emissions factor data from the U.S. Government and International Energy Agency. Portfolios of projects are represented on an aggregate basis. The carbon and water savings information included in this presentation is based on data from a third-party source that we believe to be reliable. We have not independently verified such data, which involves risks and uncertainties and is subject to change based on various factors. Past performance is not indicative nor a guarantee of future returns.
2
Executing on Our Plan
Key Highlights
$2b | $0.68 |
Q1 Adjusted EPS1 | |
KKR Partnership | |
$0.98 Q1 GAAP EPS2 | |
24% | $0.415 |
YoY Growth | Dividend |
in Managed Assets | Per Share |
$562m
Q1 Closed Transactions
Affirm
Guidance3
1. See Appendix for an explanation of Adjusted Earnings (previously Distributable Earnings), including reconciliations to the relevant GAAP measures | 2. On a fully diluted basis | 3. See | 3 |
Appendix |
Evolution of the Funding Platform
Primarily | Access | Access to | Access | |||
funded by | to public | unsecured | to private | |||
securitizations | equity | corporate | infrastructure | |||
debt | capital | |||||
Pre-IPO | 2013 | 2019 | 2024 |
Initial | Corporate | CarbonCount | |
Debt Ratings | Holdings 1 | ||
Public Offering | |||
CCH1 is a Significant Milestone in the Expansion of Our Access to
Diversified Sources of Capital
4
CarbonCount Holdings 1 Provides Significant Benefits
Consistent with | Increases | Fee | ||
Capital Light Priority | Investment Capacity | Income | ||
Reduces Reliance | … As Clean Energy Demand | Diversity & |
on Capital Markets | Increases our Opportunities | Stability of Revenue |
More Dynamic and Resilient
5
HASI & KKR: A Powerful Collaboration
- Partner with KKR Core Infrastructure platform to accelerate pace of investment
- HASI will source and manage investments for CCH1 consistent with existing investment strategy and interface with our clients
K K R
50% | 50% |
ownership | ownership |
- Expect to deploy combined $2b over the next 18 months
- Seed investments of nearly $200m1 with formation of CCH1
- HASI to earn upfront fees and recurring asset management fees
Services
Agreement
CarbonCount
Holdings 1 LLC
Investments
1. Including deferred fundings | 6 |
Growth in Pipeline Reflects Long-term Demand for Energy Transition
BTMGC
51%26%
>$5.5b
12-mo
Pipeline1
FTN
- Demand growth continues to drive opportunities
- Pipeline growth in community solar, energy efficiency, GC solar and renewable fuels
23%
Q1 Closed Transactions
Q1 Closed Transactions | $ in millions |
by Asset Class | |
Resi Solar | $124 |
Public Sector | $83 |
C&I | $82 |
Community Solar | $50 |
GC Solar | $46 |
Other3 | $177 |
- $562m closed investments in Q1
- ~10.5%2 average yield on newly negotiated balance sheet investments
1. | 12-months pipeline as of 3/31/24. BTM is Behind-the-Meter, GC is Grid-Connected, and FTN is Fuels, Transport and Nature | |
2. | Excluding follow-on investments of previous transactions | 7 |
3. | Securitization of a decommissioning payment | |
Higher Gain on Sale Income Driving Q1 Earnings Growth
Results Unaudited1 | 1Q23 | 1Q24 | Change |
YoY | |||
Adjusted NII1
GAAP Diluted EPS
Adjusted EPS
GAAP NII
Adjusted NII
Gain on Sale, Fees and Securitization Income
$0.26 | $0.98 | |
$0.53 | $0.68 | +28% |
$12.4m | $8.7m | |
$47.1m | $64.3m | +37% |
$19.5m | $35.3m | +81% |
1Q23 | 1Q24 | |
Adjusted NII | $47.1m | $64.3m |
Recurring Capital Light Income
*Will include CCH1 recurring management fees
1Q23 | 1Q24 | |
Securitization Income | $3.4m | $4.9m |
Transactions Closed | $389m | $562m | |
Portfolio2 | $4.7b | $6.4b | +36% |
Managed Assets | $10.4b | $12.9b | +24% |
Adjusted ROE3 | 12.0% | 13.9% | |
Upfront Capital Light Income
*Will include CCH1 upfront fees
1Q23 | 1Q24 | |
GoS & Fees | $16.1m | $30.4m |
- As of 1Q24, Distributable Earnings has been renamed Adjusted Earnings. See Appendix for an explanation of Adjusted Earnings, Adjusted NII and Managed Assets, including reconciliations to the relevant GAAP measures, where applicable
- GAAP-based
3. Adjusted ROE is calculated using Adjusted Earnings for the period and the respective ending equity balances. Refer to reconciliation of GAAP Earnings to Adjusted Earnings | 8 |
Continued Growth in Portfolio & Managed Assets
36% growth YoY | 24% growth YoY | ||||
Public Sector | |||||
3% | |||||
C&I | GC Solar | GC Solar | |||
6% | 17% | ||||
Community | 19% | ||||
Solar | Public | ||||
10% | Managed | ||||
Portfolio1 | Sector | Wind | |||
40% | |||||
$6.4b | Assets1 | 10% | |||
Wind | |||||
$12.9b | |||||
Resi Solar | 19% | FTN | |||
7% | |||||
29% | |||||
FTN | Resi Solar | Other | |||
3% | |||||
14% | 14% | ||||
"Portfolio" refers to all investments held on balance sheet
"Managed Assets" incudes (1) the Portfolio, (2) investments managed off-balance sheet in securitization trusts, and (3) investments managed for CCH12
1. | GAAP-based Portfolio, as of 3/31/24. Total may not sum due to rounding | 9 |
2. | As of 1Q24, assets managed in CCH1 is zero | |
Higher ROE in Q1 and Maintaining Strong Margins
Adjusted ROE 1 | Portfolio Yield 2 | Interest Expense / Avg Debt Balance3 | ||||||||||||||
Gain on Sale from asset | ||||||||||||||||
13.9% | rotation driving higher Q1 | |||||||||||||||
ROE | ||||||||||||||||
11.1% | 11.2% | 11.4% | 11.8% | |||||||||||||
10.5% | 10.7% | New asset yields in Q1 of | ||||||||||||||
~10.5%4 | ||||||||||||||||
7.6% | 7.6% | 7.5% | 7.5% | 7.9% | 8.0% | |||||||||||
6.8% | ||||||||||||||||
Temporary compression | ||||||||||||||||
5.7% | contemplated in guidance | |||||||||||||||
5.4% | 4.9% | 5.1% | 5.0% | due to newly issued | ||||||||||||
4.6% | 4.3% | corporate debt yet to be | ||||||||||||||
deployed in higher yielding | ||||||||||||||||
2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 1Q24 | ||||||||||
assets | ||||||||||||||||
Capital light activities continue to drive ROE higher | Proforma refinancing of 2025 and 2026 corporate | |
bonds using current market credit spreads and existing | ||
than historical results | ||
hedges results in blended cost of debt of 6.0%5 | ||
- Adjusted ROE is calculated using Adjusted Earnings for the period and the average equity ending balances for the period. Refer to reconciliation of GAAP Earnings to Adjusted Earnings
- For explanation of Portfolio Yield, see Appendix
- Excludes incremental interest expense related to debt prepayments. Shown here as a % of average debt balance
4. | Excluding follow-on investments of previous transactions | 10 |
5. | Proforma calculation assumes debt balances as of 3/31/24 |
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Hannon Armstrong Sustainable Infrastructure Capital Inc. published this content on 07 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 May 2024 21:20:41 UTC.