HA Sustainable Infrastructure Capital, Inc. Q4 FY2024 earnings call

• Organizational Changes: Marc Pangburn transitions to Chief Revenue and Strategy Officer to focus on investment and portfolio management; Chuck Melko is set to be CFO; Nate Rose moves to a reduced role. • Business Strategy: Extended adjusted EPS guidance of 8%-10% annual growth through 2027; increased dividend to $0.42 per share with a target payout ratio of 50% by 2030 and interim 2027 target of 55%-60%. • Market Dynamics: US power demand is entering a new growth era, renewables are the lowest-cost and fastest-to-deploy for meeting demand, and carbon reducing solutions are critical for reversing climate-related disasters. • Investment Strategy: Focus on continuity, adaptability, and new growth paths including international investments with existing clients and new asset classes; SunStrong enables incremental recurring fee streams and asset acquisition opportunities; CCH1 partnership is on track to fully deploy capital as planned.

In 2024, HASI achieved an adjusted earnings per share increase of 10%. Key financial metrics showed strong growth: adjusted NII had a 32% compound annual growth rate (CAGR), adjusted EPS had a 12% CAGR, recurring capital light income grew 39%, and upfront capital light income grew 12%. The portfolio increased to $6.6 billion, with a weighted average yield exceeding 10.5% in 2024 and a portfolio yield of 8.3% at year-end.

• Extended adjusted EPS guidance of 8%-10% annual growth to include 2027. • Increased dividend to $0.42 per share. • Target payout ratio of 50% by 2030 with an interim target of 55%-60% by 2027. • Confidence in the business plan based on economic fundamentals and a resilient business model.

• Policy uncertainty may cause process uncertainty for new projects, affecting investment decisions. • Potential revisions to the Inflation Reduction Act could impact energy tax credits, though the clean energy industry maintains bipartisan support.

Q: Mark Strouse asked about the timing and risk-adjusted returns of new opportunities.

A: Marc Pangburn stated some opportunities are near term with risk-return similar to current, while others are further out, and they adjust pricing as risk changes for new asset classes.

Q: Jeff Lipson was asked about rolling forward guidance and strategic expansion.

A: Jeff Lipson said they've consistently had multi-year guidance and the expansion would have a consistent funding strategy.

Q: Julien Dumoulin-Smith asked about rolling forward guidance and strategic focus.

A: Jeff Lipson said they've been consistent with multi-year guidance, and Marc Pangburn mentioned focus on expanding investment activity.

Q: Unidentified Analyst asked about tax credit pressure on investment opportunities.

A: Marc Pangburn said reduced tax monetization could increase cash equity participation in projects.

Q: Noah Kaye asked about leverage from existing clients in new growth areas.

A: Marc Pangburn said existing client relationships are a key pillar for entering new growth areas.

Q: Tyler Bisset asked about safe harboring and 4Q transactions.

A: Susan Nickey said safe harboring protected the pipeline, and Jeff Lipson said no 4Q transaction was a direct safe harboring.

Q: Chris Dendrinos asked about SunStrong and CCH1.

A: Marc Pangburn explained SunStrong's servicing business opportunity, and Jeff Lipson said CCH1 is on track.

Q: Vikram Bagri asked about payout ratio and 4Q yield.

A: Jeff Lipson said the long-term target is 50% payout ratio by 2030, and Chuck Melko said the 4Q portfolio yield was similar to the full year >10.5%.

Q: Maheep Mandloi asked about Q1 yield and new investments.

A: Jeff Lipson said the pipeline yield was similar to 2024, and Marc Pangburn said new asset class yields were TBD but had similar risk-return to existing.

Q: Dimple Gosai asked about international opportunity size.

A: Marc Pangburn said international opportunity was small near term, with a focus on the US.

Q: Jordan Levy asked about new investments' yield and C&I.

A: Marc Pangburn said new investment yields were TBD, and the C&I market had better opportunities in solar and storage.

Q: Ryan Pfingst asked about RNG RIN prices.

A: Jeff Lipson said RIN prices were a factor but senior debt protected cash flow in RNG investments.