Financial Data and Key Metrics Changes - In Q3 2024, the company reported adjusted earnings per share (EPS) of $0.52, with year-to-date adjusted EPS reaching $1.83, representing an 8% growth over the same period in 2023 [6][25] - Managed assets grew by 14% year-over-year, exceeding $13 billion, while the overall portfolio yield increased to 8.1% from 8% in the previous quarter and 7.9% a year ago [6][24] - New investments totaled $1.2 billion year-to-date as of September 30, 2024, and have reached $1.7 billion as of the call date [5][6] Business Line Data and Key Metrics Changes - The company has closed $1.2 billion in transactions year-to-date, with expectations to exceed $2 billion in total transaction closings for the year [22] - The portfolio growth reflects an asset rotation initiative, replacing over $400 million of lower-yielding investments with higher-yielding ones [23] Market Data and Key Metrics Changes - The company noted that the renewable natural gas (RNG) market is large and growing, with significant investments from large developers and private equity firms [35] - The company’s pipeline remains diversified, exceeding $5.5 billion, with expectations to onboard approximately 10 new clients this year [19] Company Strategy and Development Direction - The company aims for annual adjusted EPS growth between 8% and 10% through 2026, with a long-term goal of 10% annual EPS growth and a 50% payout ratio by 2030 [7] - The company emphasizes that its business is not dependent on low interest rates and has maintained a consistent approach to interest rate risk management [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to thrive under various political administrations and interest rate environments, citing historical performance [8][12] - The energy transition is viewed as an extraordinary investment opportunity, with the company positioned to benefit from its experience and access to capital [32] Other Important Information - The company reported a GAAP EPS loss of $0.17, attributed to mark-to-market impacts related to power contracts, which are expected to stabilize over time as power prices increase [25][26] - The partnership with KKR is progressing well, with additional transactions closed in the third quarter and early fourth quarter [17] Q&A Session Summary Question: How significant is RNG in the FTN market and can it support declines in solar and wind? - Management indicated that the RNG market is large and growing, with significant investments being made, and it is expected to become a meaningful part of the business alongside wind and solar [35][36] Question: What are the rate hedges and their impact on earnings power? - Management explained that various hedges are in place for floating rate facilities, supporting earnings, and ensuring a duration profile that fits closely with asset cash flows [37][38] Question: How does the company limit exposure to RIN credit volatility? - Management noted that being in a senior debt position with good cash flow coverage helps mitigate RIN risk [43] Question: Updates on the KKR partnership and project funding? - Management confirmed that additional investments have been added to the KKR vehicle, which is operating as designed, with more disclosures expected as the vehicle grows [44][47] Question: Visibility on achieving $2 billion in originations for the year? - Management expressed confidence in closing the remaining amount to reach the $2 billion target, citing strong activity in October and early November [49] Question: Clarification on GAAP equity method loss? - Management clarified that the GAAP loss is due to mark-to-market accounting for power contracts, which will reflect higher asset values over time as power prices increase [55]
Hannon Armstrong Sustainable Infrastructure Capital(HASI) - 2024 Q3 - Earnings Call Transcript