HASI Announces First Quarter 2024 Results, Establishes $2b Strategic Partnership with KKR
ANNAPOLIS, Md. , May 07 /Businesswire/ - Hannon Armstrong Sustainable Infrastructure Capital, Inc. ("HASI," "we," "our" or the "Company") (NYSE: HASI), a leading investor in climate solutions, today reported results for the first quarter of 2024.
Business Highlights
- Announced CarbonCount Holdings 1 LLC, a strategic partnership with KKR, to invest in $2 billion of sustainable infrastructure assets in a concurrent press release
- Increased the capacity and extended the maturities of our revolving line of credit and commercial paper programs
- Increased pipeline to over $5.5 billion
Financial Results
- Delivered $0.98 GAAP diluted EPS QTD compared with $0.26 a year ago
- Delivered $0.68 Adjusted EPS, formerly Distributable EPS, QTD compared to $0.53 a year ago
- Increased Portfolio 36% in the last twelve months to $6.4 billion. Managed assets grew 24% in the same period to $12.9 billion
- GAAP-based Net Investment Income decreased by 30% year over year to $8.7 million QTD, while Adjusted Net Investment Income, formerly Distributable Net Investment Income, increased by 37% year over year to $64.3 million QTD
- Closed $562 million of investments in the first quarter of 2024
- Declared dividend of $0.415 per share
- Announced 2% discount on 2024 Dividend Reinvestment and Stock Purchase Plan ("DRIP") for the second quarter
Sustainability and Impact Highlights
- An estimated 520,000 metric tons of carbon emissions will be avoided annually by our transactions closed this quarter, equating to a CarbonCount® score of 0.92 metric tons per $1,000 invested
“Our company continues to execute on our goals including closing our exciting new strategic partnership with KKR,” said Jeffrey A. Lipson, HASI President and Chief Executive Officer. “We had an outstanding quarter in all respects with strong earnings, liquidity and investment volumes.”
A summary of our results is shown in the table below:
|
|
For the three months ended
|
|
For the three months ended
|
||||||||
|
|
$ in thousands |
|
Per Share (Diluted) |
|
$ in thousands |
|
Per Share (Diluted) |
||||
GAAP Net Income |
$ |
123,025 |
|
$ |
0.98 |
|
$ |
24,106 |
|
$ |
0.26 |
|
Adjusted earnings |
|
78,906 |
|
|
0.68 |
|
|
49,658 |
|
|
0.53 |
|
Financial Results
“With our capital formation activities year-to-date, we have positioned our business to thrive in a volatile macroeconomic environment,” said Marc Pangburn, HASI Chief Financial Officer. “CCH1, the upsize and extension of our banking facilities, the corporate bond add-on, and a secured debt closing have meaningfully strengthened our liquidity profile.”
Comparison of the quarter ended March 31, 2024 to the quarter ended March 31, 2023
Total revenue increased by $37 million, driven by $27 million in higher interest and securitization income from a larger portfolio and a higher average rate, and an increase in the managed assets balance. There was a $13 million increase in gain on sale driven by a change in the mix and volume of assets being securitized, which included the balance sheet rotation of certain land assets. The rotation of land assets resulted in a reduction of rental income of $5 million.
Interest expense increased $25 million primarily due to a larger average outstanding debt balance and a higher average interest rate. We recorded a $2 million provision for loss on receivables and securitization assets as a result of loans and loan commitments made during the quarter. Other expenses (compensation and benefits and general and administrative expenses) increased by $3 million primarily due to the growth of the company.
We recognized income of $159 million using the hypothetical liquidation at book value method (HLBV) for our equity method investments in the first quarter of 2024, compared to income of $22 million for the same period in 2023. The 2024 income amounts are primarily due to allocations of income in the current period related to tax credits allocated to other investors in a grid-connected utility-scale solar project, as those tax credits reduced the tax equity investors ongoing claim on the net assets of the project, as well as an allocation of income related to the mark-to-market of a power price derivative held by one of the projects in which we have invested.
Income tax expense increased by approximately $45 million in the first quarter of 2024 compared to the same period in 2023 primarily due to larger income from equity method investments discussed above.
GAAP net income (loss) to controlling shareholders in the first quarter of 2024 was $123 million, compared to $24 million in the same period in 2023. Adjusted earnings in the first quarter of 2024 was approximately $79 million, an increase of $29 million over the same period in 2023 as a result of growth in adjusted net investment income due to the larger portfolio and gain on sale income.
Leverage
The calculation of our fixed-rate debt and leverage ratios as of March 31, 2024 and December 31, 2023 are shown in the table below:
|
March 31, 2024 |
|
% of Total |
|
December 31, 2023 |
|
% of Total |
||||
|
($ in millions) |
|
|
|
($ in millions) |
|
|
||||
Floating-rate borrowings (1) |
$ |
139 |
|
3 |
% |
|
$ |
338 |
|
8 |
% |
Fixed-rate debt (2) |
|
4,112 |
|
97 |
% |
|
|
3,909 |
|
92 |
% |
Total |
$ |
4,251 |
|
100 |
% |
|
$ |
4,247 |
|
100 |
% |
Leverage (3) |
1.9 to 1 |
|
|
|
2.0 to 1 |
|
|
||||
(1) |
Floating-rate borrowings include borrowings under our floating-rate credit facilities and commercial paper issuances with less than six months original maturity, to the extent such borrowings are not hedged using interest rate swaps. |
|
(2) |
Fixed-rate debt includes the impact of our interest rate swaps and collars on debt that is otherwise floating. Debt excludes securitizations that are not consolidated on our balance sheet. |
|
(3) |
Leverage, as measured by our debt-to-equity ratio. |
Portfolio
Our balance sheet portfolio totaled approximately $6.4 billion as of March 31, 2024, which included approximately $3.1 billion of behind-the-meter assets and approximately $2.4 billion of grid-connected assets, with the remainder in fuels, transport, and nature assets. The following is an analysis of the performance ratings of our portfolio as of March 31, 2024:
|
Portfolio Performance |
|
|
||||||||||||||||
|
Commercial |
|
Government |
|
Commercial |
|
Commercial |
|
|
||||||||||
|
1 (1) |
|
1 (1) |
|
2 (2) |
|
3 (3) |
|
Total |
||||||||||
|
(dollars in millions) |
||||||||||||||||||
Total receivables |
|
3,128 |
|
|
|
37 |
|
|
|
— |
|
|
|
— |
|
|
|
3,165 |
|
Less: Allowance for loss on receivables |
|
(52 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(52 |
) |
Net receivables |
|
3,076 |
|
|
|
37 |
|
|
|
— |
|
|
|
— |
|
|
|
3,113 |
|
Receivables held-for-sale |
|
2 |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
Investments |
|
5 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
7 |
|
Real estate |
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
Equity method investments (4) |
|
3,226 |
|
|
|
— |
|
|
|
37 |
|
|
|
— |
|
|
|
3,263 |
|
Total |
$ |
6,312 |
|
|
$ |
42 |
|
|
$ |
37 |
|
|
$ |
— |
|
|
$ |
6,391 |
|
Percent of Portfolio |
|
99 |
% |
|
|
1 |
% |
|
|
— |
% |
|
|
— |
% |
|
|
100 |
% |
(1) |
This category includes our assets where based on our credit criteria and performance to date, we believe that our risk of not receiving our invested capital remains low. |
|
(2) |
This category includes our assets where based on our credit criteria and performance to date, we believe there is a moderate level of risk of not receiving some or all of our invested capital. |
|
(3) |
This category includes our assets where based on our credit criteria and performance to date, we believe there is substantial doubt regarding our ability to recover some or all of our invested capital. Loans in this category are placed on non-accrual status. |
|
(4) |
Some of the individual projects included in portfolios that make up our equity method investments have government off-takers. As they are part of large portfolios, they are not classified separately. |
Guidance
The Company expects that annual adjusted earnings per share will grow at a compounded annual rate of 8% to 10% from 2024 to 2026, relative to the 2023 baseline of $2.23 per share, which is equivalent to a 2026 midpoint of $2.89 per share. The Company also expects distributions of annual dividends per share from 2024 to 2026 to be set at a payout ratio of 60-70% of annual adjusted earnings per share. This guidance reflects the Company’s judgments and estimates of (i) yield on its existing portfolio; (ii) yield on incremental portfolio investments, inclusive of the Company’s existing pipeline; (iii) the volume and profitability of transactions; (iv) amount, timing, and costs of debt and equity capital to fund new investments; (v) changes in costs and expenses reflective of the Company’s forecasted operations; and (vi) the general interest rate and market environment. In addition, distributions are subject to approval by the Company’s Board of Directors on a quarterly basis. The Company has not provided GAAP guidance as discussed in the Forward-Looking Statements section of this press release.
Dividend
The Company is announcing today that its Board of Directors approved a quarterly cash dividend of $0.415 per share of common stock. This dividend will be paid on July 12, 2024, to stockholders of record as of July 3, 2024.
Conference Call and Webcast Information
HASI will host an investor conference call today, Tuesday, May 7, 2024, at 5:00 p.m. Eastern Time. The conference call can be accessed live over the phone by dialing 1-877-407-0890 (Toll-Free) or +1-201-389-0918 (toll). Participants should inform the operator you want to be joined to the HASI call. The conference call will also be accessible as an audio webcast with slides on our website. A replay after the event will be accessible as on-demand webcast on our website.
About HASI
HASI (NYSE: HASI) is a leading climate positive investment firm that actively partners with clients to deploy real assets that facilitate the energy transition. With more than $12 billion in managed assets, our vision is that every investment improves our climate future. For more information, please visit hasi.com.
Forward-Looking Statements:
Some of the information contained in this press release is 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, that are subject to risks and uncertainties. For these statements, we claim the protections of the safe harbor for forward-looking statements contained in such Sections. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. When we use the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions, we intend to identify forward-looking statements. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are 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 most recent Annual Report on Form 10-K as well as in other periodic reports that we file with the U.S. Securities and Exchange Commission.
Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances, including, but not limited to, unanticipated events, after the date on which such statement is made, unless otherwise required by law. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained or implied in any forward-looking statement.
The Company has not provided GAAP guidance as forecasting a comparable GAAP financial measure, such as net income, would require that the Company apply the HLBV method to these investments. In order to forecast under the HLBV method, the Company would be required to make various assumptions related to expected changes in the net asset value of the various entities and how such changes would be allocated under HLBV. GAAP HLBV earnings over a period of time are very sensitive to these assumptions especially in regard to when a partnership transaction flips and thus the liquidation scenarios change materially. The Company believes that these assumptions would require unreasonable efforts to complete and if completed, the wide variation in projected GAAP earnings based upon a range of scenarios would not be meaningful to investors. Accordingly, the Company has not included a GAAP reconciliation table related to any adjusted earnings guidance.
Estimated carbon 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 CO2 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.
HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) |
|||||||
|
For the Three Months Ended March 31, |
||||||
|
|
2024 |
|
|
|
2023 |
|
Revenue |
|
|
|
||||
Interest income |
$ |
68,692 |
|
|
$ |
43,108 |
|
Rental income |
|
1,846 |
|
|
|
6,487 |
|
Gain on sale of assets |
|
28,611 |
|
|
|
15,719 |
|
Securitization asset income |
|
4,898 |
|
|
|
3,432 |
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