HA Sustainable Infrastructure Capital, Inc.

Good afternoon, and welcome to Hannon Armstrong's conference call on its Q1 2020 financial results. Leadership will be utilizing a slide presentation for this call, which is available now for download on the company's investor relations page at investors.hannonarmstrong.com. Today's call is being recorded, and we have allocated 30 minutes for prepared remarks and Q&A. All participants will be in a listen-only mode. If you need any operator assistance, please press star zero on your telephone keypad. At this time, I would like to turn the conference call over to Chad Reed, Vice President, Investor Relations, and ESG for the company. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and welcome. Earlier this afternoon, Hinton Armstrong distributed a press release detailing our first quarter 2020 results, a copy of which is available on our website. This conference call is being webcast live on the investor relations page of our website, where a replay will be available later today. Before the call begins, I would like to remind you that some of the comments made in the course of this call are forward-looking statements, and within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Act and Exchange Act of 1934 as amended. The company claims the protections of the safe harbor for forward-looking statements contained in such sections. The forward-looking statements made in this call are subject to the risks and uncertainties described in the risk factor section of the company's Form 10-K and other filings with the SEC. Actual results may differ materially from those described during the call. In addition, all forward-looking statements are made as of today, and the company does not take any responsibility to update any forward-looking statements based on new circumstances or revised expectations. Please note that certain non-GAAP financial measures will be discussed on this conference call, A presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. A reconciliation of GAAP to non-GAAP financial measures is available on our posted earnings release and slide presentation. Joining me on today's call are Jeff Eckel, the company's chairman and CEO, and Jeff Lipson, our CFO. With that, I'd like to turn the call over to Jeff, who will begin on slide three. Jeff?

Thank you, Chad, and good afternoon, everyone. I hope you and your families are as well as they can be. I have to admit I've struggled more in preparation for this call than I have for my prior 28 earnings calls. Today, Hannon Armstrong is announcing that fortunately we maintain a healthy workforce, have access markets for growth capital, are reporting record first quarter earnings, continue to manage a portfolio that is performing to expectations, and are able and willing to reaffirm guidance for 2020. This good news stands in stark contrast with the impact of this pandemic on people and businesses to date and in the future. This is my struggle. There are so many impacted directly and indirectly, so many first responders and healthcare workers taking risks we at Hannon Armstrong are not directly exposed to. We are deeply humbled by and grateful for their work. Rather than jump right into the numbers, I want to highlight a few actions we've taken during the pandemic. First, we closed the office on March 10th, earlier than most companies, in order to ensure our staff and their families stayed healthy. Fortunately, we have stayed healthy and will continue to put employee health first. The good news is that financial service firms are better suited to remote work than most. Other than the working parents of school-aged children struggling with school and childcare closures, our team is highly functional. Second, we made significant donations to three local organizations, the Maryland Food Bank, the YWCA of Annapolis, and the Annapolis Lighthouse, organizations providing food security, protection for domestic abuse victims, and shelter for the homeless. We and our staff will continue to support these and other community organizations during the pandemic. As for the resiliency of the business, I reflected on a number of factors that caused the Han and Armstrong business model to prosper in this unprecedented environment. First, virtually all of our investments save the obligor money. This is a profoundly important distinction that is often missed in more normal times. Second, our clients, the leading energy and infrastructure companies in the country and the world, are large, responsible corporate citizens who will survive and prosper as we exit from this crisis. Finally, the investment pipeline which drives our future growth remains intact, not only because these investments save people money and are sponsored by our terrific clients, but also because the underlying theme of investing in climate change solutions is proving a durable asset class and one that we believe will come out of this crisis even stronger. Now, on to the numbers for our first quarter results on page four of the slide deck. Today, we're announcing gap earnings per share of 35 cents, up 67% year-over-year. Core earnings per share of 44 cents, up 33% year-over-year. Later, Jeff L. will detail a new accounting standard and how our definition of core earnings has changed as a result. But until then, when I refer to core earnings, it is consistent with the last quarter's definition. to allow investors to compare our results to our guidance. We raised nearly $550 million in growth capital through April, including $400 million in unsecured green bonds and $150 million in equity through our ATM. We achieved 40% year-over-year growth in gap net investment income and 52% growth in core net investment income. We report a portfolio yield of 7.7% And as Jeff L. will detail in a bit, our portfolio is performing to expectations and is in great shape. We closed $186 million of transactions compared to $319 million in the first quarter last year, but importantly, still expect full-year originations to exceed the billion-dollar mark. And finally, at a time when challenging economic conditions and uncertainty about the future are forcing many companies to withdraw guidance, fortunately, for the reasons I outlined, we remain confident about our ability to weather the current crisis and are reaffirming our guidance for 2020, with core EPS expected to exceed $1.43 per share. Turning to slide five, let's turn to our more than $2.5 billion pipeline, the majority of which is behind the meter, although you will notice this quarter an increase in grid-connected pipeline. We continue to identify attractive efficiency and renewable opportunities in the federal and municipal markets, as well as universities, schools, and hospitals. Investments that have been engineered before the crisis are generally proceeding, while the to-be-engineered investments may be pushed back a quarter or two. With regard to residential solar, deployments of projects already in our pipeline continue even as new originations have understandably slowed as a result of social distancing and the economic downturn. The quick shift by the Resi solar companies to online selling, engineering, and permitting has been impressive. We also continue to look closely at a number of opportunities in the grid-connected sector. As federal tax credits for wind step down, wind project execution is accelerating, potentially leading to new investment opportunities for Hannon. As a final note, we occasionally get the question on the impact of low oil prices on our renewable pipelines. The answer is there is virtually zero impact, whether the price of oil is $10 or $100, because oil is not used for electric power generation, except a little bit in Hawaii. Hopefully, we can put this question to rest for good. Turning to slide six, our balance sheet portfolio is more diverse and longer dated than it was at the end of 2019. As of the end of the first quarter, we have 180 investments with an average size of approximately $12 million, and a weighted average life of approximately 15 years. The behind-the-meter market represents over 60% of our portfolio and generates a forward-looking yield of 8.1%. The fact that virtually all of these assets save money for the obligor is one of the reasons for its strong credit profile. I think one of the outcomes of the crisis is that people will be more focused on the reliability and resiliency of power where they work and live as reliable power is proving even more critical. This will only help strengthen both our credit profile as well as expand the storage opportunity. At 38% of our portfolio, generating a forward-looking yield of 7.1%, the grid-connected market continues to be driven by both solar land and onshore wind. In sum, our $2.1 billion balance sheet portfolio remains well diversified with long-dated assets and poised to support our projected growth in 2020 and beyond. Let's turn now to slide seven, which highlights a transaction that went from our pipeline to our portfolio in Q1. We invested $115 million in preferred equity into the Hawkeye Energy, a landmark public-private partnership between NG and the University of Iowa. Hawkeye Energy was awarded a billion-dollar 50-year utility management concession contract and the investment reached financial close on March 10th. Hawkeye will support the university's energy, water, and sustainability objectives for two campuses spanning 1,700 acres, including meeting its zero-carbon energy transition objectives and becoming coal-free in campus energy production on or before 2025. Innovative in both scope and ambition, It serves as a campus utility system model for major U.S. universities and research hospitals that look to achieve their cost and sustainability objectives. The investment's financial profile is strong with an attractive 50-year risk-adjusted return from contracted cash flows from a high investment grade counterparty. This expansion of the higher education P3 market also grows and diversifies our pipeline and strengthens the portfolio while fully aligning with our climate-positive ESG objectives. Now I'll turn it over to Jeff L. to detail our financial performance.