HA Sustainable Infrastructure Capital, Inc.

Good afternoon, and welcome to Hannon Armstrong's conference call on its Q2 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 then zero on your telephone keypad. At this time, I would like to turn the conference over to Chad Reed, Vice President, Investor Relations and ESG. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome. Earlier this afternoon, Hannon Armstrong distributed a press release detailing our second 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 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 undertake 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. 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 Echol, 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. Thank you, Chad, and good afternoon, everyone.

Today we are announcing another strong quarter with 33% year-on-year growth in core earnings of 40 cents per share and a 29% year-on-year increase of core net investment income for the first half of 2020 to $49 million total. Declaration of a dividend of 34 cents per share. And please note that from this call forward, earnings and dividend announcements will be combined. We announced after the quarter end another partnership with Engie where we will invest approximately $540 million over the next few quarters. I will speak more on this partnership in a bit, but it does certainly contribute to our confidence that we will once again exceed our annual target of investing $1 billion in climate change solutions, all of this despite COVID-19 disruptions. And finally, we're announcing that we've launched multiple diversity, equity, inclusion, and justice initiatives, which will shorthand as diversity for the purposes of this call. and including a multi-year plan for diversity impact. We understand that even as we continue to make progress in our mission to invest in climate change solutions, our nation is hurting. A deadly pandemic continues to threaten the health and safety of an increasing number of American families and has left millions jobless and many more far less financially secure. In our long and painful fight against systemic racism, and inequality has rightfully taken on renewed urgency in the aftermath of recent injustices. At Hannah Armstrong, our intense focus on the environmental aspects of ESG is at the core of our mission and value proposition. But the multiple crises affecting our nation have given even more urgency to expanding our focus on a durable social fabric, the S in ESG. This includes efforts toward a healthy, diverse, engaged, and fairly compensated staff, as well as proactive support and engagement with our local community. These were material factors in our financial success before these crises and will become even more so in the future. Turning to slide four, I want to share some thoughts on the continued resilience of our business. We've always said that we tend to perform well in periods of economic volatility. and this quarter is another example of that. I think it is important to reiterate the factors that enable the Hannon Armstrong business to prosper in this unprecedented environment. First, virtually all of our investments save the Albuquerque money. This is a profoundly important credit positive distinction that is often overlooked in more normal times. Second, our clients, the leading energy and infrastructure companies in the world, are large, responsible corporate citizens, who will survive and even prosper when we exit from this pandemic. Finally, the investment pipeline, which drives our growth, remains intact, not only because these investments save people money and are sponsored by high-quality clients, but 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. For example, there's little doubt that distributed solar plus storage or enhanced HVAC solutions will be perceived as more valuable during and after this pandemic for reasons related to energy security and health. All of these things add up to a business model that has substantial protection from the general economy as we have shown in this crisis. Turning to slide five, we provide an update on our 12-month pipeline, which remains greater than $2.5 billion even after adjusting to the execution of the NG investment, which, to be clear, occurred in Q3. The behind-the-meter portion of our pipeline remains robust and is weighted toward energy efficiency opportunities. However, the BTM pipeline also includes a healthy balance of residential, CNI, and community solar projects, many with storage attached. Turning to slide six, we highlight our July partnership with NG. We've committed to invest approximately $540 million of equity with a preference on cash flows in a portfolio of 13 wind and solar projects totaling 2.3 gigawatts. The portfolio has a weighted average contract life of 13 years with large investment-grade corporate and utility counterparties, including Amazon, Ingersoll Rand, Microsoft, Target, Walmart, and Xcel Energy. Located across five states, the portfolio is 75% onshore wind and 25% utility-scale solar. The portfolio enjoys an expected carbon count of more than 2.0, which indicates our capital is being deployed relatively efficiently to reduce carbon. To put this into context, our equity investment will avoid an estimated 1.1 million metric tons of carbon dioxide equivalent in the first full year of operations, or approximately 150,000 rail cars filled with coal over the life of the assets. Partnership grows and diversifies our balance sheet portfolio, provides operating leverage for continued earnings growth, and provides additional programmatic opportunities with this large, ambitious partner focused on the North American market. On slide seven, we provide a comparison of our balance sheet portfolio as of the end of the second quarter with and without the NG investment, as if all of the funding occurred on June 30. We're doing this as a means to show the impacts of the NG partnership. On a pro forma basis with the investment, our balance sheet portfolio expands almost 25%, $2.6 billion, with an increase in the average life of our assets by four years. All other metrics, such as portfolio yield, number of investments, and the average investment size, are substantively unchanged. As the pie chart on the right also makes clear, the investment further diversifies our portfolio. We add another pie slice, utility-scale solar equity in the grid-connected market, and this, combined with an increase in onshore wind, reduces our concentration in any one market. Now I'll turn it over to Jeff to detail our financial performance.