HA Sustainable Infrastructure Capital, Inc.

Good afternoon and welcome to Hannon Armstrong's conference call on its fourth quarter and four-year 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.

Thank you, operator. Good afternoon, everyone, and welcome. Earlier this afternoon, Hannon Armstrong distributed a press release detailing our fourth quarter and full year 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 factors 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. 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 Eichel, the company's chairman and CEO, and Jeff Lifson, our CFO and COO. 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. Today we are reporting that 2020 distributable earnings, previously known as core earnings, total $1.55 per share, an increase of 11% over 2019, and a 7% three-year compound annual growth rate, exceeding the high end of our previous guidance. We grew our portfolio 38% year-over-year to $2.9 billion, We closed 1.9 billion of transactions in 2020, a record including almost 800 million in Q4. And finally, we're providing three-year guidance of 7 to 10 percent compound annual growth in distributable earnings. Let's turn to page four and discuss guidance and dividend in more detail. Given the earnings trajectory of our existing portfolio and the strength of the pipeline, We are guiding, as I said, to a 7 to 10 percent growth in distributable earnings per share through 2023 relative to a 2020 baseline of $1.55 per share. If you look at the chart, this is equivalent to a 2023 midpoint of $1.98 per share. To be clear, there may be lumpiness in the yearly earnings, but we expect at the end of 2023 to be within our guidance range. Given the expectation for accelerated earnings growth, we intend to grow the dividend at a rate of 3% to 5% annually from 2021 to 2023. With distributable earnings growing faster than our dividend, we can continue to retain capital for accretive investments and remain attractive on a total return basis. Today, we're also announcing a 3% increase in our dividend to $0.35 per share for the first quarter of 2021. Now, turning to slide five, we would like to address some of the key macro themes that are top of mind for our investors and analysts. First, evidence of a changing climate continues to mount, 2020 tied for the warmest year on record. In addition, there were 416 natural disasters across the globe last year, resulting in economic losses of approximately $250 billion. The deep freeze in Texas causing the massive power outages may be an example of climate change-induced extreme weather events. But regardless of the cause, we are concerned for the people affected and hope power is restored as soon as possible. We're also grateful for our partners operating our wind and solar assets in Texas for their commitment and competence in managing through this disaster. Clean energy assets have generally performed well in 2020, and our portfolio has proven very resilient despite the pandemic and recession. Our portfolio of long-duration, non-cyclical, climate-positive assets has performed as expected. While it is too early to fully understand the net impacts of the Texas events on our portfolio, we are confident our diversity and preferred structures mitigate the impact of this week's events. The climate solutions market continues to grow, as does our pipeline. Our deep relationships with large clean energy and infrastructure clients combined with our flexible permanent capital solutions have led to a greater volume of investment opportunities and attractive risk-adjusted returns. In addition, the demand for ESG equities is growing, driven by institutional investor mandates and the strong performance of proven ESG leaders. We continue to believe that ESG reporting is a material disclosure all companies should make. We also support the efforts for global standardized performance metrics to prevent green and social washing. As ESG investing matures, we believe that the competitive advantages of ESG leaders will become more apparent and that this will be reflected in their market performance. Finally, for the first time in several years, federal policy is acting as a tailwind rather than a headwind for our industry and our business. As the competitiveness of renewables, energy efficiency, and sustainable infrastructure improves, corporates and governments are setting ever more aggressive clean energy and net zero targets. In addition, from rejoining the Paris Agreement to the appointment of key personnel, the Biden administration is taking aggressive action across the executive branch to move policy in a climate positive direction. We also believe there is momentum for a price on carbon by way of a carbon dividend plan we have long advocated for. Turning to slide six, we provide an update on our 12-month pipeline, which we are reporting as greater than $3 billion, up from the prior quarter of $2.5 billion. It is notable that we increased the pipeline from last quarter, even as we converted almost $800 million from that pipeline to closings in Q4. We continue to help our clients grow by striving to make the financing transactions as aerodynamic as possible through programmatic relationships. We see strong growth in virtually every one of the approximately 10 end markets where we invest. The bulk of our pipeline remains behind the meter and is weighted toward energy efficiency opportunities in the government and industrial sectors. We do expect President Biden to drive the federal ESPC program to return to the levels achieved during the Obama administration. In addition, the behind-the-meter solar pipeline remains strong, including residential, CNI, and community solar projects, an increasing number of which include a storage component. The grid-connected portion is similarly well-balanced between onshore wind, grid-connected solar, and solar land. Lastly, we continue to see interesting climate resilience opportunities as reflected in our sustainable infrastructure pipeline. On slide seven, we detail the $663 million preferred equity transaction we closed at the end of last year alongside Clearway Energy in a two gigawatt grid-connected portfolio of seven onshore wind, solar, and solar plus storage projects. The portfolio enjoys highly contracted generation, predominantly investment-grade counterparties, a 14-year weighted average contract life, and significant geographic diversity. The portfolio also represents our first grid-connected solar plus storage investment and provides the potential for continued programmatic deal flow with Clearway, a large, ambitious partner focused on the U.S. market. As of the end of last year, we had funded $200 million of this larger commitment, and we anticipate funding the balance as remaining projects achieve commercial operation over the next few years. On slide eight, we provide an overview of our $93 million preferred equity investment and a 78 megawatt behind-the-meter portfolio of more than 60 distributed solar plus storage projects. Co-investors include Morgan Stanley as tax equity and Engie as sponsor equity. With a weighted average contract life of 24 years, the portfolio is with highly creditworthy consumer, CNI, and rural electric co-op off-takers. We also highlight the unique structure of this transaction, which provides combines tax equity financing and a forward flow of projects. With $37 million funded to date, we anticipate funding the balance of the commitment as projects reach completion milestones over the next year or so. Turning to slide nine, what these investments also highlight is our quarterly and annual headline closed transaction number is perhaps not the most useful metric for evaluating our performance going forward. Historically, we've said that we expect to close at least $1 billion of transactions each year. And last year, we announced $1.9 billion in closed transactions. However, as of December 31st, nearly $600 million of that headline number will be funded in future periods under forward flow funding commitments. We would suggest that portfolio growth and NII growth will perhaps be more useful metrics for tracking our performance. We will still disclose closed transactions for the foreseeable future, but think these additional metrics may prove useful. Now I'll turn it over to Jeff L. to discuss our portfolio performance and financial results.