HA Sustainable Infrastructure Capital, Inc.

transparency in the climate impact of new load by ensuring that emissions, rather than simply megawatt hours generated, are credibly measured. In addition, there is expected to be continued adoption of electric vehicles, which have an 8 percent and growing market share and will result in a significant shift from the oil markets to the electricity markets. Furthermore, another trend is the heightened prioritization of domestic manufacturing, particularly when it comes to semiconductors. Together, these sources of growth are expected to account for an increase in U.S. electricity demand of more than 800 terawatt hours from a base of approximately 4,000 terawatt hours per year. This uptick in growth is expected to occur after approximately 20 years of relatively modest demand growth. In this period of lower growth over the last 20 years, clean energy became the overwhelming source of new generation. Therefore, as we enter this period of higher growth, Renewables and other low carbon solutions will experience even more rapid growth. Solar energy represents the lowest levelized cost of electricity of any source. And solar and wind energy continue to represent the vast majority of new electricity capacity being added to the grid. Likewise, increased adoption of renewable natural gas is forecasted to occur as natural gas will continue to be utilized to meet energy demand. and technology will continue to allow this gas to be more efficiently produced from municipal and animal waste. It is important to note that all of these trends are unlikely to be impacted by the 2024 election results. There continues to be active discussion and speculation regarding public policy changes and the corresponding impact on the outlook for clean energy development. However, it is our view, shared by many others, that the megatrends of the energy transition itself and the aforementioned increase in power demand will result in continued considerable clean energy deployment without meaningful disruption resulting from public policy changes. This forecasted supply of clean energy to meet surging demand will require hundreds of billions of dollars of capital investment. As the only public pure play investment company exclusively focused on the energy transition, HACI is well positioned to capitalize on this trend. particularly in light of two transformative developments in the second quarter. First was the launch of our CCH1 $2 billion strategic partnership with the global investment firm KKR. This partnership provides enhanced access to committed capital, diversifies our revenue with incremental fee income, and generally positions us to scale our business. The partnership is also an affirmation of the differentiation of our strategy and a reflection that our underlying portfolio of sustainable investments is difficult to replicate. The CCH1 vehicle has been seeded with two investments and is functioning as designed, and we expect CCH1 to be the primary financing vehicle for our balance sheet investments over the next 18 months. The second positive development in the quarter was our attainment of fully investment-grade status. We were upgraded by Fitch and placed on positive watch by S&P to go along with our existing investment grade rating by Moody's. These ratings have provided us access to the investment grade bond market, which provides more stability, lower costs, and longer tenure, among other attributes that Mark will articulate. Summarizing CCH1 and the investment grade ratings into a single sentence, we have reduced our capital needs by 50%, and significantly reduce the cost for the 50% we raise ourselves. Therefore, as we holistically assess industry trends and HACI's capital access, we are at a pivotal moment at the juxtaposition of several positive catalysts. As I said on Investor Day last year, we have a simple business model but a complex business. Our business model can be encapsulated as climate clients' assets but our business requires a deep understanding of energy markets, structured finance, and the ability to establish and maintain long-term relationships. Our talented and experienced team is uniquely qualified to meet the capital needs of the energy transition. This combination of a differentiated investment strategy and enhanced access to diversified and stable sources of capital positions HACI perfectly to capitalize on these industry trends and continue to operate with increasing scale strong margins, and profitable growth. And with that, I'll pass along the call to Mark to discuss the quarterly financials in greater detail.

Thank you, Jeff. I'll start on slide six. Before I cover the quarterly results, I'd like to take some time to emphasize one point Jeff just highlighted, our second investment grade rating and how impactful this will be for our business. We see the change benefiting our business in three primary ways, first on cost. The chart on the left shows the spread differential between BBB and BBB bonds over the last 10 years, which has averaged 120 basis points. To be more specific to HACI, within our previous high yield platform, we raised approximately $3 billion in corporate debt at a weighted average spread of 339 basis points. Compare this 339 to the credit spread of our inaugural investment grade issuance of 225 basis points. a greater than 100 basis point compression in cost. Second, we can now more reliably access longer term, longer maturity bonds, better aligning our asset and liability duration and minimizing our need for hedging activities. Third, when market dislocations occur, the IG market is meaningfully more resilient as evidenced by the graph on the left. For example, During the initial COVID dislocation, the high-yield market costs increased by 250 basis points more than investment grade market costs. Generally, the best times to invest are during these dislocations, and now our largest funding source will be substantially more cost-effective during these times. Finally, there are intangible benefits, such as the general affirmation of the credit profile of our investments. We believe that the combination of these factors will continue to drive attractive margins over the long term. Turning to slide seven to cover the quarterly results. Adjusted EPS grew 19% year-over-year to 63 cents, and adjusted net investment income rose 16% year-over-year to 63 million. Also of note, gain on sale, fees, and securitization income was 32 million, up about 12 million year-over-year As a reminder, we expect gain on sale during the guidance window to be fairly consistent with 22 and 23. Stepping back a bit and moving to slide 8, this highlights the expansion of our managed assets since 2020. As a reminder, our managed assets include our portfolio, the investments we have securitized, and CCH1. Since 2020, our managed assets have grown by more than 80% to $13 billion through the end of Q2. This includes new closings of approximately $260 million during Q2 or $823 million during the first half, which is consistent with our first half 2023. Perhaps more important, the new asset yield for portfolio investments during the first half of 2023 was greater than 8.5%, whereas today we're investing in yields greater than 10.5% with a consistent risk profile. Moving on to slide 9. Our portfolio stood at $6.2 billion at the end of Q2, up 27% year-over-year, and we continue our focus on maintaining diversification across our asset classes. Two items of note. Given the size of CCH1, we have not yet broken it out separately, but note that it is currently comprised of one resi solar transaction and one CNI solar transaction. The portfolio also decreased approximately 200 million driven by the seeding of CCH1 and our focus on asset rotations where we have been selling or syndicating our lower yielding investments to reinvest at higher yields. Next on slide 10, the narrative around our ROE and margins remain consistent with the prior quarter. Our elevated first half 24 ROE is driven primarily by gain on sale. Our portfolio yield continues to increase as new transactions are funded. Our cost of debt has increased relative to 23, but is actually down to 5.6 from 5.7 in Q1 of 24. I'd also like to touch on our recent 25 bond refinancing. The 2025 was a $400 million bond with a coupon of 6%. To manage interest rate risk, we entered into a forward-starting We actually refinanced the bond. We also unwound the swap. After factoring in the impact of the swap, the effective cost of refinancing was 6%, identical to the 6% coupon on the 25 itself, with an additional nine years of tenor. Finally, on slide 11, in terms of a balance sheet, a few important updates. Our leverage ratio declined to 1.8 times. And after paying down our revolver, we are entering the second half of 2024 with $1.4 billion of liquidity. Additionally, on the right, we have minimal near-term maturities and continue to manage our liability platform to a laddered maturity profile. Our liquidity position and minimal near-term maturities provide us the opportunity to capitalize on our pipeline and attractive investment environment we see today. With that, I'll pass back to Jeff for closing remarks.

Thank you, Mark. Turning to page 12, we detail various sustainability and impact items, including receiving the highest rating from S&P's Green Bond Framework and a notable award from Reuters regarding our sustainability culture. Let's conclude on page 13. HACI remains uniquely positioned with a differentiated business model, enabling us to remain the preeminent pure play capital provider to the energy transition. Our existing liquidity and capital paired with our improved access to growth capital and an attractive margin to our investment return, ideally positions us for success over the next several years. I would like to thank our talented team for another outstanding quarter as we look forward to a successful second half of 2024. Operator, please open the line for questions.