HA Sustainable Infrastructure Capital, Inc.

Greetings and welcome to HACI's third quarter 2024 earnings conference call and webcast. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Aaron Chiu. Senior Vice President of Investor Relations.

Thank you, Operator, and good afternoon to everyone joining us today for HACI's third quarter conference call. Earlier this afternoon, HACI distributed a press release supporting our third quarter 2024 results, a copy of which is available on our website, along with a slide presentation we will be referring to today. This conference call is being webcast live on the Investor Relations page of our website, where a replay will be available later today. Some of the comments made in this call are forward-looking statements that are subject to risk and uncertainties by the risk factors section of the company's Form 10-K and other filings with the SEC. Actual results may differ materially from those listed. Today's discussion also includes some non-GAAP financial measures. A reconciliation of GAAP and non-GAAP financial measures is available in our earnings release and presentation. Joining me on today's call are Jeff Lipson, the company's President and CEO, and Mark Pangburn, our CFO, as well as Susan Nicky, our Chief Client Officer, who will be available for the Q&A portion of our presentation. Now I'd like to turn the call over to our President and CEO, Jeff Lipson. Jeff?

Thank you, Aaron, and thanks to everyone joining us today for our third quarter 2024 conference call. I'm going to begin on slide three. The third quarter of 2024 was another solid quarter for HACI on the key elements that drive our long-term value creation. We've closed $1.2 billion of new investments year-to-date as of 9-30. And including an active start to the fourth quarter, new investments are at $1.7 billion year-to-date as of today. Our managed assets have grown 14 percent in the last 12 months and now exceed $13 billion. New asset yields have been approximately 10.5 percent year-to-date, which have increased our overall portfolio yield to 8.1 percent. And adjusted earnings per share of 52 cents in the quarter has driven our EPS through the first three quarters of 2024 to $1.83, representing 8% growth over the first three quarters of 2023. We continue to remain confident in our guidance of annual adjusted EPS growth between 8 and 10% through 2026, with our dividend payout ratio targeted between 60 and 70% over this period. As a reminder, our long-term goal is for 10% annual EPS growth and a 50 percent payout ratio by 2030. Before we discuss the quarter in more detail, I'd like to pivot to discussing the election impact following Tuesday's results and interest rates following today's Fed meeting. These are certainly not new discussion topics for us. In various investor forums over the past 18 to 24 months, I have repeatedly reminded investors that HSE can be equally successful in Republican administrations and when interest rates are higher as we are during Democratic administrations and when rates are lower. In fact, this is not just a theory. It has already been demonstrated. We achieved strong earnings growth during the first Trump administration and have continued to thrive in the spirit of higher rates that began in 2022. Turning to page four, a few more thoughts on the election impact. Investors tend to conclude a strong correlation between election results and the success of the clean energy industry. On one hand, this makes sense given the heavy involvement of government in the energy markets in general and the influence of policy, taxes, and incentives on the energy transition in particular. On the other hand, a closer look at the data reveals some interesting facts as shown on slide four, namely that investment in clean energy has undergone secular growth this century that transcends political administrations. In fact, clean energy investment adjusted for inflation has grown in every successive presidential administration from Bush to Obama to Trump and now Biden, underscoring how the market has been propelled not only by public policy, but increasingly over the last two decades by economic factors. The simple truth is that renewables have not only become the lowest levelized cost of energy, but also offer comparatively rapid deployment, which has helped transform them into the preferred source of incremental energy. In addition, the forecasted demand for power over the next several decades will inevitably result in an all of the above energy strategy in this country. The corresponding elevated investment in supply to meet this demand will ensure our clients maintain strong development pipeline. This dynamic extends not only across presidential administrations, but also across geographic lines as well. As the table at the bottom of the slide indicate, Cumulative deployments of renewable power in this country are split quite evenly between Republican and Democratic states, and in fact, lean slightly in favor of states that voted Republican in 2020. Perhaps more importantly, investment in clean energy projects announced since the IRA was enacted a few years ago, used heavily in favor of states that voted Republican in 2020. I would note we could have used a variety of data points in this slide, and they would have all resulted in the same conclusion. The energy transition is an economically viable macro trend that will continue for many decades regardless of election results. Turning to page five, a reminder that our business is not dependent on low interest rates. We continue to prove the thesis that in all rate environments, high, low, flat, steep, or inverted, our business can thrive. In 2020 and 2021, rates were unusually low. followed by a rapid increase in 2022 and 2023 during which the Fed raised interest rates by 500 basis points and the yield curve was persistently inverted. In 2024, a rate cut cycle has started again and the curve has steepened. Throughout this period of rate volatility, we have maintained a consistent and disciplined approach to interest rate risk management. As noted on the slide, our margins have remained attractive as we have consistently invested at an adequate spread to our debt costs. Likewise, we have consistently increased adjusted earnings throughout this period of rate volatility. Quite simply, the lengthy track record of our business is that we generally invest at an average of Treasuries plus 5 to 6 percent, and now, as an investment-grade debt issuer, we can fund ourselves at Treasuries plus 2 to 2.5 percent. This resulting margin has created a sustainable, predictable, and consistently profitable business. Turning from slide five detailing our margin history to slide six, I would like to emphasize that our outlook for margins over the next several quarters remains robust as we continue to close transactions with double-digit yields and our long-term public bonds are trading at roughly 6.5 percent. I'd also like to provide a brief update on two other items. Our CCH-1 partnership with KKR continues to progress entirely within our expectations. We have closed a number of additional transactions in the vehicle in the third and early fourth quarter with no modifications of our internal processes. KKR continues to be an ideal and constructive partner, and we remain on track to complete the $2 billion investment target by year-end 2025. Finally, I would note that our SunStrong growing venture has transitioned. and we have a new partner that has purchased 50% of the JV following the SunPower bankruptcy. The JV continues to effectively service the legacy leases, and our corresponding asset-secured loans are performing as expected. And with that, I will pass the call over to Mark.