Greetings. And welcome to HASI’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. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Aaron Chew, Senior Vice President of Investor Relations.

Thank you, Operator. And good afternoon to everyone joining us today for HASI’s third quarter conference call. Earlier this afternoon, HASI distributed a press release reporting our third quarter 2024 results, a copy of which is available on our website, along with the 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 which are subject to risks and uncertainties, such as 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 Marc Pangburn, our CFO; as well as Susan Nickey, 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 3. The third quarter of 2024 was another solid quarter for HASI 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% in the last 12 months and now exceed $13 billion. New asset yields have been approximately 10.5% year-to-date, which have increased our overall portfolio yield to 8.1%. And adjusted earnings per share of $0.52 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% 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 rate following today’s Fed meeting. These are certainly not new discussion topics for us. In various investor forums over the past 18 months to 24 months, I have repeatedly reminded investors that HASI 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…

Thank you, Jeff. I’ll start on Slide 7. Our pipeline remains at more than $5.5 billion and is well diversified across our end markets. Listed on the right are three items I’d like to highlight. Most notably, we anticipate onboarding approximately 10 new clients this year. These additions are across all three of our markets. I previously summarized our growth coming from three primary avenues, growing with existing clients, adding new clients and [Technical Difficulty]. The investment this year into expanding our client base will continue to drive our future opportunities. Next, as an example, the Grid-Connected investments in our pipeline have typically completed a two-plus-year development cycle, which requires a meaningful capital investment from our clients. Our entry point into these investments derisks both development delays and provides clarity on near-term pipeline, regardless of political environment. Finally, in the FTN market, we continue to see RNG as the primary driver of growth. We continue to build off our existing partnership with leaders like Amorepto [ph], and broaden to other key players like Vision RNG, as we announced a few weeks ago. Our optimism is supported by the growing forecast for U.S. power demand, which we see positively impacting our pipeline and portfolio today. Moving on to Slide 8, year-to-date, we have closed $1.2 billion of transactions. As you can see in the table, these closings are well diversified among our underlying assets. Managed assets have grown to $13.1 billion and the portfolio has increased to $6.3 billion. For the year, we expect to exceed $2 billion in transaction closings, consistent with our expectations. One other positive item I’d like to highlight, portfolio growth reflects our asset rotation initiative, where we have rotated out of more than $400 million of investments, which were on the balance sheet at a weighted…

Thank you, Marc. Turning to Slide 12, as always, we detail various sustainability and impact items, including a top-tier sustainability assessment from S&P, the greenest specially financed designation by Newsweek, and are reaching a cumulative 8 million metric tons of annual carbon emissions avoided annually. And finally, wrapping up on Slide 13, the energy transition continues to be an extraordinary investment opportunity, providing an enormous addressable market and attractive returns. HASI remains uniquely positioned to benefit, given our experience, expertise and recent improvements in our access and cost of capital. I would like to thank our talented team for another outstanding quarter, as we look forward to closing out another successful year in 2024. Operator, please open the line for questions.

Thank you. [Operator Instructions] The first question we have is from Jack Hurley of Mizuho Security. Please go ahead.

Hi. I just had a quick question regarding the technology partners. How big is RNG in the FTN market relatively speaking and can it support -- if there’s any declines in the solar and wind market? And then I have one follow-up, if I may.

The RNG market is very large and growing. And I think there’s been an acknowledgement that natural gas is going to be a big part of the energy future. So the idea of converting, obviously, wasted gas and dairy products and landfill to renewable natural gas has become a very big business, and a lot of the large developers and even large private equity firms are making big investments in renewable natural gas. So for a business like ours that prides itself on diversity, it can become a meaningful part of our business. I wouldn’t necessarily compare it to wind and solar from a size perspective. We’ll very likely continue to do wind, solar and RNG. But I think it’s emerging as a very large market.

Thanks. And can you remind us of the rate hedges and the impact of rising interest rates on your earnings power, relatively speaking? And then, if anything, you can provide regarding SunStrong for the new OEM partner. Any cost savings there possible as you get a new partner on Board?

Sure, Jack. Thanks. This is Marc. We have implemented a few different styles of hedges on our liability portfolio, primarily either current swaps that are in place for some of our floating rate facilities, namely the TLA and the revolver. And then we also have forward starting swaps in place to hedge out the base rate for the refinancing of our future liabilities, primarily the 2026 and the 2027 swaps. So in terms of earnings power, the hedges that are in place today on our floating rate facilities are generally in the money and supporting earnings. And then on the forward starting swaps, it’s primarily focused around just ensuring we are maintaining a duration profile that fits more closely with the asset side by extending those 2026 and 2027. On SunStrong, the partner that Jeff was referring to came in and bought the equity interest. In terms of servicing the lease portfolio, the JV will continue to do that on a go-forward basis and has largely transitioned away from them.

Got it. Thanks.

The next question we have is from Julien Dumoulin-Smith of Jefferies. Please go ahead.

Hey. This is Hannah [ph] on for Julien. Thank you for the question. So, as a portfolio, how do you all think about limiting your exposure to some of the volatility associated with the RIN [ph] credits? As I understand, some of these RNG projects are used for transportation offtake.

I think the primary way we insulate ourselves a bit from RIN risk is that in our RNG business, we are senior debt. So we’ve underwritten these transactions from a cash flow and coverage perspective and it’s not that we don’t have any RIN risk, but I think by being senior debt with good cash flow coverage, we have somewhat mitigated the RIN risk.

Got it. Thank you. And then just one last question really quick. I was a bit late for the call. So I don’t know if you all talked at all about the KKR partnership, if you announced any projects funded out of that JV or maybe how we would see that reflected in some of the statements. Thank you.

Sure. We did touch on it very briefly to say that we have in the third quarter and early fourth quarter added additional investments to the vehicle and that the vehicle is operating exactly as designed and the partnership is working quite well. As the vehicle gets larger, we’ll have more disclosure. But for now, it remains relatively small. So there’s not a lot of specific disclosures we’re making just yet on the assets in the vehicle.

All right. Thank you.

Thank you.

The next question we have is from Noah Kaye of Oppenheimer & Company. Please go ahead.

Hey. Thanks for taking the questions. Maybe housekeeping follow-up on that last one. I think in the press release, there is a line around the, I think it’s $74 million held in co-investment vehicles. Is that the right number to be looking at in terms of the assets that are currently from a HASI perspective in that co-investment vehicle?

That’s the, yes, Noah, that’s the KKR dollar amount. That’s the KKR portion of the vehicle that’s disclosed in that table. And when I said we’ll have more disclosure, I just meant in terms of what, and that’s the funded disclosure. There’s a fair amount of commitments in CCH1 that have not been funded yet. So I’ll make that clarification as well. And when I said we’ll have more disclosure, we might have a more descriptive rather than just a balance there over time. That’s what I meant in the previous question.

All right. Thank you. Just pointing out that gives us a starting point. So to reiterate $2 billion of originations for the year, given the year-to-date, just talk to us about the visibility to doing roughly $700 million this quarter. Were you able to get a substantial portion of that done already? What’s sort of the confidence level there?

Sure. It was in the very early moments of my script. You may have missed it, but I did…

Yeah.

… say that we’re at $1.7 billion as of today. So we did have quite an active October and an early part of November. So I think we have very good visibility on closing out the rest of that amount to get to $2 billion.

Okay. Excellent. And then I guess the last one, I think the previous question touching on the refi, just to unpack it a little bit further, now that you have investment grade credit rating, we are seeing that showing up in the bonds here. But certainly as we see some of the movements around the yield curve and longer-term notes go a bit higher, how does that change your thinking at all about managing asset versus liability duration risk and the timing of when you might go to market around the refi?

Sure. Thanks, Noah. It’s Marc. The fact that the long end of the curve might be moving around doesn’t necessarily change our approach to managing interest rate risk. What we -- I think we’ve mentioned this a few times, but we generally focus on a duration approach where our asset cash flows generally fall in the 10-year zip code. And so we like to focus on either issuing 10-year bonds or when we’re in the high-yield market at shorter tenors, attaching these forward starting swaps to extend that duration. So our goal is to minimize the impacts of those curve movements on our business. And then on the front-end side of that, it’s as Jeff already talked about, focusing on that T-plus investing approach or investing at T-plus on average 5%. In terms of timing for the market, that’s less around movements on the rate curve and more focused on managing our liquidity. And of course, we have a sizable revolver, which gives us flexibility to go to market when the market is relatively attractive. So it’s more of an opportunity approach.

Right. Maybe just sneak one more and apologize because I think for some folks it’s been a number of quarters since we actually saw a GAAP equity method loss. I think the last one was 4Q 2022. So just for all of our benefits, the simple answer here is that the projects should be worth more because power prices have gone up, but the contracts don’t reflect that yet. They have to re-contract and so there’ll be more revenue later on, but you have to mark it as a loss from an HLBV method, right? So essentially, the assets you’re invested in are now more valuable. Is that a fair way to think about it?

Yes. The power contracts are essentially treated like hedges and are mark-to-market, whereas the actual underlying assets, projects are not. So those assets will realize the benefit of higher power prices over time, whereas the contracts are mark-to-market and flow through in the period.

Great. Appreciate the clarification. Thank you.

Thank you.

Thanks, Noah.

[Operator Instructions] We have a question from Brian Lee of Goldman Sachs. Please go ahead.

Hey, guys. This is Tyler Bisset on for Brian. Thanks for taking our question. I have just one question on the pipeline. It looks like you had a strong shift towards Grid-Connected shift away from BTM. Anything to call out on driving that?

Not really. The pipeline can get a little lumpy, particularly on the Grid-Connected side as we typically look at some larger transactions there. So some quarter-to-quarter movements between BTM and Grid-Connected should not necessarily be interpreted as a long-term theme. I don’t think there’s really much of anything to read in there.

All right. Thank you.

Thank you.

At this time, there are no further questions. And with that, this concludes today’s conference. Thank you for joining us. You may now disconnect your lines.