Q4 2024 HA Sustainable Infrastructure Capital Inc Earnings Call
And full year 2020 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.
One of the comments made in this call are forward looking statements, which are subject to risks and uncertainties described in the risk factors section of the form company's Form 10-K, and other filings with the SEC action.
Actual results may differ materially from those stated.
Today's discussion also includes some non-GAAP financial measures a reconciliation of GAAP to non-GAAP financial measures is available in our earnings release and presentation.
Speaker Change: Joining us on the call today are Jeff Lipson, the company's president and CEO and Mark Pangbourne, our CFO as well as Susan Nicky our client Chief client officer, and Chuck Melco, Our Chief Accounting Officer and Treasurer.
Speaker Change: Greetings and welcome to Hathi's fourth quarter 2024 and full year earnings conference call.
Speaker Change: and Webcast. At this time, all participants are on 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 zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Aaron Chew, Senior Vice President of Investment Relations.
Speaker Change: To kick things off I'll first turn it over to our President and CEO, Jeff Lipson, who will open the presentation today on slide three Jeff.
Speaker Change: Thank you Erin and thank you all for joining us today on the call.
Speaker Change: 2024 was an extraordinary year for <unk> as we achieved a number of our long term and short term goals.
Speaker Change: Notably we closed our carbon count holdings, one co investment partnership with KKR.
Speaker Change: Thank you, operator, and good afternoon to everyone joining us today for HASI's fourth quarter 2024 conference call.
Speaker Change: Increased our bank revolver to over $1 $3 billion.
Speaker Change: Earlier this afternoon, HACI distributed a press release reporting our fourth quarter and full year 2024 results, a copy of which is available on our website, along with the slide presentation we will be referring to today.
Speaker Change: <unk>, two $3 billion of new transactions, including $1 1 billion in the fourth quarter alone maintain.
Speaker Change: <unk> maintained robust margins as interest rates fluctuated and.
Speaker Change: And increased our adjusted earnings per share by 10%.
Speaker Change: This conference call is being webcast live on the Investor Relations page of our website, where a replay will be available later today.
Speaker Change: We continued to deliver results consistent with our expert expectations, despite interest rate volatility and policy uncertainty.
Speaker Change: Some of the comments made in this call are forward-looking statements, which are subject to risks and uncertainties described in the risk factors section of the company's Form 10-K and other filings with the SEC.
Speaker Change: The cornerstone of our success is our incredibly talented team.
And I will take a moment now to address the organizational changes just disclosed today.
Actual results may differ materially from those stated.
Speaker Change: Mark Pangburn has performed at a superior level during his tenure as CFO, including closing our CCH, one transaction achieving investment grade ratings and restructuring our Sunshine joint venture.
Speaker Change: Today's discussion also includes some non-GAAP financial measures, a reconciliation of GAAP to non-GAAP financial measures is available in our earnings release and presentation.
Speaker Change: Joining us on the call today are Jeff Lipson, the company's president and CEO, and Mark Pangburn, our CFO, as well as Susan Nicky, our chief client officer, and Chuck Melko, our chief accounting officer and treasurer.
Speaker Change: With all of our success on the capital front I've asked mark to refocus on our deployment.
Speaker Change: In his new role as Chief revenue and strategy Officer, Mark will oversee our investment and portfolio management activities and continue to work with me on various strategic matters, including our asset management strategy.
Speaker Change: To kick things off, I will first turn it over to our President and CEO, Jeff Lipson, who will open the presentation today on slide three.
Speaker Change: I am confident Mark will excel in this role.
Jeff?
Jeff Lipson: Thank you, Aaron, and thank you all for joining us today on the call.
Speaker Change: Chuck Melco has been an outstanding Chief accounting officer, and Treasurer for several years addressing many complex accounting and reporting matters, while also closing new bank debt and capital raising transactions.
Speaker Change: 2024 was an extraordinary year for HACI as we achieved a number of our long-term and short-term goals.
Speaker Change: Notably, we closed our Carbon Count Holdings 1 co-investment partnership with KKR.
Speaker Change: I have full confidence in chuck's ability to be a successful CFO for husky.
Speaker Change: increased our bank revolver to over 1.3 billion dollars close 2.3 billion dollars of new transactions including 1.1 billion in the fourth quarter alone maintained robust margins as interest rates fluctuated and increased our adjusted earnings per share by 10 percent
Nate Rose who many of you know has been with <unk> since 2000.
Speaker Change: As expressed their desire for a reduced role and it will be moving to a position where he can continue to be a leader and strong contributor to our success and is also consistent with his career objectives.
Speaker Change: We continue to deliver results consistent with our expectations despite interest rate volatility and policy uncertainty.
Speaker Change: The tremendous success Nate has achieved during his tenure as our chief investment Officer.
Speaker Change: The cornerstone of our success is our incredibly talented team, and I will take a moment now to address the organizational changes disclosed today.
Speaker Change: As he has participated nearly every investment the company has made over the last 25 years.
Speaker Change: I would also like to recognize our chief client officer, Susan Nicky when completing her tenure as chair of the American Clean Power Association.
Speaker Change: Mark Pangburn has performed at a superior level during his tenure as CFO, including closing our CCH1 transaction, achieving investment-grade ratings, and restructuring our SunStrong joint venture.
Speaker Change: They are outstanding leadership of this organization.
Speaker Change: Our industry to positively impact several policy matters.
Speaker Change: With all of our success on the capital front, I have asked Mark to refocus on our deployment.
Speaker Change: Congratulations to all.
Speaker Change: Turning to slide four with our capital position is stronger than ever our business strategy well established several market dynamics moving in a positive direction.
Speaker Change: In his new role as Chief Revenue and Strategy Officer, Mark will oversee our investment and portfolio management activities and continue to work with me on various strategic matters, including our asset management strategy.
Speaker Change: And our aforementioned talented team.
Speaker Change: I am excited to announce that we are extending our adjusted EPS guidance, 8% to 10% annual growth another year to include 2027.
I am confident Mark will excel in this role.
Speaker Change: Chuck Melko has been an outstanding Chief Accounting Officer and Treasurer for several years, addressing many complex accounting and reporting matters, while also closing numerous bank debt and capital raising transactions.
Speaker Change: The confidence we have in our business plan is based on economic fundamentals, which will expand upon shortly and a resilient time tested. This model that we expect will continue to thrive in all interest rate policy scenarios.
Speaker Change: I have full confidence in Chuck's ability to be a successful CFO for HACI.
Speaker Change: Our confidence in extending guidance is also a reflection of the substantial recurring revenue from the existing $6 $6 billion portfolio.
Speaker Change: Nate Rose, who many of you know, has been with HACI since 2000, has expressed a desire for a reduced role, and Nate will be moving to a position where he can continue to be a leader and strong contributor to our team, and is also consistent with his career objectives.
Speaker Change: Coupled with a large pipeline of identified investments that are generally insulated from future changes in policy due to their development status for safe Harbor.
Speaker Change: I want to acknowledge the tremendous success Nate has achieved during his tenure as our Chief Investment Officer, as he has participated in nearly every investment the company has made over the last 25 years.
Speaker Change: I'm also pleased to announce an increase in our dividend to <unk> 42 per share as.
Speaker Change: As we continue to retain more capital and as I indicated last February.
Speaker Change: I would also like to recognize our Chief Client Officer, Susan Nickey, on completing her tenure as Chair of the American Clean Power Association.
Speaker Change: Target of 50% payout ratio by 2030.
Speaker Change: An interim target investors should expect a payout ratio.
Speaker Change: Their outstanding leadership of this organization allowed our industry to positively impact several policy matters.
Speaker Change: Queen 55, and 60% by the end of the guidance period.
Speaker Change: Now, let's discuss a few of the favorable market dynamics.
Congratulations to all.
Speaker Change: Turning to slide four, with our capital position stronger than ever, our business strategy well established.
Speaker Change: First is just picked it on slide five the demand for power is forecasted by virtually every independent.
Several market dynamics moving in a positive direction.
Speaker Change: Is poised to grow significantly over the next 20 years after more than 20 years of near zero growth.
Speaker Change: and our aforementioned talented team, I am excited to announce that we are extending our adjusted EPS guidance of 8-10% annual growth another year to include 2027.
Speaker Change: Therefore, clean energy projects will no longer simply replace other sources of power, but rather meet the need of higher demand.
Speaker Change: The confidence we have in our business plan is based on economic fundamentals, which we'll expand upon shortly, and a resilient, time-tested business model that we expect will continue to thrive in all interest rate and policy scenarios.
Speaker Change: We inevitably move towards an all the above energy strategy in the United States.
Renewables as depicted on page six are the least expensive and fastest to deploy alternatives to meet this rising demand and our clients are expected to continue to increase their development of new renewables projects Accordingly create.
Speaker Change: Our confidence in extending guidance is also a reflection of the substantial recurring revenue from the existing $6.6 billion portfolio.
Speaker Change: Our opportunity and our larger investable market for Husky.
Speaker Change: coupled with a large pipeline of identified investments that are generally insulated from future changes in policy due to their development status or safe harbor.
Speaker Change: These lower costs ultimately cause renewables to be Directionally anti inflationary.
Speaker Change: And the supply can act to offset the trend of rising energy.
Speaker Change: I'm also pleased to announce an increase in our dividend to $0.42 per share as we continue to retain more capital and as I indicated last February, target a 50% payout ratio by 2030.
Speaker Change: Susan will discuss these items in more detail in a few moments.
Speaker Change: Turning to page seven another item worth highlighting is that carbon reducing solutions will continue to be critical to our economy as related to reversing the trend of climate related disasters.
Speaker Change: As an interim target, investors should expect a payout ratio of between 55% and 60% by the end of the guidance period.
Speaker Change: These events have become more frequent and more costly which is just another reason clean energy projects will continue to be growth sector of the economy.
Now let's discuss a few of the favorable market dynamics.
Speaker Change: First, as depicted on slide 5, the demand for power, as forecasted by virtually every independent consultant, is poised to grow significantly over the next 20 years, after more than 20 years of near-zero growth.
Speaker Change: In summary, although certain federal policy matters remain unsettled for the moment. These fundamental economic dynamics will continue to drive the business.
Speaker Change: Our business is resilient and we have confidence we will adapt if there are any changes in policy or regulation and we will continue to find investments with attractive risk adjusted returns.
Speaker Change: Therefore, clean energy projects will no longer simply replace other sources of power, but rather meet the need of higher demand as we inevitably move towards an all-the-above energy strategy in the United States.
Speaker Change: To expand on these policy themes.
Speaker Change: I would like to turn the call over to Susan.
Speaker Change: Followed by Mark to discuss our investment strategy and Chuck to cover our financial results Susan.
Speaker Change: Renewables, as depicted on page 6, are the least expensive and fastest to deploy alternatives to meet this rising demand, and our clients are expected to continue to increase their development of new renewables projects accordingly, creating more opportunity and a larger investable market for HASE.
Thank you Jeff.
Speaker Change: I appreciate the opportunity to speak to you all at this important moment in the history of clean energy.
Speaker Change: While there is uncertainty related to the new administration. The fact remains that broader market forces being driven by the growing certainty of accelerating U S energy demand the need the need for an all of the above approach to supplying that span and the fact that renewables are the lowest cost and fastest to deploy at scale.
These lower costs ultimately cause renewables to be directionally anti-inflationary.
Speaker Change: And this supply can act to offset the trend of rising energy prices.
Speaker Change: Susan will discuss these items in more detail in a few moments.
Speaker Change: Turning to page 7, another item worth highlighting is that carbon reducing solutions will continue to be critical to our economy as related to reversing the trend of climate related disasters.
Speaker Change: Opening on slide eight.
Speaker Change: The Trump administration's early executive orders had been well telegraphed and the clear impacts included no major surprises related to energy.
Speaker Change: These events have become more frequent and more costly, which is just another reason clean energy projects will continue to be a gross sector of the economy.
Speaker Change: While the executive orders have led to some process uncertainty for new projects.
Speaker Change: Thus far federal agencies have continued to issue permits.
Speaker Change: In summary, although certain federal policy matters remain unsettled for the moment, these fundamental economic dynamics will continue to drive the business.
The expected actions targeting wind.
Speaker Change: Trick vehicles, and DLP and EPA grants and loans have limited impact on <unk> investment opportunities.
Speaker Change: Our business is resilient, and we have confidence we will adapt if there are any changes in policy or regulation, and we'll continue to find investments with attractive risk-adjusted returns.
Speaker Change: Fact is the U S will need renewables and storage to fulfill the new administration's commitment to economic growth national security and lower electricity prices.
Speaker Change: To expand on these policy themes, I would like to turn the call over to Susan, followed by Mark to discuss our investment strategy, and Chuck to cover our financial results.
Speaker Change: And the near term pipeline for new generating capacity remains dominated.
Susan
Thank you, Jeff.
Speaker Change: I appreciate the opportunity to speak to you all at this important moment in the history of clean energy.
Speaker Change: <unk> and storage given their relative costs and speed to deploy in addition to strong corporate and state commitment to clean energy.
Speaker Change: While there is uncertainty related to the new administration, the fact remains that broader market forces are being driven by the growing certainty of accelerating U.S. energy demand, the need for an all-of-the-above approach, and the need for a more robust U.S.
Speaker Change: With regard to potential revisions to the inflation redact snacks, we expect clarity on the outlook for energy tax credits to come with the forthcoming budget reconciliation Bill although a final outcome may not occur until the December expiration of the 2017 tax.
Speaker Change: to supplying that demand and the fact that renewables are the lowest cost and fastest to deploy at scale.
Opening on slide 8.
Speaker Change: The Trump administration's early executive orders had been well telegraphed and the clear impact included no major surprises related to energy.
Speaker Change: Nevertheless, the clean energy industry continues to maintain bipartisan support in light of the large investment in new manufacturing and the corresponding increase in jobs property taxes and economic growth.
Speaker Change: While the executive orders have led to some process uncertainty for new projects, thus far, federal agencies have continued to issue permits.
Speaker Change: As Scott indicated the core tailwind to our business are unchanged by policy and include first underlying U S power demand growth and second renewables advantage in both cost and speed to market.
Speaker Change: The expected actions targeting wind, electric vehicles, and DOE and EPA grants and loans have limited impact on HAZI's investment opportunities.
Speaker Change: The fact is, the U.S. will need renewables and storage to fulfill the new administration's commitment to economic growth, national security, and lower electricity prices.
Speaker Change: First as highlighted on slide nine.
Speaker Change: U S power demand has entered a new era of growth that we haven't experienced in decades.
Speaker Change: And the near-term pipeline for new generating capacity remains dominated by solar and storage, given their relative cost and speed to deploy, in addition to strong corporate and state commitment to clean energy.
Speaker Change: On one hand is a well publicized demand from data centers, which is forecast to increase by more than 400, terawatt hours and 10 years.
Speaker Change: The critically it's not just about AI.
Data centers are just one of several forces driving power demand appears ahead.
Speaker Change: With regard to potential revisions to the Inflation Reduction Act, we expect clarity on the outlook for energy tax credits to come with the forthcoming Budget Reconciliation Bill, although a final outcome may not occur until the December expiration of the 2017 tax cuts.
Speaker Change: It's also domestic manufacturing and the new prioritization of onshoring.
Speaker Change: On top of that there's also the electrification of buildings industrial processes and vehicles.
Speaker Change: All in Mackenzie forecast U S electricity demand will double.
Speaker Change: Nevertheless, the clean energy industry continues to maintain bipartisan support in light of the large investment in new manufacturing and the corresponding increase in jobs, property taxes, and economic growth.
Speaker Change: Over the next 25 years more than 8000 terawatt hours by 2050.
Speaker Change: Not driven by the I R. A led by underlying demand.
Speaker Change: If we aren't able to meet this demand with sufficient supply is going to drive energy prices higher.
Speaker Change: As Jeff indicated, the core tailwinds to our business are unchanged by policy and include first, underlying U.S. power demand growth, and second, renewables advantage in both cost and speed to market.
Speaker Change: On top of inflationary pressures from rising supply chain labor and tariff costs.
Speaker Change: As slide 10 shows we are already starting to see the signals across multiple markets the point to higher power prices.
Speaker Change: First, as highlighted on slide 9, U.S. power demand has entered a new era of growth that we haven't experienced in decades.
Speaker Change: Forward price curves in ERCOT and PJM has essentially doubled over the last five years.
Speaker Change: Therefore.
Speaker Change: On one hand is the well-publicized demand from data centers, which is forecast to increase by more than 400 terawatt hours in 10 years.
Speaker Change: Consumables are not about policy, but the basics of business there.
Speaker Change: Will simply be less expensive and faster to market at scale and other sources, including gas turbines, which due to supply constraints can take five years or more to deploy.
Speaker Change: But critically, it's not just about AI. Data centers are just one of several forces driving power demand in the years ahead.
Speaker Change: As shown on slide 11.
It's also domestic manufacturing and the new prioritization of onshoring.
Speaker Change: Solar and batteries currently account for 80% of current.
Speaker Change: On top of that, there's also the electrification of buildings, industrial processes, and vehicles.
Speaker Change: Interconnection queue.
Speaker Change: And first I probability forecast from January 2025, new generating capacity includes 92 gigawatts of solar.
Speaker Change: All in, McKinsey forecasts U.S. electricity demand will double over the next 25 years to more than 8,000 terawatt hours by 2050, not driven by the IRA but by underlying demand.
Speaker Change: But only 15 gigawatts of natural gas.
As you can see renewables will be a central component and arguably the most important one for the rest of this decade.
Speaker Change: If we aren't able to meet this demand with sufficient supply, it is going to drive energy prices higher, on top of inflationary pressures from rising supply chain, labor, and tariff costs.
Speaker Change: Underscoring this dynamic arc.
Our clients remain bullish as they monitor the uncertainty in the policy landscape.
Speaker Change: The feat from our clients has been remarkably consistent.
Speaker Change: As slide 10 shows, we are already starting to see the signals across multiple markets that point to higher power prices.
Speaker Change: They are staying the course and even accelerating projects to meet the surge in near term demand from their buyers.
Speaker Change: Board price curves in ERCOT and PJM have essentially doubled over the last five years.
Speaker Change: <unk> corporate utilities municipalities.
Speaker Change: With growing demand and constraints and near term supply our clients third largely expecting to pass through any potential changes to tax credits or tariffs through higher PPA prices.
Speaker Change: Therefore, renewables are not about policy, but the basics of business.
Speaker Change: They will simply be less expensive and faster to market at scale than other sources, including gas turbines, which due to supply constraints can take five years or more to deploy.
Speaker Change: Meanwhile, you are also seeing new innovative business models.
Speaker Change: Such as co located data centers and community solar partnership programs anchored by corporate off takers, such as Microsoft and Google, which expand our pipeline and in turn our opportunities.
As shown on slide 11,
Speaker Change: Solar and batteries currently account for 80% of the current interconnection queue.
Speaker Change: And FERC's high probability forecast from January 2025 for new generating capacity includes 92 gigawatts of solar, but only 15 gigawatts of natural gas.
Speaker Change: All tailwind for growth and innovation for our pipeline.
Speaker Change: So again I made changes and uncertainty we do have the fundamentals working in our favor for short and long term growth.
Speaker Change: As you can see, renewables will be a central component and arguably the most important one for the rest of this decade.
Mark: Now I will pass it to mark to discuss these new investment opportunities.
Speaker Change: Underscoring this dynamic, our clients remain bullish as they monitor the uncertainty in the policy landscape.
Thank you Susan I am incredibly excited for my new role long term fundamentals and short term market dynamics are creating a tremendous investment opportunity for healthy.
The feedback from our clients has been remarkably consistent.
Speaker Change: They are staying the course and even accelerating projects to meet the surge in near-term demand from their buyers.
Mark: Our investment strategy will remain largely unchanged with a few enhancements that I'll discuss shortly.
hyperscalers, corporates, utilities, municipalities.
Mark: Over the past two years, we have invested approximately $4 $6 billion utilizing our climate clients assets model. It is working exceedingly well well enough that we will expand our ability to meet the opportunity ahead.
Speaker Change: With growing demand and constraints in near-term supply, our clients are largely expecting to pass through any potential changes to tax credits or tariffs through higher PPA prices.
Mark: I'll start on slide 12.
Speaker Change: Jeff and Susan have previously discussed the highly supportive long term macro trend and the resulting an investment opportunity. In addition to the support of long term trend. We also see short term policy driven uncertainty.
Meanwhile, you're also seeing new innovative business models.
Speaker Change: such as co-located data centers and community solar partnership programs anchored by corporate offtakers such as Microsoft and Google which expand our clients pipeline and in turn our opportunities.
Speaker Change: Uncertainty will cause stress in our end markets, we have never been in a stronger position as it relates to our liquidity access to capital and balance sheet. These dynamics lead us.
All tailwinds for growth and innovation for our pipeline.
Speaker Change: So again, amid changes and uncertainty, we do have the fundamentals working in our favor for short and long-term growth.
Speaker Change: Focus on three areas in 2025.
First continuity.
Speaker Change: As shown with our Q4 activity, we continue to see an attractive investment environment. Our approach is working and our first priority is to grow the core business.
Speaker Change: Now I will pass it to Mark to discuss these new investment opportunities.
Thank you.
Mark Pangburn: Thank you, Susan. I am incredibly excited for my new role. Long-term fundamentals and short-term market dynamics are creating a tremendous investment opportunity for Hasee.
Speaker Change: Do we will also showcase our adaptability, while uncertainty is not optimal we do anticipate opportunity to come from it.
Mark Pangburn: Our investment strategy will remain largely unchanged with a few enhancements that I'll discuss shortly.
Speaker Change: Great example is the Sunpower bankruptcy, while an unfortunate event or some strong platform assumed.
Mark Pangburn: Over the past two years, we have invested approximately $4.6 billion utilizing our Climate Clients Assets Model. It is working exceedingly well, well enough that we will expand our capability set to meet the opportunity ahead.
Speaker Change: The Sunpower servicing business, we are excited about the growth prospects of this business.
Speaker Change: And finally, we have a strong track record of identifying new areas to invest as such we anticipate investing additional time and explore new growth paths and in particular opening up new end markets.
I'll start on slide 12.
Mark Pangburn: Jeff and Susan have previously discussed the highly supportive long-term macro trend and the resulting investment opportunity. In addition to the supportive long-term trend, we also see short-term policy-driven uncertainty.
Speaker Change: Moving to slide 13, I'll provide some context on our past growth.
Speaker Change: On our 23 Investor Day, I said that we have three primary paths to growth.
Speaker Change: Growing with our existing clients, attracting new clients and entering new asset classes. These worked well for us over the last two years, we have invested $3 $5 billion with 20 existing clients acquired.
Mark Pangburn: First, continuity. As shown with our Q4 activity, we continue to see an attractive investment environment. Our approach is working and our first priority is to grow the core business.
Speaker Change: Acquired 15, new clients in.
Speaker Change: At $1.2 billion of originations and our FTF business today, we will continue to focus on the three paths in two more.
Mark Pangburn: We will also showcase our adaptability. While uncertainty is not optimal, we do anticipate opportunity to come from it.
Speaker Change: Fourth.
Speaker Change: Investing outside the U S with existing clients, we made a handful of small investments in Canada in 2024 and are evaluating.
Mark Pangburn: A great example is the SunPower bankruptcy. While an unfortunate event, our SunStrong platform assumed the SunPower servicing business, and we are excited about the growth prospects of this business.
Speaker Change: International opportunities with longstanding clients.
Speaker Change: Fifth new forms of investments or revenues.
Speaker Change: A few examples include some strong which enables both incremental recurring fee stream.
Mark Pangburn: And finally, we have a strong track record of identifying new areas to invest. As such, we anticipate investing additional time and dollars exploring new growth paths, and in particular, opening up new end markets.
Speaker Change: And a vehicle to acquire certain assets and servicing platforms.
Speaker Change: We also platform investments as potential opportunities.
Speaker Change: <unk> given the recent and valuations.
Speaker Change: Turning to slide 14. The addition of new asset class, which is where we see a step change in our opportunity set.
Mark Pangburn: Moving to slide 13, I'll provide some context in our past growth. On our 23 Investor Day, I said that we have three primary paths to growth. Growing with our existing clients, attracting new clients, and entering new asset classes.
Speaker Change: Today, our investment activities cover 10 asset classes <unk>.
Speaker Change: Trick generation clean molecules transportation and resiliency.
Speaker Change: One element of our business, which can be underappreciated is our potential investment scope.
Mark Pangburn: These work well for us. Over the last two years, we have invested $3.5 billion with 20 existing clients.
Speaker Change: Over the last five years renewable to power the business forward, which has also coincided with massive massive growth.
Mark Pangburn: acquired 15 new clients and amassed 1.2 billion dollars of originations in our FTN business.
Speaker Change: <unk>.
Speaker Change: We launched our FTM team two years ago with the goal of growing beyond renewables and energy efficiency.
Mark Pangburn: Today, we will continue to focus on these three paths and two more.
Partnered with RMG, but will not stop there were.
Mark Pangburn: Fourth, investing outside the U.S. with existing clients. We made a handful of small investments in Canada in 2024 and are evaluating international opportunities with long-standing clients.
Speaker Change: We're currently tracking a number of asset classes as listed on the slide <unk>.
Speaker Change: Not all of these will succeed or be a good fit for hefty.
Speaker Change: However, entering a select few that scale will be a major driver for growth and diversification of our business.
Fifth, new forms of investments or revenues.
Mark Pangburn: A few examples include SunStrong, which enables both incremental recurring fee streams
Speaker Change: Ultimately our mandate is to invest in assets that are either neutral to or reduce carbon emissions or provide some other kind of environmental benefits that leaves open a breadth of different opportunities to invest.
and a vehicle to acquire certain assets and servicing platforms.
Mark Pangburn: We also view platform investments as potential opportunities, giving the reset in valuations.
Chuck Melco: Before I pass the call to Chuck I'm pleased to report.
Mark Pangburn: Turning to slide 14, the addition of new asset classes is where we see a step change in our opportunity set.
Chuck Melco: And as of year end, we have closed $815 million of transactions into our CCH one partnership.
Mark Pangburn: Today our investment activities cover 10 asset classes spanning electric generation, clean molecules, transportation, and resiliency.
Chuck Melco: <unk>, one is exceeding expectations and we remain on track to fully deploy the capital as planned.
Mark Pangburn: One element of our business which can be underappreciated is our potential investment scope. Over the last five years, renewables have powered the business forward, which has also coincided with massive growth in renewables.
Speaker Change: With that I'll pass the call to Chuck Melco, our soon to be CFO.
Chuck Melco: Thank you Mark.
Chuck Melco: I'm appreciative of the opportunity and excited about what it can bring to this role and.
Chuck Melco: I'm looking forward to working with each of our analysts and investors over the years ahead.
Mark Pangburn: We launched our FTN team two years ago with the goal of growing beyond renewables and energy efficiency. This started with RNG, but will not stop there. We're currently tracking a number of asset classes as listed on the slide. Not all of these will succeed or be a good fit for HASTI.
Chuck Melco: On slide 15, we are highlighting our key profitability metrics.
Chuck Melco: On the right hand side, you can see that we have had meaningful growth across the board over the past four years for our key metrics.
Chuck Melco: CAGR of 32% for adjusted NII wealth.
Mark Pangburn: However, entering a select few that scale will be a major driver for growth and diversification of our business.
Chuck Melco: 12% for adjusted EPS.
39% for our recurring capital light income.
Mark Pangburn: Ultimately, our mandate is to invest in assets that are either neutral to or reduce carbon emissions or that provide some other kind of environmental benefit. That leaves open a breadth of different opportunities to invest.
Chuck Melco: And 12% for our upfront capital light income.
In addition, our primary metrics adjusted EPS was $2 45.
Chuck Melco: In 2024.
Chuck Melco: An increase of 10%.
Mark Pangburn: Before I pass the call to check, I'm pleased to report...
Chuck Melco: Adjusted NII grew 22% to a new high of $264 million.
Speaker Change: But as of year-end, we have closed 815 million of transactions into our CCH1 partnership. CCH1 is exceeding expectations, and we remain on track to fully deploy the capital as planned. With that, I'll pass the call to Chuck Melko, our soon-to-be CFO.
Chuck Melco: We are continuing to deliver value from our securitization business with our gain on sale fees in securitization income.
Chuck Melco: <unk> $116 million for 2024, which is up 30%.
Thank you, Mark.
Chuck Melko: I'm appreciative of the opportunity and excited about what I can bring to this role.
Moving on to slide 16.
Chuck Melco: Our pipeline is greater than five 5 billion.
Speaker Change: I'm looking forward to working with each of our analysts and investors in the years ahead.
Chuck Melco: To split 48% behind the meter 27% F P M and.
On slide 15, we are highlighting our key profitability metrics.
Chuck Melco: And 25% grid connected.
Speaker Change: On the right-hand side, you can see that we have had meaningful growth across the board over the past four years for our key metrics.
With all three markets continuing to see ample near term investment opportunities.
Chuck Melco: And to build on something that was highlighted earlier on our pipeline much of it is already in development and largely insulated from any near term public policy changes.
Speaker Change: CAGR of 32% for adjusted NII, 12% for adjusted EPS, 39% for our recurring capital light income.
Chuck Melco: On slide 17.
and 12% for upfront capital light income.
In 2024, we closed $2 3 billion of transactions after closing a record $1 1 billion just in Q4.
Speaker Change: In addition, our primary metric, adjusted EPS, was $2.45 in 2024.
Chuck Melco: Importantly, this slide continues to show the powerful diversification of our business.
an increase of 10%.
Speaker Change: Adjusted NII grew 22% to a new high of $264 million.
Chuck Melco: Each year, our leading asset classes tend to rotate.
Chuck Melco: And our total activity level remains strong.
Speaker Change: We are continuing to deliver value from our securitization business with our gain-on-sale, fees, and securitization income totaling $118 million for 2024, which is up 30%.
Chuck Melco: Also as you can interpret from the slide when does a small contributor to the go forward business.
Chuck Melco: Moving to slide 18.
Chuck Melco: As of the end of the year, our managed asset totaled $13 7 billion.
Moving on to slide 16.
Chuck Melco: Increasing 11% year over year and more than 90% since the end of 2020.
Our pipeline is greater than 5.5 billion.
Speaker Change: which is split 48% behind the meter, 27% FTN, and 25% grid-connected, with all three markets continuing to see ample near-term investment opportunities.
This is made up of our $6 $6 billion portfolio on our balance sheet approximately.
Chuck Melco: Approximately 300 million for our partner share of CCH one.
Chuck Melco: And $6 8 billion of assets, we have securitized off balance sheet.
Speaker Change: And to build upon something that was highlighted earlier on our pipeline, much of it is already in development and largely insulated from any near-term public policy changes.
Chuck Melco: In addition to what Mark mentioned on CCH, one where that $600 million of the total commitments as of the end of 'twenty 'twenty four.
Chuck Melco: On slide 19, our portfolio increased 7% $6 6 billion from 2023 despite.
On slide 17.
Speaker Change: In 2024, we closed $2.3 billion of transactions, after closing a record $1.1 billion just in Q4.
Chuck Melco: Despite the 400 million asset rotation of lower yielding assets that we completed earlier in the year.
Speaker Change: Importantly, this slide continues to show the powerful diversification of our business.
Chuck Melco: We have been successful in adjusting the pricing of the investments to the current interest rate environment with our weighted average yield exceeding 10, 5% and 24.
Speaker Change: Each year, our leading asset classes tend to rotate, and our total activity level remains strong.
Speaker Change: Also, as you can interpret from the slide, wind is a small contributor to the go-forward business.
Chuck Melco: The higher yielding new investments and the reinvestment of portfolio principal paydowns into.
Chuck Melco: Into these higher yielding investments contributed to a meaningful increase our portfolio yield coming in at eight 3%.
Moving to slide 18.
Speaker Change: As of the end of the year, our managed assets total $13.7 billion.
Speaker Change: increasing 11% year-over-year and more than 90% since the end of 2020.
Chuck Melco: Compared to seven 9% at the end of the prior year.
Chuck Melco: On slide 20, as you can see from the trend the portfolio yield and our average debt cost.
Speaker Change: This is made up of our $6.6 billion portfolio on our balance sheet.
Approximately $300 million for our partner Sheriff CCH Juan.
Chuck Melco: We have successfully preserved our margins over multiple periods of interest rate volatility.
In 6.8 billion of assets, we have securitized off-balance sheet.
Chuck Melco: We believe that this is proof positive that our business can successfully grow and higher interest rate environment.
Speaker Change: In addition to what Mark mentioned on CCH1, we have funded $600 million of the total commitments as of the end of 2024.
Chuck Melco: And we're seeing a similar trend in the pricing potential of deals in our pipeline.
Speaker Change: On slide 19, our portfolio increased 7%, 6.6 billion from 2023, despite the 400 million asset rotations of lower yielding assets that we completed earlier in the year.
Chuck Melco: Our investment grade rating and our hedging program has successfully helped us manage our debt costs.
Chuck Melco: And we are actively focused on continuing to drive down our cost of capital.
Chuck Melco: We are just beginning to realize the benefits of our investment grade rating.
Speaker Change: We have been successful in adjusting the pricing of our new investments to the current interest rate environment with our weighted average yield exceeding 10.5% in 2024.
Chuck Melco: Turning to slide 21.
Chuck Melco: The combination of our available liquidity and the stability of the investment grade debt market are expected to provide us flexibility and completing the refinancing of our upcoming maturities and a benefit from the pricing of future debt issuance relative to our historical transactions.
Speaker Change: The higher-yielding new investments and the reinvestment of portfolio principal paydowns into these higher yielding investments
Speaker Change: contributed to a meaningful increase in our portfolio yield, coming in at 8.3%.
We ended the year with greater than $1 5 billion of liquidity and our leverage as measured by our debt to equity ratio remained within.
Speaker Change: compared to 7.9 percent at the end of the prior year.
Speaker Change: On slide 20, as you can see from the trend of portfolio yield and our average debt cost, we have successfully preserved our margins over multiple periods of interest rate volatility.
Chuck Melco: Within our one five to two times target range at one eight times.
Chuck Melco: In addition, 100% of our debt is either fixed or hedged and protected from increases in rates.
Speaker Change: We believe that this is proof positive that our business can successfully grow in higher interest rate environments. And we are seeing a similar trend in the pricing potential of deals in our pipeline.
Chuck Melco: Our liquidity liquidity levels have been increasing and we have done so through portfolio cash generation.
Speaker Change: Our investment grade rating and our hedging program has successfully helped us manage our debt costs.
Chuck Melco: Additional capital markets transactions.
Chuck Melco: <unk>, our recent $300 million 10 year issuance and an additional $100 million commitment in Q4 for our revolver.
Speaker Change: And we are actively focused on continuing to drive down our cost of capital.
Speaker Change: We are just beginning to realize the benefits of our investment grade rating.
Chuck Melco: In addition to our refinancing plan, we will use as higher liquidity to fund our growing pipeline.
Turning to slide 21.
Speaker Change: The combination of our available liquidity and the stability of the investment-grade debt market are expected to provide us flexibility in completing the refinancing of our upcoming maturities and a benefit in the pricing of future debt issuances.
Chuck Melco: We have also initiated a commercial paper issuance program that will generate meaningful savings on short term borrowings relative to our other sources.
Chuck Melco: And with that I'll pass it back to Jeff for his closing remarks.
relative to our historical transactions.
Chuck Melco: Thank you Thank you Susan Mark and Chuck.
Speaker Change: We ended the year with greater than $1.5 billion of liquidity, and our leverage, as measured by our debt-to-equity ratio, remained within our 1.5 to 2 times target range.
Chuck Melco: On slide 20, as always we provide our primary sustainability metrics carbon count in Watertown.
Chuck Melco: Although with some of our sustainability accomplishments over the last quarter and recognition that we have received.
at 1.85.
Speaker Change: In addition, 100% of our debt is either fixed or hedged and protected from increases in rates.
Chuck Melco: Wrapping up on slide 23.
Chuck Melco: We are situated with an incredibly strong balance sheet and liquidity position, coupled with a proven investment strategy.
Speaker Change: Our liquidity levels have been increasing, and we have done so through portfolio cash generation, additional capital markets transactions, including our recent $300 million 10-year issuance, and an additional $100 million commitment in Q4 for our revolver.
Chuck Melco: And we are poised to continue scaling our business and achieving our targeted earnings growth.
Chuck Melco: Not only was our adjusted EPS growth, 10% in 2024, but our compound average EPS growth has been 10% since our IPO.
Chuck Melco: We have a highly resilient and non cyclical business model that it's that it's demonstrated adapt.
Speaker Change: In addition to our refinancing plans, we will use this higher liquidity to fund our growing pipeline.
Chuck Melco: That's a demonstrated ability to adapt to business cycles and policy changes, while continuing to produce earnings growth.
Speaker Change: We have also initiated a commercial paper issuance program that will generate meaningful savings on short-term borrowings relative to our other sources.
We have an optimistic outlook business and have reinforced that confidence with guidance through 2027.
Jeff Lipson: And with that, I'll pass it back to Jeff for his closing remarks.
Chuck Melco: I would like to thank our dedicated and talented team for an outstanding year as we look forward to further success in 2025.
Thank you. Thank you, Susan, Mark, and Chuck.
Jeff Lipson: On slide 22, as always, we provide our primary sustainability metrics, carbon count and water count.
Speaker Change: Operator, please open the line for questions.
Chuck Melco: Yeah.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is our question queue.
Jeff Lipson: along with some of our sustainability accomplishments over the last quarter and recognition that we have received.
Wrapping up on slide 23.
Jeff Lipson: We are situated with an incredibly strong balance sheet and liquidity position, coupled with a proven investment strategy.
Speaker Change: You May press star two to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star.
Jeff Lipson: and we are poised to continue scaling our business and achieving our targeted earnings growth.
Speaker Change: One moment, please while we poll for questions.
Jeff Lipson: Not only was our adjusted EPS growth 10% in 2024, but our compound average EPS growth has been 10% since our IPO.
Jeff Lipson: We have a highly resilient and non-cyclical business model that has a demonstrated ability to adapt to business cycles and policy changes while continuing to produce earnings growth.
Speaker Change: Our first question comes from the line of Mark Strouse with Jpmorgan Chase <unk> Company. Please proceed with your question.
Mark Strouse: Great. Thank you very much for taking our questions and congrats.
Speaker Change: Congrats to everybody on the on your new roles.
Jeff Lipson: We have an optimistic outlook for our business and have reinforced that confidence with guidance through 2027.
Mark Strouse: I wanted to go back to slide 14, if we can.
Speaker Change: A few questions. There just to start can you talk about maybe when.
Jeff Lipson: I would like to thank our dedicated and talented team for an outstanding year, as we look forward to further success in 2025.
Speaker Change: When we should expect.
Speaker Change: Can you just kind of around the timing.
Speaker Change: When some of these opportunities can be added to the portfolio.
Operator, please open the line for questions.
Thank you very much.
Speaker Change: And then just kind of how youre thinking about it today at least as far as kind of the.
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the start keys.
Speaker Change: The risk adjusted returns how to think about that.
Mark Strouse: Hey, Mark.
Mark: Mark. Thank you for the question so with the <unk>.
Mark: Lists as extensive as we provided you can imagine that some of these are tangible and.
One moment, please, while we call for questions.
Mark: Near term and others are perhaps.
Mark: Within the scope, but from a timing perspective much further out.
Speaker Change: Our first question comes from the line of Mark Strauss with JPMorgan Chase & Company. Please proceed with your question.
Mark: In terms of some of the opportunities we see in the near term I would encourage you to think of them in a very similar context to what we're doing what we're doing today and that they are infrastructure assets with long term cash flows.
Mark Strauss: Thank you very much for taking our questions. Congrats to everybody on your new roles. I wanted to go back to slide 14, if we can. A few questions there. Just to start, can you talk about maybe when
Mark: And contracted cash flows that enable us to price in a similar code as to we are today, but obviously, we will adjust pricing as risks changes.
Mark Strauss: When we should expect, you know, just kind of around the timing of when some of these opportunities could be added to the portfolio and then just kind of how you're thinking about it today at least as far as kind of the The the risk adjusted returns how to think about that
Mark: For the asset classes as we move forward.
Mark: Okay.
Mark: And then just a quick follow ups. Obviously the scope is expanding can you talk about the scale to do.
Mark: Does the expansion into the new excuse me new Mark.
Speaker Change: Hey Mark. Hey Mark, thank you for the question. So with a list as extensive as we provided, you can imagine that some of these are tangible and near-term and others are perhaps within the scope, but from a timing perspective much further out.
Mark: Does that change kind of your your stated goal of reducing your reliance on the public capital markets.
Mark: Is there anything about these these verticals that you're going after that for example might not fit and so the the KKR partnership or some of the other private deals that youre looking at.
Speaker Change: In terms of some of the opportunities we see in the near term, I would encourage you to think of them in a very similar context to what we're doing today, and that they are
Mark: <unk>.
Mark: Okay.
Speaker Change: Thanks, Mark No I wouldn't think about the way in which we fund any of those new asset classes to be differently different than the way we have historically funded the business.
infrastructure assets.
Speaker Change: with long term cash flows and contracted cash flows that enable us to, you know, price in a similar zip code as to we are today, but obviously we will adjust pricing as risk changes for the asset classes as we move forward.
Speaker Change: And so I don't think they would results in any more or less capital raising I think they would have a consistent funding strategy as mark said.
Presuming they had a consistent risk profile, we would fund them in exactly the same as we fund ourselves historically.
Speaker Change: Got it okay. Thank you very much.
Speaker Change: Okay, and then just a quick follow-up. So obviously the scope is expanding. Can you talk about the scale, too? Does the expansion into these new markets, does that change kind of your stated goal of reducing your reliance on public capital markets?
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Ben Kayla with Baird. Please proceed with your question.
Ben Kayla: Hey, guys congrats.
Speaker Change: Chuck and Susan.
Speaker Change: Just maybe just.
Speaker Change: This on.
Speaker Change: The.
Speaker Change: Is there anything about these verticals that you're going after that, for example, might not fit into the KKR partnership or some of the other private deals that you're looking at?
Speaker Change: The mix.
Speaker Change: The deal with KKR.
Speaker Change: Foods are still less than half.
Speaker Change: Of the $2 billion, but.
Speaker Change: You guys are moving quickly and so I just wanted to understand what kind of discussions you're having with them or <unk>.
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Speaker Change: Thanks Mark. No, I wouldn't think about the way in which we fund any of these new asset classes to be differently different than the way we've historically funded the business.
Speaker Change: Others about it.
Speaker Change: Partnership familiar a follow up.
Speaker Change: and so I don't think they would result in any more or less capital raising. I think they would have a consistent funding strategy as Mark said, presuming they had a consistent risk profile, we would fund them exactly the same as we fund ourselves historically.
Speaker Change: So thanks for the question Ben Although I would say, it's a little premature we're not in advanced discussions I think we have a ways to go with our existing.
Speaker Change: A co investment vehicle I would say as I've said to you and others before I would expect a co investment strategy to be a permanent part of our capital structure.
Okay, thank you very much
Speaker Change: Thank you. Thank you. Our next question comes from the line of Ben Calo with Baird. Please proceed with your question.
Speaker Change: But we don't have anything to say yet on what's next after th one.
Ben Calo: Hey guys, congrats Mark, Chuck, and Susan. This may be just on...
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Just on the back.
Speaker Change: Correct.
Mark question on Slide 14.
The next
Speaker Change: I guess.
deal with KKR. I know it's still less than half.
Speaker Change: Yes.
Speaker Change: Wei.
Speaker Change: Do you guys have believe it or not.
Speaker Change: Ashley too.
Ben Calo: of the $2 billion, but you guys are moving quickly. And so, I just wanted to understand what the kind of discussions you're having with them or others about a similar type of partnership. And then I have a follow-up as well.
Speaker Change: I don't know we should think.
Speaker Change: Opportunities drove the new Butler.
Speaker Change: Areas.
Speaker Change: You guys have into it or.
Speaker Change: We should think about this technology's maturity or sort of more capital deployed.
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Ben Calo: So, thanks for the question, Ben, although I would say it's a little premature. We're not in advanced discussions. I think we have a ways to go with our existing
Speaker Change: All the above described framework.
Speaker Change: Why.
Speaker Change: Sure.
Speaker Change: Let's see things.
Speaker Change: Yes.
Ben Calo: co-investment vehicle. I would say, as I've said to you and others before, I would expect a co-investment strategy to be a permanent part of our capital structure, but we don't have anything to say yet on what's next after CCH1.
Speaker Change: Okay.
Speaker Change: Nationally.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Thanks, and then maybe I'll, maybe I'll start off and give mark an opportunity to expand upon my answer, but I would say definitively. It is not a reflection of the asset strategy is reflected today in the middle column on page 14 somehow running out of capacity I think we have a great opportunity.
Thank you.
Speaker Change: And the asset classes in our client base, we have today.
Speaker Change: But as as any business would we want to expand and I think mark in.
Speaker Change: I don't know if we should think that you're right to have opportunities to carve in your bread and butter.
Mark Strouse: In describing his vision in his new role that we've created for him wanted to really get out in front of this notion of where might we expand the business.
areas that you guys have been doing or
Speaker Change: If we should think of it as technology's maturing or you have more capital to deploy or maybe all of the above. Maybe just kind of frame why...
Mark Strouse: Both geographically and in terms of asset classes. So I would I would contextualize it in that framework, we're certainly not running out of opportunity, though with the existing business.
Thank you.
Mark Strouse: The market opportunity to add anything to that.
Pat: Now his he is nodding his head that nothing to add thanks, Pat I concur.
Thank you.
Mark Strouse: Goodbye.
Speaker Change: Thanks Ben, maybe I'll maybe I'll start and give Mark an opportunity to expand upon my answer, but I would say
Mark Strouse: Thank you.
Speaker Change: Our next question comes from the line of Julien Dumoulin Smith.
definitively it is not a reflection
of
Speaker Change: With Jefferies. Please proceed with your question.
Speaker Change: The asset strategy, as reflected today in the middle column on page 14, somehow running out of capacity. I think we have a great opportunity in the asset classes and the client base we have today, but as any business would, we want to expand. And I think Mark in...
Speaker Change: Hey, good afternoon, and thank you guys very much and congratulations to all of you guys nicely done.
Speaker Change: And maybe also nicely done on a rolling forward the guidance here.
The the the updates there as well is it in fact, you think going forward you'll start this cadence of rolling forward you know as you finish one kind of rolling forward the guidance and in the kind of a disciplined and consistent manner like this versus the prior analyst day Rollouts.
Mark: in describing his vision and this new role that we've created for him. Wanted to really get out in front of this notion of where might we expand the business.
Speaker Change: both geographically and in terms of asset classes. So I would contextualize it in that framework. We're certainly not running out of opportunity though with the existing business.
Speaker Change: Thanks for the question Julian I think we've done it a couple of different ways. As you know because you crystal long time, but I think we've consistently had multi year guidance out there at any given moment and to have three more years out. There is obviously a reflection of the confidence and visibility we have on the business can't guarantee exactly how we'll do it.
Mark, an opportunity to add anything to that?
Speaker Change: No, he's he's nodding his head that nothing to add. Thanks. I concur. Guys, have a good night.
Speaker Change: Thank you. Our next question comes from the line of Julian DeMoulin-Smith with Jeffrey. Please repeat your question.
Speaker Change: In the future, but I think we've been generally consistent with multiyear guidance no. It it's great affirmation here and now on the long dated view in fact, maybe that folds into the next question I mean strategically here I see the new role maybe Mark you can speak to a little bit.
Julian DeMoulin-Smith: Hey, good afternoon team. Thank you guys very much, and congratulations to all of you guys. Nicely done. And maybe also nicely done on rolling forward the guidance here.
Speaker Change: Interesting strategy is the emphasis on creating that role more about reviewing strategic nature for the company itself or more about evaluating the quote next frontier as you guys labeled in the slides as to what direction you want to go and then maybe related on you know kind of this next frontier how think about the you know.
Julian DeMoulin-Smith: the updates there as well. In fact, do you think going forward, you'll start this cadence of rolling forward, you know, as you finish one, you're kind of rolling forward the guidance in kind of a disciplined, consistent manner like this versus the prior Analyst Day rollouts?
Speaker Change: The gross asset origination number that we've talked about this a few different but given all the various new end markets given the growth trajectory is there kind of a good heuristic that you're thinking about in terms of what that gross origination number should it could scale too as you think about that 26 27.
Speaker Change: Thanks for the question Julian. I think we've done it a couple of different ways as you know because you've covered us a long time but I think we've consistently had multi-year guidance out there at any given moment.
Speaker Change: and to have three more years out there is obviously a reflection of the confidence and visibility we have on the business. Can't guarantee exactly how we'll do it in the future but I think we've been generally consistent with multi-year guidance.
Sure I'll take the first part of that and allow mark too to answer the second part so the strategy in marks.
Julian DeMoulin-Smith: No, it's great to have the affirmation here and now on the elongated view. In fact, maybe that's...
Speaker Change: New title is primarily focused on our investment strategy.
Speaker Change: Folds into the next question. I mean, strategically here, I see the new role, maybe, Mark, you can speak to it a little bit, mentioning strategy. Is the emphasis on creating that role more about reviewing strategic nature for the company itself, or is it more about evaluating the, quote, next frontier, as you guys labeled in the slides, as to what direction you guys want to go? And then maybe related on, you know, kind of this next frontier, how do you think about the, you know,
Speaker Change: Well it may involve some corporate strategy matters at certain times, but think of it more as driving the investment strategy I'll, let mark answer the second part of that question.
Mark: Hey, Julien Thanks for the question.
Mark: The second part around our general thoughts on investment volumes and so forth I do think that from a most basic perspective or an organization that.
Mark: Rose earnings primarily through the investment and deployment of capital and so our goal of course is to always be increasing our level of activity on that front.
Mark: And of course balance.
Mark: Our desire to increase the investment activity with our capital platform and the people we have internally.
Speaker Change: Sure, I'll take the first part of that and allow Mark to answer the second part. So the strategy in Mark's new title is primarily a focus on our investment strategy. It may involve some corporate strategy matters at certain times, but think of it more as driving the investment strategy. I'll let Mark answer the second part of that question.
But I'm sure you can pick up from this call that we feel very good about capital platform and the people and and are very much looking forward to expanding our level of activity.
Absolutely I'm looking forward you guys all the best Thank you for the detail.
Thank you.
Mark Strauss: Hey, Julian. Thanks for the question. The second part around our general thoughts on investment volumes and so forth, I do think that from a most basic perspective, we're an organization that
Mark: Thank you.
Mark: Thank you.
Speaker Change: Our next question comes from the line of Moses Sutton with BNP Paribas. Please proceed with your question.
Speaker Change: Good evening. This is highly untermeyer that thank you for taking my question and I just had one.
Mark Strauss: Rose earnings primarily through the investment and deployment of capital and so our goal of course is to always be increasing our level of activity on that front we of course balance
Speaker Change: And so in the event that tax.
Speaker Change: Arizona based credits faced pressure introduced whether it's whatever the timeline magnitude would you expect to gain a greater investment opportunity and the average asset of the customer.
Mark Strauss: our desire to increase the investment activity with our capital platform and the people we have internally. But I'm sure you can pick up from this call that we feel very good about the capital platform.
Considering the gap in the capital stack that could emerge.
Speaker Change: Specifically from reduced tax monetization what this actually.
Speaker Change: The positive for your funding prospects.
Mark Strauss: the people and are very much looking forward to expanding our level of activity.
Speaker Change: So.
Speaker Change: I do think that incrementally yes.
Speaker Change: Absolutely. I'm looking forward to it guys. All the best. Thank you for the details.
Speaker Change: If you think about the.
Speaker Change: Capital stack of a particular project, it's generally comprised of tax equity.
Speaker Change: Thank you. Our next question comes from the line of Moses Sutton with BNP Paribas. Please proceed with your question.
Speaker Change: Perhaps in debt and cash equity and cash equity is generally where we participate.
Speaker Change: Good evening, this is Heidi on for Moses. Thank you for taking my question. I've had one
Speaker Change: And our investments so if the amount of tax equity would go down that would imply that there is a gap there and that usually would also imply that.
Speaker Change: So in the event that tax credits, adders, or the base credit
Thank you so much, Naeemia.
Speaker Change: Sponsor is passing through a higher PPA rate that increases the level of cash and that gives us more of a monetization opportunity in any in any one any one project.
Speaker Change: Got it thank you.
be positive for your funding prospects. Thank you.
Speaker Change: So, I do think that incrementally, yes. If you think about the
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Noah Kaye with Oppenheimer. Please proceed with your question.
capital stack of a particular project, it's generally comprised
Speaker Change: Oh, thanks, so much folks.
Speaker Change: My congratulations too.
of TaxEquity.
Speaker Change: Who have already done so and it's great to see the continued growth and evolution of the organization.
Speaker Change: perhaps in debt, and cash equity. And cash equity is generally where we participate.
Speaker Change: I will return to this slide 14 around the next frontier.
Speaker Change: in our investment. So if the amount of tax equity would go down, that would imply that there's a gap there, and that usually would also imply that
Speaker Change: It strikes me that at least some of these buckets are.
Speaker Change: Areas, where some of your existing customers are already doing working quite active so mark let me talk about what leverage you might actually have found interesting relationships beginning of some of these growth areas and where you think youre going to need to build some new bridges and relationships.
Speaker Change: Sponsor is passing through a higher PPA rate that increases the level of cash, and that gives us more of a monetization opportunity in any one project.
Thank you.
Got it. Thank you.
Speaker Change: Sure. Thank you.
Speaker Change: Yeah.
Speaker Change: I think when you are.
Speaker Change: Thank you. Our next question comes from the line of Noah Kay with Oppenheimer. Please proceed with your question.
Speaker Change: Think about our model climate clients.
Speaker Change: Obviously the client dynamic.
Noah Kay: Thanks so much folks. I'll add my congratulations to those who have already done so and it's great to see the continued growth and evolution of the organization.
Speaker Change: Dynamic is one of the key pillars in something that we have I believe done a very good job of over time is of course to acquire <unk>.
Speaker Change: Retaining clients, but then figuring out how we expand into all of their business line.
Speaker Change: I will return to the slide 14 around the next frontier.
Speaker Change:
Speaker Change: You know, it strikes me that at least some of these buckets are Areas where some of your existing customers are already, you know doing work and quite active
Speaker Change: And that will be and I think the example, I'll give you is <unk> has been one of our longest standing clients. They of course are very focused on R&D and our first R&D investment was with fresco.
Speaker Change: So, Mark, maybe talk a little bit about, you know, what leverage you might actually have from existing relationships to get into some of these growth areas and where you think you're going to need to build some new bridges and relationships.
Speaker Change: Again as an example, so that will be a continued focus and I agree. There are some of these asset classes, where we'll need to initiate in the fall with new clients as opposed to existing but but again. It is a core part of our our business and model will continue.
© The Bulletproof Executive 2013
Sure. Thank you, Neha.
Thank you.
I think when you
Speaker Change: Think about our model, climate, clients, assets. Obviously the client dynamic is one of the key pillars and something that we have, I believe, done a very good job of over time is, of course, acquiring, retaining clients, but then figuring out how we expand into all of their business lines.
Speaker Change: We focus on it.
Speaker Change: Hmm.
Speaker Change: Thank you Mark.
Speaker Change: The.
Speaker Change: The outlook for 'twenty five includes kind of a.
Speaker Change: Gain on sale level, that's more consistent with 'twenty, one 'twenty three is pretty strong.
Speaker Change: And that will be and I think the example I'll give you is Amoresco has been one of our longest standing clients. They, of course, are very focused on R&G and our first R&G investment was with Amoresco.
Speaker Change: This past year.
Speaker Change: Can you give us a little bit of insight into sort of what.
Speaker Change: What drives that kind of reversion or normalization and then.
Speaker Change: Since it's been.
Speaker Change: A big support twos and the earnings growth this year.
Speaker Change: again as an example. So that will be a continued focus and I agree.
Speaker Change: Any any color on that.
Speaker Change: There are some of these asset classes where we'll need to initiate in the full with new clients as opposed to existing But but again as a core part of our our business and model We'll continue to focus on
Speaker Change: How do you think about the cadence of the multi year EPS growth in forming this next year.
Speaker Change: If we're just not kind of as much help from the gain on sale.
Speaker Change: Thanks, Noah I think the way to think about it is 21 to 'twenty three gain on sale was very attractive number and allowed us to.
Thank you. Bye-bye.
Speaker Change: <unk> achieved significant earnings growth 24 had a bit of an outsized gain related to asset rotation.
gain on sale level that's
Speaker Change: more consistent with 21, 23, is pretty strong this past year. Can you give us a little bit of insight on sort of what drives that kind of reversion or normalization and then
Speaker Change: And that would be otherwise hard to replicate it wasn't related to client related gain on sale. So client related gain on sale will remain consistent and we will grow the other revenue streams.
Speaker Change: Given our guidance.
Speaker Change: Since it's been, you know, a big support to some earnings growth this year, any any color on how you think about the the cadence of the multi-year EPS growth informing of this next year, if we're just not gonna have as much help from the gain on sale?
Speaker Change: Clearly, we will grow the other revenue streams.
Speaker Change: To accommodate what otherwise may look like a little drop this year and gain on sale.
Speaker Change: Okay very helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Thank you.
Speaker Change: Our next question comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question.
Speaker Change: Thanks, Noah. You know, I think the way to think about it is 21 to 23 gain on sale was a very attractive number and allowed us to achieve significant earnings growth. 24 had a bit of an outsized gain related to asset rotation.
Speaker Change: Hey, guys. This is Tyler bisset on for Brian Thanks for taking our questions.
Speaker Change: You call out grandfathering, and safe Harbor and protecting your pipe and then nursery recently closed a structured equity capital partnership with <unk>, who has been active with safe Harbor safe harboring. So I was just wondering are you seeing any potential near term opportunities for safe harboring and was that included at all in your $1 1 billion in <unk>.
Speaker Change: and that would be otherwise hard to replicate it wasn't related to client related gain on sale so client related gain on sale will remain consistent and will grow the other revenue streams.
Speaker Change: given our guidance, you know, clearly we'll grow the other revenue streams to accommodate what otherwise may look like a little drop this year in gain on sale.
Speaker Change: Transactions close in four Q and if so to what extent.
Speaker Change: Sure.
Speaker Change: Yeah. Thanks, I know that a lot of our clients technology industry.
and many more. Thank you. Thank you.
Speaker Change: Took advantage of our opportunities.
Okay, very helpful. Thank you. Thank you.
Speaker Change: Opportunities last year safe harbor or start construction given the uncertainty so they protected their pipelines for.
Speaker Change: Thank you. Our next question comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question.
Speaker Change: For a continued period and that in turn protects our pipeline. So that's that part of <unk>.
Speaker Change: Hey guys, this is Tyler Bissedon for Bryan. Thanks for taking our questions.
Speaker Change: Our pipeline being insulated is in a good place whether or not that was a lead to the project. Thank themselves what will give us plenty of opportunities to invest in versus new safe harboring facilities, but that could come as well.
Speaker Change: You call out grandfathering and safe harboring, protecting your pipeline, and I noticed you recently closed a structured equity capital partnership with IGS, who's been active with safe harboring.
Speaker Change: I was just wondering, are you seeing any potential near-term opportunities for safe harboring? And was that included at all in your $1.1 billion in transactions closed in 4Q, and if so, to what extent?
And I just to answer the other part of the question I don't I don't believe any of the $1 1 billion in fourth quarter was a direct safe harboring transaction with FC.
Speaker Change: Super helpful.
Speaker Change: Thanks. I know that a lot of our clients in the industry
Speaker Change: And.
Speaker Change: Kind of piggybacking off of that can close transactions were strong and <unk> for unit $2 3 billion for the year, which was the same as you did last year, but your ROE has obviously increased so I'm just wondering how you're viewing opportunities for transactions in 2025 can receive a volume increase this year.
Speaker Change: took advantage of opportunities last year to safe harbor or start construction given the uncertainty so they protected their pipelines for a continued period and that in turn protects our pipeline. I think that's that part of
Speaker Change: our pipeline being insulated is in a good place. Whether or not those will lead to the projects, I think themselves, it will give us plenty of opportunities to invest in versus new safe harboring facilities, but that could come as well.
Speaker Change: He may see volume increase I think our guidance is our guidance is premised on flat to slight increases overall volumes.
Speaker Change: But we may of course exceed the guidance. So you may see some increase in 2025, but I would I would view that as relatively modest increase over the 2.3.
Speaker Change: And I just to answer the other part of the question, I don't I don't believe any of the 1.1 billion and fourth quarter Was a direct safe harboring transaction with Hasee
Speaker Change: Super helpful. Thank you very much.
Speaker Change: Thank you.
www.mytrendyphone.co.uk
Speaker Change: Super helpful. And kind of piggybacking off of that, you know, closed transactions were strong in 4Q, bringing you to $2.3 billion for the year, which was the same as you did last year, but your ROE has obviously increased. So, just wondering how you're viewing opportunities for transactions in 2025. Could we see the volume increase this year?
Speaker Change: Thank you. Our next question comes from the line of Chris <unk> with RBC capital markets. Please proceed with your question.
Chris: Yes, Thank you and good evening.
Speaker Change: You highlighted two new growth path.
Chris: Inside of the U S sedan.
Speaker Change: Forms of investment and one of the things you pointed out was.
Thank you.
Speaker Change: Is strong and the opportunities there to leverage that in our new assets as well as make into a servicing platform can you just walk through that a little bit more what is the opportunity set look like there and how do those transactions.
Speaker Change: You may see volume increase. I think our guidance is premised on flat to slight increases in overall volumes.
Speaker Change: but we may of course exceed the guidance so you may see some increase in 2025 but it's I would I would view that as as relatively modest increase over the 2.3
Speaker Change: Thanks.
Chris: Thanks, Chris sure so.
Speaker Change: The background on this particular businesses that are before us.
Super helpful. Thank you very much.
Thank you.
Thank you.
Chris: We had a partnership with Sunpower.
Speaker Change: Thank you. Our next question comes from the line of Chris Dendrinos with RBC Capital Markets. Please proceed with your question.
Chris: Sunpower was both an equity partner and a servicer of the assets the partnership owned and of course when they.
You highlighted two new growth paths outside of the U.S.
Went bankrupt we.
The Sun strong platform itself that that partnership assumed the servicing business and so that business is a asset management and servicing business for distributed solar today and so as such it generally receives revenue in the form of fees are recurring fee.
Chris Dendrinos: New forms of investment, one of the things you pointed out was SunStrong and the opportunity there to leverage that and acquire new assets as well as make it into a servicing platform. Can you just, I guess, walk through that a little bit more? What does the opportunity set look like there and how do those transactions, I guess, unfold? Thanks.
Chris: Yes.
Chris: And we do see an opportunity to grow that platform.
Thanks, Chris. Sure. So.
Chris: Which of course would increase the level of our recurring fees running through its financial statements and then eventually ours.
Chris Dendrinos: The background on this particular business is that, of course, we had a partnership with SunPower.
Chris Dendrinos: SunPower was both an equity partner and a servicer of the assets that that partnership owned and of course when they went bankrupt we
Speaker Change: Got it okay.
Speaker Change: And then I guess, maybe just one kind of housekeeping question here, but on.
Speaker Change: CCH, one and you mentioned it was progressing as planned so does that mean is it fully funded by the end of this year or is it just that.
Chris Dendrinos: the SunStrong platform itself, that partnership, assumed the servicing business. And so that business is a
Speaker Change: Total transaction volume is complete by the end of this year and I'll leave it there. Thanks.
asset management and servicing business for
Speaker Change: So I think what we've said previously which will standby is that the original $2 billion target in the first 18 months of CCH. One is on track and that would roughly and right at the end of 2025. So I think we are in.
Chris Dendrinos: distributed solar today. And so as such, it generally receives, you know, revenue in the form of these recurring fees.
Chris Dendrinos: And we do see an opportunity to grow that platform, which of course would increase the level of recurring fees running through its financial statements and then eventually ours.
Speaker Change: In good track to hit the original projection of investment volume in BCH one.
Thank you.
Chris Dendrinos: Got it, okay. And then I guess maybe just one kind of housekeeping question here, but on CCH1 and you mentioned it was progressing as planned, so does that mean is it fully funded by the end of this year or is it just the total transaction volume is complete by the end of this year? And I'll leave it there, thanks.
Speaker Change: Oh, if that question also had to do with committed versus funded.
Speaker Change: Just to clarify it is the nature of most of our investments that they are selling equipment.
Speaker Change: In one period and then a funding that occurs later, so that dynamic is consistent and CCH one as it is in the rest of the business in an investment fund anywhere from three months to 12 to 18 months after our original commitment.
Chris Dendrinos: So I think what we've said previously, which we'll stand by, is that the original $2 billion target in the first 18 months of CCH1 is on track, and that would roughly end right at the end of 2025. So I think we're in.
Speaker Change: Thank you.
Vikram: Our next question comes from the line of Vikram.
Speaker Change: <unk> with Citi.
Chris Dendrinos: in good track to hit the original projection of investment volume in CCH1.
Vikram: Please proceed with your question.
Speaker Change: Hey, good evening, everyone I wanted to ask the macro question Mark you mentioned in your comments that the short term policy uncertainties, causing stress in any markets. I was wondering if you can expand how that stress is manifesting. How are you seeing more projects move out of the pipeline are you seeing delays cancellation given.
For more information visit www.FEMA.gov
Thank you.
Speaker Change: Oh, if that question also had to do with committed versus funded.
Speaker Change: Just to clarify, it is the nature of most of our investments that there's a commitment in one period and then a funding that occurs later. So that dynamic is consistent in CCH1 as it is in the rest of the business and investments can fund anywhere from, you know, three months to 12 to 18 months after our original commitment.
Speaker Change: You have a holistic view on so many end markets and share like Directionally, what youre in that and in the markets.
Mark: Thanks Vikram.
Thank you.
Speaker Change: Of course, the specifics of any market can differ but I think that a a general characterization is that all of these end markets are infrastructure projects, where people make investment decisions that are based on some clear understanding of the policy environment.
Thank you.
Speaker Change: Our next question comes from the line of Vikram Bagri with Citi, please proceed with your question.
Vikram Bagri: Hey, good evening, everyone. I wanted to ask a macro question. Mark, you mentioned in your comments that the short-term policy uncertainties causing stress in the markets
Mark: If you.
Mark: Lack that clear understanding it is for for our clients, who are actually investing development dollars.
Vikram Bagri: I was wondering if you can expand how that stress is manifesting. Are you seeing more projects move out of the pipeline? Are you seeing delays, cancellations? Given you have a holistic view on so many end markets, can you share directionally what you're seeing in the markets?
Mark: They're the ones, who have to make that financial decision, what either make it and take the risk or delay it.
Mark: Either way.
Mark: That represents increased risk and or extended timelines.
Thanks, Vikram.
Mark: And as Susan covered many are plowing forward, because they've taken actions to protect themselves.
Vikram Bagri: Of course, the specifics of any market can differ, but I think that a general characterization is that all of these end markets are infrastructure projects where people make
Mark: But again as a general matter of course and development.
Mark: Extending timelines is usually a bad thing.
Vikram Bagri: investment decisions that are based on some clear understanding of the policy environment. If you...
Mark: Got it and as a follow up.
Mark: Notice the deep decrease in payout ratio in 2007, where it says.
Vikram Bagri: lack that clear understanding, it is, for our clients who are actually investing development dollars, you know, they're the ones who have to make that financial decision, either make it and take the risk or delay it.
24 to 26.
Which region do you see your reliance on capital markets. I was wondering is is that our long term target where you want to get doing.
Mark: <unk> ratios and.
Vikram Bagri: Either way, that represents increased risk and or extended timelines. And as Susan covered, many are plowing forward because they've taken actions to protect themselves.
Mark: On a related note a housekeeping question can you also.
Mark: Confirm what the new asset yield was in fourth quarter I saw a number for the entirety or you can if you can share.
Mark: What the number was a full quarter. Thank you.
But, again, as a general matter...
of course in development.
Speaker Change: Sure. Thanks, Vikram on the first question there.
Extending timelines is usually a bad thing.
Speaker Change: Going all the way back to our Investor day in 2023.
Vikram Bagri: Got it. And as a follow-up, I noticed the decrease in payout ratio in 27 versus, you know, 24 to 26.
We gave a seven year projection that the payout ratio would hit 50% by 2030, So I think we've given.
Speaker Change: Very good long term visibility on where that's headed and now we've given the interim 2027 range as well what we'll do after 30 I'm not prepared to say, but I again, I think we've given good long term visibility on where we're headed where we're headed with payout ratio I'll, let Chuck answer the other part of that question.
Vikram Bagri: which increases your reliance on capital markets. I was wondering, is there a long-term target where you want to get to in terms of payout ratios?
Vikram Bagri: And on a related note, a housekeeping question. Can you also confirm what the new asset yield was in fourth quarter? I saw a number for the entire year. If you can share what the number was for fourth quarter. Thank you.
Chuck Melco: Decrements Chuck.
Chuck Melco: So the Q4, our portfolio yield number was very similar to the full year of greater than 10 and a half.
Chuck Melco: Thank you.
Speaker Change: Sure. Thanks, Vikram. On the first question there, you know, going all the way back to our Investor Day in 2023,
Chuck Melco: Thank you.
Speaker Change: Our next question comes from the line of my men mandatory with Mizuho. Please proceed with your question.
Speaker Change: We gave a seven-year projection that the parent ratio would hit 50% by 2030.
Speaker Change: very good long-term visibility on where that's headed and now we've given the interim 2027 range as well. What we'll do after 2030 I'm not prepared to say but again I think we've given good long-term visibility on where we're headed with payout ratio. I'll let Chuck answer the other part of that question.
Speaker Change: Hey, good evening, Thanks for the question and congratulations on the promotions here for everyone.
Speaker Change: Just on the previous question.
Speaker Change: If you could just talk about the keys.
Things are changing on that front.
Speaker Change: Hey Vikram, this is Chuck. So the Q4 portfolio yield number was very similar to the four-year.
Speaker Change: In Q1.
Speaker Change: To talk about increased trips and some other projects and extended construction crews, but just wondering if that's manifesting in prior.
year of greater than 10 and a half.
Speaker Change: Yeah, Yeah. It is.
The broader asset thus far as renewables are not negative carbon for Ya.
Thank you.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Mahi Mandloy with Mizuho. Please proceed with your question.
Speaker Change: Many thanks for the question I would say you know obviously, we're not going to talk a lot about one but I think the.
and many more. Thank you. Thank you.
Speaker Change: Hey, good evening. Thanks for the question, Aaron, and congratulations on the promotions here for everyone.
Speaker Change: Pipeline.
Speaker Change: Pipeline you know we were I think pretty clear has yield similar to what we've done in 2024.
Speaker Change: Just on the previous question, if you could just talk about the yield...
Speaker Change: And you know if there's rate movement, that's subject to change.
how things are changing on that front in Q1.
Speaker Change: But I think we're in that same range in terms of the transactions in the pipeline at this point.
Speaker Change: You did talk about increased risk in some of the projects in extended construction phase. I was wondering if that's manifesting in higher yields in the broader asset class for renewables or negative carbon for you.
Speaker Change: You made a reference to increased risk and I think you were calling back too.
Speaker Change: My answer around the policy uncertainty I, just want to clarify that that would not be risk as it relates to us or the physicians that we take but more around in decisions made.
Speaker Change: Thanks for the question. I would say, you know, obviously we're not going to talk a lot about Q1, but I think the
Speaker Change: During the development phase, which is before we.
Speaker Change: And again.
Speaker Change: pipeline you know we were I think pretty clear has yield similar to what we've done in 2024 and you know if there's rate movement that's subject to change but I think we're in that same range in terms of the transactions in the pipeline at this point
Speaker Change: Got it so it seems more like a risk for construction financing of bridge financing for <unk>.
Speaker Change: For the latest stage when you guys got my gosh.
Speaker Change: And then separately just on its own.
Speaker Change: Going back to slide 14.
Speaker Change: Sure.
Speaker Change: You made a reference to increased risk and I think you were calling back to...
Speaker Change: On these new opportunities I know, it's probably pretty early but in terms of the yields or.
Speaker Change: My answer around the policy uncertainty, I would just want to clarify that that would not be risk as it relates to us or the positions that we take, but more around decisions made during the development phase, which is before we tend to get involved.
Speaker Change: These investments.
Speaker Change: Any differences, there or central Florida.
Florida.
Speaker Change: Modeling purposes, just assume this is a bigger funnel.
Speaker Change: Pretty much everything else from a marketing perspective remains the same for us.
Speaker Change: Sure so.
Speaker Change: It seems more like a risk for construction branching or bridge branching than for
Speaker Change: A couple a couple of comments.
Speaker Change: Yeah.
Speaker Change: One from a modeling perspective, I would want to clarify that the guidance Jeff.
Speaker Change: for the latest information when you guys come in. Thank you.
Thank you.
Speaker Change: And separately, just going back to slide 14, on these new opportunities, I know it's probably pretty early.
Speaker Change: Jeff laid out is premised on the.
Speaker Change: The asset classes that we invest in today.
Speaker Change: And so I would suggest that you continued modeling the business as you as you have been.
Speaker Change: But in terms of the yields or tenure of these investments, do you expect any differences there, or for our modeling purposes, let's just assume this just expands your bigger funnel, and pretty much everything else from a modeling perspective remains the same for us?
Speaker Change: In terms of the yields that we're seeing on some of these new asset classes.
Speaker Change: It is TBD, but as I mentioned I believe when Mark asked the question.
Speaker Change: We're generally looking at these in a very similar way, we look at our existing asset classes in terms of being infrastructure assets with long duration cash flows that are contracted.
So, a couple of comments.
Speaker Change: One, from a modeling perspective, I would want to clarify that the guidance that Jeff laid out is premised on the asset classes that we invest in today.
Speaker Change: And so I would think of the risk return to be similar to what we have today of course, we will adapt to markets as they evolve overtime.
Speaker Change: And so I would suggest that you continue modeling the business as you have been. In terms of the yields that we're seeing on some of these new asset classes,
Speaker Change: Thank you.
Speaker Change: Yep.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Dimple.
Speaker Change: It is TBD, but as I mentioned, I believe when Mark asked the question,
Speaker Change: Go Segue Bank of America. Please proceed with your question.
Dimple: I appreciate you taking my question. Thanks, guys I just wanted to ask you a little bit more about the internet opportunity, which you mentioned on slide 13.
Speaker Change: We're generally looking at these in a very similar way that we look at our existing asset classes in terms of being infrastructure assets with long duration cash flows that are contracted.
Speaker Change: How would you frame the size of the opportunity relative to you the best pipeline in terms of Tam growth.
Speaker Change: And so I would think of the risk return to be somewhat similar to what we have today. Of course, we will adapt to markets as they evolve over time.
Dimple: Can you kind of discuss the underlying details in terms of you know this.
Dimple: Asset classes sectors, and geographies that kind of underpins that.
Thank you.
Thank you.
Dimple: Sure. So first I would say and I and I tried to.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Dimple Gosei with Bank of America. Please proceed with your question.
Dimple: Indicate in the prepared remarks that.
Dimple: What we've done to date has been.
Dimple: A very small portion of the business and I would anticipate that much like the way we enter many different markets we will.
Speaker Change: Thanks for watching. If you liked this video, please subscribe to my YouTube channel. Also, click on the bell icon to be notified of all my latest videos. See you in the next video.
I appreciate you taking my question. Thanks, guys.
Speaker Change: I just wanted to ask you a little bit more about the international opportunity which you mentioned on slide 13. How would you frame the size of the opportunity relative to the US pipeline in terms of TAM growth? Can you kind of discuss the underlying details in terms of the types of asset classes, sectors and geographies that kind of underpins that?
Dimple: Take our time to not over extend ourselves. So I would continue to think about the business as being heavily U S focused.
Dimple: In the near term one of the areas that we wanted to.
Dimple: <unk> put out with this call is just to remind people of the scope of the business and then what we're doing to continue to grow the business, but again from a near term perspective I'd continue to think of.
Thank you.
Speaker Change: Sure, so first I would say and I and I tried to indicate in the prepared remarks that what we've done to date has been a very small portion of the business and I would anticipate that much like the way we enter many different markets we will
Dimple: A majority of our pipeline in the U S.
Mark Strouse: And I would add something that Mark actually did already say in the prepared remarks, which is the international strategy is overwhelmingly likely to be with an existing client, which will give us more of a comfort zone. So it makes it a little.
Speaker Change: take our time to not overextend ourselves. So I would continue to think about the business as being heavily U.S. focused.
Dimple: Harder to pick two.
Speculate on geographies.
Dimple: Because we'll see what what.
Speaker Change: In the near term, one of the areas that we wanted to put out with this call is just to remind people of the scope of the business and then what we're doing to continue to grow the business. But again, from a near term perspective, I'd continue to think of a majority of our pipeline in the U. S.
Dimple: Opportunities are clients show us internationally.
Dimple: Understood. Thank you.
Dimple: <unk>.
Dimple: Thank you.
Dimple: Thanks.
Speaker Change: Our next question comes from the line of Jordan Levy with <unk> Securities. Please proceed with your question.
Mark Pangburn: And I would add something that Mark actually did already say in the prepared remarks, which is international strategy is overwhelmingly likely to be with an existing client.
Speaker Change: Afternoon all.
Speaker Change: For all the details.
Speaker Change: In the prepared remarks, Jeff you made mention to for maybe Marc mentioned.
Mark Pangburn: which will give us more of a comfort zone. So it makes it a little harder to speculate on geographies because we'll see what.
Speaker Change: Additional forms of investment, including platform investments, becoming more attractive given valuations I just wanted to get a sense of whether this was sort of a reference to your historical target sector buckets.
opportunities our clients show us internationally.
Speaker Change: Yes, it could be extended into some of the new growth areas as well in terms of possibilities.
Understood. Thank you.
Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from the line of Jordan Levy with Truist Securities. Please proceed with your question.
Speaker Change: Thanks, Jordan and thanks, Thanks for picking up coverage I mean, I think the fundamental answer to that question is both.
Speaker Change: It could be in either of those buckets I think it's something again.
Jordan Levy: Afternoon all and thanks for all the details. I think in the prepared remarks, Jeff, you made mention to or maybe Mark mentioned of additional forms of investment, including platform investments becoming more attractive given valuations. I just wanted to get a sense of whether this was sort of a reference to your historical target sector buckets or if that could be extended into some of the new growth areas as well in terms of possibilities.
Speaker Change: With the reset in valuations, we want to be prudent about it has not been.
Speaker Change: A core part of our business and you should.
Mark Strouse: Think about the core part of our business continuing to be at the asset level, but if there is a specific opportunity that presented itself given this reset in valuations we might consider it so mark wanted to make mention of it but it's big.
Speaker Change: Again, it would be hard to speculate what that might be.
Thank you.
Speaker Change: Thanks Jordan and thanks for picking up coverage. I mean I think the fundamental answer to that question is both. It could be in either of those buckets. I think it's something again with the reset in valuations we want to be prudent about. It's not been a core part of our business and you should
Speaker Change: Thanks for that and then just a follow up on the breakout of new investments on slide 17, I know it bounces around a lot year to year, but it seems like a really strong year for new investments in C&I, particularly.
Speaker Change: Maybe just some of the opportunity set and dynamics Youre seeing.
Speaker Change: In that particular sub segment.
Speaker Change: think about the core part of our business continuing to be at the asset level but if there is a specific opportunity that presents itself given this reset in valuations we might consider it so Mark wanted to make mention of it but it's again it'd be hard to speculate what that might be.
Speaker Change: Sure.
That is a market where we have been.
Speaker Change: More and less focused on.
Speaker Change: Thanks for that. And then just to follow up on the breakout of new investments on slide 17.
Speaker Change: But lately, we've seen some better opportunities and I would think of that primarily in the solar and storage business.
Speaker Change: I know it bounces around a lot year to year, but it seems like a really strong year for new investments in C&I particularly. Maybe just some of the opportunity set dynamics you're seeing in that particular subsegment.
Speaker Change: And again, our continued focus on our <unk>.
Speaker Change: Got it thanks for the details.
Speaker Change: Thank you.
Sure.
Speaker Change: And our next question comes from the line of Ryan <unk>.
Speaker Change: <unk> with B Riley Securities. Please proceed with your question.
That is a market where we have been
Speaker Change: Hey, guys. Thanks for taking my question.
Speaker Change: more and less focused on, but lately we've seen some better opportunities and I would think of that as primarily in the solar and storage business.
Speaker Change: I'll just ask one on the R&D side, Dimitri RIN prices had been a bit volatile in recent months does that affect your investment process at all or are you, mostly looking at R&D facilities with price offtake.
and again our continued focus on our BTM solar business.
Thank you. Thank you.
Got it. Thanks for the details.
Speaker Change: I would say, it's certainly is a factor in our underwriting and we watched RIN prices close closely.
Speaker Change: Thank you. Our next question comes from the line of Ryan Pincus with B-Riley Securities. Please proceed with your question.
Speaker Change: End of the day, we are senior debt in these R&D projects and we don't.
Speaker Change: <unk>, our tranche of capital to be.
Ryan Pincus: Hey guys, thanks for taking my question. I'll just ask one on the R&G side. D3 ring prices have been a bit volatile in recent months. Does that affect your investment process at all, or are you mostly looking at R&G facilities with fixed price offtake?
Speaker Change: Materially exposed to RIN pricing given that its senior debt. So it's a factor.
Speaker Change: But we.
Speaker Change: We are well protected from a cash flow perspective, and these investments.
Mark Strouse: Understood. Thanks, Jeff.
Speaker Change: Thanks Ross.
Speaker Change: I would say it certainly is a factor in our underwriting, and we watch green prices closely. But at the end of the day, we are senior debt in these R&D projects, and we don't
Speaker Change: Thank you and this concludes today's.
Speaker Change: We have reached the end of the question and answer session.
Concludes today's call.
Speaker Change: You may disconnect your lines at this time and thank you for your participation.
Ryan Pincus: view our tranche of capital to be materially exposed to rent pricing given that it's senior debt. So it's a factor but we we are well protected from a cash flow perspective in these investments.
Understood. Thanks, Jeff.
Thanks, Ron.
Thank you. Thank you.
Speaker Change: Thank you and this concludes today's, we have reached the end of the question and answer session and this also concludes today's conference. You may disconnect your lines at this time and thank you for your participation.