HASI - Earnings call transcript Q3 2017 | Hannon Armstrong Sustainable Infrastructure Capital, Inc.

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Operator

Good afternoon and welcome to Hannon Armstrong's Conference Call on its Q3 2017 Financial Results. Management will be utilizing a slide presentation for this call, which is available now for download on their Investor Relations page at investors.HannonArmstrong.com. Today's call is being recorded and we have allocated 30 minutes for prepared remarks and Q&A. [Operator Instructions] At this time, I'd like to turn the conference call over to Amanda Cimaglia, Investor Relations Director for the Company.

Amanda Cimaglia

Thank you, Sophie. welcome. and everyone, afternoon, Good Earlier this its which press detailing distributed available Hannon quarter XXXX Armstrong third of our a results, on release website. afternoon, a is copy is a replay be Investor call This on today. will webcast our where of available the conference website, Relations being page later live

the Before protections Section the and the and XX-K Act you and this sections. course of results Securities some from the the of call subject would the contained XXA within to may Form the Harbor statements amended Risk of statements are XXE the Company XXXX and materially remind during Company's begins, call to forward-looking I in statements The the claims the described uncertainties Exchange SEC. as Factors are the of risks such the Actual of meaning comments differ of call section forward-looking as Section XXXX call. described like in that of made of of made Safe The Act other in for amended. and forward-looking Securities in with filings those this the

conference or as earnings GAAP presentation. is GAAP. for measures this is with any new not note as and to our be In the substitute statements does and are information call. to in non-GAAP financial undertake not a of certain on forward-looking that discussed circumstances posted on financial update this addition, any presentation be isolation financial made of based or on Company to available non-GAAP revised A of responsibility in slide Please all statements forward-looking today, expectations. information will intended measures the reconciliation A accordance release presented considered

Jeff, Cressall, call Slide are to Deputy, President Eckel, the our will CFO; Joining CFO. Justin and and begin CEO; me call X. Company's that, over With Jeff? Brendan who turn on Herron, our I'll on the today's Jeffrey

Jeffrey Eckel

million announcing we're in. core million or per of you quarterly afternoon. share $X.XX $X.X all good $XX.X Today and for or Thank Amanda, $X.XX of GAAP share. Thanks and dialing per earnings earnings

a Given significant interest amount rates took we the the fix and our rising curve, rate interest flattening decision risk quarter. out proactively to during a of yield

the maturities our leverage on XX% to of have X:X:X increasing approximately committed balance extending significantly sheet increasing while strengthening debt rates fixed the We liquidity. and

the an including XXX small at average insulated a grow rate target. and a are million position and transactions We’ve approximately of we achieve rate We now debt nearly feat. X.XX% dividend. year-to-date decision rising in million guidance solid fixed-rate this was to risk be we our We're all facts a quarter. While at higher future, bit believe per the at - in debt strong XXX of our few stable earnings core debt of the almost be of rate this we project growth has the achieved fixed was get base below of low very ensure prudent proud our now $X XX to no with which the largely here, And environment. are To good for of range. consider the point transactions million share and grade to us largest will balance done coupons investment annual cost approximately to of our investment annual or lead approximately the to what closed many from sheet of billion years. This preserve $XXX well-positioned sit

regions. average with profitably sheet million technologies, our X, XXX consists billion portfolio portfolio one obligors and is investment is after The across exiting investments and grade noninvestment an Slide of to separate diversified $XX of balance our markets, $X Turning over of transactions. geographic

our portfolio. yield several extreme the consistent the events is of weather impact quarters a with quarters remained last It yields of portfolio note X.X%. Forward-looking on timely blended over the to

by insurance extent diminimus. the coverage wind concluded Napa with We have minimize impact human remains of weather our quality mapped residential Irma these portfolio damage. as than considered affected charitable We the three and comprised from to Hurricane of high the solar to the projects fires and we've events. X% only No our to Overall, corporately Hurricane $XX in the activities Valley impact with supported assets Harvey. all affected solar grade. several credit investment or million assets were not by Texas less portfolio Individually

investment conversations to the opportunities. to continues activity. We unchanged were greenhouse gas top efficiency and and win JCI first deep indicator the sponsors newbuilds the with managers. strong. commercial reduction while interesting. [Avia] commercial recent the noneconomic years, suggest diversified time to volumes goals efficiency more business QX found augurs $X.X billion our well buying enjoy According Slide continue a pipeline X, although security relatively prior In in The shows were compared largest commercial we to the Turning improved prospects. cadence were of This QX than influences property Energy the report, efficiency for in factors survey increased three government XXXX the CEOs for two for energy market of and looks wind that lower QX like for

be an for We yields nearing capital in capital a lows washing the markets. recycling find active clients and our competitive operating stack. The markets also optimize solar to continued surprising capital market wind still projects most to with

pursue other and we to yields the solar to as the are from While trim quarter-over-quarter, attractive. yielding where our is not ability of assets X% and pipeline for continue fell infrastructure. This increase more example sustainable attractive to pipeline willingness X% pipeline an

much they our now any to than that seeing interesting portfolio potential has portfolio our privatization are also quarter because Brendan increased the last we than trajectory We part in has are the to turn transaction of as faster $XXX million I’ll transactions our These over in our performance. change they detail can utility bite-size have to in positive grown. our assets it in lumpiness course given opportunities quarter. larger financial smaller but past of increase like

Brendan Herron

Thanks Jeff.

interest we've labeled $XX.X equity approximately $XX.X which year. investments from of quarter X, income an income Slide increase investment for income, GAAP to from income million Turning we last method generated and million the rental

this portfolio last allocations approximately other well equity fee GAAP. sale XX% from revenue investment on result in labeled increases million in the of in compared $X.X income a under and as growth gain the time As investments we which We in prior-year. method $X.X generated million of the year, approximately to as

the as additional In XX Given expenses associated of the in $X.X million million Full quarter of drove the primarily compared with QX million the time million primarily fund due year-to-date grew approximately from Interest nature XXXX portfolio $XX.X market general per last by of the we year. $XX.X total, for had QX the year. revenue. used last in to higher growth year general and conditions, which to and investment $X.XX year-to-date was XX in headcount GAAP in of our million we of to or Comp sold the and increased or share higher to end expense at per million as approximately the assets $X.XX share a quarter cost company. end QX of last other and quarter margins to the increase XX% compared administrative in the debt approximately result the $X.X at achieved $X.X growth. $X.X the income

tax equity the the a profits a not have reminder, larger allocation received investments invested effect we where and losses, alongside earnings of the limited we of equity GAAP of renewable include especially cash. much full allocation from cash do and received As energy a the although

credits. production HLBV In investment tax addition, can by tax the influenced GAAP or the method attributes like allocation credit heavily the accounting be of tax

with income approximately these comment As a profit a not $XX our million million million. the $XX million we our income the total Since believe cash capital compared to approximately investments investment. end we large investors million cash like to we are have investing have the return allocations the and periodically quarter to we flows of return One present our discounted we these added $XX of make other other the recognize a where on a million from core attributes, investments cash when our of $XX tax value, in on investments represents method reflects attributes. equity received to we in adjustment tax return year-to-date up we receive debt. as back for future will Year-to-date in GAAP a this on based on core that's $XX $XX of Thus GAAP which of return capital. and the investment the both gives return collected

we made in us QX estimate up doubled expect strategic rates, this Jeff concept our debt a we XX% debt end the With of and the discussed decision our mentioned, early QX average at of the more the debt cost. of an fixing often access. to QX ending one As I've to have well by our QX comes XX% we Obviously, $X.XX levels of of between fixed closed on additional and rate expect fixed-rate now out Using deals we since the the rate difference as could annual XX% start share as our debt than impact to the beyond transaction, basis. and per year. target fixed range. increase that messages XX% to low

would cost of the With investor understand a of conversations the impact target years reduce assets. to Jeff many risk range by that into back move increases is first rates that over years small fixed for time earnings and largely five and we you in various discussed, as we expect short-term is these down have will Fed. believe while the We over indicated we on there out it deals the the that further that

and as forward. provide have who base We're Chief Chief on who Accounting future for Office and have expect strategy. Chuck and Justin they us us as drive who Justin ago business it Melko Both joined capabilities from longer-term expect an to fix will update financing turn from the now Officer us bought additional our approximately in our have the [Maryland] as same execution joined future out We the rise to time. we that over positions Officer rise Cressall great around I yields National Deputy help our will seven-months will of to glad the Financial decision will rates rates with PWC growth. along experiences the our well

Justin Cressall

Brendan. Thanks

and Slide our solar first quarter. closed our debt importantly approximately efficiency, or We progress this we've on issuer. involving transaction financing corporate highlight to transaction wind debt our to made general as expect wanted is $XXX And of the assets. million strategy Turning we to close Hannon the

in rate been corporate were each classes. of a asset various to with As grade rating of our working the we to on front. investment represents by August rating our proceed DBRS which And in we our efforts culmination first this agencies we've stated past pleased

and transaction notes issued were good convertible this senior a happy unsecured a million towards foreign issuing viewed premium. Additionally goal the first a conversion corporate of unsecured with bond as We we our XXX step X and execution investment straight with years grade XX% on debt.

and from As over a to page our of on as maturity maturities expected notably to of before debt as transactions heard sheet. year. we and earlier, of given amount debt of the have we represent these XX%. further balance to profile successfully more in our anticipated Furthermore our chart a other outstanding percentage added dated our no long amounts you of illustrates, bottom and maturity Jeff XX% significant result extended fixed-rate current This those is debt any increase the the no than XXXX

the our further turn position call well Hannon we these and for to expanded investor the Jeff. we actions base. have believe diversified and back future. that, With lender Overall I'll Importantly,

Jeffrey Eckel

by with We’ll Justin. yield Armstrong continuing up managed credit now another substantially up the protected rising We financed believe sheet produced team an with on sides balance you to and on for that generated is the sheet. We'll portfolio, of a balance Hannon of now questions. example attractive this a X. diversified call both rates, this aligned this is time Thanks high execute quarter the shareholders. We Page quality, stronger from interest open by wrap

Operator

Philip we'll And Instructions] question take first our with ROTH from Shen [Operator Capital Partners.

Philip Shen

talk back down that that and impact core about debt or then the for originate come target. you you transactions, down, mentioned how and next I fixed-rate fixed interest your well. able the could ratio Brendan in more year fixed rates you might of to turn on to to $X.XX the out potential about work with would support talk the as next - your year earnings can you original of higher being guys you you just come dividend Can it as of mentioned think debt,

Brendan Herron

rate interest So about we on ourselves rising and of the about did part number how obviously to that. this quarter first coming. check saying were rate a fixed lot a the we what they of rates hikes and given debt Fed work want where was We against

letter asset rates our As of work and at we've a of rates. will much as in then new we And the use either like bond debt rise talked floating new and form or will our rates originate debt some those very credit rate assets facility about when - debt. that

period for XX% move from expect the time us. of that this rates given XX% we’ll time we XX% strategic long-term range, believe do the down at target we back back So into we this over where the a but market were right where would to down the makes sense was adjust was and that thought

time, I we time that the are getting this this year so pipeline don't giving us continuing to look do not to think and dividend. well point this to continue in point later grow we mentioned we business our grow that grow at dividend, think strong positions that that the at position think Jeff usually helps this specific that do to guidance would I us and remains think but we we The do strategically. forward we to the

Philip Shen

to power yields to I by mentioned think or cost faster and funding end you the color helpful. segment to drive you that you some Brendan faster or at looks the higher similar a that color some perspective on as relative be to perhaps pricing markets rise, expect expect arise rate yet your be give your can yields on you to able yields would that some us additional just perhaps of also

Jeffrey Eckel

certainly not yields to to know I active the is going overbanked - to area willing quarters very are I'm levels. at four more shift portfolio low at areas But and of we somewhat do there for those we been been the flat at investments we markets other now. International except as We're drive higher. will solar and or probably for an Solar Power power were to can areas the sure grow focus that to portfolio than the have yield on the we've in we’re well people struck you frankly with yields shockingly forward-looking gross business. that equity three trying that’s not What marginally shift are there some lucrative the our have be continually where continue

Philip Shen

debt expect timing is it do in more or One of by we your it you about corporate first corporate issuance the DBRS, is terms thing of here when your of around the size rating how might you can the talk some corner, that grade about what - details might be?

Justin Cressall

I was So market of be DBRS. and where as unsecured it a that low a of the was process issuer longer-term corporate the convertible rated rated, undertook on a bond we rated BBB future view give have specifics but an part the ideally we can’t at in offerings level. sort convert debt is by these to want this

other but might market I in forms. part plan when all the in place to specific guidance as it's we So of a have can't access we longer-term give

Jeffrey Eckel

it gotten debt public reintroduce add about of in the lot to was grade. and on we step. those know reeducate the of you we that in debt of questions different step a to yourself a process have and this worked equity is convert - move whole to The thought to corporate convert public through to the but as markets, debt investment the calls classes the on to had first good introducing in people kind market about most market ourselves we’ve why and a a us we’re just investors. And asset the market rated individual talked we the going first then and first And as rating that, we gone past our we based getting knew

we debt So in was finance first a that that think plan us our good step an of process and for the do part convert corporate becomes important forward. going

Philip Shen

color on the for Thanks that.

Sorry, thanks. by was on that and pass rating I DBRS. it missed the I'll

Operator

[Operator Instructions] our Noah from We take will with Funds. Oppenheimer question next Kaye

Noah Kaye

a wind be what speculative not tax would some reform affect a industry, thoughts you're that obviously for and hate And here investment your stake hear basically be doing on at current the but could how solar interested great it's one, be the but credits might the for to that ask to With tax would topic. for commentary I ongoing PTC here. it

from about being scale you’ve that? tax for know finance away or upside but to You not lesser is we part equity stayed utility or debt the with typically an Hannon should think being stack, capital for yields solar potentially of how potentially there

Jeffrey Eckel

really I to have its it our pipeline opinion five longer business think win of can in on with and would projects inoculate two the that’s from where capital policy think general that years wind in legacy the be if is ramp an So for we've down recycle of grandfathered they place The on five today's affected federal supply the year most thing relatively and no prospects. impact of into get down have of a already except gets truncated our economic of When I X% limited being developers I think is in policy PTCs negative PTCs try we I ramp we if newbuilds feels most sets in our always tremendous guess amount is solar first like the need ourselves because PTC. very tax can small. of opportunities, dependent that tax for that wind business really that turbine the the

But cash economic an we got of opportunity capital a oriented number. out between think grandfathered tax become they've and for that's projects enough tax way years Hannon or have these all credit than and capacity. said run of source say its on investors. cash - more actually then investors I Delta That it's desired penciled what a still tools forecasting good is two that’s think a years three I So the minor of don't relatively whether PTCs no

So will any that, things we say I hard understand as that don’t can't we mean inoculate we from who ourselves don't company to I probably care those we of as know worked control.

Noah Kaye

I think terms you by the and that the I'm much a quarters of pretty unchanged federal in kind of on picking of - mentioned couple ago way up activity. businesses

think of interested for agencies ESPC agencies be at program sub some within the looking to applying DOD in I been the some in might some the that there's transportation. of commentary example say that even

of seeing the to the whether any that to potential initiatives you're know curious scope program? traction Just like on expand

Jeffrey Eckel

progress savings on frustrated long as certainly been very positive best and will there do get to going not direction House it's and that will if committees more to and of given the thought upgrade and as at complex meaningful Senate jobs some ESPC open up prospects create Well the one for I in well the ESPC treasury it that which DOD is money they But and then say DOD. cost long volumes years cycle the hopefully CBO conditions think or of budget system great can mobile particularly was a a can everybody be two. It That treasury basically step term takes war technology by for is said, expansion has would of for the the year the a having and a the has improve all a to away at scale does thing to chairs look fighter behind. for time the the assets. and at transportation potential procurement any things the seem

Operator

with Souther Cowen. Our comes from next question Chris

Chris Souther

within smart to to idea resiliency view I highlighted. that subject opportunities first any any sustainable was want within addition infrastructure an just the the you if you're of get curious seeing water financing a in was I opportunity? market you infrastructure, on city Just how potential

Jeffrey Eckel

just in smart of a much Annapolis and think particularly The so the a city there a is a I street to lot has not business it’s we for that being know hard it’s It’s of not positive lot good necessary initiatives The resiliency technology many I'm implemented happening upgrades lighting of are a very the with many that mentioned worrying thing because to in a thing those is so you really program jurisdictions. about and program which I industry. part various see one familiar resiliency. there flipside scale. local the is is City of and very LED there for activity of but get programs is that's that

Chris Souther

give little delays there? And the volume, just quarter then because of little you on solar a were quantify on I on kind the you for can mentioned going of some bit was about know what bit just of on of or amount kind guys transaction you there commentary that maybe a kind talk that

Jeffrey Eckel

the year. don’t business know $X transactions to of last any transaction, and the about years billion specifically really been I quarter mean for and in a I solar has model couple delay mention there's we a talked of for Actually last the do

away or quarters is it to September quarters enterprise biggest after October three the deal hopefully risk closed We’re on the a matter doesn't table the matters so our track land our lot that XX to quarter. we’re always business was inability a year. as and Armstrong, a and billion. of lands We've to do value Hannon you a the the We've will report it amount to how of interest X off predict transaction through when which whether three $X done taken risk said rate

means QX we’re where QX, to good really a was. had is we it that looking be good for QX a So going

Chris Souther

that you earnings method netting looks kind two? income And and then reverse core or up for those method it that kind of net equity of the out between broken out adjustments is equity between net GAAP like investments

Jeffrey Eckel

doing. way make exactly core two feel really were is an no in broke of understood We we've back very were there to a for one and which worked why show we see more calculating adjustment change to was show out they is so some it we’re GAAP that either clear and suggestions make had to how how adding those we much we’re would clear what attempt the a it definitely make try and people have be if reversal then better just trying into to lines we just to - to we it and hard -

Operator

comes next our And question Driscoll FBR. with Carter B. from Riley

Carter Driscoll

average So putting that when next couple a to traditionally upsize? at I where transaction we some up against we 'XX year, all, XX, closer that on greater you do, these it it about sizes, of XX, characterization does neither in the was maybe just you maybe trying had say, think to guess, wouldn't larger different a of of just down the where sides, closer bump you the this mix of and if in of talk larger I'm 'XX, end deal move the or to competitors quarters, to from get some go it potentially players you transaction, typically might as in sizes of better sense bump and

Jeffrey Eckel

we the profile something to see talk we I larger still balance that don't our would transaction really ourselves relatively have think small portfolios and We they’re time. of that single portfolio doing completely it really about when about to tilt credit to sheet transactions the projects. dominates point that the every a talk our

see can still those plus relatively all That million land leases and portfolios be or they seeing you’re going equity hundred more of some now would may the we were range large range. diversity can we XXX portfolio plus said, acquire then the of tax when a wind be in with think did lot I and So like portfolio. to we the in transactions

Carter Driscoll

more done what things talked kind you there? so have point Can on know well of commercial was any and about to have pace, energy a you you one more get I your I solar, of trying follow-up? obviously pretty it to update or of in update small, wind the guys and And a activities then just efficiency, in structure was programmatic now but and

Jeffrey Eckel

in other if very and with about the count platform generally whole that energy the has for priority putting The is there's it's been do XX and years reasons office on criterion But building are its for sustainability place. efficiency it to talk economics they not said, a pursuing doing one a to is commercial That the is economics sector first and we’re been economics I still be owners update but Johnson PACE going time. reason the always the survey now doing promising to smaller this wanted that takes for we on to to building number transact quite transaction just problem blocks Controls energy security it new, lot Not and the year two that’s building commercial you seems some a definitely building that the are with economic. then efficiency for PACE. transactions economic it’s and

Carter Driscoll

And new conversations obviously number disasters, any infrastructure last current one address a offered then side? maybe of this potentially portfolio. it up the natural we've your Is had on

Jeffrey Eckel

issue places to So I think Houston and from when of resiliency critical we think in talk a they’re a the and sadly still that storm aftermath Harvey advance suffering a about of we for number that. critical the Hurricane still we've mentioned water issue in is people of it's still

be infrastructure not in growing I would a if it's surprised investing. So theme

Carter Driscoll

showy a in of distribution transmission, last play or terms not [indiscernible]. It's mile on resiliency of

Brendan Herron

measure security XX generations, may some building, efficient commercial I microgrid very having having we and security talk building not we a office minutes think DOD XX what see sometimes of of a you but when storage envelope, some word about energy be business. days that's can and particularly on-site a be about very, more important energy to

So, definitely a station is provide It's drivers. for think solution model secure physically it the meter, very central the to big utility super impossible. yes that’s the one hard of I behind

Operator

to for to any appears additional like conference questions turn would no over It or you phone this back I the Eckel, at Mr. are remarks. further time. closing there

Jeffrey Eckel

you thank thanks much questions. good for very No, and

Operator

This concludes today's call. Thank you for your now participation. And disconnect. you

Hannon Armstrong Sustainable Infrastructure Capital (HASI) 1 Nov 172017 Q3 Earnings call transcript