HA Sustainable Infrastructure Capital, Inc. Q2 FY2025 earnings call

• Strong quarter with pipeline exceeding $6 billion and new adjusted recurring net investment income 19% higher YTD. • Business model focused on climate-positive investments with noncyclical revenue-producing projects. • Balance sheet efficiency improved, with investment dollars per equity dollar tripling post-CCH1. • S&P upgraded to investment grade, aiding in minimizing cost of debt. • SunStrong joint venture, a 50% ownership with HASI, servicing residential solar leases and benefiting from the Sunnova transaction. • Next Frontier asset classes identified with investments in the pipeline, less impacted by policy changes. • Sustainability highlights with cumulative carbon and water impact from investment strategy.

HASI's pipeline has grown over the past few quarters and now exceeds $6 billion. The business is diversified across various asset classes including behind-the-meter (energy efficiency, community solar, residential solar and storage), grid-connected, fuels transportation, and nature. The adjusted recurring net investment income is 19% higher year-to-date compared to 2024. The portfolio yield is 8.3%, and the adjusted EPS for Q2 2025 was $0.60.

• Reaffirmed 8% to 10% compound annual adjusted EPS growth through 2027. • Expect volume of closings to exceed 2024. • Gain on sale activity expected to be more in line with 2021-2023 levels, with majority coming in H2 2025.

• Policy changes could impact the business, though pipeline remains unimpacted. • Lumpiness in closing transactions, which can affect quarterly volume perception. • Dependence on client-driven closings, making volume difficult to predict on a quarterly basis.

Q: Can you chat about the transaction with SunStrong and its impact going forward?

A: SunStrong is a 50% joint venture owned by HASI, servicing residential solar leases and was awarded servicing by the purchasers of the Sunnova portfolio. It provides scale to the business and the team is well positioned.

Q: How will CCH1 debt mechanically flow through income statements and how do credit rating agencies treat it?

A: Debt at CCH1 doesn't show up in HASI's financials directly but increases returns as investments are funded. Rating agencies don't factor in debt-to-equity ratio under 0.5:1 as long as leverage ratio is maintained.

Q: What's included in Next Frontier and trend of BTM solar vs energy efficiency?

A: Next Frontier refers to potential expansion into new asset classes with investments in the pipeline. BTM split between solar and energy efficiency is roughly 50-50 and relatively consistent.

Q: Thoughts on cash generation and timing of adjusted cash from operations?

A: Cash generation is lumpy; don't read into quarterly volumes in isolation. Trend in cash received from equity and loans has shown an uptick, and rest of the year is expected to continue growth mirroring portfolio growth.

Q: Thoughts on closed transactions being low and adjusted cash from operations?

A: Don't read into second quarter volumes in isolation due to lumpiness; volume is expected to exceed 2024. Adjusted cash from operations is lumpy based on collections, but trailing 12-month view is better.