Hannon Armstrong Sustainable Infrastructure Capital, Inc. Stock

Greetings, and welcome to HASI's Second Quarter 2026 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Aaron Chew, Senior Vice President of Investor Relations.

Thank you, operator, and good afternoon to everyone joining us today for HASI's Second Quarter 2026 Conference Call. Earlier this afternoon, HASI distributed a press release reporting our second quarter 2026 results, a copy of which is available on our website, along with the slide presentation we will be referring to today. This conference call is being webcast live on the Investor Relations page of our website, where a replay will be available later today.

Some of the comments made in this call are forward-looking statements, which are subject to risks and uncertainties described in the Risk Factors section of the company's Form 10-K and other filings with the SEC. 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.

Joining us on the call today are Jeff Lipson, the company's President and CEO; as well as Chuck Melko, our Chief Financial Officer. Also available for Q&A is Susan Nickey, our Chief Client Officer. To kick things off, I will turn it over to our President and CEO, Jeff Lipson, who will begin on Slide 3. Jeff?

Thank you, Aaron, and welcome to our second quarter 2026 earnings call. We are pleased to report another strong quarter, including excellent results across all key metrics for the first half of 2026 as our business model of providing capital to energy transition projects with programmatic clients continues to be effective and resulted in more than $1 billion of new investments in the second quarter. Adjusted earnings per share in the quarter was $0.75, up 25% year-over-year, enabled by growth in portfolio revenue, fee income and gain on sale revenue. We also expanded our investment margins and maintained our capital efficiency with 0 ATM issuance.

Adjusted return on equity exceeded 15% for the second quarter in a row. And through the first half of 2026, adjusted recurring net investment income grew 27% year-over-year to $208 million. As of quarter-end, our managed assets were $17.6 billion, up 20% year-over-year. Encouraged by these exceptional results and our confidence in the outlook for new investment activity, fee income, portfolio yield and our cost of debt, we are increasing our 2028 adjusted EPS guidance to a range of $3.55 to $3.65, up from $3.50 to $3.60, and affirming our guidance for adjusted ROE of greater than 17% in 2028.

Turning to Slide 4. We highlight 3 catalysts that have been integral to driving growth in our assets and income. First is our exceptionally robust investment activity of greater than $1.7 billion year-to-date, underpinned by ongoing demand for new power capacity throughout the economy. Second is the success of our expansive funding platform, which is providing a continuous pool of flexible capital from multiple sources. This includes our CCH1 co-investment vehicle, which has opened our access to infrastructure fund capital. And since achieving investment-grade ratings a couple of years ago, we now have access not only to the deep investment-grade bond market, but also the junior subordinated debt market as well. All of this is further supplemented by the flexibility provided by our short-term debt programs, in particular, our successful commercial paper program that is backed by our revolving credit facility, which we recently upsized to $2.25 billion. In combination, all of these elements have helped elevate HASI into a new category as a capital provider, facilitating our ability to execute larger transactions for our clients. And third is the steady progress we have made in reducing our cost of capital, enabled by the improvement in our debt spreads as we have become a frequent issuer in the investment-grade debt market, a highly effective hedging program and a reduction of new equity issuance with 0 ATM so far this year. Now, I will dive a little deeper into each of these themes.

Turning to Slide 5. It all starts first and foremost with demand, which is driving heightened investment activity for power infrastructure in general and clean energy infrastructure in particular. Although recent headlines tend to focus on less favorable aspects of renewables development such as permitting and reduction of incentives, the underlying economic trends are actually quite favorable. Renewables remain the most cost-effective solution and the fastest to market to meet the growing demand for new capacity. Lazard's recent levelized cost of energy report details that solar and wind remain the low-cost sources on an unsubsidized basis even after accounting for the impact of inflation and tariffs. And renewables comprise more than 3/4 of the net new U.S. generation capacity expected to be added to the grid over the next decade. Therefore, renewables are no longer a niche but an integral component of the electric grid today.

The chart on the left side of this slide does a great job of capturing this trend as May 2026 was the first time ever that solar generation was higher than coal generation. And on the right side of the slide, the chart shows the forecast for new electric generation capacity over the next decade by source. New renewables capacity is expected to grow from just under 150 gigawatts over the next 5 years to 168 gigawatts over the 5 years beginning 2031, even after the sunset of the ITC. This forecast notably does not come from a clean energy-focused research or advocate, but rather from EIA, which is the technology-agnostic division of the DOE.

In summary, demand for renewables continues to grow, and the outlook remains strong even in a post-ITC world. And hundreds of billions of dollars of long-term capital will be needed to meet this demand over the next decade.

Turning to Slide 6. As we announced last November, HASI closed a $1.2 billion investment in SunZia, the largest clean energy infrastructure project in the Western Hemisphere to date, developed and majority owned by Pattern Energy. In July, we completed the funding of our investment in this project. As the chart on the left displays, SunZia is single-handedly having a transformational impact on California's grid, driving peak wind generation to a new CAISO record. In another fascinating data point displayed in the chart on the right, solar and wind generated 44% of the state's electricity generation through the first half of 2026.

Now, turning to Slide 7. I would like to pivot and discuss our margins in light of the recent increase in long-term interest rates. We have demonstrated our ability to remain profitable in all interest rate environments over several years. Since 2021, base rates have risen by approximately 300 basis points, but we've been able to offset that increase with a comparable increase in our investment returns. Over the same period, our debt spreads have improved by more than 140 basis points. The resulting impact of these factors has been both margin and ROE expansion in our business. And if rates continue to rise, we remain confident in our ability to manage this risk.

Turning to Slide 8. Our pipeline remains above $6.5 billion, even after closing more than $1 billion of new investments in Q2. This pipeline is supported by the major macro tailwinds driving energy markets today, including the strong demand for power and the corresponding demand for utility-scale renewables, as mentioned earlier, higher retail electricity rates, increasing battery attachment rates, and greater than 450 renewable natural gas facilities under construction or in development.

On Slide 9, in addition to all of our ongoing success investing in wind, solar, storage and renewable natural gas, I wanted to highlight our objective of continuing to expand and diversify our investment platform. These emerging asset classes have several consistent attributes with our historical core asset classes, including environmental impact, proven technologies and contracted cash flows with high-quality offtakers. The transportation component of our business has grown into a more meaningful contributor over the last few years with more than $325 million of cumulative new investments.

We also closed our first water infrastructure project investment in the third quarter and expect to see additional opportunities in that sector. And we have a few interesting projects in the sustainable agriculture sector in our pipeline that we are optimistic can become another diversification opportunity over time. These investments will provide additional paths to portfolio diversification and accelerated growth, while reinforcing the noncyclical and resilient traits of the HASI business model.

And one final item before I turn it over to Chuck. Our SunStrong and Neogenyx affiliates continue to perform within our expectations.

And with that, I'll ask Chuck to discuss our Q2 results in greater detail. Chuck?

Thanks, Jeff. As highlighted on Slide 10, our Q2 results demonstrate continued strong execution across our platform. We are meaningfully growing our earnings base, increasing our profitability and strengthening our capital platform as we will show on the next few slides.

Slide 11 highlights our key profitability metrics for the first half of the year. And as you can see, we achieved meaningful growth from 2025. Adjusted EPS was $1.52 per share in the first half of the year. Our adjusted earnings increased 31% to $200 million, driven by growth in both net investment income from our portfolio and fees from CCH1. As our efforts to improve the efficiency in the deployment of equity capital continue to pay off, adjusted ROE exceeded 15% so far this year, up meaningfully from the 12.3% in the same period last year. We had another quarter with no ATM issuance. And as we mentioned on our Q1 call, we still expect minimal issuance in 2026.

Turning to Slide 12 and the key components driving our earnings growth. Our adjusted recurring net investment income grew 27% year-over-year to $208 million. Supplementing this income, gain on sale revenue increased to $39 million, while origination fees and other income grew to $17 million. Consistent with our view last quarter, we expect gain on sale to be at a similar level as last year.

On Slide 13, our closed transactions totaled $1.7 billion, $1.4 billion of which will be held on our balance sheet or at CCH1. This is a meaningful increase over the past 3 years, and we are well on track to meet our guidance of $2 billion to $3 billion of new balance sheet or CCH1 transactions in 2026. The closings in the first half of the year were not only diversified but underwritten with returns greater than 11%, in large part due to the higher return expected from our investment in Neogenyx that closed in Q2.

Turning to Slide 14. Similar to the trend in our closed transaction growth, we have doubled our managed assets over the past 5 years. Managed assets grew 20% year-over-year to $17.6 billion as our portfolio increased 14% year-over-year to $8.2 billion. Assets held at CCH1 have grown to $2.9 billion, supporting a growing stream of recurring management fees. Our portfolio remains diversified across 9 asset classes with uncorrelated cash flows. And our investment approach as well as our portfolio management activities have contributed to our average annual loss rate being less than 10 basis points.

Our platform has consistently demonstrated our ability to manage performing assets as well as those that are having performance challenges such as our experience with the SunPower bankruptcy in 2024, where we successfully protected our investment in SunStrong. On our Q1 call, we mentioned an asset that moved to Category 2 in our asset quality table of the 10-Q. This is an RNG asset that experienced construction challenges. We have since taken control and are overseeing its completion with an intention to sell the project and believe there is a reasonable likelihood of recovering our full investment. This is another example of our investment strategy, supported by asset collateral and our capabilities in protecting the value of our investments.

Next on Slide 15, we highlight our latest bond offering and more specifically, the actions we are taking to drive down our cost of debt. Since our issuance in February, base rates had increased. And if all that changed since the February issuance was the increase in base rates, the cost of our June issuance would have been around 6.3%. However, we continue to focus on fixed income investor engagement. And with our interest rate hedging program, we further mitigated the impact of the change in base rates. As a result, our effective cost of the June issuance was 5.6% and was 70 basis points lower than it would have otherwise been. This is an excellent example of how we are effectively managing our cost of capital and minimizing the interest rate sensitivity of our business.

Finally, on Slide 16, we have continued to enhance the resilience of our capital platform through the refinancing of our corporate bonds and short-term bank facilities. After our recent activity, we do not have a senior note maturity until 2030. On the revolver, we increased the capacity to $2.25 billion to support continued growth in investment activity over the next few years and also extended the maturity from 2028 to 2031. In addition, we consolidated our unsecured term loans into one $400 million term loan, while also extending the maturity to 2029. With both our revolver and unsecured term loan, we reduced our overall spread to the base rate. At the end of the quarter, we had $2.2 billion in liquidity. And with the additional capacity added to the revolver, we are well positioned to fund the growth in our business.

I will now turn the call back to Jeff for his closing remarks.

Thanks, Chuck. Turning to Slide 17, we display our sustainability and impact highlights, noting our cumulative carbon count and water count numbers, reflecting the significant impact of our investment activity. We also note, we recently published our ninth annual sustainability and impact report, which is available on our website.

Wrapping up on Slide 18, we reiterate the positive messages from this quarter as we had outstanding growth in new investments and expect continued strong volumes in the second half of 2026. Our margins in the business remain attractive as we issue low-cost debt and invest at attractive risk-adjusted returns. And the resiliency of our business and the talent of our team remain critical catalysts to our success. In light of all these trends, we are more confident in our 2028 outlook and have increased our guidance accordingly.

I thank our dedicated team for an outstanding quarter and first half of 2026. Operator, please open the line for questions.

[Operator Instructions] Our first question is from Jon Windham with UBS.

Perfect. Happy to kick it off. First of all, congratulations on the results. It's been an impressive 10-year-plus track record of you guys dealing with interest rate volatility and delivering consistent earnings. So I appreciate that. Not much to pick on in the result. Maybe I would just ask a big picture question. There's been lots of concern in the investment community over the last couple of months about potential delays in some of the larger projects, some noise out of Texas with data centers. Just any color you have on where you are in sort of early-stage conversations about the pace of build as we go sort of really into the end of this year. But I appreciate your comments.

Thanks, Jon. Appreciate the question. We always get that question on this quarterly call, and we just haven't seen too many delays related to our universe of partners and our projects. There's always some delay. These are energy projects, so they never are entirely on schedule. But no systemic delays in the system that we've noticed, and it's really not been a factor. We're obviously simultaneously involved in many, many projects, and some are moving more quickly than others. But I don't think there's anything thematic related to delays that we're seeing in our pipeline.

Our next question is from Ben Kallo with Baird.

Congrats on the results. Maybe first, just on the KKR partnership. Could you just -- it seems like it should be nearing capacity. I know you guys raised it. Should we think about you guys just like doing an incremental raise again? Or if you do a new structure, will we have different economics?

Thanks, Ben. So our CCH1 vehicle will likely hit its capacity either at the very end of this year or sometime early next year. I think early next year is a little bit more likely. And it's our intention to have a seamless transition from CCH1 to CCH2. So we're working very hard on CCH2 right now. There was nothing specifically that we could report on this call, but we're happy to report generally that we're making good progress there, and we expect that vehicle to be up and running right around the time that CCH1 hits its capacity. If there were some reason to be delayed, I'm also equally confident that HASI and KKR could upsize CCH1. And likewise, as Chuck said, we have $2 billion of liquidity. So we could also operate back on our balance sheet. But I think the most likely scenario is that CCH2 is ready to go when CCH1 hits capacity.

Okay. Great. I guess, as we think about just how much demand for new power capacity, and you talked about like new frontier type of investments in ag and things like that, I just wonder like how you guys want to frame looking ahead of how much investments you can make per year and what you have to do internally from a staffing perspective? Because, I guess, you'll have the capital with KKR, but just what you have to do and like what kind of size you could get to if I look out, not next year, but -- I'm not asking for guidance, but if we go out a couple of years, can that number go up to $5 billion?

Yes. Good question, Ben. I don't want to put a specific number on it, but I think the track record on this point is very good. Obviously, we started 10-ish years ago on resi solar, and that became a significant component of our portfolio over time. We started about 3 to 4 years ago with renewable natural gas, and now that's a meaningful part of the portfolio. So these asset classes, where I talked about, whether it's transportation or water or sustainable ag, one or more of those in the aggregate, I think, is likely to become a meaningful part of the business. And I'd prefer not to put a precise number on that, but I think this notion of these new asset classes continuing to drive growth over the guidance period, the core asset classes of wind, solar storage, RNG likely to be the vast majority of what we do. But certainly, we're very focused on these new asset classes as a diversification and growth play.

As it relates to resources, I think we're well resourced as we are today. We're obviously constantly adding people, but nothing dramatic will be required to become more active in these new asset classes. In our model, it's all about building relationships and identifying programmatic clients that we can work with over and over again, and we're replicating that strategy in these newer asset classes as well.

Our next question is from Noah Kaye with Oppenheimer & Co.

Always interested when there's a new asset class with an investment that's being called out. And so, on the water infrastructure investment, wondering if you could just give us a bit of color on the nature of that investment. Is the revenue stream coming from a water utility? Is it some kind of infrastructure upgrade to the pipe system? Is there something one-off in nature? Or is this something that is, in your view, repeatable?

Thanks, Noah. And we are working with the sponsor on incremental disclosure around this investment. So we may be able to provide a little more detail in the coming weeks. But I would say, generally, it's a contracted wastewater treatment -- contracted wastewater treatment facility with a municipality, and it's already operational. So it was, all things considered, a relatively low-risk investment, given the nature of the contract, given obviously, water is quite a noncyclical underlying item. And therefore, as is often the case, when we're looking at new things, we want to start with a relatively low-risk investment. And I think this would qualify in that regard.

That's very interesting. I mean, that's an asset class, wastewater treatment, with some real capacity constraints. So very interesting to see you get into that. And I guess, you touched on it at the beginning. But if you had to call out the 1 or 2 biggest factors in raising the guidance here? Fully appreciate, spreads have outperformed our model, and the pipeline is strong. But is there any one factor that you would really call out to lead to what is a bit of an unexpected pleasant surprise here in raising the long-term target?

Yes. I don't know if there's one. I think in the prepared remarks, Chuck and I went through the factors that are allowing us to increase guidance. I think the industry trends are quite positive, as well as our ability to raise cost-effective capital. So I think it all comes back ultimately to volumes and margins, and both of those items are trending in a very positive direction. And we also have that much more certainty than we had 6 months ago when we put out this guidance. We've raised over $2 billion of capital, and it's long-term capital. So it goes well beyond the guidance period. We've done over $1 billion of new investment since we put out guidance. So all these things create a little more certainty that gives us a little more comfort in increasing the guidance.

Chuck, was there anything you wanted to add to that?

The only additional thing I would say is that on the capital efficiency front, I mean, we've talked about this quite a bit over the past few quarters, but we have seen more and more that the things that we have done to be more efficient with the capital that we're raising, that's really coming to benefit. And we feel really good about that looking forward. And obviously, we highlighted the fact that we have not issued any ATM yet this year. I can't promise that, that won't be the case into the future. But what we do know is that the efficiency of our equity capital that we expected, we are realizing that, and that's certainly helping as well.

[Operator Instructions] Our next question is from Chris Dendrinos with RBC.

I echo the comments on the congratulations on a nice quarter. Maybe just one for me here. And looking at the pipeline, I think it's up, call it, $500 million or so over the past 12 months. But when you look at the grid-connected portion of that, I mean, I think it effectively has doubled. And so, is that a function of, I guess, maybe a lot more opportunities just coming across your plate from demand? Or is that maybe a function of as you've grown, you're now looking at bigger ticket deals? Just trying to get a flavor for what the driving force is there.

Thanks, Chris. I think it's a little bit of some of the things that you mentioned, and I'm going to ask Susan to add a little color to that as well.

Yes, Chris, I think the grid-connected business, particularly right now, is growing rapidly. And sponsors, both existing sponsors and as we announced last quarter, with a pattern, adding new sponsors into our mix, we're seeing recycling of capital and projects and portfolios that can be also a more significant size that we're able to finance. So I think we'll continue to see that and -- but also some of the -- there's a lot of growth across all of our sectors, and some of it's just what's in the pipeline in the next 6 months.

[Operator Instructions] Our next question is from Maheep Mandloi with Mizuho Securities.

Congratulations on the quarter and the guidance raise here. But just a question on the guidance raise, following up with the previous questions on that. It does look like your yields are increasing much faster and you're also deploying more capital here. Is there any limiting factor which would have caused you to be somewhat conservative on the guidance raise over here? Just trying to see if there's anything you're worried about or anything else which could unlock further growth here?

Sure. Thanks, Maheep. There's not a limiting factor, we don't believe, a reasonably limiting factor related to capital. I don't think there's a reasonably limiting factor related to our internal resources and our ability to grow the business. So the only really limiting item is how fast our clients move. And again, as Susan said and as we said a couple of times, most of our clients are extremely active right now and very much desirous of capital to continue to build their projects. But ultimately, that's the really only external related limiting factor. I think our capital and platform can grow as fast as we needed to meet the demands of our clients.

Got it. And separately, just on the ROE, long-term ROE guidance of the 17% you talked about in the past. Any thoughts on how is that changing in your model with all the information of the yields you're getting -- upside on the yields you're getting right now?

Yes. I think, obviously, when you increase EPS, the natural thought would be, well, shouldn't there be a direct increase in ROE as well. But there are some other things that go into equity that are a little bit harder to predict. So we still feel very good about the greater than 17%. And certainly, the things that we've done on the capital efficiency front will help us ensure that we are trending towards that. And is there upside to it? Yes, potentially. But there are some things in the equity component of that, that just are -- don't give us enough insight at this moment in time to do anything with that guidance.

We have reached the end of the question-and-answer session. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to HASI's First Quarter 2026 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Aaron Chew, Senior Vice President of Investor Relations.

Thank you, operator, and good afternoon to everyone joining us today for HASI's First Quarter 2026 Conference Call. Earlier this afternoon, HASI distributed a press release reporting our first quarter 2026 results, a copy of which is available on our website, along with the slide presentation we will be referring to today. This conference call is being webcast live on the Investor Relations page of our website, where a replay will be available later today.

Some of the comments made in this call are forward-looking statements which are subject to risks and uncertainties described in the Risk Factors section of the company's Form 10-K and other filings with the SEC. 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.

Joining us on the call today are Jeff Lipson, the company's President and CEO; as well as Chuck Melko, our Chief Financial Officer. Also available for Q&A is Susan Nickey, our Chief Client Officer.

To kick things off, I will turn it over to our President and CEO, Jeff Lipson, who will begin on Slide 3. Jeff?

Thank you, Aaron, and welcome to our first quarter 2026 earnings call. We are pleased to report a strong start to 2026 with outstanding financial results and a positive outlook for the business.

In Q1, adjusted EPS was $0.77, driven by growth in revenue across the board, along with 0 new share issuance from our ATM. Adjusted ROE was 15.7%, the highest quarterly level in our history. Adjusted recurring net investment income was up 29% year-over-year to $101 million, and our managed assets were up 13% year-over-year to $16.4 billion.

We continue to execute on our 2026 business plan, and we are reaffirming our 2028 guidance of $3.50 to $3.60 adjusted earnings per share and adjusted ROE of 17%.

Moving to Slide 4. It's important to highlight how our Q1 results represent particularly strong performance in light of the ongoing volatile geopolitical and macroeconomic developments impacting financial and energy markets.

Most notable, of course, is the Iran war, creating volatility, particularly in oil prices and jet fuel availability. Separately, the increase in power prices in the U.S. has created affordability challenges. Additionally, credit and liquidity challenges have emerged in the private credit sector with implications across financial and credit markets.

Despite these challenges impacting the economy, our business has remained consistently profitable with ongoing earnings growth as we effectively address this volatility. In fact, certain of these developments reinforce the value of renewable energy and HASI's investment thesis.

For example, once installed and operational, renewable energy projects have minimal operating costs and do not depend on an ongoing supply of fuels, but instead are powered by naturally replenishing resources.

Renewable energy projects are less vulnerable to geopolitical volatility and bolster energy independence and national security, and they provide a high degree of cost certainty and visibility. The intermittency of renewables can be increasingly improved by continued storage development.

In addition, beyond the implications for renewable energy, the recent geopolitical and macroeconomic uncertainty has also served to accentuate the prominent attributes underpinning HASI's business model of offering differentiated capital solutions to clients supported by project cash flows.

This business model results in HASI offering our investors low-risk, diversified exposure to growth in U.S. energy transition infrastructure, stability and visibility of long-term predictable revenue and a proven track record of exceptional risk-adjusted returns. In the face of this backdrop, we continue to demonstrate the resilience of our business and our ability to execute at a high level with strong operating results.

Turning to Page 5. We closed more than $460 million in new transactions in the quarter that will be held at CCH1 and on our balance sheet. And we increased fee-generating assets 130% year-over-year to $1.1 billion. In terms of the returns on these investments, new asset yields on portfolio transactions closed in the quarter remain over 10.5% for the eighth quarter in a row. Supported by the increase in new asset yields over this period, our portfolio yield rose 90 basis points year-over-year to 9.2%.

Finally, we continue to optimize our balance sheet in the first quarter of 2026. As Chuck will provide greater detail on shortly, we were active issuing low-cost, long-duration debt and redeeming higher coupon debt while issuing no ATM shares in the quarter.

Turning to Slide 6. We highlight the investment activity for the quarter, including a robust Q1 total volume of $637 million, of which $462 million will be held by CCH1 and on our balance sheet. This volume keeps us on pace for the $2 billion to $3 billion expectation for 2026 that we discussed on the Q4 call. The investments were well diversified and underwritten with attractive risk-adjusted returns. Our investment platform is continuing to deliver on our goals and fueling the continued growth in our profitability.

Turning to Page 7. On Monday, we jointly announced with Ameresco the creation of Neogenyx, a newly formed joint venture representing the spin-off of Ameresco's biofuels business. We are excited about co-investing in what we expect to be the premier developer and owner-operator of biofuels projects. Ameresco has been a partner of HASI for over 20 years and across more than 60 investments, and we have tremendous familiarity and confidence in Mike Bacus and their team.

This investment fits well into the HASI business model as it includes a very strong partner, an asset class renewable natural gas in which we have extensive experience, operating projects that we were able to diligence, a business model well suited to current and expected future market demand and a structure that provides a priority position on cash flows.

Neogenyx' existing portfolio of operating projects allow the company to have scale from day 1 and a strong pipeline of identified development opportunities that will facilitate future growth. Our investment in the venture is initially $400 million, and we will own 30% of the enterprise with a priority position on cash distributions until a hurdle return is achieved. And our long-term expected return on investment is higher than our typical investment given the large upside potential of the business.

Turning to Page 8. Our pipeline remains greater than $6.5 billion as end market dynamics, including consolidation, continue to result in a wide variety of developers and sponsors seeking project level capital. In addition, power demand continues to result in an elevated level of development activity and policy items are well understood and workable.

I also want to mention a definitional change. We first introduced the concept of what we call the Next Frontier in our Q4 2024 call, to illustrate the tremendous growth opportunities for the business. We continue to pursue certain of these asset classes, and we'll disclose closings as they occur. However, from a presentation perspective, we have recategorized these into the 3 existing core segments and an Other Sustainable Infrastructure category as appropriate in order to simplify our disclosure.

And with that, I would like to turn the call over to Chuck to discuss our financial results and funding activity in greater detail.

Thanks, Jeff. We are continuing to build off the success achieved in 2025 and have had a great start to the year. We have increased our adjusted EPS to $0.77 per share in the first quarter compared to $0.64 per share in the same period last year. Our adjusted earnings increased 31% from Q1 last year to $102 million in Q1 this year. This increase is predominantly driven from the growth in our investments in CCH1 and our portfolio.

Our focus on being more efficient with the deployment of equity capital has contributed to our higher adjusted ROE this quarter to 15.7% compared to 12.8% in the same period last year. The marginal ROE that we are generating, is making an impact, and we are benefiting from the reduction of share issuances that we need to fund the growth of our business.

While we achieved growth in our adjusted EPS, our GAAP results included an HLBV loss related to the timing of tax credit sale proceeds distributed to tax equity investors. And we expect this HLBV accounting will fully reverse next quarter.

On the next slide, we have seen growth in our adjusted recurring net investment income of 29% to just over $100 million, and this source of income is not only generating a good base of recurring earnings, but is also growing into a larger component of our overall earnings relative to our other sources of income, as we illustrated on last quarter's call.

Our gain on sale this quarter was $23 million. And as we often highlight, our gain on sale income does not increase quarter-to-quarter on a trend line. And while we do expect full year gain on sale to be similar to last year because of the higher level of gain on sale this quarter, it is reasonable to expect lower levels of gain on sale for the remaining quarters of the year.

The other component of our revenues that consists of upfront fees from CCH1 and other advisory-related fees continue to increase and contributed $9 million to our earnings this quarter.

On the next slide, as we close transactions, they become managed assets, which are held either on our balance sheet directly or indirectly through CCH1. These transactions can also be held in securitization trusts where we typically hold a residual interest. We generate upfront and ongoing income from these transactions and a growing base results in more earnings.

Our managed assets are now at $16.4 billion, up 13% year-over-year, and we are continuing to see the high-quality performance of these assets that are reflective of our prudent underwriting with an average annual realized loss rate of less than 10 basis points. The portfolio continues to be well diversified. And in addition to the diversity of asset classes, each of the individual investments also typically consists of multiple projects with uncorrelated cash flows.

The earnings power of our portfolio demonstrated by our portfolio yield has increased to 9.2% and is a result of the continued closing of transactions into our portfolio at higher yields. The CCH1 assets in which we hold 50% of the equity in our portfolio, are now at $2.3 billion and are providing a growing stream of ongoing management fees.

We also just recently completed a private debt placement at CCH1 in which the notes were priced at a spread of 195 basis points to the 10-year treasury, a tighter spread than the previous issuance. This is further validation of the quality of the assets that we are investing in and a contributor to the increasing returns on our investments in CCH1.

On the next slide, we are continuing to realize a lower cost of capital and successfully manage our liability structure, as demonstrated through the transactions that we executed in February. We issued a total of $1 billion in bonds between a $400 million senior bond priced at 6% and a $600 million junior subnote priced at 7.125%

The proceeds of these transactions were used to retire our remaining $450 million senior bonds due 2027 with an 8% coupon and create additional liquidity for the upcoming $600 million maturity. The outcome of these transactions resulted in a lower cost of capital as the spread on our senior bonds improved 50 basis points and the subordination premium on the junior sub notes improved by 48 basis points from the most recent issuances.

The maturity profile of our debt platform was significantly extended with the senior bond offering a 10-year maturity and on our junior sub note a 30-year maturity. Adjusting for the upcoming 2026 maturity, which we have already reserved for with our existing liquidity, the weighted average maturity of our corporate term debt extended from 7.9 years to 12.8 years.

On the next slide, I've already made some brief comments on the topics outlined here, but there are items that really emphasize the benefits of our capital platform. First is our liquidity position. It is a real strength to our business to have the flexibility and timing to access the market and raise capital opportunistically and reduce our costs.

We currently have $2.3 billion available, a portion of which we plan to use to pay off the $600 million of remaining notes due in June. After this maturity, our next corporate bond is not due until 2028.

Lastly, with our focus on funding more investment with the need for less additional equity, the use of CCH1, issuance of junior subnotes and the higher reinvested portfolio cash, resulted in no additional shares issued through our ATM in the first quarter, and we are on track to issue a minimum amount in 2026 based on our current funding expectations. When coupled with the growth in our managed assets, we are on track to meaningfully accelerate our profitability.

I will now turn the call back to Jeff.

Thanks, Chuck. Turning to Slide 14, we display our sustainability and impact highlights, noting our cumulative carbon count and water count numbers, reflecting the significant impact of our investment strategy.

Let's wrap up on Slide 15. We reiterate the themes of strong returns in the business, coupled with ongoing access to low-cost capital that will continue to drive our business towards achieving our guidance levels.

I will conclude by addressing the management changes announced today. First, I would like to welcome Christy Freer to our executive team as our Chief Legal Officer and look forward to working with Christy. Next, I want to acknowledge Marc Pangburn for his tremendous contribution to HASI over the last 12 years, as Marc has been instrumental in closing countless important transactions that have led to our success.

In his new role at GoodFinch, we will continue to work closely with Marc, and he will continue to provide value for HASI by optimizing our SunStrong business. Our prosperity has always been a function of numerous dedicated and talented individuals. The 4 executives identified in today's press release are all enormously talented and have already built teams and contributed significantly to HASI's success.

I have full confidence in each of them, in their expanded roles, and I'm thrilled we have this depth of talent in our organization. Annmarie Reynolds, who recently closed Neogenyx; and Manny Haile-Mariam, who recently closed Sunzia, are extremely well qualified to be our Co-Chief Investment Officers. They both possess outstanding leadership qualities and significant commercial acumen as well as a track record of success.

Daniela Shapiro, who has grown our BTM business significantly over the last 4 years; and Viral Amin, who has upgraded our risk management infrastructure, are both accomplished leaders who will do a tremendous job as our Co-Chief Risk Officers and investment committee members. They both possess leadership, credit and commercial skills, extremely well suited to their critical roles. I'm very excited by these executive appointments, and I congratulate all. Thank you.

Operator, please open the line for questions.

[Operator Instructions] Our first question comes from Vikram Bagri with Citi.

To start off, I wanted to dig into this new JV with Ameresco. I understand the return on that project is higher than where you're tracking -- where you have been tracking recently. Could you clarify what the yields are or returns are on that investment?

Also, if you can clarify relative to your 30% equity interest, what would be the initial cash flow from that, your take of cash flow will be initially? And then finally, how do you see this JV evolve? Is this going to be a vehicle for consolidation, organic growth? Is the -- do you envision this JV to take the company public at some point or Ameresco buys you out in the long term? And then I have a follow-up.

Sure, Vikram. Thanks for the question. I would say the venture is primarily focused initially on organic growth. There may be consolidation over time in terms of buying other platforms, but that's not the principal objective. There's a critical mass of operating projects going in day 1, and there's a very strong pipeline that the team there has developed. So it's a little bit more focused on organic growth.

In the long term, whether we someday jointly take this public is much too early to say. We're kicking it off this month. So again, we're focused on building this up into something very special, but the exit strategy, it's a little premature to talk about.

In terms of our cash flow, the initial investment based on the operating projects is roughly $100 million. The other $300 million will go in as additional projects are developed. And then our -- I think you asked about our cash flow coming back. That's not something we would disclose. Obviously, we have an expectation based on contracts of a certain amount of cash coming back and has a very strong cash yield, but we won't disclose that specifically.

Got it. And then as a follow-up, I see you moved 2 receivables from category 1 to category 2. Can you provide more details on that? Fully understanding that this is relatively small for you. I'm just trying to understand in which market are you seeing some stress? Are these residential solar assets, utility scale, RNG and if both the assets are in the same sector? Any color you can share on that would be helpful.

Vikram, this is Chuck. Yes. So on the question of the category 2 there, I mean, just to set the stage here, I mean, you definitely hit on the point that we do have very small amounts in that category. It isn't often you see too much movement in that category, but we still have 98% of our portfolio that's in the category 1 bucket.

The item that moved in there, I mean, I think what we'd say with that is that there is a project that is having some technical challenges with some of the equipment, and it needs some -- a little bit more investment to correct the issue at hand with the equipment itself. But there are various plans to get that project where it needs to be on our original economics. And we certainly think there's a good outlook for that.

So it's one of those things where we track projects, as you know, every quarter. And when we see something -- that there's something going a little bit in one direction here that we need to pay attention to, we will not hesitate to put in category 2 because we are paying attention to it.

Our next question comes from Chris Dendrinos with RBC Capital Markets.

Great. And maybe to follow up on Vik's question there and ask this more directly. There is some challenges going on in the resi space right now and a few other folks have highlighted some debt challenges. Are you seeing any of that on your end? And is there any kind of risk exposure there that you could speak to?

Thanks, Chris. I would say, generally, no, there is a bit of an uptick in some delinquencies in the resi sector generally, and we're seeing a little bit of that in our portfolio as well. But it's tracking well within our original underwriting expectation of charge-offs and our loans there are all performing, literally 100% of the loans in resi are performing. So again, it's well within our underwriting guidelines, and we're not seeing stress in that portfolio.

And then maybe as a follow-up here, the tightness in the tax equity markets have been kind of broadly highlighted that some of the banks are maybe taking a step back near term waiting for treasury clarity. Is that translating into any sort of funding opportunity for you all where maybe there's a hole in the cap stack and you're able to kind of fill it here?

I'm going to ask Susan to answer that. I think on -- or at least respond to the part about the tightness in the market in terms of refilling gaps in the capital stack, that's usually not the dynamic. The tax equity obviously serves a specific purpose in terms of the tax attributes that it would be hard to substitute traditional HASI capital for that tranche. But the first part of the question around the tightness of tax equity, I'm going to let Susan answer.

Yes. Thanks. A couple of comments on that. One is that just in terms of the tightness, it's important to note that the reports from last year is that the tax equity market actually grew significantly. Crux is one of the -- the Crux platform tracks some of that data and the total market increased 26% to $63 billion. And very importantly, the tax transfer market, which is still in its third year, grew 50% to $42 billion.

So as we move -- and some of the -- at the end of the year, some of the corporates, and there's now nearly 25% of Fortune 1000 companies participating in the market who're dealing with their own understanding of where their corporate tax bill was going to settle with the change in the tax laws. But as we move into this year, I think some of that tightening that's been reported is what we're seeing and hearing from some of the stakeholders, but also from Crux is starting to have more liquidity as corporate buyers know where they're settling out in that regard and providing some uplift.

I think the second issue, which is a bit different is regarding the FEOC rules related to clean energy tax credits being transferred and not to Foreign Entity of Concern ownership. And that reflates again, to 2026 tech-neutral tax credits, not the '25 or before substantial safe harbor pipeline through '23, which will -- many of the players already have their inventory set.

So what we expect in that regard is certainly the IRS and treasury have been coming out with guidelines, and we need them -- people are waiting for that guideline on -- to be clarified on those -- the tax credit ownership. And again, there's precedents, but as we know, with ambiguity. Some tax equity investors and banks are waiting for that clarity, which should come. And that is important, obviously, for the whole industry because nuclear, carbon capture, geothermal, all the technologies need that guidance.

And I'd say lastly, we certainly want to keep working to expand the tax credit market given there'll be continuing growth in the supply with all the different projects being built with these technologies and manufacturing and HASI is working with the industry in American Clean Power to develop standardization documents to help facilitate growing the corporate tax credit market. Does that help address what you've heard?

Yes. Well, I guess maybe just a quick follow-up would be, I mean, is this any way to have a bearing on the investment pace that you all are going on right now?

Not -- in our pipeline, again, as we've talked about significant, our sponsors, and it's really across certainly the grid connected, and I think Sunrun and others have mentioned it, have safe harbored their pipelines through 2030, if not the next 2 years. So it wouldn't directly impact what we're seeing in terms of growth.

Our next question comes from Ben Kallo with Baird.

My first question is just on CCH1 and the capacity left there under that agreement. And then following that, has anything changed with your partner in the -- their appetite to invest more after that first tranche?

So thanks, Ben. On the second part of the question, no, our partner has continued to express significant enthusiasm around the partnership. And as evidenced by the upsize late last year, has shown a strong willingness to continue to invest. As we disclosed here on Page 11, the assets are $2.3 billion. The commitments are a bit higher than that for some things that are in CCH1, just haven't funded yet. And as I think we mentioned last quarter, as structured right now and given our pipeline, we certainly have enough capacity for this year. And we're working on a CCH2. We've started to commence some activity there. I can't say too much in terms of detail there, but we certainly are intending to have that up and going by the time CCH1 capacity has been utilized.

I'll also add -- sorry, Ben, just also to provide a little bit of context for the capacity that we have. And we've said that in the past that we've got roughly about $5 billion of capacity available, and that's comprised of the equity commitments between us and KKR. It's roughly about $3 billion.

And then -- as we said before, we are -- and we did mention in our call here that we have issued some debt at CCH1. So keeping our leverage ratio at CCH1 under 1x -- anywhere between 0.5 to 1x debt to equity, that gets you to a total of $5 billion and comparing that to the $2.3 billion that we currently have in there.

Okay. Great. Just on -- in terms of your cost of capital, can you talk about how much you think you can reduce your cost of capital? I know you guys have done a lot. But also, I just -- going from '25, I think on Slide 17, you had 5.8% interest expense over average debt balance. It ticked up in Q1. So maybe the -- could you explain that a bit? And then just how much more you think you can reduce your cost of -- your total cost of capital going forward?

Yes. So the uptick that you're seeing in Q1 is largely attributable to the issuance that we've done on the junior subordinated notes. So they do carry a little bit higher of a coupon. But from an overall cost of capital standpoint, because we get 50% equity credit for purposes of our leverage ratios with the rating agencies, we do have to -- we do get to issue less equity.

So a little bit higher coupon that we're paying an interest expense, but we are issuing less shares. So overall, it is a benefit to our cost of capital. And I think if you took out from that 6.1%, the interest expense related to those hybrids, the debt cost is relatively flat, around 5.8% or so compared to last year.

Now on the -- how much further can it go question, we've obviously seen a benefit and reduction of spreads on the debt that we're issuing. And I think a large part of that is due to just the efforts that we put into getting out there and talking to the investment-grade investor market, and we've had some success with that. We're still relatively new to the market. So there is a little bit improvement we could see on the spread.

But as you probably know, spreads across the board are a little bit tight in the investment-grade market, and they can only go so far. But right now, with the guidance that we have out there, do we need this to go lower? No, we absolutely don't. And with the margins and the yields that we're seeing on our assets and the equity efficiency that we're seeing, we don't really need it to go down to further increase our returns.

[Operator Instructions]

Our next question comes from Maheep Mandloi with Mizuho Securities.

Maheep Mandloi from Mizuho. Maybe just on the investment with Ameresco's Neogenyx. Can you just talk about the rationality over there or like what motivated you to invest? Is it somewhat similar to what we have seen with -- on the resi solar side, which helps with ITC or something else which helps you capture more value with the RNG assets?

Sure. Thanks, Mandeep. I think -- and I talked a little bit about this in the prepared remarks, some of the attributes that really attracted us here were, first and foremost, the partnership we have with Ameresco and the trust and familiarity we have with their team. It's very consistent with how we've built the business with programmatic partners. Here, we were able to, again, diligence all of the investments day 1. RNG is something we're very familiar with, and we've been very active in RNG, as you know. And so it's an asset class we well understood.

And then there was great alignment with the Ameresco team of what we want to do with this business going forward, what the relative structure of the parties would be in terms of ownership and cash flows. And so it's a real opportunity for us to do something perhaps slightly different than we've done in the past, but with very, very similar attributes and certainly more upside than most of what we do at the project level investing.

Appreciate it. And on the Ameresco's deck, they kind of talked about a $2 million to $4 million of net income to you guys from the -- for this year for Neogenyx. Is that like the framework we should think about and build upon that going forward? Or how to think about the modeling here?

Sorry, I missed one word there, Mandeep. Can you just repeat that question, please?

Yes, sure. On Ameresco's presentation, they talked about your minority interest in the net income at around $2 million to $4 million for this joint venture. Just curious if that's something we should assume for modeling purposes for this year for -- on your...?

No. From a HASI perspective, our accounting, of course, is different than Ameresco's. Our accounting here will be simply an equity method investment, consistent with what we've done in the past. We underwrote this in terms of cash-on-cash IRR, and we're going to account for it consistent with how we've accounted for our other equity method investments. So there's no pass-through of direct income as part of our accounting. And Chuck may want to expand on that.

Yes. Maheep, I think at Ameresco's release, all they did for that number was simply just take 30% of the total EBITDA expectations for that project, which, as we've mentioned, this is an investment that is very similar to what we do where it's a structured equity investment. And when you have structured equity investments, we're focused on the cash-on-cash returns. There's targeted returns that we go after. And it's not as simple as just taking 30% of the total project EBITDA.

Our next question comes from Noah Kaye with Oppenheimer & Company.

The first one, just on the 12-month pipeline. You replenished this right, quarter-over-quarter, it's still greater than $6.5 billion. It looks like the largest percentage increase and therefore, dollar increase was in grid-connected assets. And certainly, that tracks with the increase in grid scale renewables being deployed. But maybe just comment a little bit on what drove that uptick? And can you talk a little bit about the nature of those transactions? Are these primarily mezz debt, pref equity or of a different nature?

Sure. Thanks, Noah, for the question. And I always caution against too much precision on pipeline disclosure. Of course, it's greater than $6.5 billion and it's a 12-month pipeline. So there's always a little bit of judgment involved. But to answer your question, grid-connected does have a very strong pipeline. The vast majority of it is programmatic partners that HASI has worked with before and the majority of it is pref equity on solar projects. So I think that's the majority of that pie slice of the pipeline.

Very helpful. And then this was a quarter where there was 0 ATM issuance. The progress from the company and becoming more capital light, we're all seeing it. I think in the deck, it says minimal equity issuance expected for '26. Not asking you to put any kind of finer point on that, but from an equity perspective, I mean, how close do you feel this business is to really a self-funding model?

I would say very close. I think that minimal you can interpret as if the volume of fundings this year is within the expectation that we set, that could very well be 0. If we're a little more successful than that estimate and we end up doing $4 billion or $5 billion, then certainly you would see us issuing more equity, but that's accretive equity, and that's a really big year in terms of new originations. So that's a good scenario as well. But I think if we hit the expectation range that we established, I think we'll be -- we are already self-funding.

Noah, I'll also add to this that we certainly have seen an uptick in transaction closings that we've had. And looking forward, we do expect some growth in that number. And if you go back to the slide that we prepared last quarter where it shows how far our each dollar of equity goes, we are making much better progress on how little equity we need to issue when we're making our fundings. But what you will see -- certainly see in the future is that if we are issuing equity, the percentage of that equity relative to the total fundings is much, much lower percentage than you've seen historically.

Ladies and gentlemen, that was the last question for today. The conference call of HASI has now concluded. Thank you for your participation. You may now disconnect your lines.

Greetings, and welcome to HASI's Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Aaron Chew, Senior Vice President of Investor Relations.

Thank you, operator, and good afternoon to everyone joining us today for HASI Fourth Quarter 2025 Conference Call. Earlier this afternoon, HASI distributed the press release reporting our fourth quarter 2025 results, a copy of which is available on our website, along with the slide presentation we will be referring to today.

This conference call is being webcast live on the Investor Relations page of our website, where a replay will be available later today. Some of the comments made on 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. 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.

Joining us on the call today are Jeff Lipson, the company's President and CEO; as well as Chuck Melko, our Chief Financial Officer. Also available for Q&A are Susan Nickey, our Chief Client Officer; and Marc Pangburn, our Chief Revenue and Strategy Officer. To kick things off, I will turn it over to our President and CEO, Jeff Lipson. Jeff?

Thank you, Aaron, and welcome to our fourth quarter and full year 2025 call. We are very pleased and proud to report that 2025 was an outstanding year for HASI with meaningful progress in all aspects of our business and a particularly strong finish in the fourth quarter, with a higher volume of transactions closed than in any previous full year. The level of client development activity remains elevated and the demand for project-level capital is extremely strong, creating continued tailwinds for our business, as evidenced by both our 2025 results and our outlook for the next several years.

Our climate clients asset strategy continues to thrive. As we execute on closing attractive climate positive investments, with programmatic clients supported by project cash flows from high-quality offtakers.

Turning to Slide 3. Not only was 2025 the strongest year of results we have ever recorded on virtually every metric used to monitor and assess our performance, but the underlying fundamentals of the business have been enhanced in establishing pathways to future continued success. Notably, nearly every facet of our business is operating at a high level right now, including new investment volumes, returns, profitability and capital efficiency.

These higher volumes are supported by a new paradigm of load growth in the United States, rising demand for third-party providers of permanent capital and HASI competitive advantage. We closed $4.3 billion in new transactions in 2025, 87% more than 2024. And our pipeline has continued to grow from more than $5.5 billion at the end of Q1 to more than $6.5 billion at the end of 2025.

Not only have our investment volumes scaled meaningfully larger, we are also increasing returns on these investments. For the second year in a row, yield on new investments has exceeded 10.5%, meanwhile, our bond spreads continue to narrow, and our senior unsecured term bonds are trading with a yield below 6.25% today. These attractive margins have been a key factor in driving adjusted EPS growth, which was 10.2% in 2025.

We have also made significant strides enhancing our business model and capital efficiency. In 2025, we issued our inaugural junior subordinated hybrid notes. With access to this new segment of the bond market, along with our investment-grade ratings and our CCH1 co-investment vehicle with KKR, we have become significantly more profitable with each new share and are issuing fewer shares to grow our business.

And it's also noteworthy that we upsized CCH1's equity commitments by $1 billion in the fourth quarter. This combination of one, large volumes; two, increasing profitability; and three, improved capital efficiency have combined to push our 2025 ROE above 13%. And their incremental ROE above 19%. On the next few pages, I will further expand the discussion of these 3 items.

Turning to Slide 4. I want to particularly highlight the enormous year we had in closing new investments in 2025. Of course, the $1.2 billion investment in the SunZia project we announced on our last quarterly call was a big contributor. But even without that investment, we closed more than $3 billion of new investments last year. This is a testament to not only how strong the underlying demand is in the U.S., but also the important role HASI is playing in the market and the strength of our business model.

Importantly, we have accomplished this with no change in our risk appetite or the general range of returns on the investments. Our asset level investment strategy continues to be well received by our clients, and is driving attractive risk-adjusted returns. Of note, historically, we have reported on figure covering the total transactions closed volume, including both the securitized and on balance sheet. However, going forward, we're going to break this out separately. In the dark blue bars, you can see our investment volume retained on our balance sheet and included in CCH1 totaled $3.6 billion in 2025, up approximately 140% year-over-year from $1.5 billion in 2024.

On Slide 5, we display our diverse pipeline, which remains in excess of $6.5 billion. Virtually all of our markets remain active and opportunities to invest continue to grow. Ultimately, our business is driven by fundamental economics, which outweigh policy changes as it relates to development activity. The underlying demand for power and the cost effectiveness and shorter development cycles in our asset classes combined to create an attractive investing environment.

The economics of this development continues to improve. -- as PPA rates have increased more than 40% over the past 3 years. In our behind-the-meter business, the trend towards more third-party ownership and leases, results in more opportunity, as we have always focused on providing capital to lease portfolios. The increase in battery attachment has allowed for an increase in customer payments and a corresponding increase in our investment opportunity.

Our grid connected business is benefiting from the significant growth in the renewables pipeline, primarily driven by solar and storage, which now exceeds $230 billion. Renewables now comprise 99% of the projected capacity additions in 2026. And our FTN business remains a growth engine as RNG production is forecasted to more than double by 2030, and will benefit from the trend of increasing gas production and the existing infrastructure.

Turning to Slide 6. We emphasize the diversity of our platform, which is an underlying strength of the business model. The chart depicts different asset classes achieving the highest volume in various years. Notably, after several years of minimal volume, onshore wind investments were 33% of the volume in 2025. Our ability to pivot as opportunities arise among a diverse set of asset classes from a large pipeline is a key factor in the consistency of our financial results.

Turning to Slide 7. We recapped the last 5 years of adjusted earnings per share. Again, I note the resilience of our business model and the outstanding execution of our team. This 5-year period included a pandemic supply chain challenges, elevated inflation, a rapid rise in interest rates, policy disruption, permitting and transmission difficulties, client bankruptcies and many other challenges. Despite these obstacles, our team remained focused on sourcing, closing and effectively managing large and diverse volumes of high-quality climate positive investments, producing these consistently outstanding results.

In fact, our 10-year compound average growth rate and adjusted earnings per share is also 10%.

Turning to Slide 8. We emphasize that each dollar we invest has become increasingly more profitable as measured by incremental ROE, which is a metric that Chuck introduced last quarter. This metric is measured by the change in adjusted earnings divided by the change in shareholders' equity. On this basis, incremental returns in 2025 exceeded 19% as the combination of higher yields, lower debt costs and balance sheet efficiency continue to enhance our profitability.

On Slide 9, we provide an illustration of our tremendous progress achieving improved equity efficiency. Prior to CCH1, $100 of proceeds from new equity issuance resulted in $300 of new investments. The additions of CCH1, modest debt on the CCH1 vehicle and our hybrid offering have collectively produced an outcome such that $100 of proceeds from new shares now results in $1.35 billion of new investments.

This represents an improvement of more than 400% as measured by the earning assets that can be originated from each dollar of equity.

Turning to Page 10. We emphasized 2 large investments we closed in the fourth quarter. On the left, a joint venture with our longtime partner, Sunrun, totaling $500 million. Residential solar and storage continues to benefit from increasing utility rates and consumers' desire for affordability and resiliency. The unique structure of this joint venture enables ITC transferability in a programmatic and efficient way, allowing Sunrun to scale its business while providing an attractive risk-adjusted return to HASI. And on the right, we reemphasized the SunZia project with pattern that we discussed on the third quarter call. Our largest investment ever, this is the largest onshore wind project in North America and remains on schedule to fund in the second quarter of this year.

On Page 11, we reflect and update an extension of our guidance. Our consistent results allow us to once again extend our guidance out 3 years until 2028. In that year, we expect adjusted earnings per share to be in the range of $3.50 to $3.60. We are shifting to a nominal EPS guidance range from an EPS growth rate so that we may provide more precise updates in the future.

Additionally, we expect our adjusted ROE to exceed 17% by 2028, driven by the profitability and efficiency discussed a few moments ago. Regarding our payout ratio, we discussed at our Investor Day in 2023, a trend of utilizing slower dividend growth and correspondingly more recycled retained earnings to reduce the payout ratio to 50% by 2030. We are now ahead of schedule on that trend and expect the payout ratio to be below 50% by 2028 and below 40% by 2030, as capital recycling also adds to the equity efficiency of our business model.

To summarize, our 3-year plan underscores our confidence in our ongoing ability to achieve our profitability objectives. Now I'd like to ask Chuck to discuss our financial results and funding activity in greater detail. Chuck?

Thank you, Jeff. Turning to Slide 12. As previously highlighted, we have experienced meaningful growth in our transaction closings, and our results in 2025 are a good indication of our ability to convert incremental closings to attractive returns. Our business model continued to deliver a 10% adjusted EPS growth rate up to $2.70 per share in 2025. We have been successful at building our recurring earnings that serve as a solid foundation for our future earnings growth, with adjusted recurring net investment income of $362 million, an increase of 25% from the prior year.

Our fees and income earned for managing assets in CCH1 and securitization trusts increased to $49 million in 2025, growth of 32% from the prior year. In addition, our securitization business continued to deliver with gain on sale contributing $65 million to our adjusted earnings. Our adjusted ROE is beginning to reflect the growth achieved in our profitability, as we have been able to maintain the recent increase in yields while also growing fees from CCH1.

As a result, our adjusted ROE rose 70 basis points from 2024 to 13.4% in 2025. With our recent junior subordinated note offering, we expect to further increase our profitability on each share of equity issued and to meaningfully reduce the reliance on new equity issuance to achieve our growth targets.

Our GAAP results were impacted by volatility that can typically occur in calculations of HLBV relative to our true economic returns in any given period. And also, as a reminder, the GAAP-based net investment income does not include the earnings from our equity method investments, which are a growing portion of our portfolio.

On to Slide 13. The foundation of our recurring earnings and growth in adjusted EPS and ROE is our managed assets, which grew 18% to $16.1 billion at the end of 2025. Our portfolio has grown to $7.6 billion and improved its earnings power with an increase in the portfolio yield to 8.8%.

A key strength to the overall quality of our portfolio is its diversification and our investment strategy. As you can see, our portfolio continues to not be concentrated in any particular asset class. And additionally, our investment strategy has contributed to our minimal level of losses with an average annual realized loss rate of less than 10 basis points. Specific to CCH1, we recently expanded the total equity commitments by $500 million each between HASI and KKR, bringing the total to $3 billion. We expect that the remaining capacity after considering CCH1 level debt and reinvestment of cash collections will get us through 2026, and we fully expect that we will either extend the existing vehicle or create a new one that will continue as a source of funding additional investments while earning asset management fees.

On Slide 14, the growth in our managed assets is helping increase the ongoing reliable earnings from our adjusted recurring net investment income. It provides a stable level of income that we can expect into the future and produce a steady growth in our earnings from year to year. Adjusted recurring net investment income is the largest component of our earnings. And as you can see by this graph, the largest driver of our earnings growth.

However, gain on sale is also a meaningful component but its contribution to adjusted EPS has been changing over time. If it were not for the impact of gain on sale per share, the growth in our adjusted recurring net investment income would have translated into even faster EPS growth over the last few years. As a result, we are focused on building our recurring income streams to provide a base level of earnings year after year. And despite the impact of the changing contribution of gain on sale, we can rely on it every year and has a great source of additional returns with minimal capital investment needed.

On Slide 15, a -- our liquidity and capital platform has been a key strength to the resilience of our growth as well as our ability to optimize returns after considering our cost of capital. Our liquidity has grown to $1.8 billion, and is scaling with the growth in our business. We have grown the diversity of sources of capital over the years and continue to do so in 2025. We have increased the commitments in CCH1, expanded our bank facilities, obtained our third investment grade rating and issued our first junior subordinated notes.

Enhancing our options has allowed us to lower our overall cost of capital, effectively manage liquidity and refinancing risk and reducing the need for equity to grow the business. Specific to our recent $500 million junior subordinated note offering, the rating agencies provide 50% or more equity credit in their leverage ratios for this instrument, which allows us to reduce equity issuances to fund our growth while remaining within the rating agency leverage targets for our investment-grade ratings.

Starting this quarter and going forward, when we report our debt-to-equity ratio, it will include an adjustment consistent with rating agency treatment. We intend to continue issuances in this market, especially given our focus on reducing the need for equity issuance to grow the business and accelerate our ROE. I will now turn the call back to Jeff for some closing remarks.

Thanks, Chuck. Turning to Slide 16. We display our sustainability and impact highlights, noting our cumulative carbon count and water count numbers reflect the significant impact of our investment strategy. In particular, I want to highlight that 2025 was not only the first year that the avoided annual CO2 emissions estimated from our new investments exceeded 1 million metric tons, but that it rose to a record 1.7 million metric tons in 2025, increasing the total annual CO2 emissions avoided from all of our investments to date to 10 million.

Now let's conclude on Slide 17. 2025 was in many regards, the strongest year of operational and financial results in our history. Investment volumes nearly doubled, return on equity increased significantly and is well positioned for future growth. Our diverse capital platform is working as designed for maximum efficiency and minimal cost and our 3-year guidance reflects an expectation of future meaningful growth and profitability. I would also note we have made significant investments in our own platform, particularly in talent and technology that have positioned the business for further scale as we now exceed $16 billion in managed assets.

These platform investments in our own infrastructure have created the foundation for additional expected growth. In closing, I would like to thank our talented team. And in particular, I would like to recognize and thank Steve Choslow for his outstanding 18-year tenure as our Chief Legal Officer, during which time he made an outsized contribution to HASI's success and our culture. As previously disclosed, Steve will be transitioning to a strategic adviser role in April. Thank you. Operator, please open the line for questions.

[Operator Instructions] And our first question we'll hear from Chris Dendrinos with RBC.

Congratulations on the strong quarter and a strong year. I guess maybe starting out here on the 2028 outlook, and you've highlighted that basically, you all are outperforming historical levels basically on all the metrics here. So what gets you to grow above a 10% CAGR? And it seems like maybe you're on pace to do that. So just kind of walk us through the guidepost here that we should be measuring you against to maybe outperform that over time?

Sure. Chris, thanks for the questions. And again, this business, we're very proud of the fact that over a 10-year period, we've had a 10% CAGR in our adjusted EPS. And I think the resiliency and the consistency of the business is quite admirable. The other thing we've really focused on is management credibility as it relates to guidance. So I think -- I don't think I know we've hit guidance -- every guidance that we've put out. So that's very important to us as well, so we maintain that credibility.

So the $350 million to $360 million is our guidance. As with any guidance, there are pathways to beat it. And in our case, there would be things like more volume better yield on the investments, lower debt costs than we've otherwise modeled would be the primary ones. There are also maybe discrete events like some strong monetization at some point, and other scenarios in which we'd beat guidance. But again, we're very focused on being intellectually honest with the Street and our management credibility. And so $350 million to $360 million is our guidance at this point.

Got it. And then maybe just on the media kind of near term. I noticed it didn't look like you all provided any kind of outlook for 2026 specifically. Could you provide any kind of color how should we be thinking about this year?

Sure. So I think we have been consistent over the last several years in putting out 3-year guidance and not necessarily speaking to the first 2 years. The primary reason for that is the lumpiness of the gain on sale business, it makes forecasting shorter periods, a little bit more difficult. But what I would say is there's nothing about 2026 that we call out either negatively or positively as related to the trend. And I would ask Chuck to see if he wants to add anything to that. .

I think, Chris, the 1 thing that I think we did put in a slide, just looking forward to 2026, given the success that we've had in our volume closings and specifically with SunZia driving us up to $4.3 billion of transaction closings while we are expecting meaningful growth and are seeing it come through in our pipeline, raising our pipeline of $6.5 billion from $6 billion that we reported last quarter. given the SunZia transaction and the size of that, we wouldn't, at this time, necessarily expect to be at $4.3 billion transactions again will be higher than historical closings, but don't expect a $4.3 billion number necessarily.

Our next question will hear from Davis Sunderland with Baird.

Can you hear me okay?

Yes. Thanks, Davis.

I apologize for any background noise. First of all, let me congratulate you and say thank you for the time and outstanding results in Q4 and 2025. My questions are actually somewhat of an extension from Chris' I wanted to go back to just the change in the guidance strategy and the messaging here. And I wondered if the switch to a point guide or a range of point guidance for '28, is it all related to you guys having maybe increased confidence or increased visibility or maybe tied to deal sizes getting larger? Or just any other thoughts you could provide on the why now as to guiding in that particular way?

Sure. Thank you for your kind words, Davis. And I would say the primary reason that we switched to nominal EPS guidance from EPS growth rate. Even though everyone can do the math is very simply, it allows us in subsequent quarters to perhaps be a little more precise in adjusting that guidance. So what you've seen from us over the last several years just to have a guidance number out there, and then to affirm it quarter after quarter because we were generally still in that range.

And then, of course, we did meet that expectation. Here, we may have a little more flexibility to adjust those pennies a little bit here or there, to allow disclosure of a little more precision as to where we're headed. So that's the primary objective here.

And maybe just a second question about investments and any other large deals that may be in the pipeline such as SunZia that may blur the average, if you will, just how we think about the normalized run rate for a full year going forward? If there's been a structural change in the business closer to $3 billion or certainly not run rate in Q4 and in all the future quarters. But any thoughts on just how we contextualize that into your pipeline.

Sure. I'm going to -- I'll say there's no structural change in the business, larger investment opportunities to materialize from time to time. And I'll let Marc perhaps talk a little bit more about our pipeline.

Sure. I think Jeff covered the primary point that when we look at our pipeline, it is highly consistent with the transactions that we have been closing recently, both in terms of risk profile and yield. There's no SunZia type project to call out in the pipeline. But that being said, even if there was, we likely wouldn't tell you until after it closed. And then the only -- you brought up project sizes, we are seeing project sizes increase. And that is, I'd say, due to 2 primary items. One is, of course, just these larger grid-connected complexes that are getting built. But then also whether it's reconnected or behind the meter the storage attachment rate going up quite significantly and the focus on storage driving more capital deployment opportunities as well.

And our next question will hear from Noah Kaye with Oppenheimer.

All right. And good afternoon, everyone. Maybe to get at this from a slightly different angle, so the pipeline was $5.5 billion or greater than that this time last year, now $6.5 billion, so a little under 20% growth. I guess -- do you feel like that is proportional to the growth in the TAM in the different sort of sandboxes that the company is going to participate in. Really, the spirit of this is -- have you been able to take some share? Or do you see some ability through platform investments and partnerships to take a greater share of the pie?

Thanks, Noah, for the question. I would say that's a difficult question to answer with precision in our markets. There's not necessarily great data on things like market share. But in general, I think directionally, the answer is yes. We do feel like we have increased our market share. We do feel like there's been some pullback from certain players who have been capital providers. And we've been able to absorb a little bit more. We feel our penetration with our own clients has improved. And therefore, we probably have increased market share, although there's not a strong way to prove it. And I would also make that comment without necessarily precision. So when you see our pipeline go up 20%, I wouldn't claim our market share has improved by necessarily 20%. But I would say directionally, we have increased our market share.

Yes. And the related question is really about leverage. As was alluded to earlier, you do have some increase in individual project sizes. You also spoke before about ongoing investments and kind of capacity within the organization. Just wondering how the capital efficiency versus individual project size versus just pure operating leverage plays into driving the incremental ROE going higher and the ROE targets for fiscal '28. If the question makes sense, basically trying to do some attribution here on what drives the inflection?

So maybe I'll start and if Chuck wants to add anything. I would say the building blocks are on Slide 9 in our deck. And you can see that it's not -- our equity efficiency is not entirely taking on more leverage. A big chunk of that equity efficiency is KKR's equity capital. So it's not entirely a play on leverage. But I think the proportional improvement of the dollars of investments we can close with each dollar of equity is displayed there. So hopefully, that somewhat answers your question. Those are really the building blocks of how we get there.

Yes. I'm sorry clear. I was talking about like debt leverage. I was talking about like operating leverage in terms of -- you grow your headcount, you grow your organizational capacity but are you growing revenues and profit on those revenues faster than you're growing the organization, that's the question.

Yes. Okay. I'm sorry. I answered a different question. So the answer to that question. I appreciate also, yes. We have been growing our revenues faster than we've been growing our expenses, and we are highly focused on improving our operating leverage. I did talk about towards the end of the call, making significant investments in talent and technology, and we're doing that. And we think they certainly will pay long-term dividends to the company, and we've made some of those investments already. We'll continue to make those investments in 2026. But on a trend basis, we are -- we are and have been and will continue to grow revenues faster than expenses. .

And now we'll hear from Brian Lee with Goldman Sachs.

A couple of big picture ones. Just -- if I look at the slides, you've consistently had a really good presence in the residential solar market. It looks like it's expected to grow here into '26. So first question would just be around you alluded to the traditional PPA lease product and you guys having good exposure there. Does this prepaid lease product that seems to be trying to make its way into the market to maybe offset some of the volume loss from the cash loan customer market over the past few years. What does that do for you guys in terms of financing opportunity or returns? Or are you going to be involved there? Just maybe give us a sense of what that has in terms of implications for your resi solar business model?

Sure. Thanks, Brian. And I'm going to ask Marc to answer that specific question. But as a preamble, I would reinforce what a success story resi solar has been for us as a long-term meet provider with several partners over many years. Our SunStrong joint venture that's worked out very well. in our most recent transaction that I talked about in the prepared remarks, with Sunrun, I think it's been a real success story in resi solar, and we expect it to continue to be an important component of our business. To answer your specific question around the prepaid lease product, I'm going to ask Marc to answer that.

Brian, we've seen over the past 10 years or so that we've been in resi, some prepaid leases. But as it relates to your current -- the comment on the current trend, we haven't seen any transactions using the prepaid lease structure to evaluate right now. But we'd certainly look at it to...

likely the more traditional lease and TPO products.

Okay. Fair enough. I appreciate that color. And then maybe just 1 kind of related, I guess, there was some recent news that maybe there is some tightness in tax equity markets. I mean, I guess, we've been kind of hearing that over the course of the past few quarters. But I guess, the recent attribution was around renewables financing, having maybe a little bit of tightness tied to policy uncertainty, whether that's for an entity of concern or other issues that haven't been finalized in terms of guidance, in this case, treasury guidance.

Does that have any implications for you guys? Are you seeing that? Is that actually an opportunity maybe, but just wondering if that's something that is impacting the marketplace as you see it and what it means for HASI?

Sure. So what we've seen is the deployment of transferability structures to be more frequently used. And I think that's in part due to some simplicity but also could be driven by of the tax equity items, which I think you've attributed it correctly to FAC and some of the desire for clarity. I don't think it's more than that, though. It's really just the market looking for clarity. And in the interim, the transferability structures have been deployed quite frequently. And I think a good example of that is actually the transactions that we highlighted with Sunrun and pattern were used the transferability structure.

And next, we'll move to Maheep Mandloi with Mizuho.

Thanks just on the treasury guidance, I think you probably gave more rigor here. But there's another question on that, but just like high level as you think through 2028. Any thoughts on how fee kind of impacts your portfolio here or the projects will be building over the next 3 years?

Sure. Thanks, Maheep. We are aware, guidance was issued literally while we're sitting in this room. So clearly, we haven't read it. But to answer that question a little more generally on FEAC, I'll ask Susan to speak to that. .

Yes. Thanks. The good news is that getting -- starting to get guidance out on Fiat in any of the guidance that continues to remain is important and helpful to give clarity around the rules. I think in the interim, as we think we've talked about over the last few quarters, our clients have generally safe harbored under the prior guidance before that was effective through December of last year for several years ahead of their pipeline of projects.

So the current guidance is really more -- is obviously focused on 2026, incremental safe harboring or started construction, but isn't really impactful for our current pipeline and most of what our clients had already planned for.

Got it. I appreciate that. And maybe a different question on some of these older vintage renewal projects which you might have under the portfolio, keep hearing from some of the developers that they see -- or some of these projects are up for the negotiations. As that happens, how does that can impact your earnings power? Or how should we think about that its impact to you that the cap income with the adjusted net income are you cash for you guys.

Sure. So I'm going to let 1 or more of my colleagues jump in on that. But I would start out by saying that we have seen a fair amount of PPA renegotiation and several of our projects recently, and we work closely with our sponsors on those renegotiations and given where PPA prices are now, those have been positive renegotiations as it relates to the long-term cash flows we expect from those projects. .

And where that shows up for us on a non-GAAP basis is in portfolio yield, which is the summation of all the individual yields and all the individual projects. And so when there's a new PPA, that's a new fact, and we would rerun the yield on a project.

Let me ask if anyone okay, I'm getting a lot of head nodding that, that was a sufficient answer. So hopefully, that answers your question. No one has anything to add to that.

And just trying to understand it, it feels like the capital needs for renegotiations were pretty low, right? So is that -- and just anything like does that accelerate your EPS growth beyond '28 or the think about this 10% CAGR here, especially with more of your negotiations happening.

We lost the beginning of that question, but I think you asked to these PPA renegotiations potentially result in higher EPS than our guidance in '28. Was that really the question?

6 Yes, yes. And then it seems like these are really get capital intensive, right the higher yield from these renegotiations. So just curious how that actually relates to the EPS here?

Well, sure. So I think our EPS guidance includes our best information at the moment and our best forecast as it relates to future energy prices and future PPA renewals. And so as part of our forecasting process and is included in these guidance numbers -- to the extent things trend better than that, that is an upside to the guidance. And I talked earlier to Chris' question around upside to guidance. But yes, that's another 1 if on many of the underlying projects PPAs are negotiated at a higher level than we've already put in our forecast. .

Got it. Appreciate that.

[Operator Instructions] Next, I'll move on to Praneeth Satish with Wells Fargo.

So clearly, there's a lot of capital flowing into data center development power infrastructure with your investments starting to become larger -- just wondering if you have any updated views on how you're approaching or would consider approaching data center financing I guess, what's your appetite to invest there? And to the extent that you've looked at, I guess, how do the opportunities in that segment compare to your other investment opportunities on a risk-adjusted basis?

So I would say a couple of things. One is we are indirectly obviously very involved in data centers in that -- it is the data center is driving so much of this demand that we keep talking about that in turn is driving development. So many of our projects are derivative of that demand, and therefore, we're already indirectly in the data center business. In terms of being more directly in the data center business, what I would say is really not too much different than we said last quarter, which is we've had conversations around the data center ecosystem with developers and other power providers to data centers. We're determining if there's a role for us, if there's a piece of business there that makes sense, and we don't really have anything to report just yet on that, but it's an area that we continue to evaluate what our role may be. .

Got it. And just going to your payout ratio and kind of the long-term guidance here. So payout ratio moves below 50% by 2028. And potentially 40% by 2030. I guess in the context of that, how should we think about your long-term dividend framework? Does that kind of create some flexibility for potentially a faster pace of growth, dividend growth in the outer years? Or is there kind of a preference to take the payout ratio even lower over time?

I think it's more the latter. We're not going to comment past 2030 where the dividend may go. That's already, I think, several years into the future. But I think the long-term trend of starting out as a REIT and with 100% payout ratio. And by, call it, 17 years later, having that payout ratio down to 4% or less is a reflection of the evolution of our business and the notion that we believe the business is more valuable and can grow faster if we recycle more capital. And we're doing that in a way where we're still increasing the dividend every year, which you've seen us do, but we can increase it a little bit each year and reduce the payout ratio because we do have such strong earnings growth. So I'm not going to comment past 2030, but I think this trend is very clear, as to how we think about the dividend and why we think this is the optimal way to run the business. .

Our next question will hear from Jeff Osborne with TD Cowen.

A couple of questions on my side. I was wondering more financial oriented but the -- I think you had a step-up in receivables outside of CCH1 mark, I was wondering if you could just touch on what drove the higher investment income. And this is a level we expect to continue from here?

Actually, I'm going to ask Chuck to respond to that. Thanks, Jeff. .

Jeff, yes, so as you likely know and understand many of investments that we make are now going through CCH1, but there are various assets that we may close that are directly onto our balance sheet that could show up as receivables. If they're in through CCH1, they come through as equity method investment of course. But we did have an investment that we put directly on our balance sheet and the yield that we're earning on that is consistent with our new asset yields. .

And just as a follow-up, is this like a level you expect to continue with the expansion of CCH1 in '26 of the recent expansion? Like how should we think about the mix between CCH1 and the legacy HASI?

I think you'll see more growth in the CCH1 and equity method investments than you will on the receivables.

Got it. Okay. And then along that line, I think you had a cash flow benefit from EMI equity method investments this quarter? Is that along the same lines that you were just answering or is there something else that drove that from a timing perspective? .

Yes, it's a couple of things. It is along those lines that we are getting cash distributions out of CCH1. But overall, with our portfolio, we are seeing an uptick in operating cash distributions that we're receiving. But we are also within our equity investments, we do from time to time have certain activities that occur where we get distributions such as refinancings that might occur within the portfolios. So yes, we are seeing growth in our equity method cash collections. That is a combination of an uptick in operating cash, but also CCH1-related.

Thank you. Thanks Jeff.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

Greetings, and welcome to HASI's Third Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Aaron Chew, the Senior Vice President of Investor Relations.

Thank you, operator, and good afternoon to everyone joining us today for HASI's Third Quarter 2025 Conference Call.

Earlier this afternoon, HASI distributed a press release reporting our third quarter 2025 results, a copy of which is available on our website, along with the slide presentation we will be referring to today. This conference call is being webcast live on the Investor Relations page of our website, where a replay will be available later today.

Some of the comments made in this call are forward-looking statements, which are subject to risks and uncertainties described in the Risk Factors section of the company's Form 10-K and other filings with the SEC. 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.

Joining us on the call today are Jeff Lipson, the company's President and CEO; as well as Chuck Melko, our Chief Financial Officer. And also available for Q&A are Susan Nickey, our Chief Client Officer; and Marc Pangburn, our Chief Revenue and Strategy Officer.

To kick things off, I will turn it over to our President and CEO, Jeff Lipson. Jeff?

Thank you, Aaron, and thank you, everyone, for joining the call. Welcome to the HASI Q3 2025 Earnings Call.

Before we discuss the prepared slides, I'd like to start the call today by reiterating 4 aspects of our business model and how they interact with recent market developments. One, the demand for energy continues to increase and virtually all forecasts expect this trend to continue. This demand will clearly result in greater supply, facilitating ongoing development by our clients, which in turn increases HASI's total addressable market. Therefore, the current underlying economic trends are a tailwind for our business. Additionally, if demand causes power curves to increase, our existing portfolio of investments will become increasingly more valuable.

Two, the operating environment remains conducive to business-as-usual activities. Capital markets have experienced relatively low recent volatility, and our clients' pipelines continues to be active and growing. Therefore, the backdrop remains very supportive for expanding our investment volumes.

Three, we continue to demonstrate that our business is able to achieve meaningful EPS growth in all interest rate environments. Since interest rates began to rise in 2022, we've been able to continue to grow our earnings with higher-yielding investments, prudent hedging strategies and opportunistic debt issuances. With 3 investment-grade ratings and our CCH1 co-investment vehicle, we have become even less exposed to changes in interest rates. If the yield curve steepens going forward, we do not expect any material impact on our profitability.

And four, virtually all of our investment markets are currently providing attractive opportunities. Utility scale renewables and storage, distributed solar and storage, energy efficiency, renewable natural gas and transportation have all been active markets for us in 2025 and continue to be well represented in the pipeline. And we remain excited with the emergence of our pipeline of Next Frontier opportunities.

In summary, these 4 items reinforce the framework of our successful business model, further evidenced by our outstanding results this quarter. We just completed the most profitable quarter in our history and closed the largest investment in our history as we continue to consistently achieve our goals and provide outstanding returns to our investors.

Now let's turn to the slides, beginning on Slide 3 and highlight a few key metrics. Our adjusted earnings per share in Q3 was $0.80, the highest quarterly EPS we have ever reported. This result was driven by strong growth in all of our components of revenue, which Chuck will discuss in more detail. Adjusted recurring net investment income, the new financial measure we introduced last quarter is 27% higher year-to-date over last year.

And our managed assets, which includes our portfolio as well as our partners' assets in CCH1 and the assets we have securitized off balance sheet, were up 15% year-over-year to $15 billion. And our year-to-date adjusted ROE also has experienced significant year-over-year growth, rising to 13.4%. We are reaffirming our guidance for 8% to 10% compound annual EPS growth through 2027 and noting that we expect to achieve roughly 10% adjusted EPS growth in 2025.

As detailed on Slide 4, we continue to make progress in the key areas of value creation for our business: one, originating new investments; two, optimizing return on our existing assets; and three, managing our liabilities and lowering our cost of capital.

First, in terms of new investments, as the box on the left indicates, both volumes and returns have been strong year-to-date. Not only did we close more than $650 million of new transactions in Q3 for a total of $1.5 billion through the first 3 quarters of 2025, but we closed on a $1.2 billion investment early in Q4 that has put us on a path to close more than $3 billion for the full year 2025, up more than 30% year-over-year. We will discuss this investment in greater detail later in the call.

Importantly, it is not only volumes that have been elevated, but our returns as well, with new asset yield in Q3 greater than 10.5% for the sixth quarter in a row. Meanwhile, our pipeline remains above $6 billion, even after taking into account the large October transaction.

Second, we do not simply create value originating investments, but also in how we optimize returns over the life of the investment. One example of this is the targeted asset rotation strategy we executed in 2024 through which we were able to monetize certain lower-yielding assets in our portfolio for a gain while generating cash that we were able to recycle into higher-yielding assets.

In Q3 of this year, we refinanced the senior ABS debt within the SunStrong residential solar lease portfolio, resulting in significant paydown of our mezzanine debt investments and a meaningful cash distribution to the SunStrong equity owners, of which we are 50%. This distribution created significant earnings in the quarter as we began to monetize the increasingly valuable SunStrong platform.

We have also maintained a strong risk return profile in our portfolio as evidenced by minimal annual realized loss rate of under 10 basis points. This low level of losses reinforces the predictability of our cash flow and our ability to effectively underwrite investment opportunities. And lastly, we maximize value in our business with our low-cost, diversified and efficient debt and capital platform.

It's notable to highlight that even after refinancing a portion of our low-cost debt due in 2026 at today's higher market rates, the increase in our cost of debt was only 10 basis points at 5.9% in Q3. In addition, we opportunistically added $250 million in hedges in September that reduced the base rate risk for our next debt issuance.

Turning to Slide 5. As I briefly mentioned a moment ago, we are excited to announce a new investment that closed in October but is significant enough to mention on our Q3 call. It is a $1.2 billion structured equity investment in a major component of what will be the largest clean energy infrastructure project in North America once completed in Q2 of next year.

HASI's involvement in providing capital to this project is truly a milestone event for our company and a reflection of the transaction size we can now accommodate given our access to capital. Developed and managed by one of the world's largest developers and owners of clean energy and transmission infrastructure, the project has several components.

Our specific investment is for 2.6 gigawatts of wind power supplied by the largest U.S. turbine manufacturer and backed by PPAs with a weighted average life of almost 15 years, including counterparties spanning energy majors, utilities, community electricity providers and universities. Consistent with our discussion last quarter, we are investing at a derisked stage as most of our funding will occur in the first half of 2026. The expected return on the investment is consistent with our typical return targets on recent utility scale investments.

The total investment commitment is $1.2 billion. However, the net impact to HASI's balance sheet will be much lower due to the investment closing in CCH1, resulting in an initial proportional commitment of approximately $600 million. Subsequently, we may add back leverage to the investment, further reducing our long-term hold. As noted earlier, this is not included in our Q3 financials and will be considered a closed transaction in Q4 with the vast majority of funding expected in Q2 of 2026.

Turning to Slide 6. Our pipeline remains above $6 billion, including a pro forma adjustment to remove the $1.2 billion project just discussed as other investment opportunities have replaced this amount in the pipeline. Our pipeline of new investments remains highly diversified with strong undercurrents of demand in each of our key end markets.

Higher retail electricity rates are facilitating demand in our BTM asset classes, including not just rooftop solar, but importantly, energy efficiency as well. Meanwhile, residential solar leases are expected to gain market share from loans and cash sales following the expiration of the 25D ITC at year-end. And our business is largely focused on leases and serving this end market.

In addition, the grid-connected end market is experiencing larger project sizes to accommodate the growth in U.S. power demand, clearly driven by data centers, but also domestic manufacturing and the expanding use cases of electrification in general. Likewise, demand underpinning our fuels, transport and nature end market remains strong with RNG facilities in construction or in development expected to double the current installed base in North America. And finally, our Next Frontier asset classes remain an exciting new opportunity.

And with that, I will ask Chuck to discuss our financial results.

Thank you, Jeff. On Slide 7, we highlight our Q3 profitability. And as you can see, we had meaningful growth in many of our key metrics. Jeff already highlighted our record quarterly adjusted EPS of $0.80, and our year-to-date adjusted EPS is at $2.04, up 11% year-over-year. This growth is driven largely by our primary source of revenue, adjusted recurring net investment income, which grew year-over-year by 42% in the quarter and 27% year-to-date.

We are growing the recurring earnings portion of our adjusted EPS, and our equity efficiency has also helped us increase our year-to-date adjusted ROE to 13.4% compared to 12.7% for the same period last year. This growth in our adjusted ROE is demonstrating the meaningful benefits from our CCH1 co-investment vehicle, which I will speak to in a few slides.

One last point on our metrics. Our GAAP net investment income does not include the earnings from our equity investments. Therefore, the adjusted recurring NII will continue to be greater than our GAAP NII.

Now that I have highlighted the key results for the quarter, some additional context is useful. Jeff mentioned our diversified business model earlier, and I will add that it is also versatile, where we can generate value in different ways, such as through recurring earnings from the underwritten returns on our investments and also optimization transactions where we capture additional value that is embedded in our portfolio, such as through project-level refinancing activities, which we saw this quarter. These optimization transactions may not occur every quarter, but we consistently identify these opportunities year after year.

Now on to Slide 8. Through the first 3 quarters of this year, we have closed $1.5 billion of transactions, which is greater than the same period last year. And when incorporating the transaction that Jeff spoke to earlier, we are on track to meaningfully exceed last year's total closed transactions. While transaction closings on their own are not an indicator of profitable growth, if you take into account our ability to generate new balance sheet transaction yields at an attractive level above 10.5%, we're also setting the stage for continued growth in adjusted EPS and ROE.

Even as interest rates and our own cost of debt have risen over the last couple of years, it is important to note that we have been able to maintain our margins through the increase in our new asset yields and our hedging program. We expect we will continue to maintain attractive margins as well in a declining interest rate environment given our approach to investment, funding and managing interest rate risk.

Next on Slide 9, we are experiencing double-digit growth in our managed assets as well as our portfolio. They have grown 15% and 20%, respectively, from a year ago. This is the base of assets from which we generate our recurring income. As we have discussed previously, we are migrating to a business model that is less dependent on new equity issuance to generate earnings growth. And the factor in accomplishing this is our CCH1 co-investment vehicle.

As of the end of Q3, CCH1 has completed funding of $1.2 billion of investments, leaving $1.4 billion of available capital for future investment with the potential to increase it to $1.8 billion with additional debt at the CCH1 level while keeping its leverage level below a debt-to-equity ratio of 0.5.

Our portfolio yield is at 8.6%, up from 8.3% last quarter as we are starting to see the new asset investments with yields greater than 10.5% start to come through our portfolio. The portfolio yield is the largest contributor to the growth in our adjusted recurring net investment income that is illustrated on the next slide.

On to Slide 10, we provide a buildup of our new financial measure that we introduced last quarter, adjusted recurring net investment income. We are now utilizing this metric in addition to our adjusted EPS to measure the profitability of our managed assets as a whole, inclusive of both the net investment income from our portfolio as well as the recurring fee income from the other assets we manage that are not on our balance sheet. Our year-to-date adjusted recurring net investment income of $269 million has grown 27%. This component of revenue is a consistent source of earnings generated from our existing managed assets.

Turning to Slide 11. We highlight a few items that will contribute to managing our liquidity and liability structure and further reduce our cost of capital. Over the past couple of years, we have significantly broadened our sources of capital and between our bank facilities, commercial paper program and our investment-grade ratings, we have a capital platform that is well-positioned to fund our growth needs at an attractive cost.

First to mention is a $250 million term loan that closed after quarter end that will provide another source of potential liquidity for the refinancing of our senior bonds due next year. As we reported last quarter, we retired a large portion of the upcoming maturity through a tender offer. With our current liquidity at $1.1 billion at the end of the quarter, this term loan and our access to the investment-grade debt market, we are well-positioned to retire the remaining notes outstanding.

Next, in furtherance of our focus on managing our interest rate risk, we executed an additional $250 million of SOFR-based hedges related to anticipated debt issuances and now have hedged up to $1.4 billion of our future debt issuance.

On to Slide 12. This slide is a good illustration of the changes we have made to the business over the past couple of years that is accelerating our growth and returns for shareholders. We have historically just provided the total adjusted ROE metric that is highlighted in the dark blue. And while it was steadily increasing over time, it is not painting the complete picture on where our business is headed.

With the introduction of CCH1 last year and obtaining our investment-grade ratings, we have meaningfully changed the profile of our adjusted ROE for new transactions. It may take some time for the higher profitability from our incremental business to fully show up in our adjusted ROE given the previous transactions on our balance sheet. So we want to illustrate where our business is headed with the adjusted ROE from incremental business by period.

As you can see with our current business model since the start of CCH1 early in 2024, our newer transactions are generating a higher adjusted ROE with year-to-date being 19.6%. We expect this trend to continue and even increase as CCH1 investments are funded from debt at CCH1. Over time, you will see our adjusted ROE increase to the higher ROE that we are generating from our new business.

I will now turn the call back to Jeff for closing remarks.

Thanks, Chuck. Turning to Slide 13, we display our sustainability and impact highlights, noting our cumulative carbon count and water count numbers reflect the significant impact of our investment strategy. We also remain very proud of our recognition, our targeted advocacy activities and the generosity of the HASI Foundation.

Concluding on Page 14. To summarize the themes of this call, we just completed the most profitable quarter in the company's history, and we expect our investment volumes to exceed last year's by more than 30%. Economic trends remain favorable to our continued profitable growth. This success is the result of a resilient business model that focuses on asset level investing with long-term programmatic partners.

Our approach also relies on disciplined underwriting and reasonable assumptions, and the model is further enhanced by a diversified and prudent approach to obtaining access to attractive sources of capital. Combining all of these elements with a talented and dedicated team results in consistent success despite periodic market volatility. Thank you, as always, to our talented team for this outstanding quarter.

Operator, please open the line for questions.

[Operator Instructions] The first question comes from Jon Windham from UBS.

Great result, by the way. I'll be very specific. It sounds a lot like you're describing the SunZia project on Pattern Energy in New Mexico. Is there a reason you're not naming the project? That's sort of a quick question. And then any color you can talk about what sort of equity stake and the economics of it would be interesting.

Thanks, Jon. I appreciate the question. It is the SunZia project and as you described. And -- in terms of returns, I think we talked about it being consistent with returns on recent other transactions we've had in our grid-connected portfolio. So, I think that's probably the best way we could describe the return. And it is a preferred equity investment. So, it has some structure to it. It's not a common equity investment.

Right. This is similar to other wind investments you've made in the past, you sort of get paid first. That's on the equity stack.

Yes. That's correct.

The next question comes from Chris Denginos from RBC.

Echoing Jon's comments on the solid quarter. I wanted to ask about the pipeline. And I think you mentioned $6 billion, so flat quarter-on-quarter, but you've got -- I guess, if you adjust in the $1.2 billion transaction in October, it'd be up significantly. So can you just maybe talk about the pipeline here? It looks like it's strengthened quite a bit quarter-on-quarter. And just curious what you're kind of seeing from that perspective, if there's any sort of demand pull forward going on as a result of?

Sure, Chris. I would say, as we discussed in the prepared remarks, we did replace the grid-connected pipeline, in particular, with enough new volume such that it didn't go down after this $1.2 billion transaction that we described.

Beyond that, our pipeline disclosure is, of course, not precise. We say greater than $6 billion. So I know it's hard from the outside looking in to tell if it actually went up or down in the quarter. But it's certainly at above $6 billion at a level that we're comfortable we'll have enough to invest in, in 2026 to achieve our goals.

And we're not seeing too much in the way of pull forward. I would describe what we're seeing as ordinary course. And as we talked about last quarter, folks executing on their pipeline, meaning our clients, everything they're working on now is grandfathered or safe harbor, but I don't really think this is the result of any kind of pull-through.

The next question comes from Noah Kaye from Oppenheimer.

I want to ask sort of a broader question around investments resulting from this announcement today, the $1.2 billion. We've historically thought about the business as making smaller investments spread across a large number of projects. This is a pretty big one. But of course, as you said, energy projects are getting bigger. You've talked about data centers as the Next Frontier asset class and they're getting just on the energy infrastructure, this type of investment. So, I guess, how should we think about this investment and what it signals for your appetite to take on larger single projects going forward?

Well, it's a good question, Noah. We've built the business on some small and modest-sized transactions over time, but we've always, at least after -- since 2020, supplemented that with some larger transactions as well. I think this transaction is a reflection in many ways of our access to capital through both being investment grade and our CCH1 relationship.

The amount of capital we can bring to the table is more significant. So, we've become a player in these larger transactions. And when it makes sense, we'll do that. We're, of course, going to manage our risk accordingly. I talked about half of this being in CCH1 and some other pathways to a lower long-term hold level. So, we're certainly managing our risk.

But in terms of your broader question of how we think about the business, I think you should think about the business as we're being active in both smaller transactions where we've historically found great value and continue to find opportunities, but also supplemented by some periodic larger transactions where it makes sense for us. And so, I think this is in many ways -- I use the word milestone, but it's we graduating into access to some of these larger transactions, which are going to be more frequent, as you mentioned, because of data centers and the grid-connected development focusing on larger projects.

It is a milestone, and we want to recognize that. A housekeeping item, just the ABS, the SunStrong ABS refinancing. Can you kind of quantify what the benefit was to the quarter in that because the ROE expansion this quarter was pretty noticeable?

Sure. And I'm going to ask Chuck to do that. But before I do that, Noah, I'm going to clarify a little bit a few items around SunStrong. I expected us to get a question on it, and I don't want there to be any confusion about what this distribution was.

So let me just answer that a little more broadly and say we often refer to SunStrong and folks talking about us refer to SunStrong in a singular capacity, but we actually own 50% of 2 separate entities. One of them is SunStrong Capital Holdings, which is an AssetCo that primarily owns solar leases, most of which have been securitized. And the distribution we received this quarter was the result of refinancing the ABS debt, which due to de-levering and the very strong performance of the underlying leases resulted in essentially a cash out refi. So, there was meaningful cash distribution to the equity owners.

And going forward, as an equity owner in SunStrong Capital Holdings, we'll just get the normal distributions from the waterfall of the securitized assets. The refi was a bit of a onetime. Now separate from that, we own 50% of SunStrong Management or SSM, as we call it, which is truly an operating business that provides servicing to consumer and commercial loans and leases, including the legacy SunPower and Sunnova portfolios.

Now SSM is an operating business. It has its own executive team. It's performing very well. It has a business plan, which includes ongoing growth in the platform and expansion ideas. And our accounting for our SSM investment is as an equity method investment that we hold at fair value. So to the extent the underlying value of SSM increases, that would positively impact HASI's earnings.

So I just wanted to create that clarification of when we say SunStrong, what we actually mean. This distribution that we're talking about in the third quarter was from SunStrong Capital Holdings. So sorry for the deviation to your actual question, I'm going to defer to Chuck.

Noah, so our investment in SunStrong consisted of both mezzanine level loans as well as a small amount of equity. The total proceeds from the ABS that we received was around $240 million. And the composition of that was roughly about $200 million of it went to pay off our mezzanine loans. of which we're redeploying back into additional accretive investments.

But then we also -- the other remaining $40 million was related to our equity, of which we did have some small investment, like I said. And of that $40 million that we received, roughly about $24 million of it was a gain in excess of our investment. So the impact to the quarter was $24 million.

The next question comes from Davis Sunderland from Baird.

Congrats on an awesome quarter. Just one for me. I wanted to ask just how much the tax credit changes from Big Beautiful Bill have maybe impacted the types of investments you're seeing by asset class? And I guess the root of my question is just wondering if you've seen any opportunities in the last couple of months in discussions to step into a potential hole in the cap stack or any other ways that there have been puts or takes.

Sure. Thanks, Davis. I'm going to ask Susan to answer that one.

I think at this point, with the extension of the tax credits for wind and solar, by and large, for 5 years with safe harbor and started construction and storage and some of the other credits that extend longer, I think we're still seeing the traditional combination of tax equity structures and transfer structures to dominate the market. So, we're still -- we still have this longer transition period before we expect to see a change in the capital stack to not include tax credits.

The next question comes from Maheep Mandloi from Mizuho.

Jack on for Maheep here. Congrats on the quarter. A lot of third-party ownership have talked about prepaid leases. Is that a kind of product that would interest you guys? And would you see similar yields as traditional leases?

Sure. Thanks, Jack. I'm going to ask Marc to answer that one.

Jack, that's something that we could certainly take a look at but haven't been presented any opportunities yet. So we'll have to defer on that until the future.

The next question comes from Vikram Bagri from Citibank.

It's Ted on for Vik. Just looking at the principal collections, it looks like it was a larger quarter with about $382 million returns. Could you just give some insight into what the maturity profile and roll-off schedule of the existing portfolio looks like? Should we expect the pace of that to potentially increase as you approach the new wind investment?

Yes. This is Chuck. So, the $300 million number that you're seeing there, the biggest driver of why that's a little bit higher has to do with the SunStrong refinancing that I just mentioned. When I said that roughly about $200 million of the proceeds went to pay down the mezz loans that came through that line. So that was a little bit of an acceleration of normal amort profile that you'll see from our portfolio. But the way I generally think of it is that the lives of our assets, weighted average life is around 10 years or so. So you could expect looking at our portfolio that our amort in any given period will mirror that.

[Operator Instructions] The next question comes from Mark Strouse from JPMorgan.

This is Michael Fairbanks on for Mark. Just wondering if you could talk about how this large transaction and the $3 billion of volumes this year might impact the EPS growth algorithm in '26 and beyond. I know you reaffirmed the 8% to 10% range, but should we be thinking about a possible step-up in '26 from these volumes?

Thanks, Michael. Good question. Our cadence has consistently been to talk about guidance in February, and I think we're going to stick to that. So we're working diligently right now on our business plan with our Board. And I think we'll have more to say about '26 and '27 in February.

Okay. Great. And then maybe just for a follow-up. It looks like SunZia was excluded from the greater than $6 billion pipeline, which makes sense. Just wondering if it was included in that number last quarter?

It was. It was in last quarter's pipeline. That's correct.

The next question is a follow-up question from Chris Dendrinos from RBC.

I just wanted to follow up here. And I think you mentioned during your prepared remarks, the really low rate of bad debt. I think bp Lightsource or subsidiary had reported a default with one of their suppliers. And I'm curious, I think you all have worked with them in the past. Is there anything related to that, that would impact you all?

Thanks, Chris. No, there wouldn't be. We do work with bp Lightsource. But again, we're monetizing project cash flows. And the challenge that you discussed has no impact on the project in which we're invested.

Thank you very much. There are no further questions at this time. Ladies and gentlemen, that does conclude today's conference for today. You may now disconnect your lines at this time, and thank you very much for your participation.