HASI Announces Fourth Quarter and Full Year 2023 Results, Dividend Increase, Record Closings, and New Three-Year Guidance

ANNAPOLIS, Md.–(BUSINESS WIRE)–Hannon Armstrong Sustainable Infrastructure Capital, Inc. (“HASI,” “we,” “our” or the “Company”) (NYSE: HASI), a leading investor in climate solutions, today reported results for the fourth quarter and full year of 2023.

Financial Highlights

• Delivered $1.42 GAAP EPS on a fully diluted basis in 2023, compared with $0.47 in 2022
• Delivered $2.23 Distributable EPS on a fully diluted basis in 2023, compared to $2.08 Distributable EPS in 2022, representing 7% year-on-year growth
• Grew Portfolio 44% in 2023 to $6.2 billion and managed assets 26% to $12.3 billion compared to the end of 2022
• Reported GAAP-based Net Investment Income of $58 million in 2023, compared to $45 million in 2022
• Increased Distributable Net Investment Income in 2023 by 21% year-on-year to $217 million, compared to $180 million in 2022
• Closed $2.3 billion of investments in 2023, compared to $1.8 billion in 2022
• Reported pipeline of greater than $5 billion as of the end of 2023, compared to greater than $4.5 billion as of the end of 2022
• Increased dividend to $0.415 per share for the first quarter of 2024, representing a 5% increase over the dividend declared in the fourth quarter of 2023
• Announced 2% discount on 2023 Dividend Reinvestment and Stock Purchase Plan for the first quarter of 2024

Guidance

• Established new guidance that annual distributable earnings per share is expected to grow at a compounded annual rate of 8% – 10% during the years 2024 to 2026 relative to the 2023 baseline of $2.23 per share
• Established guidance that our dividend per share is expected to be within a payout ratio range of 60% – 70% of distributable earnings per share during the years 2024 to 2026

2024 REIT Election

In December 2023, our Board of Directors approved a plan to revoke our Real Estate Investment Trust (REIT) election and become a taxable C-Corporation, effective January 1, 2024. Our Board of Director’s decision was made after careful consideration of all relevant implications and is not expected to have any material impact on the Company’s business or operations. The Company expects its existing net operating losses (“NOLs”) and other tax attributes will enable HASI to continue to operate in a tax efficient manner.

Sustainability and Impact Highlight

• Estimated that more than 760,000 metric tons of carbon emissions will be avoided annually by our transactions closed in 2023, equating to a CarbonCount^® score of 0.3 metric tons per $1,000 invested

“Driven by a record volume of closed transactions, HASI delivered another excellent year of financial performance in 2023, underscoring the strength and resilience of our non-cyclical and adaptable business model,” said Jeffrey A. Lipson, HASI President and Chief Executive Officer. “Our updated earnings and dividend guidance demonstrates continued confidence in our strategy over the next three years.”

A summary of our results is shown in the table below:

		For the three months ended December 31, 2023						For the three months ended December 31, 2022
		$ in thousands			Per Share (Diluted)			$ in thousands				Per Share (Diluted)
GAAP Net Income		$	89,762		$	0.74		$	(19,928	)		$	(0.22	)
Distributable earnings			60,642			0.53			42,887				0.47
		For the year ended December 31, 2023						For the year ended December 31, 2022
		$ in thousands			Per Share			$ in thousands				Per Share
GAAP Net Income		$	148,836		$	1.42		$	41,502			$	0.47
Distributable earnings			232,248			2.23			185,791				2.08

Financial Results

“Our diversified funding platform facilitated record growth in the Portfolio,” said Marc T. Pangburn, Chief Financial Officer. “Recent debt raises combined with our liquidity position provide a significant portion of our growth debt capital needs for 2024.”

Comparison of the year ended December 31, 2023 to the year ended December 31, 2022

Total revenue increased by $80 million, or 33%. Interest and rental income increased by $68 million, or 42%, due to a larger portfolio and a higher average interest rate. Gain on sale and other income increased by $11 million, or 17%, primarily from a change in mix of assets being securitized. Securitization asset income increased by approximately $1 million, due to a larger volume of securitized assets under management.

Interest expense increased by $55 million, or 48%, due to a higher average interest rate on a larger average outstanding debt balance. Provision for loss on receivables decreased by $1 million compared 2022 as a result of the release of certain loan specific reserves, partially offset by provisions on new loans and loan commitments. Other expenses (compensation and benefits and general and administrative expenses) increased by $2 million primarily due to an increase in our employee headcount and compensation and additional investment in corporate infrastructure.

We recognized $141 million in income using the hypothetical liquidation at book value method (HLBV) for our equity method investments in 2023, compared to $31 million of HLBV income in 2022, primarily due to allocations of income in the current period related to tax credits allocated to other investors in a grid-connected utility-scale solar project.

We recognized income tax expense of $32 million in 2023, compared to an income tax expense of $7 million in 2022, driven primarily by deferred tax expense recognized in the current period associated with the Board’s 2023 approval of our decision to revoke our REIT status effective January 1, 2024.

GAAP net income in 2023 was $151 million, compared to $42 million in 2022, driven primarily by the equity method investment income change discussed above. Distributable earnings in 2023 was $232 million, or an increase of approximately $46 million from 2022 due primarily to an increase in distributable earnings from a larger portfolio.

Leverage

The calculation of our fixed-rate debt and leverage ratios as of December 31, 2023 and December 31, 2022 are shown in the table below:

	December 31, 2023			% of Total			December 31, 2022			% of Total
	($ in millions)						($ in millions)
Floating-rate borrowings (1)	$	338		8	%		$	431		14	%
Fixed-rate debt (2)		3,909		92	%			2,545		86	%
Total	$	4,247		100	%		$	2,976		100	%
Leverage (3)	2.0 to 1						1.8 to 1

(1)	Floating-rate borrowings include borrowings under our floating-rate credit facilities and commercial paper notes with less than six months original maturity, to the extent such borrowings are not hedged using interest rate swaps.
(2)	Fixed-rate debt includes the impact of our interest rate swaps and collars on debt that is otherwise floating. Debt excludes securitizations that are not consolidated on our balance sheet.
(3)	Leverage, as measured by our debt-to-equity ratio.

Portfolio

Our balance sheet portfolio totaled approximately $6.2 billion as of December 31, 2023, which included approximately $3.0 billion of behind-the-meter assets and approximately $2.3 billion of grid-connected assets, with the remainder invested in fuels, transportation, and nature assets. The following is an analysis of the performance of our portfolio as of December 31, 2023:

	Portfolio Performance
	Commercial												Government
	1 (1)				2 (2)				3 (3)				1 (1)				Total
	(dollars in millions)
Total receivables held-for-investment	$	3,033			$	—			$	—			$	91			$	3,124
Less: Allowance for loss on receivables		(50	)			—				—				—				(50	)
Net receivables held-for-investment (4)		2,983				—				—				91				3,074
Receivables held-for-sale		32				—				—				3				35
Investments		5				—				—				2				7
Real estate		111				—				—				—				111
Equity method investments (5)		2,930				36				—				—				2,966
Total	$	6,061			$	36			$	—			$	96			$	6,193
Percent of Portfolio		97	%			1	%			—	%			2	%			100	%

(1)	This category includes our assets where based on our credit criteria and performance to date, we believe that our risk of not receiving our invested capital remains low.
(2)	This category includes our assets where based on our credit criteria and performance to date, we believe there is a moderate level of risk of not receiving some or all of our invested capital.
(3)	This category includes our assets where based on our credit criteria and performance to date, we believe there is substantial doubt regarding our ability to recover some or all of our invested capital. Loans in this category are placed on non-accrual status.
(4)	Total reconciles to the total of the government receivables and commercial receivables lines of the consolidated balance sheets.
(5)	Some of the individual projects included in portfolios that make up our equity method investments have government off-takers. As they are part of large portfolios, they are not classified separately.

Guidance

The Company expects that annual distributable earnings per share will grow at a compounded annual rate of 8% to 10% from 2024 to 2026, relative to the 2023 baseline of $2.23 per share, which is equivalent to a 2026 midpoint of $2.89 per share. The Company also expects distributions of annual dividends per share from 2024 to 2026 to be set at a payout ratio of 60-70% of annual distributable earnings per share. This guidance reflects the Company’s judgments and estimates of (i) yield on its existing portfolio; (ii) yield on incremental portfolio investments, inclusive of the Company’s existing pipeline; (iii) the volume and profitability of transactions; (iv) amount, timing, and costs of debt and equity capital to fund new investments; (v) changes in costs and expenses reflective of the Company’s forecasted operations; and (vi) the general interest rate and market environment. In addition, distributions are subject to approval by the Company’s Board of Directors on a quarterly basis. The Company has not provided GAAP guidance as discussed in the Forward-Looking Statements section of this press release.

Dividend

The Company is announcing today that its Board of Directors declared a quarterly cash dividend of $0.415 per share of common stock. This dividend will be paid on April 19, 2024, to stockholders of record as of April 5, 2024.

Conference Call and Webcast Information

Hannon Armstrong will host an investor conference call today, Thursday, February 15, 2024, at 5:00 p.m. Eastern time. The conference call can be accessed live over the phone by dialing 1-877-407-0890 (Toll-Free) or +1-201-389-0918 (toll). Participants should inform the operator you want to be joined to the HASI call. The conference call will also be accessible as an audio webcast with slides on our website. A replay after the event will be accessible as on-demand webcast on our website.

About HASI

HASI (NYSE: HASI) is a leading climate positive investment firm that actively partners with clients to deploy real assets that facilitate the energy transition. With more than $12 billion in managed assets, our vision is that every investment improves our climate future. For more information, please visit hasi.com

Forward-Looking Statements:

Some of the information contained in this press release is forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are subject to risks and uncertainties. For these statements, we claim the protections of the safe harbor for forward-looking statements contained in such Sections. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. When we use the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions, we intend to identify forward-looking statements. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements.

Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward-looking statements. Factors that could cause actual results to differ materially from those described in the forward-looking statements include those discussed under the caption “Risk Factors” included in our most recent Annual Report on Form 10-K as well as in other periodic reports that we file with the U.S. Securities and Exchange Commission (the “SEC”).

Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances, including, but not limited to, unanticipated events, after the date on which such statement is made, unless otherwise required by law. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained or implied in any forward-looking statement.

The Company has not provided GAAP guidance as forecasting a comparable GAAP financial measure, such as net income, would require that the Company apply the HLBV method to these investments. In order to forecast under the HLBV method, the Company would be required to make various assumptions related to expected changes in the net asset value of the various entities and how such changes would be allocated under HLBV. GAAP HLBV earnings over a period of time are very sensitive to these assumptions especially in regard to when a partnership transaction flips and thus the liquidation scenarios change materially. The Company believes that these assumptions would require unreasonable efforts to complete and if completed, the wide variation in projected GAAP earnings based upon a range of scenarios would not be meaningful to investors. Accordingly, the Company has not included a GAAP reconciliation table related to any distributable earnings guidance.

Estimated carbon savings are calculated using the estimated kilowatt hours, gallons of fuel oil, million British thermal units of natural gas and gallons of water saved as appropriate, for each project. The energy savings are converted into an estimate of metric tons of CO2 equivalent emissions based upon the project’s location and the corresponding emissions factor data from the U.S. Government and International Energy Agency. Portfolios of projects are represented on an aggregate basis.

HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
	For the Three Months Ended December 31,								For the Year Ended December 31,
	2023				2022				2023				2022
Revenue
Interest income	$	62,170			$	36,752			$	207,794			$	134,656
Rental income		2,239				6,529				21,251				26,245
Gain on sale of assets		15,722				5,935				68,637				57,187
Securitization asset income		5,878				7,962				19,259				17,905
Other income		576				1,130				2,930				3,744
Total revenue		86,585				58,308				319,871				239,737
Expenses
Interest expense		50,595				30,524				171,008				115,559
Provision for loss on receivables		(649	)			6,576				11,832				12,798
Compensation and benefits		15,817				13,337				64,344				63,445
General and administrative		6,457				7,238				31,283				29,934
Total expenses		72,220				57,675				278,467				221,736
Income before equity method investments		14,365				633				41,404				18,001
Income (loss) from equity method investments		113,545				(27,241	)			140,974				31,291
Income (loss) before income taxes		127,910				(26,608	)			182,378				49,292
Income tax (expense) benefit		(36,920	)			6,412				(31,621	)			(7,381	)
Net income (loss)	$	90,990			$	(20,196	)		$	150,757			$	41,911
Net income (loss) attributable to non-controlling interest holders		1,228				(268	)			1,921				409
Net income (loss) attributable to controlling stockholders	$	89,762			$	(19,928	)		$	148,836			$	41,502
Basic earnings (loss) per common share	$	0.80			$	(0.22	)		$	1.45			$	0.47
Diluted earnings (loss) per common share	$	0.74			$	(0.22	)		$	1.42			$	0.47
Weighted average common shares outstanding—basic		111,277,751				89,601,922				101,844,551				87,500,799
Weighted average common shares outstanding—diluted		129,656,080				89,601,922				109,467,554				90,609,329

HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
	December 31, 2023				December 31, 2022
Assets
Cash and cash equivalents	$	62,632			$	155,714
Equity method investments		2,966,305				1,869,712
Commercial receivables, net of allowance of $50 million and $41 million, respectively		2,983,170				1,887,483
Government receivables		90,685				102,511
Receivables held-for-sale		35,299				85,254
Real estate		111,036				353,000
Investments		7,165				10,200
Securitization assets, net of allowance of $3 million and $0, respectively		218,946				177,032
Other assets		77,112				119,242
Total Assets	$	6,552,350			$	4,760,148
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable, accrued expenses and other	$	163,305			$	120,114
Credit facilities		400,861				50,698
Commercial paper notes		30,196				192
Term loan facility		727,458				379,742
Non-recourse debt (secured by assets of $239 million and $632 million, respectively)		160,456				432,756
Senior unsecured notes		2,318,841				1,767,647
Convertible notes		609,608				344,253
Total Liabilities		4,410,725				3,095,402
Stockholders’ Equity:
Preferred stock, par value $0.01 per share, 50,000,000 shares authorized, no shares issued and outstanding		—				—
Common stock, par value $0.01 per share, 450,000,000 shares authorized, 112,174,279 and 90,837,008 shares issued and outstanding, respectively		1,122				908
Additional paid in capital		2,381,510				1,924,200
Accumulated deficit		(303,536	)			(285,474	)
Accumulated other comprehensive income (loss)		13,165				(10,397	)
Non-controlling interest		49,364				35,509
Total Stockholders’ Equity		2,141,625				1,664,746
Total Liabilities and Stockholders’ Equity	$	6,552,350			$	4,760,148

HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
	Years Ended December 31,
	2023				2022				2021
Cash flows from operating activities
Net income (loss)	$	150,757			$	41,911			$	127,346
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loss on receivables		11,832				12,798				496
Depreciation and amortization		3,127				3,993				3,801
Amortization of financing costs		12,958				11,685				11,316
Equity-based compensation		18,386				20,101				17,047
Equity method investments		(108,025	)			16,403				(94,773	)
Non-cash gain on securitization		(43,542	)			(28,614	)			(48,332	)
(Gain) loss on sale of assets		1,305				(218	)			(720	)
Changes in receivables held-for-sale		51,538				(62,953	)			(22,035	)
Loss on debt extinguishment		—				—				14,584
Changes in accounts payable and accrued expenses		48,485				18,176				11,313
Change in accrued interest on receivables and investments		(44,105	)			(15,414	)			(859	)
Other		(3,027	)			(17,638	)			(5,875	)
Net cash provided by operating activities		99,689				230				13,309
Cash flows from investing activities
Equity method investments		(869,412	)			(127,867	)			(401,856	)
Equity method investment distributions received		30,140				110,064				21,777
Proceeds from sales of equity method investments		—				1,700				300
Purchases of and investments in receivables		(1,338,860	)			(726,931	)			(553,366	)
Principal collections from receivables		197,784				125,976				148,769
Proceeds from sales of receivables		7,634				5,047				75,582
Purchases of real estate		—				(4,550	)			—
Sales of real estate		—				4,550				—
Purchases of investments and securitization assets		(14,404	)			(2,329	)			(4,830	)
Proceeds from sales of investments and securitization assets		—				7,020				15,197
Collateral provided to hedge counterparties		(93,550	)			—				—
Collateral received from hedge counterparties		84,950				—				—
Funding of escrow accounts		—				(5,476	)			(12,069	)
Withdrawal from escrow accounts		—				22,757				1,756
Other		2,915				(2,071	)			5,338
Net cash provided by (used in) investing activities		(1,992,803	)			(592,110	)			(703,402	)
Cash flows from financing activities
Proceeds from credit facilities		1,177,000				100,000				100,000
Principal payments on credit facilities		(827,000	)			(150,000	)			(22,441	)
Proceeds from issuance of commercial paper notes		30,000				—				50,000
Principal payments on commercial paper notes		—				(50,000	)			—
Proceeds from issuance of non-recourse debt		—				32,923				—
Principal payments on non-recourse debt		(21,606	)			(30,581	)			(37,974	)
Proceeds from issuance of term loan		365,000				383,000				—
Principal payments on term loan		(16,478	)			—				—
Proceeds from issuance of senior unsecured notes		550,000				—				1,000,000
Redemption of senior unsecured notes		—				—				(500,000	)
Proceeds from issuance of convertible notes		402,500				200,000				—
Principal payments on convertible notes		(143,748	)			(461	)			—
Purchase of capped calls related to the issuance of convertible notes		(37,835	)			—				—
Net proceeds of common stock issuances		492,377				188,881				200,641
Payments of dividends and distributions		(159,786	)			(132,198	)			(113,510	)
Withholdings on employee share vesting		(1,488	)			(3,211	)			(14,018	)
Redemption premium paid		—				—				(14,101	)
Payment of debt issuance costs		(22,894	)			(11,754	)			(17,750	)
Collateral provided to hedge counterparties		(166,600	)			—				—
Collateral received from hedge counterparties		176,050				—				—
Other		(3,268	)			(9,820	)			(12	)
Net cash provided by (used in) financing activities		1,792,224				516,779				630,835
Increase (decrease) in cash, cash equivalents, and restricted cash		(100,890	)			(75,101	)			(59,258	)
Cash, cash equivalents, and restricted cash at beginning of period		175,972				251,073				310,331
Cash, cash equivalents, and restricted cash at end of period	$	75,082			$	175,972			$	251,073
Interest paid	$	138,418			$	98,704			$	108,267
Supplemental disclosure of non-cash activity
Residual assets retained from securitization transactions	$	35,483			$	28,614			$	56,432
Equity method investments received upon deconsolidation of a special purpose entity		144,603				—				—
Issuance of common stock from conversion of convertible notes		—				7,674				141,810
Deconsolidation of non-recourse debt and other liabilities		257,746				—				126,139
Deconsolidation of assets pledged for non-recourse debt		374,608				—				130,513

EXPLANATORY NOTES

Non-GAAP Financial Measures

Distributable Earnings

We calculate distributable earnings as GAAP net income (loss) excluding non-cash equity compensation expense, provisions for loss on receivables, amortization of intangibles, non-cash provision (benefit) for taxes, losses or (gains) from modification or extinguishment of debt facilities, any one-time acquisition related costs or non-cash tax charges and the earnings attributable to our non-controlling interest of Hannon Armstrong Sustainable Infrastructure, L.

Contacts

Investor Contact:

Neha Gaddam

investors@hasi.com
410-571-6189

Media Contact:

Gil Jenkins

media@hasi.com
443-321-5753

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