Bulletin
Investor Alert

Aug. 6, 2021, 9:15 a.m. EDT

10-Q: HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

or Cancel Already have a watchlist? Log In

(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations In this Form 10-Q, unless specifically stated otherwise or the context otherwise indicates, references to "we," "our," "us," and the "Company" refer to Hannon Armstrong Sustainable Infrastructure Capital, Inc., a Maryland corporation, Hannon Armstrong Sustainable Infrastructure, L.P., and any of our other subsidiaries. Hannon Armstrong Sustainable Infrastructure, L.P. is a Delaware limited partnership of which we are the sole general partner and to which we refer in this Form 10-Q as our "Operating Partnership." Our business is focused on reducing the impact of greenhouse gases that have been scientifically linked to climate change. We refer to these gases, which are often for consistency expressed as carbon dioxide equivalents, as carbon emissions. The following discussion is a supplement to and should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and related notes and with our Annual Report on Form 10-K for the year ended December 31, 2020, as amended by our Amendment No. 1 to our Annual Report on Form 10-K for the year ended December 31, 2020, (collectively, our "2020 Form 10-K") that was filed with the SEC. Our Business We invest in climate solutions developed by the leading companies in the energy efficiency, renewable energy and other sustainable infrastructure markets. We believe we are one of the first U.S. public companies solely dedicated to such climate change investments. Our goal is to generate attractive returns from a diversified portfolio of projects with long-term, predictable cash flows from proven technologies that reduce carbon emissions or increase resilience to climate change. We are internally managed, and our management team has extensive relevant industry knowledge and experience, dating back more than 30 years. We have long-standing relationships with the leading energy service companies ("ESCOs"), manufacturers, project developers, utilities, owners and operators. Our origination strategy is to use these relationships to generate recurring, programmatic investment and fee-generating opportunities. Additionally, we have relationships with leading banks, investment banks, and institutional investors from which we are referred additional investment and fee generating opportunities. Our investments are focused on three areas: Behind-the-Meter ("BTM"): distributed building or facility projects, which reduce energy usage or cost through the use of solar generation and energy storage or energy efficiency improvements including heating, ventilation and air conditioning systems, lighting, energy controls, roofs, windows, building shells, and/or combined heat and power systems; Grid-Connected ("GC"): projects that deploy cleaner energy sources, such as solar and wind to generate power where the off-taker or counterparty is part of the wholesale electric power grid; and Sustainable Infrastructure: upgraded transmission and distribution systems, water and storm water infrastructure, and other projects that improve water or energy efficiency, increase resiliency, positively impact the environment or more efficiently use natural resources. We prefer investments in which the assets use proven technology and have a long-term, creditworthy off-taker or counterparties. For BTM assets, the off-taker or counterparty may be the building owner or occupant, and we may be secured by the installed improvements or other real estate rights. For GC assets, the off-taker or counterparty may be a utility or electric user who has entered into a contractual commitment, such as a power purchase agreement ("PPA"), to purchase power produced by a renewable energy project at a minimum price with potential price escalators for a portion of the project's estimated life. We completed approximately $509 million and $697 million of transactions during the three and six months ended June 30, 2021, respectively, compared to approximately $178 million and $364 million during the same period in 2020. As of June 30, 2021, pursuant to our strategy of holding transactions on our balance sheet, we held approximately $3.0 billion of transactions on our balance sheet, which we refer to as our "Portfolio." As of June 30, 2021, our Portfolio consisted of over 225 assets and we seek to manage the diversity of our Portfolio by, among other factors, project type, project operator, type of investment, type of technology, transaction size, geography, obligor and maturity. For those transactions that we choose not to hold on our balance sheet, we transfer all or a portion of the economics of the transaction, typically using securitization trusts, to institutional investors in exchange for cash and/or residual interests in the assets and in some cases, ongoing fees. As of June 30, 2021, we managed approximately $5.0 billion in assets in these securitization trusts or vehicles that are not consolidated on our balance sheet. When combined with our Portfolio, as of June 30, 2021, we manage approximately $8.0 billion of assets which we refer to as our "Managed Assets". - 33 -

We make our investments utilizing a variety of structures including:

Factors Impacting our Operating Results







                                                                                    Balance                 Maturity
                                                                                 (in millions)
        Fixed-rate receivables, interest rates less than 5.00% per annum       $          117             2023 to 2046
        Fixed-rate receivables, interest rates from 5.00% to 6.50% per annum               67             2022 to 2056
        Fixed-rate receivables, interest rates greater than 6.50% per annum
        (1)                                                                             1,010             2021 to 2069
        Receivables                                                                     1,194
        Allowance for loss on receivables                                                 (37)
        Receivables, net of allowance                                                   1,157
        Fixed-rate investments, interest rates less than 5.00% per annum                   11             2035 to 2038
        Fixed-rate investments, interest rates from 5.00% to 6.50% per annum                7             2047 to 2051
        Total receivables and investments                                      $        1,175
        


(1)Excludes receivables held-for-sale of $9 million The table below presents, for the debt investments and real estate related holdings of our Portfolio and our interest-bearing liabilities inclusive of our credit facilities, the average outstanding balances, income earned, the interest expense incurred, and average yield or cost. Our earnings from our equity method investments are not included in this table.







                                                            Three Months Ended June 30,                 Six Months Ended June 30,
                                                              2021                  2020                 2021                 2020
                                                                                    (dollars in millions)
        Portfolio, excluding equity method investments
        Interest income, receivables                    $          25           $      23          $         49           $      46
        Average balance of receivables                  $       1,180           $   1,133          $      1,214           $   1,148
        Average interest rate of receivables                      8.4   %             8.0  %                8.1   %             7.9  %
        Interest income, investments                    $           -           $       1          $          1           $       1
        Average balance of investments                  $          21           $      58          $         36           $      66
        Average interest rate of investments                      4.5   %             4.4  %                3.9   %             4.4  %
        Rental income                                   $           6           $       6          $         13           $      13
        Average balance of real estate                  $         358           $     361          $        358           $     361
        Average yield on real estate                              7.2   %             7.2  %                7.2   %             7.2  %
        Average balance of receivables, investments,
        and real estate                                 $       1,559           $   1,553          $      1,608           $   1,576
        Average yield from receivables, investments,
        and real estate                                           8.1   %             7.7  %                7.8   %             7.6  %
        Debt
        Interest expense                                $          26           $      22          $         53           $      40
        Average balance of debt                         $       2,068           $   1,664          $      2,129           $   1,532
        Average cost of debt                                      5.0   %             5.2  %                5.0   %             5.2  %
        


The following table provides a summary of our anticipated principal repayments for our receivables and investments as of June 30, 2021:







                                                                     Payment due by Period
                                                              Less than        1-5       5-10       More than
                                                  Total         1 year        years      years       10 years
                                                                         (in millions)
        Receivables (excluding allowance) (1)   $ 1,194      $      139      $ 185      $ 390      $      480
        Investments                                  18               1          2          3              12
        


(1)Excludes receivables held-for-sale of $9 million.

- 36 -

See Note 6 to our financial statements in this Form 10-Q for information on:







        30, 2020
                                                         Three months ended June 30,
                                                           2021                  2020              $ Change               % Change
                                                                                   (dollars in millions)
        Revenue
        Interest income                             $            25          $      24          $         1                        4  %
        Rental income                                             6                  6                    -                        -  %
        Gain on sale of receivables and investments              25                 16                    9                       56  %
        Fee income                                                3                  3                    -                        -  %
        Total Revenue                                            59                 49                   10                       20  %
        Expenses
        Interest expense                                         41                 22                   19                       86  %
        Provision for loss on receivables                         1                  2                   (1)                     (50) %
        Compensation and benefits                                12                  9                    3                       33  %
        General and administrative                                5                  4                    1                       25  %
        Total expenses                                           59                 37                   22                       59  %
        Income (loss) before equity method
        investments                                               -                 12                  (12)                    (100) %
        Income (loss) from equity method
        investments                                              22                 (1)                  23                   (2,300) %
        Income (loss) before income taxes                        22                 11                   11                      100  %
        Income tax (expense) benefit                             (6)                 1                   (7)                    (700) %
        Net income (loss)                           $            16          $      12          $         4                       33  %
        


Net income increased by $4 million due to an increase of $10 million in total revenue and an increase in equity method investments income of $23 million, offset by a $22 million increase in total expenses and a $7 million increase in income tax expense. These results do not reflect the non-GAAP distributable earnings adjustments discussed in the non-GAAP financial measures section below.

Income tax expense increased by $7 million primarily due to the increased HLBV income described above.







        2020
                                                        Six months ended June 30, 2021
                                                           2021                   2020             $ Change               % Change
                                                                                   (dollars in millions)
        Revenue
        Interest income                             $             50          $      47          $        3                        6  %
        Rental income                                             13                 13                   -                        -  %
        Gain on sale of receivables and investments               42                 21                  21                      100  %
        Fee income                                                 6                  8                  (2)                     (25) %
        Total Revenue                                            111                 89                  22                       25  %
        Expenses
        Interest expense                                          68                 40                  28                       70  %
        Provision for loss on receivables                          1                  3                  (2)                     (67) %
        Compensation and benefits                                 28                 18                  10                       56  %
        General and administrative                                10                  7                   3                       43  %
        Total expenses                                           107                 68                  39                       57  %
        Income (loss) before equity method
        investments                                                4                 21                 (17)                     (81) %
        Income (loss) from equity method
        investments                                               77                 16                  61                      381  %
        Income (loss) before income taxes                         81                 37                  44                      119  %
        Income tax (expense) benefit                             (13)                (1)                (12)                   1,200  %
        Net income (loss)                           $             68          $      36          $       32                       89  %
        


Net income increased by $32 million due to an increase of $22 million in total revenue and an increase in equity method investments income of $61 million, offset by a $39 million increase in total expenses and a $12 million increase in income tax expense. These results do not reflect the non-GAAP distributable earnings adjustments discussed in the non-GAAP financial measures section below.

Aug 06, 2021

COMTEX_391090217/2041/2021-08-06T09:14:34

Is there a problem with this press release? Contact the source provider Comtex at editorial@comtex.com. You can also contact MarketWatch Customer Service via our Customer Center.

(c) 1995-2021 Cybernet Data Systems, Inc. All Rights Reserved

This Story has 0 Comments
Be the first to comment

Story Conversation

Commenting FAQs »

Partner Center

Link to MarketWatch's Slice.