Hannon Armstrong Sustainable Infrastructure Capital, Inc. Price & Performance (HASI)

Joining us on the call today are Jeff Lipson, the company's President and CEO and Mark Pingburn, our CFO as well as Susan Niki, our Chief Client Officer and Chuck Melco, our Chief Accounting Officer and Treasurer.

To kick things off, I will first turn it over to our President and CEO, Jeff Lipson who will open the presentation today on Slide three. [indiscernible] Thank you, Aaron.

And thank you all for joining us today on the call. 2024 was an extraordinary year for HESI. As we achieved a number of our long term and short term goals. Notably, we closed our Hannon Count Holdings one co investment partnership with KKR increased our bank revolver to over $1,300,000,000 closed $2,300,000,000 of new transactions including 1,100,000,000.0 in the fourth quarter alone maintained robust margins as interest rates fluctuated and increased our adjusted earnings per share by 10%. We continue to deliver results consistent with our expectations despite interest rate volatility and policy uncertainty. The cornerstone of our success is our incredibly talented team. And I will take a moment now to address the organizational changes disclosed today. Mark Pangburn has performed at a superior level during his tenure as CFO including closing our CCH-one transaction achieving investment grade ratings, and restructuring our SunStrong joint venture. With all of our success on the capital front, I have asked Mark to refocus on our deployment. In his new role as Chief Revenue and Strategy Officer, Mark will oversee our investment and portfolio management activities, and continue to work with me on various strategic matters including our asset management strategy. I am confident Mark will excel in this role.

Chuck Melco, has been an outstanding Chief Accounting Officer and Treasurer for several years. Addressing many complex accounting and reporting matters. While also closing numerous bank debt and capital raising transactions. I have full confidence in Chuck's ability to be a successful CFO for Hassie.

Nate Rose, who many of you know, has been with Hassie since February has expressed a desire for a reduced role and Nate will be moving to a position where he can continue to be a leader and strong contributor to our team and is also consistent with his career objectives. I want to acknowledge the tremendous success Nate has achieved during his tenure as our Chief Investment Officer. As he has participated in nearly every investment the company has made over the last twenty five years. I would also like to recognize our Chief Client Officer, Susan Nikki, on completing her tenure as Chair of the American Clean Power Association. Your outstanding leadership of this organization allowed our industry to positively impact several policy matters. Congratulations to all. Turning to Slide four, with our capital position stronger than ever, our business strategy well established, several market dynamics moving in a positive direction, and our aforementioned talented team I'm excited to announce that we are extending our adjusted EPS guidance of 8% to 10% annual growth another year to include 2027.

The confidence we have in our business plan is based on economic fundamentals, which we will expand upon shortly and a resilient time tested business model that we expect will continue to thrive in all interest rate and policy scenarios. Our confidence in extending guidance is also a reflection of the substantial recurring revenue from the existing $6,600,000,000 portfolio, coupled with a large pipeline of identified investments, that are generally insulated from future changes in policy, due to their development status or safe harboring. I'm also pleased to announce an increase in our dividend of $0.42 As we continue to retain more capital, and as I indicated last February, target a 50% payout ratio by 02/1930. As an interim target, investors should expect a payout ratio of between 5560% by the end of the guidance period. Now let's discuss a few of the favorable market dynamics. First, as depicted on Slide five, the demand for power as forecasted by virtually every independent consultant is poised to grow significantly over the next twenty years after more than twenty years of near zero growth. Therefore, clean energy projects will no longer simply replace other sources of power but rather meet the need of higher demand as we inevitably move towards an all the above energy strategy in The United States Renewables as depicted on Page six are the least expensive and fastest to deploy alternatives to meet this rising demand, and our clients are expected to continue to increase their development of new renewables projects according creating more opportunity in a larger investable market for Hessie.

These lower costs ultimately cause renewables to be directionally anti inflationary and this supply can act to offset the trend of rising energy prices.

Susan will discuss these items in more detail in a few moments. Turning to Page seven, another item worth highlighting is that Hannon Reducing Solutions will continue to be critical to our economy as related to reversing the trend of climate related disasters. These events have become more frequent and more costly which is just another reason clean energy projects will continue to be a growth sector of the economy. In summary, although certain federal policy matters remain unsettled for the moment, these fundamental economic dynamics will continue to drive the business. Our business is resilient we have confidence we will adapt if there are any changes in policy or regulation and we'll continue to find investments with attractive risk adjusted returns, To expand on these policy themes, I would like to turn the call over to Susan, followed by Mark to discuss our investment strategy and Chuck to cover our financial results.

Susan?

Thank you, Jeff.

I appreciate the opportunity to speak to you all at this important moment in the history of clean energy. While there is uncertainty related new administration The fact remains that broader market forces are being driven by the growing certainty of accelerating U. S. Energy demand the need for an all of the above approach to supplying that demand And the fact that renewables are the lowest cost and fastest to deploy at scale. Opening on Slide eight, the Trump administration's early executive orders had been well telegraphed and the clear impact included no major surprises related to energy. While the executive orders have led to some uncertainty for new projects, thus far, federal agencies have continued to issue permits. The expected actions targeting wind, electric vehicles, and DOE and EPA grants and loans have limited impact on HAZY's investment opportunities. The fact is The U. S. Will need renewables and storage to fulfill the new administration's commitment to economic growth national security, and lower electricity prices. And the near term pipeline for new generating capacity remains dominated by solar and storage given their relative costs in addition to strong corporate and state commitment to clean energy. With regard to potential revisions to the Inflation Reduction Act, we expect clarity on the outlook for energy tax credits to come with the forthcoming budget reconciliation bill.

Although a final outcome may not occur until the December expiration of the 2017 tax cuts.

Nevertheless, the clean energy industry continues to maintain bipartisan support in light of the large investment in new manufacturing and the corresponding increase in jobs Property Taxes and Economic Growth, As Jeff indicated, the core tailwinds to our business are unchanged by policy and include First, underlying U. S. Power demand growth and second, renewables advantage in both cost and speed to market. First, as highlighted on Slide nine, U. S. Power demand has entered a new era of growth that we haven't experienced in decades. On one hand is the well publicized demand from data centers, which is forecast to increase by more than 400 terawatt hours in ten years. But critically, it's not just about AI. Data centers are just one of several forces driving power demand in the years ahead. It's also domestic manufacturing, and the new prioritization of onshoring. On top of that, there is also the [indiscernible] [indiscernible] All in, Mackenzie forecasts U. S. Electricity demand will double over the next twenty five years more than 8,000 terawatt hours by 02/1950. Not driven by the IRA but by underlying demand. If we are unable to meet this demand with sufficient supply, it is going to drive energy prices higher on top of inflationary pressures from rising supply chain, labor and tariff costs.

As Slide 10 shows, we are already starting to see the signals across multiple markets that point to higher power prices. Board price curves in ERCOT and PJM have been sent Therefore, renewables are not about policy but the basics of business. They will simply be less expensive and faster to market at scale than other sources. Including gas turbines, which due to supply constraints can take five years or more to deploy. As shown on Slide 11, solar and batteries currently account for 80% of the interconnection queue, [indiscernible] high probability forecast from January 2025 for new generating capacity includes 92 gigawatts of solar, but only 15 gigawatts of natural gas. As you can see, renewables will be a central component and arguably the most important one for the rest of this decade. Underscoring this dynamic our clients remain bullish as they monitor the uncertainty in the policy landscape. The feedback from our clients has been remarkably consistent. They are staying the course and even accelerating projects to meet the surge in near term demand hyperscalers, utilities, municipalities, With growing demand and constraints and near term supply, our clients are largely expecting to pass through any potential changes to tax credits or tariffs through higher PPA prices.

Meanwhile, we are also seeing new innovative business models. Such as colocated data centers and community solar partnership programs anchored by corporate off takers such as Microsoft and Google, which expand our clients' pipelines and in turn All tailwinds for growth and innovation for our pipeline. So again, amid changes and uncertainty we do have the fundamentals working in our favor for short and long term growth. Now I will pass it to Mark to discuss these new investment opportunities. Thank you, Susan.

I am incredibly excited for my new role. Long term fundamentals, and short term market dynamics are creating a tremendous investment opportunity for Hannon.

Our investment strategy will remain largely unchanged with a few enhancements that I'll discuss shortly. Over the past two years, we have invested approximately $4,600,000,000 utilizing our climate clients assets model it is working exceedingly well well enough that we will expand our capability set to meet the opportunity ahead. I'll start on Slide 12. Jeff and Susan have previously discussed the highly supportive long term macro trend and the resulting investment opportunity, in addition to the support of long term trend, we also see short term policy driven uncertainty. Uncertainty will cause stress in our end markets, we have never been in a stronger position as it relates to our liquidity access to capital and balance sheet. These dynamics lead us to focus on three areas in 2025.

First, [indiscernible] As shown with our Q4 activity, we continue to see an attractive investment environment.

Our approach is working and our first priority is to grow the core business.

Two, we will also showcase our adaptability While uncertainty is not optimal, we do anticipate opportunity to come from it.

A great example is the SunPower bankruptcy.

While an unfortunate event our SunStrong platform assumed the SunPower servicing business and we are excited about the growth prospects of this business. And finally, we have a strong track record of identifying new areas to invest. As such, we anticipate investing additional time, and dollars exploring new growth paths and in particular opening up new end markets. Moving to Slide 13, I'll provide some context on our past growth. On our twenty three Investor Day, I said that we have three primary paths to growth.

Growing with our existing clients, attracting new clients, and entering new asset classes.

These work well for us. Over the last two years, we have invested $3,500,000,000 with 20 existing clients acquired 15 new clients and amassed $1,200,000,000 of originations in our FTN business.

Today, we will continue to focus on these three paths and two more.

Fourth, investing outside The U. S. With existing clients. We made a handful of small investments in Canada in 2024 and are evaluating international opportunities with long standing clients. [indiscernible] new forms of investments or revenues. A few examples include SunStrong, which enables both incremental recurring fee streams and a vehicle to acquire certain assets and servicing platforms. We also view platform investments as potential opportunities given the reset in valuation. Turning to Slide 14, the addition of new asset classes is where we see a step change in our opportunity set. Today, our investment activities cover 10 asset classes spanning electric, clean molecules, transportation and resiliency. One element of our business which can be underappreciated is our potential investment scope Over the last five years, renewables have powered the business forward, which has also coincided with massive growth in renewable.

We launched our FTN team two years ago with the goal of growing beyond renewables and energy efficiency this started with RNG, but will not stop there. We're currently tracking a number of asset classes as listed on the slide. Not all of these will succeed or be a good fit for Hasty.

However, entering a select few that scale will be a major driver for growth and diversification of our business. Ultimately, our mandate is to invest in assets that are either neutral to or reduce carbon emissions or that provide some other kind of environmental benefit. That leaves open a breadth of different opportunities to invest. Before I pass the call to Chuck, I'm pleased to report that as of year end, we have closed $815,000,000 of transactions into our CCH1 partnership, CCH1 is exceeding expectations and we remain on track to fully deploy the capital as planned. With that, I'll pass the call to Chuck Melco, our soon to be CFO.

Thank you, Mark. I'm appreciative of the opportunity and excited about what I can bring to this role. I'm looking forward to working with each of our analysts and investors in the years ahead. On Slide 15, we are highlighting our key profitability metrics. On the right hand side, can see that we have had meaningful growth across the board over the past [indiscernible] for our key metrics. CAGR of 32% for adjusted NII 12% for adjusted EPS 39% for our recurring capital light income and 12% for our upfront capital light income. In addition, our primary metric adjusted EPS, was $2.45 in 2024. An increase of 10%. Adjusted NII grew 22% to a new high $264,000,000 We are continuing to deliver value from our securitization business with our gain on sale [indiscernible] and securitization income totaling $118,000,000 for 2024. Which is up 30% Moving on to Slide 16, our pipeline is greater than $5,500,000,000 which is split 48% behind the meter 27% FDM and 25% With all three markets continuing to see ample near term investment opportunities. And to build upon something that was highlighted earlier, on our pipeline, much of it is already in development. And largely insulated from any near term public policy changes.

On Slide 17, in 2024, closed $2,300,000,000 of transactions after closing a record 1,100,000,000.0 just in Q4.

Importantly, this slide continues to show the powerful diverse Each year, our leading asset classes tend to rotate.

And our total activity level remains strong.

Also, you can interpret from the slide, wind is a small contributor the go forward business? Moving to Slide 18, As of the end of the year, our managed assets totaled $13,700,000,000 increasing 11% year over year. More than 90% since the end of twenty twenty.

This is made up of our $6,600,000,000 portfolio on our balance sheet, approximately 300,000,000 for our partner share of CCH1, and $6,800,000,000 of assets we have securitized off balance sheet. In addition to what Mark mentioned on CCH1, we have funded 600,000,000 of the total commitments.

As of the end of twenty twenty four. On Slide 19, our portfolio increased 7 percent $6,600,000,000 from 2023.

Despite the $400,000,000 asset rotations of lower yielding assets, we completed earlier in the year. We have been successful in adjusting the pricing of our new investments to the current interest rate environment with our weighted average yield exceeding 10.5% in 2024.

The higher yielding new investments and the reinvestment of portfolio principal paydowns into these higher yielding investments, contributed to a meaningful increase in our portfolio yield coming in at 8.3%. Compared to 7.9% at the end of the prior year.

On Slide 20, as you can see from the trend of portfolio yield and our average debt cost, we have successfully preserved our margins over multiple periods of interest rate We believe that this is proof positive that our business can successfully grow a higher interest rate environment and we are seeing a similar trend in the pricing potential of in our pipeline. Our investment grade rating and our hedging program has successfully helped us manage our debt costs. And we are actively focused on continuing to drive down our cost We are just beginning to realize the benefits of our investment grade rating. Turning to Slide 21. The combination of our available liquidity and the stability of the investment grade debt market are expected to provide us in completing the refinancing of our upcoming maturities and a benefit from the pricing of future debt issuances relative to our historical transaction. We ended the year with greater than $1,500,000,000 of liquidity.

And our leverage as measured by our debt to equity ratio remained with within our 1.5 times to two times target range.

Of 1.8 times.

In addition, 100% of our debt is either fixed [indiscernible] from increases in rates. Our liquidity levels have been increasing and we have done so through portfolio cash generation, additional capital markets transactions, including our recent $300,000,000 ten year issuance, and additional $100,000,000 commitment in Q4 Our In addition to our refinancing plans, we will use this higher liquidity to fund our growing pipeline. We have also initiated a commercial paper issuance program that will generate meaningful savings on short term borrowings relative to our other source And with that, will pass it back to Jeff.

Closing remarks.

Thank you. Thank you, Susan, Mark and Chuck. On Slide 22, as always, we provide our primary sustainability metrics. Carbon count and water count.

Along with some of our sustainability accomplishments over the last quarter and recognition that we have received. Wrapping up on Slide 23, We are situated with an incredibly strong balance sheet and liquidity position coupled with a proven investment strategy. And we are poised to continue scaling our business and achieving our targeted earnings growth. Not only was our adjusted EPS growth 10% in 2024, but our compound average EPS growth has been 10% since our IPO. We have a highly resilient and non cyclical business model that has demonstrated adapt has a demonstrated ability to adapt to business cycles and policy changes while continuing to produce earnings growth. We have an optimistic outlook for our business and have reinforced that confidence with guidance through 2027. I would like to thank our dedicated and talented team for an outstanding year as we look forward to further success in 2025. Operator, please open the line for questions.

Thank you. We will now be conducting a question and answer session.

Our first question comes from the line of Mark Strauss with JPMorgan Chase and Company.

Please proceed with your question. Great. Thank you very much for taking our questions.

Congrats to everybody on your new roles.

I wanted to go back to Slide 14, if we can. A few questions there. Just to start, can you talk about maybe when when we should expect just kind of around the timing of when some of these opportunities could be added to the portfolio? And then just kind of how you're thinking about it today at least as far as kind of the the risk adjusted returns, how to think about that? Hey, Mark.

Hey, Mark. Thank you for the question. [indiscernible] list as extensive as we provided, you can imagine that some of these are tangible and near term, and others are perhaps within the scope but from a timing perspective, much further out. In terms of some of the opportunities we see in the near term, I would encourage you to think of them in a very similar context to what we're doing today and that they are infrastructure assets with long term cash flows and contracted cash flows that enable us to price in a similar zip code as to we are today, but obviously, we will adjust pricing as risk changes the asset classes as we move forward.

Okay. And then just a quick follow-up. So obviously, the scope is expanding. Can you talk about the scale too? Does the expansion into these new markets does that change kind of your your stated goal of reducing your reliance on public capital markets Is there anything about these these verticals that you're going after that for example, might not fit into the KKR partnership or some of the other private deals that you're looking at? Thank you.

Thanks, Mark. No, I wouldn't think about the way in which we fund any of these new asset classes to be differently than the way we've historically funded the business. So I don't think they would result in any more or less capital raising. I think they would have a consistent funding strategy. As Mark said, presuming they had a consistent risk profile, we would fund them exactly the same as we fund ourselves Got it. Okay. Thank you very much.

You.

Thank you. Our next question comes from the line of Ben Kayla with Hey guys, congrats, Mark, Chuck and Susan.

Just maybe Just on the The next deal with KKR. I know that's still less than half of the $2,000,000,000 but you guys are moving quickly. And so just wanted to understand what kind of discussions you're having with them or others about the solar cycle partnership? And then I have a follow-up.

As well. So thanks for the question, Ben.

Although I would say it's a little premature in advanced discussions. I think we have ways to go with our existing co investment vehicle. I would say, as I've said to you and others before, I would expect a co investment strategy to be a permanent part of our capital structure but we don't have anything to say yet on what's next after CCH1.

Okay. Just on this going back to Mark's question on Slide 14. I guess The takeaway, you guys talked about moving internationally Hannon I don't know We should think that you're right. You have opportunities kind of in your bread and butter areas that you guys have been doing or if the we should think of it as technologies maturity or have more capital to deploy or maybe all of the above. Let me just kind of frame like, why [indiscernible] and then the move internationally. Thank you.

Thanks, Ben. Maybe I'll start and give Mark an opportunity to expand upon my answer [indiscernible] definitively it is not a reflection of the asset strategy as reflected today in the middle column on Page 14, somehow running out of capacity. I think we have a great opportunity in the asset classes and the client base we have today But as any business would, we want to expand And I think Mark in describing his vision and this new role that we've created for him. Wanted to really get out in front of this notion of where might we expand the business. Both geographically and in terms of asset classes. So I would I would contextualize it in that framework. We're certainly not running out of opportunity though with the existing business.

Do you market an opportunity to add anything to that? No, he's not. He has said that nothing to add. Thanks, Ben. I concur.

Guys. Have a good night.

Thank you.

Our next question comes from the line of Julien Dumoulin Smith with Jefferies.

Please proceed with your question.

Hey, good afternoon team. Thank you guys very much and congrats Nicely done.

And maybe also nicely done on rolling forward the guidance here. The updates there as well. In fact, do you think going forward, you'll start cadence of rolling forward as you finish one year kind of rolling forward the guidance in kind of a versus the prior Analyst Day rollouts.

Thanks for the question, Julian. I think we've done it a couple different ways, as you know, because you've covered us a long time. But I think we've consistently had multiyear guidance out there at any given moment. And to have three more years out there is obviously a reflection of the confidence and visibility we have on the business. Can't guarantee exactly how we'll do it in the future, but I think we've been generally consistent with both of your guidance.

No. It's great to have the affirmation here and now on the long dated view. In fact, falls into the next question. I mean strategically here, I see the new role maybe Mark, you can speak to a little bit, mentioning strategy. Is the emphasis on creating that role more about reviewing strategic nature for the company itself? Or is it more about evaluating the quote next frontier as you guys label in the slides as to what direction you guys want to go? And then maybe related on kind of this next frontier, how do you think about the the gross asset origination number? I know we've talked about this a few different times, but given all the various new end markets, given the growth trajectory, is there kind of a good heuristic that you're thinking about now in terms of what that gross origination number could scale as you think about that 26 and now 27?

Sure. I'll take the first part of that and allow Mark to answer the second part. So the strategy and Mark's new title is primarily focused on our investment strategy. It may involve some corporate strategy matters at certain times but think of it more as driving the investment strategy. I'll let Mark answer the second part of that question.

Hey, Julien. Thanks for the question.

The second part around our general thoughts on investment volumes and so forth. I do think that from a most basic perspective, we're an organization that [indiscernible] earnings primarily through the investment and deployment of capital. And so our goal of course is to always be increasing our level of activity on that front We, of course, [indiscernible] our desire to increase the investment activity with our capital platform and the people we have internally But I'm sure you can pick up from this call that we feel very good about the capital platform the people, [indiscernible] and are very much looking forward to expanding our level of activity.

Absolutely. I'm looking forward to you guys. All the best. Thank you for the details.

Thank you. Thank you. Our next question comes from the line of Moses Sutton with BNP Paribas. Please proceed with your question.

Good evening. This is Heidi on for Moses. Thank you for taking my question.

I've had one So in the event that tax credits adders or the base credit [indiscernible] whatever the timeline or magnitude, would you expect to gain a greater investment opportunity in the average asset of the customer considering the gap in the capital stack that could emerge specifically from reduced tax monetization, would this actually be positive for your funding prospects?

So I do think that incrementally, yes. If you think about the capital stack of a particular project, it's generally comprised of tax equity and cash equity. And cash equity is generally where we [indiscernible] in our investment. So if the amount of tax equity would go down that would imply that there's a gap there and that's usually would also imply the sponsor is passing through a higher PPA rate that increases the level of cash and that gives us more of a monetization opportunity in any one any one project.

Got it. Thank you.

Thank you. Our next question comes from the line of Noah Kaye with Oppenheimer. Please proceed with your question.

Thanks so much folks.

I'll add my congratulations to those who have already done so. And great to see the continued growth and evolution of the organization.

I will return to the slide 14 around the next frontier.

It strikes me that at least some of these buckets are areas where some of your existing customers are already doing work and quite active Mark, maybe talk a little bit about what leverage you might actually have from into relationships again in some of these growth areas and where you think you're going to need to build some new bridges in relation Sure. Thank you, Noah.

I think when you Think about our model, climate clients' assets, obviously, the client dynamic is one of the key pillars and something that we have I believe, done a very good job of over time is of course, acquiring retaining clients, but then figuring out how we into all of their business lines. And that will be and I think the example I'll give you is Ameresco has been one of our longest standing clients They, of course, are very focused on RNG, and our first RNG investment was with Ameresco again, as an example. So that will be a continued focus. And I There are some of these asset classes where we'll need to initiate new clients as opposed to existing. But But again, as a core part of [indiscernible] business and model continue to focus on Thank you, Mark. [indiscernible] The outlook for 2025 includes kind of a being on sale level that's more consistent with 2021, 2023 is pretty strong. This past year.

Can you give us a little bit of insight on sort of what what drives that kind of reversion or normalization? And then since it's been a big support to some of the earnings growth this year, Any color on how you think about the cadence of the multiyear EPS growth in this next year.

If we're just not going to have as much help from the gain on sale.

Thanks, Noah. I think the way to think about it is $21,000,000 to $23,000,000 gain on sale was a very attractive number and allowed us to achieve significant earnings growth $24,000,000 had a bit of an outsized gain related to asset rotation. And that would be otherwise hard to replicate. It wasn't related to client related gain on sales. So client related gain on sale will remain consistent and we'll grow the other revenue streams given our guidance. Clearly, we'll grow the other revenue streams to accommodate what otherwise may look like a little drop this year and get on sale.

Okay.

Very helpful. Thank you. Thank you.

Thank you. Our next question comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question.

Hey guys, this is Tyler Bissett on for Brian. Thanks for taking our questions.

You call out grandfathering and safe harboring protecting your pipeline and I noticed you recently closed a structured equity capital partnership with IGS, who's been active with safe harboring. So just wondering, are you seeing any potential near term opportunities for safe harboring? And was that included at all in your $1,100,000,000 in transaction closed in 4Q and if so to what extent?

Yes, thanks. I know that a lot of our clients in the real estate industry took advantage of opportunities last year to safe harbor or start construction given the uncertainty they protected their pipelines for a continued period that in turn protects our pipeline that part of our pipeline being insulated is in a good place. Whether or not those will lead to the projects, I think themselves will give us plenty of opportunities to invest in versus new safe harboring facilities, but that could come as well.

And I just to answer the other part of the question, I don't believe any of the $1,100,000,000 in fourth was a direct safe harboring transaction with Assi.

Super helpful. [indiscernible] Kind of piggybacking off of that, closed transactions were strong in 4Q.

Bringing you to $2,300,000,000 for the year, which was the same as you did last year, but your ROE has obviously increased. So just wondering how you're viewing see the volume increase this year?

You may see volume increase. I think our guidance is guidance is premised on flat to slight increases in overall volumes. But we may of course exceed the guidance. So you may see some increase in 2025. But it's I would view that as relatively modest increase over the 2.3%.

Super helpful. Thank you very much.

Thank you.

Thank you. Our next question comes from the line of Chris Dendrinos with RBC Capital Markets. Please proceed with your question.

Yes. Thank you and good evening.

You highlighted two new growth paths outside of The U. S. But then new forms of investment. One of the things you pointed out was SunStrong and the opportunity there to leverage that and acquire new assets as well as make it into a servicing platform. Can you just I guess, walk through that a little bit more. What is the opportunity set look like there? And how do those transactions, I guess, unfold? [indiscernible] Thanks, Chris. Sure. So the background on this particular business is that, of course, we had a partnership with SunPower So SunPower was both an equity partner and a servicer of the assets that partnership owned. And of course, when they went bankrupt, [indiscernible] the SunStrong platform itself, that partnership assumed the servicing And so that business is asset management and servicing business for distributed solar today. And so as such, it generally receives revenue in the form of these recurring fees.

And we do see an opportunity to grow that platform which of course would increase the level of recurring fees running through It's financial statements and then eventually ours.

Got it. Okay.

And then I guess maybe just one kind of housekeeping question here. But on CCH-one and you mentioned it was progressing as planned. So does that mean is it fully funded by the end of this year or is it just [indiscernible] total transaction volume is is complete by by the end of this year and I'll get there. Thanks.

So I think what we've said previously, which we'll stand by is that the original $2,000,000,000 target in the first eighteen months of CCH1 is on track and that would roughly end right at the end of twenty twenty five. So I think we're in in good track to hit the original projection of investment volume in CCH1. If that question also had to do with committed versus funded, Just to clarify, it is the nature of most of our investments that there is a commitment in one period and then a funding that occurs later. So that dynamic is consistent in CCH1 as it is in the rest of the business. And and investments can fund anywhere from three months to twelve to eighteen months after our original Thank you. Our next question comes from the line of Vikram Bagri with Citi. Please proceed with your question. Hey, good evening everyone.

Wanted to ask a macro question. Mark, you mentioned in your comments that the short term policy uncertainties causing stress in end markets. Was wondering if you can expand how that stress is manifesting? Are you seeing more projects move out of the pipeline? Are you seeing delays, cancellations? Given you have a holistic view on so many end markets, can share like directionally what you're seeing that in the markets? Sure. Thanks Vikram.

Of course, the specifics of any market can differ, but I think that a general characterization is that all of these end markets are infrastructure projects where people make investment decisions that are based on some clear understanding of the policy environment. If you lack that clear understanding, it is our clients who are actually investing development dollars, they're the ones who have to make that financial decision either make it and take the risk or delay it Either way, that represents increased risk and or extended [indiscernible] And as Susan covered, many are plowing forward because they've taken actions to protect themselves But again, as a general matter, of course, in development, extending timelines is usually a bad thing.

Got it. As a follow-up, I noticed the decrease in payout ratio in 27 versus 24 to 28, 26. Which reduces your reliance on capital markets. I was wondering if is there a long term target where you want to get to in terms of payout ratios [indiscernible] On a related note, a housekeeping question. Can you also confirm what the new asset yield was in 4Q quarter? I saw a number for the entire year If you can share what the number was for fourth quarter? Thank you.

Sure. Thanks Vikram. On the first question there, going all the way back to our Investor Day in 2023, we gave a seven year projection that the payout ratio would hit 50% by 02/1930. So I think we've given Very good long term visibility on where that's headed. And now we've given the interim 2027 range as well. What we'll do after 02/1930 I'm not prepared to say, but again, I think we've given good long term visibility on where we're headed headed with payout ratio. I'll let Chuck answer the other part of that question.

Vikram, this is Chuck.

So the Q4 yield number was very similar to [indiscernible] of Thank you.

Thank you. Our next question comes from the line of Mandloy with Mizuho.

Please proceed with your question.

Hey, good evening. Thanks for the good question here and congratulations on the promotions here for everyone. Just on the previous question, the you could just talk about the yield, how things are changing on that front in Q1. You did talk about increased risk and some of the projects and extended construction phase, which is wondering if that's manifesting in higher yields and the broader asset cost for those renewables are negative carbon for you.

Mehdi, thanks for the question. I would say, obviously, we're not going to talk a lot about about Q1, but I think [indiscernible] we were, I think pretty clear, has a yield similar to what we've done in 2024. And if there's rate movement that's subject to change, But I think we're in that same range in terms of transactions in the pipeline at this point.

You made a reference increased risk. And I think you were calling back to my answer around the policy in uncertainty. I would just want to clarify that that would not be risk as it relates to us or the positions that we take but more around [indiscernible] in the development phase, which is Before we tend to get involved.

It seems more like a risk for construction financing or bridge financing than for for at the later stage when you guys come in? And separately just on going back to [indiscernible] On these new opportunities, I know it's probably pretty early But in terms of the yields or tenure of these do you expect any differences there or [indiscernible] modeling purposes, let's just assume this just expands your bigger funnel and pretty much everything else from modeling perspective remains the same for us.

Sure.

So a couple of comments. One, from a modeling perspective, I would want to clarify the guidance that Jeff laid out is premised on the [indiscernible] The asset classes that we invest in today, And so I would suggest that you continued modeling the business as you as you have been. In terms of the yields that we're seeing on some of these new asset classes it is TBD But as I mentioned, I believe, when Mark asked the question, We're generally looking at these in a very similar way that we look at our existing asset classes in terms being infrastructure assets with long duration cash flows that are contracted. And so I would think of the risk return to be somewhat similar to what we have Of course, we will adapt to markets as they evolve over time.

Thank you.

Our next question comes from the line of Dimple Goseig with you, America.

Please proceed with your question.

I appreciate you taking my question. Thanks guys.

I just wanted to ask you a little bit more about the international opportunity, which you mentioned on Slide 13. How would you frame the size of the [indiscernible] Can you kind of discuss the underlying details in terms of the types of asset class sectors and geographies that kind of underpins that?

Sure. So first, I would say, and I tried to in the prepared remarks that what we've done to date has been a very small portion of the business. And I would anticipate that much like the way we enter many different markets, we will take our time to not overextend ourselves continue to think about the business [indiscernible] being heavily U. S. Focused, in the near term, One of the areas that we wanted to put out with this call is just to remind people of the scope of the business and then what we're doing to continue to grow the business. But again, from a near term perspective, I continue to think of a majority of our pipeline The U. S. And I would add something that Mark actually did already say in the prepared remarks, which is international strategy is overwhelmingly likely to be with an existing client. Which will give us more of a comfort zone. So it makes it a little harder to pick to speculate on geographies. Because we'll see what opportunities our clients show us internationally.

Understood. Thank you.

Thank you. Thank you. Our next question comes from the line of Jordan Levi with Truist Securities. Please proceed with your question. [indiscernible] for all the details. I think in the prepared remarks, Jeff, you made mention to or maybe Mark mentioned of additional forms of investment including platform investments becoming more attractive given valuations. I just wanted to get a sense of whether this was sort of a reference to your historical target sector buckets or if that could be expanded into some of the new growth areas as well in terms of [indiscernible] Thanks, Jordan, and thanks for picking up coverage. I mean, I think the fundamental answer to that question is both. It could be in either of those buckets. I think it's something again with the reset in valuations we want to be prudent about. It's not been a core part of our business and you should think about the core part of our business continuing to be at the asset level. But if there is a specific opportunity that presents itself given this reset in valuations, we might consider it. So Mark, wanted to make mention of it. But it's again, it would be hard to speculate what that might be.

For sure. Thanks for that. And then just a follow-up. On the breakout of new investments on Slide 17. I know it bounces around a lot year to year, but it seems like a really strong year for new investments in C and I. Particularly. Maybe just some of the opportunity set dynamics you're seeing in that particular sub segment?

Sure.

That is a market where we have been More and less focused on But lately, we've seen better opportunities. And I would think of that as primarily in the solar and storage [indiscernible] And again, our continued focus on our Got it. Thanks for the details.

Thank you.

And our next question comes from the line of Ryan Pincus with B. Riley Securities.

Please proceed with your question.

Hey guys, thanks for taking my question.

I'll just ask one on the RNG side. D3 rim prices have been a bit volatile in recent months. Does that affect your investment process at all? Or are you mostly looking at RNG facilities with fixed price optic?

Would say it certainly is a factor in our underwriting and we watch wind prices close [indiscernible] But at the end of the day, we are senior debt these RNG projects and we don't view our tranche of capital to be materially exposed to RIN pricing.

Given that it's senior debt. So it's a factor but we are well protected from a cash flow perspective in these investments. Understood. Thanks, Jeff. Thanks, Brad.

Thank you.

And this concludes today's we have reached the end of the question and answer session and this also concludes today's [indiscernible] and thank you for your participation.