Business Wire News

Hannon Armstrong Announces Second Quarter 2022 Results and Declares Dividend

ANNAPOLIS, Md.--(BUSINESS WIRE)--Hannon Armstrong Sustainable Infrastructure Capital, Inc. ("Hannon Armstrong," "we," "our" or the "Company") (NYSE: HASI), a leading investor in climate solutions, today reported results for the second quarter of 2022.


Financial Highlights

  • Delivered $(0.21) GAAP EPS on a fully diluted basis for the second quarter of 2022, compared with $0.20 for the same period in 2021
  • Delivered $0.60 Distributable EPS on a fully diluted basis for the second quarter of 2022, compared to $0.57 Distributable EPS for the same period in 2021, representing a 5% YOY increase
  • Reported GAAP-based Net Investment Income of $11.1 million for the second quarter of 2022, compared to $(9.0) million for the same period in 2021
  • Increased Distributable Net Investment Income for the second quarter of 2022 by 44% YOY to $47.9 million, compared to $33.2 million for the same period in 2021
  • Closed $340 million of investments in the second quarter of 2022, compared to $509 million in the same period in 2021
  • The portfolio grew 30% YOY to $3.9 billion
  • Investment Grade (Baa3) rating by Moody’s
  • Declared dividend of $0.375 per share
  • Affirm guidance that Distributable Earnings Per Share is expected to grow at a compound annual rate of 10% to 13% from 2021 to 2024, relative to the 2020 baseline of $1.55 per share, which is equivalent to a 2024 midpoint of $2.40 per share

ESG Highlights

  • Published internal price on carbon and updated business partner code of conduct
  • An estimated 81,000 metric tons of carbon emissions will be avoided annually by our transactions closed this quarter, equating to a CarbonCount® score of 0.24 metric tons per $1,000 invested

"Record Distributable Earnings Per Share in the quarter on strong Net Investment Income from portfolio growth and stable margins, shows the increasing strength of our dual-revenue business model," said Jeffrey W. Eckel, Hannon Armstrong Chairman and Chief Executive Officer. "We remain confident in the continued growth of the portfolio based on committed transactions and conversion of the pipeline to executed investments, including growth in Sustainable Infrastructure opportunities."

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

 

 

For the three months ended
June 30, 2022

 

For the three months ended
June 30, 2021

 

 

$ in thousands

 

Per Share
(Diluted)

 

$ in thousands

 

Per Share
(Diluted)

GAAP Net Income

$

(18,449

)

 

$

(0.21

)

 

$

15,974

 

$

0.20

Distributable earnings

 

53,524

 

 

 

0.60

 

 

 

47,573

 

 

0.57

 

 

For the six months ended
June 30, 2022

 

For the six months ended
June 30, 2021

 

 

$ in thousands

 

Per Share

 

$ in thousands

 

Per Share

GAAP Net Income

$

26,896

 

 

$

0.30

 

 

$

66,998

 

$

0.81

Distributable earnings

 

99,257

 

 

 

1.13

 

 

 

83,248

 

 

1.01

Financial Results

"Our flexible funding platform, investment grade rating, and consistent portfolio cash flows contribute to our business resiliency," said Jeffrey A. Lipson, Chief Financial Officer and Chief Operating Officer. “We remain well-positioned to achieve our earnings guidance.”

Comparison of the quarter ended June 30, 2022 to the quarter ended June 30, 2021

Total revenue increased by $4 million, as higher interest income of $8 million from a larger portfolio with a lower average interest rate was offset by $4 million of lower gain on sale due to a change in the mix of assets being securitized.

Interest expense decreased $12 million primarily due to a one time loss on the redemption of senior unsecured notes in the prior period which did not recur. We recorded an $8 million provision for loss on receivables driven primarily by loan and loan commitments made during the period as well as certain loan specific provisions. Other expenses (compensation and benefits and general and administrative expenses) increased by approximately $12 million primarily due to an acceleration of share based compensation resulting from the adoption of a new retirement policy.

We recognized a loss of $20 million using the hypothetical liquidation at book value method (HLBV) for our equity method investments in the second quarter of 2022, compared to income of $22 million for the same period in 2021, primarily due to the impact of increasing power prices and the resulting unrealized mark-to-market losses on economic hedges used by some of our projects to reduce the impact of power price fluctuations.

Income tax benefit (expense) increased approximately $11 million in the second quarter of 2022 compared to the same period in 2021 due to the GAAP loss recognized in the quarter.

GAAP net income (loss) in the second quarter of 2022 was $(18) million, compared to $16 million in the same period in 2021. Distributable earnings in the second quarter of 2022 was approximately $54 million, or an increase of approximately $6 million from the same period in 2021 due primarily to new assets added to our portfolio.

Leverage

The calculation of our fixed-rate debt and leverage ratios as of June 30, 2022 and December 31, 2021 are shown in the table below:

 

June 30, 2022

 

% of Total

 

December 31, 2021

 

% of Total

 

($ in millions)

 

 

 

($ in millions)

 

 

Floating-rate borrowings (1)

$

201

 

7

%

 

$

101

 

4

%

Fixed-rate debt (2)

 

2,621

 

93

%

 

 

2,392

 

96

%

Total

$

2,822

 

100

%

 

$

2,493

 

100

%

Leverage (3)

1.8 to 1

 

 

 

1.6 to 1

 

 

(1)

 

Floating-rate borrowings include borrowings under our floating-rate credit facilities.

(2)

 

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 $3.9 billion as of June 30, 2022, which included approximately $2.3 billion of behind-the-meter assets and approximately $1.6 billion of grid-connected assets. The following is an analysis of the performance of our portfolio as of June 30, 2022:

 

Portfolio Performance

 

 

 

 

Government

 

Commercial

 

 

 

1 (1)

 

1 (1)

 

2 (2)

 

3 (3)

 

Total

 

(dollars in millions)

Total receivables

 

111

 

 

 

1,472

 

 

 

 

 

 

11

 

 

 

1,594

 

Less: Allowance for loss on receivables

 

 

 

 

(29

)

 

 

 

 

 

(8

)

 

 

(37

)

Net receivables (4)

 

111

 

 

 

1,443

 

 

 

 

 

 

3

 

 

 

1,557

 

Receivables held-for-sale

 

50

 

 

 

24

 

 

 

 

 

 

 

 

 

74

 

Investments

 

3

 

 

 

9

 

 

 

 

 

 

 

 

 

12

 

Real estate

 

 

 

 

359

 

 

 

 

 

 

 

 

 

359

 

Equity method investments (5)

 

 

 

 

1,907

 

 

 

28

 

 

 

 

 

 

1,935

 

Total

$

164

 

 

$

3,742

 

 

$

28

 

 

$

3

 

 

$

3,937

 

Percent of Portfolio

 

4

%

 

 

95

%

 

 

1

%

 

 

%

 

 

100

%

Average remaining balance (6)

$

8

 

 

$

11

 

 

$

14

 

 

$

11

 

 

$

11

 

(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. In the second quarter of 2022, we moved to this category from Category 2 $11 million of loans we had made in a new market venture where the performance has not met expectations. Previously included in this category were two commercial receivables with a combined total carrying value of approximately $8 million which were assignments of land lease payments from two wind projects that we had originated in 2014, as a part of an acquisition of a large land portfolio. In 2017, the operator of the projects terminated the lease, at which time we filed a legal claim and placed these assets on non-accrual status. In 2019, we received a court decision indicating that the owners of the projects were within their rights under the contract terms to terminate the lease which impacts the land lease assignments to us, at which time we reserved the receivables for their full carrying amount. In the second quarter of 2022, we received a court decision indicating that our appeal was not successful, and accordingly we charged off the full amount of the receivable.

(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.

(6)

 

Average remaining balance is calculated gross of allowance for loss on receivables and excludes approximately 243 transactions each with outstanding balances that are less than $1 million and that in the aggregate total $76 million.

Guidance

The Company expects that annual distributable earnings per share will grow at a compounded annual rate of 10% to 13% from 2021 to 2024, relative to the 2020 baseline of $1.55 per share, which is equivalent to a 2024 midpoint of $2.40 per share. The Company also expects growth of annual dividends per share to be at a compounded annual rate of 5% to 8%. 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. All guidance is based on current expectations of the ongoing and future impact of COVID-19 and the speed and efficacy of vaccine distribution on economic conditions, the regulatory environment, the dynamics of the markets in which we operate and the judgment of the Company’s management team, among other factors. 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 approved a quarterly cash dividend of $0.375 per share of common stock. This dividend will be paid on October 11, 2022, to stockholders of record as of October 4, 2022.

Conference Call and Webcast Information

Hannon Armstrong will host an investor conference call today, Thursday, August 4, 2022, at 5:00 p.m. Eastern Time. The conference call can be accessed live over the phone by dialing 1-877-407-0890 or for international callers, +1-201-389-0918. Participants should inform the operator they want to be joined to the Hannon Armstrong call. The conference call will also be accessible as an audio webcast with slides on the Company’s website at investors.hannonarmstrong.com. An online replay will be available for a limited time beginning immediately following the call.

About Hannon Armstrong

Hannon Armstrong (NYSE: HASI) is the first U.S. public company solely dedicated to investments in climate solutions, providing capital to assets developed by leading companies in energy efficiency, renewable energy, and other sustainable infrastructure markets. With more than $9 billion in managed assets, our core purpose is to make climate positive investments with superior risk-adjusted returns. For more information, please visit hannonarmstrong.com or follow us on Twitter and LinkedIn.

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, and include the ongoing impact of the current outbreak of the novel coronavirus (“COVID-19”). 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.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

2022

 

2021

 

2022

 

2021

Revenue

 

 

 

 

 

 

 

Interest income

$

33,358

 

 

$

25,016

 

 

$

63,601

 

 

$

50,117

 

Rental income

 

6,609

 

 

 

6,462

 

 

 

13,108

 

 

 

12,931

 

Gain on sale of receivables and investments

 

19,664

 

 

 

24,426

 

 

 

36,762

 

 

 

41,916

 

Fee income

 

3,172

 

 

 

2,990

 

 

 

7,809

 

 

 

5,625

 

Total revenue

 

62,803

 

 

 

58,894

 

 

 

121,280

 

 

 

110,589

 

Expenses

 

 

 

 

 

 

 

Interest expense

 

28,827

 

 

 

40,463

 

 

 

55,479

 

 

 

68,045

 

Provision for loss on receivables

 

8,064

 

 

 

906

 

 

 

8,685

 

 

 

1,411

 

Compensation and benefits

 

22,246

 

 

 

12,422

 

 

 

37,176

 

 

 

27,633

 

General and administrative

 

7,408

 

 

 

4,966

 

 

 

14,546

 

 

 

9,850

 

Total expenses

 

66,545

 

 

 

58,757

 

 

 

115,886

 

 

 

106,939

 

Income before equity method investments

 

(3,742

)

 

137

 

 

 

5,394

 

 

 

3,650

 

Income (loss) from equity method investments

 

(19,585

)

 

 

22,252

 

 

 

27,981

 

 

 

76,734

 

Income (loss) before income taxes

 

(23,327

)

 

 

22,389

 

 

 

33,375

 

 

 

80,384

 

Income tax (expense) benefit

 

4,789

 

 

 

(5,981

)

 

 

(6,209

)

 

 

(12,760

)

Net income (loss)

$

(18,538

)

 

$

16,408

 

 

$

27,166

 

 

$

67,624

 

Net income (loss) attributable to non-controlling interest holders

 

(89

)

 

 

434

 

 

 

270

 

 

 

626

 

Net income (loss) attributable to controlling stockholders

$

(18,449

)

 

$

15,974

 

 

$

26,896

 

 

$

66,998

 

Basic earnings (loss) per common share

$

(0.21

)

 

$

0.20

 

 

$

0.31

 

 

$

0.85

 

Diluted earnings (loss) per common share

$

(0.21

)

 

$

0.20

 

 

$

0.30

 

 

$

0.81

 

Weighted average common shares outstanding—basic

 

87,049,777

 

 

 

78,372,647

 

 

 

86,316,464

 

 

 

77,935,264

 

Weighted average common shares outstanding—diluted

 

87,049,777

 

 

 

81,944,511

 

 

 

89,541,858

 

 

 

87,165,587

 

HANNON ARMSTRONG SUSTAINABLE INFRASTRUCTURE CAPITAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

 

 

June 30,
2022

 

December 31,
2021

Assets

 

 

 

Cash and cash equivalents

$

279,459

 

 

$

226,204

 

Equity method investments

 

1,935,467

 

 

 

1,759,651

 

Commercial receivables, net of allowance of $37 million and $36 million, respectively

 

1,445,576

 

 

 

1,298,529

 

Government receivables

 

110,754

 

 

 

125,409

 

Receivables held-for-sale

 

74,109

 

 

 

22,214

 

Real estate

 

359,106

 

 

 

356,088

 

Investments

 

11,643

 

 

 

17,697

 

Securitization assets

 

178,156

 

 

 

210,354

 

Other assets

 

124,748

 

 

 

132,165

 

Total Assets

$

4,519,018

 

 

$

4,148,311

 

Liabilities and Stockholders’ Equity

 

 

 

Liabilities:

 

 

 

Accounts payable, accrued expenses and other

$

105,200

 

 

$

88,866

 

Credit facilities

 

201,032

 

 

 

100,473

 

Green commercial paper notes

 

100,174

 

 

 

50,094

 

Non-recourse debt (secured by assets of $553 million and $573 million, respectively)

 

416,343

 

 

 

429,869

 

Senior unsecured notes

 

1,765,195

 

 

 

1,762,763

 

Convertible notes

 

339,559

 

 

 

149,731

 

Total Liabilities

 

2,927,503

 

 

 

2,581,796

 

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, 87,489,951 and 85,326,781 shares issued and outstanding, respectively

 

875

 

 

 

853

 

Additional paid in capital

 

1,811,889

 

 

 

1,727,667

 

Accumulated deficit

 

(232,590

)

 

 

(193,706

)

Accumulated other comprehensive income (loss)

 

(22,132

)

 

 

9,904

 

Non-controlling interest

 

33,473

 

 

 

21,797

 

Total Stockholders’ Equity

 

1,591,515

 

 

 

1,566,515

 

Total Liabilities and Stockholders’ Equity

$

4,519,018

 

 

$

4,148,311

 

 

 

 

 

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, gains or (losses) 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 our Operating Partnership. We also make an adjustment to our equity method investments in the renewable energy projects as described below. We will use judgment in determining when we will reflect the losses on receivables in our distributable earnings. In making this determination we will consider certain circumstances such as the time period in default and sufficiency of collateral as well as the outcomes of any related litigation. In the future, distributable earnings may also exclude one-time events pursuant to changes in GAAP and certain other adjustments as approved by a majority of our independent directors.

We believe a Non-GAAP measure, such as distributable earnings, that adjusts for the items discussed above is and has been a meaningful indicator of our economic performance in any one period and is useful to our investors as well as management in evaluating our performance as it relates to expected dividend payments over time. As a REIT, we are required to distribute substantially all of our taxable income to investors in the form of dividends, which are a principal focus of our investors. Additionally, we believe that our investors also use distributable earnings, or a comparable supplemental performance measure, to evaluate and compare our performance to that of our peers, and as such, we believe that the disclosure of distributable earnings is useful to our investors.

Certain of our equity method investments in renewable energy and energy efficiency projects are structured using typical partnership “flip” structures where the investors with cash distribution preferences receive a pre-negotiated return consisting of priority distributions from the project cash flows, in many cases, along with tax attributes. Once this preferred return is achieved, the partnership “flips” and the cash equity investor(s) receive more of the cash flows through its equity interests while the previously preferred investors retain an ongoing residual interest. We have made investments in both the preferred and common equity of these structures. Regardless of the nature of our equity interest, we typically negotiate the purchase prices of our equity investments, which have a finite expected life, based on our underwritten cash flows discounted back to the net present value, based on a target investment rate, with the cash flows to be received in the future reflecting both a return on the capital (at the investment rate) and a return of the capital we have committed to the project. We use a similar approach in the underwriting of our receivables.

Under GAAP, we account for these equity method investments utilizing the HLBV method. Under this method, we recognize income or loss based on the change in the amount each partner would receive, typically based on the negotiated profit and loss allocation, if the assets were liquidated at book value, after adjusting for any distributions or contributions made during such quarter. The HLBV allocations of income or loss may be impacted by the receipt of tax attributes, as tax equity investors are allocated losses in proportion to the tax benefits received, while the sponsors of the project are allocated gains of a similar amount. The investment tax credit typically used in solar projects is a one-time credit which is realized in the quarter when the project is considered operational for tax purposes and is fully allocated under HLBV in that quarter (subject to an impairment test) while the production tax credit used in wind is a ten year credit and thus is allocated under HLBV over a ten year period. In addition, the agreed upon allocations of the project’s cash flows may differ materially from the profit and loss allocation used for the HLBV calculations.

The cash distributions for those equity method investments where we apply HLBV are segregated into a return on and return of capital on our cash flow statement based on the cumulative income (loss) that has been allocated using the HLBV method. However, as a result of the application of the HLBV method, including the impact of tax allocations, the high levels of depreciation and other non-cash expenses that are common to renewable energy projects and the differences between the agreed upon profit and loss and the cash flow allocations, the distributions and thus the economic returns (i.


Contacts

Investor Contact:
Neha Gaddam
This email address is being protected from spambots. You need JavaScript enabled to view it.
410-571-6189

Media Contact:
Gil Jenkins
This email address is being protected from spambots. You need JavaScript enabled to view it.
443-321-5753


Read full story here

Read Article On Business Wire


Author:This email address is being protected from spambots. You need JavaScript enabled to view it.
Offshore Source Logo

Offshore Source keeps you updated with relevant information concerning the Offshore Energy Sector.

Any views or opinions represented on this website belong solely to the author and do not represent those of the people, institutions or organizations that Offshore Source or collaborators may or may not have been associated with in a professional or personal capacity, unless explicitly stated.

Corporate Offices

Technology Systems Corporation
8502 SW Kansas Ave
Stuart, FL 34997

Phone: +1 772.221.7720