Earnings call transcript: Hannon Armstrong Q3 2025 beats earnings expectations

Hannon Armstrong Sustainable Infrastructure Capital (HASI) reported a record quarterly adjusted EPS of $0.80 for Q3 2025, surpassing the forecast of $0.69 and achieving the highest in the company's history. Revenue also exceeded expectations, coming in at $103.06 million against a forecast of $100.25 million. Despite these strong results, the stock saw a decline of 1.35% in aftermarket trading, closing at $28.94.

Key Takeaways

• Hannon Armstrong reported record quarterly EPS of $0.80, beating forecasts by 15.94%.
• Revenue reached $103.06 million, surpassing expectations by 2.8%.
• The company closed $1.5 billion in transactions through Q3, including a significant investment in the SunZia wind power project.
• Despite strong earnings, the stock declined 1.35% in aftermarket trading.

Company Performance

Hannon Armstrong's performance in Q3 2025 marked a significant achievement with the highest quarterly adjusted EPS in its history. The company reported a year-to-date adjusted EPS of $2.04, reflecting an 11% increase year-over-year. The robust performance was supported by a 42% growth in adjusted recurring net investment income for the quarter and a 27% increase year-to-date. The company's strategic investments and focus on diverse markets, including utility-scale renewables and energy efficiency, have contributed to its strong growth trajectory.

Financial Highlights

• Revenue: $103.06 million, exceeding the forecast of $100.25 million.
• Earnings per share: $0.80, surpassing the forecast of $0.69.
• Year-to-date adjusted EPS: $2.04, up 11% year-over-year.
• Adjusted recurring net investment income: 42% growth in Q3 and 27% year-to-date.

Earnings vs. Forecast

Hannon Armstrong delivered a significant earnings beat with an EPS of $0.80, exceeding the forecast by 15.94%. The revenue surprise was 2.8%, with actual revenue of $103.06 million compared to a forecast of $100.25 million. This strong performance underscores the company's ability to surpass market expectations and achieve record financial results.

Market Reaction

Despite the record earnings, Hannon Armstrong's stock fell by 1.35% in aftermarket trading, closing at $28.94. This decline may reflect broader market trends or investor expectations for even stronger performance. The stock remains closer to its 52-week low of $21.98, indicating some market caution.

Outlook & Guidance

Hannon Armstrong reaffirmed its guidance for 8-10% compound annual EPS growth through 2027, with an expected 10% adjusted EPS growth in 2025. The company's pipeline remains robust, exceeding $6 billion, as it continues to explore larger infrastructure investments.

Executive Commentary

"We just completed the most profitable quarter in our history," stated Jeff Lipson, CEO, highlighting the company's record performance. CFO Chuck Melko emphasized, "We are growing the recurring earnings portion of our adjusted EPS," underscoring the company's focus on sustainable growth.

Risks and Challenges

• Market fluctuations and broader economic conditions could impact future performance.
• The stock's proximity to its 52-week low may indicate underlying investor concerns.
• Potential challenges in executing large-scale infrastructure projects or managing investment risks.

Q&A

During the earnings call, analysts inquired about the SunZia project's impact and the implications of tax credit extensions. Executives confirmed the significance of the SunZia investment and maintained a positive outlook on market opportunities, addressing concerns about future growth and strategic initiatives.

Full transcript - Hannon Armstrong Sustainable Infrastructure Capital Inc (HASI) Q3 2025:

Conference Operator: Greetings and welcome to Hannon Armstrong Sustainable Infrastructure Capital Jonathan Lewis' third quarter 2025 earnings conference call and webcast. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Aaron Chu, the Senior Vice President of Investor Relations.

Aaron Chu, Senior Vice President of Investor Relations, Hannon Armstrong Sustainable Infrastructure Capital: Thank you, Operator, and good afternoon to everyone joining us today for Hannon Armstrong Sustainable Infrastructure Capital's third quarter 2025 conference call. Earlier this afternoon, Hannon Armstrong Sustainable Infrastructure Capital distributed a press release reporting our third quarter 2025 results, a copy of which is available on our website along with the slide presentation we will be referring to today. This conference call is being webcast live on the Investor Relations page of our website, where a replay will be available later today. Some of the comments made in this call are forward-looking statements, which are subject to risks and uncertainties described in the risk factor section of the company's Form 10-K and other filings with the SEC. Actual results may differ materially from those stated. Today's discussion also includes some non-GAAP financial measures.

A reconciliation of GAAP to non-GAAP financial measures is available in our earnings release and presentation. Joining us on the call today are Jeff Lipson, the company's President and CEO, as well as Charles Melko, our Chief Financial Officer. Also available for Q&A are Susan Nickey, our Chief Client Officer, and Marc Pangburn, our Chief Revenue and Strategy Officer. To kick things off, I will turn it over to our President and CEO, Jeff Lipson. Jeff?

Jeff Lipson, President and CEO, Hannon Armstrong Sustainable Infrastructure Capital: Thank you, Aaron, and thank you everyone for joining the call. Welcome to the Hannon Armstrong Sustainable Infrastructure Capital Jonathan Lewis' Q3 2025 earnings call. Before we discuss the prepared slides, I'd like to start the call today by reiterating four aspects of our business model and how they interact with recent market developments. One, the demand for energy continues to increase, and virtually all forecasts expect this trend to continue. This demand will clearly result in greater supply, facilitating ongoing development by our clients, which in turn increases Hannon Armstrong Sustainable Infrastructure Capital Jonathan Lewis' total addressable market. Therefore, the current underlying economic trends are a tailwind for our business. Additionally, if demand causes power curves to increase, our existing portfolio of investments will become increasingly more valuable. Two, the operating environment remains conducive to business-as-usual activities.

Capital markets have experienced relatively low recent volatility, and our clients' pipelines continue to be active and growing. Therefore, the backdrop remains very supportive for expanding our investment volumes. Three, we continue to demonstrate that our business is able to achieve meaningful EPS growth in all interest rate environments. Since interest rates began to rise in 2022, we've been able to continue to grow our earnings with higher-yielding investments, prudent hedging strategies, and opportunistic debt issuances. With three investment-grade ratings and our CCH1 co-investment vehicle, we've become even less exposed to changes in interest rates. If the yield curve steepens going forward, we do not expect any material impact on our profitability. Four, virtually all of our investment markets are currently providing attractive opportunities. Utility-scale renewables and storage, distributed solar and storage, energy efficiency, renewable natural gas, and transportation have all been active markets for us in 2025.

We continue to be well represented in the pipeline. We remain excited with the emergence of our pipeline of next frontier opportunities. In summary, these four items reinforce the framework of our successful business model, further evidenced by our outstanding results this quarter. We just completed the most profitable quarter in our history and closed the largest investment in our history as we continue to consistently achieve our goals and provide outstanding returns to our investors. Now let's turn to the slides, beginning on slide three and highlight a few key metrics. Our adjusted earnings per share in Q3 was $0.80, the highest quarterly EPS we have ever reported. This result was driven by strong growth in all of our components of revenue, which Chuck will discuss in more detail.

Adjusted recurring net investment income, the new financial measure we introduced last quarter, is 27% higher year-to-date over last year. Our managed assets, which includes our portfolio as well as our partner's assets in CCH1 and the assets we have securitized off-balance sheet, were up 15% year-over-year to $15 billion. Our year-to-date adjusted ROE also has experienced significant year-over-year growth, rising to 13.4%. We are reaffirming our guidance for 8%-10% compound annual EPS growth through 2027. We expect to achieve roughly 10% adjusted EPS growth in 2025. As detailed on slide four, we continue to make progress in the key areas of value creation for our business. One, originating new investments, two, optimizing return on our existing assets, and three, managing our liabilities and lowering our cost of capital.

First, in terms of new investments, as the box on the left indicates, both volumes and returns have been strong year-to-date. Not only did we close more than $650 million of new transactions in Q3, for a total of $1.5 billion through the first three quarters of 2025, but we closed on a $1.2 billion investment early in Q4 that has put us on a path to close more than $3 billion for the full year of 2025, up more than 30% year-over-year. We will discuss this investment in greater detail later in the call. Importantly, it is not only volumes that have been elevated, but our returns as well, with new asset yield in Q3 greater than 10.5% for the sixth quarter in a row. Meanwhile, our pipeline remains above $6 billion, even after taking into account the large October transaction.

Second, we do not simply create value originating investments, but also in how we optimize returns over the life of the investment. One example of this is a targeted asset rotation strategy we executed in 2024, through which we were able to monetize certain lower-yielding assets in our portfolio for a gain while generating cash that we were able to recycle into higher-yielding assets. In Q3 of this year, we refinanced the senior ABS debt within the SunStrong residential solar lease portfolio, resulting in significant paydown of our mezzanine debt investments and a meaningful cash distribution to the SunStrong equity owners, of which we are 50%. This distribution created significant earnings in the quarter as we began to monetize the increasingly valuable SunStrong platform. We have also maintained a strong risk-return profile in our portfolio, as evidenced by minimal annual realized loss rate of under 10 basis points.

This low level of losses reinforces the predictability of our cash flow and our ability to effectively underwrite investment opportunities. Lastly, we maximize value in our business with our low-cost, diversified, and efficient debt and capital platform. It is notable to highlight that even after refinancing a portion of our low-cost debt due in 2026 at today's higher market rates, the increase in our cost of debt was only 10 basis points at 5.9% in Q3. In addition, we opportunistically added $250 million in hedges in September that reduced the base rate risk for our next debt issuance. Turning to slide five, as I briefly mentioned a moment ago, we are excited to announce a new investment that closed in October, but is significant enough to mention on our Q3 call.

It is a $1.2 billion structured equity investment in a major component of what will be the largest clean energy infrastructure project in North America once completed in Q2 of next year. Hannon Armstrong Sustainable Infrastructure Capital Jonathan Lewis' involvement in providing capital to this project is truly a milestone event for our company and a reflection of the transaction size we can now accommodate given our access to capital. Developed and managed by one of the world's largest developers and owners of clean energy and transmission infrastructure, the project has several components. Our specific investment is for 2.6 gigawatts of wind power supplied by the largest U.S. turbine manufacturer and backed by PPAs with a weighted average life of almost 15 years, including counterparties spanning energy majors, utilities, community electricity providers, and universities.

Consistent with our discussion last quarter, we are investing at a de-risked stage as most of our funding will occur in the first half of 2026. The expected return on the investment is consistent with our typical return targets on recent utility-scale investments. The total investment commitment is $1.2 billion. However, the net impact to Hannon Armstrong Sustainable Infrastructure Capital's balance sheet will be much lower due to the investment closing in CCH1, resulting in an initial proportional commitment of approximately $600 million. Subsequently, we may add back leverage to the investment, further reducing our long-term hold. As noted earlier, this is not included in our Q3 financials and will be considered a closed transaction in Q4 with the vast majority of funding expected in Q2 of 2026.

Turning to slide six, our pipeline remains above $6 billion, including a pro forma adjustment to remove the $1.2 billion project just discussed, as other investment opportunities have replaced this amount in the pipeline. Our pipeline of new investments remains highly diversified with strong undercurrents of demand in each of our key end markets. Higher retail electricity rates are facilitating demand in our BTM asset classes, including not just rooftop solar, but importantly, energy efficiency as well. Meanwhile, residential solar leases are expected to gain market share from loans and cash sales following the expiration of the 25D ITC at year-end. Our business is largely focused on leases and serving this end market. In addition, the grid-connected end market is experiencing larger project sizes to accommodate the growth in U.S.

Power demand, clearly driven by data centers, but also domestic manufacturing and the expanding use cases of electrification in general. Likewise, demand underpinning our fuels, transport, and nature end market remains strong with RNG facilities in construction or in development expected to double the current installed base in North America. Finally, our next frontier asset classes remain an exciting new opportunity. With that, I will ask Chuck to discuss our financial results.

Chuck Melko, Chief Financial Officer, Hannon Armstrong Sustainable Infrastructure Capital: Thank you, Jeff. On slide seven, we highlight our Q3 profitability. As you can see, we had meaningful growth in many of our key metrics. Jeff already highlighted our record quarterly adjusted EPS of $0.80, and our year-to-date adjusted EPS is at $2.04, up 11% year-over-year. This growth is driven largely by our primary source of revenue, adjusted recurring net investment income, which grew year-over-year by 42% in the quarter and 27% year-to-date. We are growing the recurring earnings portion of our adjusted EPS, and our equity efficiency has also helped us increase our year-to-date adjusted ROE to 13.4% compared to 12.7% for the same period last year. This growth in our adjusted ROE is demonstrating the meaningful benefits from our CCH1 co-investment vehicle, which I will speak to in a few slides. One last point on our metrics.

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

Through the first three quarters of this year, we have closed $1.5 billion of transactions, which is greater than the same period last year. When incorporating the transaction that Jeff spoke to earlier, we are on track to meaningfully exceed last year's total closed transactions. While transaction closings on their own are not an indicator of profitable growth, if you take into account our ability to generate new balance sheet transaction yields at an attractive level above 10.5%, we are also setting the stage for continued growth in adjusted EPS and ROE. Even as interest rates and our own cost of debt have risen over the last couple of years, it is important to note that we have been able to maintain our margins through the increase in our new asset yields and our hedging program.

We expect we will continue to maintain attractive margins as well in a declining interest rate environment, given our approach to investment, funding, and managing interest rate risk. Next, on slide nine, we are experiencing double-digit growth in our managed assets as well as our portfolio. They have grown 15% and 20% respectively from a year ago. This is the base of assets from which we generate our recurring income. As we have discussed previously, we are migrating to a business model that is less dependent on new equity issuance to generate earnings growth. The factor in accomplishing this is our CCH1 co-investment vehicle.

As of the end of Q3, CCH1 has completed funding of $1.2 billion of investments, leaving $1.4 billion of available capital for future investment with the potential to increase it to $1.8 billion with additional debt at the CCH1 level while keeping its leverage level below a debt-to-equity ratio of 0.5. Our portfolio yield is at 8.6%, up from 8.3% last quarter, as we are starting to see the new asset investments with yields greater than 10.5% start to come through our portfolio. The portfolio yield is the largest contributor to the growth in our adjusted recurring net investment income that is illustrated on the next slide. On to slide 10. We provide a build-up of our new financial measure that we introduced last quarter, adjusted recurring net investment income.

We are now utilizing this metric in addition to our adjusted EPS to measure the profitability of our managed assets as a whole, inclusive of both the net investment income from our portfolio as well as the recurring fee income from the other assets we manage that are not on our balance sheet. Our year-to-date adjusted recurring net investment income of $269 million has grown 27%. This component of revenue is a consistent source of earnings generated from our existing managed assets. Turning to slide 11. We highlight a few items that will contribute to managing our liquidity and liability structure and further reduce our cost of capital. Over the past couple of years, we have significantly broadened our sources of capital in between our bank facilities, commercial paper program, and our investment-grade ratings.

We have a capital platform that is well-positioned to fund our growth needs at an attractive cost. The first to mention is a $250 million term loan that closed after quarter-end that will provide another source of potential liquidity for the refinancing of our senior bonds due next year. As we reported last quarter, we retired a large portion of the upcoming maturity through a tender offer. With our current liquidity at $1.1 billion at the end of the quarter, this term loan, and our access to the investment-grade debt market, we are well-positioned to retire the remaining notes outstanding. Next, in furtherance of our focus on managing our interest rate risk, we executed an additional $250 million of SOFR-based hedges related to anticipated debt issuances and now have hedged up to $1.4 billion of our future debt issuance. On to slide 12.

This slide is a good illustration of the changes we have made to the business over the past couple of years that is accelerating our growth and returns for shareholders. We have historically just provided the total adjusted ROE metric that is highlighted in the dark blue. While it was steadily increasing over time, it is not painting the complete picture on where our business is headed. With the introduction of CCH1 last year and obtaining our investment-grade ratings, we have meaningfully changed the profile of our adjusted ROE for new transactions. It may take some time for the higher profitability from our incremental business to fully show up in our adjusted ROE, given the previous transactions on our balance sheet. We want to illustrate where our business is headed with the adjusted ROE from incremental business by period.

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

Jeff Lipson, President and CEO, Hannon Armstrong Sustainable Infrastructure Capital: Thanks, Chuck. Turning to slide 13, we display our sustainability and impact highlights, noting our cumulative carbon count and water count numbers reflect the significant impact of our investment strategy. We also remain very proud of our recognition, our targeted advocacy activities, and the generosity of the HA SUSSEY Foundation. Concluding on page 14. To summarize the themes of this call, we just completed the most profitable quarter in the company's history, and we expect our investment volumes to exceed last year's by more than 30%. Economic trends remain favorable to our continued profitable growth. This success is the result of a resilient business model that focuses on asset-level investing with long-term programmatic partners. Our approach also relies on disciplined underwriting and reasonable assumptions, and the model is further enhanced by a diversified and prudent approach to obtaining access to attractive sources of capital.

Combining all of these elements with a talented and dedicated team results in consistent success despite periodic market volatility. Thank you, as always, to our talented team for this outstanding quarter. Operator, please open the line for questions.

Conference Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then two if you would like to remove your question from the queue. Please limit your questions to one question and one follow-up question. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. The first question comes from John Wyndham from UBS. Please proceed with your questions, John.

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

Jeff Lipson, President and CEO, Hannon Armstrong Sustainable Infrastructure Capital: Thanks, John. I appreciate the question. It is the SunZia project, as you described. In terms of returns, I think we talked about it being consistent with returns on recent other transactions we've had in our grid-connected portfolio. I think that's probably the best way we could describe the return. It is a preferred equity investment, so it has some structure to it. It's not a common equity investment.

Right. This is similar to other wind investments you've made in the past. We sort of get paid first.

That's correct.

On the equity stack. Yeah.

That's correct.

Awesome. Thank you so much. Great result.

Thanks, John.

Conference Operator: Thank you. The next question comes from Chris Dendrinos from RBC. Please proceed with your questions, Chris.

Yeah. Good afternoon and echoing John's comments on the solid quarter. I wanted to ask about the pipeline. I think you've mentioned $6 billion, so flat quarter on quarter. You've got, I guess, if you adjusted the $1.2 billion transaction in October, it'd be up significantly. Can you just maybe talk about the pipeline here? It looks like it's been strengthened quite a bit quarter on quarter. I'm just curious what you're kind of seeing from that perspective. If there's any sort of demand pull forward going on as a result of the.

Jeff Lipson, President and CEO, Hannon Armstrong Sustainable Infrastructure Capital: Sure, Chris. I would say. As we discussed in the prepared remarks, we did replace the grid-connected pipeline in particular with enough new volume such that it did not go down after this $1.2 billion transaction that we described. Beyond that, our pipeline disclosure is, of course, not precise. We say greater than $6 billion. I know it is hard from the outside looking in to tell if it actually went up or down in the quarter. It is certainly at above $6 billion at a level that we are comfortable we will have enough to invest in in 2026 to achieve our goals. We are not seeing too much in the way of pull forward. I would describe what we are seeing as ordinary course. As we talked about last quarter, folks executing on their pipeline, meaning our clients, everything they are working on now is grandfathered or safe harbored.

I don't really think this is the result of any kind of pull-through.

Got it. Thank you.

Thank you.

Conference Operator: Thank you. The next question comes from Noah Kaye from Oppenheimer. Please proceed with your questions, Noah.

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

Jeff Lipson, President and CEO, Hannon Armstrong Sustainable Infrastructure Capital: It's a good question, Noah. We've built the business on some small and modest-sized transactions over time, but we've always, at least since 2020, supplemented that with some larger transactions as well. I think this transaction is a reflection in many ways of our access to capital through both being investment-grade and our CCH1 relationship. The amount of capital we can bring to the table is more significant. We've become a player in these larger transactions. When it makes sense, we'll do that. We're, of course, going to manage our risk accordingly. I talked about half of this being in CCH1 and some other pathways to a lower long-term hold level. We're certainly managing our risk. In terms of your broader question of how we think about the business, I think you should think about the business as we being active in both.

Smaller transactions where we've historically found great value and continue to find opportunities, but also supplemented by some periodic larger transactions where it makes sense for us. I think this is, in many ways, and I use the word milestone, but it's we graduating into access to some of these larger transactions, which are going to be more frequent, as you mentioned, because of data centers and the grid-connected development focusing on larger projects.

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

Sure. I'm going to ask Chuck to do that. Before I do that, Noah, I'm going to clarify a little bit a few items around SunStrong. I expected us to get a question on it. I don't want there to be any confusion about what this distribution was. Let me just answer that a little more broadly and say we often refer to SunStrong, and folks talking about us refer to SunStrong in a singular capacity. We actually own 50% of two separate entities. One of them is SunStrong Capital Holdings, which is an asset co that primarily owns solar leases, most of which have been securitized. The distribution we received this quarter was the result of refinancing the ABS debt, which, due to delevering and the very strong performance of the underlying leases, resulted in essentially a cash-out refi.

There was meaningful cash distribution to the equity owners. Going forward, as an equity owner in SunStrong Capital Holdings, we'll just get the normal distributions from the waterfall of the securitized assets. The refi was a bit of a one-time. Now, separate from that, we own 50% of SunStrong Management, or SSM, as we call it, which is truly an operating business that provides servicing to consumer and commercial loans and leases, including the legacy SunPower and Sunnova portfolios. SSM is an operating business. It has its own executive team. It's performing very well. It has a business plan, which includes ongoing growth in the platform and expansion ideas. Our accounting for our SSM investment is as an equity method investment that we hold at fair value. To the extent the underlying value of SSM increases, that would positively impact HASI's earnings.

I just wanted to create that clarification of when we say SunStrong, what we actually mean. This distribution that we're talking about in the third quarter was from SunStrong Capital Holdings. Sorry for the deviation to your actual question. I'm going to defer to Chuck. Hey, Noah. Our investment in SunStrong consisted of both mezzanine-level loans as well as a small amount of equity. The total proceeds from the ABS that we received was around $240 million. The composition of that was roughly about $200 million of it went to pay off our mezzanine loans, of which we're redeploying back into additional accretive investments. We also, the other remaining $40 million, was related to our equity, of which we did have some small investment, like I said. Of that $40 million that we received, roughly about $24 million of it was.

Gain in excess of our investment. The impact to the quarter was $24 million.

Perfect. Thank you. I'll turn it over.

Thanks, John.

Well, thanks.

Conference Operator: Thank you. The next question comes from David Sunderland from Baird. Please proceed with your questions, David.

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

Jeff Lipson, President and CEO, Hannon Armstrong Sustainable Infrastructure Capital: Sure. Thanks, David. I'm going to ask Susan to answer that one.

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

That's helpful. Thank you very much. Congrats again.

Thank you.

Conference Operator: Thank you. The next question comes from Maheep Mandloi from Mizuho. Please proceed with your questions, Maheep.

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

Jeff Lipson, President and CEO, Hannon Armstrong Sustainable Infrastructure Capital: Sure. Thanks, Jack. I'm going to ask Mark to answer that one.

Hey, Jack. That is something that we could certainly take a look at, but have not been presented any opportunities yet. We will have to defer on that until the future.

Got it. Thanks.

Conference Operator: Thank you. The next question comes from Vikram Bagri from Citigroup. Please proceed with your questions, Vikram.

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

Jeff Lipson, President and CEO, Hannon Armstrong Sustainable Infrastructure Capital: Yeah. Hey, this is Chuck. So the $300 million number that you're seeing there, the biggest driver of why that's a little bit higher, has to do with this SunStrong refinancing that I just mentioned. When I said that, roughly about $200 million of the proceeds went to pay down the mez loans, that came through that line. That was a little bit of an acceleration of normal amor profile that you'll see from our portfolio. In a way, I generally think of it as that. The lives of our assets, weighted average life is around 10 years or so. You could expect, looking at our portfolio, that our amor in any given period will mirror that.

Thank you.

Thank you.

Conference Operator: Thank you. The next question comes from Jeff Osborne from TD Cowen. Please proceed with your questions.

Yeah. Thank you. Good evening.

Jeff Lipson, President and CEO, Hannon Armstrong Sustainable Infrastructure Capital: Operator, we lost Jeff.

Conference Operator: Yeah. It seems like we have. Ladies and gentlemen, just another reminder. If you'd like to ask a question, please press star and then one. We will pause to see if we have further questions. The next question comes from Mark Strauss from J.P. Morgan. Please proceed with your questions, Mark.

Jeff Lipson, President and CEO, Hannon Armstrong Sustainable Infrastructure Capital: Hey, this is Michael Fairbanks, pawn for Mark. Just wondering if you could talk about how this large transaction and the $3 billion of volumes this year might impact the EPS growth algorithm in 2026 and beyond. I know you reaffirmed the 8-10% range, but should we be thinking about a possible step up in 2026 from these volumes?

Thanks, Michael. Good question. Our cadence has consistently been to talk about guidance in February. I think we're going to stick to that. We're working diligently right now on our business plan with our board. I think we'll have more to say about 2026 and 2027 in February.

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

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

Okay. Great. Thank you.

Thank you.

Conference Operator: Thank you. The next question is a follow-up question from Chris Dendrinos from RBC. Please proceed with your questions, Chris.

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

Jeff Lipson, President and CEO, Hannon Armstrong Sustainable Infrastructure Capital: Thanks, Chris. No, there wouldn't be. We do work with BP Lightsource bp, but again, we're monetizing project cash flows. The challenge that you discussed has no impact on the project in which we're invested.

Thank you.

Thank you.

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

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