HASI Earnings Call Transcript

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Date

Feb. 12, 2026 at 5 p.m. ET

Call participants

• President and Chief Executive Officer — Jeffrey A. Lipson
• Executive Vice President and Chief Financial Officer — Charles W. Melko
• Executive Vice President and Chief Operating Officer — Marc T. Pangburn
• Executive Vice President and Chief Client Officer — Susan D. Nickey

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Takeaways

• Total new transactions closed -- $4.3 billion, marking an 87% increase from 2024, with more than $3 billion closed even excluding the $1.2 billion SunZia investment.
• Pipeline -- Surpassed $6.5 billion at year-end, rising from over $5.5 billion at the end of fiscal Q1 2025.
• Investment yield -- Yield on new investments exceeded 10.5% for the second consecutive year.
• Term bond yield -- Senior unsecured term bonds now yield below 6.25%.
• Adjusted EPS -- Increased 10.2% to $2.70 per share.
• Adjusted recurring net investment income -- Reached $362 million, reflecting 25% growth.
• Fees and asset management income -- Rose to $49 million, up 32%.
• Gain on sale -- Contributed $65 million to adjusted earnings.
• Adjusted ROE -- Increased 70 basis points to 13.4%.
• Incremental ROE -- Surpassed 19% in 2025.
• Managed assets -- Expanded 18% to $16.1 billion.
• Portfolio yield -- Improved to 8.8%.
• Annual realized loss rate -- Remained below 10 basis points.
• Equity efficiency -- $100 from equity now generates $1,350 in investments, up from $300 prior to CCH 1 and hybrid notes.
• Liquidity -- Increased to $1.8 billion with expanded capital sources and three investment-grade ratings.
• Junior subordinated hybrid notes -- Inaugural issuance completed; recognized as 50% equity credit by rating agencies for leverage calculations.
• CCH 1 equity commitments -- Upsized by $1 billion in fiscal Q4 2025, reaching $3 billion in total commitments.
• Major Q4 investments -- $500 million Sunrun joint venture finalized; SunZia project remains on schedule for Q2 2026 funding.
• Sustainability impact -- Investments avoided 1.7 million metric tons of CO2 emissions in 2025, bringing total annual emissions avoided to 10 million metric tons.
• 2028 guidance -- Adjusted EPS projected between $3.50-$3.60, and adjusted ROE expected to exceed 17%.
• Payout ratio outlook -- Anticipated below 50% by 2028 and below 40% by 2030 through reduced dividend growth and capital recycling.
• Residential solar and storage -- Platform expanded with Sunrun JV; storage attachment boosting investment opportunity and customer payments.

Summary

HA Sustainable Infrastructure Capital (NYSE:HASI) delivered record new investment volume and enhanced profitability, including a substantial increase in equity efficiency through structural capital improvements and product innovation. The company extended its three-year guidance, offering an explicit EPS and ROE forecast for 2028, while further reducing its anticipated payout ratio. Management described its business fundamentals as strengthened by both market demand and internal diversification, highlighting the non-concentration of asset classes and consistently low loss rates across the portfolio.

• President and CEO Lipson said, "$3.50 to $3.60 is our guidance." The transition to nominal EPS guidance aims to enable "more precise updates in the future."
• Capital access was broadened by the inaugural junior subordinated notes, increased leverage recognition, and CCH 1 expansions funded jointly with KKR, directly reducing reliance on raising new equity.
• Growth in the renewables pipeline, largely from solar and storage assets, now exceeds $230 billion, with renewables projected to make up 99% of 2026 capacity additions.
• Management confirmed, "There is no SunZia-type project to call out in the pipeline," currently, although project sizes are trending larger due to more complex infrastructure.
• Adjusted recurring income, portfolio yield, fee generation, and gain-on-sale collectively contributed to increased stable earnings, while operating leverage is rising as revenue outpaces expense growth.
• Direct explanations were provided regarding the minimal earnings impact from Treasury guidance on FEOC policy, with existing client pipelines generally safe-harbored under prior regulations.
• Management stated its market share "probably have increased," attributing growth to a pullback from other capital providers and improved client penetration.
• Leadership advised that, due to the one-time size of the SunZia transaction, transaction volume for 2026 is not expected to repeat the 2025 high but will remain elevated relative to past norms.

Industry glossary

• PPA (Power Purchase Agreement): A contract to buy electricity at a pre-agreed rate, often underpinning renewable energy project revenues.
• CCH 1: A co-investment vehicle managed by HA Sustainable Infrastructure Capital and KKR to provide scalable capital for climate infrastructure assets.
• Incremental ROE: The return generated on each additional dollar of equity invested, calculated as the change in adjusted earnings divided by the change in shareholders' equity.
• FEOC (Foreign Entity of Concern): U.S. policy designation affecting tax treatment and supply chain eligibility for clean energy investment credits.
• Hybrid notes: Junior subordinated securities recognized partially as equity by rating agencies, used to enhance capital efficiency and manage leverage.
• Asset management fees: Revenue earned for managing investment vehicles such as CCH 1 and securitization trusts.
• Gain on sale: Earnings realized by selling or securitizing financed assets above their carrying value.
• Equity method investments: Holdings where the company exerts significant influence but not control, accounting for earnings proportionately.

Full Conference Call Transcript

Jeffrey A. Lipson: And welcome to our fourth quarter and full year 2025 call. We are very pleased and proud to report that 2025 was an outstanding year for HA Sustainable Infrastructure Capital, Inc. With meaningful progress in all aspects of our business, and a particularly strong finish in the fourth quarter, with a higher volume of transactions closed than in any previous full year. Level of client development activity remains elevated, and the demand for project-level capital is extremely strong, creating continued tailwinds for our business, as evidenced by both our 2025 results and our outlook for the next several years.

Our climate clients asset strategy continues to thrive as we execute on closing attractive climate-positive investments with programmatic clients supported by project cash flows from high quality offtakers. Turning to slide three. Not only was 2025 the strongest year of results we have ever recorded, on virtually every metric used to monitor and assess our performance, but the underlying fundamentals of the business have been enhanced establishing pathways to future continued success. Notably, nearly every facet of our business is operating at a high level right now, including new investment volumes, returns, profitability, and capital efficiency.

These higher volumes are supported by a new paradigm of load growth in the United States, rising demand for third-party providers of permanent capital, and HA Sustainable Infrastructure Capital, Inc.'s competitive advantage. We closed $4,300,000,000 in new transactions in 2025, 87% more than 2024. Our pipeline has continued to grow from more than $5,500,000,000 at the end of Q1 to more than $6,500,000,000 at the end of 2025. Not only have our investment volumes scaled meaningfully larger, we are also increasing returns on these investments. For the second year in a row, yield on new investments has exceeded 10.5%. Meanwhile, our bond spreads continue to narrow, and our senior unsecured term bonds are trading with a yield below 6.25% today.

These attractive margins have been a key factor in driving adjusted EPS growth, which was 10.2% in 2025. We have also made significant strides enhancing our business model and capital efficiency. In 2025, we issued our inaugural junior subordinated hybrid notes. With access to this new segment of the bond market, along with our investment grade ratings, and our CCH 1 co-investment vehicle with KKR, we have become significantly more profitable with each new share. We are issuing fewer shares to grow our business. It is also noteworthy that we upsized CCH 1's equity commitments by $1,000,000,000 in the fourth quarter.

This combination of 1) large volumes, 2) increasing profitability, and 3) improved capital efficiency have combined to push our 2025 ROE above 13% and our incremental ROE above 19%. The next few pages, I will further expand the discussion of these three items. Turning to slide four, I want to particularly highlight the enormous year we had in closing new investments in 2025. Of course, the $1,200,000,000 investment in the SunZia project we announced on our last quarterly call was a big contributor. But even without that investment, we closed more than $3,000,000,000 in new investments last year.

This is a testament to not only how strong the underlying demand is in the US, but also the important role HA Sustainable Infrastructure Capital, Inc. is playing in the market and the strength of our business model. Importantly, we have accomplished this with no change in our risk appetite or the general range of returns on the investments. Our asset-level investment strategy continues to be well received by our clients and is driving attractive risk-adjusted returns. Of note, historically, we have reported one figure covering the total transactions closed volume including both the securitized and on balance sheet. However, going forward, we are going to break this out separately.

In the dark blue bars, you can see our investment volume retained on our balance sheet and included in one, totaled $3,600,000,000 in 2025, up approximately 140% year over year from $1,500,000,000 in 2024. On slide five, we display our diverse pipeline, which remains in excess of $6,500,000,000. Virtually all of our markets remain active and opportunities to invest continue to grow. Ultimately, our business is driven by fundamental economics, which outweigh policy changes as it relates to development activity. The underlying demand for power and the cost effectiveness and development cycles in our asset classes combined to create an attractive investing environment.

The economics of this development continues to improve, as PPA rates have increased more than 40% over the past three years. In our behind-the-meter business, the trend towards more third-party ownership and leases results in more opportunity, as we have always focused on providing capital to lease portfolios. The increase in battery attachment has allowed for an increase in customer payments, and a corresponding increase in our investment opportunity. Our grid-connected business is benefiting from the significant growth in the renewables pipeline primarily driven by solar and storage, which now exceeds $230,000,000,000. Renewables now comprise 99% of the projected capacity additions in 2026.

And our FTN business remains a growth engine as RNG production is forecasted to more than double by 2030 and will benefit from the trend of increasing gas production and the existing infrastructure. Turning to slide six. We emphasize the diversity of our platform as an underlying strength of the business model. The chart depicts different asset classes achieving the highest volume in various years. Notably, after several years of minimal volume, onshore wind investments were 33% of the volume in 2025. Our ability to pivot as opportunities arise among a diverse set of asset classes from a large pipeline is a key factor in the consistency of our financial results. Turning to slide seven.

We recap the last five years of adjusted earnings per share. Again, I note the resilience of our business model and the outstanding execution of our team. This five-year period included a pandemic, supply chain challenges, elevated inflation, a rapid rise in interest rates, policy disruption, permitting and transmission difficulties, client bankruptcies, and many other challenges. Despite these obstacles, our team remained focused on sourcing, closing, and effectively managing large and diverse volumes of high-quality climate-positive investments producing these consistently outstanding results. In fact, our 10-year compound average growth rate in adjusted earnings per share is also 10%.

Turning to slide eight, we emphasize that each dollar we invest has become increasingly more profitable as measured by incremental ROE, which is a metric that Charles introduced last quarter. This metric is measured by the change in adjusted earnings divided by the change in shareholders' equity. On this basis, incremental returns in 2025 exceeded 19%, as the combination of higher yields, lower debt costs, and balance sheet efficiency continue to enhance our profitability. On slide nine, we provide an illustration of our tremendous progress achieving improved equity efficiency. Prior to CCH 1, $100 of proceeds from new equity issuance resulted in $300 of new investments.

The additions of CCH 1, modest debt on the CCH 1 vehicle, and our hybrid offering have collectively produced an outcome such that $100 of proceeds from new shares now results in $1,350 of new investments. This represents an improvement of more than 400% as measured by the earning assets that can be originated from each dollar of equity. Turning to page 10, we emphasize two large investments we closed in the fourth quarter. On the left, a joint venture with our longtime partner, Sunrun, totaling $500,000,000. Residential solar and storage continues to benefit from increasing utility rates and consumers' desire for affordability and resiliency.

The unique structure of this joint venture enables ITC transferability in a programmatic and efficient way, allowing Sunrun to scale its business providing an attractive risk-adjusted return to HA Sustainable Infrastructure Capital, Inc. And on the right, we reemphasize the SunZia project with Pattern that we discussed on the third quarter call. Our largest investment ever, this is the largest onshore wind project in North America, and remains on schedule to fund in the second quarter of this year.

Operator: On page 11,

Jeffrey A. Lipson: we reflect an update and extension of our guidance. Our consistent results allow us to once again extend our guidance out three years, until 2028. In that year, we expect adjusted earnings per share to be in the range of $3.50 to $3.60. We are shifting to a nominal EPS guidance range from an EPS growth rate so that we may provide more precise updates in the future. Additionally, we expect our adjusted ROE to exceed 17% by 2028, driven by the profitability and efficiency discussed a few moments ago.

Regarding our payout ratio, we discussed at our Investor Day in 2023 a trend of utilizing slower dividend growth and correspondingly more recycled retained earnings to reduce the payout ratio to 50% by 2030. We are now ahead of schedule on that trend and expect the payout ratio to be below 50% by 2028 and below 40% by 2030 as capital recycling also adds to the equity efficiency of our business model. To summarize, our three-year plan underscores our confidence in our ongoing ability to achieve our profitability objectives. Now I would like to ask Charles to discuss our financial results and funding activity in greater detail. Charles? Thank you, Jeff.

Charles W. Melko: Turning to slide 12. As previously highlighted, we have experienced meaningful growth in our transaction closings. And our results in 2025 are a good indication of our ability to convert incremental closings to attractive returns. Our business model continued to deliver a 10% adjusted EPS growth rate up to $2.70 per share in 2025. We have been successful at building our recurring earnings that serve as a solid foundation for our future earnings growth, with adjusted recurring net investment income of $362,000,000, an increase of 25% from the prior year. Our fees and income earned from managing assets in CCH 1, and securitization trusts increased to $49,000,000 in 2025, growth of 32% from the prior year.

In addition, our securitization business continued to deliver with gain on sale contributing $65,000,000 to our adjusted earnings. Our adjusted ROE is beginning to reflect the growth achieved in our profitability as we have been able to maintain the recent increase in yields while also growing fees from CCH 1. As a result, our adjusted ROE rose 70 basis points from 2024 to 13.4% in 2025. With our recent junior subordinated note offering, we expect to further increase our profitability on each share of equity issued and to meaningfully reduce the reliance on new equity issuance to achieve our growth targets.

Our GAAP results were impacted by volatility that can typically occur in calculations of HLBV relative to our true economic returns in any given period. And, also, as a reminder, the GAAP-based net investment income does not include the earnings from our equity method investments, which are a growing portion of our portfolio. On to slide 13. The foundation of our recurring earnings and growth in adjusted EPS and ROE is our managed assets, which grew 18% to $16,100,000,000 at the end of 2025. Our portfolio has grown to $7,600,000,000 and improved its earnings power, with an increase in the portfolio yield to 8.8%. A key strength to the overall quality of our portfolio is its diversification, our investment strategy.

As you can see, our portfolio continues to not be concentrated in any particular asset class. And additionally, our investment strategy has contributed to our minimal level of losses, with an average annual realized loss rate of less than 10 basis points. Specific to CCH 1, we recently expanded the total equity commitments by $500,000,000 each between HA Sustainable Infrastructure Capital, Inc. and KKR, bringing the total to $3,000,000,000. We expect that the remaining capacity, after considering CCH 1 level debt and reinvestment of cash collections, will get us through 2026.

And we fully expect that we will either extend the existing vehicle or create a new one that will continue as a source of funding additional investments while earning asset management fees. On slide 14, growth in our managed assets is helping increase the ongoing reliable earnings from our adjusted recurring net investment income. It provides a stable level of income we can expect into the future and produces steady growth in our earnings from year to year. Adjusted recurring net investment income is the largest component of our earnings, and as you can see by this graph, the largest driver of our earnings growth.

Jeffrey A. Lipson: However,

Charles W. Melko: gain on sale is also a meaningful component but its contribution to adjusted EPS has been changing over time. If it were not for the impact of gain on sale per share, the growth in our adjusted recurring net investment income would have translated into even faster EPS growth over the last few years. As a result, we are focused on building our recurring income streams to provide a base level of earnings year after year. And despite the impact of the changing contribution of gain on sale, we can rely on it every year as a great source of additional returns with minimal capital investment needed.

On slide 15, our liquidity and capital platform has been a key strength to the resilience of our growth as well as our ability to optimize returns after considering our cost of capital. Liquidity has grown to $1,800,000,000 and is scaling with the growth in our business. We have grown the diversity of sources of capital over the years, and continued to do so in 2025. We have increased the commitments in CCH 1, expanded our bank facilities, obtained our third investment grade rating, and issued our first junior subordinated notes. Enhancing our options has allowed us to lower our overall cost of capital, effectively manage liquidity and refinancing risk, and reduce the need for equity to grow the business.

Specific to our recent $500,000,000 junior subordinated note offering, the rating agencies provide 50% or more equity credit in their leverage ratios for this instrument. This allows us to reduce equity issuances to fund our growth while remaining within the rating agency leverage targets for our investment grade ratings. Starting this quarter and going forward, when we report our debt-to-equity ratio, it will include an adjustment consistent with rating agency treatment. We intend to continue issuances in this market especially given our focus on reducing the need for equity issuance to grow the business and accelerate our ROE. I will now turn the call back to Jeff for some closing remarks.

Jeffrey A. Lipson: Thanks, Charles. Turning to slide 16, we display our sustainability and impact highlights, noting our cumulative carbon count and water count numbers reflect the significant impact of our investment strategy. In particular, I want to highlight that 2025 was not only the first year that the avoided annual CO2 emissions estimated from our new investments exceeded 1,000,000 metric tons, but that it rose to a record 1,700,000 metric tons in 2025, increasing the total annual CO2 emissions avoided from all of our investments to date to 10,000,000. Now let us conclude on slide 17. 2025 was in many regards the strongest year of operational and financial results in our history.

Investment volumes nearly doubled, return on equity increased significantly and is well positioned for future growth. Our diverse capital platform is working as designed for maximum efficiency and minimal cost. And our three-year guidance reflects an expectation of future meaningful growth and profitability. I would also note we have made significant investments in our own platform, particularly in talent and technology, which have positioned the business for further scale as we now exceed $16,100,000,000 in managed assets. These platform investments in our own infrastructure have created the foundation for additional expected growth.

In closing, I would like to thank our talented team, and in particular, I would like to recognize and thank Steve Chuslo for his outstanding 18-year tenure as our Chief Legal Officer, during which time he made an outsized contribution to HA Sustainable Infrastructure Capital, Inc.'s success and our culture. As previously disclosed, Steve will be transitioning to a Strategic Adviser role in April. Thank you. Operator, please open the line for questions.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. Participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions. And our first question, we will hear from Christopher J. Dendrinos with RBC.

Christopher J. Dendrinos: Yes. Good evening, and congratulations on the strong quarter and strong year. I guess maybe starting out here, on the 2028 outlook and you have highlighted that basically you all are outperforming historical levels basically on all the metrics here. So what gets you to grow above a 10% CAGR? And it seems like maybe you are on pace to do that. So just kind of walk us through the guideposts here that we should be measuring you against to maybe outperform that over time? Thanks.

Jeffrey A. Lipson: Sure, Chris. Thanks for the questions. And, again, this business, we are very proud of the fact that over a 10-year period, we have had a 10% CAGR in our adjusted EPS, and I think the resiliency and the consistency of the business is quite admirable. The other thing we have really focused on is management credibility as it relates to guidance. So I think—I do not think, I know—we have hit guidance, every guidance that we have put out. That is very important to us as well so we maintain that credibility. So the $3.50 to $3.60 is our guidance. As with any guidance, there are pathways to beat it.

And, you know, in our case, there would be things like more volume, better yield on the investments, lower debt costs than we have otherwise modeled would be the primary ones. There also may be discrete events like some strong monetization at some point and other scenarios in which we beat guidance. But, again, we are very focused on being intellectually honest with the Street and our management credibility. And so $3.50 to $3.60 is our guidance at this point.

Christopher J. Dendrinos: Got it. Thank you. And then maybe just on the immediate kind of near term, you know, I noticed it did not look like you all provided any kind of outlook for 2026 specifically. Could you provide any kind of color—how should we be thinking about this year? Thanks.

Jeffrey A. Lipson: Sure. So I think we have been consistent over the last several years in putting out three-year guidance, and not necessarily speaking to the first two years. The primary reason for that is the lumpiness of the gain-on-sale business that makes forecasting shorter periods a little bit more difficult. But what I would say is there is nothing about 2026 that we would call out either negatively or positively as related to the trend. And I would ask Charles to see if he wants to add anything to that.

Charles W. Melko: Yes. I think, Chris, the one thing that I think we did put in a slide, just looking forward to 2026: given the success that we have had in our volume closings in 2025, specifically with SunZia driving us up to $4,300,000,000 of transaction closings, while we are expecting meaningful growth and, you know, are seeing it come through in our pipeline, raising our pipeline to $6,500,000,000 from $6,000,000,000 that we reported last quarter, you know, given the SunZia transaction and the size of that, you know, we would not, at this time, necessarily expect to be at $4,300,000,000 of transactions again. We will be higher than, you know, historical closings.

But, you know, do not expect a $4,300,000,000 number necessarily.

Christopher J. Dendrinos: Got it. Thank you very much.

Operator: Our next question, we will hear from Davis Sunderland with Baird. Hey, good evening, guys. Can you hear me okay?

Jeffrey A. Lipson: Yes. Thanks, Davis.

Charles W. Melko: I apologize for any background noise. First of all, let me congratulate you and say thank you for the time and outstanding results in Q4 and 2025. My questions are actually somewhat of an extension from Chris'. I wanted to go back to just the change in the guidance strategy and the messaging here and I wondered if the switch to a point guide or a range of point guide for '28 is at all related to you guys having maybe increased confidence or increased visibility? Or maybe tied to deal sizes getting larger or just any other thoughts you could provide on the why now as to guiding in that particular way.

Jeffrey A. Lipson: Sure. Thank you for your kind words, Davis. And I would say the primary reason that we switched to nominal EPS guidance from EPS growth rate—everyone can do the math—is very simply it allows us in subsequent quarters to perhaps be a little more precise in adjusting that guidance. So what you have seen from us over the last several years is to have a guidance number out there and then to affirm it quarter after quarter because we were generally still in that range. And then, of course, we did meet that expectation.

Here, we may have a little more flexibility to adjust those pennies a little bit here or there to allow disclosure of a little more precision as to where we are headed. So that is the primary objective here.

Davis Sunderland: Thank you for that. And maybe just a second question about investments and any other large deals that may be in the pipeline, such as SunZia, that may blur the average, if you will? Just how we think about the normalized run rate for full year going forward, if there has been a structural change in the business, closer to $3,000,000,000 or certainly not run rate in Q4 instead into future quarters. Any thoughts on just how we contextualize that into your pipeline? Thank you.

Jeffrey A. Lipson: Sure. I am going to say there is no structural change in the business. Larger investment opportunities do materialize from time to time. And I will let Marc perhaps talk a little bit more about our pipeline.

Marc T. Pangburn: Sure. I think Jeff covered the primary point that when we look at our pipeline, it is highly consistent with the transactions that we have been closing recently, both in terms of risk profile and yield. There is no SunZia-type project to call out in the pipeline, but that being said, even if there was, we likely would not tell you until after it closed. And then you brought up project sizes. We are seeing project sizes increase. And that is, I would say, due to two primary items. One is, of course, just these larger grid-connected complexes that are getting built.

But then also whether it is grid-connected or behind the meter, the storage attachment rate going up quite significantly and the focus on storage driving more capital deployment opportunities as well.

Davis Sunderland: Super helpful. Congrats again, guys, and thank you.

Jeffrey A. Lipson: Thank you.

Operator: And our next question, we will hear from Noah Duke Kaye with Oppenheimer.

Noah Duke Kaye: Alright. Thanks for taking the questions, and good afternoon, everyone. Maybe to get at this from a slightly different angle, you know, so the pipeline was $5,500,000,000 or greater than that last year. Now it is $6,500,000,000, a little under 20% growth. I guess do you feel like that is proportional to the growth in the TAM in the different sort of sandboxes that the company is going to participate in? Really, the spirit is, have you been able to take some share, or do you see some ability through both platform investments and partnerships to take a greater share of the pie.

Jeffrey A. Lipson: Thanks, Noah, for the question. I would say that is a difficult question to answer with precision in our markets. There is not necessarily great data on things like market share. But in general, I think directionally, the answer is yes. We do feel like we have increased our market share. We do feel like there has been some pullback from certain players who have been capital providers, and we have been able to absorb a little bit more. We feel our penetration with our own clients has improved. And, you know, therefore, we would probably have increased market share, although there is not a strong way to prove it. I would also make that comment without necessarily precision.

So when you see our pipeline go up 20%, I would not claim our market share has improved by necessarily 20%. But I would say, directionally, we have increased our market share.

Noah Duke Kaye: Yeah. And thank you, Jeff. And the related question is really about leverage. As it was alluded to earlier, you do have some increase in individual project sizes. You also spoke before about ongoing investments and kind of capacity within the organization. Just wondering how the capital efficiency versus individual project size versus just pure operating leverage plays into driving the incremental ROE going higher and the ROE targets for fiscal '28. If the question makes sense, basically trying to do some attribution here on, you know, what drives the inflection.

Jeffrey A. Lipson: So maybe I will start, and if Charles wants to add anything, I would say the building blocks are on slide nine in our deck. And you can see there it is not—equity efficiency is not entirely taking on more leverage. A big chunk of that equity efficiency is KKR's equity capital. So it is not entirely a play on leverage, but I think the proportional improvement of the dollars of investments we can close with each dollar's equity is displayed there. So, hopefully, that somewhat answers your question. Those are really the building blocks of how we get there.

Noah Duke Kaye: Yeah. I am sorry. I was not being clear. I was not thinking about, like, debt leverage. I was talking about, like, operating leverage in terms of—you know, you grow your headcount, you grow your organizational capacity, but are you growing, you know, revenues and, you know, profit on those revenues faster than you are growing the organization? That is the third question. Yeah. I am—

Jeffrey A. Lipson: Okay. I am sorry. I answered a different question. So the answer to that question—I appreciate it—is also yes. We have been growing our revenues faster than we have been growing our expenses. And we are highly focused on improving our operating leverage. I did talk about towards the end of the call making significant investments in talent and technology, and we are doing that and we think they certainly will pay long-term dividends to the company. And we have made some of those investments already. We will continue to make those investments in 2026. But on a trend basis, we are—we are and have been and will continue to grow revenues faster than expenses.

Noah Duke Kaye: Very good. Thank you.

Jeffrey A. Lipson: Thank you.

Operator: And moving on, we will hear from Brian Lee with Goldman Sachs.

Brian Lee: Hey, guys. Good afternoon. Thanks for taking the questions. A couple of big picture ones. Just if I look at the slides, you have had a really good presence in the residential solar market. It looks like it is expected to grow here into 2026. So first question would just be around—you alluded to the traditional PPA lease product and you guys having good exposure there. Does this prepaid lease product that seems to be trying to make its way into the market to maybe offset some of the volume loss from, you know, the cash loan customer market over the past few years—what does that do for you guys in terms of financing opportunity or returns?

Are you going to be involved there? Just maybe give us a sense of what that has in terms of implications for your resi solar business model?

Jeffrey A. Lipson: Sure. Thanks, Brian. And I am going to ask Marc to answer that specific question. But as a preamble, I would reinforce what a success story resi solar has been for us as a long-term meddev provider with several partners over many years. Our SunStrong joint venture that has worked out very well. Our most recent transaction that I talked about in the prepared remarks with Sunrun, I think it has been a real success story in resi solar, and we expect it to continue to be an important component of our business. To answer your specific question around the prepaid lease product, I am going to ask Marc to answer that.

Marc T. Pangburn: Brian, we have seen over the past 10 years or so that we have been in resi some prepaid leases. But as it relates to your current—the comment on the current trend, we have not seen any transactions using the prepaid lease structure to evaluate right now. But we would certainly look at it, likely to the more traditional lease and TPO products.

Brian Lee: Okay. Fair enough. Appreciate that color.

Brian Lee: And then maybe just one kind of related. I guess there was some recent news that maybe there is some tightness in tax equity markets. I mean, I guess we have been kind of hearing that over the course of the past few quarters. But I guess the recent attribution was around renewables financing having maybe a little bit of tightness tied to policy uncertainty, whether that is foreign entity of concern or other issues that have not been finalized, in terms of guidance—in this case Treasury guidance—does that have any implications for you guys? Are you seeing that? Is that actually an opportunity maybe?

But just wondering if that is something that is impacting the marketplace as you see it and what it means for HA Sustainable Infrastructure Capital, Inc.

Marc T. Pangburn: Sure. So what we have seen is the deployment of transferability structures to be more frequently used. And I think that is in part due to some simplicity, but also could be driven by some of the tax equity items, which I think you have attributed it correctly to FEOC and some of the desire for clarity. I do not think it is more than that, though. It is really just the market looking for clarity, and in the interim, the transferability structures have been deployed quite frequently. And I think a good example of that is actually the two transactions that we highlighted with Sunrun and Pattern were—you know—use the transferability structure.

Brian Lee: Okay. I appreciate that color. Thanks, guys.

Operator: Thanks. Thank you. And next, we will move to Maheep Mandloi with Mizuho. Hey. Thanks—thanks for calling.

Maheep Mandloi: So I was just on the Treasury guidance. I think it probably came out half an hour ago here. But it is another question on that, but just like high level as you think through 2028. Any thoughts on how FEOC kind of impacts your portfolio here or the projects you will be bringing over the next three years?

Jeffrey A. Lipson: Sure. Thanks, Maheep. The guidance was issued literally while we are sitting in this room, so clearly, we have not read it. But to answer that question a little more generally on FEOC, I am going to ask Susan to speak to that.

Susan D. Nickey: Yeah. Thanks, Jeff. And, you know, the good news is that getting—starting to get guidance out on FEOC and any of the guidance that continues to remain is important and helpful to give clarity around the rules. So in the interim, as we think—have talked about over the last few quarters, our clients have generally safe harbored under the prior guidance before that was effective through December, for several years ahead of their pipeline of projects. So the current guidance is really more—is obviously focused on 2026 incremental safe harboring or start of construction. That is not really impactful for our current pipeline and most of what our clients had already planned for.

Maheep Mandloi: Got it. Appreciate that. And maybe a different question. On some of these older vintage renewable projects which you might have under your portfolio? I keep hearing from some of the developers that they see—or some of these projects are up for the negotiations. As that happens, how does that impact your earnings power? How should we think about that it is impacted either the GAAP income or the adjusted net income for you guys?

Jeffrey A. Lipson: Sure. So I am going to let one or more of my colleagues jump in on that. But I would start out by saying that we have seen a fair amount of PPA renegotiation in several of our projects recently, and we work closely with our sponsors on those renegotiations. And given where PPA prices are now, those have been positive renegotiations as it relates to the long-term cash flows we expect from those projects. And where that shows up for us on a non-GAAP basis is in portfolio yield, which is the summation of all the individual yields and all the individual projects. And so when there is a new PPA, that is a new fact.

And we would rerun the yield on a project. Let me ask if—is anyone—okay. I am getting a lot of head nodding that was a sufficient answer. So hopefully, that answers your question. No one has anything to add to—

Maheep Mandloi: And, yeah, it is almost something that it feels like the capital needs for any concessions would be pretty low, right? So is that—is there something like, does that accelerate your EPS growth beyond '28? Or think about this 10% CAGR here, especially with more renegotiations happening?

Jeffrey A. Lipson: We lost the beginning of that question, but I think you asked do these PPA renegotiations potentially result in higher EPS than our guidance in '28? Was that really the question?

Maheep Mandloi: Yeah. Yeah. And then it seems like these are pretty less cap intensive, right? Like, the higher yield from these negotiations. I am just curious how that accelerates the EPS kicker.

Jeffrey A. Lipson: Well, sure. So I think our EPS guidance includes our best information at the moment and our best forecast as it relates to future energy prices and future PPA renewals. And so that is part of our forecasting process and is included in these guidance numbers. To the extent things trend better than that, that, as you know, is an upside to the guidance. And, you know, I talked earlier to Chris's question around upside to guidance. But, yes, that is another one of many—if on many of the underlying projects PPAs are negotiated at a higher level than we have already put in our forecast.

Maheep Mandloi: Got it. I appreciate that. Thank you.

Jeffrey A. Lipson: Thank you.

Operator: Next, we will move on to Praneeth Satish with Wells Fargo.

Praneeth Satish: Thanks. Good evening. So clearly, a lot of capital flowing into data center development power infrastructure. With your investments starting to become larger, just wondering if you have any updated views on how you are approaching or would consider approaching data center financing? I guess, what is your appetite to invest there? And to the extent that you have looked at it, I guess, how do the opportunities in that segment compare to your other investment opportunities on a risk-adjusted basis?

Jeffrey A. Lipson: So I would say a couple things. One is we are indirectly, obviously, very involved in data centers in that it is the data centers driving so much of this demand that we keep talking about that in turn is driving development. So many of our projects are derivative of that demand, and therefore, we are already indirectly in the data center business. In terms of being more directly in the data center business, what I would say is really not too much different than we said last quarter. We have had conversations around the data center ecosystem with developers and other power providers to data centers.

We are determining if there is a role for us, if there is a piece of business there that makes sense. And we do not really have anything to report just yet on that, but it is an area that we continue to evaluate what our role may be.

Praneeth Satish: Alright. Thanks. And just going to your payout ratio and kind of the long-term guidance here. So payout ratio moves below 50% by 2028, and potentially 40% by 2030. I guess in the context of that, how should we think about your long-term dividend framework? Does that kind of create some flexibility for potentially a faster pace of dividend growth in the outer years? Or is there kind of a preference to take the payout ratio even lower over time?

Jeffrey A. Lipson: I think it is more the latter. You know, we are not going to comment past 2030 where the dividend may go. That is already, I think, several years into the future. But I think the long-term trend of starting out as a REIT and with a 100% payout ratio and, you know, by, call it, you know, 17 years later, having that payout ratio down to 40% or less is a reflection of the evolution of our business and the notion that we believe the business is more valuable and can grow faster if we recycle more capital.

And we are doing that in a way we are still increasing the dividend every year, as you have seen us do. But we can increase it a little bit each year and reduce the payout ratio because we do have such strong earnings growth. So I know, I am not going to comment past 2030, but I think this trend is very clear as to how we think about the dividend and why we think this is the optimal way to run the business.

Praneeth Satish: Gotcha. Thank you.

Jeffrey A. Lipson: Thank you.

Operator: And our next question, we will hear from Jeff Osborne with TD Cowen.

Jeff Osborne: Thank you. Good evening. A couple of questions on my side. I was wondering—more financial oriented—but I think you had a step up in receivables outside of CCH 1. I was wondering if you could just touch on what drove the higher investment income, if this is a level we expect to continue from here.

Jeffrey A. Lipson: Actually, I am going to ask Charles to respond to that. Thanks, Jeff.

Charles W. Melko: Yes. Hey, Jeff. Yeah. So as you likely know and understand, many of the investments that we make are now going through CCH 1, but there are various assets that we may close that are directly onto our balance sheet that could show up as receivables. If they are in through CCH 1, they come through as equity method investment, of course. But, you know, we did have an investment that we put directly on our balance sheet. And the yield that we are earning on that is consistent with our new asset yields.

Jeff Osborne: And just as a follow-up, is this like a level you expect to continue with the expansion of CCH 1 in '26 or the recent expansion? Like, how should we think about the mix between CCH 1 and the legacy HA Sustainable Infrastructure Capital, Inc.?

Charles W. Melko: Yeah. I think you will see more growth in the CCH 1 and equity method investments than you will on the receivables.

Jeff Osborne: Got it. Got it. And then is—along that lines, I think you had a cash flow benefit from equity method investments this quarter. Is that along the same lines that you were just answering? Or is there something else that drove from a timing perspective?

Charles W. Melko: Oh, it—yeah. It is a couple of things. It is along those lines that, you know, we are getting cash distributions out of CCH 1. But overall, with our portfolio, we are seeing an uptick in operating cash distributions that we are receiving. But we are also within our equity investments do from time to time have certain activities that occur where we get distributions such as refinancings that might occur within the portfolios. So, yeah, we are seeing growth in our equity method cash collections. That is a combination of an uptick in operating cash, but also CCH 1 related.

Jeff Osborne: Perfect. That is all I had. Thank you.

Charles W. Melko: Thank you. Thanks, Jeff.

Operator: Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

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