Executive Summary / Key Takeaways

• Resilient Business Model & Consistent Growth: HA Sustainable Infrastructure Capital, Inc. (NYSE: HASI) demonstrates a robust, non-cyclical business model focused on climate-positive investments, reaffirming its guidance of 8% to 10% compound annual adjusted EPS growth through 2027. This is underpinned by a strong Q2 2025 performance, with net income up $73 million, and H1 2025 adjusted recurring net investment income growing 19% year-over-year.
• Enhanced Capital Efficiency & Liquidity: Strategic partnerships like the CarbonCount Holdings 1 LLC (CCH1) joint venture with KKR (KKR) have significantly boosted capital efficiency, tripling investment dollars per equity dollar. HASI boasts substantial liquidity of $1.397 billion as of June 30, 2025, and an investment-grade credit rating (BBB- from S&P, Moody's, Fitch), enabling flexible funding and proactive debt management.
• Proprietary Analytical Edge: HASI's "CarbonCount" and "WaterCount" methodologies serve as critical technological differentiators, quantifying environmental impact and attracting green capital. This proprietary framework enhances deal sourcing, risk assessment, and competitive positioning in the sustainable infrastructure market.
• Diversified & Derisked Investment Strategy: With a pipeline exceeding $6 billion, diversified across Behind-the-Meter (BTM), Grid-Connected (GC), Fuels, Transport, and Nature (FTN), and "Next Frontier" assets, HASI invests at derisked stages of development. This strategy insulates the company from policy shifts and macroeconomic volatility, while expanding into new, less tax-dependent asset classes.
• Favorable Market Dynamics & Reduced Competition: The U.S. is experiencing unprecedented power demand growth, making renewables the most cost-effective and fastest-to-deploy energy source. This, coupled with a policy environment expected to result in less competition for project-level investments, creates a compelling backdrop for HASI's continued expansion.

A Sustainable Engine for the Energy Transition

HA Sustainable Infrastructure Capital, Inc. (NYSE: HASI) stands as a specialized financier at the forefront of the global energy transition. Founded in 1981, HASI has evolved from its roots in energy efficiency to become a diversified investor across the entire sustainable infrastructure landscape in the United States. The company's core business revolves around partnering with clients to deploy real assets that reduce carbon emissions or provide other environmental benefits, generating recurring income from net investment income, residual ownership in securitization and co-investment structures, and asset management fees.

HASI's strategic positioning is unique. Unlike traditional developers or asset owners, HASI acts as a financial engineer, providing capital solutions across the project lifecycle, typically after development risk has been substantially mitigated. This approach, combined with its REIT structure, allows HASI to focus on attractive risk-adjusted returns that consistently exceed its cost of capital. The company's investment-grade credit ratings from S&P, Moody's, and Fitch underscore its financial discipline and access to diverse capital pools, a critical advantage in a sector often characterized by capital intensity.

In a competitive landscape populated by large-scale renewable operators like Brookfield Renewable Partners (BEP), NextEra Energy Partners (NEP), and Clearway Energy (CWEN), HASI carves out its niche through specialized financing expertise and a focus on U.S. sustainable infrastructure. While BEP and NEP boast broader operational scale and global reach, HASI's emphasis on energy efficiency and its proprietary analytical framework provides a distinct edge. Its REIT status offers tax efficiencies that can translate into superior margins and attractive dividend payouts, fostering stronger client relationships in financing-heavy segments. HASI's derisked investment approach, focusing on projects already in advanced stages of development, also differentiates it from competitors who might take on earlier-stage development risks.

The Power of Proprietary Analytics: CarbonCount and WaterCount

HASI's true technological differentiator lies not in physical hardware, but in its sophisticated, proprietary analytical framework: CarbonCount and WaterCount. These are not mere metrics; they are embedded methodologies that quantify the environmental impact of every investment, serving as a critical lens for deal selection, risk assessment, and capital allocation.

CarbonCount measures the ratio of estimated first-year metric tons of carbon emissions avoided by investments, divided by the capital invested. This involves using precise emissions factor data, expressed in CO2 equivalents, to compute the avoided emissions from a project's energy production or savings. Similarly, WaterCount assesses other environmental attributes, such as water use reduction, stormwater remediation benefits, and stream restoration. These tools provide tangible, quantifiable benefits that extend beyond traditional financial metrics. They enable HASI to identify and prioritize truly "climate-positive" projects, attracting a growing pool of "green" capital and clients committed to ESG objectives. This proprietary screening process acts as a competitive moat, enhancing HASI's brand, improving risk management by integrating environmental factors into underwriting, and potentially lowering its cost of debt by qualifying for green bond issuances.

Looking ahead, HASI's "Next Frontier" asset classes represent its strategic "R&D" in expanding its investment scope. These burgeoning markets, which currently constitute approximately 8% of its pipeline, include opportunities in areas like geothermal and fuel cells. The stated goal is to scale a select few of these new asset classes, driving further growth and diversification. Importantly, management notes that many of these Next Frontier investments are less susceptible to policy changes and less driven by tax policy, signaling a strategic evolution towards a more resilient, tax-agnostic business model over time.

A History of Adaptation and Strategic Expansion

HASI's journey has been marked by continuous adaptation and strategic expansion. From its founding in 1981, the company has consistently refined its focus on energy efficiency and renewable energy. A significant shift occurred with the launch of its Fuels, Transport, and Nature (FTN) team around 2022, diversifying beyond traditional renewables. This initiative proved successful, with FTN contributing $1.2 billion in originations between 2023 and 2024, demonstrating HASI's ability to identify and capitalize on new market opportunities.

The year 2024 was pivotal, marked by the establishment of the CarbonCount Holdings 1 LLC (CCH1) co-investment partnership with KKR. This vehicle was designed to enhance capital efficiency, a strategy that has proven highly effective. Management highlighted that prior to CCH1, $100 of equity raising resulted in $300 of investments; post-CCH1, this has doubled, and with the recent debt facility at CCH1, it has tripled the investment dollars for each dollar of equity. This partnership not only expands HASI's investment capacity but also generates recurring asset management fees without requiring additional equity capital from HASI.

Further strengthening its financial foundation, HASI proactively managed its debt profile. In June 2025, the company achieved an investment-grade credit rating upgrade from S&P Global Ratings to BBB-, aligning with its existing ratings from Moody's and Fitch. This was swiftly followed by the issuance of $1 billion in green senior unsecured notes, with proceeds strategically used to repurchase $700 million of existing senior unsecured notes due in 2026 and 2027. This move demonstrates HASI's proactive approach to debt management, extending maturities and optimizing its cost of capital.

Robust Financial Performance and Capital Strength

HASI's financial performance in the second quarter and first half of 2025 reflects the strength of its underlying business model and strategic initiatives. For Q2 2025, net income increased by $73.00 million, primarily driven by a substantial $131.00 million increase in income from equity method investments. This was partially offset by a $9.00 million decrease in total revenue, mainly due to an $18.00 million decrease in gain on sale income, attributed to a shift in the mix and timing of securitized assets. However, interest and rental income saw a $5.00 million increase, propelled by higher asset yields on a larger average asset balance. Management fees and origination income also rose by $4.00 million and $1.00 million, respectively, benefiting from additional assets in co-investment structures.

For the first half of 2025, net income increased by $6.00 million, with adjusted recurring net investment income growing an impressive 19% year-over-year to $164 million. This new metric underscores the increasing stability and predictability of HASI's core earnings streams. The company's portfolio, valued at approximately $7.20 billion as of June 30, 2025, is highly diversified, comprising 55% equity method investments, 38% fixed-rate receivables and debt securities, 5% floating-rate receivables, and 2% real estate. It consists of over 600 transactions with an average size of $10.00 million and a weighted average remaining life of approximately 16.00 years. Critically, 99% of the portfolio is in Performance Category 1, indicating a low risk of not receiving invested capital, and no receivables were on non-accrual status. The unlevered portfolio yield stood at a robust 8.30%.

HASI maintains a strong liquidity position, with $1.397 billion available as of June 30, 2025, including $87.00 million in unrestricted cash and significant unused capacity on its credit facilities. Its debt-to-equity ratio of 1.80 to 1.00 remains comfortably within the target range of 1.50 to 2.00, with approximately 97% of its debt fixed-rate or hedged. This disciplined capital management, coupled with its investment-grade ratings, provides ample flexibility to fund its growing pipeline and manage upcoming debt maturities.

Outlook and Growth Drivers

HASI has reaffirmed its guidance of 8% to 10% compound annual adjusted EPS growth through 2027, a testament to its confidence in the business model's resilience. This outlook is supported by several powerful tailwinds and strategic advantages.

The U.S. energy market is undergoing a fundamental shift, with power demand forecasted to grow significantly over the next two decades, driven by data centers, domestic manufacturing, and electrification. Renewables, being the least expensive and fastest to deploy, are poised to meet this demand, creating a vast and growing investable market for HASI's clients. This secular growth trend transcends political administrations, as evidenced by consistent clean energy investment across different U.S. presidencies.

HASI's pipeline of new investments exceeds $6.00 billion, with an average yield on new investments greater than 10.5%. This pipeline is largely insulated from near-term policy changes like tariffs or potential Inflation Reduction Act (IRA) revisions, as projects are typically operational, under construction, or safe-harbored. Management anticipates that any increased costs will be absorbed by clients through onshoring or passed on via higher Power Purchase Agreement (PPA) prices. Furthermore, the policy environment is expected to result in less competition for project-level investments, further strengthening HASI's competitive position. The CCH1 partnership is a key growth engine, with an additional $1.5 billion in capacity expected to be filled by the end of 2026, further enhancing capital efficiency and fee income.

The company's strategic diversification into Fuels, Transport, and Nature (FTN), particularly Renewable Natural Gas (RNG), provides additional growth avenues less impacted by traditional power grid policies. HASI's senior debt position in RNG projects also mitigates exposure to RIN price volatility. The expansion into "Next Frontier" asset classes promises long-term diversification and reduced reliance on tax policy. HASI has also increased its dividend to $0.42 per share, targeting a payout ratio of 55% to 60% by 2027, reflecting a commitment to retaining capital for future growth while rewarding shareholders.

Risks and Considerations

Despite its strong positioning, HASI faces several inherent risks. Credit risk remains a factor, particularly in mezzanine loans and projects without government obligors. However, this is actively managed through rigorous due diligence, structural protections, and continuous monitoring. Interest rate risk, arising from floating-rate borrowings and refinancings, is mitigated by HASI's active hedging strategy and high proportion of fixed-rate debt.

The illiquidity of its assets and geographic concentration in certain collateral areas pose liquidity and concentration risks. While HASI's substantial liquidity provides a buffer, the ability to sell assets quickly if needed could be constrained. Commodity and environmental attribute price volatility can impact projects, especially for Grid-Connected assets. HASI addresses this through long-term PPAs and preferred return mechanisms in its investment structures. Finally, while management expresses confidence in policy resilience, significant, unforeseen regulatory shifts could still impact the long-term investment landscape.

Conclusion

HA Sustainable Infrastructure Capital, Inc. is a compelling investment proposition, uniquely positioned to capitalize on the accelerating energy transition. Its core investment thesis is built on a resilient, non-cyclical business model, underpinned by sophisticated financial engineering, a derisked investment strategy, and a robust capital platform. The company's proprietary CarbonCount and WaterCount methodologies provide a distinct competitive advantage, attracting mission-aligned capital and enhancing risk management.

With strong financial performance in the first half of 2025, a growing pipeline, and a clear strategic roadmap for diversification into new asset classes and enhanced capital efficiency through partnerships like CCH1, HASI is poised for sustained earnings growth. The favorable macroeconomic backdrop of increasing power demand and reduced competition further strengthens its outlook. While risks such as credit and policy changes exist, HASI's proactive management, disciplined capital structure, and proven adaptability suggest it is well-equipped to continue its trajectory as a leading financier of sustainable infrastructure.