Hannon Armstrong Sustainable Infrastructure Capital (HASI) Q1 2020 Earnings Call Transcript

Hannon Armstrong Sustainable Infrastructure Capital (HASI -0.81%)
Q1 2020 Earnings Call
May 07, 2020, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to Hannon Armstrong's conference call on its Q1 2020 financial results. Leadership will be utilizing a slide presentation for this call, which is available now for download on the company's Investor Relations page at investors.hannonarmstrong.com. Today's call is being recorded. [Operator instructions] At this time, I would like to turn the conference call over to Chad Reed, vice president of investor relations and ESG for the company.

Please go ahead.

Chad Reed -- Vice President of Investor Relations and ESG

Thank you, operator. Good afternoon, everyone, and welcome. Earlier this afternoon Hannon Armstrong distributed a press release detailing our first-quarter 2020 results, a copy of which is available on our website. This conference call is being webcast live on the Investor Relations page of our website, where a replay will be available later today.

Before the call begins, I would like to remind you that some of the comments made in the course of this call are forward-looking statements and within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended. The company claims the protection of the safe harbor for forward-looking statements contained in such sections. The forward-looking statements made in this call are subject to the risks and uncertainties described in the Risk Factors section of the company's Form 10-K and other filings with the SEC. Actual results may differ materially from those described during the call.

In addition, all forward-looking statements are made as of today, and the company does not undertake any responsibility to update any forward-looking statements based on new circumstances or revised expectations. Please note that certain non-GAAP financial measures will be discussed on this conference call. A presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. A reconciliation of GAAP to non-GAAP financial measures is available on our posted earnings release and slide presentation.

Joining me on today's call are Jeff Eckel, the company's chairman and CEO, and Jeff Lipson, our CFO. With that, I'd like to turn the call over to Jeff, who will begin on Slide 3. Jeff?

Jeff Eckel -- Chairman and Chief Executive Officer

Thank you, Chad, and good afternoon, everyone. I hope you and your families are as well as they can be. I have to admit I've struggled more in preparation for this call than I have for my prior 28 earnings calls. Today Hannon Armstrong is announcing that fortunately, we maintain a healthy workforce, have accessed markets for growth capital, are reporting record first-quarter earnings, continue to manage a portfolio that is performing to expectations, and are able and willing to reaffirm guidance for 2020.

This good news stands in stark contrast with the impact of this pandemic on people and businesses to date and in the future. This is my struggle. There are so many impacted, directly and indirectly, so many first responders and healthcare workers taking risks we at Hannon Armstrong are not directly exposed to. We are deeply humbled by and grateful for their work.

Rather than jump right into the numbers, I want to highlight a few actions we've taken during the pandemic. First, we closed the office on March 10, earlier than most companies, in order to ensure our staff and their families stayed healthy. Fortunately, we have stayed healthy and will continue to put employee health first. The good news is that financial service firms are better suited to remote work than most.

Other than the working parents of school-age children struggling with school and child care closures, our team is highly functional. Second, we made significant donations to three local organizations: the Maryland Food Bank, the YWCA of Annapolis, and the Annapolis Lighthouse, organizations providing food security, protection for domestic abuse victims, and shelter for the homeless. We and our staff will continue to support these and other community organizations during the pandemic. As for the resiliency of the business, I've reflected on a number of factors that caused the Hannon Armstrong business model to prosper in this unprecedented environment.

First, briefly, all of our investments saved the obligor money. This is a profoundly important distinction that is often missed in more normal times. Second, our clients, the leading energy and infrastructure companies in the country and the world, are large, responsible corporate citizens who will survive and prosper as we exit from this crisis. Finally, the investment pipeline which drives our future growth remains intact, not only because these investments save people money and are sponsored by our terrific clients, but also because the underlying theme of investing in climate change solutions is proving a durable asset class and one that we believe will come out of this crisis even stronger.

Now on to the numbers for our first-quarter results on Page 4 of the slide deck. Today we're announcing GAAP earnings per share of $0.35, up 67% year over year; core earnings per share of $0.44, up 33% year over year. Later Jeff L. will detail a new accounting standard and how our definition of core earnings has changed as a result.

But until then, when I refer to core earnings, it is consistent with the last quarter's definition to allow investors to compare our results to our guidance. We raised nearly $550 million in growth capital through April, including $400 million in unsecured green bonds and $150 million in equity through our ATM. We achieved 40% year-over-year growth in GAAP net income -- excuse me, GAAP net investment income and 52% growth in core net investment income. We report a portfolio yield of 7.7%.

And as Jeff L. will detail in a bit, our portfolio is performing to expectations and is in great shape. We closed $186 million of transactions, compared to $319 million in the first quarter last year, but importantly, still expect full-year originations to exceed the $1 billion mark. And finally, at a time when challenging economic conditions and uncertainty about the future are forcing many companies to withdraw guidance, fortunately, for the reasons I outlined, we remain confident about our ability to weather the current crisis and are reaffirming our guidance for 2020, with core EPS expected to exceed $1.43 per share.

Turning to Slide 5. Let's turn to our more than $2.5 billion pipeline, the majority of which is behind the meter, although you will notice this quarter an increase in the grid-connected pipeline. We continue to identify attractive efficiency and renewable opportunities in the federal and municipal markets, as well as universities, schools, and hospitals. Investments that had been engineered before the crisis are generally proceeding, while the to-be-engineered investments may be pushed back a quarter or two.

With regard to residential solar, deployments of projects already in our pipeline continue, even as new originations have understandably slowed as a result of social distancing and the economic downturn. The quick shift by the resi solar companies to online selling, engineering, and permitting has been impressive. We also continue to look closely at a number of opportunities in the grid-connected sector. As federal tax credits for wind step down, wind project execution is accelerating, potentially leading to new investment opportunities for Hannon.

As a final note, we occasionally get the question on the impact of low oil prices on our renewable pipeline. The answer is there is virtually zero impact, whether the price of oil is $10.00 or $100.00 because oil is not used for electric power generation, except a little bit in Hawaii. Hopefully, we can put this question to rest for good. Turning to Slide 6, our balance sheet portfolio is more diverse and longer-dated than it was at the end of 2019.

As of the end of the first quarter, we have 180 investments with an average size of approximately $12 million and a weighted average life of approximately 15 years. Behind-the-meter market represents over 60% of our portfolio and generates a forward-looking yield of 8.1%. The fact that virtually all of these assets save money for the obligor is one of the reasons for its strong credit profile. I think one of the outcomes of the crisis will that be people will be more focused on the reliability and resiliency of power where they work and live, as reliable power is proving even more critical.

This will only help strengthen both our credit profile, as well as expand the storage opportunity. At 38% of our portfolio generating a forward-looking yield of 7.1%, the grid-connected market continues to be driven by both solar land and onshore wind. In sum, our $2.1 billion balance sheet portfolio remains well-diversified with long-dated assets and poised to support our projected growth in 2020 and beyond. Let's turn now to Slide 7, which highlights a transaction that went from our pipeline to our portfolio in Q1.

We invested $115 million in preferred equity into the Hawkeye Energy, a landmark public-private partnership between ENGIE and the University of Iowa. Hawkeye Energy was awarded a $1 billion, 50-year utility management concession contract, and the investment reached financial close on March 10. Hawkeye will support the university's energy, water, and sustainability objectives for two campuses spanning 1,700 acres, including meeting its zero-carbon energy transition objectives and becoming coal-free in campus energy production on or before 2025. Innovative in both scope and ambition, it serves as a campus utility system model for major U.S.

universities and research hospitals that look to achieve their cost and sustainability objectives. The investment's financial profile is strong, with an attractive 50-year, risk-adjusted return from contracted cash flows from a high investment-grade counterparty. This expansion into the higher education and P3 market also grows and diversifies our pipeline and strengthens the portfolio while fully aligning with our climate-positive ESG objectives. Now I'll turn it over to Jeff L.

to detail our financial performance.

Jeff Lipson -- Chief Financial Officer

Thanks, Jeff. Summarizing our first-quarter results on Slide 8, we recorded GAAP earnings per share of $0.35 in the first quarter, an increase of 67% over the same period last year due to increases in both interest revenue and equity method investment earnings. For core earnings per share, allow me to reiterate our definition that beginning this quarter, core earnings will now include CECL-related provisions, which I will explain further in a few moments. However, for 2020, we will also disclose pre-provision core EPS, as that is the comparable metric related to prior periods and is also the metric we are utilizing for our guidance.

Core earnings per share was $0.43 in the first quarter and core earnings per share on a pre-provision basis was $0.44, reflecting a 30% increase from 2019. As we turn to Slide 9, I want to highlight the $29 million of core net investment income in Q1, a 52% increase year over year. This increase has been the result of growth in our portfolio, as well as improvement in our portfolio yield. We are encouraged by this migration of the business to more significant levels of net investment income, as this enhances the predictability of our core EPS.

However, we would expect the growth rate in core net investment income to moderate somewhat over the next one to two quarters due to a substantial amount of low-yielding cash on the balance sheet from our recent capital raises. It is also notable we achieved a core ROE in excess of 12% in the first quarter. As we turn to Slide 10, I want to emphasize that even in the midst of an extraordinarily challenging macroeconomic environment, our diversified liquidity platform is working as intended. We primarily fund our business in four ways: bank credit facilities, unsecured debt, public equity, and secured financings, both on and off balance sheet, primarily with life insurance companies.

Despite all of the disruption in capital markets over the last two months, we have utilized all four of these sources actively, and each of them remains open to us. After a brief period in which non-investment-grade debt markets were inaccessible, we issued $400 million of green bonds soon after the market reopened in a transaction that was well received by investors and significantly oversubscribed. The substantial fundraising we completed over the last two months positions us extremely well for the current recessionary environment with a substantial amount of cash available to continue to fund accretive investments. We ended the quarter with $173 million of unrestricted cash, much of it generated from equity issuance via our ATM platform, and we significantly increased that balance with the debt offering and additional ATM sales in April.

In fact, the ATM has been a successful low-cost equity issuance platform, and we intend to refresh our registration, allowing for another $350 million of issuance. To reiterate, our motivation for raising this debt and equity was our confirmation from our clients that our pipeline transactions continue to move forward. I'll also note we have limited refinance risk, as we have no material recourse debt maturities until September 2022, when our convertible bonds mature, and that given these may be settled in shares, this maturity does not necessarily reflect a cash need. We also have limited interest rate risk, as the vast majority of our assets and liabilities are fixed rate.

Turning to Slide 11, the credit quality of our portfolio remains stable as depicted on the pie chart on the right. All of our government and the vast majority of our commercial obligors enjoy investment-grade ratings. In addition, the obligors of our residential solar assets include approximately 150,000 high-credit-quality consumers located across 22 states. And in our equity method investments, we are typically preferred in the investment structure.

On Slide 12, as I discussed on our last call, we highlight that beginning this year, we have implemented the new accounting standard referred to as CECL. Similar to the method that banks and many finance companies have utilized for years, as a result, we have created an allowance for losses on the balance sheet and recorded a provision on the income statement for certain of our assets. Notably, equity method investments are excluded from CECL. For the first quarter, we recorded approximately $650,000 of provision expense, hence the $0.01 difference in core EPS mentioned earlier.

It's important to note two things. One, utilizing provision and allowance does not change the profitability of our investments over their full life, but typically reduces profitability in the first year of the investment. And two, CECL is an accounting methodology change and does not impact the actual credit quality of our investments and should not be interpreted as a change in our expectations of portfolio performance. We have also included for reference a simple example of the timing impact of CECL income recognition in the appendix of today's presentation.

Further, to give investors additional transparency into our portfolio's performance, we've provided a new disclosure table on Slide 12. Currently, 99% of our portfolio is performing. 1% is performing slightly below our metrics, both a low probability of loss of invested capital and $8 million of assets are performing significantly below our metrics. However, please note the investments in category three have been fully reserved for in 2019.

Turning to Slide 13, we are also providing detail on the credit attributes of our residential solar investments, including the customer savings component that Jeff referenced earlier, modest monthly payment amounts, widespread usage of ACH, FICO scores well above national averages, transferability of panels, portfolio granularity and geographic diversity. We also highlight that these portfolios have been underwritten by multiple sophisticated investors and rating agencies as part of the senior debt financing these same pools of assets. These debt financings are also structured with an identified backup servicing plan. Towards the bottom of the slide, we reflect that we have substantial equity providing credit enhancement for our mezzanine investments.

We can report that since the COVID-19 pandemic commenced, based on information we have received to date and other public disclosures, the increase in customer delinquencies and deferrals in the underlying portfolio have not been significant. However, we continue to work closely with our solar partners to monitor the portfolio, given the current macroeconomic environment. We have also included in the appendix a slide outlining the collections procedures of the solar providers. We hope these enhanced asset quality disclosures are helpful to our investors in better understanding our credit risk and portfolio performance.

With that, I'll turn the call back over to Jeff.

Jeff Eckel -- Chairman and Chief Executive Officer

Thanks. Turning to Slide 14, I will highlight notable recent developments on the ESG front that continue to demonstrate our leadership. Following our most recent green bond offering, we joined the NASDAQ's sustainable bond network, which sharpens accountability for issuers and should enhance liquidity for green bond investors. In addition to the donations I mentioned at the beginning of the call to support COVID-19 relief efforts by local charities, we also offered a 100% match of employee charitable contributions and an employee bonus to help with hardship expenses.

We also invite you to check out our 2019 Impact Report, which we published in March and you can find on our website. Boy, that seems like a long time ago that we published that report. While I believe we get appropriate credit for our environmental and governance practices in most quarters, the social element of ESG is generally not as visible to investors. When this crisis has passed, and it will, I'm certain that the investments we have made in our staff and our community will elevate the "S" in social to equal visibility and prominence with the "E" and "G" in investors' eyes.

And you as investors should see the financial benefit from our unwavering commitment to industry-leading ESG business practices. I'll conclude on Slide 15. We believe our core markets and clients will prove strong and capable of continuing to develop and engineer programmatic, high-quality, long-dated assets for us to invest in for our portfolio. That portfolio is geographically and technologically diverse in over 180 investments and has shown strength in past financial crises by being uncorrelated to the general business cycle.

Our durable capital structure, as Jeff detailed, with ample liquidity, conservative leverage, and access to diverse funding sources, will allow us to make investments and grow the business. Finally, we remain focused on the sizable and growing investment opportunities in climate change solutions that our clients continue to create. Thank you for joining us today. Stay well.

And operator, we'll open the line for questions.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Chris Van Horn with B. Riley FBR. Please go ahead.

Chris Van Horn -- B. Riley FBR, Inc. -- Analyst

Good afternoon. Thanks for taking my call and hope everyone is well. I'm wondering if you could give us maybe a real-time update on how the month of April has progressed and how your conversations with the pipeline have been going.

Jeff Eckel -- Chairman and Chief Executive Officer

Chris, it's kind of hard to address April. I think you could take from, particularly my comments on the pipeline and the reaffirmation of guidance, that we've not heard anything in April that would change what our view was at the end of the quarter. Most of the assets in construction are considered essential services. We've not seen any notable reduction in construction.

And I think maybe a key thing to think about is when we see an investment opportunity like the University of Iowa, there's been a year or two of selling and engineering and originating and structuring that investment before we see it. There is a stock of those assets sitting out there in our clients' pipeline that we fully expect to be able to transact on in 2020. I mentioned that some assets that haven't been sold or engineered yet might have a one or two-quarter delay. I think that's quite possible, and I think most of the clients believe they can play catch-up at the end of the year and get their pipelines back intact.

Chris Van Horn -- B. Riley FBR, Inc. -- Analyst

Got it. OK. Great. And then when you look at your pipeline, I imagine there's a lot of military or government exposure, and just curious or even municipal, down to municipal level.

I'm wondering if you're seeing any budget effects affecting that pipeline, or if because of the scope of work is to save money, you're actually seeing an increase in demand, which I think you alluded to a little bit.

Jeff Eckel -- Chairman and Chief Executive Officer

Yes. I think, the federal government, obviously, they can issue debt and make more dollars. We've been through this through several financial crises with the federal government, and they'll have the same remote working issues as any employed person. But from a credit standpoint, that has never been an issue and we don't anticipate it.

For let's say, the MUSH market -- municipal, universities, schools and hospitals -- they obviously can't issue debt, and one should worry about credit. But you hit exactly on the answer, are these assets save them money. To not pay us will eventually cost them more money. And also, the credit profile of, particularly the municipal exposure we've got, is quite high.

Chris Van Horn -- B. Riley FBR, Inc. -- Analyst

Got it. Great. And I guess finally, the resi solar piece of the portfolio, it seems like it's somewhat holding up, mainly due to the high FICO score. But in your conversations with the servicers, what's the temperature moving forward, and how do they see that playing out?

Jeff Eckel -- Chairman and Chief Executive Officer

I think SunPower's doing their call right now. Sunrun has reported. I'm not sure about Vivint. But in talks with SunPower and Sunrun's comments, you are given the impression, and we have zero -- we have the information that Jeff said, that the assets are performing.

But there's a sense of optimism among the SunPower and Sunruns that this is actually an asset class that people will value more post-crisis than they might have pre-crisis. And we're still early days, but we love the credit profile of what we've got and where we are in the capital stack in these transactions. Jeff, anything you would add to that answer?

Jeff Lipson -- Chief Financial Officer

No. Nothing other than to reiterate what I said in the prepared remarks, that we're not seeing significant deferrals or delinquencies yet, but we're watching it very closely, and we have underwritten it as a priority payment, and we continue to have that thesis that this is a priority payment to the customer.

Chris Van Horn -- B. Riley FBR, Inc. -- Analyst

OK. Great. Thank you so much for the time, and stay safe and healthy.

Jeff Eckel -- Chairman and Chief Executive Officer

Thank you, Chris.

Jeff Lipson -- Chief Financial Officer

Thank you.

Operator

The next question is from Julien Dumoulin-Smith with Bank of America. Please go ahead.

Anya Shelekhin -- Bank of America Merrill Lynch -- Analyst

Hey. This is actually Anya filling in for Julien. First, just wanted to ask what your expectations are for the pace of origination growth, just given the circumstances, similarly for gain on sales securitizations. Maybe more for 2021 than 2020, since it seems you're pretty confident on 2020 originations as those conversations have been ongoing.

And just more color on that.

Jeff Eckel -- Chairman and Chief Executive Officer

A 2021 question. I think the companies that we're dealing with are actually looking at this in many respects as an opportunity to accelerate the infrastructure from less sustainable infrastructure to more sustainable. There are other companies and other energy industries who are not looking at all optimistically about 2020 or 2021. Those aren't our clients.

So given that it is early days and we don't have a vaccine, how long this lasts is really quite the right question, and we're no better at answering it than anybody else. But to the extent construction projects are getting done that save people money, our clients are going to do them, and we'll have, I think, a good pipeline. One other way to look at it, Anya, is I've reemphasized that we expect to get to $1 billion in closed transactions in 2020. We carry a more than $2.5 billion pipeline.

Now the problem historically with our pipeline is things move to the right. I'm sure things will move to the right, but that right just happens to be 2021. And I do believe new transactions will surface to fill in the transactions that we move from pipeline to portfolio. With respect to securitizations, Jeff, do you want to take it? Go ahead.

Jeff Lipson -- Chief Financial Officer

Sure. Again, to forecast gain on sale in 2021 would be challenging. As you know, Anya, most of what we securitize is energy efficiency transactions. That market remains strong, but I think we'd be hesitant to be definitive about what 2021 gain on sale would look like at this point.

Jeff Eckel -- Chairman and Chief Executive Officer

Except maybe I would add that the insurance companies are who the buyers of our gain on sale are functioning, open. We're doing business with them, just as we did in '08 and '09. They have insurance premium money coming in. They have to reinvest it.

And in this extremely low-interest rate environment, they have no choice but to keep doing transactions. And that's good news for us.

Anya Shelekhin -- Bank of America Merrill Lynch -- Analyst

OK. Thanks. And just a follow-up just across the asset classes, where are you seeing growth opportunities today, maybe in the P3 asset class and then elsewhere?

Jeff Eckel -- Chairman and Chief Executive Officer

Well, I think, yes, the P3 area -- for those of you who don't know what P3 is, it's not Paycheck Protection Plan in our context. It's public-private partnerships. We're thrilled to be in the transaction with ENGIE and supporting them. The offering that they're making to the P3 customers is a really compelling one, and I think they're going to have a lot of success in this market, and we look forward to participating in future transactions.

We're certainly seeing governments continue to go after their sustainability goals, which is largely achieved through efficiency but also through solar and storage. And then, as I mentioned, the wind industry is having maybe not the uber record that they were planning on having in 2020, but they're going to have a terrific year, and that creates opportunities for us as well.

Anya Shelekhin -- Bank of America Merrill Lynch -- Analyst

OK. Thanks. I'll jump back in the queue.

Operator

The next question is from Noah Kaye with Oppenheimer. Please go ahead.

Noah Kaye -- Oppenheimer and Company -- Analyst

Good afternoon. Thanks for taking the questions.

Jeff Eckel -- Chairman and Chief Executive Officer

Hi, Noah.

Noah Kaye -- Oppenheimer and Company -- Analyst

Hi. How are you?

Jeff Eckel -- Chairman and Chief Executive Officer

Good.

Noah Kaye -- Oppenheimer and Company -- Analyst

Thanks for providing this extremely transparent view of the health of the business and, frankly, doing so in a manner that befits the company's values. Jeff, I'm not sure if you were alluding to this as a potential opportunity, but it's something we've been thinking about. There's quite a lot of discussion about what the built environment needs to look like and how that needs to change as we all, hopefully, do go back to work and recongregate. Some of the partners that you have for institutional building improvements, commercial building improvements, they've been talking about this, and there's quite a lot that may need to be done from the perspective of making buildings more resilient and now, really, from a public health perspective as well.

It's not strictly talking about energy savings, but it is lifesaving, some of these measures being considered. And so I'm wondering if, since you're talking about the social aspect of your business, is that expanding your opportunities at all?

Jeff Eckel -- Chairman and Chief Executive Officer

No. It's a great question. I did a webinar for the Alliance to Save Energy on Johnson Controls' 2020 survey of building energy managers. It was completed in 2019, so pre-COVID and somewhat out of date, but the entire webinar was focused, at least my comments, on what is actually changing now on the scope of supply for energy service companies for buildings? You need a lot more air circulation post-COVID environment than you did before, and you need UV filters in that circulation system.

People aren't going to -- our employees aren't going to come back to work unless they know the building is safe, and we fully encourage that. So we're actually looking into some of those technologies for our own office. It's early days in how to get them done, but absolutely, this increases the scope of supply for the energy service companies, and it goes from, "Gosh, we get to save money," to, "Good lord, we get a safe building." That is very valuable. So as I think everybody is realizing that virtually everything has changed, that is one area that I think our clients are very quick off the blocks to seize that opportunity.

Noah Kaye -- Oppenheimer and Company -- Analyst

OK. Appreciate that. And maybe just a quick, more pragmatic one. Near term, you mentioned this potential rush of wind projects in the pipeline.

At this point, does it look to you like there's sufficient tax equity to really fund that rush of projects? If the cost of tax equity increases due to scarcity, how does that position you? Just your thoughts on that would be helpful.

Jeff Eckel -- Chairman and Chief Executive Officer

Sure. And I think in most markets you see, life isn't fair in a crisis, and large companies have access to, in this case, tax equity that smaller companies don't. To the extent there's scarcity, and it's not clear to us that tax equity has become scarcer. We're seeing commitments get followed through on and transactions closed.

But it's going to be our large clients who are getting what available capacity there is. If there are other projects that need tax equity and can't get it, that's pretty hard for us to bridge in the short term with actual cash equity. But in terms of the wind opportunity we're talking about, we do not see, and I think the Wind Industry Association has confirmed that it's not seeing a notable pickup in the tax equity market.

Noah Kaye -- Oppenheimer and Company -- Analyst

OK. That's very helpful. Thank you.

Jeff Eckel -- Chairman and Chief Executive Officer

Thank you, Noah. Stay safe. Hello? I think Chris from Cowen is up next.

Chris Souther -- Cowen and Company -- Analyst

Hi, Jeff. I missed the introducer. Thanks for taking the question here. I just wanted to touch on and see if there were any new opportunities that were popping up outside of your traditional scope as projects and companies face liquidity issues in the near term.

Just given you have beefed up the war chest here, I wanted to get your thoughts.

Jeff Eckel -- Chairman and Chief Executive Officer

Yes. It's a fair question, Chris. The bias we have in picking through projects and investable opportunities is who can we do repeat business with, this programmatic investment that we talk about so often. That's the way our business makes money.

We are less likely to be opportunistic in a one-off transaction, even if somebody needs more capital than they thought they did. That's really not our way of working. And fortunately, most of our clients are large companies who have tremendous access to liquidity. So we're not seeing train wrecks that allow us to be more opportunistic.

But I would say that we've seen an increase in our cost of capital as the stock price has lowered and the unsecured debt priced more expensively than the prior issuance. That is something that we'll be able to in, this market, I think, adjust pricing to make sure that the price and cost of capital move out in parallel lines.

Chris Souther -- Cowen and Company -- Analyst

Got it. So just the price that you're discussing, has the dislocation in markets changed that with either some of the projects that you're looking at now or potentially hearing somebody's going to go to sell different projects?

Jeff Eckel -- Chairman and Chief Executive Officer

Yes. I think there was, maybe in March and early April, some failure to recognize that the world had changed a bit. But now that we're in May, I think everybody's pretty much got the memo that the finance markets have changed, and capital is getting paid, I think, a more fair price than it was pre-crisis.

Chris Souther -- Cowen and Company -- Analyst

That's good to hear. And then just the last one. You called out wind as, grid-tied wind, as an area of the pipeline that seems to be growing. Can you talk a bit about what's in the sustainable infrastructure side and where the increased opportunities are there?

Jeff Eckel -- Chairman and Chief Executive Officer

So a lot of that is stormwater remediation. We continue to do that business. Those transactions are primarily state-level credits, so a very -- and highest-rated states. So very good transactions for us to add to the balance sheet.

And COVID-19 are not -- the states are still under mandate to do these projects, and they simply have to do them. And they're clearly construction projects with a lot of social distancing. They're often out in the woods or along a highway where there aren't people. So we're pretty confident that those will continue.

There are other sustainable infrastructure projects in burying transmission lines and things like that. They've always been a bit episodic, but when they come, they should be good transactions as well for a post-COVID environment.

Chris Souther -- Cowen and Company -- Analyst

Got it. And then just the last one. How's going to be your origination process change? I understand with the programmatic relationships, it's a lot easier, but just wanted to -- it sounds like things seem to be well on track. I just wanted to see if there were any areas where there are delays or logjams within that process.

Jeff Eckel -- Chairman and Chief Executive Officer

And again, typically the projects that may experience those logjams are supply chain problems we probably wouldn't have seen for another six to 12 to 18 months anyways. So they may be out there, but it's in the future for us. The projects that we're investing in generally are well-supplied and able to proceed. So much of this new environment, there's still a lot to learn and a lot to understand, but I'm just super impressed with our clients, the ability of them to turn on a dime and change the way they're working and fix things.

These are really capable companies, and it's great to have them as clients.

Chris Souther -- Cowen and Company -- Analyst

Good to hear. I will hop in the queue. Thanks.

Operator

The next question is from Stephen Byrd with Morgan Stanley. Please go ahead.

Stephen Byrd -- Morgan Stanley -- Analyst

Hey. Good afternoon. Hope you all are doing well.Jeff EckelHi, Stephen.

A lot of my questions have been addressed. I wanted to just touch on Hawkeye, a pretty sizable investment. And I just wanted to understand in terms of the impacts to guidance for 2020, how to think about the impacts to guidance, given the size of the investment.

Jeff Eckel -- Chairman and Chief Executive Officer

Let's see, I'm looking at Jeff here. How would you answer it? I think we obviously have just reiterated guidance. We expected to put a substantial amount of assets into the portfolio. This is one of them that's been in our pipeline for a while.

I'm not sure it fundamentally changes the 2020 results. The good thing about infrastructure investments like these is they move glacially, up and down. And the things in our pipeline are generally going to happen. So I'm not sure there's a 2020 impact.

Anything you would add, Jeff?

Jeff Lipson -- Chief Financial Officer

No. No. Our guidance is based on, obviously, a certain level of investments, and the Iowa transaction was a component of that that we've now checked off, so it certainly helps facilitate us reaffirming our guidance.

Jeff Eckel -- Chairman and Chief Executive Officer

Darn glad to close it on March 10, the same day we were closing the office. So a lot of stuff got closed on March 10th.

Stephen Byrd -- Morgan Stanley -- Analyst

Very good. That's all I had. Thank you.

Jeff Eckel -- Chairman and Chief Executive Officer

Thanks, Stephen.

Operator

The next question is from Philip Shen with ROTH Capital Partners. Please go ahead.

Philip Shen -- ROTH Capital Partners, LLC -- Analyst

Hey, guys. Thanks for the questions.Jeff EckelHi, Phil.

Phillip Shen -- ROTH Capital Partners -- Analyst

We're navigating, as many others are, many conference calls, so apologies if you've already addressed this. I wanted to see if you could give us a little more color on how the resi solar investments are going. I know you have -- I believe you have three partners, SunStrong with SunPower, Vivint and one other one. Can you compare and contrast the performance from each of those different portfolios? And Sunrun gave some interesting data yesterday about how their delinquencies, 30, 60, 90, 120 days through March and April, are at the lowest levels in the past six months.

And so I was wondering -- and so perhaps that's some color right there on Sunrun. But can you comment on how your three different portfolios are performing?

Jeff Lipson -- Chief Financial Officer

So, Phil, we would not comment on the portfolios individually. That's just not something that we're able to disclose. And they are, each of our three partners are public companies. So as you alluded to, there is some data out there that they are providing.

I think what we have said, if you missed it, was that deferrals and delinquencies have not increased significantly as a result of the pandemic so far. But obviously, we're keeping a close eye on it, given the macroeconomic trends we have right now. And we've underwritten our investment thesis here is that this is a priority payment for the consumers, at the top of the consumer waterfall, so to speak. And for reasons that we've outlined, most notably that it does save them money, and many other things which are on Page 13 of the slide deck.

So that's how we've thought about it, and so far it's holding up, but we're watching it closely, I think would be our message there.

Philip Shen -- ROTH Capital Partners, LLC -- Analyst

OK. But as we go through this pandemic, and given the performance of that asset class for you guys, and you have lots of other investment options, are you more encouraged or less encouraged? They're going to continue to originate. Do you expect to take on meaningfully more megawatts or investments into your portfolio over time?

Jeff Eckel -- Chairman and Chief Executive Officer

We'd certainly -- we liked what we've invested in. We certainly are open to future residential solar investments. One thing I think has been fascinating is, and I think Ed Fenster said it at Sunrun, is what they planned to do in two years, they did in 30 days in terms of going to online selling, engineering and permitting. Sunrun has echoed the same -- excuse me, SunPower has echoed the same rapidity of change.

That does wonders for sales, but what it really does for those guys is reduce their cost of customer acquisition and selling. And so you could look at this as the impact is going to make them more profitable, which is quite a good fact for us.

Philip Shen -- ROTH Capital Partners, LLC -- Analyst

Great. One other one, if I may. Your data centers and the growth there is pretty phenomenal, and there's a lot of renewables going into there. And thus far, you guys have not talked about exposure to that end market.

But do you see on the horizon potential to get some exposure to that data center growth?

Jeff Eckel -- Chairman and Chief Executive Officer

I do think some of the PPA off-takers in portfolios we bought would represent some of those companies. It's absolutely going to be a growing market, and they have a big impact, and so I'm glad they have big sustainability goals. It's certainly a market that we will like and continue to see opportunities in.

Philip Shen -- ROTH Capital Partners, LLC -- Analyst

Great. Thank you both. I'll pass it on.

Jeff Eckel -- Chairman and Chief Executive Officer

Stay well, Phil

Jeff Lipson -- Chief Financial Officer

Thanks, Phil.

Operator

The next question is from David Katter with Baird. Please go ahead.

David Katter -- Baird -- Analyst

Hey, guys. Thanks for taking the question. And I'm sorry if I'm repeating something you already touched on, but seeing portfolio yields continue to move higher, as you look at your current portfolio, how high can that go? How much more room do you have to rotate some lower-yielding assets off there?

Jeff Lipson -- Chief Financial Officer

The rotation of lower-yielding assets is primarily complete, so movements in portfolio yield will likely, going forward, be much more affected by what the incremental assets are on the balance sheet and when and if any payoffs are syndicated. But we don't forecast publicly our yield. I would say directionally, as Jeff alluded to a few moments ago, the price of risk has increased and there's been some resetting of cost of capital, and so that may have a positive impact on our yield, but I think it's a little too early to tell right now.

David Katter -- Baird -- Analyst

Understood. And then shifting to capital, you issued some more debt in 2020. As we think of future capital raises, how much debt are you comfortable raising there? What do you view as the upper limit?

Jeff Eckel -- Chairman and Chief Executive Officer

Now that we're an active participant and an established name in the high-yield market, I don't think there's any meaningful limitation on the amount we could issue, given the size of that market. And if we are upgraded, certainly I would make the same comment around the high-grade market as well. So the limitation is only what we can do with that money and what kind of leverage profile we want to maintain. And so it's not a market limitation.

So we'll raise debt consistent with maintaining roughly the leverage profile we have today and the amount of investment opportunity we have in the pipeline. So it's not a debt target, so to speak.

David Katter -- Baird -- Analyst

Understood. That's helpful and that's all I had, guys. Thanks.

Jeff Eckel -- Chairman and Chief Executive Officer

Thank you. Stay well.

Operator

[Operator signoff]

Duration: 52 minutes

Call participants:

Chad Reed -- Vice President of Investor Relations and ESG

Jeff Eckel -- Chairman and Chief Executive Officer

Jeff Lipson -- Chief Financial Officer

Chris Van Horn -- B. Riley FBR, Inc. -- Analyst

Anya Shelekhin -- Bank of America Merrill Lynch -- Analyst

Noah Kaye -- Oppenheimer and Company -- Analyst

Chris Souther -- Cowen and Company -- Analyst

Stephen Byrd -- Morgan Stanley -- Analyst

Philip Shen -- ROTH Capital Partners, LLC -- Analyst

Phillip Shen -- ROTH Capital Partners -- Analyst

David Katter -- Baird -- Analyst

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