Good afternoon, and welcome to Hannon Armstrong's conference call on its first quarter 2021 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, and we have allocated 30- minutes for prepared remarks and Q&A. All participants are in a listen-only mode. If you need any operator assistance, please press star zero on your telephone keypad. At this time, I would like to turn the conference call over to Chad Reed, Vice President, Investor Relations, and ESG for the company. Please go ahead.
Thank you, operator. Good afternoon, everyone, and welcome. Earlier this afternoon, Hannon Armstrong distributed a press release detailing our first quarter 2021 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 Exchange Act of 1934, as amended. The company claims the protections 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 and COO.
With that, I'd like to turn the call over to Jeff, who will begin on slide three. Jeff?
Thank you, Chad, and good afternoon, everyone. Today, we are reporting GAAP earnings of $0.61 per share and distributable earnings of $0.43 per share. 38% portfolio growth year-over-year to $2.9 billion, and 19% growth in our managed assets to $7.4 billion. The establishment of a $400 million unsecured revolving credit facility. A 10 basis point increase in our portfolio yield to 7.7% from the Q4 levels, and the declaration of a dividend of $0.35 per share. We continue our leadership on ESG reporting with our CarbonCount disclosures and our 2020 Impact Report. Turning to slide four. We remain confident in our ability to achieve the three-year guidance target we established last quarter due to expected portfolio growth, stable or improving margins, and improvements in our operating leverage.
These three factors will be the drivers for growth in distributable earnings per share of 7%-10% through 2023, and the dividend growth at a rate of 3%-5% annually, also through 2023. With distributable earnings growing faster than our dividend, we can continue to retain capital for accretive investments and believe the combination of earnings growth and dividend yield remain attractive on a total return basis. On slide five, we provide an update on our 12-month pipeline, which we are again reporting as greater than $3 billion. Our pipeline is driven by both new and existing programmatic relationships with the leading clean energy and infrastructure companies, and we see strong growth in virtually every one of the approximately 10 end markets where we invest.
Energy efficiency opportunities continue to dominate the behind-the-meter, or BTM pipeline, as government and corporate obligors save money with energy efficiency, improve their reliability, all the while reducing greenhouse gas emissions. The solar pipeline is up as well, inclusive of the residential C&I and community solar markets. The grid-connected pipeline continues to expand in each of the markets, led first by grid-connected solar land, and then offshore wind. We continue to source attractive climate resilience opportunities, as reflected in our sustainable infrastructure pipeline, and expect this opportunity to grow further as the impacts of severe weather continue to challenge state and local government stormwater management efforts. We've been asked frequently lately about project delays due to COVID, silicon chip shortages, or delays in anticipation of government stimulus. Are pleased to report that we see no noticeable project or transaction delays and expect a very active 2021.
Turning to slide six, we detail our $2.9 billion balance sheet portfolio as of the end of the first quarter. As I said at the beginning, the portfolio yield ticked up slightly from last quarter, but otherwise is fairly steady at 7.7% on over 220 investments, with an average size of $13 million and a weighted average life of 18 years. With no asset class comprising more than 28% of the portfolio, the diversity of our portfolio remains a strength. A little more detail on the portfolio. The behind-the-meter assets represents roughly half of our portfolio and generates a yield of 8.4%. The strong credit profile of these assets is driven by the fact that virtually all of these assets save money for the obligor.
The grid-connected investments represent the other half of the portfolio, with an expected forward-looking yield of 7.1%. This market continues to be driven primarily by onshore wind and solar land, with utility-scale solar a small but growing piece of the pie, as reflected in the pipeline discussion on a prior slide. We remain pleased with the diversity of our portfolio and believe this is a key driver of its consistently strong performance. Now I'll turn it over to Jeff L. to detail our portfolio performance and financial results.
Thanks, Jeff. Turning to slide seven, we note our high-quality assets continued to perform within our expectations in the first quarter. This performance is driven in part by the structural seniority of our investments and the credit quality of our obligors. In nearly all of our investments, we are in a preferred, senior, or super senior position. In addition, our obligors are typically investment-grade government or corporate entities or credit-worthy consumers. The structure of our investments, most notably our structural seniority, has a very meaningful impact in reducing our exposure to both operating and commodity price risk. As we discussed last quarter, this structural seniority was a significant factor in limiting the impact of the Texas weather events on our results. Moving to slide eight, we detail our balance sheet as of the end of the quarter.
In the first quarter, we funded $168 million of investments, many of which are ongoing fundings of previously closed transactions. We also executed several securitization transactions, including a low-yielding, highly leveraged government transaction consistent with our past practice of taking transactions with this profile off balance sheet. The net result was a portfolio balance of $2.9 billion, similar to year-end 2020. Our funding expectation of previously announced transactions is shown on the lower left. We expect these incremental fundings, along with the strong pipeline that Jeff referenced earlier, will generate further growth in net investment income. As of the end of the quarter, we have over $200 million of cash on our balance sheet, and subsequent to the quarter, we added substantial incremental liquidity with our revolver, which I will discuss in a moment.
Summarizing our results on slide nine, we recorded distributable earnings per share of $0.43 in the first quarter, roughly flat with the same period last year. Higher revenue from gain on sale was offset by higher interest expense due to the volume of debt that we've issued since the first quarter of 2020 and higher compensation. I will also note that distributable net investment income increased to $30 million, as higher income from equity method investments was partially offset by the aforementioned higher interest expense. To conclude, we enjoyed another strong quarter as our dual revenue model continued to perform. On slide 10, we highlight our establishment of a $400 million sustainably linked unsecured revolving credit facility with 10 relationship banks. Given significant interest among other lenders, we replaced a similar $50 million facility we had established in the first quarter with JP Morgan as the sole lender.
The support we received from the top-tier banks should be viewed as an affirmation of our strategy and strong confirmation of the credit profile of our portfolio. Having a revolver in place will facilitate a more efficient balance sheet, as we will no longer be required to raise all the capital prior to the funding of an investment and will have the flexibility to reduce the earnings drag of outsized cash balances. The facility provides for interest rate reductions if we achieve certain levels of our CarbonCount metric on a quarterly basis. Therefore, in addition to further enhancing our liquidity and funding flexibility, the facility also provides market validation of our CarbonCount scoring tool. With the facility in place, we also highlight in the graphic on the right the four prongs of our funding platform. This diverse liquidity profile provides substantial flexibility in financing our business.
We've been successful in reducing our cost of capital over the last few years and have worked closely with our institutional debt investors and bank partners to build and maintain a scalable liquidity platform. Additionally, in terms of equity, we utilized our ATM platform to raise $103 million in the first quarter. I'll note that leverage is 1.6 x at quarter end, we prudently manage interest rate risk, and we maintain a laddered maturity profile. Let's now turn to slide 11 for a discussion of an issue on the minds of some investors. Since the beginning of the year, the 10-year Treasury rate has ticked up over 65 basis points in anticipation of a strong economic recovery. This rate movement has led to several questions about the impact on our profitability of movements and interest rates.
The first thing I'd mention is that as depicted in the chart, we have successfully achieved strong earnings growth in a variety of rate environments since IPO. The 10-year Treasury has been above 3% and below 1% in that time, and our earnings have maintained their consistent upward trajectory. Likewise, curve steepness, as depicted by the green line, has fluctuated significantly, but with no meaningful impact on our results. Secondly, I'll reiterate that changes in Treasury rates have no impact on our existing assets and liabilities. We have a portfolio of $2.9 billion, almost exclusively fixed-rate investments, and over $2 billion of fixed-rate debt. None of the rates or cash flows of these assets or liabilities are altered by subsequent changes in Treasury rates.
Third, as we close on new investments and new debt issuance, rates are known to us at the time of closing, and we can continue to lock in our margins. At times, these margins may expand or contract a bit, but our investment profile and the history of our investment and debt markets suggest that margins typically remain within an acceptable range. Also, given the diversity of the asset classes in our portfolio, we can pivot to better risk-adjusted returns if a certain asset class is experiencing margin compression. The last bar on page 11 depicts our 2021 distributable earnings per share, assuming we achieve the midpoint of our run rate guidance. We expect to achieve this result regardless of what happens to the yield curve. With that, I'll turn the call back over to Jeff.
Thanks. Turning to slide 13, we highlight publication of our 2020 Impact Report, which we're proud of, and I really urge you to read it. It's a terrific piece of work. The report features enhanced disclosures and advocates for a common ESG reporting framework that includes standardized reporting on avoided emissions, particularly for financial institutions. We would certainly love for them to embrace the Carbon Count metric. In addition, yesterday, we announced the Hannon Armstrong Foundation's first grant to establish the Climate Solutions Scholarship Program. The program provides financial assistance for high-achieving, sustainability-focused undergraduate students from underrepresented communities. At launch, the participating schools include Morgan State University, Maryland's largest historically Black college and university, and Miami University in Oxford, Ohio. The needs-based scholarships will cover the cost for up to five students interested in pursuing careers related to climate change and sustainability.
We believe this grant serves as an important step forward in our journey to drive meaningful and sustainable impact, as well as a potential pipeline of new professionals in the industry. We'll conclude on slide 14. Our four key strengths are the strong programmatic investment platform with the firms who are driving the energy transition to a low-carbon future. We are grateful for the opportunity to support these companies in this effort. Second, our well-diversified funding platform allows us to satisfy our clients' capital requirements, whether the assets are a good fit for our balance sheet or not. This flexibility allows us to solve our customers' financing problem with a full range of behind-the-meter and grid-connected assets these programmatic clients generate. Third, it is terrific to have a policy tailwind for the first time in four years.
We expect recent and anticipated executive orders and proposed federal legislation to contribute to continued growth in our existing markets and asset classes. As we showed over the last four years, we don't need the tailwind. If the country is going to meaningfully address climate change, public policy will be a key piece of the solution. As Jeff L. showed, we have a proven track record in a variety of interest rate environments over our eight years as a public company, with consistent growth in distributable earnings independent of the level of interest rate or the shape of the yield curve. This track record should give investors comfort in how we will manage the business into the future. To sum up, the opportunity for growth has never looked more promising. We are confident in our ability to execute in the months and years ahead.
Operator, please open the line for questions.
We will now begin the question-and-answer session. To ask a question press star then one on a touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If anytime your question has been address and you would like to withdraw your question, press star then two. At this time we will pause momentarily to assemble our roster.
The first question comes from Noah Kaye with Oppenheimer. Please go ahead.
Good afternoon. Thanks for taking the questions. A lot of positive commentary and actual reported results from some of the leading performance contracting companies. Seems like just that having moved past some of the logistics difficulties during the pandemic of doing contracting, we're starting to see improved contracting flow. Just wanted to get your color on whether you're seeing that as well and how you look at the flow in the energy efficiency business over the balance of the year. I know you addressed that it's a large part of the 12-month pipeline, just curious for any incremental color you can provide.
Hi, Noah. I think the comment that in our behind-the-meter pipeline, it is dominated by energy efficiency speaks to that robustness that you're commenting on about the ESCO market. It's a good business and they're doing a good job. I think things are starting to move at the federal level, but also state and local level. Maybe they experienced some delays in COVID last year. Things are starting to happen again.
You've always said that the timing of originations is lumpy. I think this dovetails off of my previous question. Confidence in kind of an increasing pace of originations over the balance of the year?
I think we're quite confident, Noah. What we did in Q1 was about what we did in Q1 last year. If you look at last year, it ended rather well with high volumes. I don't think anybody should be surprised if the same thing happens this year.
Just one last question. You may have seen that, it was actually on Earth Day. There was a lot of announcements on Earth Day, the European Commission announced that as part of the new climate law package in June, they're going to add buildings to the emissions trading system for carbon. In other words, building decarbonization is going to be properly incentivized. This has always been a U.S.-focused business. Just curious for perspective on that, whether there's potential for similar legislation in the U.S. to benefit whether or not your ambition might start to stretch overseas as you look at the potential for building carbon pricing to actually impact the bottom line.
Great question, Noah. As you know, we've been big fans of carbon pricing in whatever form it might take, and applaud the EU for adding buildings, which is, I think, the built environment is 40% of greenhouse gas emissions or something like that. If we're actually going to get at it, you should be incentivizing it. I'm not familiar with any comparable legislation in the U.S. but it certainly is a good idea and would provide yet another revenue stream and benefit to the energy services industry.
All right. Thanks very much for taking the questions.
Noah.
The next question comes from Ben Kallo with Baird. Please go ahead.
Hey, guys.
Hey, Ben.
Maybe, Jeff Lipson, could you just talk a little bit more about interest rates, because all of our sector stocks have gotten crushed, partly because of interest rates, I think. Maybe just refine or remind us how they impact you and how we think about the yield curve. I know you have the slide here, and I know you guys talked about it, but any color you can give there.
Sure, Ben. I think the primary item to consider is, as I said, we have fixed-rate assets that are funded by long-term fixed-rate liabilities, and we have been extending our liability duration, particularly with the 10-year debt offering we did in 2020. We have locked in margins on a large segment of the portfolio. As we go forward and add new investments, our funding costs are available to us at the time of close, so we can look at those and invest accordingly to maintain our margin. It's not as if rates moving up, down, steeper, flatter, have this sudden impact on the portfolio. The existing portfolio margins are pretty much locked in, and the new investments, we can lock in our margins at the time we close.
I'd add to that, we have our off-balance sheet distribution network as well, and we can lean on that a little heavier if need be to take more things off balance sheet if we really had some kind of disconnect between funding costs and our investment markets, but we certainly don't expect that.
Ben, I would add to that, what we fundamentally look at is the economic rate of return on these assets. I'm perplexed why a 50 or 100 basis point move in interest rates threatens the viability of those assets. These assets are not so fragile that 50, 100 or 200 basis points is going to kill them.
That was going to be my question. Sorry to interrupt. What is that kind of threshold that you think about across the different asset classes? I have a bigger picture question for you guys too after that.
Well, I would say, the entire industry, renewable energy industry and energy efficiency industry, has operated successfully in higher interest rate environments than now, and they have done it by continually taking costs out of their systems. It's not easy. It's hard work. I have no doubt they're going to continue to do that. To me, it's perplexing that a couple 100 basis points rise in market rates, which we haven't seen, let's say it happens, that the viability of the entire industry goes away. I don't have a precise number to your specific question. Obviously, we're not betting against this industry. We think this industry has good ability to prosper in a higher and choppier interest rate environment.
Yeah, no, it's good context to remember just the history of that, so thank you. A question that you've gotten forever, maybe on competition, but you're not small anymore. You raised a lot of capital, and you're doing bigger deals, and it used to be that you were a niche player, and people didn't want to do small deals like this. Now where do you stand with that competition front? Every headline is, people want to pour money into the sector here. How do you guys stay nimble as well as have the growth?
Hey, good question. We have competition in every market, in every asset class. I still haven't seen anybody who's put their financial services offering together the way we have that can nimbly go with the same team from a grid-connected transaction to a behind-the-meter transaction. Our clients are doing both. You have some companies that are just doing wind and solar, and I'm sure we'll have more competition over time. We need a lot more capital in this industry to make a meaningful difference on climate change. That said, I'm hard-pressed to see where somebody's coming in with a better offering than we have right now. Our cost of capital has come down. Our price of capital has come down. I think we're extremely competitive.
At the end of the day, service does matter, knowledge of the industry matters, and our portfolio management business continues to be a very sticky aspect of client management.
Let me ask this way. Who would buy you if they were going to buy you?
Now, Ben, you know I'm not going to answer that.
All right. I had to try. All right. Thanks, guys.
Thanks, Ben.
The next question comes from Philip Shen with Roth Capital Partners. Please go ahead.
Hey, guys. Thanks for taking my questions.
Welcome.
In your prepared remarks. Hey, guys. Thanks. You talked about how the shortages that people are seeing out there, whether they be chip shortages or what have you, are not impacting your business yet. Was wondering if you might be able to elaborate on that more. As you mentioned, you're getting a lot of inbounds on this. There is the interest to hear and get more color on this. Specifically, when I've been in touch with EPCs recently, they're saying capacity through the whole system is very tight, whether it be EPC capacity or even truckers in the U.S. that drive blades and get materials from one point to another. Are you getting any sense that some of your investments and the timing that you might have expected earlier might be getting pushed out a little bit into 2022? Any color on this would be very helpful. Thanks.
Phil, I recently checked with a number of our clients on this very question. I think one of the themes is prices are going up a little bit. It's some of the risk of development that they've got, and we don't. They're basically getting the material they need. I won't say it's absolute and everybody's got everything just in time. Generally, that's not the thing that our clients seem to be worrying about. Maybe what they're worrying about are next year's projects. Looking at the supply chain for next year's transactions. That may be, but we're not seeing it in the business we think we're going to do in 2021.
Okay, thanks. That was my follow-up on that topic, what are they worrying about? Anything else you have in mind on that topic?
No, I think those are normal things for developers of these assets to worry about. What's the price and is there a margin in it? They're generally doing a good job with it, but definitely prices are going up in a variety of, whether it's labor or steel or copper or chips, obviously.
Yep. Aluminum, et cetera.
Yep.
Okay, great. Last quarter, you guys talked about it was too early to get a full understanding of the impact of the Texas events on your portfolio. I was wondering if you could give us an update on the situation. What's the risk? You may have a write-down at some point or pay any kind of settlement for power that wasn't supplied from your facilities. You highlight that 99% of your assets are performing, I wanted to see if you could share some more there. Thanks.
There's not too much update from what we said last quarter, Phil, in terms of the overall impact on the portfolio is going to be minor. There's no contingent items still hanging out there. There's various force majeure resolutions going on and payments in cash for power when the power couldn't be provided. As we said last quarter, the punchline of all that for us is some very minor reductions in the expected lifetime IRR of some of our investments. Very minor. That's the impact for us. It really hasn't changed from last quarter.
As we look across Texas and ERCOT, how many megawatts of projects are actually behind on payments to you guys? How much is actually late? If there were late payments, are they already caught up or is there any continuation of that potential threat?
There's no late payments to us. Again, we're supplying power and as we talked about last quarter, and some of the developers have talked about, we did have to make certain payments for the days we could not provide power, but nobody's late in a payment to us.
Great. Okay. That's really helpful. Then one last housekeeping question on compensation and benefits. I think it looks like it increased $5 million quarter-over-quarter. What drove this? Is this a one-time thing? Should we be modeling this level going forward?
It was driven by higher headcount. It was driven by a higher percentage of our compensation being paid in cash, which runs through distributable, whereas equity does not. There's also a bit of one time in there as well, which will not recur in the subsequent quarters.
We should have an increase in that line item, but maybe not as much as $5 million. Is that a fair way of putting it?
That's exactly right.
Okay, great. Thank you both.
Thanks, Phil.
Thank you.
The next question comes from Stephen Byrd with Morgan Stanley. Please go ahead.
Hey, thanks for taking my questions.
Hi, Stephen.
Hi, Steve.
Hi. Congrats on the scholarship announcement as well. That's fantastic. A lot's been addressed. I wanted to maybe just focus on energy efficiency a little bit further. Obviously you're bullish on the outlook. I was just curious, given the Biden administration's focus on a variety of things, but certainly energy efficiency is on the list. Is that bullishness reflective of what you expect there? Or is it possible we could see a further step change upward in terms of government demand beyond what you're seeing already in your bullish overview of where you see energy efficiency going?
Good question, Stephen. I think when we reflect on our pipeline that we're reporting as of 3/31, we didn't factor in a lot of new stuff. The way we build our pipeline, there's got to be a lot of granularity. It's very doubtful that, with a Inauguration in January, we would have seen deals happen and go to our pipeline. I think what we're talking about is just sort of normal course business. We're certainly very encouraged by the type of appointments the administration has made in the appropriate agencies and the experience these people have. They actually know how to turn the dials and push the levers of energy efficiency.
You haven't seen anything go up, but I would also caution against people always talk about energy efficiency as that low-hanging fruit, and that just means they've never picked grapes on a vine, because low-hanging fruit is always picked. It takes a long time to engineer these solutions. I think the one thing I would point to is in our comments was the industrial sector, which has always been a real challenge for the energy services business to be effective in. We're starting to see signs that the service providers are offering a really interesting value-add service to industrial customers and corporate customers that hit a lot of their sustainability goals, inclusive of on-premise energy efficiency.
Well, that's helpful. Yeah, it does seem like, as you say, it's not easy to get these projects done, but the trend does seem to be pretty clear, pretty favorable. That's helpful. I seem to ask you about legislation every quarter. I wanted to focus in a different way. I think we're constructive around the prospects for support for clean energy. One thing I haven't really focused on very much would be just tax rate impacts for you all if we did see a higher corporate tax rate. I wonder if you could just remind us how to think about the impacts to Hannon Armstrong if we did see a higher corporate tax rate.
Well, I guess there's two answers to that, the impact on Hannon Armstrong as an entity and the impact on our outlook for additional projects and investments. For us, of course, we're a REIT, we're not a taxpayer. It doesn't affect us. We do have taxable REIT subsidiaries, but we have enough in the way of tax planning strategies. We don't expect our taxable REIT subsidiaries to be taxpayers for the foreseeable future. Virtually no impact on us. On our investment outlook, it would potentially create more tax equity capacity, which would be certainly positive for the volume of transactions that could get done.
Yep. That could help in turn. That's been a limit to some extent, right, is tax equity capacity.
Right. Yes.
Okay. That's all I have. Thank you.
Thanks, Stephen.
Thanks, Stephen.
The next question comes from Julien Dumoulin-Smith with Bank of America. Please go ahead.
Hey, good afternoon to you.
Hi, Julien.
Hey. If I can just go back to ERCOT real quickly, just to understand that. Sounds like it was fairly immaterial in the quarter itself here, and really, as best I understand your response earlier, obviously you guys have more of a credit exposure here than necessarily an equity exposure. How do you think about that as an ongoing exposure? It sounds like whether it is counterparty issues or projects or otherwise, that seems relatively immaterial as well, to the extent to which that not everything is necessarily resolved thus far. Is that fair? I'm trying to rehash a little bit what you said a moment ago here, but I want to make sure I heard that right.
Talking about Texas?
Yes.
Yeah.
Julien, you are breaking up a little bit, but I think we got most of that. On Texas, again, to reiterate the ongoing exposure is very limited. Most of these situations have now been settled up, and for us, with very limited impact on our portfolio. There's still, as I mentioned, a few loose ends being tied up on various of the hedges and arrangements, but it's mostly behind us at this point.
Excellent. Thanks for that clarification. I just wanted to make sure I heard that right. The real question I had for you guys is, how do you think about the scaling and the cadence of the balance sheet through the course of this year? Specifically, obviously quarter on quarter here, not too much of a change in the balance sheet. How do you think about what this balance sheet looks like in size and composition by the end of this year? If you can speak to that a little bit more. Obviously, I'm seeing community solar see a little bit of a step-up here. What is that pie going to look like, if you will?
Based on the remarks, you would expect to see more grid-connected solar, which is a small slice of the pie. That's, as I said, one of the largest element in our grid-connected pipeline. Solar land is next, and wind. I would expect to see more grid-connected solar, and perhaps less wind added to the portfolio. The behind-the-meter assets, a lot of those are securitized and probably not added to the portfolio. Some will, of course, in the government sector and in the federal and state and local government, as well as the solar.
In terms of the level, I did say on the last call, judge us by our growth in the portfolio over the full year, not the quarter, and I would reiterate that. I think we will have a significantly larger portfolio, and that will be one of the key drivers of our earnings to hit our guidance.
Right. Yeah, hence the question, just quarter-over-quarter here. Any sense on securitization percentages, since that's how you transpose your growth into the portfolio?
Yeah. It remains as unpredictable to you as it is to us. It is when the transactions happen.
Okay. Fair enough. I got you. Thank you guys very much. Best of luck, and congrats again.
Thanks, Julien.
The next question comes from Greg Lewis with BTIG. Please go ahead.
Yeah. Thank you, and good afternoon. I wanted to touch a little bit on how the trend is of the ability to recycle cash. As we think about the ability for you guys to monetize some of your portfolio, is that at all interest rate sensitive from your customer side?
At all is sort of a tough threshold. I would say it's not particularly sensitive to interest rates. Most of the folks who are the buyers of our off-balance sheet transactions, I wouldn't say they're completely immune from interest rates, but less sensitive than, for instance, capital markets.
As we think about where we are today, would you say the appetite is as strong as it was, I don't know, pre-COVID, in terms of those opportunities to lay off existing assets to buyers?
It's extremely strong, as strong as pre-COVID, if not stronger.
Yeah, it's been proven. Sure.
We could even take more off balance sheet than we do to maintain, as we spoke about a moment ago, a nice size and growing balance sheet. We could even, if we so chose to do so, take even more off balance sheet. The appetite is quite large.
Okay, great. Thanks. That is all for me.
Thank you.
Thank you.
As a reminder, if you have a question, press star then one to be joined into the queue. The next question comes from Chris Souther with B. Riley. Please go ahead.
Hey, guys. Thanks for taking my question here. Just one quick one. As the grid-connected piece of the pipeline continued to go up, maybe you could just talk a little bit about the timeframe for the projects you're looking at originating there would be for funding. Some of the deals that you closed last year, it was funding through kind of 2022. Should we expect, if you're able to close some grid-connected deals this year, would it be a similar over the next year or two years type timeframe we'd be looking at before those would be added to the balance sheet? Just wanted to get a sense of how those opportunities are looking at this point.
It's a good question, Chris. We may not have all the information yet, but clearly there's a forward flow element to a lot of the grid-connected transactions we do. There's always generally going to be an upfront funding of some projects that have commercially matured and then a pipeline of future. How those lay out over the next few quarters, kind of hard for us to say at this point. What we do like is the number of programmatic platforms that we're developing start to create good diversity among the quarters. Not every company is going to hit the same set of projects in any one quarter. I think we'll start to see perhaps a bit smoother quarter-to-quarter additions to the portfolio.
Got it. No, that's very helpful. Looking at the various kind of solar pieces within your portfolio and pipeline, I just wanted to get a sense of where storage is starting to fit in there. I imagine an okay portion of the residential solar is starting to include it, but maybe just kind of walk through where storage is starting to fit within the portfolio. If you could break out a number, kind of taking apart the different solar areas that you're looking at between resi, utility, and community there.
I think they all have storage. I think community solar is much more site-specific as to whether storage is valued. I know Massachusetts is one market for community solar that puts a price on capacity, and so there's value to add storage. Other markets are less interesting for community solar storage. Resi and C&I, generally, we can echo what the SunPower of the world say, but the uptake is pretty strong.
Got it. Okay. No, that's helpful to think about. Thanks.
Thanks, Chris.
This concludes our question- and- answer session, which also concludes today's conference call. Thank you for attending today's presentation. You may now disconnect.