“Decades of rules and regulations on how to implement the National Environmental Policy Act [“NEPA”] are set to be thrown out by the Trump administration in the coming months in an effort to lift burdensome permitting hurdles.”
That’s the first line of a Washington Examiner article yesterday. And the next two lines go like this:
For over 50 years, NEPA has required federal agencies to study the environmental effects of infrastructure projects, including transmission lines, highways, pipelines, and more – all of which require federal permits.
While supporters of the law have said it is key to avoiding the endangerment of public lands and wildlife as well as curbing climate change, critics have accused NEPA of acting as red tape, slowing domestic infrastructure development through excessive litigation.
Either way you look at it, the end results look like they’ll be the same: drastically slashed environmental regulations. Though this shouldn’t surprise anyone. We all knew Trump’s positions well before he took office.
As I remember, the words “drill, baby, drill” left his lips more than once. He’s made it very clear that he’s all for expanding the oil, natural gas, and coal industries. And within days of taking office, he pulled the U.S. out of the Paris climate agreement as well.
He even deliberately and unmistakably targeted environmental activism in his inaugural speech, saying:
With my actions today, we will end the Green New Deal. And we will revoke the electric vehicle mandate, saving our auto industry and keeping my sacred pledge to our great American autoworkers.
It’s a very new day compared to when the Biden administration was in power. There will be no more government funding for net-zero emissions activities, the goal of eliminating fossil fuels by 2050.
That’s prompted investors to sell many of the green energy names. The iShares Global Clean Energy Fund (ICLN) is down about 7% since the election.
But a few babies are being thrown out with the bathwater. And one of them is green-energy player HA Sustainable Infrastructure Capital (HASI), which is in an excellent position to grow.
The Bigger Picture on HASI
If you don’t know what HASI is, join the club. It’s a niche company, to be sure, describing itself as:
An investor in sustainable infrastructure assets advancing the energy transition. With approximately $14 billion in managed assets, our investments are diversified across multiple asset classes, including utility-scale solar, onshore wind, and storage; distributed solar and storage; and energy efficiency.
And here’s its “Investment Strategy”:
Our vision is that every investment should improve our climate future, which is why we require that all prospective investments are neutral to negative on incremental carbon emissions or have some other tangible environmental benefit, such as reducing water consumption.
In which case, it seems like it’s in the running for “Worst Investment Pick Possible” right now. Right?
At first glance, yup! Pretty much.
However, I believe some companies are worth more than a quick look. And that’s especially true of one like HASI, which I’ve been following for the last 10 years.
Because it rented out land to energy-efficient firms, it existed as a real estate investment trust (“REIT”) for a while. But while that setup gave it some very nice tax benefits, it also generated a lot of confusion.
So HASI is back to being a “regular” C-corporation again.
Judging by its expanding $5.5 billion pipeline through this year – complete with around 150 opportunities through 30 partners – I’d say it’s doing just fine with the switch.
In fact, HASI is doing better than ever. It ended 2024 with more than $1.5 billion liquidity and a debt-to-equity ratio of 1.8 times. Plus, this non-REIT has ratings from Fitch (BB-), Moody’s (Baa3), and S&P (BB+).
Donald Trump or no Donald Trump, HASI isn’t on the verge of any obvious collapses in 2025. In fact, I think there’s a significant case to be made for it thriving from here.
HASI Is Trading at a Current Discount I Can’t Ignore
Refuting the first-glance conclusion against HASI requires a deeper dive into the green-energy boogeyman himself, President Trump. In which case, I want to return to his inaugural speech.
You see, directly after dismissing the Green New Deal and Biden’s electric-vehicle mandate, he said this: “In other words, you’ll be able to buy the car of your choice.”
So this isn’t a complete reversal of how things have been. It just means the government will stop forcing green-energy acceptance, which could actually work out nicely for HASI.
The company began in the 1980s, well before the eco-warrior mentality went mainstream. It knows how to operate in a free market where consumers get to decide for themselves. Therefore, while other green-energy entities might implode now that nobody will hold their hands…
HASI could actually benefit from a dwindling pool of competition.
In another sign of resiliency and rolling with the times, HASI has been moving into the data-center space. That and community solar partnership programs with major corporate players such as Microsoft (MSFT) and Alphabet (GOOG).
For all those reasons, HASI Chief Client Officer Susan Nickey recently said:
The fact is the U.S. will need renewables and storage to fulfill the new administration’s commitment to economic growth, national security, and lower electricity prices. And the near-term pipeline for new generating capacity remains dominated by solar and storage given their relative cost and speed to deploy in addition to strong corporate and state commitment to clean energy.”
HASI is clearly not worried about any bogeymen. And neither am I – especially considering how cheap it’s trading.
As you can see above, HASI is far out of favor. Normally trading at a valuation of around 19 times, it’s sitting at about 11.3 times today. Its dividend, meanwhile, is at an attractive 6% that’s still well-covered by a 50% payout ratio.
All told, it could return 40% annually over the next two years, including dividend returns. For interested investors, HASI deserves a close look even under Trump’s agenda.
Regards,
Brad Thomas
Editor, Wide Moat Daily
MAILBAG
What other companies do you think deserve a closer look under Trump’s agenda? Write us at [email protected].