© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon, and welcome to Hannon Armstrong's Conference Call on its Q3 2019 Financial Results. Management will be utilizing a slide presentation for this call, which is available now for download on the Investor Relations page at investors.hannonarmstrong.com. Today's call is being recorded, and we have allocated 30 minutes for prepared remarks and question-and-answer. All participants will be in a listen-only mode. [Operator Instructions]
At this time, I'd like to turn the conference call over to Chad Reed, Vice President, Investor Relations and ESGS for the Company. Please go ahead, sir.
Thank you, operator. Good afternoon, everyone, and welcome. Earlier this afternoon, Hannon Armstrong distributed a press release detailing our third quarter 2019 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 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 Jeffrey Eckel, the Company's Chairman and CEO; Jeffrey Lipson, our CFO.
With that, I'd like to turn the call over to Jeff, who will begin on Slide 3. Jeff?
Thanks, Chad, and good afternoon, everyone. Today we're announcing GAAP earnings of $0.13 per share, and core earnings of $0.38 per share. GAAP earnings decreased due to a one time provision that will be discussed later in the call.
In the third quarter, we realized year-over-year growth in core earnings per share of 6% and growth in core net investment income of 37%. This growth was driven by an improvement of 130 basis points in our portfolio yield, which now stands of 7.7% and a lower leverage position now one and a half times debt-to-equity. We closed $287 million of transactions in the third quarter, more than 90% of which we intend to fund on balance sheet. Year-to-date, we've closed $810 million of transactions and remain well on track to close over a $1 billion of investments for the full year.
In addition, we continue to improve our access to capital and our liquidity position by following up with $150 million add on to our previously discussed $350 million inaugural corporate unsecured green bond. We also reiterate our three year guidance through 2020 of 2% to 6% growth in core earnings per share from the 2017 base. And as we do every quarter, and for every investment, we calculate the carbon reductions from our investments. The carbon count for our third quarter investment is 0.35, offsetting over 96,000 metric tons of annual carbon emissions.
Turning the Slide 4, as a reminder, we source our pipeline from the premier engineering development and operating companies driving the energy system of the future. We endeavor to do this on a programmatic basis in each of the Behind the Meter, sustainable infrastructure and Grid Connected markets. Across these markets, we invest in approximately 10 asset classes that provide a highly diversified and uncorrelated flow of investment opportunities. Given our investments year-to-date and our view on fourth quarter opportunities, we remained comfortable we will be able to meet or exceed our $1 billion annual target.
As of the end of the third quarter, our 12 months pipeline remained strong and more than 2.5 billion with Behind the Meter or BTM opportunities totaling 76% of this opportunity set. The weighting of our pipeline toward BTM opportunities is reflective of our belief that the future of energy will be decentralized, digitalized and decarbonized. The majority of the BTM pipeline remains governmental energy efficiency and resiliency opportunities, the bulk of which are securitized. With regard to other BTM asset classes, the commercial and industrial portion of our pipeline continues to grow, as several recent announcements have indicated including those in community solar, C&I solar and C&I energy efficiency opportunities with new clients, as well as a safe harbor facility for Sun power C&I business, all of which demonstrate the potential of programmatic relationships.
The residential solar market continues to expand and makes up a growing but still modest portion of our pipeline. I'd also note how quickly resi solar, once storage is added has gone from nice to have home addition to a need to have home resiliency system, due to the ongoing power outages associated with catastrophic wildfires in California.
Approximately 13% of our pipeline consists of sustainable infrastructure assets. This diverse set of opportunities includes climate change, adaptation, and resiliency investments. The Grid Connected market remains competitive to the amount of capital chasing deals driving down returns. As a result, our opportunities remain weighted towards utility scale solar land investments, with existing clients for whom we offer an accretive slice of capital to help them compete for new business. As landlord with a senior position the cash flows, we're also largely protected from short term energy price fluctuations and counterparty credit risk like the PG&E bankruptcy.
To summarize this page, with a long term investment horizon and a broad platform focused on climate change solutions, we will continue to execute on the investment opportunities in the given quarter that provide the best risk adjusted returns.
Turning to Slide 5, we provide a view into our managed assets and our portfolio. Since the end of Q2, our portfolio has grown from 1.8 billion to 1.9 billion as rotation of lower yielding assets off balance sheets is more than offset by additions of higher yielding assets to the balance sheet. BTM assets comprised 57% of our portfolio, with Grid Connected and sustainable infrastructure assets making up the remainder at 36% and 7% respectively.
In total, we have 195 investments with a $9 million average investment size, which speaks to the diversity of our portfolio. As we previously noted, we treat some portfolios of assets as a single investment. So the total number of physical assets and obligors is substantially larger and thus diversity is even more robust than these figures suggest. While residential solar has become a larger portion of our portfolio because of the attractive risk adjusted returns, we have several decades of experience in syndicating large positions and are focused on ensuring our portfolio retains the appropriate level of diversity and return to support our continued growth.
I'll now turn it over Jeff L to detail our financial performance.
Thanks, Jeff, and good afternoon. Turning to Slide 6, we revised our presentations to emphasize that our earnings are broadly the result of two sources of revenue. Net investment income from our balance sheet portfolio, and gain on sale and fees primarily resulting from the securitization and servicing of assets that we originally.
GAAP earnings of 9.1 million or $0.13 per diluted share this quarter, were down from 16.6 million and $0.30 per diluted share in the same quarter last year. This decrease was primarily the result of an $8 million provision for losses related to lease royalty receivables, which were initially placed on nonaccrual status in 2017. This provision was recorded due to a recent court ruling in the litigation matter related to these projects. The underlying assets are part of a previously disclosed land portfolio acquisition from 2014 which in aggregate remains a very successful investment. I'd also note that we now have zero assets on nonaccrual status, and our cumulative losses since 2012 are approximately 30 basis points.
One further item related to GAAP results is that GAAP earnings do not include the full effect of the cash we receive from our equity method investments.
Year-to-date, we've collected 75 million in cash from our equity method investments, which include both the core earnings component of 29 million, and a return of investment of 46 million. Core earnings in the third quarter increased 29% to 25.2 million or $0.38 per share, as compared to 19.6 million or $0.36 per share in the same quarter last year. This is primarily due to a 37% increase in core net investment income to 19.7 million as compared to 14.4 million in the same quarter last year. Gain on sale and fees were up 6% compared to the same quarter last year.
Turning to Slide 7, we demonstrate that growth in net investment income is driven by two factors, increasing portfolio yield and lower leverage. As we've discussed for the last few quarters, we've been rotating lower yielding highly leveraged assets off of our balance sheets and replacing them with higher yielding assets. The lower leverage has reduced our interest expense. Therefore in 2019, we are currently on track to continue the upward trend in core net investment income we've experienced since 2015. Given the 14 year average life of our assets, we are well positioned for this trend to continue.
Turning to Slide 8, we want to highlight continued recent success we've had in adding more flexibility and diversity to our funding platform. Following our inaugural issuance in July of 350 million of five year unsecured green bonds at 5.25%. In September, we issued a $150 million add on to these notes with the yield to maturity of 4.13%. Note that both offerings were oversubscribed, enabling an aggregate $100 million upsize to the original transaction launch sizes. These transactions demonstrate our access to the deep, stable and liquid corporate bond market, which when coupled with our established access to the secured debt and equity markets, positions as well to consistently and flexibly fund our growth going forward.
Note that we have no material recourse debt maturities until 2023 when our convertible bonds mature. This maturity profile, combined with the fact that the non-recourse debt on our underlying assets largely amortizes within the contracted terms of the assets, and that approximately 97% of all of our debt is at fixed rates, demonstrate that we are largely inoculated against near term refinance risk and interest rate movements. The 97% fixed rate debt ratio is above our previously disclosed target range of 60% to 85%. This is primarily the result of utilizing the proceeds of unsecured debt offerings to temporarily reduce our credit facility bounce. As the credit facilities are the primary source of our floating rate debt.
Turning to Slide 9, the credit quality of our portfolio remains strong as depicted in the pie chart on the upper 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 are high credit quality consumers in equity method investments, which by their nature do not lend themselves to simple obligors credit analysis, we are typically senior or preferred in the investment structure.
As I turn the call back over to Jeff, I just want to give a quick shout out to the Washington Nationals and wish some success in Game 7 of the World Series tonight, as many of us are not fans and we're very excited about the game.
And with that, I'll turn back over to Jeff.
Thanks, Jeff. Turning to Slide 10, we believe that investors broadly are seeking opportunities that offer a few common characteristics. First, they're looking to capture yield in an environment with historically low interest rates. Second, they're looking for recession resilient companies that can demonstrate sustainable growth in a late stage economy. And finally, they're looking for companies strongly committed to ESG and environmental leadership.
With a demonstrated history of providing a total return, comprised of a dividend yield plus growth, Hannon Armstrong presents an attractive opportunity for yield hungry investors. Further through our flexible and diversified funding platform, our decades long history of sourcing accretive investment opportunities, and our many recession resilient government utility and other counterparties, we have demonstrated sustainable growth across all terms of the business cycle. And with the mission of funding climate change solutions, and industry leading ESG practices and disclosures, we offer a very compelling opportunity for the ESG focused investor.
Thank you for joining us today. Operator, please open the line for few questions.
Thank you. [Operator Instructions] And we'll take our first question today from Noah Kaye with Oppenheimer. Please go ahead.
Thanks. Good afternoon. Maybe we can start with a question on the investment by the SunStrong JV for 200 megawatts and safe harbor panels under the ITC. Seems like there could be more runway here just looking at, you know, forecasts for distributed solar installations over the next couple of years. So can you comment on how you view this growth opportunity over the short and medium term as the ITC ramps down?
Hi, Noah. I think we've commented in prior calls that as the ITC ramps down, the investment opportunity for Hannon Armstrong goes up as tax equity is replaced with cash equity. So that's the big picture. What we're talking about with the safe harbor facility is an increased opportunity for Hannon in this transition period, which, you know, we certainly see as an opportunity. And we certainly see the overall growth in distributed solar as being very constructive for our business, as well some powers and our other solar clients. So not sure what more to add other than I think it's a good opportunity for Hannon and our clients are the ones that we think are going to be the winners in this business.
Okay. Maybe on the investment in GridPoint, can you talk about what attracted you to that platform? You know why you believe the energy management is a service approach makes sense for the target market of mid-sized buildings? Maybe what kind of pipeline or deal opportunities this partnership brings you?
You know first of all, it's not an investment in GridPoint, it's an investment in the assets, which is consistent with our general business practices of not taking company, but investing in the assets. Energy as a service grown and that's an example of digitalization of the energy systems of the future. We've known GridPoint for 20 years. We tried to sell them something in probably 20 years ago, and it took a while. But we looked at – you know, really like what they're doing now. They're very granular transactions, very, very small investments, and they've been able to aggregate through corporate clients, a series of very profitable, very carbon impactful transactions. When I say very profitable, very cost effective for the end user, in terms of the limited amount of capital that needs to be invested to gain a significant amount of savings. It's – you know, we look at it as an evolution of the industry. We certainly think PACE is an opportunity to get at some of this market. But frankly, the GridPoint actual investments are so much smaller than you would want to do for a PACE transaction. This is really another way to access the energy savings opportunities in the commercial sector.
Okay. And maybe as a follow-up here. You know, you mentioned the partnership, the PACE opportunity and you partnered with companies there for now, the energy management as a service approach, is so seems like the C&I market is very under penetrated is an area of opportunity and higher yield potential for you. So I guess, you know, can you talk about reasons to think that commercial building efficiency can start to become more material for the company? Do you have any targets you can share with respect to growth or any timetables for growth for the segment?
Good question. You know the C&I is the market is what 20% of U.S. greenhouse gas emissions. So it's clearly an interesting market and we think it's one of the more profitable market. That said, it's historically been quite resistant to these kinds of services. We still think PACE is a terrific solution. And when we have talked about PACE or some other new markets, we generally talk about them on calls when we think that can be about $100 million or more of annual investment. So we still think that's the case. I would say energy as a service is early days, but it seems quite promising. You know, the problem with small transactions is takes a lot of them to make a meaningful difference in anybody's financials. But you got to start somewhere and we like where we are with GridPoint.
Okay. Thanks very much for the color. And of course good luck to your nets tonight, it should be good game.
Thanks Noah.
Our next question today comes from Philip Shen with ROTH Capital Partners. Please go ahead.
Hey guys, thanks for the questions. For the first one, would love to explore the Empower Energies partnership. When do you expect assets to be added to the balance sheet? Can you talk about the pipeline and perhaps give some examples of the types of projects, I know it's C&I, municipal university, but what's near term in the docket in terms of what you guys might be able to add to the balance sheet.
And similar to the concept on GridPoint, we really are focused on financing the assets that Empower is developing and engineering and operating. You know, they've done a good job of developing assets. They do them on a contract basis as well as a finance basis. And we just have a great deal of comfort with the management team. It's one of the – we're excited to have a new origination platform with them. This is a market that is exploding I think nationally, and we've struggled in the past to figure out how to participate. And I think we now have a model with Empower that will allow us to get to scale. As you know, again, a consistent theme and all of our assets, no one transaction, no one client is all that big. So while we're excited about Empower and GridPoint. I don't think either of these bend the curve materially, but it certainly gets us into a market that we're attracted to. And we think has good risk adjusted returns.
Thanks, Jeff. You know as a follow-up there, and you would expect the average deal size to be and you mentioned just now that you've struggled in the past to get into this market. What's differentiate about this model? What did you guys do to crack the code?
It's actually more what Empower of the world are doing. And you know, there are a lot of companies they compete with. But they've started to focus on it. And like every business, it takes a while. And I think there are a number of companies that have figured out how to work with corporate clients and do things on a programmatic basis with their clients. And then naturally, our programmatic finance is a pretty good fit. So I don't think we did anything particularly innovative other than just stay very persistent on the market. We knew we won't be there. And you talk to a lot of companies and try to find the ones that match up with your – one with our capital, but also culturally, we think the Empower team is a great fit for us.
Okay. Shifting over to resi solar, you're at 29% of your portfolio being resi, last quarter was 22%. You know, this is – it's growing fast as a percentage of your overall mix. At this rate, at some point, you're going to get to a majority of your asset base being in resi solar. What does this look like by year end 20 and how much is too much or do you just keep on adding?
Well, I think part of the reasons we added some comments on the pipeline and that resi solar as well as growing is relatively small piece of the pipeline is to address that. You know, we love where we are. Can we do more? Sure. Will it become a majority of our balance sheet? I think that is highly unlikely.
Okay, great. And then staying with the solar theme, the real estate line item has been pretty flat for the past couple years. What's the outlook for solar real estate for utility scale solar? And do you expect any opportunities near term to add real estate to the balance sheet?
It's a good question, Phil. I think a couple years ago, I was thinking that run of utility scale solar was pretty much over. That's just not the case. Yeah, I think we see a pretty consistent flow of business. Again, it's kind of lumpy. If that's all we did, it would a lousy business, but as a – one of our asset classes, we think it's good value for us good, very much like the risk. And the utility scale guys are doing a terrific job of developing great projects. So, we do expect to see more land in the portfolio.
Okay, thanks, Jeff. I'll pass it on.
Thank you, Phil.
Our next question today comes from Julien Dumoulin-Smith with Bank of America. Please go ahead.
Hey, this is Anya filling in for Julian.
Hey, Anya.
Hey. So I guess in terms of the pipeline overall, maybe first, could you discuss your thoughts around asset level growth past the roughly 2 billion that you've had historically? And then is there any potential for acceleration from the 2% to 6% EPS growth target you've had?
So Anya, we've had a history of talking about our pipeline. I think we started out with a 1.5 billion at the IPO and then 2 billion and then more than 2 billion and now more than 2.5 billion. And the reason is, if we're doing a 1 billion or a 1.2 billion a year, you know, that's 2X coverage, more than 2X coverage of what it is we're proposing to invest. We certainly believe carrying a pipeline that is, at least that size is sufficient for us to continue to hit our investment targets and to continue to grow earnings. Can the pipeline be bigger? Sure, but it's enough. And what we're particularly focused on, we don't want to be judged on the pipeline to us. That's a second order metric. And you can – there's a lot less discipline and talking about pipelines, lot less discipline required to talk about pipeline then there is to talk about actual earnings and investment. So, we certainly think the future of energy will be our kind of assets behind the meter. And we certainly expect that to grow. With respect to earnings, you know, we'll address earnings in the future, but we're comfortable reiterating guidance at 2% to 6% growth.
And Anya, the portion of your question that addressed balance sheet growth, keep in mind in the prepared remarks, I think we said at least two or three times, we made reference to the balance sheet rotation we've been going through. So although we've been closing, you know, large volume of balance sheet transactions, we've also been selling a decent amount to optimize, so that's where you've not seen as robust balance sheet growth as we go through this rotation.
Okay, thanks.
So growing the balance sheet itself – net interest income is the goal.
Correct.
Thanks a lot. And on portfolio credit quality, how do you think of the non-IG portion, what would be a reasonable range going forward? Because it looks like the IG portion, if I'm reading this correctly, it has declined to slightly under 50% as of 3Q and it was maybe around 60% a couple quarters ago?
So I think we've in the prepared remarks, try to migrate away from that being the primary metric in terms of IG and non-IG as it relates to the entire portfolio because, you know, as we show in the top of Page 9, we have two large components of the portfolio that really don't even lend themselves to this notion of being investment grade or non-investment grade, you know, a big portion in consumer obligors are essentially, you know, the off-takers. And, you know, they're not certainly going to be investment grade either individually or collectively. And likewise, for the equity method investments, we're not getting investment grade rating. So, we are trying to steer away from that being the primary metric. We're very, very comfortable with the level of credit quality in the portfolio and will continue to describe the portfolio in detail. But this notion of investment grade, non-investment grade, I think has become a little less meaningful over time in describing credit risk in the portfolio.
Alright, thanks a lot. And last question from my end. Could you talk more about the prospects for community solar? How big of a market can it be? What kind of returns could you see?
I think I just heard a statistic that rooftop resi solar that have max potential something like 10% or 15%, just because of roof orientation and shading and things like that, which implies a much bigger opportunity for community solar than that's we were thinking about a couple years ago. So we have announced a transaction in committed solar and continue to think that's a pretty interesting model to expand the solar market with some of the benefits of the – residential market with some of the scale benefits of utility scale solar. You know, it's up to our clients to go commercialize those and develop those projects and make them investable. And I think when we talked to them, they're pretty enthusiastic about the possibilities.
Okay, thanks. And could you talk more about how meaningful it could be for your own portfolio in terms of returns and size of the portfolio?
Not really. I mean, we don't really talk about anyone asset class, because actually, it would be factual, not anyone asset classes driving the results. But we like, you know – we use the metaphor of 10 cylinder engine and with our 10 asset classes. You know, this is potentially an interesting new asset class that could be $100 million of investment a year. It's starting to be more meaningful than I particularly had anticipated today.
Okay. Thanks a lot.
Thanks Anya.
Our next question comes from Mark Strouse with JPMorgan. Please go ahead, sir.
Yeah, good afternoon. Thank you very much for taking our questions. So most of them had been answered by now, but kind of high level, given the change in rates since the last time we spoke, just open for an update on how we should think about the mix of securitizations going forward? And then kind of on a similar tone, I mean, just the global search for yield, just wondering if there's been any material change that you've noticed in your competitive landscape? Thanks, Jeff.
Sure, Mark. So on the first question, it's not necessarily the absolute level of rates or even the slope of the yield curve that drives the level of securitization, it tends much more to be the type of asset that we originate. So certain of our assets like energy efficiency, we tend to securitize and many of the other asset classes, like a resi solar or solar land, we tend to keep on balance sheet. So that decision tends not to be driven by absolute level of interest rates. And most of the – or let's put it this way, the energy efficiency business, as we've noted many times tends to be monthly. So you know, when that – when we have quarters where we close a large volume of those transactions, you'll see securitization percentage go up. And in a quarter like both second and third quarter of this year, where we didn't do too many of those deals, you'll see securitization percentage go down. So that's the more appropriate way to think about it.
And then the second question, I'll let Jeff answer.
I was so absorbed with your answer, I've forgotten the second question. Global search for yield, yeah. It persists and, you know, our ability to continue to adapt our business model to access investors who are looking for that or participants in that global search for yield. That just means several asset classes can be securitized, rather than – and profitably securitized rather than put on the balance sheet which from our client’s standpoint, they don't really care how we do it as long as we have the capital. And so we're seeing better opportunities to take things off the balance sheet. But fundamentally, you know, with an average investment size of $9 million, it's really hard for some of these global players to actually compete on a $9 million transaction. That's where I think many of them look at us as an opportunity to aggregate those assets using our balance sheet or otherwise and partner with those players rather than necessarily compete with them. That's what we talked about, you know, the Grid Connected, particularly the wind projects, and the utility scale solar. Those are not the areas we're choosing to play in for precisely that reason. There is an abundance of capital willing to take large transaction sizes and they're good bids for the developers of those projects. That's just not our business.
Got it. Okay, very helpful. Thank you both.
Thanks, Mark.
Our next question comes from Chris Souther with Cowen. Please go ahead.
Hey, thanks for taking my question. I want to go back to the new JV with SunPower for safe harboring. Could you talk a little bit about how that structure be, you know, similar different to the SunStrong JV, just given it seems like become a shorter timeframe, kind of just during that transition period versus a longer term. You know, this can be similar where you guys have that along with that and there's kind of a senior lender and all that kind of stuff. How does that going to work?
Well, I think it's a little bit of apples and oranges, some strong transaction is a true JV that's invested in a series of underlying transactions to finance many of these portfolios of lease receivables whereas the safe harboring facility is more of a transactions than a joint venture to capture these ITCs and to your point will run off quickly. So there's not – they're really two quite different transactions, it's quite being the same client.
Okay, got it. And then did that transaction occur in the third quarter or is that fourth quarter that's kind of ramping up here?
It closed in the third quarter.
Okay. And then just talking about the, you know, 10 or so 10 plus kind of end markets. Could you talk a little bit about where else you're seeing strength beyond kind of a solar and kind of where the other markets are sitting at this point?
We continue to see good flow in the governmental efficiency business, particularly for resiliency into climate change. Those transactions are getting larger and lumpy. Didn't do any of this quarter, but the resiliency problem in the United States government didn't get fixed, either. So the transactions still persist. We've talked about the energy as a service in the C&I market. You know, that's maybe small dollars now, but it's certainly an area that we think can be the interesting. I've mentioned PACE, we continue to grow the PACE business. In the sustainable infrastructure markets, you know, again our episodic, they're pretty small in the pipeline, but they're developing as communities cope with and try to adapt to hundred year storms that happened more frequently, then perhaps they have in the past. And again, that takes time to develop, but it's not like the problem is getting fixed or the severity of the issue is going away. And again, it's really good to have 10 cylinders on its engine because they don't all hit in the same quarter. You know, the area that we haven't seen much activity and that we've talked about for a number of quarters is wind. There's a lot of capital in the wind business. And we're not saying necessarily the risk adjusted returns we want there. So I think that's a survey.
Jeff, would you add anything you know the color?
No, I think you covered.
Excellent. And just the last one. I wanted to get an idea of where we are within the active management we've seen over the last couple of quarters. Obviously, the second quarter was a big move, but there is still some moves here. You know, looking at the end of the second quarter, about 400 million of receivables and investments that are below 5%. You know, is that going to continue to come down here? Or, you know, just really, opportunistically, that you guys are looking at that. Could you provide a little color there?
Sure. So to your point, what we've been calling the rotation was larger in the second quarter than third quarter. I would characterize our point in the process there has not being complete yet. So I think there are – do remain some assets on our balance sheet that we may rotate out of. And so don't be surprised to see that. But to your point...
Probably would have been logical for us to do the more attractive ones first. So probably some diminishing marginal returns to future rotation. Sorry to interrupt you, but.
No, no, I totally agree with that. And Chris, yeah, I was just going to say to your point about being opportunistic, it certainly is. We're not aggressively marketing assets, I would characterize it more as opportunistically taking advantage of opportunities to at times rotate out of some of these low yielding assets, is the way to think about it. But that is likely not complete yet.
Okay, and good luck tonight. Make sure you send Bryce Harper ring [ph] if you guys win.
Thank you.
Thank you, all.
And it appears there are no further questions in the queue at this time. So this will conclude today's call. We'd like to thank you so much for your participation and you may now disconnect.