Q3 2022 Altus Power Inc Earnings Call
Ladies and gentlemen, if you could please remain online the call will begin shortly ladies and gentlemen, if you could please remain online cohort shortly.
[music].
Good morning, and welcome to the Alkermes power third quarter 2022 conference call.
As a reminder, today's call is being recorded and participants are in a listen only mode.
A question and answer session will follow the formal presentation.
At this time for opening remarks, and introductions I would like to turn the call over to Chris Shelton The head of Investor Relations. Thank you.
Good morning, and welcome to all our investors and analysts.
Speaking on today's call are Gregg Felton co Chief Executive Officer, Industrial Weber, Chief Financial Officer.
In addition, co Chief Executive Officer, Lars and the ROE will be joining us for the Q&A.
This morning, we issued a press release and a presentation related to a matter matters being discussed on todays call.
You can access both the press release on the presentation on our website www Dot altice power Dot com in the investors section. This information will also be available on the SEC website.
As a reminder, our comments on this call may contain forward looking statements. These forward looking statements refer to future events, including Altice Power's future operations and financial performance.
When used on this call. The words aim believe expect intend may could will should plan project forecast seek anticipate goal objective target future outlook strategy vision and similar to <unk>.
Similar expressions as they relate to all this power as such identified forward looking statements.
These statements are subject to various risks and uncertainties and are based on certain assumptions and thus could cause actual results to differ materially from those predicted in our forward looking statements.
Altice tower assumes no obligation to update these statements in the future or if circumstances change for more information. We encourage you to review the risks uncertainties and other factors discussed in our SEC filings.
It could impact these forward looking statements specifically in our Form 10-K filed with the SEC on March 24, and our 10-Q filed with the SEC today.
During this call. We will also refer to adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP financial measures.
Our management team uses these non-GAAP financial measures to plan monitor and evaluate our financial performance and we believe the information may be useful to our investors.
These non-GAAP financial measures exclude certain items that should not be considered as a substitute for comparable GAAP financial measures.
Altus towers methods of computing. These non-GAAP financial measures may differ from similar non-GAAP financial measures used by other companies more detailed information about these measures and a reconciliation from GAAP to <unk>.
These non-GAAP financial measures is contained in both the press release on the presentation that we issued today.
Finally, our speakers today will reference our third quarter slide deck. During our prepared remarks, we are providing this information to assist you in understanding certain of the financial information that we will be discussing today and with that I'm pleased to turn the call over to Gregg Felton Co Chief Executive Officer of office Tower.
Thanks, Chris and welcome to our investors and analysts.
With just six weeks until the end of 2022, we are incredibly excited to be reporting the most profitable quarter in the history of Altus power and also to report that in spite of the challenges that our industry in the broader markets are experiencing we are finishing year exactly where we envisioned in terms of.
Our annualized recurring revenue and cash flow.
Our industry is experiencing secular tailwind that we believe will support uniquely attractive long term growth and altice powers incredibly well designed to thrive notwithstanding the supply chain headwinds and more recent tightening of capital availability.
With this backdrop, let me address our updated expectations for 2022 adjusted EBITDA.
As described in our release, we currently expect our adjusted EBITDA will come in at or near the low end of our guidance. This reflects administrative delays that led to a later than anticipated closing of our 88 megawatt acquisition from D E Shaw renewable investments, which was initially.
We announced in September and closed this past Friday.
We were compensated for the delay in the form of a reduced purchase price in lieu of additional recorded EBITDA.
We're glad to report that these assets are now closed and have started contributing to our long term recurring revenue and cash flow.
Our underlying business has been executing well, which is why we are reiterating our expectation for full year adjusted EBITDA margins in the mid 50% range.
<unk> and I are proud of the culture, we're building at Altice tower, and we would like to applaud our dedicated employees each of whom is a key ingredient to our performance.
During 2022, our industry as with many others has faced numerous headwinds, including Covid related slowdowns supply chain delays and more recently tightening financial conditions.
As seasoned professionals, we deliberately built out this power in a way, which we expect will drive success, notwithstanding any external pressures of the cycle.
Please turn to slide three.
As I talk through what differentiates altice power.
First we chose the commercial scale segment of the market because our sector is more attractive unit economics than other market segments, and we benefit from long term contracted revenues.
Many of our customers currently representing a majority of our contracts prefer variable rate contracts, which arent common outside of our sector.
These contracts are providing a tailwind driven by upward pressure on utility rates.
Notably our customers are generally entities with investment grade profiles, which contracted by solar electricity from our commercial sized solar rays.
Altice power as the largest independent and vertically integrated company operating in the commercial scale segment of the solar market and the only public company focused specifically on this space.
Our customers include commercial municipal utility and community members, who.
Who are increasingly focused on decarbonising the grid and are attracted to <unk> power's ability to deliver clean electricity at a discount to their utility provider.
Second in this desirable segment of the market, we built a profitable business with annual recurring revenue and strong adjusted EBITDA margins and a model for profitable growth.
We've accomplished this by controlling our customer acquisition costs and limiting our corporate overhead.
And we've assembled strategic partners, who we believe offer us an unparalleled pipeline of potential customers.
We're now planning for next year and by virtue of our asset growth, we anticipate a significant increase in our recurring cash flow, which will support our platform growth, while allowing us to maintain our attractive profit margins.
Third I want to update you on our flexible access to capital, which has been enhanced by our position as a public company.
Our C&I segment consists predominantly of private developers with relatively higher cost of capital.
Please turn to slide four as I elaborate on this competitive advantage.
Our strategic partner with Blackstone allows us to efficiently access the securitization market to support our growth.
In addition to the Blackstone loan facility, we have access to the syndicated bank loan markets, which provide us with both competitively priced construction and term financing solutions.
In spite of the tighter financing environment. We are pleased to be further enhancing our liquidity by obtaining commitments on our first revolving credit facility, which we expect to be sized at up to $200 million with a term of five years.
If and when completed this syndicated facility would provide financial support for many of the largest U S banks and add to our financial flexibility and competitive advantage.
The revolving credit facility will be yet another tool in our arsenal available for general corporate purposes, including to finance, our working capital needs or support other short term financing requirements.
In summary, we believe we are well positioned to fund our growth through a combination of the cash on our balance sheet and our diverse sources of debt financing.
In addition, a huge differentiator for all of this is our cash flow generation, which serves as a valuable additional source of growth capital or.
Our profitable business model is particularly powerful in the current environment as we believe it offers us the flexibility to weather periods of financial market volatility without the need to access additional equity capital.
These three characteristics represent fundamental pillars of our business and we believe combine to provide ultra's power with a competitive moat that positions the company well to capitalize on the incredible growth, we're expecting over the coming years.
Now, let me dive into some updates on our business since our last call. These include details on our significant portfolio additions and update on our portfolio as of the end of the third quarter and the quarterly refresh of our pipeline.
Lastly, we'll hear financial highlights from our CFO Duston Webber before taking your questions.
Joining me on slide five as we review our recent developments.
During the quarter, we announced a definitive agreement to acquire approximately 97 megawatts of solar assets and the announced additions included a portfolio of approximately nine megawatts located in new Jersey in a bilateral transaction with a local developer which is closed and is now part of our operating portfolio.
The larger portfolio of approximately 88 megawatts with a commercial scale portfolio from D E Shaw renewable investments or desert for short.
This was another bilateral negotiation, which started with desert deciding to narrow its focus to utility scale solar.
Desert reviewed altice power as a natural counterparty.
Given our leading market position ability to transact efficiently and reputation for excellent customer service.
Both portfolios come with long term contracts in place and we will make all this power the clean energy provider for these new customer relationships with the potential to offer additional services like battery storage and electric vehicle charging.
Critically these additions as a whole meet our expectation of profitability for adjusted EBITDA margins in the mid <unk> range.
We're very excited to welcome these new customers to the Altice power platform.
Turning now to slide six our updated portfolio as of today, including this recent acquisition totals approximately 469 megawatts.
To match, our financial disclosures, our various portfolio statistics on this slide only include our assets as of September 30th.
Our updated portfolio now includes approximately 73% of our contracts, which are structured to escalate over time.
We are happy to provide our customers with various forms of contracts. So long as our portfolio provides the appropriate level of risk adjusted profitability, which is reflected in our cash flow margins.
We look forward to updating our disclosures for these and other additions on our year end call.
Let's now turn to our pipeline update on slide seven.
Starting with operating acquisitions, we've made substantial progress on a few of our targeted portfolios as reflected by the more than doubling of our in closing bucket.
For clarity this bucket now excludes the 97 megawatts of previously announced acquisitions and we are working to close these additional transactions in the coming months at prices, which we believe to be attractive, particularly in light of the backdrop of rising interest rates and tightening financial conditions.
Let's now review the progress on our development pipeline.
We continue to have success with client engagement and are originating new large portfolio customers through introductions by our strategic partners were.
We're pleased to report that some of our initial CBRE client introductions have resulted in engagements that are now making their way through our pipeline, including a few new commercial customers with $25 to 50 megawatt programs or projects each well.
While these relationships take longer to come to fruition as compared to asset sourced from our channel partners. They are precisely the scale of customers that fit our vision to scale our business profitably.
Turning to our projects under construction, we're encouraged to see more equipment being placed on commercial rooftops more modules being secured and inverters being installed at some of our sites, while construction timelines remain extended compared to our experience from previous years, we're looking forward to.
<unk> of many of these assets and adding them to our portfolio during 2023.
We are further adapting in a number of ways, including inventory equipment and filing for permits and interconnections earlier with the support of CBRE project management.
As a further update we have now secured equipment for development projects well into 2023 at this point and remain comfortable with our access to equipment and labor.
Before turning the call to Duston, let me reinforce one of the decisive drivers widening our competitive moat or.
Our unique origination strategy, which leverages, our partnerships with CBRE Blackstone and various channel partners together.
Together, our strategic partners own manage or have close relationships with our targeted customers, including both landlords and commercial or industrial tenants.
Slide eight describes the ocean of opportunities, which our partners represent specific to C&I.
All of these are available to us in a streamlined fashion and with limited sales and marketing expense.
We believe there is no coincidence that both Blackstone and CBRE chose to become significant investors in our company and share our excitement to decarbonize the C&I sector.
With that let me now hand, the call over to our CFO Duston Weber for additional financial highlights duston.
Thanks, Craig and thanks to all of you for tuning into the call. Please join me on slide nine to cover our financial highlights.
To summarize third quarter of 2022 was the most profitable in our company's history with respect to operating revenues and adjusted EBITDA.
We recorded a record revenues of $34 million, an increase of 51% over the third quarter of 2021, reflecting the growth of our portfolio over the last 12 months.
This revenue increase drove record adjusted EBITDA of $19 4 million, an increase of 57% over 2021, which results in an adjusted EBITDA margin of 64%.
Seasonality drives more of our revenues into the third quarter and 2022 is no exception.
We also benefited from rising power prices beginning to filter through our variable rate contracts.
Turning to our performance for the first nine months, we earned revenues of $74 4 million compared to $50 2 million for the same period in 2021.
48% increase.
Adjusted EBITDA amounted to $42 1 million compared to $28 1 million from the first nine months of 2021, a 49% year over year increase.
As with quarterly results our growth in both revenue and adjusted EBITDA were primarily driven by growth of our asset portfolio.
With our expanded adjusted EBITDA margins in the third quarter, we improved our year to date margin to 57%, which is in line with our expectations for the year and gives us confidence we can achieve our adjusted EBITDA margin goals for the remainder of the year.
I'd like to also comment on our GAAP net income for the third quarter, we recorded a loss of $97 million, which was primarily the result of a noncash loss of $102 million due to the mark to market of our redeemable warrants and alignment shares.
For the first nine months GAAP net income some to a loss of $14 9 million, which largely netted out gains on the same securities over the first half.
Third quarter was similarly, the most impactful in terms of carbon avoided as compared to carbon intensive utility power with almost 100000 metric tons of carbon avoided.
For the last 12 months solar generation from our projects have saved over 300000 metric tons of carbon dioxide or the equivalent of carbon consumed from using over 30 million gallons of gasoline.
We're proud that our business provides our customers with affordable power as compared to their utility rates, while also replacing their consumption of carbon intensive utility power.
On the right side of slide nine you can see we are building a track record of top line growth as well as adjusted EBITDA growth.
We expect this progression to yield that recurring cash flows, which we plan to reinvest into our business as.
As we plan for the future, we're putting our funding strategy in place, which we expect will minimize our cost of capital as well as shareholder dilution.
Our current growth plan calls for that tax equity cash on our balance sheet and also cash generated from operations, which can be reinvested into our business as Greg mentioned.
Moving to our balance sheet, we ended the quarter with total debt of $545 million as well as $291 million of cash.
These balances do not yet reflect the desert transaction, but we expect to provide you with pro forma financials in the coming weeks.
We remain highly focused on creating long term shareholder value and minimizing dilution to that end during third quarter. We took the first opportunity to redeem our public and private warrants at levels designed to minimize shareholder dilution.
In addition, we also chose to not issue primary shares in conjunction with Blackstone secondary sale of approximately 8 million shares of <unk> power stock in September .
As Greg mentioned, our cash generation offers us flexibility on timing when accessing.
Equity markets and our growth plan currently does not require any equity capital over the next 12 months.
Regarding the Blackstone secondary.
While we're sensitive to any of our shareholders, reducing their stakes, we believe resulting increase in our public float will ultimately result in better liquidity in our shares which has been a consistent consideration of both new and existing investors.
Blackstone was among the earliest investors and remains a significant shareholder and long term strategic partner.
In conclusion, we continue to execute our plan notwithstanding the market backdrop, we're excited to be well positioned to grow our platform in 2023.
Given our asset growth and associated increase in annual recurring revenue. We are looking forward to growing our team across all parts of our organization while at the same time, maintaining our adjusted EBITDA margins and targeted profitability.
I'll now turn the call back to Gregg for closing remarks.
Thanks, Justin as we approach the first anniversary as a public company next month. We appreciate all of the time, our investors and analysts have invested to understand what we believe is a truly unique investment proposition, we're creating here at altice power.
We continue to work daily to achieve the vision, we've shared with you over the past year with that we now welcome your questions.
Thank you we will now be conducting a question and answer session.
I would like to ask a question Keith.
And then one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
You made Scott.
If you would like to remove your question from the queue.
All participants using speaker equipment. It may be next to safety to pick up your handset pricing the star keys.
One moment, please while we poll for questions.
First question comes from Justin Clare from Roth Capital markets. Please proceed with your question Justin.
Yeah, Hi, guys. Thanks for taking my question.
Absolutely Jonathan.
So I guess first off here was wondering if you could just talk more about the progress that's being made on the assets that are in that pre construction and construction phase of the pipeline.
You mentioned you expect completion of many of these assets in 2023, but just wondering if you could give us a little bit more on the timing could some assets to be brought online this year.
And then if you could just talk through the cadence in 2023 should we expect things to be kind of balanced throughout the year or weighted earlier or later.
And then finally just.
Give us a sense for the hurdles that remain for these assets are their equipment needs for these assets or is it interconnection theres anything standout as a <unk>.
<unk>.
Sure. Thanks, a lot just for that question. This is lars.
Let me begin to answer.
As we stated in the prepared remarks, we're turning on assets that are coming out of the construction pipeline.
And some of those clients have begun to be served when solar electricity from all pissed that provides them with the compensation benefits and savings as.
As we work to gradually overcome and find ways around the challenges that we've talked about previously on permitting interconnections and in some cases component availability, we're pleased with the progress and getting more assets into and further along in the construction bucket.
The assets under construction buckets find themselves on the timeline that is some of them come online during the last couple of weeks of this year. Some others in early 2023 and still others further out next year.
Importantly, when we look at the combined buckets of ink construction and in contract negotiation in our development pipeline. We can begin to see how all of this is working towards its goal of having the most efficient version of the current platform.
Output of new construction assets of around 200 to 250 megawatts per year.
We're working diligently to reduce obstacles on the way there like you mentioned b. They extend the timelines are permits the lead time for switch gear deliveries as well as ensuring that we have the resources to get to this level of throughput both in the office and Stanford and on site, where construction is actually taking place.
Okay, Great I appreciate the color there.
And then it looks like.
You have about 200 megawatts of acquisitions in closing here, maybe a little bit more than that.
I was wondering if you could just give us a little bit of a better sense for timing there could some of those acquisitions closed this year or is it likely to be more next year.
Are there many different transactions within that category.
Close over time here or is this one or two large acquisitions.
And then if you could just speak more broadly about the environment you are seeing for acquisitions. There is a lot of things going on with.
Rising interest rates, but then also the IRA legislation how are you seeing the opportunity set here for for acquisitions.
Thanks, Justin for the question this is Greg.
I'll take that one so of course, each transaction has its own characteristics and complexity, but the transactions that are reflected in that closing bucket are expected to close within a matter of months.
In General we would say we continue to be a buyer of choice because of our frankly ability to embrace the complexity that some of these transactions require and our efficiency to transact and obviously, we're very proud of the desert acquisition that we executed and what you see in that pipeline, a 42% as you called out.
<unk>.
Or some combination of transactions, but certainly some larger ones.
We're far along in their process.
And I think from our perspective as it relates to the horizon. The backdrop that you asked about.
To some extent that's an opportunity for US right. We are set up incredibly well as it relates to our position in the market our reputation our access to financing and as you might expect we're mindful of the cost of capital going up and that is reflected in our required returns whether it be on and operate acquisition.
<unk> on a development asset.
Certainly our cost of capital is flowing through and influencing our return requirements, but that's true of everyone in the market and we continue to think we have a very strong position and that should lead to continued flow of opportunity over time.
Okay, Great and then just one more you mentioned financing here I was wondering if you could just speak more about the accessibility of financing both for new assets, but then also for acquisitions and whether you might look to refinance assets that you acquire.
Or if you are likely to look at assets that already have financing in place.
And then just you have this new credit facility here.
How should we think about your strategy in terms of financing assets in construction and then taking them through to longer term project financing.
Sure. So we're in a very desirable position in terms of having a diversity of different funding sources. So we've talked about the Blackstone facility that we have in place which is available for upsizing continued borrowing obviously the strategic relationship that we have with Blackstone.
Really provides us with a unique opportunity to continue to in a streamlined fashion accessed the securitization market. So that's certainly a first point secondly, I would say that we.
Have a broader opportunity in the context of the bank loan market.
In the Desert acquisition is an example of that where we will be accessing the bank loan market for the first time in a term funding formats syndicated term loan that is and.
And we have excellent access in that market and then finally, the revolver, which as we mentioned comes from a diversity of leading financial institutions as another source of funding. So all of these we think taken together should demonstrate to you that altice has the flexibility.
Frankly that is industry, leading in terms of having this opportunity to pick our spots and make a determination on a case by case basis, what is the best source of funding.
So that's I think how you ought to be thinking about it I would finally note.
Every asset that we acquire.
Or operationalize when it is a development asset has fixed rate funding associated with it. So we're locking in long term fixed rates on every asset that we own.
And of course, we're making those decisions.
Optimizing the financing on a case by case basis.
Okay, great. Thanks very much.
Thanks, Joe.
Thank you. The next question comes from Chris <unk> from B Riley. Please proceed with your question.
Hey, Thanks for taking my question here maybe.
Maybe just.
Talk a little bit more about the variable rate portion of the portfolio.
Could you talk about what the year over year rate among that group looks like for the third quarter. It looks like overall revenue per megawatt hour generated was up about 25%.
So just wanted to get a sense of what was driving that piece there.
Hey, Chris This is duston ill take that one.
So.
I don't know the exact number for you as to the.
Impact in Q3 from power price increases, but I will say that.
We did experience increases in along with seasonality they were definitely the two main drivers for our Q3 margins.
We have a diverse portfolio, we're now in 22 states.
The majority of those contracts sell power at a floating rate.
We have a preference for floating rate ppas because.
Not only do we make more money when rates go up but our customers also save more.
We think the structure is unique in our industry and creates powerful powerful alignment with our customers.
Got it okay. That's helpful. So maybe some of the kind of newer assets also had higher pricing is that kind of a good way to think about.
Just have some of that played out.
Yes, I think that Thats as I said like power prices generally we all know they are going up and we with our diverse portfolio when an individual asset or our contract will escalate.
There is some are real time some.
<unk> annually on a lag so.
I think it is broad based and.
The timing of which.
We'll definitely vary by asset.
And Chris This is Lars as a general matter.
When we sign up corporate customers or enterprises or communities.
Because our preferred contract structure is to sell clean electricity at a discounts call it 15% give or take against some avoidable cost our parent power tariffs that those customers buy power from their grid.
We tend to generally and gradually escalate during the time that we're constructing dot assets, because we are sort of to some extent floating with that power price.
And the customers are happy because the savings go up given that they have a fixed percentage of savings against that power price and of course, we feel very good.
As power prices in the market gradually come up so they're so does our revenue from each of those contracts.
Got it okay that makes sense.
Maybe just on the <unk> relationship I'm curious you mentioned they were looking to kind of exit that commercial space are there additional assets with them.
Were not included in kind of a.
Initial transaction and then maybe just a higher level talk about some of the IRR.
Youre looking at across the.
Different opportunities, how those are shaking out versus.
The higher cost of capital and it could be kind of the other place to focus.
Yes, I would say as it relates to <unk>, we had an excellent experience I think that feeling is mutual and so I think there is a very strong relationship that also fuels with E Shaw and vice versa.
As a consequence of that we hope that if there is future opportunity to work together that we will be able to find some opportunities too.
Two to create mutual value.
The reality is that they are focused on the utility scale segment of the market and we are focused on the commercial scale segment of the market and as we've talked about.
Before in the commercial scale segment of the market, particularly with all of the policy initiatives.
Initiatives.
A variety of ways to create incremental value on commercial scale assets.
Broadening relationships with those customers.
Adding additional.
Solar or adding storage or adding electric vehicle charging and we view this as a long term opportunity, where we will look to expand our relationships with customers whether doing more at a site or doing or engaging in more locations. So all of those I think play to our opportunity and frankly this was a small disposition.
Sure.
Sure, but a very attractive one for altus power and we'd say the returns and cash flow margins were consistent with our objectives.
Okay generally.
The market is kind of waking up to the higher cost of capital as far as the acquisition pipeline and kind of the new the new asset development.
I wanted to get a sense. If there was any lag in kind of the market kind of understanding this.
<unk> Corp, that's baked in.
It's a good question.
There's a number of different factors that ultimately influence how the market might behave we often find.
Hi.
A bit of a lag effect in terms of seller expectation relative to buyer recognition of what youre, describing in terms of higher cost of capital and that that dynamic causes us to just be selective right. We are.
<unk> for example, and you've heard us talk about the bilateral nature of our opportunity set.
<unk> transaction was bilateral what you see in the in closing bucket of our pipeline is bilateral we think the competitive processes are still plagued with that sort of historical view, meaning a lack of a reset of pricing and as a consequence, we have not been really present in many of those if any of those competitive pressures.
<unk>, but the bilateral ones.
Our sellers and buyers come together.
A sophisticated fashion and recognize the environment. We're operating in are reflective of what we're focused on.
No that's very helpful. I'll hop in the queue. Thanks, guys.
Thanks, Chris Thank you.
Thank you. The next question comes from Mark Strouse from Jpmorgan. Please proceed with your question Marc.
Yes. Good morning, excuse me. Thank you very much for taking my questions.
Good to see progress in your projects moving through different different stages towards closing just curious, though as the industry kind of weights specific guidelines from treasury regarding the IRR.
Just any color on how that's impacting your pipeline are you seeing projects kind of waiting for that or is that somehow being baked into your contract language.
Hey, Mark this is Lars thanks. Thanks for your question I'll try to answer that.
We're seeing clients lean in currently in our engagement process.
I think we've talked about before we are very focused on spending most of our time in origination on programmatic clients that have large portfolios.
We can sort of come up with standard form documents.
And procedures, and then see a greater velocity of ASIC construction with them as we sort of put those documents to good use we're noticing some of those clients leaning in but we think it's predominantly because of higher power prices.
And our sense that energy security has focused big operations in enterprises on both resiliency, but also to increase the pace of their shift towards clean electricity, while obviously remaining connected to the grid continuing to use natural gas etcetera, and so we think the effect.
That we are noticing in our origination discussions and client engagement is coming more from the price increases in energy security than they are for the moment at least from the IRS.
Okay, Yeah that makes sense. Thank you.
And then just one.
Slightly related question, just with a few more months under our belt now since the last call.
As we look to 2023.
I know you are still waiting on some some granularity from treasury, but as you look to 2023, just how we should think about from a high level kind of what the weighted average tax credit might be.
With all of the different potential adders and kind of what your pipeline looks like next year.
Sure I'll take that Mark this is Greg So I think from our perspective, there are a variety of different adders. As you know that are going to be available in 2023. The one that we've highlighted that as most.
Most interesting relative to our pipeline is the community solar at or associated with low and moderate income.
We have taken so we have a.
The diversity of projects that are in our pipeline that have been a focus for all of this power historically that happened to have the profile that the government is encouraging which is the.
The notion of having low and moderate income offtake that exist in our pipeline of New Jersey assets in Maryland assets in other locations as well.
And those adders or up to 20% of additional tax credits and so we think thats interesting theres, an adder as well associated with brownfield.
Building, frankly that at or it needs a little bit more guidance, but we are in the business historically of building on brownfields, it's a pretty desirable place to develop a new solar array. So we're kind of in a sweet spot. We think in terms of taking advantage of some of these additional sources of incentive that the government is providing but we <unk>.
Didn't get tried to quantify that on a portfolio basis other than to say that we're in the right spot and the final one of course would be the storage opportunity, where there's a 30% standalone tax credits now available for storage, which should mean that more assets should find the opportunity to have storage attachment as well.
Yes, Okay very helpful. Thank you.
Thank you thanks Mark.
Okay.
Thank you ladies and gentlemen, just another reminder, if you'd like to ask a question Keith I'll start and then.
The next question comes from James Lee.
Evercore ISI. Please go ahead with your question James.
Hey, good morning, guys.
Good morning <unk> area.
So I'm curious.
We're now.
I guess more than a few months into the enhanced CBRE relationship where youre going to use their construction teams on projects.
Hoping to get an update on how thats progressing whats youre seeing there.
There and so I think it is a huge competitive differentiator.
Would you be able to use them as necessary.
And kind of just curious.
And how that how that.
Situation is evolving.
Thanks, James This is Lars we completely agree with you.
And we don't think of this relationship and partnership is still not a sleeper issue.
Right, we think of it as front and center issue, which we.
Which comes about because one of the key differentiators is going to be <unk> ability to bring its intellectual property in designing and constructing solar and storage and fleet charging in basically every single market, where CBRE already exists and Seabury PJM group, where the project management group basically exist.
Everywhere.
They are in the inland Empire in Los Angeles, They are in Baltimore, Maryland, and Theyre in Paris, France, and so all of these locations.
Represent to some extent latent horsepower for us and what we're working on right now is to make sure that we develop an efficient process for tapping that horsepower.
That is things like coming up with standardized documents.
Coming up with different groups that interface with Altice, and we then take a project or a solar assets, whether it's solar storage or charging and we involve the CBRE groups early on in the design process and they stick with US next to us at the interconnection process and we've done stock process of handy.
Off to them at the permitting process and then into construction.
In the first assets that have begun construction together with the CBRE team are now being slowly put together.
The first one will be in Maryland, and following closely after that will be assets in California and in Hawaii. So we are in complete agreement with you Theres a lot of work left to be done.
But during the next year, we will see scale beginning to come out of that particular relationship and it's going to take us to a level that we think is going to be very difficult for any of our peer set to replicate.
Right, Okay, great I like that idea of laden horsepower.
I'll steal that term Permian and our work.
And maybe secondarily.
For me.
And more so with kind of current projects.
How much is storage given the IRI and how much storage starting to be a.
A significant part of the of your current.
Building portfolio today.
Given the debt.
Tightens, the supply chain et cetera, but storage seems to me to be one of the big winter buy rate it should be.
Testing rates should be going up significantly.
Your thoughts on that.
Yes, absolutely and this is Lars again, so so storage has become over the last two years, let's say an integral part of everything we do at the outset of a silver construction project.
It is instruments will become storage to some extent the borrows the connectivity to the building or the grid through the interconnection that the solar needs as well if you think of any interconnection.
Type two access both the building and the grid storage uses the same pipe to get into the building or into the grid. So we to some extent already have this pipe for free with the solar system.
It will be malfeasance to not consider storage in every single location when we install solar what's been the determinant factor and which is getting slightly easier with the IRI is whether or not that particular location has a rate structure or utility programs that immediately left the storage pencil because one thing that we don't want to.
Due is to add storage, if it's going to reduce the yield of the asset to altice or somehow reduce the benefit to the client unless they ask us for it and the reason they might ask for a higher cost is resiliency. If the clients that look I'm prepared to pay more for solar electricity from altice as long as I can run my operation for <unk>.
18 hours based on storage if the grid goes down then in case in that situation of course, we'll add storage, even if it's slightly reduces the savings to the client.
But to give you some granularity every solar system. We are building in California, right now we fully expect that storage will be part immediately of those forces right. So we're moving forward with those interconnections, because California has a good rate structure and a good rebates.
<unk> the same thing, Maryland, not yet the Maryland utility.
Our regulator is thinking of a storage program.
New Jersey, beginning to be the case, the New Jersey program for storage is about to be launched we think in early next year, it's coming together during the last couple of weeks of this year and so it is really a market by market evaluation and the second storage pencil to makes sense, it's getting added by us and we have the scale.
Both the sign that the storage to source the equipment and its not impossible to source third party controlling systems in many cases actually sit on the solar inverter that allows us time to harvest the energy from the storage or shifted around in the way that's most beneficial to decline.
Okay got it thanks Laurence.
Sure.
Thank you.
No further questions at this time and this does conclude today's teleconference.
You may now disconnect your lines at this time and thank you very much for your participation.
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<unk>.
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Yes.
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