Q4 2023 Enlight Renewable Energy Ltd Earnings Call
Good day, and thank you for standing by Watkins Citi and like renewable energy fourth quarter and year end 2023 financial results Conference call.
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Please be advised that today's conference is being recorded I would now like to hand, the conference or virtual speaker today, Joseph That's Covid. Please go ahead.
Thank you operator, good morning, everyone and thank you for joining our fourth quarter and full year 2020 earnings conference call for renewable energy.
We're beginning this call I would like to draw participants attention to the following certain statements made on the call today, including but not limited to statements regarding our business strategy and plans our project portfolio market opportunity utility demand and potential growth discussions with commercial counterparties and financing sources pricing transfer materials.
Progress with company projects, including anticipated timing of related approvals and project completion and anticipated production delays.
<unk> impact from various regulatory developments completion of development the potential impact of the current conflict in Israel on our operations and financial condition of the company actions designed to mitigate such impact expected changes in cleaners leadership, and the company's future financial and operational results and guidance, including revenue and adjusted EBITDA are forward looking.
Statements within the meaning of U S Federal Securities Law, which reflect management's best judgment based on currently available information, we reference certain project metrics in this earnings call and additional information about such metrics can be found in our earnings release.
These statements involve risks and uncertainties that may cause actual results to differ from our expectations.
Please refer to our 2022 annual report filed with the SEC on March 30th 2023, and other filings for more information on the specific factors that could cause actual results to differ materially from our forward looking statements. Although we believe these expectations are reasonable we undertake no obligation to revise any statements to reflect.
Changes that occur after this call. Additionally, non <unk> financial measures may be discussed on the call. These non <unk> measures should be considered in addition to and not as a substitute for or in isolation from our results prepared in accordance with <unk> reconciliations to the most directly comparable <unk> financial measures are available in the earnings release.
The earnings presentation for today's earnings call, which are posted on our Investor Relations webpage.
With me this morning are <unk>, CEO and co founder of it Mike.
<unk> CFO of enlighten, Jason Houseworth, CEO and co founder of <unk>, and Adam official CLO and cofounder of <unk>.
I will provide some opening remarks and will then turn the call over to Jason and Adam for a review of our U S activity.
Then kinnear for a review of our fourth quarter and full year results. Our executive team will then be available to answer your questions.
You all for joining us today for <unk> fourth quarter and full year 2023 earnings call.
<unk> 23, we continue to deliver and be a nice story above market growth and above market project returns.
Moreover, we built the necessary foundation to take the next major step in 2024 and beyond.
And life is now on the cusp of another major expansion as we begin the construction of several flagship solar and storage projects.
Particularly in the United States.
I will first review the important achievements we've made in 2023.
And then describe our outlook into 2024 and beyond.
Let's start with our strong full year 2023 financial results.
Revenue for the whole of 2023 grew 33% over last year to $256 million.
Net income grew 157% to $98 million and adjusted EBITDA grew 45% to $189 million annually.
We also saw significant growth in our operating cash flow, which reached $150 million for the full year.
Increase of 66% over 2022.
In the fourth quarter revenue grew 21% over last year to $74 million.
Net income grew 48% to $60 million and adjusted EBITDA grew 8% to 47 million.
Overall, we delivered strong growth and profitability in 2023, even amid a challenging macroeconomic backdrop.
Driving the growth in our financial Department was our project condition.
<unk> 23, we connected over 480 megawatts across Israel, Europe, and the U S.
A growth of 33%.
This included Genesis wind in Israel, and apex solar in the U S. While we also ramped up production at <unk> each with them.
As of today, we have one nine gigawatt of operational duration as well as our first operational storage project with a capacity of 277 megawatts hour.
This results testify to the strength and resilience of Elijah Overfeeding technology diversification combined with our developer of class IPP model.
As a result, we benefit from recurring and growing income from our IPP, while our Greenfield development activity fueled continuous growth at high returns.
In 2023, we also saw a rapidly improving outlook for electricity demand electric.
Electricity demand is rising in the U S for the first time in two decades driving increased PPA pricing.
Moreover, equipment costs have come down significantly while the cost of finance is now in decline.
Result, we expect to see continued demand for our projects at attractive returns.
We demonstrated that in 2023 by successfully amended PPA pricing upwards from over one eight gigawatts by an average of 25%.
While timing new ppas at even higher levels.
Our pipeline of large scale projects and competitive access to the grid allows us to continue to capitalize on the need for electricity with favorable prices.
At the same time pattern in battery pricing fell considerably throughout the year.
These trends will continue to consolidate in the fourth quarter higher PPA pricing and lower construction costs contributed to the improving project material, which we expect to reach 10%.
Leverage basis for project, creating cfd between 2024 and 2026.
On top of that in the fourth quarter, we sold nearly 70 basis points decline in interest rates when overlaying this with our Unlevered project returns of 10% we.
We can generate average levered equity IRR in the mid to high teens and in some cases, even higher.
In 2023, we also continued to convert additions to our mature portfolio.
Our Greenfield development team converted 871 megawatt and two seven gigawatt hours from our large development pipeline into mature projects.
The additions included several major flagship project in the United States, such as road runner in country acre, which will commence construction in 2024.
And finally substantial financing is required to sustain and accelerate that growth and in 2023, we successfully raised capital from a diverse set of sources.
Given the constrained financing environment. This constitutes a notable achievement.
We raised $271 million in equity through an IPO on the NASDAQ and the start of the year and secured over half a billion dollars in project finance and tax equity.
Also important was the completion of our first asset sell down in the U S and some fell down in Israel.
During the $19 million.
While this initial disposal were small.
Is that the breadth of them tell them to become an increasingly important source of funds in the future.
To sum up 2023 was a year in which <unk> delivered on its above market growth and above market return story.
We secured via sources of financing expanded the portfolio of projects to be built in the near term and improved future project returns.
Amidst a challenging macro economic environment.
Looking to 2024, we forecast further revenue growth and profitability.
We expect to add 543 megawatts of generation and one six gigawatt hour of energy storage to our operational assets and move them at risk of project in the U S.
This represents our major move into energy storage with 580% growth in this segment.
Moreover, we expect to commence construction on upwards of one gigawatts and two nine gigawatts hour of capacity in 2024, which reflects an over 55% increase on our current operational generation.
1040% increase on our operational storage.
This includes major projects, such as Roadrunner country acreage and quail rents in the U S.
<unk> hybrid in Spain, and several Standalone storage project in Israel and Italy.
In total including increased go this project are expected to generate $307 million in revenue and $221 million in EBITDA in their first full year of operation.
This is a massive step in the growth of the company and therefore execution of this project is our highest priority.
These new build will also have diversified and light current geographical mix introducing significant U S exposure, while adding a major element of solar and storage through our technological mix, which is largely weighted to date.
In 2024, we also expect to convert more over a large development pipeline into mature project. Examples of this include our unique portfolio of solar and storage in PJM in the U S totaling one four gigawatt and two two gigawatt hours of storage.
This project, which benefit from exceedingly lower interconnection costs.
Has been moved to PJM interconnection fast track significantly easing their path to further development.
In addition, we have additional large scale solar and storage project across the Western U S and wind project in Europe that are approaching maturity.
The depth and breadth of our development pipeline is a strategic restored for ignite with 15, Gigawatts and 25 gigawatt hours of storage of potential. It ensures that we maintain a sizable buffer of imminently available material project, which we can work.
Finally, it is important for me to stress that with the capital. We raised last year, we have all the equity needed to fund 2024.
Activity.
We will have to secure significant project finance commitments. However, the success in raising project panel. During 2023 provides us with confidence that we will achieve this.
With macroeconomic conditions now more settled our all in interest rates for project Finance now stands at 525% to 575%.
In 2024, we also plan to execute large asset sell down.
Either of minority or majority stakes in the U S project further underpinning the company's financial position.
<unk> continues to grow our ability to self finance also gather steam and larger IBP provide more operating cash flow, while additional conversion of project increases the potential for sell downs.
This represents sources of funds for future growth and when combined with our extensive pipeline.
Of development projects provide a path for growth without the need for external capital.
Turning to our 2024 guidance, we expect revenues between $335 million and $360 million.
36% higher than in 2023 at the midpoint and adjusted EBITDA between $235 million and $255 million, 30% above that of 2023 at the midpoint.
Growth continues to be robust as we add new projects to our operational portfolio.
<unk> will describe in detail the assumptions that underlie this guidance later in the call.
To tie it all together in 2024 and light will harness it resources to grow considerably in all markets, but especially in the U S.
And as before we aim to continue delivering on our twofold objective above market growth and above market project returns.
Before handing the call over to Jason for his remarks, I'd like to comment on the cleaner a leadership transition we announced in January.
After more than 10 years as CEO of linear Jason accepted the call from the church of gene described to flatter, Dave <unk> to serve as a full time, Michigan President in Chile.
He will lead both with clean ore at the end of June <unk>, CFO and co founder Adam <unk> will assume the role of CEO.
Adam is an amazing leader in responsible for building Pinera beside Jason during the last 10 years, we anticipate a smooth transition over the next six months as Adam and the Amazing leaner leadership team remain and continue to move the company in.
Project forward.
I think Jason for his leadership and expertise in creating and cultivating cleaner <unk>.
The division leadership, and tireless work, coupled with the talented and dedicated propel the company to make a huge impact on the U S renewable market.
Adam has always been a big part of <unk> success, and I'm fully confident in the skills experience and leadership and the ability to take <unk> narrowed to the next level, which we had in light should continue to support and accelerate.
Jason.
Thank you Gilad I will certainly Miss working with you and the rest of our amazing team enlighten clean era regarding our U S business 2023 was foundational and in 2024, we expect to launch from that foundation into a period of significant growth during 2023, we successfully.
Pleated apex solar a 106 megawatt project located outside Dillon, Montana apex was the first project completed together by enlighten and clean ore in the U S. We also made progress toward completing our <unk> solar project in new Mexico as of today equipment supporting the full 300.
64 megawatts is installed and work is underway to finalize mechanical completion.
Further during the fourth quarter, we closed tax equity and debt financing on a tricycle solar raising $300 million of construction in term debt and $198 million in PTC tax equity there.
Transaction, which released $204 million of excess equity back to enlighten balance sheet demonstrated our continued access to competitive project financing, including tax equity. We have reached a mutual resolution of a supplier matter on the one two gigawatt hour battery storage portion of the Trustco and now expect.
The solar site will reach Sidoti in third quarter of 2004 and saw the storage installation in fourth quarter a 24.
Our overall project portfolio in the U S advanced steadily in 2023 with approximately 10 gigawatts through system impact study.
We signed Ppas on 806 megawatts and two gigawatt hours that will enter construction in 2024.
This includes country acres, a 392 megawatts and 688 megawatt hour project delivering two Sacramento utility District in California Road runner, a 294 megawatt and 940 megawatt hour facility contracted with Atco in Arizona and.
Well Ranch 120 megawatt at 400 megawatt hour project that represents the second phase of our <unk> facility in new Mexico and delivers to PNM.
The full 806 megawatts and two gigawatt hours will start construction during 2020 for launching a new phase of clean air as expansion and growth in the U S.
In addition to advancing and constructing projects in the U S. We improved returns by amending many of our existing ppas over the past 18 months. Our team successfully raised prices by an average of 25% on contracts covering one eight gigawatts of capacity.
Strong utility relationships and large sized projects that are deliverable in the near term made these pricing negotiations possible.
And as <unk> mentioned, we are also experiencing economic tailwind by way of falling equipment prices since the beginning of 2023, we've seen our solar panel prices dropped by approximately 25% and battery prices by more than 30%.
We continue to focus on converting our early stage development projects into mature projects. As an example in PJM, we are advancing a portfolio of projects totaling one four gigawatts and two two gigawatt hours of capacity that have negligible interconnection costs prices in the regions, where these projects are being developed.
<unk> are high due to a growing appetite for renewable energy and limited availability of feasible interconnections.
With final interconnection agreement is expected by the end of 2024, we anticipate achieving attractive PPA terms on these assets in the Western U S. We continue to see significant utility demand for our solar and storage projects with power demand continuously on the rise our roughly 10 gigawatts portfolio.
Of developing a mature projects all with advanced interconnection puts us in prime position to meet rising demand with attractively priced generation.
Finally, as previously announced I will be stepping down from my position as clean as CEO at the end of June Adam Piszel clean arrows cofounder and current COO will take my place I'm supremely grateful for the years I've had to work with Gila, Adam and the clean ore and then light teams the company as an industry.
<unk> leader because the organization and its partners are comprised of what I consider to be the most dedicated talented and genuinely good people in the business, both <unk> and Adam our Dear friends in trusted leaders I'm excited to see all the great projects and exciting developments they deliver in coming years.
Now I'll, let Adam Piszel introduce himself and add some comments.
Thank you Jason.
Leaving alongside Jason for nearly two decades has been an incredible journey.
Together, we have built three renewable energy companies develop hundreds of solar projects.
And most importantly have built an incredible team of professionals, who are now leading clean ore into its greatest period of growth.
While execution is our highest priority for 2024.
And clean Air I continue to invest in our growing development portfolio that will take us through the next decade and beyond.
I am passionate about renewable energy this incredible organization and our dedicated team and Im excited about this expanded role.
I'm confident in our 2020 for execution plan and look forward to sharing more of this developing growth story during future earnings calls. Thank you and I'll now turn the call over to Nir.
Thank you items in the fourth quarter of 'twenty three the company's revenue increased to $74 million up from 61 million last year, a growth rate of 21% year over year.
<unk> was mainly driven by new operational projects compared to last year, when being offset by a decline in revenues caused by much lower electricity prices in Spain relative to the prices observed in the same quarter last year.
During the fourth quarter of last year project in the U S Hungary, and Israel started selling electricity.
Most important of BC, Genesis, which contributed $9 million.
In addition, bill at which barely Sunpower in 'twenty, two contributed $6 million in this quarter.
<unk> generated revenue of approximately $40 million in revenue. However, its contribution fell 36% year over year due to much lower Spanish power prices compared to Q4, 2000 and relative to expected prices in Q4 2003.
We saw borrowing spend at an average price of 50 megawatts this quarter versus $150 per megawatt in the same period last year.
In addition, we were impacted by the slower than expected ramp up in production at Genesis and Israel.
Okay.
Fourth quarter net income increased to $60 million a growth rate of 48% year over year.
Three noncash items this quarter.
Mark to market loss related to interest rate hedges on the financial growth process at visco storage of 8 million again related to the reduction in expected earn out payments linked to the acquisition of <unk> 12 million and a loss of 5 million due to the impact of Israeli shekel volatility on foreign currency.
Liabilities. These figures are all net of tax.
In the fourth quarter of 'twenty three the company adjusted EBITDA grew by 8% to $47 million compared to 43 million for the same period in 2002.
Aside from the positive factor, which affected our revenues growth the year over year decline in revenues at good Karma has led to slower than expected ramp of project in Israel and $3 million increase in overhead resulted in lower profit margin and solid growth in adjusted EBITDA year over year.
We recorded $2 million and final payment recognized from deferred Donald Faraday completed last quarter.
Looking to our balance sheet and not completed a large financing deal during this quarter, reaching the closing of both the twist controller in the U S and our solar plus storage project in Israel. This way a combined $511 million in project finance.
<unk> reached 325 million of excess equity capital will recycle back when light.
This transaction strengthened our balance sheet and we haven't followed the financial footing needed to deliver the growth of our business in 2004.
To reiterate no new equity capital is needed to deliver on our plans for this year.
As of the date of todays report, we had $260 million of revolving credit facility at several of Israeli bank, none of which has been doing this is $90 million above what we reported in our Q3 'twenty three results.
Moving into 'twenty for guidance, we expect annual revenues between 335 million to $360 million with adjusted EBITDA between $235 million and $255 million.
Of our total forecasted revenues, 40% I expect it to be denominated in Israeli shekel, 55%.
And 5% in U S dollar nothing less exposure to the sector and the current high degree of volatility in this currency.
Guidance is predicated on the average <unk> exchange rate assumption of three a chicken to the dollar and 1.05 to the dollar which are lower than the current levels.
In addition, 90% of our 24 generation output will be sold at fixed price either through hedges or ppas.
Our guidance reflects growth of 36% and 30% at the midpoint compared to 23, respectively, demonstrating our accelerated growth back in 2004 and the year then.
I will now turn it over to the operator for questions.
Thank you as a reminder to ask a question you will need to press star one.
<unk> on your telephone and wait for your name to be announced to withdraw your question. Please press star one.
One again.
Okay.
Yes.
We will take our first question.
Your first question comes from the line of Justin Clare from Roth.
Please go ahead your line is open.
Yes, Hello, Thanks for taking my questions.
So first off here.
You did mentioned plans to execute larger asset sell down in 2024 was wondering if you could give us a sense for the possible magnitude of those sell down earnings how much equity capital.
Be looking to raise and what would be needed to support <unk>.
2025 developments and then the.
The projects in the U S coil Ranch road runner country acres are those projects that youre looking at for potentially selling minority interests.
Hi, Thank you very much for the question Justin.
On the sell downs. So yes, as you said part of our strategy is.
To perform.
Some sell downs on a very large portfolio that is maturing next year. So we intend to construct and holds the main projects that we are going to consider.
Construct next year country acres were drawn our quell ranch and the other projects in Europe and Israel back there is a potential for additional large sell downs currently.
In.
The current guidance.
Provided to the market, we assumed total sell downs of $15 million.
But of course, the potential can be higher and it's important to say based on your second question is that we are already fully funded in terms of the equity ticker that we need to invest for all the growth that we are going to.
Uh huh.
Construct next year. So we are talking about roughly 900 megawatts of new project and two seven gigawatt hours of new storage project.
Our fully funded and we do not have to perform any sell downs or any capital raise or debt raise in terms of the corporate in order to.
Yes.
Reyes.
The equity it is already in the company.
The effort in terms of finance will be more on the construction debt and the tax equity side, So project finance.
Got it okay very helpful.
And then you did secure.
A large number of PPA amendment in 2023 was wondering what we could expect going forward here are there additional possible amendments.
Ppas for any of your projects.
Sure.
Youre developing here and then also just wondering on the general trend we've seen a decline in module prices battery prices.
What are you seeing in terms of the PPA trend has that started to level off or potentially decline or is demand is so high that the things are potentially moving even higher here.
Yes, so I can start with the Ontario, then Jason you can complement me.
U S market.
So basically what we are seeing overall in the different markets, but especially in the U S is that the PPA price curves are continuing to rise although.
Natural gas prices are already normalized this is because we see for the first time in two decades.
As for the demand of electricity in the U S market and we believe these are very positive.
<unk> that will continue to fuel our growth in the coming years.
Now that we have amended the majority.
Of our Ppas Preconstruction, we believe that the next PPA that we are going to sign are going to be new ppas.
I would say materially but the level of pricing in the new Ppas that we have signed recently and we expect to sign the next year, we expect to maintain the higher level than in the past of around 25% So again, reflecting.
Our higher level of electricity pricing.
And higher demand for electricity in the U S. What we see in Europe is that electricity prices are continuing to normalize based on the.
Historical peaks, that's where in the last two years, but still.
As we said in previous discussions.
The new norm of electricity prices after the decline is.
Very high comparing our liberalized cost of electricity in our project and wind or solar in Europe, and therefore, the returns are very high. So we expect electricity prices in Europe to continue and normalize on the level of 50 to 60 and this level is still a high.
That reflects very good return for our projects.
Jason If you want to complement me on the U S.
You bet, Thanks, Justin great great. Thank.
Thank you Lord answered very well and we have a small number of ppas that that we are discussing potential price increases with but as you guys get a lot is noted the emphasis is on the new pricing.
Steady growth.
On the heels of dramatic growth in terms of.
Demand and in stripes.
Some of what is his advantages the company.
Is our interconnection position, where are we have projects roughly 10 gigawatts through system impact study projects that are advanced and mature and ready to deliver to two utilities.
Where qs are clogged up and projects are behind schedule.
With with competing.
Reese's and therefore, giving us the opportunity to deliver at at strong price savings, we see long term that this steady increase in demand here in the U S. Along with with a limited supply of capacity is is driving prices incrementally higher year.
Over years.
Second for the long term and we're experiencing that on the ground.
Got it okay very very helpful. Maybe just one more curious on how you are positioned relative to securing the domestic content adder in the U S. Whether it's for the solar portion of a project or the storage part of our project whats the timeframe that we should be thinking.
In terms of when that comp.
That out or it could be secured.
Jason I would like to take this.
So I'll take it and I would say.
Another great question.
Each of these projects today is <unk>.
When he lied and near our speaking of the economics on these projects are project finance. None of those include domestic content adders as a as a basis that makes all of that is considered to be upside we are working carefully.
Along the path of confirming about that pad on a number of these projects both in terms of of storage as well as the overall PV side.
Some of that does depend on.
The advances are suppliers make in terms of up there.
The production and and we are seeing that accelerate but watching it carefully and we're not getting out over our skis.
There were we're making certain that.
We're taking product from lines that that are stable.
Close to us, making making certain that we deliver on the projects on time.
And that those projects are producing.
Stabilize in the coming years so.
We are carefully pursuing domestic content, but but doing it.
In support way that supports the overall plan again not not included in our current in our current forecast by way of Rep turnover EBITDA.
Got it.
And just to reiterate that.
Following to what.
Jason said I think that we cannot disclose that on a transco. We finally selected Tesla to be the battery supplier.
As Jason said the assumption the current assumption for the project still does not.
Assume tax equity adder on the battery. However, we believe that there is a potential for that we will see in the future. So this is a some upside that we believe that there might be unlocked in the future.
Got it.
It's worth it may be worth, noting just quickly as well, but we have been aggressive about capturing the community.
Hershey community Adder, and Ed have have included that on on a number of projects. Thus far so that that is nice upside to the numbers.
Right.
Right, Okay, alright, thanks for the time.
Okay.
Thank you.
We'll take our next question.
Please standby.
Your next question comes from the line of Mark <unk> from J P. Morgan. Please go ahead. Your line is open.
Okay.
Alright. Thank you very much for taking my questions I'd, just like to start by thanking Jason for all of your help since prior to the IPO and best of luck with your next chapter.
Our questions I think just kind of maybe one multi part question if I can.
The <unk> revenue shortfall.
Mentioned kind of a slower ramp of Genesis win.
Israeli Israel cluster.
Checking or are those now fully ramped.
And then on the next part with the 2024 guide.
We didn't notice any major project push outs, but the EBITDA guide is a little bit lower than what consensus expectations were so just kind of.
Seeing if you can bridge that gap between it sounds like asset sales might be part of that driver.
Can you talk about any kind of conservatism that you're baking in projects ramping or FX.
Anything else that you think might be driving that.
Okay.
Yeah, Hi, Mark. Thank you very much for the question. So far I would say just in general in terms of our guidance and then the general the way we look at the market in the company right now I would say that.
After 15 years in founding the company I think that the conditions that right now we see in the market and also for the company or may be the best condition with <unk>. We are seeing a very nice and accelerated growth, but also based on scale and very high returns. So if you look at our.
And you can see that the average unlevered return of our projects for the next three years is around 10%, meaning that the Levered return the IRR will be in the mid of the tiers or may be higher I think this is a very good I would say.
Number, especially for the large scale that we are going to build and for the ones that we are entering into this year and this is a large capacity of almost one gigawatt generation and almost three giga I'll say energy storage. So we are talking about even a higher IRR so fresh.
Yes, there was some shortfall in the fourth quarter, but we still grew 40%.
On average between the EBITDA and the revenue.
And we are going to grow 35% next year I think.
This kind of continuous growth will continue based on high returns and based on that we are very positive.
On the EBITDA. There is no particular reason why the EBIT at 30% there is no trend.
Just like to point out that currently.
Big portion of our revenue mix is coming from the wind projects in Europe that are.
Partially based on merchant.
Price forecasting and on a tax mechanism that we include in our cost of sales. So basically it reflects the net price is reflected.
In the gross margin, but we see the gross price in the revenues and then the tax.
Yes.
<unk> after tax into EBITDA, so last year since the electricity prices.
Were dropped a bit.
More rapidly also the tax mechanism.
Created lower tax on the net electricity price that reflects our is reflected in our EBITDA, you'll see that we were more or less.
Like our forecast for I think in the mid of the forecast, but on the revenues it came down a bit.
So I think that in terms of the growth of the company in the next year, we still see a very very accelerated growth been based on I think.
High returns in terms of the project debt.
Our.
Coming to operation and ramping up so.
I would say that in the large wind farms and maybe also in solar.
I think on the broad terms across geographies, we still see some supply chain issues I think that the big suppliers, such as Siemens General electric and other supplier are still struggling a little bit after the COVID-19 with their supply chain and this caused a project.
Performance to ramp up I would say in three or four quarters to the full capacity and availability rather than three months or three to six months before this is not affecting the overall return of the project. The multiyear return of the projects that his deal its forecasted.
To be very high.
So or according to plan. So this is something that we will take into consideration in the project in the next few years until we see that the supply chain is being I would say normalized across the geographies.
Very helpful I'll take the rest offline. Thank you.
Thank you once again, if you wish to ask a question. Please press star one on your telephone.
We will take our next question. The question comes from the line of Mohit Mondo from Mizuho. Please go ahead. Your line is open.
Okay.
Hi, This is David Benjamin and for Mandalay.
A question on your strategy with tax equity transferability versus traditional tax equity.
Can you talk a little bit about where you guys are now and where do you see that trending over the next year.
Yes.
Thank you.
Thank you.
David.
We are seeing in the market as the move towards traditional tax equity.
With credits being transferred through the bank's transfer desks, so the banks will come in and monetize the accelerated depreciation.
And in some of the other attributes and the cash flow obviously in the <unk>.
Flip period.
But what they will look to do is syndicate the transfers to fortune 500.
Customers, who the bank services elsewhere.
Now what we think is important to emphasize is that the move towards the transfer market.
Also.
To accelerate the path to construction finance, while in the past construction finance was predicated on full tax equity commitments.
<unk> for tax equity providers to use transfer and syndicate those credits will enable us will enable us to access construction capital earlier and.
And therefore reduced the peak equity that we need for projects I think thats, where this is headed.
And the conversations we've had with the major banks.
And Jackson. In addition, I would say that I believe because of the position of in life as a public company and.
Positioning in the market is such that we feel that once there is a bottleneck in tax equity.
And in the market players like in light gets prioritized. So this is why we believe.
We were able to complete tax equity last year with <unk> and based on favorable terms in the future I think.
The tax transferability will ease up a little bit about the lag, but still player like us will be able to play between the traditional structure and.
Their transferability and it is important to say that once we sell down more assets and we generate more profit on the corporate level, we will be able to monetize this profits in terms of depreciation also in the tax some fair ability stock.
And thus I would say creates also a good alternatives in terms of our tax structure versus the regular or traditional tax equity. So I think that we are positioned very well.
Today in the market.
To be able to select between the traditional structure and the new structure and be able.
To execute on the project on time based on that.
Great. Thanks, that's very helpful I'll take the rest offline.
Thank you once again, if you wish to ask a question. Please press star one on your telephone.
We will take our next question.
Your next question comes from the line of David Paz from Wolfe. Please go ahead. Your line is open.
Thank you good morning.
Couple of quick questions just on the CEO Bart interconnection issue can you just sorry, if you disclosed this already will provide an update on.
The timing.
And any further studies or anything else that's needed to achieve the 2026.
Yeah, So what I can say is that.
There is no change in our <unk>.
<unk> channel progress, Brazil bar so.
We'll start construct constructing <unk> bar in 'twenty five and.
We believe that we will reach <unk> by the end of 'twenty six.
And the growth that we forecast for 24 and 25 is not based on that so this will only I would say support the additional growth that is needed for 'twenty six and then of course.
And following that tier.
So no change in our forecast right now on <unk>.
Okay and just.
Three other projects in the U S. I think this internet connection issue.
Surprised if I recall correctly is there any any any other projects, where we should be watching or you are waiting for any any studies that could impact.
<unk>.
Yes.
Yes, I think that we can point out to very good news that we received in our PJM portfolio. As you know majority of the portfolio in the U S come from the West States, but they were always areas of development in PJM and MISO and recently in the last quarter, we got very good.
Very positive.
Stones in PJM.
The project totaling more than one gigawatts of generation in and around two gigawatt hour of storage with five projects getting into the fast track in terms of the interconnection queue and with network upgrades that are less than 5 million square project, which is very very good results for PJM.
We believe that this.
Potentially that is unlocking in a new market for us opens up a lot of alternatives for us either to grow all in contract this project or maybe following our sell down strategy.
To use that because of their high valuation and performed sell downs to recycle equity into our growth in the west. So these are very very good news that we got recently and is reflected in our presentation in slide 14.
Yeah, that's great no that was it was my last question related to that slide.
Maybe just talk about the.
<unk>.
The growth that you see beyond what you've laid out here or are there other projects that are in the advanced stage behind early stage and in particular, just how are these arrangements, particularly with the data centers.
B.
What do those look like in terms of economics are you seeing due to directly contract with the buyer.
Literally with data centers.
How do you provide the service. Thank you David and then Jason feel free to chime in afterwards, I think on the datacenter side, whether the demand is direct from the data center businesses or through the utilities that service them.
We see massive demand through Virginia, and broader PJM, but particularly in the Virginia region, which as we know.
It's not the biggest data center market in the world.
The interconnection advantage that we've developed in PJM in particular these projects in Virginia gives us a unique opportunity to provide power to the AI data center massive growth and need for power.
We're seeing.
And thats, putting us in the driver seat on terms and offtake, so whether that's ultimately see sleep through the utility or directly from the datacenter providers.
We're in a very strong position on those projects. In addition, there are some other projects outside of PJM and the West coast.
Another major project in Arizona called Snowflake, which is another gigawatt interconnection, we've got a gigawatt in interconnection in the Pacific Northwest, which is uniquely positioned to serve the big data center markets in the northwest the Microsofts and Amazons of the world. So.
Portfolio is very well positioned to echo Jason's comments at the beginning to service the massive demand of electricity that we're seeing coming particularly from the data center market, but also broadly across the U S in the coming years.
Great. Thanks, Great yourself.
And I would I would note that in particularly in the west we have been successful at maintaining a bus bar PPA standard and.
What's unique across our portfolio and we'll continue to be a strength of the company given given our strong interconnection positions.
Those are sleeved delivering the bus the bus bar and.
And all sleep for utilities to date.
Future, but we continue to find that as a effective way forward.
Great. Thank you so much.
Thank you there aren't any further questions I would like to hand back to you Joseph Smith for closing remarks.
Thank you everybody for your time today, we will be at the Bank of America Power and Utilities Conference in New York Early next week, and we look forward to seeing many of you there. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Okay.
Yeah.
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Yes.