Q2 2026 XPLR Infrastructure LP Earnings Call
Speaker #2: Good morning, everyone. And thank you for joining our second quarter 2026 financial results conference call for XPLR Infrastructure. With me this morning are Alan Lu, president and chief executive officer of XPLR Infrastructure; and Jessica Jeffrey, chief financial officer of XPLR Infrastructure.
Speaker #1: Hello, and welcome to the XPLR Infrastructure Q2 2026 earnings webcast call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session.
Speaker #1: If you would like to ask a question during this time, simply press star, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again.
Speaker #2: Alan will walk through our business highlights, and Jessica will provide an overview of our financial results. After that, our executive team will be available to answer your questions.
Speaker #1: On the alternative conference server to Kang Hee-yeon, Director of Investor Relations. Please go ahead.
Speaker #2: Good morning, everyone. And thank you for joining our second quarter 2026 financial results conference call for Explora Infrastructure. With me this morning are Alan Liu, president and chief executive officer of Explora Infrastructure; and Jessica Jeffrey, chief financial officer of Explora Infrastructure.
Speaker #2: On this call, we will be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements.
Speaker #2: If any of our key assumptions are incorrect, or because of other factors discussed in today's earnings news release, in the comments made during this conference call, the risk factor section of the accompanying presentation or in our latest reports and filings with the securities and exchange commission, each of which can be found on our website, www.xplrinfrastructure.com.
Speaker #2: Alan will walk through our business highlights, and Jessica will provide an overview of our financial results. After that, our executive team will be available to answer your questions.
Speaker #2: On this call, we'll be making 4 looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our 4 looking statements, if any of our key assumptions are incorrect, or because of other factors discussed in today's earnings news release, in the comments made during this conference call, in the risk factor section of the accompanying presentation, or in our latest reports and filings with the Securities and Exchange Commission, each of which can be found on our website, www.xplorinfrastructure.com.
Speaker #2: We do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure.
Speaker #2: With that, I'll turn the call over to Alan.
Speaker #1: Thank you, Gong Yi. Good morning, everyone. During the second quarter, the XPLR team continued to execute well, achieved key financial and operational objectives. On the financial front, XPLR completed the first minimum buyout of 7 of 5 for approximately $150 million.
Speaker #2: We do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure.
Speaker #1: And fully repaid $500 million of convertible notes with available cash. These actions served to further simplify our capital structure, and through the 7-of-5 buyout, increased our equity ownership in assets within the existing portfolio, all while maintaining balance sheet strength.
Speaker #1: The team also continued to make steady progress on the existing capital plan. Starting with repowering, execution remains on track. To date, we have completed approximately 50% of our planned repowerings for 2026.
Speaker #2: With that, I'll turn the call over to Alan.
Speaker #3: Thank you, Kang Hee. Good morning, everyone. During the second quarter, the Explora team continued to execute well and achieved key financial and operational objectives.
Speaker #1: The remaining program is progressing as planned and is expected to enhance the long-term value of our portfolio. We are also advancing the previously announced battery storage and co-investment agreement with Nexter Energy Resources.
Speaker #3: On the financial front, Explora completed the first minimum buyout of SEPA 5 for approximately $150 million, and fully repaid $500 million of convertible notes with available cash.
Speaker #1: In July, we formed the Mammoth Plains Energy Storage and Carousel Energy Storage joint ventures, and completed the associated sales of interconnection assets and rights.
Speaker #3: These actions served to further simplify our capital structure and, through the SEPA 5 buyout, increase our equity ownership in assets within the existing portfolio, all while maintaining balance sheet strength.
Speaker #1: We believe these battery storage investments, enabled by our distinct surplus interconnections and by NextEra Energy Resources’ development expertise, will generate attractive returns and incremental long-term contracted cash flows.
Speaker #3: The team also continued to make steady progress on the existing capital plan. Starting with repowering, execution remains on track. To date, we have completed approximately 50% of our planned repowerings for 2026.
Speaker #1: With improvements in power market fundamentals, we continue to believe reconstructing could be a key driver of value enhancement for XPLR's portfolio over time. While we believe the majority of opportunities will come in the 2030s and beyond, as legacy contracts expire, we are actively evaluating contract optimization opportunities where market conditions support value-enhancing outcomes.
Speaker #3: The remaining program is progressing as planned and is expected to enhance the long-term value of our portfolio. We are also advancing the previously announced battery storage and co-investment agreement with NextEra Energy Resources.
Speaker #1: In summary, we remain focused on strong execution and disciplined capital allocation to enhance financial and strategic flexibility as we seek to maximize the value of our portfolio.
Speaker #3: In July, we formed the Mammoth Plains Energy Storage and Carousel Energy Storage joint ventures, and completed the associated sales of interconnection assets and rights.
Speaker #1: With that, let me turn it over to Jessica.
Speaker #2: Thank you, Alan, and good morning, everyone. Turning to our second quarter results, XPLR's portfolio generated approximately $523 million in adjusted EBITDA and $257 million in free cash flow before growth.
Speaker #3: We believe these battery storage investments enabled by our existing surplus interconnections and by NextEra Energy Resources development expertise will generate attractive returns and incremental long-term contracted cash flows.
Speaker #3: With improvements in power market fundamentals, we continue to believe recontacting could be a key driver of value enhancement for Explora's portfolio over time. While we believe the majority of opportunities will come in the 2030s and beyond, as legacy contracts expire, we contract optimization opportunities where market conditions support value-enhancing outcomes.
Speaker #2: Second quarter results for existing projects were affected by approximately $42 million higher net operating expenses compared to the prior year period, primarily driven by an approximately $45 million higher benefit in 2025 associated with certain vendor credits or unplanned economic expenses.
Speaker #2: On a full-year basis, we anticipate total O&I expenses to be roughly $500 million, which is consistent with the historical average over the last few years.
Speaker #3: In summary, we remain focused on strong execution and disciplined capital allocation to enhance financial and strategic flexibility, as we seek to maximize the value of our portfolio.
Speaker #2: These impacts were partially offset by improved year-over-year wind resource, which was approximately 102% of the long-term average compared to 97% in the prior year period.
Speaker #3: With that, let me turn it over to Jessica.
Speaker #2: Thank you, Alan, and good morning, everyone. Turning to our second quarter results, Explora's portfolio generated approximately $523 million in adjusted EBITDA and $257 million in free cash flow before growth.
Speaker #2: Repowered assets continued to enhance generation and cash flow across the portfolio. The second quarter results were also impacted by asset dispositions completed in 2025.
Speaker #2: Second quarter results for existing projects were affected by approximately $42 million higher net operating expenses compared to the prior year period, primarily driven by an approximately 45 million dollar higher benefit in 2025 associated with certain vendor credits for unplanned O&M expenses.
Speaker #2: For 2026, we continue to expect adjusted EBITDA of $1.75 to $1.95 billion, and free cash flow before growth of $600 to $700 million. As always, our expectations assume our usual caveats, including normal weather and operating conditions.
Speaker #2: That concludes our prepared remarks, and we will now open the line for questions.
Speaker #2: On a full-year basis, we anticipate total O&M expenses to be roughly $500 million, which is consistent with the historical average over the last few years.
Speaker #1: Thank you. Pardon? Thank you. If you have a question, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, simply press star 1 again.
Speaker #2: These impacts were partially offset by improved year-over-year wind resource, which was approximately $102% of the long-term average, compared to $97% in the prior year period.
Speaker #1: One moment, please, for your first question. Your first question comes from the line of Nelson Ng of RBC Capital Markets. Your line is open.
Speaker #2: Repowered assets continued to enhance generation and cash flow across the portfolio. The second quarter results were also impacted by asset dispositions completed in 2025.
Speaker #3: Great, send. Good morning, everyone. This first question just relates to your first two battery storage projects. I think, Alan, you mentioned that the GAVs are formed.
Speaker #3: When do you expect shovels to be in the ground for the first two projects?
Speaker #2: For 2026, we continue to expect adjusted EBITDA of $1.75 to $1.95 billion, and free cash flow before growth of $600 to $700 million. As always, our expectations assume our usual caveats, including normal weather and operating conditions.
Speaker #1: Sorry, Nelson, could you say that again? You cut out for a second.
Speaker #3: Sure. Sorry. When do you expect construction to start on the first two battery storage projects?
Speaker #1: We would expect and anticipate the earliest start is, call it Q4 of this year, but work could start there, and then it's mostly, as we've mentioned before, most of the construction activity is going to be in 2027.
Speaker #2: That concludes our prepared remarks, and we will now open the line for questions.
Speaker #3: Got it. Okay. And then, maybe a question for Jessica. So, the free cash flow before growth metric—are there any one-time items to call out in the quarter?
Speaker #1: Thank you. Pardon? Thank you. If you have a question, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, simply press star 1 again.
Speaker #3: I just noticed that, I think, the contribution from existing facilities was a bit higher than last year, and in that bridge you provide between adjusted EBITDA and free cash flow, there's less tax credits affected from EBITDA.
Speaker #1: One moment, please, for your first question. Your first question comes from a line of Nelson Ng of RBC Capital Markets. Your line is open.
Speaker #3: Great. Thanks, Ann. Good morning, everyone. This first question just relates to your first two battery storage projects. I think Alan, you mentioned that the JVs are formed.
Speaker #3: I'm not sure whether that's something we should just expect going forward.
Speaker #2: Yeah, hi. Good morning. So I wouldn't call it one-time, but what you should think about is the contribution from the repowered assets and the way that the tax credits are monetized, as they're being generated from those assets.
Speaker #3: When do you expect Shovels to be on the ground for the first two projects?
Speaker #4: Sorry. Nelson, could you say that again? You cut out for a second.
Speaker #3: Sure. Sorry. When do you expect construction to start on the first two battery storage projects?
Speaker #2: So, when I look at the quarter and I look at existing projects, I see that the repowering assets are delivering economics that are consistent with what we previously disclosed.
Speaker #4: We would expect anticipated earliest start is call it Q4 of this year, but work could start there, and then it's mostly as we've mentioned before, most of the construction activity is going to be in 2027.
Speaker #2: These are strong investments, and they're delivering strong results. They are more repowerings in the portfolio this year than they were last year, and the tax credits for those new repowered assets are being monetized through transferability.
Speaker #3: Got it. Okay. And then maybe a question for Jessica. So the free cash flow before growth metric, are there any one-time items to call out in the quarter?
Speaker #2: So, when you look at the free cash flow versus the adjusted EBITDA, adjusted EBITDA is also going to be impacted by the absence of higher tax credit amounts that were reflected in the prior-year period through tax equity structures that have since matured or been bought out.
Speaker #3: I just noticed that the I think the contribution from existing facilities were a bit higher than last year. And in that bridge, you provide between adjusted EBITDA and free cash flow, there's less tax credits subtracted from EBITDA.
Speaker #2: So that's some of the dynamic you're seeing in the difference between the two metrics.
Speaker #3: Okay, thanks. And then just one last question. So in terms of your roughly saying on about $500 million of cash reserves at the project level, but is the plan to potentially bring forward some of the I think there's like $470 million of minimum satisfied for next year.
Speaker #3: I'm not sure whether that's just something that we should just expect going forward.
Speaker #2: Yeah. Hi, good morning. So I wouldn't call it one-time, but what you should think about is the contribution from the repowered assets and the way that the tax credits are monetized, as they're being generated from those assets.
Speaker #3: And then I think you also have roughly $550 million of corporate debt that matures next year. You have the available capital— is one option that you're closely looking at bringing that forward this year and paying some of that down a bit earlier?
Speaker #2: So when I look at the quarter and I look at existing projects, I see that the repowering assets are delivering economics that are consistent with what we previously disclosed.
Speaker #2: These are strong investments, and they're delivering strong results. There are more repowerings in the portfolio this year than there were last year, and the tax credits for those new repowered assets are being monetized through transferability.
Speaker #1: Nelson, I'll address your question. This is Alan. In two parts. One is, as you look at that cash balance, you're correct, right? A portion of that sits at the project level.
Speaker #2: So when you look at the free cash flow versus the adjusted EBITDA, adjusted EBITDA is also going to be impacted by the absence of higher tax credit amounts that were reflected in the prior year period through tax equity structures that have since matured or been bought out.
Speaker #1: Normal course, kind of project level working capital, accounts, so if there's a portion of that. I would also remind you, right, we've got capital that we've already committed in terms of capex that would also have to be paid for in the second half of the year as well as additional capex.
Speaker #2: So that's some of the dynamic you're seeing in the difference between the two metrics.
Speaker #1: So, that will eat into that cash balance. So you've got to factor that into your calculation as you're looking at the balance sheet. If there is available cash and excess cash flow, would we pull ahead separate buyouts or debt? That is your question.
Speaker #3: Okay. Thanks. And then just one last question. So in terms of your roughly sitting on about $500 million of cash and I'm sure a lot of that are in reserves, at the project level, but is the plan to potentially bring forward some of the I think there's like $470 million of minimum SEFIS buyouts for next year.
Speaker #1: So we have a plan for SEPAs and debt. The SEPAs have certain buyout windows, and as we've explained before, think of them as a series of call options.
Speaker #1: And when the buyout window opens, we then have the ability to go exercise those call options. So we've laid out the schedule in which we intend to or would expect to buy out SEPA before, which is sometime next year.
Speaker #3: And then I think you also have roughly $550 million of corporate debt that matures next year. If you had the available capital is one option that you're closely looking at is bringing that forward to this year and paying some of that down a bit earlier?
Speaker #1: With respect to debt, our plan is to refinance those notes at some point later this year—sorry, at an early part of next year.
Speaker #1: If there are opportunities to pull ahead that refinancing—let's say the market window opens—we will certainly be open to that. Sorry, I made a mistake.
Speaker #4: Nelson, I'll address your question. This is Alan, in two parts. One is, as you look at that cash balance, you're correct, right? A portion of that sits at the project level.
Speaker #1: I said it was SEPA before. It's SEPA 5 next year, not SEPA 4.
Speaker #4: Normal course, kind of project-level working capital, accounts, so there is a portion of that. I would also remind you, right, we've got capital that we've already committed in terms of capex that would also have to be paid for in the second half of the year, as well as additional capex.
Speaker #3: Okay, great. Thanks for the clarification, Alan. And yeah, I'll leave it there.
Speaker #1: Your next question comes from the line of Mark Javi of CIBC Capital Markets. Your line is open.
Speaker #2: Yeah, thanks for taking the question. Just on the recontacting opportunity, can you just sort of outline how much of that is outbound effort from your side, how much is interest from the counterparties, and maybe just put a table—sort of roughly, the scope of megawatts that you're actively pursuing at this point?
Speaker #4: So that will eat into that cash balance. So you've got to factor that into your calculation as you're looking at the balance sheet. If there is available cash, an excess cash flow, would we pull ahead SEFIS buyouts or debt?
Speaker #4: That is your question. So we have a plan for SEFIS and debt. The SEFIS have certain buyout windows. And as we've explained before, think of them as a series of call options.
Speaker #1: Hey, Mark. Just as a reminder, as we've said, the majority of our projects are under existing term contracts, right? So the bulk of the contracts don't expire until, call it, the early to mid-2030s and beyond.
Speaker #4: And when the buyout window opens, we then have the ability to go exercise those call options. So we've laid out the schedule in which we intend to or would expect to buy out SEFIS before, which is sometime next year.
Speaker #1: We were certainly anticipating that the majority of these conversations would happen, call it, one or two years ahead of the expiration of those contracts. So that leads us to saying, "Hey, sometime in the early 2030s, the bulk of those conversations may happen." Conversations today can be a combination, right?
Speaker #4: With respect to debt, our plan is to refinance those notes at some point later this sorry, at the early part of next year. If there is opportunities to pull ahead that refinancing, let's say the market window opens, we will certainly be open to that.
Speaker #1: Customers' demand and their RFPs, and things happening in the marketplace and us responding to it, as well as us actively engaging and thinking through other extensions, other renegotiations of existing contracts that would be favorable to explore.
Speaker #4: Sorry, I made a mistake. I said it was SEFIS 4. It's SEFIS 5 next year, not SEFIS 4.
Speaker #1: The relatively limited, but those are opportunities that we are certainly actively pursuing. I am not going to put those in terms of megawatt hours, given the commercial sensitivity around those activities today.
Speaker #3: Okay. Great. Thanks for the clarification, Alan. And yeah, I'll leave it there.
Speaker #1: Your next question comes from a line of Mark Javi of CIBC Capital Markets. Your line is open.
Speaker #2: Okay. And anything else in terms of you can update in terms of opportunities, different things you can do in the SEPAs? We talked about SEPAs through before.
Speaker #5: Yeah. Thanks for taking the question. Just on the recontracting opportunity, can you just sort of outline how much that's outbound effort from your side, how much that is interest from the counterparties, and maybe just put on the table sort of roughly the scope of megawatts that you're actively pursuing at this point?
Speaker #2: Now you're doing the minimum buyout in SEPA 5. Does it assume that it just kind of goes as planned, or is there opportunities to work with the counterparties on different options?
Speaker #1: As we said, there's the investments contractually have certain buyout windows, right? Right. We have call options that give us rights to buy out during certain windows.
Speaker #4: Hey, Mark. Just as a reminder, as we've said, the majority of our projects are under existing long-term contracts, right? So the contracts bulk of them don't expire until you get into call it the early to mid-2030s and beyond.
Speaker #1: Any deviation from that would require negotiations with the SEPA investors. And those to do anything other than what we've laid out would require us to get to a point that would make sense for us holistically, right?
Speaker #1: From the standpoint of doing it at a value point that makes sense and is accretive to what we've laid out already, but also from the perspective of us financing those buyouts in a way that makes sense given our existing balance sheet and existing capital commitments.
Speaker #4: We would certainly anticipate that the majority of these conversations would happen call it one or two years ahead of expiration of those contracts. So that leads us to saying, "Hey, sometime in the early 2030s, those bulk of those conversations are going to happen." Conversations today can be a combination, right?
Speaker #2: So, are there any active dialogues going on around different options at this point?
Speaker #1: We're always open to opportunities. I won't comment on that.
Speaker #4: Customers' demand and their RFPs and things happening in the marketplace and us responding to it, as well as us actively engaging in thinking through other contracts extensions, other renegotiations of existing contracts that would be favorable to explore.
Speaker #2: Okay. Thanks for the time.
Speaker #1: Again, if you have a question, please press star one on the phone keypad to join the queue. Your next question comes from the line of Nick Makuchi of Evercore ISI.
Speaker #1: Your line is open.
Speaker #4: The relatively limited, but those are opportunities that we are certainly actively pursuing. I am not going to put those in terms of megawatt hours, given the commercial sensitivity around those activities today.
Speaker #3: Hey, good morning, everyone. A little bit of a longer-term one for me. Just as we kind of think about the simplification process and kind of the move forward, with XTERA as a sponsor, and then any management as an external manager, how are the management fees and IDR economics evolving as we kind of think about the portfolio simplification, if at all?
Speaker #5: Okay. And anything else in terms of you can update us in terms of opportunities, different things you can do on the SEFIS? Talked about SEFIS 3 before.
Speaker #5: Now that you're doing the minimum buyout on SEFIS 5, does it assume that it just kind of goes as planned, or is there opportunities to work with the counterparties around different options?
Speaker #1: The IDRs, as you know, are currently suspended. And we are not distributing. So there is no IDR at play at this time. And as such, time that if we are distributing, then we would have that would be subject to discussion.
Speaker #4: As we said, there's the investments contractually have certain buyout windows, right? Right. We have call options that give us rights to buy out during certain windows.
Speaker #4: Any deviation from that would require negotiations with SEFIS investors. And those to do anything other than what we've laid out would require us to get to a point that would make sense for us holistically, right, both from the standpoint of doing it at a value point that makes sense and is accretive to what we've laid out already, but also from the perspective of us financing those buyouts in a way that makes sense, given our existing balance sheet and our existing capital commitments.
Speaker #1: But as of now, they're suspended and not effective.
Speaker #3: Got it. And then just going back to April, and forgive me if you guys insist on earlier, but you renewed the $300 million ATM program.
Speaker #3: You guys have seemingly been pretty averse to dilution of equity. So, I guess under what conditions would we see that ATM actually passed, and how have you weighed it against, I guess, current pricing levels?
Speaker #1: We have no plans at this time to use the ATM or do equity, as we've said before. But we did renew it. It was an existing program that was available and that was set to expire.
Speaker #5: So are there any active dialogue going around different options at this point?
Speaker #4: We're always open to opportunities. I won't comment on that.
Speaker #1: And it was only prudent to keep all our options open and have all the tools as needed. But there's no current plan to use that at this time.
Speaker #5: Okay. Thanks for the time.
Speaker #1: Again, if you have a question, please press star 1 on your telephone keypad to join the queue. Your next question comes from a line of Nick Amicucci of Evercore ISI.
Speaker #3: Got it. Thank you.
Speaker #1: Your line is open.
Speaker #6: Hey, good morning, everyone. A little bit of a longer-term one for me. Just as we kind of think about the simplification process and kind of the move forward, with Nextera as a sponsor, and then any management as an external manager, how are the management fees and IDR economics evolving as we kind of think about the portfolio simplification, if at all?
Speaker #1: Your next question comes from a line of Christine Cho of Barclays. Your line is open.
Speaker #4: Our CPIF decisions around buyout or flip, can you just remind us what the protocol is? If you do decide to do a flip, just sort of what sort of notice do you need to give to the CPIF owners?
Speaker #4: And with the CPIF payments, usually being over multiple years, would the whole thing flip, or just a portion, if you decide not to buy out at the time of the first payment?
Speaker #4: The IDRs, as you know, are currently suspended. And we are not distributing. So there is no IDR at play at this time. And at such time that if we are distributing, then we would have that would be subject to discussion.
Speaker #4: And I guess, how should we think about the long-term leverage goals for the company? Maybe like by 2030.
Speaker #1: Yep. So I'll address the CPIF question and then long-term leverage second. With respect to the CPIF, as you recall, they are securities in which we hold the class A interest in partnership, right?
Speaker #4: But as of now, they're suspended and not effective.
Speaker #6: Got it. And then just going back to April and forgive me if you guys addressed this on earlier, but you renewed the $300 million ATM program.
Speaker #1: The CPIF partner holds class B. If there is a flip, the majority of the cash flows would flip to the partner. It's not just a portion.
Speaker #6: You guys have seemingly been pretty averse to dilutive equity. So I guess what under what conditions would we see that ATM actually tapped and how can you have you weigh it against, I guess, current pricing levels?
Speaker #1: It's if think about it as effectively if we don't exercise our buyout, right, any of the buyouts in the series, then the cash flows would flip to the SEPA investor.
Speaker #4: Okay. And then the long-term leverage?
Speaker #1: Our anticipation and our goal is to attain continued to maintain our leverage levels as consistent with today and predently operate this business. We've said before a lot of it depends on our contract profile and the cash flows that we're generating.
Speaker #4: We have no plans at this time to use the ATM or issue equity, as we've said before. But we did renew it. It was an existing program that was on available and that was set to expire.
Speaker #4: And it was only prudent to keep all our options open and have all the tools as needed. But there's no current plan to use that ATM.
Speaker #1: So if there is ability to extend contracts, if there is ability to add to cash flows, we would certainly feel comfortable with the leverage that we're at today.
Speaker #4: And Christine, I would just add, in our fourth quarter materials we gave that picture through 2030, that I think you're asking for, in part to kind of be responsive to these conversations that we've had with you and others.
Speaker #6: Got it. Thank you.
Speaker #1: Your next question comes from a line of Christine Cho of Barclays. Your line is open.
Speaker #4: It shows even though we're growing the portfolio, we're adding recurrings, we're adding storage, our leverage levels remain consistent from year-end 2025 capital structure through 2030.
Speaker #7: For CPIF decisions around buyout or flip, can you just remind us what the protocol is if you do decide to do a flip? Just sort of what sort of notice do you need to give to the CPIF owners?
Speaker #4: And so that should give you an indicator of what we're managing toward. Okay. Great. Thank you. And then just my last question. As you bring on these storage assets that Mammoth and Carousel how should we think about the tenor of these contracts?
Speaker #7: And with the CPIF payments, usually being over multiple years, would the whole thing flip or just a portion if you decide to not buy out at the time of the first payment?
Speaker #4: The company wind assets have been on for more than 10 years. I think we're both repout last year. And I'm not sure what the remaining contract life is on those, but is there potential for a mismatch here with remaining life on wind contracts?
Speaker #7: And I guess how should we think about the long-term leverage goals for the company? Maybe like by 2030.
Speaker #4: Yep. So I'll address the CPIF question and then long-term leverage second. With respect to the CPIS, as you recall, they are securities in which we hold the class A interests in the partnership, right?
Speaker #4: There's only five years left on the wind, and then the storage contract is something like 10 years. If so, is there a chance to re-contract the wind assets so they're a lot more properly?
Speaker #4: The CPIF partner holds the class B. If there is a flip, the majority of the cash flows would flip to the partner. So it's not just a portion.
Speaker #4: How should we think about that, especially as I would think that wind and storage together are worth more than each of those separately?
Speaker #3: I think you're thinking about
Speaker #1: the right way. The tenor of the battery storage projects is quite long, and generally, there is a desire to extend wind contracts as well to match.
Speaker #4: It's a if think about it as effectively if we don't exercise our buyout, right, any of the buyouts in a series, then the cash flows would flip to the SEFIS investor.
Speaker #4: Great. Thank you so much.
Speaker #7: Okay. And then the long-term leverage?
Speaker #1: Your next question comes from a line of Ruja of Mizuho. Your line is open.
Speaker #4: Our anticipation and our goal is to attain continued to maintain our leverage levels as consistent with today and prudently operate this business. We've said before a lot of it depends on our contract profile.
Speaker #5: Hi. Good morning. Thank you for taking my question. Just a follow-up on the battery storage projects. Can you talk a bit more about how you're thinking about just the overall contracting structure of these assets?
Speaker #4: And the cash flows that we're generating. So if there is ability to extend contracts, if there is ability to add to cash flows, then we would certainly feel comfortable with the leverage that we're at today.
Speaker #5: For example, your expectation on project return and perhaps you're thinking process when it comes to determining which assets will be which interconnection assets will be marked for sale?
Speaker #3: And Christine, hi it's Jessica. I would just add, in our fourth quarter materials, we gave that picture through 2030 that I think you're asking for.
Speaker #5: Thank you.
Speaker #1: With respect to returns, I think we've talked about it before. These are very attractive equity returns. At least double digit. Very attractive from an infrastructure perspective.
Speaker #3: In part to kind of be responsive to these conversations that we've had with you, you and others. And it shows even though we're growing the portfolio, we're adding repowerings, we're adding storage, our leverage levels remain consistent from the year-end 2025 capital structure through 2030.
Speaker #1: We haven't given exact percentages, but we find them very attractive. The interconnection sales, I think, was your second question. Again, we had to agree to with the battery storage JV that was announced previously.
Speaker #3: And so that should give you an indicator of what we're managing toward.
Speaker #1: There is an agreement to work with Nexer Energy Resources to identify additional interconnections to be sold to help fund fully fund the equity contributions into the storage JV.
Speaker #7: Okay. Great. Thank you. And then just my last question. As you bring on these storage assets at Mammoth and Carousel, how should we think about the tenor of these contracts?
Speaker #1: We are working with Energy Resources. I think the specific projects depend on a number of factors. One, obviously, is the surplus interconnects. Are they in markets that have demand for development projects, right?
Speaker #7: The company wind assets have been on for more than 10 years. I think they were both repowered last year. And I'm not sure what the remaining contract life is on those.
Speaker #7: But is there potential for mismatch here with remaining life on wind contracts? There's only five years left on the wind and then the storage contract is something like 10 years.
Speaker #1: Are they viable projects there? And then ultimately, the economics—specifically the economics of that development project—will dictate the value of the interconnect. And then that becomes a negotiated value between us and Energy Resources on how we set a price for the surplus interconnect.
Speaker #7: And if so, is there a chance to re-contract the wind assets so they're aligned more properly? How should we think about that? Just especially as I would think that wind and storage together is worth more than each of those separately.
Speaker #1: Does that answer your questions?
Speaker #5: Yes. Thank you so much for the color there.
Speaker #5: I think you're
Speaker #4: thinking about the right way. The tenor of the battery storage projects are quite long. And generally, there's a desire to extend wind contracts as well to match.
Speaker #1: Thank you. With no further questions at this time, this concludes our Q&A session. And today's conference call. We thank you for your participation. You may now disconnect.
Speaker #7: Great. Thank you so much.
Speaker #1: Your next question comes from a line of Rujia of Mizuho. Your line is open.
Speaker #3: Hi. Good morning. Thank you for taking my question. Just a follow-up on the battery storage projects. Can you talk a bit more on how you're thinking about just the overall contracting structure of these assets?
Speaker #3: For example, your expectation on project-level return, and perhaps you're thinking process when it comes to determining which assets will be which interconnection assets will be marked for sale?
Speaker #3: Thank you.
Speaker #4: With respect to returns, I think we've talked about it before. These are very attractive equity returns. At least double digit. Very attractive from infrastructure perspective.
Speaker #4: We haven't given exact percentages, but it's we find them very attractive. The interconnection sales, I think, was your second question. Again, as we had agreed to with the battery storage, JV that was announced previously, there is an agreement to work with Nexer Energy Resources to identify additional interconnections to be sold to help fund fully fund the equity contributions into the storage JV.
Speaker #4: We are working with Energy Resources. I think the specific projects it depends on a number of factors. One, obviously, is the surplus interconnects are they in markets that have demand for development projects, right?
Speaker #4: Are there viable projects there? And then ultimately, the economics, specifically the economics of that development project will dictate the value of the interconnect. And then that becomes a negotiated value between us and Energy Resources on how we set the price for the surplus interconnect.
Speaker #4: Does that answer your questions?
Speaker #3: Yes. Thank you so much for the color there.
